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Market Plus: Dec 28, 2007: Market Analyst Virgil Robinson

posted on December 28, 2007

Market Plus: Dec 28, 2007: Market Analyst Virgil Robinson Pearson: This is the Friday, December 28th, 2007 version of market plus here at our Market to Market Web site. Glad you've joined us. I'm Mark Pearson along with one of our senior analysts, Virgil Robinson, this week closing out the year with Virgil. Virgil, a wild year, wheat, corn, beans, you name it. Volatility, you talked about the huge volatility in wheat, volatility in corn, volatility in soybeans. It's been a very exciting year, profitable year for farmers, record net farm income. Let's talk about 2008 that is before us and kind of what you see there. Let's talk first about the corn market.

Robinson: Mark, again, the food, fuel and feed frenzy continues. As mentioned earlier even with corn cash prices and futures prices as high as they are, at least historically speaking, the basis has continued to improve in many areas. The recent increase in U.S. biofuels mandate sent another charge through the marketplace, Mark, and accentuates the fact that we're going to need to produce big crops of corn for the foreseeable future while we're competing for acres here in the U.S. for a host of other commodities to include soybeans and several others. How this is all accomplished remains to be seen. CRP acreage is certainly a potential candidate and will likely be put back into production or at least some of that, Mark, in the immediate couple of years. Will it eliminate or alleviate the global tightness of supplies? Probably not. And as mentioned all of this could be trumped by the weather concerns that are beginning to develop for the 2008 U.S. crop cycle highlighted by the La Nina event. So, all of these things play into the price discovery process, Mark, and that is not likely to change. So, as you mentioned earlier let's highlight volatility, let's highlight the weather uncertainties, all underscored by growing demand here in the United States and in the world for increased feed, food and fuel needs.

Pearson: Well put, Virgil. I want to talk about soybeans while I've got you here. You mentioned something on the show that I know has been a concern to producers out there. We've had this big run up in December, we're at some pretty lofty levels. You always talk about everybody getting on one side of the boat, you know, and something happens and all of a sudden we flip her over. Could that happen to us in January in soybeans do you think?

Robinson: Yeah, a couple of things, Mark. Again, as mentioned the CFTC report indicates that the combined position of the non-commercial entities in soybean futures contracts is at or very close to an all-time high so clearly there have been a lot of players in this move in soybeans and justifiably so. That doesn't preclude the fact or the possibility that that kind of a position combined with perhaps some realignment of the index funds positions to begin 2008 combined with what traditionally is a pretty good movement of cash grain into the pipeline creating short hedging and filling the pipe and diminishing demand, it all concerns me to the extent that in the first 30 days of January we could very easily have a corrective price phase in the futures market that could be a dollar and a half very, very easily, Mark. So, kind of prepare yourself for that and then keep that in perspective. As mentioned earlier, the long-term trend, at least as I view it tonight in soybeans and co-products, remains up even with a correction of that kind.

Pearson: Very good, Virgil Robinson, as usual, appreciate your insights. Appreciate you being with us on market plus. And, of course, we want to thank you for checking us out here at our Market to Market Website. Make sure you tell your friends and neighbors. And from all of us here on Market to Market, I'm Mark Pearson wishing you a Happy New Year.

Tags: agriculture commodity prices markets news