Market Analysis with Ernie Goss and Chris Robinson

Paul Yeager: Coming up on market to market. Cattle news tied to kitchen table economics. Come home in a roundtable discussion of the economic state of affairs, commodity and Economic Analysis with Chris Robinson and Ernie Goss next.

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Speaker: This is the Friday, November 28th edition of Market to Market, the Weekly Journal of Rural America.

Yeager: Hello, I'm Paul Yeager. The headlines after the turkey is sent home with your uncle and cousins usually revolve around shopping just before Thanksgiving, the government released retail sales from September, again delayed because of the shutdown. Retailers posted their smallest gain in four months with a 2/10 of a percent rise in sales. This leaves few strong signals of what the holiday season will bring to the nation's cash registers. The cost for energy and tariffs were passed on to consumers in the form of higher prices. In September, the producer price index was up 3/10 of a percent the year over year figure was up 2.7%, still adding fuel to the already burning inflation fire. What has transpired in the past year is part of the larger discussion this week. 

Ernie Goss is the McAllister chair and professor of economics at Creighton University, based in Omaha, Nebraska, and Chris Robinson is founder of Robinson AG marketing and a regular market analyst on the program. We'll get their insight in a moment on the economy here. 

But first, a programing note. We are recording this week's show on Tuesday ahead of the Thanksgiving holiday. So in the markets, much of the movement so far was muted as traders made their way to the sidelines and a reduced trading schedule. For the week, the nearby wheat contract stayed flat for the third consecutive week, while the March corn contract added a penny. The market waited for China buying to resume in the soy complex. The January soybean contract was even while January meal added $1.20 per ton. March cotton expanded by $0.40 per hundredweight over in the dairy parlor. December class three milk futures weakened $0.21. The livestock market was mixed. February cattle fell 7.45. January feeders cut 7.5, and the February lean hog contract added $1.30. In the currency markets, the U.S. dollar index was weaker by 49 ticks. January. Crude oil lost $0.14 per barrel. Comex gold added 5340 per ounce, and the Goldman Sachs Commodity Index was down more than five points to settle at five 3960. Now, to lend us their insight on the commodity and economic picture, Chris Robinson Ernie Goss. Good to see you both.

Chris Robinson: Good to be here.

Yeager: Ernie, of all the weeks to have you booked, big story develops out of Nebraska. That's going to have major reverberations in the food we eat and the price we get. And absolutely. And the economics of the state of Nebraska. How big is this announcement by Tyson to close this plant? The notes that I have is they push through 1,000,000.8 head, 1.8 million head a year, 5% of the capacity, and 95% of Nebraska's cattle could go through there on numbers if they all went through there. Accurate. What's that going to mean?

Ernie Goss: Well, you said it better than I. That's it. Big a big deal. And is that, that plant accounted for about 5%, 5% of U.S. beef production output. And that of course is huge. And if you compare it, if you take on their plant in Texas, the one they're downshifting a bit to two combined is seven, 7 to 8% cut by Tyson. Now Tyson has lost value and investors see it went from $100 a share three and a half years ago to about $57 a share, which of course is about 40, 40 to 45% reduction. So something's going wrong with Tyson and it's not good and it's spilling over. Part of it's coming from the beef industry itself, but also from Tyson. What they've done and not done.

Yeager: Well, what they've not done is had a lot of animals come through. When we're talking about low herd numbers, it's been an industry thing. The prices, though, aren't going down. The president's getting involved with what's going to give first. I mean, is this, is this the first sign of more to come, or is this as bad as it's going to get for the beef industry? The closing of this plant?

Goss: Well, I think it's the, we're going to see better out in to come in 2026. But anytime you get political meddling that's not good. So if we have politics enter it will, it could get worse than what we're seeing right now. Right about 60 miles down the road from Lexington is another plant that's just opened sustainable beef. And my team did an analysis of that plant. And we're talking about a plant that's much more automated, much more environmentally friendly. So doing some of the things that the new plants are doing, one of the problems with this plant has been around since 1990. It went from the population of that town. Lexington went from about 6,300 to 11,500. So you can imagine we're losing 3,200 jobs. What it's going to do to that community. But what does it do to the industry is what we're talking about here, I guess, is part of this story. The labor issue that we're just not talking about.

