Market Analysis with Chris Robinson

Paul Yeager:  Russian wheat exports continued flooding the market while harvest pressure and outside markets weighed in for attention for the week. The nearby wheat contract fell a quarter while the December corn contract added a penny. The soybean yields may be better than expected. While technical bots pushed the trade lower. The November contract dropped by $0.44 and the December meal contract shed 630 per ton. December cotton shrank by $0.53 per hundred weight. Over in the dairy parlor, October, class three, milk futures tumbled $0.98. The livestock market was mixed. October cattle improved $0.15. October feeders cut 533 and the October lean hog contract declined a dollar 60. In the currency markets, the US dollar index added 35 ticks. November crude oil fell a penny per barrel. Comex gold lost a dollar per ounce and the Goldman Sachs Commodity Index shed nearly ten points to settle at six 1160. Joining us now, market analyst Chris Robinson. Hi, Chris.

Chris Robinson:  Good to see you. Good to see you.

Paul Yeager:  Let's talk with wheat like we do. Demand is maybe starting to pick up, but we still have this Black Sea issue flooding the market, altering prices. How much longer can that narrative play out and impact U.S. farmers?

Chris Robinson:  I wish I knew. I mean, this is the year or if you followed fundamental if you were a fundamental trader, you would have thought on multiple times we should have had much, much higher prices. And every rally was met with more selling from Russia. So it was really something I think it would be studying this for a while because with all of the risk and all the worry every week and we went home, what's going to happen? What's going to happen? And every time we got a good dollar rally to rally, it did not hold. So at the end of the day, I think that, you know, we're trying to find a bottom around here were two year lows. But then we get into this game, it's like it's like playing mousetrap. They go back and look for what's the next level, What's the next level?

And at some point, we're probably going to have like a big reversal. But boy, anybody that's tried to buy that bottom in this past year and no, it's it's been very, very difficult. And it's been especially hard because we have had a couple of good rallies and you think, okay, we're going to be alright. And then they're just they've been so short lived. It was a really, really tough marketing year for wheat.

Paul Yeager:  So with Co-Bank saying this week that Russian wheat exports remain the biggest threat or risk to U.S. wheat elevators, what do you do if you're sitting on December wheat or March wheat is selling yet? I mean, it's hard to when you say engineer.

Chris Robinson:  Low, we're at two year lows. Right. And it's it's really hard to sell into a dollar or $2. We just dropped $2.12 in six, seven weeks ago. We were it looks like we're going to be alright. So I think it's hard to do that if you don't want to sell it, don't kid yourself. I mean, there could be another another one more downdraft. If you go back and look at 2013, which was the last year, we had kind of similar market action to this both corn and wheat. From September to December, they dropped a buck. So for somebody to say, no, it's it can't go any lower, I think that's disingenuous. I think that you've got to keep a floor. If you're going to store it, you've got to keep a floor. And I just you know, you don't want to spend too much because we're already at two year lows, but doesn't mean we can't go lower. So store it, protect it if you have to sell it. I mean, if you have to sell it, please take a look at re owning it because we are so overdue for a correction higher. And I don't think that you that's something where you sell it and then you're going to run it for next week. You re on it for three or four months.

Paul Yeager:  You could also probably say some of the same things about corn right now too.

Chris Robinson:  Absolutely. Sitting at two year lows with the commodity funds short but short corn and short wheat. So they're leaning on that market. You know, they're still long soybeans. They're actually long the whole soy complex. Although we did get some sell pressure here this week. They sold some last week. I'm sure they sold some more this week. You know, you mentioned that stat earlier. I think we're down $0.40 on the week for soybeans. And what's what's been driving that is the yields are bigger. The first stories of yields are better than people thought. A lot of people thought that the two weeks of heat was really going to clip the yield and it hasn't. And now, you know, this is a big weekend. A lot of guys are probably going to get rolling and we're going to start, you know, the rubber is going to meet the road and we're going to find out what the yields actually are.

Paul Yeager : Let's put a bow on corn for just a moment on that deferred contract. Or do you see any hesitation from people to pull the trigger on a sale or even do a re ownership that you're talking about? I mean, is there hesitation or is there a what more can I do, throw my hands up in the air?

Chris Robinson:  Well, I think it depends on what you've done in your marketing year. We had over 100 days of corn north of $6. You know, we had opportunities this year. We go back ten or 12 years ago, we would get above 433 or four times. Right. And it didn't it wasn't very long lasting. Soybeans. You know, we were well above $14 for a while. Wheat, I think, was a different story. It just was basically drifted lower with a couple of returns. So it depends on where somebody hedged. We had a lot of opportunities to hedge or sell corn around $6. So if you're unhedged and you're you're thinking, well, you know, I don't want to lose down here are these two year lows, then I think you've got to make sure that you keep some sort of a floor under it, set it and forget it. 

