Market to Market (January 22, 2021)

Jan 22, 2021  | 27 min  | Ep4623

Coming up on Market to Market -- After the oath, the new administration charts their course for America. Cotton’s slice of the 2021 acreage pie is a moving target as commodities rally. Market analysis with Chris Robinson, next.


What's the most complex industry on Earth? It's not genetics, or meteorology, or logistics. It's a business that involves them all. It's farming. Thank you, farmers, from Pioneer.  

Sukup Manufacturing Company -- providing equipment and buildings to store and condition grain to help farmers adjust to market swings. We build drying, moving and storage equipment designed to preserve the quality of their crops. Sukup Manufacturing -- store now, profit later.


Tomorrow. For over 100 years we have worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today.


This is the Friday, January 22 edition of Market to Market, the Weekly Journal of Rural America.


Hello, I’m Paul Yeager.

Normal is a word we may have left in the past. The hurdles of COVID-19 have altered our course with new curves of virus flare ups and slower-than-hoped vaccine distribution.

As rural main street waits for its shot in the arm the economy moves ahead. This week, some of the last reports with data gathered during the Trump administration were delivered.

Construction of new homes jumped 5.8 percent in December, the strongest growth since 2006.

Even with higher prices and a shrinking pool of listings, existing home sales increased 0.7 percent last month, also a 14-year high.

The Rural Mainstreet Index turned in its second highest reading since before the COVID-19 pandemic, staying above growth neutral. Rural bankers are expressing concern over possible inflation and higher interest rates.

The final hours of President Trump’s presidency included the EPA granting three more “small refinery exemptions”, giving those oil refiners a pass on federal blending rules.

Some of the first moves by the Biden administration included an extension of the existing moratorium on farm foreclosures.

Peter Tubbs has more on the Biden laundry list of Executive Orders.

Chief Justice John Roberts : "Preserve, protect and defend."

Chief Justice John Roberts: "The Constitution of the United States."

Joe Biden: "The Constitution of the United States."

Chief Justice John Roberts: "So help you God."

Joe Biden: "So help me God."

Chief Justice John Roberts: "Congratulations, Mr. President."


On Wednesday, Former Vice President Joe Biden of Delaware was sworn in as the 46th President of the United States. 

The ceremony came two weeks after a violent mob of insurrectionists attempted to stop the certification of the 2020 Presidential Election. The new President addressed the political divide in the American population.

President Joe Biden: “We must end this uncivil war that pits red against blue, rural versus urban, rural versus urban, conservative versus liberal. In the work ahead of us. We're going to need each other. We need all our strength to persevere through this dark winter.”

This dark winter is driven mostly by the unchecked spread of the COVID-19 virus, which has infected 24 million Americans, killed 400,000, and hobbled the economy.

President Biden signed multiple Executive Orders in the opening hours of his Administration. 

One of the first Executive Orders withdrew the permit for the Keystone XL pipeline, which would have added capacity to pipelines delivering Canadian and U.S. crude oil to distribution points in the Gulf of Mexico. Environmental groups had argued that the pipeline crossed environmentally sensitive areas and wasn't needed in a petroleum market that has struggled with overproduction. 

President Biden issued orders ending new construction on the Mexican border wall, a focal point of the Trump Administration. Biden also ended the ban on the immigration of Muslins into the United States, and ceased the deportation of children born in the country of noncitizen parents by reinstituting the Deferred Action for Childhood Arrivals program.

The President also directed the USDA to explore ways to provide more assistance to families who are food insecure.

A proposed $1.9 Billion dollar relief bill is awaiting Congressional approval. Schools get money to reopen, and states get money to cover COVID related expenses. 

Finally, the President placed a freeze on all new regulations imposed by the previous Administration pending review of which, if any, will be allowed to move forward. 

For Market to Market, I’m Peter Tubbs.

The battle for acres is a frequent topic on this program. With a pivotal USDA report just 2 months away, it’s anybody’s guess on which commodity will dominate. Cotton continues to watch its portion get smaller but this year’s question will be “by how much?”.