That's some of the issue. That's certainly an issue. I think the bigger issue is just the cattle supply. And of course, with the drought conditions that we had, the screwworm issue going from from Mexican cattle going across the border, not going, not going across the border.

Yeager: So, Chris, what's the market reaction? We saw the market reaction Monday was limit- down lower. Tuesday there was this expectation that we were going to do the same thing. Did not kind of cut some of those losses down later in the week. Next week. What's the long term impact of losing 5% capacity?

Chris Robinson: Well, I think it's going to be are there going to be other plans are going to be closing down because it is it's end of the day. It's a business decision. And this has been brewing, brewing for a while. So we'll see if it if we get more closings because we have the herds too small. You have to get you have to have some motivation for ranchers to hold back the mama cows. There's been all kind of talk about are they going to are they going to, you know, there were rumors that they were going to pay people because you have to rebuild the herd. It's not like when you have the problems with chickens or eggs. It can come back very quickly. Even with hogs comes back quickly. So that's that's the problem. And you know, you talked about prices. We we had a all time high. And now we're now we're back to basically trading $2 fat cattle, which years ago would have been crazy. And we got $3 feeder cattle which years ago would have been crazy. We went from 380, you know, we we had a 10-month rally where we rallied 111 points in feeders and then in five weeks, we lost 75% of that. So and it all started when the talk was, well, we're going to bring up we're going to bring up cheaper beef from Argentina. And that's all it took. Was that so that that emotion drove it more than anything. And this is why commodity trading is so difficult because there's there are the facts. There's the side of the herd, there's the supply and demand. And then there's the emotion. And when people get when the exit doors get small, when everybody wants to get out. So we've done a lot of damage. We've basically given back 75 to 80% of the rally that we had in the last year. So we've hit that reset button. The question is, is this going to be like 2014, 2014, 2008 to 14? We had record high prices and then it took two years for prices to come back down. So was this the first shot across the bow? We'll have to wait and see. But I think that we're going to have to watch and see if there are more plant closings. And but definitely the market feels oversold now, but doesn't mean it can't go lower.

Yeager: So Dr. Goss, I'm going to guess in your surveyed states, when they hear talk like that it changes their sentiment. Already facing higher inflation, higher interest rate. Yes. We've had a little relaxation of that. What's the outlook here in your states.

Goss: Not good Paul. This of course is a survey of bank CEOs in rural areas and rural areas of ten states. The number the negatives are getting less and negative, I can put it that way. But what we're talking about, the U.S. economy and the regional economy, we're talking about take a man with his hand in the fireplace and his hand in the refrigerator. On average, he's doing okay. That's what we're talking about for the U.S. economy. The regional economy, the rural areas is the refrigerator, the and the the other side. It's not a fireplace. It's warmer though. So what we're doing on average, the U.S. economy, the regional economy is doing okay, but okay is not good enough. We're looking at, for example, the Atlanta Fed says 4.1% GDP growth in quarter three. Now that's a lot to do with data centers, data center expansion. That's investment. But unfortunately for the consumer out there, he or she can't eat a data center. I mean, that's investment. It's long term. What how much does that add to our welfare, our economic welfare. And that's the real issue right now. And and back to what it's doing in the rural economy. Those of our survey participants who are in cattle country say prices are good and strong. And that's that's a good point. But in the grain side, not much at all. We're talking about real issues. There.

Yeager: When inflation gets talked about at the election time, you hope that something happens in the months that follow. We haven't seen that. There's arguments of oh no, prices are lower. But when you report producer price index, consumer price index, those numbers keep going up. What's the real story.

Goss: They're going up. That's the real story. As you had it. And we economists and the fed is going to, is caught between that hot and cold as well. And what they need to do, in my judgment, is reduce interest rates by a quarter percent on December the 30th. That will bring the prime interest rate down to six and three quarters. Okay. Right now, farm equipment sales in these communities out there, the rural communities, not well at all. And that spills over into the broader economy, particularly in Iowa. And that a quarter percent won't it's not going to turn sales around, but it's not going to hurt. It will be helpful. And that's what we need to see.

