Market Analysis with Chris Robinson

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Yeager: New contract lows in wheat this week. Even with a shrinking world supply. While corn tried to hold on before harvest, pressure fully enters the futures market. For the week, the nearby wheat contract lost $0.15 and the December corn contract declined $0.02. China remained out of the market for U.S. beans, instead opting for more South American products. The November soybean contract fell $0.28, while October meal decreased to 90 per ton. December cotton shrank by $0.50 per hundredweight. Over in the dairy parlor. October class three milk futures lost $0.98. The livestock market was mixed. October cattle lost three. 67. October feeders cut 658. And the October lean hog contract expanded by $1. In the currency markets, the U.S. dollar index was flat. October crude oil fell by 217 per barrel. Comex gold added $137.40 per ounce, and the Goldman Sachs Commodity Index was off by more than five points to settle at 540 305. Joining us now is regular market analyst Chris Robinson. Hello, Chris.

Chris Robinsonr: Hello, Paul.

Yeager: This wheat market doesn't seem to change. It. Except one thing happened that you just don't want to talk about. All three of those contracts. Contract lows. How much longer can that market not attract buyers as it keeps going down?

Chris Robinson: Well, there's that old expression, right? The cure for low prices is low prices. But every time you turn around, you know, there's just more bearish news out there about. We had a huge crop and it's just ironic right. Farmers do all they can to grow a good crop. And then you know you get one. This year has been very difficult to market. We have 1 or 2 chances. We're $1 plus off of our June July highs. We had that one little blip up to June-July. And that's why this has been such a hard market year. You get these moves. We think we're going to go, it's time to go. And then, you know, we grind it away. So but wheat is definitely wheat doesn't have a story. It's there and again we've produced too much of what the world wants less of. Eventually we're going to find a bid down here. We're near five year lows depending on which contract you look at. I don't care if you look at Casey, Chicago or even spring. And so the good news is, is that usually when we start getting down that level, you'll start to see some, some more interest buying coming in.

Yeager: Do you have any ranges lower on this one?

Chris Robinson: Well I think the biggest risk is if we get we've already seen it when we go from the five handle to the four handle, then people start doing what they always did. they go back and look and say, okay, where's where the last time we were this low? So we're probably going to go back to those, you know, the 2013 lows somewhere in there. That's probably a risk. So I'd say there's probably another 40, 50 cents worth of risk. And again it could turn at any point. The one saving grace is yes the speculators are bet short. But it's not massively short. So it's small enough that if something changes, you know, they could flip and turn us around. But yeah, it's, it's you know, people are going to store it. Ignore I would say you have to store it. And you know if there's 50 more cents worth of risk, you have to keep a floor under it somehow.

Yeager: Last week we had some assistance from corn. This week, corn, two cent loss on the week. Do you have to take that as a good sign that it didn't fall further?

Chris Robinson: I think that if corn hadn't, you know, we're $0.35 off the low corn had a great week up until the finish today. We finished a couple cents lower, but since that August 12th report where we made a low of 3.92 corn, you know, we hit almost 4.25 for 25. A market likes to go to those round numbers. The psychological numbers. So yeah I think it could have been a lot worse if corn hadn't had this little blip. I don't know what's driving it. It's again, we've had consistently good people stepping up and buying corn consistently from Mexico and our end users. So that's been a positive. There was a little bit of worry that we might get an early frost that was out there last week. That's always good for 10 or $0.15. But as we get closer and closer to where the rubber meets the road, we're going to find out what the yield is. Everybody's been, and rightly so. Just disappointed about the yields that came back, even from the crop tour or whatever. Analysts are looking at. But it's a big crop. The question is, will we continue to see good demand, and are we going to hold you know, it all comes down for I think psychologically these corn's got to hold that $4 level. I think if we can hold a $4 level, then there's some possibilities ahead. But if I'm a producer and, again, that's nice to see. We're from 390 to, to almost 425. Any year where we've had an 85 cent trading range $0.35. It feels like $3. So it was a little bit of a gift. A couple, about a two month high. So hopefully we'll get a little bit more here. There's three weeks left in this month. Hopefully we get a little bit more gas on the fire.

