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Market Plus: Nov 10, 2006: Virgil Robinson, Pioneer Hi-Bred International

posted on November 10, 2006

Market Plus: Nov 10, 2006: Virgil Robinson, Pioneer Hi-Bred International Pearson: This is the Market Plus segment for Market to Market on Thursday, November the 9th, 2006. I'm Mark Pearson. With me, Virgil Robinson. Virg, great to have you on. We covered a lot of ground on the show, a couple things I wanted to talk about and I kind of wanted to follow up really on the discussion we had the last time you were on. And we didn't get to it on the show because we were talking fundamentals and the crop report out and all. What about these funds? Are they making any money, Virgil? Are they in, in a big way? Are they totally long this market? What's going on?

Robinson: Well, I think in general -- I don't think in general they have made a lot of money or any money this year, Mark, but in that context I've got a couple, three things here I'd like to bring to your attention.

Pearson: Alright.

Robinson: I'd try and watch ethanol futures. And it appears to me, Mark, there is a bottom that is taking shape in the ethanol, the spot ethanol futures contract in Chicago and what would convince me of that is a weekly close. Tomorrow is Friday, today is Thursday, tomorrow is Friday, if that spot contract closes above $2.08 I think there is a bottom in ethanol and maybe another fifteen to twenty cents a gallon move higher in that contract. Crude oil, it appears to me, Mark, if we can catch a monthly settlement, now that is a couple of weeks away, a monthly settlement above $63.85 I think the crude oil market is in position to move back to $70. The unleaded gasoline contract I watch fairly closely, here again short-term signal taking shape, a weekly close, a Friday close tomorrow above $1.62 gives me a count back toward ... the energy markets might all or many of them be making near term bottoms which could attract a lot of equity and a lot of interest, Mark, from our friends in the fund positions. If that is the case and as we talked about a little bit briefly here earlier the grain markets might lose a little appeal simply because we've had kind of a climax it seems to the run higher in wheat prices, the run higher in soybean prices and corn to some extent. So, we could see a shift in fund behavior out of the ags more towards the energy complex again and one of your early graphics kind of hinted at that. You know, we had today kind of a pull down, a general pull down in the grain complex, corn, wheat, soy, rice and others while the CRB is nine points higher on the week. It could be sensing that, Mark, so there could be a shift here from the ags into the energy complex by the funds and it could pull agricultural futures, corn, wheat and soy down and allow those of us who missed the opportunity to procure feed and procure some supply at cheaper prices that opportunity.

Pearson: Alright, so what you want to be watching for would be what is going on in the energy which, you're right, seems to have all the sex appeal.

Robinson: Well, again Mark, I'm making these observations based on bar charting principles. I am not well versed in the underlying fundamentals of those three energy commodities. So, it's kind of a technical observation. But we, you know, do talk about technical things from time to time and to me these appear to be a very viable subject to visit about and alert our listeners and viewers to.

Pearson: If you were strictly a fundamental analyst, Virgil, you'd have missed a lot of boats this year.

Robinson: I have, in fact, Mark thank you.

Pearson: No, I'm talking generally speaking because the impact that the technicals follow -- I want to come back to these funds. Are they that liquid? Are they that fluid? And could that result in a short covering rally to a certain extent too? Or are they strictly long these markets?

Robinson: Well, there are a couple of different funds, Mark. The index funds are predominantly long, a market basket of commodities that include agricultural commodities. The directional funds are those funds that try and position themselves in any given market given a defined direction up or down. And they are the ones that are more liquid and move the markets I think more abruptly than do the index funds.

Pearson: Okay, alright. So, be on the lookout for these factors, again, could give us, particularly the livestock people, could give us a break to get some feed needs covered at some decent prices and may coincide with that discussion you had on feeder cattle. Maybe we're coming into some kind of a near term bottom so maybe these things will all come together.

Robinson: Good correlation, good analogy, Mark. Good observation.

Pearson: Let's see what happens. Some great insights, Virgil, as usual, really appreciate it. Thank you very much. Virgil Robinson joining us this week on Market to Market. Thank all of you for joining us here at our Market Plus segment. Make sure you tell your friends and neighbors to join us here too. We cover all the commodities for you each week right here on Market Plus. From all of us here on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news