Yeager: I believe in your survey last week, land values, 58% of your survey said land values are going to likely fall by 3% next year. Is that why do you say that?

Goss: Well, it's 3 to 4% is going to be the outlook. Well think the rural economy is just not strong. We're talking about again look at corn prices. Look at wheat prices. Look at soybean prices. Now a lot will depend on what happens at unfortunately at the DC level. What about Argentina beef coming in? I mean there's, there's a heck of a lot of resistance to that. And there is a primary there are a few years from now, but nonetheless, I was the first on the Republican side anyway. So there are political issues and we need to see higher prices. But at the same time, you're talking about, say, 20% of overall farmers, according to the bank, CEOs are below breakeven. They're in negative territory. Now, that includes the beef persons, individual farmers, ranchers and the grain grains much higher underwater.

Yeager: Let's talk about those prices in grain. I'm going to look at wheat for a minute, Chris. Three weeks in a row of not moving. And we have this target of ending Ukraine - Russia war. That might give some stability to rising the wheat price. Why the movement sideways so much?

Robinson: Well, we have a tremendous oversupply of wheat. We have the most expensive wheat on the planet. First of all. And lastly, we just came off. In October, November, we were at five year lows. So we've had this three year collapse. Really. You go back to work, the long term charts. I do a lot of charts, probably too many charts. But when we went from really extensively higher prices because of COVID, because of inflation, you mentioned inflation. If inflation really comes back, that might be one thing that would bring up the price of all commodities. So we'll see if that happens. That's what they teach you in econ 101. We'll see if that happens. But we're coming off five year lows in wheat. There's a lot of wheat out there. The Soviets and the rest of the world is producing more wheat every time you turn around. That's a bigger crop than we thought. So you've got that stuff weighing on it, right? We did have a 50 cent rally, but it was short lived. We had a rally also in corn, about a 50 cent rally was short lived. The most explosive rally we had was because of the idea that the Chinese were really going to come back and and buy our soybeans. Promises were made. They were by 12 million metric tons. They've taken about two, maybe a little bit less than two so far. But the market, we rallied $1.50 in a month, which is that's the best rally we've had. We were at 18 month highs in soybeans. We're still relatively high, but we've given some of that back. So I think for the farm economy to get going again, we've got to get that that lead back. We've got to get okay, we've got this demand, especially. And people talk about China and corn. It's really that's not really where the demand is. The demand for China is soybeans. And I think a rising soybean market will help pull up corn and wheat with it. That's what I'm hoping for.

Yeager: Well, let's stick with soybeans. I'm going to get to you in a moment. On a soybean question here, Ernie, especially with China. But Chris, on this $11 mark, what is someone are they are you calling up making some orders right now? Are you placing some sales.?

Robinson: When we rallied $1.50 in five weeks, we're basically just on speculation that the Chinese were going to come back and to see that, that they actually really haven't made those buys yet. They're holding back. They're keeping their hands like this because they're going to wait and see. Are the tariffs going to be ruled legally? And also what's happening with this whole issue with Taiwan and Japan that came out today, where it's taken off because if they make a promise when they have that meeting in South Korea, it's a memorandum of understanding. Right. And then what they can say is, well, yes, we'll take a look at that. But the other problem is the grain coming out of South America is so much cheaper than here. So if you have a choice to buy up here or down there, they may say, yeah, we'll look at your market, but we're going to buy the cheaper market. So that's the problem. That's the last problem we're going to we've had a big supply coming out of South America. They're going to plant more acres right now. They South America sees an opportunity to take away more world share from United. The U.S. farmers. So that's really the issue there. We've got kind of the perfect storm of bearishness. So hopefully we'll get at least, you know, maybe $11 beans are going to be our worst price for the year next year I hope so. If you look at November 2026 beans, we're, I think 1118 is where we settled today. You know, a month ago we were down. We were worried about sub $10. So I think you take advantage of it. Make sure you know what your breakevens are and we'll hopefully get some sort of a recovery next year.