Yeager: Do you get the sense though, that that harvest pressure, I mean, knowing and confirming whether it's Stone or Allendale or whoever is doing the private estimate that keeps saying, yeah, yeah, yeah, it's big. So you mentioned “store and ignore” with wheat. Same story going to happen in corn?

Chris Robinson: I think farmers are going to do that. Typically they like to store corn and they typically will sell the beans off the combine. And as far as wheat, they'll sell what they need to sell and wait. I mean, you go back, you know, wheat especially has always been a difficult market to trade and or hedge corn. I think that's probably where the biggest risk is financially for the whole country. When you look at, you know, where our farmers are exposed to price risk, it's in corn. Everybody really needs, you know, the high of the year for 79. Are we going to get back there? I don't know. This is going to be the first time in a long time where we might not get back to the spring insurance prices, which was 470. So I'm hopeful, but I'm not blindingly hopeful, you know, hopes it's always nice to be hopeful, if we're lucky. In my opinion, we may get one more chance. There's a gap. Back in the July 4th weekend where we were making highs, highs, highs. We gapped lower. It comes in around 434 435. That's going to be the big test. If we can get these guys to push us up there. You may see some more fun short covering. They bought 35,000 last week so they were only short 110. It feels to me like they probably bought another 15 or 20 this week. We'll know when they get the data today. And at this point, if I'm long corn, if I'm a farmer, anybody that's watching this, you've got to hope that those guys start to feel a little bit of heat and cover some of those positions. It may give us one more blip up, and all I can say is if we get there, you got to be ready to do something.

Yeager: Talk about buying China, they bought Argentine and Uruguay beans. I don't see the United States. How much longer can we hold out or are we stuck with no sales from China? Now go to a plan B.

Chris Robinson: I think that's one reason we had a little bit of a blip earlier this week with when the Chinese, the negotiators, said, we'll see you in two months. The market did not like that and we had a really good rally and relatively really good rally in soybeans. We had a rally at about 80, $0.85. It looked like we were going to maybe take one more shot at 1075, which is roughly the high for the year. And, and, you know, in three days it all went away. Now, what's interesting is yesterday, which was Thursday, we had a very vicious, sudden turnaround. And all that was was if you take that move, it was $0.80. We came back halfway. Somebody I don't know exactly who it was, but somebody bought that. I don't know if it was computers, the algorithms or whether we see that a lot in these things where you have a big move, you get halfway back. Now what we need is more of that for the next week. But yeah, China's been gone. But we're still running. We're about 2 million metric tons ahead of where we were this time last year without China in there.

Yeager: So who's buying it?

Chris Robinson: There's a good question. It's always goes to unknown. Right. Well, no unknown is when the USDA says this is unknown. But I honestly think it's just the function of the market. You know, soybeans were near one year low. We were at the bottom of the trading range. So if you're an end user, you know, you're going to step in there and say, all right, we're going to start buying here. You know, and I think if those people have a longer term outlook, that's the key. So we've got to get through this month. But there's some possibility there.

Yeager: Well let me ask Matt G's question a little bit. And it extended I kind of asked the first part right. If a trade deal cannot be reached with China soon, is it better to sell beans out of the field and hold on to corn to capture the carry in the market?

Chris Robinson: I would say most farmers are going to store corn anyhow, and they may say they're going to try and store beans, you know, statistics statistically, basis gets better. Usually January, February for beans. That time of the year. So if you're going to store beans, keep a floor under it. You may want to be trying to look for that basis to get better. But remember basis is one thing. Your flat price is what you can defend. So if we were to lucky enough to get back, you know, north of 1050, 1060, I have no problem with people selling it at that, especially if you're making money. And again, you can always re-own it. Right. If you sell into a dollar rally and you're worried, it's going to rally another dollar, as soon as I pick up the phone, I always tell clients, re-own a part of it. You know, you just made a dollar. Hold back. Ten, 15, $0.20. Now with these shorter dated options, you don't have to go out and spend 25 or $0.30 to buy a long term option. You can protect yourself and you can stay in the game after the sale. So I think that if you're trying to play that basis game, I'd look at that in the beans.

