Market Plus: Chris Robinson
Chris Robinson discusses the commodity markets in a special web-only feature.
Yeager: Welcome in to the Friday, April 8, 2022 Market Plus. Joining us again is Chris Robinson. Chris, I'm just going to yell. What do you want to yell about right now? What do people need to hear? You talked a little bit about looking at '22, 23, I think you even said '24. Are you ready to go on record and say we need to be looking at making some sale at the prices we're at right now in those --
Robinson: If not a sale, a hedge. And we're almost to the point right now, go look at 2023 corn and 2023 beans. Even today for 2022, for 20 cents, less than 20 cents you can protect $6 corn all the way through harvest. 236 days, we haven't had a chance like this for years. It's the best marketing opportunity we've had in years. Is it going to last? I don't know. Where's the high going to be? I don't know. It depends on what happens with the growing season. I do know that this is an opportunity and it's certainly, you should at least be talking about talking about how can we take advantage of this opportunity? Now, if you want to call up your elevator and price some prices that's fine too. The other way to go too is either you sell futures or you buy put options. That's really what you can do. And if you don't want to go all the way to '24, okay well you can do '22, '23, you can sort of maybe double up for that. But at some point there, I'm not recommending this right now because it's April 15th and we just hit $7.15 corn today, I don't want to get oversold too fast. We saw that happen in '19, we saw that happen certainly in '21. We know a lot of guys got oversold at $4.30 and watched it go.
Yeager: But those were, go back to '21, I'll address that one first, we didn't think we would get that way. '19 we were still dealing with price levels that we're just not at right now. Now we've grown accustomed to this $1 move up overnight.
Robinson: That's dangerous right there, the fact that you said you just grew accustomed to it, it's the same thing, for seven years we didn't have to worry about volatile prices. Now you go to bed every night and we have 30, 40 cents worth of risk. We had six months where we didn't move 50 cents. So it's a different environment in that way and I think it's just giving you an opportunity to take advantage of it. And I'm a big believer, you get your risk on paper. You're a farmer, you’re a producer, you're always long. What can hurt you? Lower prices. Also too don't be afraid to make a cash sale. But if you make a cash sale you owe it to yourself and this is 2020 and 2021, if you sold anything I always tell guys reown half, you're half right, you're half wrong, go buy a call option. You sell 10,000 bushels, reown, buy one contract. You may be happy because nobody knows three or four months from now if we're going to be sharply higher. So it lets you stay in the game and lets you not have seller's remorse.
Yeager: What does the impact of crude oil right now have on any of these commodities?
Robinson: Well, obviously the price of gas has made everything more expensive, your fuel, your fertilizer, that has already been factored in but it's kind of a lagging indicator. We came off those lows in 2020, they really broke the oil supply chain. But then as recently as December we were at $62 and gas really hadn't exploded yet. Kind of the straw that broke the camel's back on the whole supply and demand thing if you ask me was the Ukraine war and the market was, I think the market was anticipating that less oil was going to come out of Russia but that hasn't stopped, they haven't stopped taking the Russian oil. So that's another reason we hit that $130 level and then pull back really, really hard. The market is kind of trying to figure out where it's going to go right now. The Dec low was $62, the high was $130, we're at $98, $96.50, somewhere in there. We're halfway back, we're in the middle of it. And the market is going to watch and see, are we going to go back to 2008 highs or are we going to roll over? And that's all going to come down to supply and demand. And I think that it's something you have to keep an eye on. Now, I can tell you this, if crude oil was to collapse it's not going to be good for commodity prices in general. People will say oh the commodity bubble is over, sell everything. So that's your risk right there if you're a bull and you're unprotected or if you're a bull and you don't have any exit strategy or any protection in the form of a hedge. So that's why you have to have something on the books.
Yeager: Cotton market kind of had a little bit of a selloff this week. Is that an indication of things to come?
Robinson: Well, cotton has been on such a tear. We have actually if you go back and look at the big picture, and I put this in my letter all the time, it's amazing, the highs back in 2011 or 2012 I think we were at 227, the pandemic lows we were 48 cents. This $130, $140 level, we're halfway back, 10 year highs and that has been the most I call it a honey badger market. It has just had very few corrections, it just keeps going and going. And I'll tell you what, if you’re a producer and you're looking at 10 year highs, if you've never hedged you really need to take a look at setting a hedge now. You can go protect 95 cent cotton for a reasonable amount for a year or two. And again, you may be getting a 10 year shot. It would have been nice back in 2011 to sell some more bales ahead on that spike. So take advantage of the spike and don't let it get away from you.
Yeager: I've got a couple of questions I've got to fly through here. I appreciate everybody that submits. And I keep asking Chris questions and not getting to yours. Let's start with Alan in Iowa came in via Facebook. What would a slow planting pace mean for new crop corn?
Robinson: Well, a slow planting pace, that market doesn't need any more bullish news, not after today.
Yeager: So the second part of his question, would it send it to $8?
