Pearson: This is the Friday, September 21, 2012 version of Market Plus. Joining us now is Virgil Robinson. Virgil welcome back.
Robinson: Thank you Mike.
Pearson: We have a couple questions here from Twitter kind of to get us started. Justin in Steele County, Minnesota is asking how can we best re-own corn on paper to make up for lower prices on 2012 contract corn?
Robinson: On 2012 contracted corn. Ok. I don't always tax situations. So, that clearly is a factor here. But it would be my best opinion that futures provided his tolerance for risk is a little higher than perhaps many would be the best alternative. I think he needs to remember now that at present we are in the confines of an inverted market where the premiums are up front. And I suspect with the stocks-to-use ratio at our around six percent that is likely to persist the balance of this crop year. So, I would keep my purchase. For example in the March and then roll it to the May and then roll it to the July. I think at present that would be his best strategy for trying to capture most value.
Pearson: Would you offer the same advice to soybean producers in a similar situation?
Robinson: I would Mike. Because again we are in an inverted market and historically it has been my experience any time stocks-to-use ratios are below double digits which both this year's corn and soybean crops are. We have contained or sustained, excuse me, an inverted market both in the cash and in the futures.
Pearson: Now this Dale in Bloomington, Illinois is asking what is your take on soybean seed size this year and the impact that will have on soybean yields.
Robinson: Man, I have to be careful answering that question. I represent a seed company. I will just answer it in this fashion. I am of the opinion from those in production that we will have an ample supply of high quality seed.
Pearson: All right. With the drop in corn and we talked about this a little bit on the show. This is Troy in Avoca, Iowa. He is asking with the drop in corn prices over the last two weeks do you think rationing is still valid. Are people still going to -- livestock and drop exports even as the price falls?
Robinson: I think it has not been to the extent where will see a wholesale revival in any of the livestock industry. I think it is going to require additional time. And as mentioned I would not be surprised in a lot of geographies here in the U.S. the cash prices begin to firm and again when you have the competition from an ethanol facility and a train shipper and a livestock industry, all those demand pulls I think will prefer the physical commodity that being the cash product this year. So, I can envision some dislocation and - and some markets the likes of which we have maybe never experienced in the cash grain industry.
Pearson: During the show we talked a little bit about the hog markets going forward. Could you expand on that a little bit. Where do you see hogs going through December/January? Generally positive once we get through this period?
Robinson: I think the balance of 2012 will be - will be a struggle, Mike. We mentioned the supply of cold storage, the inventory in cold storage, it is pretty significant particularly in pork. We are going to have to work our way through that inventory. We have had more market weight hogs hit the pipe than we assumed back in June. We have had the sow liquidation and the high grain prices. So, I don't think that part of the liquidation phase is over. I think it will linger probably through the balance of 2012, but come to a crescendo in - in - in December, excuse me, in 2013. And as mentioned and I read a paper recently by Dr. Chris Hurt, Purdue University, who made the statement and it is at public domain, he felt we could see stress the likes of which we saw in '98 yet in 2012 to be replaced by the strongest hog market perhaps ever seen in in 2013. The cycle can change that quickly.
Pearson: And if that happens, if we see a very strong hog market in 2013 and producers start to re-grow their herds, what is the time line to get back to the - the number of animals or pounds produced level that we were at earlier this spring? A couple years?
Robinson: No, I think it will be quicker than that, Mike. The efficiencies and the technologies in the industry improved so dramatically that we can produce a lot of pork with actually fewer animals. So, we will be back into a high production mode, I think sometime in 2013 and I would expect exports to assist in terms of disappearance in 2013 as well.
Pearson: All right. Now we didn't get a chance to talk cotton at all on the show. Where do you see cotton headed?
Robinson: A couple of things that have been well documented here. There is an adequate supply of cotton in the U.S. as well as in the world. It is likely that cotton acres because of that and lower prices will be reduced in the up and coming crop cycle. So, I think that in combination with what is a pretty strong seasonal tendency and that is normally, cotton makes kind of a low in October, it does make a low in October, and then works here regularly higher in to February and March. I think we will track in that same direction this year. So, there should be an opportunity, I think for better cotton prices in the winter of 2013 versus tonight's market.
Pearson: And do you see that continuing as even as China slows down or is projected to perhaps slow down?
Robinson: You know China has a history of doing a pretty good job of juicing their economy and stimulating a growth and I think they will probably be successful again. So, I think this is a pause in their economy to be replaced by improvement and more strength in 2013.
Pearson: All right. Well Virgil, do you have anything else to add tonight?
Robinson: Mike, I guess I don't aside from the fact that as mentioned most of the U.S. farm community has the best balance sheet they have had in 50 years. I think many will be a bit more risk tolerant this year than perhaps in year's past. It is going to be tough to source cash corn and cash beans in 2013.
Pearson: Thank you so much Virgil. Glad to have you here. Have a great week.