Yeager: Real quick. Cotton, you think the support is finally here?

Chris Robinson: It sure.

Yeager: Looks like it, right? I mean, we're.

Chris Robinson: At five month lows. Somebody has been stepping in here and buying it. If I did the charts this morning, a lot of what I do is chart based. So it's holding in there again that's very, very sensitive to what's going on with China. I think that, you know, 65 cent cotton is not what most guys want. But the thing is you don't want to let 65 cent cotton turn into 60 cent cotton. So I would say this, keep it cheap, put underneath it if we're lucky enough to get a turnaround, be ready to sell into it.

Yeager: Live cattle. Other thing, other side of this happening. Is this the beginning of the end?

Chris Robinson: It was the first lower close for live cattle. I think in seven weeks or 11 weeks. And for feeder cattle, the same thing. It was either seven weeks or 11 weeks for seven weeks we've had and I'm talking about on a weekly basis. So that's number one. Number two, we're all familiar with the fact that people on the East Coast and West Coast who never talk about commodities have suddenly gotten interested in cattle. It's shown up on a lot of stock index shows. So that's kind of a late warning sign when somebody that's never interested in something gets, gets it grabs their attention. It could be a sign that we're kind of long in the tooth. And let's say we are, you know, we are long in the tooth. We could have a ten, 15, 20 cent correction in cattle and not have it be completely meaningless. So it's a possibility. The big thing I'm worried about and we dodged a bullet today. We had the unemployment numbers. Today. The stock market I believe the S&P made a new all time high. So there's a big correlation between if the stock market stays in good shape. I think that's a positive for the cattle market. The first thing these guys will do if we do have a correction in the stock market, they will pick up the phone and they're massively long cattle. The first thing they do, you've made a lot of money in something. You're losing money over here in stocks. Let's take profits on the stuff that we've made money on. That's the risk. If you're long cattle.

Yeager: What about hogs? Are you long them yet?

Chris Robinson: You know hogs. It's funny, there was a lot of argument out there about the last pig report. They they got the numbers wrong. I'll tell you one thing. Mr. Market thinks you need to be long cattle. I mean, excuse me, long cattle, long lean hogs. New contract highs this week. But at the same idea, I also if if there was a hiccup in the economy, the first thing people are going to do is say, you know what? We're not buying steak anymore. We're going to buy pork. You may see a shift towards that anyhow. So I think that as long as the numbers are the way they are right now, the supply is a little bit tight. If I'm a hog producer, I want to stay long. I want to make sure that I'm defending it because again, we go to bed one night, somebody says something. We break, you know? Ten, 12, $0.13. And now again, you don't have to spend a lot on these options. Now you can defend that. So I'd say defend the revenue. Stay long if you're worried as you're selling a pot load or two, you can always stay in the game. The best strategy for the last four months has been anytime you sold two pot loads, we own one for something cheap and that would have really helped you make you feel better. As you watch prices go higher.

Yeager: You make us feel better too Chris, when we see you. Thanks, Chris.

Chris Robinson: Thank you.

Yeager: Sir Chris Robinson, everyone, you have been watching the analysis segment and in a moment we will continue our discussion in an online only segment that we call Market Plus search Market Plus with Chris Robinson. Wherever you get your podcasts to hear that conversation, or go on to our website at Markettomarket.org. Thank you to those of you who've been in our inaugural year of the Market Insider newsletter. Sign up for season two on our website of markettomarket.org. Next week we get into an extended livestock market discussion. Thank you so much for watching. Have a great week!

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