Market Plus: Chris Robinson and Ernie Goss

Nov 26, 2021  | 13 min  | Ep4714 | Podcast


Yeager: Welcome in to the Friday, November 26, 2021 Market Plus, back in-studio with Chris Robinson and Dr. Ernie Goss. Gentlemen, I gave Ernie the last word and he took them all. So Chris, I didn't give you a chance to counter. What he was talking about at the end of the broadcast, we were looking ahead a little bit, he cited farm income looking good. When you hear stories like that, Chris, and the headline from somebody who is an economist saying some of those things, there is a but to what he said. What is it?

Robinson: I would say this, first of all, this '21 crop farmers actually got a gift because they got to lock in, they didn't know it at the time, but inputs were cheap because crude oil was at $33. And then you got a huge explosion after March when corn and beans went to 8 year highs. So that doesn't happen very often when you get low inputs and good prices for your outputs. Now, depending on where you sold that's a whole other story. But you still had the opportunity. Heading into 2022, everybody had a better farm economy, interest rates probably are going to go up but also too cash rents are going to go up. So you've got interest rates, cash rents and inputs. So yeah, the prices are higher and we're heading into 2022. We've got Dec corn at $5.60, we've got November beans at $12.50 which are great historical prices. Not that long ago we were at $3 corn and $8 beans. But the question is, on that spread, is there going to be a big enough spread for somebody that maybe doesn't own their land that is cash rent that has got to worry about that? That's the key. 2022 has got a lot of risk. You can correct me if I'm wrong, but I think it's going to be 2022 is going to be the year of the spreadsheet because depending on where their prices are now and where they are when you sell them, that's a lot of risk.

Goss: Absolutely. I think we're talking about looking at 2022 I would say less profitable I think as you put it together. And it's not just for the cash renters. Your property taxes are also going to rise. It depends on the county of course and how fast your assessments go up. But nonetheless it's going to be some increasing costs. And again, the value of the dollar is going to be important. But global trade, in other words we're looking today, exports of agricultural products up 24% from the same period last year. Now, of course some of that is pandemic. But we're talking about boon in exports, the issue is imports have grown even more, even with these port issues. And so it's remarkable what the American farmer has done and will continue to do.

Yeager: Just this morning there was -- we're recording this on Tuesday by the way, so if you're like what happened between Wednesday and Thanksgiving, I'm not on tryptophan. But there was a story Tuesday morning about maybe the American consumer has actually been buying local and been buying at places, last Friday it was after I think we taped Market both Target and Wal-Mart said we're going to be fine, we've got everything we need. Has the American consumer saved Christmas for the retailers?

Goss: Absolutely, to a large degree. In other words, the idea that you can -- my daughter is always telling me I ordered it yesterday and I got it today on FedEx or whatever, not anymore, the idea that you can do that and depend on it. So you're going to have more in-store shopping of course relative to last year when we had the pandemic and we were social distancing. But think about this, Paul, Black Friday and social distancing, those two don't go together. I try to avoid shopping on Black Friday. But nonetheless, we are seeing buying local and I think the message needs to go out, especially for this part of the country is, when your local merchant provides you with a competitive price and good service, buy local. The spillovers are so much more significant and so much better for all of us that that's what we do.

Yeager: I said it jokingly before about your freezer, if it was full of -- we have a tendency in this country when we hear just a whisper of something to stock up on everything. Has that been part of this problem, this hoarding mentality?

Goss: You know, Paul, you ask that question. We do another survey, a manufacturing supply managers, we ask them about hoarding. 30% of them said the reason some of the supply chain disruptions are because of hoarding, in other words, building your inventories up just to protect yourself against these issues. So there is some hoarding going on, among retailers as well, and among manufacturers and in terms of the farmer you're talking about derecho happened, that in Iowa knocked out a lot of storage facilities. Chris can tell you obviously more about that than I could ever tell you.

Yeager: And then it's the just-in-time mentality. You talk about your daughter. We want things now and we may have to wait a week or two or nine months or whatever it is. We're impatient as Americans.

Goss: Absolutely. Nine months, are you kidding?

Yeager: We didn't make that furniture purchase. So the derecho, that was really the story changer in commodities. Has that been the biggest story that has led us to this issue and then we had a dry west and a dry Canada and some rain here in the east and it just all contributed, the death by a thousand paper cuts?

