Market Plus with Ernie Goss and Chris Robinson

[Kohlsdorf] Welcome to the table for the Friday, July 4th, 2025 installment of Market Plus. And joining us back Ernie Goss and Chris Robinson. Happy 4th of July. I guess I should say that right.

[Goss] Happy Independence Day to you.

[Kohlsdorf] That's right. We're gearing up for the big one next year. 250 years. Let's start with some positive news. How about that? Okay, so I want to ask you both what are some places of optimism? What what is a positive piece that our listeners, our viewers can take away with them today? I'll start with you, Chris.

[Robinson] Well, the most positive is the fact that if you look at the the cattle market and the hog market still at or near record highs, not so much, but not record highs for the hogs. But cattle market is has just been amazing. It's been a gift. Now, if you've been using futures to hedge on the way up, it has as much fun. Because when you if you sell the board and then the prices go up. Yeah, you've locked in that price. But you left all that on top. So that's been the probably the best market for the past four years in the grains. It's been resilient. We've had a couple corrections here and there, a couple scary moves. But it's just been and fueled and really fueled by really good demand. And also the fact that we don't have the supply that we need. It's taken time to build back this herd. And now when you're going to go out and spend 3 or 4 or $5,000 for an animal, it's even more daunting. So it's great to have those high prices. But it's it's really, really important that you do some risk management because now when you go out and you start building a herd, you really have a lot of money on the line. So but that's probably the, the, the, the, the, the bright spot of 2025. The other bright spot would be, I'll say this, $4 corn held for corn. So hopefully it holds. Hopefully the lows are in. Hopefully we can get a summertime rally. One of my clients pointed out to me that in the last 40 years, we've never had a market where we didn't get back to the spring price for the spring insurance price for corn, which is 470. It was 1065 for soybeans. We've already gotten back there twice, 1065 for soybeans. But we're you know, we went from 479 to about, I think 416 was our our low, which is pretty, pretty pretty sad a 62 cent move. Are we going to get back to 470. Historically we're supposed to. So there's there's your silver lining. If history holds, hopefully we'll get one more run up to that spring price.

[Kohlsdorf] Okay Ernie, where do you see silver lining.

[Goss] Well, the silver lining certainly in the equity market, the U.S. Equity market up to all time highs on the S&P. And I would say to go against that is investors are whistling past the graveyard. I mean it's it's way too high. The market is too expensive. But the investors those equity buyers just shrug off all the bad news and and take a good news and they go with it. And what's happening there is the ETFs. The exchange traded funds, passive investing. All of us are just putting money in. And they just put it into ETFs, which means they buy across the S&P. So it just drives it up automatically. So that's been the great news I guess if you and if you look at your 401 s they did well last quarter. So that's that's the darn good news. Also gold gold has been moving up. I expect it to continue to move upward because of the cheaper dollar. We're also talking about lower interest rates probably coming now short term interest rates because of the battle going on between President Trump and of course, Jay Powell, head of the Federal Reserve. That's the good news.

[Kohlsdorf] Well, let me lead into that next question. That's good, because one of our viewers wondered about President Trump and Powell. So Husker fan in Nebraska or Husker fans in Nebraska is asking, what does Doctor Ghost think of Trump's plan to replace Jerome Powell and then move interest rates to 1% inflationary? And what's it to do with the dollar? Is it good for farmers? There's a lot to that.

[Goss] First off, it's good for farmers. Cheaper dollar. We'll replace Jerome Powell. No not a chance I don't see it as Jerome Powell is saying you you are trying to force me to reduce rates. As a result I'm not going to reduce rates. So he should be reducing rates right now. There should be a rate reduction in July, July, the 29th and 30th. That's the next meeting they should reduce then I think they should reduce also in September. I don't think they will in July. I think they will have to in in September because the economy is much, much weaker than Jerome Powell in his press conferences, talks about so. And will he be able to get rid of Powell? I mean, as I said, Powell leaves next May. It's not going to happen. It's just I think he's a good foil for the president. He can say, well, I told him reduce and he didn't do it. And now he should have he should have. And president's right there. He should. And back to the question of inflation. Inflation. The tariffs have not pushed inflation up as we economists thought it would. What it's done is press margins for companies. In other words, their profit margins are getting squeezed right now. And it's not showing up in stock prices just yet. So I expect the downturn in stock prices going forward. Now down slightly. And there's some real jeopardy. There's jeopardy there as well. But looking forward, inflation is probably going to tick upward a bit. But it's still moving sort of sideways. The latest PCE personal consumption expenditures, the one that the fed watches 2.7% year over year. That's high. Higher than their target. But it's within the range. We can live with 2.7%. And it's good for the farmer. It's good in the sense I think farmers can live with that. It tends to weaken the value of the dollar. And again, the rate cut would tend to push the dollar down. Our central bank, the Federal Reserve, is one of the ones holding rates up every. All the other central banks have been reducing, reducing, reducing. And they just had a conference of central bank heads. And they all they love Jay Powell. He's made well I shouldn't say he's making him look good. That's unfair to Jay Powell. But he should be reducing right now.

