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Market Plus: Mar 27, 2009: Virgil Robinson, Pioneer Hi-Bred International

posted on March 27, 2009

Market Plus: Mar 27, 2009: Virgil Robinson, Pioneer Hi-Bred International Pearson: Welcome to the Friday, March 27th version of Market Plus here on our Market to Market Web site. We're glad you've joined us. One of our regular market analysts with us this week, Virgil Robinson. Virgil, always good to have you on the show, great insights on that, we appreciate it. Let's go a little bit deeper. Soybeans, now you're anticipating, the trade is anticipating for sure more soybean acres in that USDA report that's coming out on the 31st. Where are we going to sell all these beans? And are we going to be able to get the kind of money that we hope to for them?

Robinson: We have two different scenarios here. We have a relatively tight old crop situation and expectations of a big new crop and more than adequate supplies. So, as we visit we mentioned tonight the inversion that exists in the old crop versus new crop cash market as well as futures market. My point tonight was simply to bring to the attention of our listeners and our viewers that inversions based on basic supply and demand adjustments will, over the course of time, give way to a carry and that is precisely what is being projected this year, this crop year and next crop year. So, I just wanted to bring to the attention of all if you are still carrying old crop beans, I understand that rationale because of tight supply and relatively strong demand, but be advised that at some point you are going to have to reconcile yourself to moving that inventory. And historically from a seasonal perspective often times soybean prices are at or pretty much on their highs in the late spring, early summer of each calendar year. So, we are not that far away from that point in time. So, I would be looking here very actively for that opportunity and when it does develop I wouldn't hesitate in finalizing sales in old crop soybeans. New crop beans, you and I have had this discussion many years, I'm always reluctant to finalize the price of new crop before they have even been planted and we have a read on how many acres have been planted. But I certainly don't discourage nor would I feel badly about creating a minimum price, particularly if that minimum price is at or above my cost of production.

Pearson: And so look at that and then use whatever strategies you're most comfortable with doing but put some kind of a bottom line number. It doesn't look too optimistic, based on what I heard you say on the show tonight, doubling the carryout on soybeans which, again, if these acreage numbers are correct and if they hold and they do change but if we get all these additional soybean acres it will be a lot of beans next year.

Robinson: It would be, it would be what would historically be perceived as too many and as a result price would have to adjust. Now, clearly there is another crop of soybeans that is pretty integral in price discovery through the course of a twelve month period and that's what happens and takes shape in the southern hemisphere and my understanding is as we visit tonight new crop, next year's crop of soybeans in the southern hemisphere, those prices do in fact calculate a margin, a profitable margin for those producers. So, there is clearly incentive to grow some beans again in that part of the world next crop year.

Pearson: Soybeans are a world crop, obviously we've got northern and southern hemisphere production going on, getting some strange signals from China, you touched on it on the show, they have been our biggest buyer of soybeans, been aggressive buyers of soybeans. Now they are turning some soybeans loose in their northern provinces. Can you explain what they're doing?

Robinson: Well, apparently the processors in those geographies were complaining about the price of beans in as much as the government was supporting and moving the price of local inventory higher to the extent that processors could not buy, convert those into product and make a margin, make a profit. So, given their geographical area and the cost of importing and transporting beans to that zone they had a predicament and apparently the government is responding to that stress by assumedly releasing anywhere from 500,000 to 1 million tons of beans to those processors in their effort to relieve their stressful margin condition.

Pearson: But that should not be read as potential reduced exports to China from the United States or imports?

Robinson: No, I don't think so. I think it's a near-term phenomenon that captured the attention of the market in conjunction with what assumedly is a respite between the Argentinean farmer and their governing bodies.

Pearson: Real quick, the corn market, again, we're looking at those acreage numbers. As you pointed out the corn number tends to grow except for when we have a spring weather issue. So, we look at those numbers -- what can we see about the corn crop for 2009 and potential increases in carryout there?

Robinson: Again, it would appear to me that we're in a position where we're going to go in quite the opposite direction of soybeans from a market where there is ample to more than enough supply into a new crop year where there is adequate supply. So, that will have an effect on basis, it should support and underpin price and at some point moving forward most likely discourage carrying charges. So, here is an opportunity for those of us that own on-farm space to make some calculations as to which crop in this up and coming crop year might provide a better return on storage and right now it's pointing more towards soybeans than it is corn.

Pearson: Virgil Robinson, as usual we appreciate your insights. Thank you so much and thank all of you for joining us here on Market Plus. Again, if you enjoy Market Plus and picking us up here on the Internet and you'd like to see our show on a live basis at your local public television affiliate just give your local public television station a call and say we'd like to see Market to Market. That's it for Market to Market for this week. I'm Mark Pearson. From all of us on Market to Market, have a great one.

Tags: agriculture commodity prices markets news