Market Plus: Chris Robinson

Jan 22, 2021  | 12 min  | Ep4623 | Podcast

Podcast

Yeager: This is the Friday, January 22, 2021 version of the Market Plus segment. Joining us now, Chris Robinson. Hi Chris.

Robinson: Hi, Paul.

Yeager: The V word, volatility. I can remember not that long ago we would get these social media questions and people would say, when are the funds going to enter? When is the outside money going to come in? Where is all this money from the sidelines? When are the equities going to show up? Last week and the week before when CNBC, the Wall Street Journal and these non-agriculture based organizations start reporting on commodities, that was the sign by many who follow commodities and agriculture to say, uh-oh, the top is in. All those factors combined leads me to Shane in Bloomfield, Nebraska's question to start us here off of Facebook. Is the high volatility in grains signaling a top or leg higher?

Robinson: Well, I've been doing this for 32 years and typically when you start getting more volatile it can be a sign of the top. Now, just because it has proved that way in the past doesn't mean it's going to be this way. I'll say this, the grain markets, we all went to sleep for six years. We had very narrow trading ranges, 40 cent trading ranges for a couple years in corn, $1.50 trading range in soybeans. We just had a dollar range today in soybeans in one day. So we haven't seen this volatility really since 2012, maybe a little bit in '17. So everybody has got to get used to trading it again. You saw perfect example, before the report if you go pull up a five minute chart, or if you were paying attention before the USDA report, soybeans broke 30 cents. People thought oh my God, somebody knows something, right, and then immediately spun around and that 30, 40 cents was gone and then we were off to the races higher. So there's a perfect example, when we start seeing moves like that where somebody is just like, I have to get in, I have to get out, that can be a signal of a top. And now it took three or four days past that report for us to have the follow through. But in answer to your question, it can be a near-term indication that we have come too far, too fast. And I think I would expect on a regular basis, for the rest of the year and certainly until we figure out what is going with weather in South America and weather here, if you go to bed at night expect to see a 20, 30 cents trading range every night in soybeans and a 10 cent trading range every night in corn.

Yeager: You say sleeping because when it does that I don't think anybody is sleeping very much because they're a little worried about what is happening because things can change so quick. I know that the overnights are not really the overnights, but you get what I'm saying. There's a lot of worry all of a sudden with some people.

Robinson: Yeah, I think so and again, if there's something to worry about I’d rather be worried about corn at north of $5 in the spot month or north of $4 and you've got to remember where we were eight months ago. We were at multi-year lows, 10 year lows. People were worried about what if corn has a 2 in front of it? What happens if soybeans have a 7 in front of it? So there's always something to worry about in this business. At the end of the day, if you're a farmer or producer your biggest worry now is did I sell too soon? That's really what it comes down to. And we talked about this earlier in the segment, is it okay to sell beans when we're $5 off the bottom instead of $6? I'd say yes because you can see it only takes three or four days to have a big correction like this and two weeks from now, three weeks from now if we start to get issues with drought in South America, if we start to get issues with it's too dry to plant here, people are worried about subsoil moisture in the Great Plains, there's your bull story and then we're back off to this grinding rally.

Yeager: Okay, so here's a worry, here's a grind. Todd in South Dakota asked us via Twitter, will the ethanol industry survive with current prices and policy? What happens to all grain prices if we have plant shutdowns and a normal growing season?

Robinson: We just had two a few weeks ago, one of the oldest ethanol plants shut down.

Yeager: Here in Cedar Rapids, yeah.

Robinson: Right, because the math didn't work. They operate on margins. They don't care if they pay $9 a bushel for corn if they can make it work. It's all about the margins, it's really not about the price. I will say this, the fact that you've got crude oil back above $52 and --

Yeager: Don't even say the word yet.

Robinson: -- just today I heard somebody mention the hundred word. How soon do we have hundred dollar a barrel oil? I'm like okay, you know what, around $60, $65, things worked out a lot better for the ethanol plants and maybe the fact that you saw, sometimes you see when somebody completely shuts down or walks away from the business that can signal a near-term low. So ethanol is not going to go away. With the new administration talking about more green and more getting away from fossil fuels, etc. etc. it opens up the door for potentially better demand. You've got to remember this, ethanol used to take one-third of our corn crop. We grew 15 billion bushels, they took 5 billion bushels. One reason we had such a dump earlier this year was when crude oil fell out of bed all of a sudden all these ethanol plants were like it doesn't make any sense, we don't need that. And that was one of the big pushes that pushed us when corn went down to $3 in the spot month, it was like there goes ethanol demand. So now that it has come back I would say this, I would say that if we sustain $50 a barrel oil I think that is going to help the ethanol industry. It's not going to go away. But the question is, are they going to get back to taking30% of our corn crop because that was a natural -- for all the corn producers out there if you know that one-third of the crop is going somewhere no matter what, that builds the floor for you. So, leaning ahead if we do get some sort of a drought issue then you're going to have people talking about, well if they shut down ethanol plants maybe that was a sign that we had the bottom.

