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Market Plus: Aug 24, 2007: Virgil Robinson, Pioneer Hi-Bred International

posted on August 24, 2007

Market Plus: Aug 24, 2007: Virgil Robinson, Pioneer Hi-Bred International Pearson: Welcome to the Friday, August 24th, 2007 version of market plus here at our Market to Market website. Thanks so much for joining us. We are so thrilled this week to have with us one of our senior market analysts, a very insightful young man named Virgil Robinson. Virgil, good to have you with us.

Robinson: Thank you, Mark.

Pearson: Alright, you said some things frankly that spooked me a little bit to be honest with you. You talked about the soybean market and you mentioned in July that you didn't really like what you were seeing in soybean prices. Now, you've got a couple of benchmarks that you're looking forward to when September goes off the board which, again, it's going to take some work to get them off where you would like to see them be in the bullish range of the $8.30 plus area. What's going on in soybeans? What should producers be doing? There is still a decent size crop coming in and there's an awful lot of soybeans that must be out there somewhere.

Robinson: Yeah, all in storage on farms, Mark, or about 575 million bushel of them. So, it's reason to be concerned. What I was trying, the point I was trying to make on the show this evening was clearly a technical observation, Mark, because the fundamentals of the bean market are well discussed. We're trying to figure out the size of the crop here in the U.S., trying to figure out what the Brazilians will or will not do this crop season. Those are all factors that remain to be seen. But the work I keep, Mark, on the continuation chart the end of August, one week from tonight I think it's going to be very, very important that the September soybean futures contract which is the lead contract in Chicago close at $8.35 or higher to sustain the idea of higher and stronger soybean prices. If we happen to close below that and ideally in the lower portion of the August trading range, Mark, in addition to the poor price behavior in July I think you'll have a host of technical traders, technicians be very willing to liquidate long positions and even go short this market. And as mentioned earlier, perhaps I didn't mention the amount of speculative energy in the soybean futures market at least as compared to historical standards is still very high and very large. So, under right circumstances there could be a leg of liquidation that might surprise people and take the market much lower than tonight's values. So, just be advised of that the next week.

Pearson: Alright, and your concept includes the fact that you don't think necessarily the lows are in, in soybeans?

Robinson: I am reluctant to make that statement tonight, Mark. Now, a good solid monthly close and one that is comfortably above that pivot level I just mentioned then the argument becomes much more palatable.

Pearson: Alright, so at this stage of the game, Virgil, if you look at it from these deferred contracts, and I want to talk beans and corn now, are you defensive enough to start making some sales out there, say March?

Robinson: Mark, I already started, okay, I've already started. So, yes I would, particularly if they meet your objectives. If you've gone through some kind of a worksheet, some kind of calculation in terms of break even and the costs of production and there are returns here that are attractive by historic level, maybe it's $40 to $50 per acre in soybeans, maybe it's $90 to $100 in corn, those are pretty solid objectives at least based on my career in the business, Mark, and yes I would capture some of that.

Pearson: Let me as you the same thing on wheat because that's the other question I get a lot from producers out there speaking in the countryside and you do it too, you know, is this the time -- I know we have a discount on the wheat market going for it -- but is this time -- maybe you mentioned July wheat, $6. July wheat at $6, Virgil, in my lifetime that's pretty darn good.

Robinson: Yeah, it is, good observation, Mark. Again, that far in the future, I mean, that new crop level at this lofty point I am not at all hesitant to make minimum price contracts, Mark, kind of like we did last year in corn and soybeans that worked relatively well. I know the premiums to buy options are high and expensive but please keep in mind wheat futures have had a tendency in markets like this to move in excess of $1 or $1.50 a bushel in as few as 30 days. So, the premium is kind of proportionate to the risk associated here.

Pearson: Excellent point, as usual, Virgil Robinson, some great insights. Thanks so much for being with us. Virgil Robinson, one of our senior market analysts joining us this week on market plus. I'm Mark Pearson. From all of us here at Market to Market, have a great week.

Tags: agriculture commodity prices corn markets news wheat