Is there is there carry that you can capture? We're going to get into one of these markets now where these are going to be carry. You and I were talking about this before. You've got to do the math because make sure you can capture that carry. It might make more sense to sell it and buy a T-bill where you can get 5% guaranteed rather than take the risk of not capturing the carry.

Paul Yeager:  Which could also be your play in soybeans, too. Absolutely right. So, I mean, you mentioned the capture, the carry opportunity. Technically, we've walked out, washed out 50, 102 hundred day moving averages. So technically, what does that tell you before you even look at the fundamental story?

Chris Robinson:  Well, technically, we're halfway back. We had our entire marketing year, one from 1130 to 14, 35 of those lows this summer. And when we got to 14, 35 people were talking about $15. So we're kind of back here to this 1280 1290 level. It's a very, very big report. You and I have talked about this in the last two years. We've seen so many market moves where it moves X, it comes back half of X or or it's we've seen it over and over again. That's the influence of these computer traders. It's been an amazing thing to watch. So we're at a key level. If you're thinking about selling soybeans here, the big number was $12.33. Why is that a big number? $12.33 puts you in the top one third of available prices for the whole year. If you're one of those person where you try $11.

Paul Yeager:  Let's get to livestock for a moment. Cattle on feed came out today. The headline is you the United States cattle on feed down 2%. Is the headline accurate?

Chris Robinson:  Yeah, as expected and friendly supportive. You know we've seen this for the last year and a half right. It's been the biggest bull market. Go back and look you know we've had a couple of corrections but the demand has held up. And despite all the other stories that are out there about, you know, are we going to have a recession, are we knocked out of recession? I think I think that the the consumer is going to be the person that's going to put the top end for for cattle, for cattle as people keep buying it. And as long as the herd is smaller than it needs to be, you know, these are we're at record high prices. What do you say when your record high prices?  You know.

Paul Yeager:  I'm going to go to something you said your newsletter today, but it's similar to both cattle and feeders here you were talking about when people ask you are the highs. Yes, I'm guilty of asking that question, but what does this pattern say? Is there anything different as we have hit a high and now kind of trended lower? Is there anything technically you see in that feeder chart?

Chris Robinson:  Not really. I mean, the feeder chart, I think that there's a trend line down there that we've hit a couple of times. The last time we were over there was in May. That was the last correction we've had. That's always there's always a risk that if we do have some something, change, somebody say something, some politician says something, something happens where something unexpected happens. You know, that we could have a a bigger correction lower. But technically, you know, you know, we've had so many outside days and reversal days and key reversal days. This market has just been full speed ahead. And it's been something really to watch. Sooner or later it's going to correct. But again, I think as long as the demand is there, you know, we may see these prices continue.

Paul Yeager:  I'm looking at hogs to see if there's anything different about them. Is there?

Chris Robinson: You know, the hogs had a difficult year. The first six months we just kept turning lower, lower. That was the spread. I call it the spread. This year, everybody wanted to be long cattle and they would hedge it by selling lean hogs. And it's just kind of a an economic decision to it's harder to rebuild a cattle herd just because of biology than it is to rebuild, You know, the hog herd. And, you know, we've had our fits and starts. We've had a couple of times where looks like we were about to turn the corner when the Chinese about two weeks ago decided that they were going to really hit the pedal and just print money to try and get turn their economy around. People were like, well, that money's going to come through. It's going to help pull up demand for for our lean hogs. But yeah, I think that you'll probably continue to see that spread, especially if people are want to stay long. And the interesting thing is the manage money, the funds, they're actually bet long the entire protein complex. So they're bet long with the producers.

Paul Yeager:  And we are long out of time. Chris Robinson, good to see you. Thank you so much.

Chris Robinson:  Thank you.

Paul Yeager Appreciate it. Hold tight. We're going to pause this analysis and continue our discussion about these markets in our market Plus segment, you can find both, plus an analysis on our website of market to market dot org. As you head to the field this fall, take us with you. We want to make sure that you keep up to date on commodity market analysis and news around agriculture with our three podcast offerings, two of them come out on Friday and the third the Moto M is released Tuesday. Subscribe or follow where you get your podcasts today. Next week we look at the ever moving fertilizer market. Thank you so much for watching. Have a great week.

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