Our next MtoM podcast will feature two cotton analysts, Rogers Varner of Mississippi and Markham Dossett of Texas, discussing this question. Part of the conversation is our Cover Story.

Markham Dossett, Talon Asset Management: “It's a crop that you plant because you always planted or because you love it. It is hard.  It is hard to plant hard to maintain, hard to grow, it's easy to be disappointed by the weather. And, and when you only have limited export customers like China and Turkey. It's easy to be frustrated on the export size by bribes from other countries that that are producers in say South America or wherever else. So, the, but, people that grow cotton are going to grow cotton, because when you, I mean, they're not going to switch out every year they grow, now they've got to make a decision to buy a $300,000 picker. And that picker can't be used for corn, wheat or beans or rice. It's got to be used for cotton. So you're making an investment so you're going to plant cotton you're in your up where's my corn, we've been customers for one year, they may plant No, no corn or soybeans. They may plant no wheat or corn and beans. They may plant all corn and wheat, no beans, they can switch back around and rotate. And of course cotton steals nitrogen out of the soil. So you've got to rotate your cotton land. But if you're planning cotton, its, we made the investment in the equipment, you're probably going to plant cotton every year. Because of that, you don't lose as many acres unless the price really goes below cost of production. And even then you'll still have people who grow cotton.”

Paul Yeager: “As you go into ‘21 do you see the industry having more headwinds or tailwinds? Or is it going to be choppy seas? Let's use a sailing metaphor.”


Rogers Varner, Varner Brokerage: “Well, I look at the balance sheet. First I'm, I'm a balance sheet guy. And you know you like to try to calculate the production based on the yield the acres, then you take a look at the consumption of what we're going to do. I'll show you the cotton balance sheet, and it's gone from being extremely burdensome back in May, to being what I would call adequate today. We're not in a shortage. But we're nowhere near what we were back in May. And I think the price on the new crop and 77, 78 cents. It would be considered as an inducement to plant if it was not for one other thing, and that would be the prices of the other row crops. And once, once you get out of West Texas, and let's just start at the Louisiana border with Texas that would be the Sabine River. Basically all the states east of the Sabine River, plant cotton and have alternatives. But the areas of West Texas, Kansas, Oklahoma, Arizona, California, they don't they, they either plant cotton or they don't know what to do. So anyway, we've got a good price going in. And we got two variances or variables out there. One is the drought in West Texas and West Texas has the highest density of acreage in this country for sure. And nobody really knows if we're going to get enough rain to plant those Texas crops. If we do, and we get a couple of three rains during the year, okay, we'll have a lot more cotton. If we don't well, then the price has to take care of it. But the other thing is the price of soybeans right now is leading what I call the profitability tables.”

Markham Dossett, Talon Asset Management: “You are in an acreage battle over here, and cotton will rise when they see soybeans and corn rise like this, they know we will lose some acres on the south. And as a result, in result, you're going to have to go up to keep those acres because you can shave from 500 acres down to 400.” 

Paul Yeager: “Do you have producers really on the fence still? Or do you think they already kind of know you? You hinted that some might be making a change? But when do they make that decision? And can the y make it super late in the game, say a week or two before it's time to plant?”

Rogers Varner, Varner Brokerage: “They can but that would be on a what I would call a marginal amount of acreage, I think that you take a farmer with 1000 acres, he's probably already got an ideal 900 of them right now what he's going to do. And you know, maybe later, depending upon seed availability and light price, he could he can make do with the last 40 or 100 acres. But going into late January, I think 90% of the decisions already made because the seed companies require a pretty good bit of advance notice, just so they know what to prepare for, and they know how many seeds to make available to the market.”

Next, the Market to Market report.

