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Market Plus: Market Analyst Virgil Robinson

posted on October 21, 2011

Market Plus: Market Analyst Virgil Robinson

Pearson:  This is the Friday, October 21, 2011 version of Market Plus. Thanks for joining us here at our Market to Market web site.  One of our long time analysts with us this week is Virgil Robinson and Virg, great to have you with us. 

Robinson:  Thank you Mark. 

Pearson:  We had a chance to talk a lot about seasonality’s and seasonal issues.  Well, we are in harvest season and these things are jumping in front of us.  We talked about hogs near the end and I wanted you to make a point because typically October is a bad seasonal month for pork.  We start seeing pork prices pull back.  And the exact opposite has happened on hogs. 

Robinson:  True.  Mark, I think again exports sales have been very, very robust for several months, thank you South Korea, thank you China, thank you Japan, and certainly they can continue but one cautionary note, at least in my mind, was this afternoon's Cold Storage Report, Mark, where frozen pork inventories grew pretty significantly month over month as well as year over year.  In addition to that total red meat did much the same.  So it suggests to me at least measured by that metric that we have supply.  So we are going to need to sustain this export trade, Mark, moving forward. 

Robinson:  And of course as you well know one thing about high prices it has a tendency to attract production not just in theU.S.but worldwide wise.  So, I think there will be some competition surface.  Maybe a good illustration of that is the current situation in the dairy market where all of the sudden New Zealand is producing at rates not seen ever before and capturing and acquiring a pretty good share of World Market Trade.  Who would have guessed or who would have thought or who would have forecasted that six or ten months ago.  I sure wouldn't have.  So an illustration of how things and how dynamics can change when you have been intensified by strong prices. 

Pearson:  That is right good prices and a global economy where things can perk at one part of the world as to the other.  You mentioned on the show South America.  Seeing more corn coming out of South America.  That was confirmed.  Farm Progress Show every Brazilian farmer that I talked to was talking to the experts of the U.S.A. about more corn.  You talked seasonality’s on a lot of crops tonight and like you say it is very appropriate.  One we didn't get to, we ran out of time, was energy.  Seasonality’s there? 

Robinson:  There are Mark.  And I will define energies as crude oil, gasoline, heating oil, and ethanol.  All of those have a pretty strong tendency at least in the last three and five year study, five year histories, to move lower through the fourth quarter of each year.  So clearly we are in that window, Mark, and beginning to see a little increase in oil production from OPEC as well as other Non-OPEC Countries including our region the Bakken, the Permian, and the Alberta Oil Sands.  And now of course we have word that things are perhaps changing in the Middle East/North African Region where perhaps oil production will again move higher.  So, there are some seasonality’s, there are some fundamentals, at least to my way of thinking, that suggests lower prices in all four of the four mentioned energy categories at least through the balance of this calendar year. 

Pearson:  All right.  And obviously that is, we don't know, and you said it several times on the show what big thing might happen?  Obviously we are talking a geopolitical situation could erupt and throw the baby out with the bath water.  But right now we are in an interesting period of time where it is that way.  Now here is another interesting thing Virgil I have got to ask you about.  

Robinson:  Ok. 

Pearson:  We have had huge amounts of money being thrown in commodities, going over into the Foreign Exchange Market, going into gold; I think we have seen it in farmland values, where is that money going these days?  Where do you think it is going and is it coming back into commodities?  Is it going - they are not paying anything on cash.

 Robinson:  Really a difficult question Mark, but I will try and at least lend some insights here from my perspective.  I think believe it or not the equity market, the S & P Futures Contract is what I watch pretty carefully, and Mark, it has had some very, very strong weeks here consecutively, and it appears to me at least the futures contracts are in position to move higher.  Now if in fact that read is correct, Mark, for whatever reasons, maybe it is a better feeling about what's going on in Europe. 

Pearson:  You are looking at it more as a technician. 

Robinson:  I am in this instance.  I am in this instance, Mark.  It would clearly, I think, attract equity from other asset classes including the likes of precious metals for example, perhaps even land.  Investors again are of the opinion that the U.S. Equity Market is in position to improve over the course of the next many months.  I have got a feeling there could be an equity switch out of several other asset classes back into that market.  So be advised or at least acknowledge that possibility as you think about the value of precious metals, the value of land, and other asset classes.

Pearson:  You mentioned gold.  I have to ask you about it now.  There has been the pull back.  From a technician's standpoint is this a significant pull back?  Is it over in gold barring major global, political strike, whatever? 

Robinson:  The behavior of gold futures in September was about as volatile a situation and as volatile a month as I have ever witnessed in anything.  Four hundred dollars from high to low, Mark.  A classic, at least in my opinion, what is known as an outside or reversal month where you blast into all time highs, by the end of the month you are dead flat on your low, it is like a big exclamation point, climatic.  So from that perspective it would imply, at least in my way of tracking commodities that we have in fact seen the high in gold for at least awhile. So if you are long a lot of gold in your portfolio and you are thirty-one years old and your investment horizon to our age, Mark, perhaps you stay the course.  If you are on a little shakier ground or maybe a little more highly leveraged being involved in that commodity, I would at least acknowledge the very, very poor price behavior in September, and adjust your thinking accordingly. 

Pearson:  All right.  Virgil Robinson, excellent points Virgil.  As usual appreciate your analysis, what you see in the world, and we appreciate it and appreciate it on the show and of course here on Market Plus as well.  And from all of us here on Market Plus and on Market to Market, thanks for watching.  Thanks for being with us.  Have a great week.


Tags: agriculture commodity prices economy markets news