Yeager: What of his? What he just said gives you. I've been asking all these negative questions, Ernie. Let's go positive. What gives you the most positive?

Goss: I'm an economist. We don't go positive.

Ernie: Oh, I thought it was “You're out of hands” when you're an economist. Sorry.

Goss: That's right. But one thing we haven't discussed at all, much at all, is the cost. On the cost side, it's not just prices are are low. We've cost or high. In other words, we've talked about again data centers. Now what does that have to do with agriculture. A lot to do with natural gas prices pushing up natural gas prices, electricity prices. And of course, those are fundamental to the farm sector as it is to the ranching and also those of us in the suburbs as well. In cities. So it's it's there's real concern out there about inflation. And the fed is this may I expect a rate cut on December the 10th, but that may be the last one for some time because the inflation numbers are still too high. Where the goal, of course is 2%. Well, we're at now about 3%. If you talked earlier about the retail sales, 2/10 of 1%, and everybody says, wow, it's great. No, it's not good. Multiply that by 12. We know what that is. That's less than inflation rate. In other words we're not getting retail sales. What we're seeing is what's called the k-shaped economy. Now wish I'd invented that. I didn't. But the upward part those individuals, those families, those businesses, even the businesses are doing well. The other side, the other part of that down. And that's where we're seeing the real problems.

Yeager: Ernie, I think the first time I talked to you back in like 2009, 2010, you were talking about that, is that giving you flashbacks? Are we in a flashback to that time and place?

Goss: We are potentially there? In other words, that was the great financial crisis, the GFC, so-called. Yes, we're not there, but the housing sector now, separate from the ag ag side, we're talking about today, the housing sector is looking very problematic. And the we talk about how much consumers are, they're spending this holiday season. Where is the buy now, pay later, buy now and not pay later? I mean there are some real issues there. I mean, stretching from the federal government at $38 trillion debt all the way down to college students who aren't paying back their former college students, not paying back their loans. I mean, we got some debt problems. I hate to be focusing so much on the negatives, but somehow you as what? Churchill, I think once said, we try everything and we finally get to the right solution and we'll get there. But political meddling does not help, though I'm concerned about political meddling.

Yeager: Well, it's a follow up to what Chris said about China and soybeans. That was a big story on this program. And anybody that trades commodities. What's the rural mainstreet concern about our back and forth and political discussions with China?

Goss: Well, the most of the support, most of the farmers, at least as reported by the bankers, are positive about the trade, the tariffs and trade. Now, I think and I get asked why is that? Why? How could they be? Well, I think they believe, at least in my, my judgment, they believe that the president is negotiating and that's how you negotiate. You don't do, you don't negotiate like an economist. The economist comes in and tells you that, well, if you'll just give me this, I'm okay. No, that's not how he negotiates. He's a negotiator. He wrote a book on it. Ernie Goss did not. So the I think. But I think there's a it's getting iffy there. I mean, I mean, support for tariffs. I mean, we've seen what happened with China. That was a huge, huge loss. And my concern is once you lose a customer, that's that's the U.S. customer. And you go to Brazil, do you then come back to the U.S.? I don't care what kind of deal you cut out there in Beijing, did you. Is it going to is it going to work? Is it going to happen?

Yeager: All right Chris, when your phone rings on Monday morning to hear what Ernie just said, what are you going to advise them? Are you is this a hold market, a sell market? Because I know he said the worst is probably behind us, but it doesn't sound real positive.

Robinson: Well, so far we have no weather issues in South America. So if you're looking for something that's going to help rally things, the quickest thing to clean all this up would be to chew through the supply we have. We have to wait because of the shutdown. We've got to wait till January to get. It's going to be a gigantic data dump to find out exactly what the numbers are. There's arguments about what the yield was, what this was, and former already came out with their acres for next year. They're going to we're still going to plant a lot of corn acres north of 90 million. We're going to plant less, I think 4 million less corn acres. And I think 3 million less soybean acres. But we're still going to plant a lot. So that's going to be and the decision is going to be made. Well, do I plant $11 beans or do I plant 425 or 430 corn? I mean, we just got we had new crop corn hit for almost four 7475. Now the highest price we had all year for 2025. Corn was I think was four 79.75. Most producers out there, and they need $5. Unless there's some magical way where you can cut the input prices. You were talking about the economy, the the it doesn't matter. The inputs are there when they go to buy their seed and their and their inputs and their phosphate and everything they're going to do that's that's still expensive. So it comes down to a math problem. And I think that like everything else, I mean, it's people will keep going as long as they can, but when they can't that'll be the issue. So defend what you can. Make sure you know what your breakeven is. I think a lot of guys you need to sit down with your accountant and know, because there's an old expression that I didn't invent it either, but nobody needs practice farming, right? It's a business. At the end of the day. And if it costs you $5 to plant something and you sell it for $4.99, you can't make it up in volume. You know.