[Kohlsdorf] Chris what do you think about inflation.

[Robinson] Well at the end of the day if they cut rates it's going to be better for farmers, especially young farmers or anybody that's carrying debt or needs to go buy new equipment because that is a, you know, a big difference. For years and years, how many 14 years we had 0%, 0%, 0%. So there's a whole generation of of young men and women out there that are like, wait a minute, now, I've got to pay 7%, 8% for, you know, a for a note for, you know, and you're going out and buying a half million dollar piece of machinery. It's not like you're buying a, you know, a Corvette or something like that. So it's it is an issue. And I think it would help, especially younger farmers, especially somebody that's anybody that has to pay cash rent and has it has to cash flow. That's going to be and I've talked to a lot of bankers too, that clients of mine work with, and that's been the one number one concern.

[Goss] I think rates are by historical standards are not that high right now. So the idea that they're going to go back to the zeros, no, no, it's not going to zero. So we're going to have them come lower. And you're talking about long term rates versus short term rates. The fed sets short term rates. They influence long term rates. It's very important. And a lot of folks don't get that. Long term rates are determined by investors out there globally. If inflation ticks up then that yield will tick up.

[Robinson] But most guys, if they have to go get an operating loan, they've seen that price of borrowing, that money has gone up. So if they can knock that down. Operating loans, even just psychologically to have it go down a point or point and a half, it takes some of the stress off I think especially younger farmers.

[Goss] Mortgage loans, though I'm not so certain. Mortgage loans, long term loans where the fed can't really bring those down except through quantitative easing. And I'm not sure they're going to go back to that again.

[Robinson] What percentage of the of the land that's bought for farm usage, what percentage of that is cash? A lot of it's just cash, right. That's the one that's those are silver lining. All that land that's owned out there, it's not mortgaged. So that's one positive.

[Goss] That's true.

[Kohlsdorf] Yeah. Let's talk about the Main Street Index for a second. Ernie. The recent one I want to make sure I'm getting this right. The index numbers a quarter of the farmers in the survey area aren't expecting to make a profit this year. So what's pointing you to this conclusion?

[Goss] The bankers. I blame them. They're telling me. And then you didn't say also that the index was up to its highest level in two years. And I'm like, what's accounting for it? I don't know, maybe it's maybe it's yields that I don't know. But prices obviously are not there. But things are looking better. According to the bank CEOs and and chief loan officers as well. So it's it's it's bewildering and but that's it's hard to say. You know, it's hard for me to say. But 25% they expect 25%. And but that's but you're talking about grain versus livestock. Livestock is doing quite better quite well in many, many, many farmers are do both. So I don't know how they I don't know how the bankers handle that question. I just ask the question. They answer it thankfully.

[Robinson Well, Rowe prices have calmed down in the last three years. You go back and look at a chart three years ago, we've been in a downtrend. Corn, wheat, beans. And that's really the issue. That's I think that's what longer term that longer term trends been lower. And humans human beings you know they get excited when we're at six seven year highs. It's nice to go plant you know $6 corn at 550 corn. It's not so much fun to plant, you know, 416 corn. And that's I think that's what maybe, you know, your bankers are worried about row crop guys are in a different situation than the cattle producers, right?

[Kohlsdorf] Yeah. All right. I think that's all we have time for. We got a lot in. That's it, that's it. Yeah. Unless you have some lasting words of wisdom that you'd like to share with everyone on this 4th of July.

[Goss] No, I was going to tell you my Walmart story, but that's probably too long. The trousers I'm wearing were $16 before the tariff increase. They've now gone up to $18. I mean, people say $16 for a pair of -- my students say 16 bucks for a pair of pants. I said, well, it doesn't matter. You can throw them away in two washings.

[Kohlsdorf] Jeans. $2. Okay.

[Goss] Yeah. $2, I think that's right.

[Kohlsdorf] Okay. Well, that kind of puts things in perspective a little bit. Sometimes we think that things have gone up a lot more than that. And I don't know, I mean it's a lot.

[Goss] It's 10%, more than 10% okay. Yeah I don't know.

[Kohlsdorf] And you buy your trousers at Walmart. I love that about you.

[Goss] 16 bucks. How who can resist. And you can wash them and say, well, they fade out. Come on.

[Kohlsdorf] Yeah.

[Goss] You can wash two times and you throw them away and you're still okay. Well, I'm not okay. I mean, I still wear them, you know.

[Kohlsdorf] You wear them longer than two times, I bet.

[Goss] Of course I do. Certainly in college.

[Kohlsdorf] All right. Thanks, Ernie and Chris, great to have you on the show. A reminder to get signed up for the Market to Market Insider newsletter. It's free. Sign up at Markettomarket.org. And next week getting a handle on crop conditions in the east and the west, plus commodity market analysis with Kristi Van Ahn-Kjeseth. Thanks for joining us and have a great week.

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