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Market Plus: Feb 26, 2010: Virgil Robinson

posted on February 26, 2010

Market Plus: Feb 26, 2010: Virgil Robinson Pearson: This is the Friday, February 26, 2010 version of Market Plus, glad you've joined us here at our Market to Market Web site. With us this week is Virgil Robinson. Virgil, you covered a lot of stuff on the show, you really didn't tell me what you want to talk about in the Market Plus segment so I'm going to kind of leave it up to you. But you brought up several interesting things that I did want to pursue if that's okay.

Robinson: That would be fine, Mark.

Pearson: Number one, March 10th report from the USDA. Why is it in the last two and a half years when the USDA has issued a report they have had an asterisk by it saying they are going to re-audit and re-figure the numbers. They did that with that January report, the January 12th report and obviously we've got a lot of standing corn. I've been all around the country, Virgil, talking to farmers and they're all saying, where did they get 300 million extra bushel of corn, we've got all this corn out in the field, name the state, they've got some corn out there. 500 million bushels has been the number kind of bandied about and it's in tall snow, this is not like it's standing on dry ground. On Interstate 29 north of Sioux Falls there's corn on both sides of the road and there's snow two feet deep drifted around it, same thing up in North Dakota, not exactly ideal conditions for the best quality corn to withstand the winter. So, maybe some losses out there?

Robinson: I think there will likely be some as we spoke to briefly earlier, very hard to quantify that. It's going to be a real test to some of these genetics.

Pearson: Oh yeah, they really weren't built for this.

Robinson: We anxiously await some of this data. The number that I have heard from reliable sources including in house type sources is that there could be a loss approaching 100 million bushel of that 600 million that was standing as of January 1. But as mentioned earlier I think at some point the USDA will be obligated to address the issue of corn export sales which to this point just are not on pace to meet their yearly target. It is conceivable that some of the potential field loss in this re-survey could be offset by an equivalent or something near an equivalent loss in export sales. So, I just don't sense that this re-survey data is a game changer. I think the market is pretty well prepared for the data that is coming here on the 10th.

Pearson: You have never been a big one for locking in new crop sales this early, and you talked about the on the show, and you're minimum price strategy has always played out fairly well and it gives producers that baseline because the bottom line is we've got to stay in business. I'm looking out at December 2011 and '12 and there's fours in front of both of those months. As we look at this thing going forward -- you mentioned exports and so forth -- obviously the ethanol thing you also mentioned on the show has looked pretty good but should producers be looking out that far? Should we be making sales out there or establishing some minimum price two or three years out on some of that $4.00 stuff?

Robinson: Minimum price is difficult because of lack of liquidity but to that question I've had the opportunity to visit with a lot of farmers this winter and several have in fact already made commitments to 2011 and a select few beyond. However, when quizzing them or visiting with them I ask them, are you fairly confident of your costs of production that far in advance? What if, for whatever reasons, we have $100 plus crude oil in 2011 and it changes and skews the macros to the point where corn prices move another $1.00 a bushel higher? Are you prepared for something of that nature? Are you still talking about profitability? And that does give them reason to pause, Mark. So, clearly I think some type of projection, crop budget projection that far in advance is a needed exercise before one goes about doing that because if they're making the statement they don't think that those futures contracts can go beyond current levels that to me would be an awfully risky proposition because they certainly can.

Pearson: Oh yeah, we've seen it. And Virgil, just to finish up one thing we didn't talk about was -- we talked about making corn sales, bean sales, wheat sales -- we didn't talk about covering feed needs, livestock producers. You were talking again about a good year for livestock producers, you're friendly towards the cattle market and for a couple of quarters friendly still towards hogs even though they've had a good move. What about covering feed needs at this point? Are you in a hurry to do that?

Robinson: Mark, you know, we noted that in January when the markets pulled down so sharply we did see a noticeable increase or at least I feel we did of that commercial user buying product and laying in proteins and I think a lot of the people you're alluding to here did precisely that. Those that chose not to and remain hand to mouth I'd stay in that pattern because I think over the course of the next few weeks there's likely to be a pull down in the marketplace here. So, I don't believe I would make a full fledged commitment to protein, vegetable protein and/or corn, in this instance, at prevailing values. I think there will be a better opportunity down the road.

Pearson: All right, appreciate it, Virgil Robinson, one of our long time market analysts here on Market to Market. Thanks for being with us and thank all of you for joining us here at our Market to Market Web site. Tell your friends and neighbors. It's always a good idea to contact your local public television station and say, hey, I really enjoy Market to Market on the Web, I'd like to see the live version on our local public television station. Contact your local public television director of programming and tell them you want to see Market to Market. From all of us on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news