Robinson: We still had the second biggest crop, it was a very, very big crop. So yeah, we had some issues, and I think that was the last thing and we can talk about markets if you want to go that deep. But actually old crop corn and old crop beans, since the June, July highs, the 8 year highs, they have been trending lower. The only thing that has been trending higher has been '22 beans and '22 corn, '22 beans not so much but certainly '22 corn has been going higher. So then I think that moving ahead a lot of people, yeah, we're going to have a tighter supply. I think we had a much tighter supply than we actually did. The last two USDA reports, we have a plentiful supply, we don't have an overabundance, we don't have a billion bushel carryout of beans like we started last year with, that was a big hangover. The other thing we haven't seen too and I think I've got to worry about if I'm a producer is China has pretty much folded their hands when it comes to soybeans. Now, they were super aggressive last year. This year I think they were one-third less than what they were at this point last year and so people are concerned. But I always say, it seems to me like they frontloaded a lot of their bean purchases last year. So we'll see because at the end of the day if you're growing soybeans you've got to look at 2022. You've got $12.50 beans out there. The risk is I think for '22 corn and beans is the inputs will cost a lot more to put a corn crop in with the anhydrous. People say, you know what, I'm not going to plant the corn, I'm going to plant the beans. If you have everybody switch to beans, and I've heard every estimate out there from 5 million acres to 10 million acres might switch, then all of a sudden you've got a lot more beans. So if you're going to be planting beans your risk is that everybody plants beans and $12.50 beans now at harvest are at $10.

Yeager: It seems really good if you can get the $12.50. Chris kind of answered Phil's question a little but, but let's just get it up there for sure. Phil in Dresden, Ontario, Brazil is set to produce 144 million metric tons of soybeans this crop year, which obviously will affect what soybean prices will do. Is there an end to Brazil's ever-expanding soybean acreage?

Robinson: Well, if you're in South America and you just saw prices at 8 year highs up here, no wonder they're going to plant from fence post to fence post. The cure for high prices is high prices, this is exactly what happens. So we saw this back in 2012 when we had a big spike up in prices that is what the markets do, they'll address it. Now, if there's no problems with the weather in South America, if they have an uneventful year, if they have a Garden of Eden type of growing season they're going to have that supply there and I think that is what China is doing. China's like, all right, let's see what we have to deal with. They know they can always come back to the U.S., but I think that's your risk. So yes sir, I would say that's a concern. They certainly harvest more beans than North America at this point. So that is a big risk. And again, that comes back to what I just said, $12.50 beans don't let them turn into $10 beans.

Yeager: Get something on the books.

Robinson: Get something on the books, you have to hedge.

Yeager: Eric in Custer, Ohio had two questions. I'm going to use this second one here first. With higher fertilizer prices, does corn have to fight beans for acreage at the start of next year?

Robinson: It's already happened, it's already happening and if you can see it in the charts. Today is Tuesday, right? But we had a new contract high in Dec '22 corn around $5.60. Everybody is looking to see when are we going to get to $6, $6 is a big psychological level. And that may be what is going to happen this year. And we really won't know, like we did until this year, we have to wait until that March planting report. That is what we spiked our lows this year and took off. That is going to be a huge report. The two reports I'd be worried about are the January final production reports, that's always a big one, and they're not bad if they go up, they're bad if they go down, that's the risk. And then the other one you'd have to worry about would be that March planting, the acres report. That is going to determine a lot of what happens in 2022. So you're getting a gift here at the beginning of the year. It's a great way to be starting the year out to be at $5.60 corn and $12.50 beans. It's a much better place to be than if we were at $4.50 corn and $10 beans.

Yeager: All right, one question for you each here to wrap up. Dr. Goss, 2022, what is the biggest story economically that we're going to see?

Goss: I think higher interest rates and remaining inflation and government spending, government putting the pedal to the metal so to speak and the Feds pulling back on some of their stimulus but the federal government is increasing their stimulus through the Build Back Better program and the infrastructure bill that was just passed in addition to the normal spending that we're seeing. We’re talking about European style government spending and that is what we're going to see next year. It will be a big story and Americans are not Europeans.

Yeager: I'll let that one go. Chris, what do you think is the biggest story in agriculture or the economy in '22?

Robinson: I would say probably interest rates. It's going to affect your borrowing rate. If you've got your eye on property or land that you want to buy these may be the low point for interest rates for a while. I'm not saying we're going to go extremely higher but if the writing is on the wall interest rates are going higher. If you can do something about it now I think you try and lock it in now if you can.

Yeager: All right, Chris Robinson, good to see you. Thanks for participating in these wild adventures we do on a Thanksgiving holiday, appreciate it. Ernie Goss, good to see you.

Goss: Good to see both of you.

Robinson: Nice to meet you.

Goss: Happy Christmas -- Happy Thanksgiving.

Yeager: All of them, let's celebrate them all. We have the poinsettias already from DMACC.

Goss: That threw me off, the poinsettias.

Yeager: It's already after Thanksgiving, we're celebrating now. All right, thank you, gentlemen. Next week we are going to look at shaking up a niche market, just like we shook up this show this week, we're going to talk about a fresh local supply and Mark Gold will be in to analyze the markets. Thanks for watching. Have a great week.

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