South American rains, profit taking and fund adjustment pulled the market lower this week. March wheat lost 41 cents while the nearby corn contract dropped 31 cents. The big sell off happened in the soy complex. Nearby soybeans plummeted $1.05.  March soybean meal went down $41.60 per ton. March cotton expanded 86 cents per hundredweight. Over in the dairy parlor, February Class III milk futures gave back last week’s gains and then some with a $2.72 sell off or a drop of 14 percent. A course reversal in the livestock sector. February cattle gained $3.95. March feeders jumped $8.32. And the February lean hog contract improved $2.00. In the currency markets, the U.S. Dollar index weakened by 53 ticks. March crude oil shed 11 cents per barrel. COMEX Gold gained $28.50 per ounce. And the Goldman Sachs Commodity Index improved more than three points to finish at 433.75.

Yeager:  Now here to provide insight is one of our regular market analysts, Chris Robinson. Chris, good to see you again.

Robinson: Good to be here.

Yeager: That's probably the best way to respond to that question because the mood dramatically changed in one week. It even got worse on Friday. You had written a couple of times this week about three day pulls, watch these three -- I was going to call it the Gilligan's Island three-day tours. But given what happened today it's not really appropriate to joke about things. This was a dramatic day on Friday. What happened?

Robinson: Well, we hadn't seen a pullback lasting for more than three days really for 8 months and it has been a tremendously rally. I'm sure if somebody digs into the charts they can point out where it was three or four together, but really had been chugging higher since the summer lows. And we also got the last USDA, which was extremely bullish for corn. We're limit bit in corn and then gapped higher. We went and filled that gap this week. That was kind of the first sign that maybe there was nobody left to buy, the news was all baked into the pie. And then here on a short week, after a holiday week, after MLK, we had this correction and one person's correction is another person's profit-taking. I can tell you, if you were long corn or beans today it didn't feel very good to watch soybeans break a dollar and corn break as hard as it did. That being said, we were overdue for a correction. We were just getting started for the year. And it just felt to me like, again, we had come so far without a pullback. Now, the next thing I'm looking for is what is going to happen Sunday night. What we've seen all year long, really since this rally started, is a lot of buying interest in the overnight markets where you've got the Asian and European traders. They have bought, bought, bought. This is going to be a test week for them to see if they step in and buy because a lot of people have been waiting to try and buy these breaks. We'll see. But certainly we haven't had a correction like this, and it's the old expression, it's kind of a cliché, a market goes up the escalator and corrects down the elevator shaft. Well, today was a perfect example.

Yeager: Wheat market early in the week was more of a sympathy, seen as a sympathy move. Also, the Russians had kind of pulled back on some of their news when it came to taxes. What do you think was the winner in pulling wheat down so low?

Robinson: Well, wheat has turned into -- it actually had some independent strength. If you look at the USDA numbers there wasn't anything extremely bullish with that. The market is pretty well supplied worldwide and even here in the U.S. The concern was dryness in Argentina, dryness in Russia and you've noticed that periodically the Russians will float that story that they're going to hold back on exports. They get a little blip and they tend to be the first ones to sell it. We have yet to see them really put their hands in their pockets and I think the market just came pretty far, pretty fast. You had a nice two-year high in Kansas City, two and a half year high. You were at six year highs in Chicago. And I just think, again, typically wheat is a thinner market than corn and beans anyhow. And the boat was weighted pretty heavy to the buy side, the managed money is long a ton of wheat, they're long Kansas City and Minneapolis. That's going to be interesting to see how they get out of that this week if they need to sell more. But certainly today felt like wheat became a follower of corn once again.

Yeager: All right. If you look back two weeks, rewind the tape, you'd probably be selling at these prices. So, I'll ask you, are you selling any of the contracts right now in wheat? 

Robinson: In wheat I would say, if these are good prices for you we're still in relatively good shape. You've got to look at where we were three, four, five months ago. We've had a correction here. I would say this, if you feel like you need to sell it because you're worried that it's going to continue to drop lower, I would say you've got to make sure that you take some sort of step to manage the possibility that you're selling into a dip and four or five months from now when we have a different story, different supply and demand, a different weather story we could be back where we were again. So if you feel like you missed the top and you need to make a cash sale, that's fine. But I would say make sure that you hold back some money to either look to reown those on paper because it's just the beginning of the marketing year, nobody knows if we're really going to have a drought, nobody knows what is going to happen with South American weather, there's so much up in the air. So if you felt like you should have sold, I always tell guys at the end of the day you have to make the cash sale, you've got to make the decision. And then how you manage that sale after the sale is really the key.