Robinson: You know what, the moment somebody says that, I'm not a big believer in limiting it whatever it is. We're at $7.15 today, back in December we were at $5.40. You do the math. We've done that in three months. The way the market will ration was higher prices. So I would say this, I don't want to predict the top, but I do want to have a trailing stop. What's a trailing stop? Okay. you had a $5 floor, now I've got a $6 floor, if we go to $8 it's going to give you a chance to protect $7 and by a floor I mean having a put, which is basically a sell stop, which you have the right to either exercise or not. It's a lot better than selling futures, just ask anybody that was short futures with wheat from $7.50 and made $3 with their margin calls. So that is what an option can really be a beautiful hedge for a producer because yeah, you pay for the option, but you're not making those margin calls if the market goes vertical. And I don't know if we're going to have an '88 drought. If we have an '88 drought why do we stop at $8 corn?
Yeager: Well, how about this? Let's inject Glenn in George, Iowa's question then. He's asking about Brazil. He says, well what if Brazil and what is going on with their safrinha crop? What if the second crop there ends up being short and then we have a drought and it keeps moving east? Do we need both of these factors to happen to go higher?
Robinson: No because actually this crop from everything I saw today, which it could change on Sunday, but that crop is looking better than a lot of people had thought it was and that's going to be key. And that is why everybody was looking at the USDA today because they left Argentine corn and beans alone, they didn't change that at all. So yeah, that is absolutely going to drive what happens up here. But yeah, at this point it all comes down to what is going to happen in the next 16 weeks? And boy if I knew that --
Yeager: You wouldn't be sitting here with me on a Friday night?
Robinson: I would be sitting here but I'd be, I'm getting ready to buy the bears, how's that, if you knew that because this is an opportunity. That's the biggest thing, I'm not concerned about where the top is, don't let this opportunity slip away, don't get oversold and then watch it go higher. Even if you only hedge half your crop, if you've never hedged before, this is the year where you need to take a shot at doing some hedging.
Yeager: I'm not asking you to do a comparison to this question but I'm going to switch out of order here because it brings up something that you're mentioning. Dan in Green Bay, Wisconsin took a road trip last week, he says I drove from South Dakota back through Sioux City, then to Dubuque and back to Green Bay. He says, he saw several elevators with corn still on the ground, no sign of rail cars. A, is this typical this time of the year? And B, are the bins full? I'm asking that given what you just said, it sounds like some people haven't sold.
Robinson: Oh there's still some corn out there, guys are holding onto it, absolutely. And let's face it, if you held it for five years this is your opportunity and I've actually worked with some producers who are sitting on unpriced bushels and we've hedged it all because it's just at this point it's like having a gigantic wallet out there. If you're the producer and you've got corn that you haven't touched -- drive around, I was just in Indiana and I saw what looked like were some full bins. A lot of guys hang onto it if they ever need it for cattle, stuff like that. But yeah, it always is surprising to see when you see spot corn very, very expensive and you're like why would somebody leave that out there? I would say this, I would ask the viewer or individual, drive out there in a month and see if it's still there because if it's still there and we're higher prices then that's somebody that really is never ever wants to sell their corn. This is a great opportunity if you've been sitting on bushels for a while, let them have it.
Yeager: Well, Phil, I'm not going to ask your question specifically because Chris has addressed it a bunch. I'm going to finish with Bradley in Upland, Nebraska's question. He's asking about export sales for soybeans are currently running 129 million bushels above USDA projections. Is the USA going to run out of beans prior to the '22 soybean harvest?
Robinson: Not if China keeps nibbling. They really have been kind of a non-factor. They bought a little bit but they're behind schedule. Supplies are tight. But no, at the end of the day I don't think that happens. If you believe that's going to happen then you need to get Sunday night, Monday and buy yourself some calls.
Yeager: Is the dollar done rallying.
Robinson: Two year, we're at two year highs. It's possible. You've got to remember the pandemic was strange. Pandemic we were at 22 year highs, a year and a half ago we were at four year lows. So we've come back, for a long time it's a halfway back thing. We're kind of sitting in this 92 area, it seems like where we want to be. I'll tell you something else about the dollar, take a big picture look, a 45 year look, we're right in the middle of where the dollar has been for the last 40 or 50 years. So when somebody says the dollar is too strong or the dollar is too weak, I'd say what's your timeframe? Yeah, we're at two year highs. And let's call it the way it is, the higher dollar has not really hurt commodities right now. Maybe there could be some argument about it. But certainly it's not hurting soybeans or corn prices right now because we're at 10 year highs.
Yeager: Very good. Chris Robinson, good to see you, thank you so much.
Robinson: Thanks for having me.
Yeager: Good luck on buying the bears if all things work out.
Robinson: I've got it planned.
Yeager: All right. Next week we're going to look at how one Kansas producer is answering the acreage question in a different way and Angie Setzer will join us to break down the commodity markets. Thank you for watching. Please have a great week.
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