Yeager: You mentioned a little political, I need to go back to Eric in Moville, Iowa asked us via Twitter this week, we all know in marketing timing is everything, especially the buy the rumor sell the fact. So then how long before the rumor of the Biden administration becomes fact to the marketing world? He's now the President. There is the run-up of what he may do, what he might do, there's what the previous administration did or didn't do, EPA granted 3 waivers, that was a final thing. So how long, because usually it's the futures, so futures have been baking in a Joe Biden presidency for weeks.

Robinson: I think it might already be baked in. The question is -- the other thing we baked in too was up until two weeks ago we were really kind of set on gridlock. And historically, like I said I've been doing this for 30 years, usually the market likes gridlock, it really does. Also too there have been times in the past where even if the general -- we could be in a situation where the general economy doesn't do that well but the ag economy does well. This market is waking up. We're coming out of a seven year sideways lower to lower market. We just had a rotation up. The question is, is that going to extend? So I'm not going to sit here and say, for the next two, three, four years don't worry about it. But we have to start somewhere and it feels like a lot of things have shifted. And the number one thing, I don't care if you're left wing, right wing, libertarian, whatever, you can't fight the law of supply and demand. And if we saw anything despite the trade war, despite the fact that the dollar was at the bottom of the pandemic, we were at 18 year highs, the Chinese kept buying because they needed it. You can't fight supply and demand. At the end of the day, supply and demand will always win. And I think that politicians, what they say it can have impact, absolutely. I'm not saying it can't. But on the longer term supply and demand wins. So that is what is driving this market. We haven't had a demand market in a long time and I think it's going to be an education for a lot of people that haven't traded a demand market.

Yeager: But this week the market responded when the designee for -- Janet Yellen said, hey the Biden administration, we're going to keep going tough on China and the market didn't like that. That's a continuation of what the Trump administration tried to do and got Phase 1. I didn't see -- the market didn't like being tough on China but it may have actually worked out a little bit.

Robinson: Well, it looked pretty disappointing -- when we were at the bottom of the pandemic things looked pretty bad, a lot of people were very concerned. So it's always darkest before the dawn. But two, three years of the trade war, you go back and look and pull up a chart of soybeans between 2016 and 2020, that can tell you right there what was going on. And what turned this market, it wasn't because China suddenly got a warm fuzzy for the United States, they needed our soybeans. And if they need it they will come.

Yeager: Real quick, these are just yes or no. Are the bulls done for '21?

Robinson: No.

Yeager: Why didn't I -- no I don't want to ask that one yet. What is the likelihood of historical levels being met here in January? Have we hit the year's high?

Robinson: I spent a long time looking at charts, I've been doing this a long, long time. Typically this January report if you look back at it and look at a long-term chart it can set the tone for the next three or four months. So now we've digested that, now we're back to trading weather.

Yeager: And we're back to acreage. That's our final question, Chris. This s Jerry in Audubon, Iowa on Twitter. Which grain is going to win the acreage battle the spring? He says he's thinking of going all in on oats. He's got a soft spot for the underdog. We talk about cotton and you heard our guys in the South say hey, if -- I think soybeans is going to pull from cotton. Who is the winner and who is the loser in the intentions report as you sit here tonight in January?

Robinson: Like you said, I just saw something the other day where the anticipated plantings are up 4 million acres for both corn and beans already. So right there people are like, we're going to plant more. The cure for high prices is high prices. People are going to plant -- now that's going to be the question. In my experience, farmers like to plant corn so they may say they’re going to plant beans and beans are $12 and corn is this. But, usually I think given my experience, this is just my personal experience, if a farmer has a choice between planting corn and beans, they’ll take corn.

Yeager: And again, why didn't I see beans at $14.40?

Robinson: Because you thought they were going to $18.40.

Yeager: It's a great question, Imperio, I appreciate it. Thank you, Chris.

Robinson: Thank you, appreciate it.

Yeager: Thank you for everybody who asked questions via Facebook, Twitter and Instagram. We always love hearing from you. I know we had a lot, we didn't get to them all. Keep asking them, they all get in the mix. Next week, we will look at lessons learned from the most recent hemp harvest and Sue Martin will be here to break down the commodity markets. I'm Paul Yeager. Thank you so very much for watching, listening or reading. Have yourselves a great week.

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