Yeager: In corn, any market, nobody calls the top, nobody gets the top, only one person does. But has the top come for the next, let's say two months, in corn?

Robinson: Well, the next big hurdle is going to be planting intentions which is the end of March and typically if you look at the charts, which is really all we have to go for, it's kind of like driving down the road 100 miles an hour looking in the rearview mirror. What has happened in the past? Sometimes you're looking in the rearview mirror and then you miss what's right in front of you. I'm hesitant to say this is the top. It certainly feels like based on today's action if you look at new crop especially, new crop corn and new crop beans, new crop corn had a dollar rally, a dollar eight rally. We gave back around 34% of that today. The levels that people look at are 38%, then 50%. So I don't know if the top is quite in or not, but it certainly feels like there might be a little bit more selling pressure. You have to remember, a lot of people bought corn just after that report that probably shouldn't be even trading corn. You've got a lot of speculators coming in, they're like oh my goodness, this is a great report, we have to buy. So I think once those people get shook out then we're going to be back to trading South American weather and the demand. And there's still enough up in the air, I'm not going to sit here and say that's it the top is in. Certainly these prices are still worth protecting. When you've got Dec corn still north of $4.25, $4.20, that's still not a bad price. I think the concern is that if we make another dive down to that psychological y$4 level. So I would say this, I'd say I'm cautiously bearish that there could be a little bit more downside to go. But I'm sure not in the position where I want to say okay, that's it, sell everything and oh by the way, reach out and sell two or three years' worth of crop. I think it's too early to do that.

Yeager: In the beans it's the same story, in soybeans. There were rains over the weekend in South America. There were discussions, it also throws into corn, that also the second corn crop will be planted down there. So weather is what set the table come Sunday night into Monday. But then what happened?

Robinson: Today?

Yeager: Any of the days because it was a profit, it was I think you said it this week, you called it a violent business. Mr. Market is chasing some longs. Is that what happened?

Robinson: It certainly felt like that, especially after the USDA. We're still kind of digesting that report. The surprise in that report was corn. Really everything that came out with the soybean numbers was right in line with what people expected and then this came down to you've got a record long position for the funds, you've got the commercials that are record short against it. So it's this tug of war now between the commercials and the speculative funds. You also had a lot of buying from the index funds, those are the funds when you talk about inflation and the Goldman Sachs Index, there are people out there that just buy that index because they want to own commodities because they're worried about inflation. They don't buy and sell, they buy and hold. So all that buying, a lot of buying was done as they rebalanced that because everybody is trying to get in front of this idea that the government is going to continue with stimulus and low interest rates we're going to have inflation. So all that money is kind of baked into it and again, we talked about this before, I'm really interested to see what happens with the European and Asian traders. If they continue to come in and buy it I think that is going to be the first positive sign. But it could be a situation where we have come so far and everybody, you know what, they just sit back and wait. So there may be a little bit more downside to go.

Yeager: Okay. Well, that's interesting you bring it up that way. I want to read you a question we got via Instagram and this is from a young producer. This is Christian in Brooklyn, Iowa. He asks, I've sold 1,000 bushels of new crop beans. But what would an analyst suggest to a person like me, young and beginning, that can store all their new crop corn in grain bins? Would they suggest putting a put on those bushels of corn now? Or wait until later in the summer during the growing season? You can say corn and beans and/or beans for this answer.