Yeager: Correct. As we look at a couple of these other things, cotton continues five year lows. Another one of those exports that we could use help on from somewhere. The hog market though has been able to rebound a little bit. Do either of those I mean because with cotton is the bottom in and in the hogs do they are they the count? I mean, I'm trying to find some positives.

Robinson: You would think so, yeah. What I'm doing here. Yeah. Well China is the biggest producer and end user of cotton. They like our cotton because we have the highest quality cotton in the world. A lot of stuff they grow isn't as good, but it's really easy for them to sit on their hands and wait, which is what they've done. And that's why you see cotton is just made a new five year low this week. If it takes out $0.60, we're going to be back down to where we were. So this I think that's going to be something we're going to have to look ahead, because it is a smaller part of the economy. But it's still impacts what happens in, you know, in the southern part of this country. Are they going to plant more beans? Probably what's going to happen is somebody's going to say, why would I plant cotton at X if I can at least plant $11 beans and make make a living. So you'll see guys make that decision. Because as I said, it's a business. It's not. And some farmers are in a situation where they can hang on longer. They've got more assets, more weight. The people that are going to be the most stressed are going to be young guys who are borrowing money to put. And again, then it's just a business decision. So the positive part you mentioned about lean hogs, lean hogs have rallied with the entire protein complex going up until they shut the government down, managed money, had a record long bet they were long 146,000. So you had kind of really good support level there long term. The lean hogs are at a really big support level here. Around 78, 78, $0.79. If that holds, you may see another thing come in. And if we get a I hate to say it, but if we get another big rush of inflation that generally helps commodities because then the financial community says, oh, we want to own things. So if you look back in the 70s, you know, and you probably know more about it than I do, it was actually a help to the commodity economy, because when you had inflation.

Yeager: Ernie, you get the last few seconds.

Goss: Well, inflation is more of a benefit to the agriculturally dependent areas of the country. And assets hold assets going forward. Assets are the key. The fiat money, the dollar, other fiat money's the yen and so on. They're taking dives. So holding on to assets, buying assets. In fact, I didn't answer your question. Well about the farm farm land. One of the reasons to buy farmland, it's an asset that's going to be there. And it's going to in the long run, it will go up in price and we'll go up in value.

Yeager: It's just one of those things that we have to sit through, maybe a little, I wouldn't call it maybe necessarily a recovery or an adjustment, but you're saying just real quick, all right. Very good. I'll let you I'm going to hold you on that because I got a couple more questions I need to get to in a minute. Thank you. Ernie Goss. Good to see you, Chris Robinson. 

Robinson: Thank you very much. Thank you. 

Yeager: Happy Thanksgiving to you both. 

Goss: Turkey day we're here. We're always here on Turkey Day. 

Yeager: We appreciate that.

Robinson: Turkey and football.

Yeager: That's right. We're in football. Our own tradition. You have been watching the analysis segment and in a moment we are going to continue this discussion in an online only segment. Search Market Plus with Chris Robinson and Ernie Goss. Wherever you get your podcast to hear that conversation, or go to our website at Markettomarket.org. We want to make sure that you never miss any of our content. When you subscribe to our YouTube channel at Market to Market, there are benefits of being there. When you turn on notifications, you'll be the front of the line for our stories. The Market Plus, as well as the MtoM podcast. Especially this week when we recorded earlier than normal. Next week, farmers navigate changes to labor policy. Thank you so much for watching. Have a great week.

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