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Market Plus: Jun 15, 2007: Virgil Robinson, Pioneer Hi-Bred International

posted on June 15, 2007

Market Plus: Jun 15, 2007: Virgil Robinson, Pioneer Hi-Bred International Pearson: This is the Friday, June 15th, 2007 version of our market plus feature here on Market to Market. Glad you've joined us. Mark Pearson with Virgil Robinson celebrating 31 years as an analyst on this program and they've all been good, Virg, and we appreciate you being with us this week. Let's talk a little bit about a lot of things and I want to review some of the things you talked about on the show strategy wise. Obviously this huge rally in wheat is catching a lot of people by surprise and you pointed to the reasons and that is weather issues in places where it's been extremely dry are not extremely wet down in the south and in the southern plains I should say and elsewhere around the world it doesn't look very good. So, now we've got the wheat market screamed up 80 cents this week which, as you said on the show, it's a good time to make some sales. The board is over $6.

Robinson: You know, Mark, I'm not sure how many of our listeners have wheat yet for sale to be perfectly honest with you and that's probably one of the reasons the market has done what it's done. But if they do it's very difficult for me to tell them to pass on this opportunity. Now, in some instances, Mark, the basis is wide which would imply then that if you have the wherewithal making a short hedge or a hedge to arrive contract is probably appropriate because I do think over the course of the next several weeks the basis will improve as the harvest progresses through the southwest and into the northern states I think the basis will begin to improve. So, that is one strategy that might enhance return.

Pearson: Let's talk about the cash basis differential and you talked about this on the show. Again, sales strategy, last time you were on you were talking about, you know, putting some kind of a floor on this market. Now you're saying maybe let's roll those up and take advantage of this latest 30 plus cent rally in the corn bin?

Robinson: Yeah, I think for those trend followers, and there are a lot of them in our listening group, Mark, what can I tell you? The trend of these markets is down? Clearly they are not, they're up, they're fueled by a lot of speculative energy and I think people need to understand that for whatever reason should trend following systems change from up to down there could be a terrific correction in these futures markets and very, very swiftly. So, let's prepare for that. If you're not prepared for that then be advised you may need to be employing some of these simple strategies we visited about in the past. As mentioned on the show, Mark, I've had the question about new crop corn, '07, '08 and '09, isn't new, you know, this developed last summer and we started addressing that issue last summer when new crop corn was $3.05 and 2008 corn was $3.15. So, anybody that employed this minimum price strategy now has the opportunity to roll that floor up, capture some return yet keep their opportunities and their flexibility in place, that's what I'd do.

Pearson: Alright, let's talk about soybeans. I was over in Springfield, Illinois this week and that's all anybody wanted to talk about was soybeans. Again, the reason is two-fold. Number one, obviously we've got a lot of soybeans around and number two, this market going forward in the next year people are talking about a nine or a ten in these soybeans and producers are saying, you know, what do we need to do to get the biggest score?

Robinson: Yeah, Mark, you know, you talked about geography there in Illinois. I wouldn't be surprised in the final analysis to see more corn acres planted in Illinois than what we're currently projecting or forecasting. So, for those guys, for example, that still have old crop beans and are growing fewer beans or in many instances no beans this season they're probably going to retain those for quite a length of time. I mean, that is their production for this crop year, what they're carrying over from last and I understand their argument. They need to be advised, of course, of the fact that there is still a lot of beans in hand, not only here but globally. Is the prospect of a nine or ten dollar soybean market possible? Certainly it is. But I wouldn't' bank on that. What I would do, again, is I would spend 35 or 40 cents over the course of the next six to twelve months, create myself a floor and let's see how the market takes shape. Do we buy enough acres in the U.S. next season? Will the southern hemisphere expand their sewn hectares by five or six or seven or eight million hectares? Those questions I don't know how to answer, Mark. They have issues in South America, economic issues. I'm not convinced they have the ability to increase their sewn hectares by that many.

Pearson: Final point, livestock, I want to talk about the fed cattle market one more time. We talked about it on the show, never have enough time there, that's why we do this market plus segment. As you look at this cattle market going forward talked to a lot of producers in the last couple of weeks in the upper Midwest of cow-calf producers or feed cattle who were saying, you know, what am I doing? We can plant that pasture and make some easy money as opposed to calving in the middle of March. What do you see ahead for this cow market? We keep hearing about higher beef prices but really in the last 90 days the fed cattle market softened up.

Robinson: I think your point is a good one, Mark, I did see in USDA data just today there is a larger percentage of the beef cow herd being sent to market than was the case a year ago. So, cow slaughter is on the rise which would suggest and indicate there is a phase of liquidation underway. Now, perhaps some of it has been precipitated by the weather conditions in the south, southeast but as you mentioned I think there is some economic incentive here as well. So, I wouldn't be surprised to see that trend continue and the total cattle herd decline this year by perhaps a percentile or more.

Pearson: It's going to be interesting, going fast in the year, Virgil, appreciate your insights throughout the year here on Market to Market and, of course, right here on market plus. And from all of us on Market to Market I want to say a big thank you to Virgil and thank you for joining us and have a great week.

Tags: agriculture commodity prices markets news