Robinson: Well, I think the market has kind of told you if you've got corn and beans still and you're holding it. I don't know why you wouldn't have sold, even today we're a dollar off the highs, if you look at spot soybeans, the March contract from the summer lows to these highs we had a $6 rally, so now we've had a $5 rally. Are you concerned about the fact that you missed that last dollar? I would say this, these are good prices and if you want to move some grain, move some grain. You can always reown it down the line. You can look for another break, you can go out and buy a cheap call spread for three or four months, you can stay long through whatever happens in June, July and August. And I think the longer I've been in this business and I started out as a trader and then for the past 12 years I've been working with producers, in my opinion you cannot beat a good cash sale. And when the market is at these levels, the best levels we've seen in six years, even after today's correction, you can't beat a good cash sale. You can always reown it down the road. But I was talking to one of my clients the other day, when was the last time you made $6 on any hedge? When was the last time you made $1 on any move? So I think the answer to Christian's question, I would say go ahead and if you want to store it, if you want to store it buy yourself a cheap put. A cheap put is there as a guarantee that okay, if it goes below that price you've got that covered.

Yeager: I've got to get to livestock real fast and then we'll come back to cotton hopefully at the end. Cattle, record red meat production in December, then cattle on feed today. This was all ahead of a report, a cattle on feed report today. Cattle specifically, let's start there.

Robinson: Cattle today made a great move even before the cattle on feed report and it has to do with the whole supply and demand thing. You have to remember you've coming off of 10 year lows at the bottom of the pandemic, 10 year lows for feeders and fats. That supply chain got completely out of whack. So we've been looking at a really good kill rate. I think the market is factoring in where we're going to be when restaurants start reopening, that's a huge, huge thing and I think that is really what is behind this. We're looking ahead to the point in the spring when hopefully everybody has been vaccinated and things go back to normal and you start to get that good demand.

Yeager: And feeders up $8 on still expensive corn.

Robinson: Yeah, and the fact that we've been holding up pretty well for feeders despite the expensive corn. So the market is telling you, you go back and look out to the deferred months, go look in August and September, fat cattle, feeder cattle, they all look really good, they're all good opportunities and I just think that the market is, again, that trend looks like it wants to continue to go and I really think that is what is driving it. People are concerned about inflation, people are concerned about if we do get back to normal there's a lot of pent up demand. Think about all the people you know that want to go out to dinner. If we can go back to going out to dinner there's a huge demand right there.

Yeager: 30 seconds on hogs. That too, is that a similar scenario?

Robinson: Hogs you've got to talk about ASF. ASF another report this morning. We hadn't had an ASF report coming out of China in three months. There was a thousand head of, a thousand animals that they're going to have to apparently cull. The market didn't like that obviously in China but it is supportive for our lean hog market and I think you see that, especially in the deferred months. Take a look at those. If you're a hog producer go out and look June, July, August, those are great prices.

Yeager: 10 seconds on cotton. Are you buying or selling that contract right now?

Robinson: If I'm selling it, I'm reowning it because we talked about the acres war earlier, even with new crop soybeans today it dropped from $12 to $11. That's still a decision a guy has got to make if they want 80 cent cotton or $11 beans.

Yeager: Chris Robinson, thank you so much. We'll talk more in Market Plus. That will do it for this installment of the TV show. We will, as we said, talk in Market Plus. So join us there. Find that on our website at Now, you can find our show on several social networks, but we want to let you know we still have the email inbox turned on for you. Drop us a line anytime at Next week we’ll look at lessons learned from the recent hemp harvest. Until then, thanks for watching. Have a great week.



Trading in futures and options involves substantial risk. No warranty is given or implied by Iowa PBS or the analysts who appear on Market to Market. Past performance is not necessarily indicative of future results.

Market to Market is a production of Iowa PBS which is solely responsible for its content.

What's the most complex industry on Earth? It's not genetics, or meteorology, or logistics. It's a business that involves them all. It's farming. Thank you, farmers, from Pioneer.  

Sukup Manufacturing Company -- providing equipment and buildings to store and condition grain to help farmers adjust to market swings. We build drying, moving and storage equipment designed to preserve the quality of their crops. Sukup Manufacturing -- store now, profit later.


Tomorrow. For over 100 years we have worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today.


Grinnell Mutual Insurance