Hjort: Thank you, Mark.
Pearson: Hey, let's talk a little bit about that Kansas wheat tour and an update on the Kansas wheat crop, in fact, the wheat crop as a whole. We quote, of course, the Chicago Board of Trade soft red wheat crop. That's really not what we're talking about when we're talking about Kansas, we're talking about the hard red crops. What is your take, Doug? It's been a challenge down in a big chunk of the panhandle, Oklahoma and Texas and a big part of Kansas to grow a wheat crop this year.
Hjort: Well, it sure has. Starting in the south Texas crops really hurt bad. I don't know, production something less than 50% of last year down there, maybe considerably below that. Oklahoma, estimates this week said about 50% of the crop there compared to last year. As you get up into Kansas the reports talking about, oh, 20% down, the tour report, 20% down from a year ago. That is kind of in the middle. But the problem with that report down there and that tour was the range of estimates were so wide that it's pretty hard to try to judge what really is going on. I think that's key to what is going on in Kansas because you've got some good crops, you've got some crops that have failed. Somewhere in the middle is where you're going to come out but that's going to depend on weather in the next two to three weeks here too. We're getting a little better chances for rain down there in the central and southern plains now and that is supposed to continue next week.
Hjort: If we get that and then some mild weather, not too windy and not too hot, the Kansas crop can come on and be a reasonable one, not as large as last year most likely. Colorado crop is in a lot of trouble. Nebraska probably pretty good shape except way out west and the Montana crop is in pretty good shape. As far as spring wheat planting goes kind of cool up there, very cool this week and some showers across. But the planting progress is moving ahead. With the capacity we've got to plant now it's pretty hard to get too far behind on planting for any crop. So, all in all that kind of sets the stage. We've got a very short supply of hard red winter wheat, a very adequate supply, surplus supply most likely continuing on soft red winter.
Hjort: The spring wheat crop looks to be okay now. Soil moisture up there has been improved and so on as well as up in Canada. So, all in all now from this price level I think we're going to struggle. We're going to have a lot of trouble trying to move higher but at the same time the fear that maybe weather is not going to be nice to us here in the next month we'll keep these prices at this level and then we'll have the spikes up like we did on Friday where Kansas City wheat was up like 17 cents.
Pearson: We sell those spikes, Doug?
Hjort: Yes, I think we should. I think some new crop sales should be made. I wouldn't go too deep into the new crop because of this price uncertainty.
Pearson: Alright, corn prices have been under some pressure. We've seen some corn move from farm storage, we've seen it move into town and of course, that's what a lot of our analysts have been saying to do, get that old crop moved. What is your take now going forward? You mentioned obviously the weather problems have affected wheat. Corn is going into the ground well, planting seems to be rolling right along and the moisture has come back to most of the Midwest.
Hjort: That's right. You know, a month from now the U.S. corn crop is most likely going to look just about perfect. Just get a little warm weather is about all we need now. Planting progress jumped faster than was expected, this is the report a week ago. And this week I think the planting slowed down some but still we'll remain at or above the normal pace. I think we have the potential for a good corn crop, probably not record high yields but trend line is a possibility now. You go back a month ago and trend line, most people thought trend line was not possible. But now, like you say, with the rains it looks good. If we have trend line acreage or yields and cut acreage 2 million we could still raise what we would like to use next year, not what we would use but to keep stocks above, well above a billion bushel and that would keep prices from skyrocketing. But look at the price structure you've got, you know, from the current futures to the new crop and then out to the 27 crop, you're looking at a good sized carry all the way out there. And that is indicative of the strong demand that we're looking at, very, very strong demand, domestic and export and that means that production has to be right up there at top levels every year.
Pearson: Alright, let's talk about this soybean crop which, again, we talked about it on the lead in here we could be looking at record soybean carry out next year, substantially above where we've been before and yet the soybean market was up this week. What's going on, Doug? Is this energy? Is that crude oil?
Hjort: That's right, that's what they say. The index funds are buying the soybeans, they'll hold onto them forever I guess, roll them forward if the time runs out and hang onto them. It's an inflationary type thing. It's really beyond me when I have to go and start looking at metals and energy prices and so on. But that has been giving solid support to the soybeans. If you look at the supply/demand balance, what we've got right now and looking ahead a year from this fall our soybean prices are probably at least a dollar a bushel too high right now. Real big risk there. If the funds quit buying the soybeans these soybean prices could drop hard. So, I think sales are advised on soybeans.
Pearson: Let's talk about livestock, fed cattle market, a lot of trouble this year. And we talked about the poultry issue. You've got excess poultry supplies around. The fed cattle, we've increased some numbers, you talked about that happening last year. It's been confirmed that prices have been under pressure. What is your take the next 60 days on fed cattle, Doug?
Hjort: Well, I think we're in the process of trying to stabilize but I believe I may have said that the last time I was on the show and that was two months ago. But the market is at a level to where the price is equal to the supply out there. But trying to get it to move higher is a problem. So, if you can't move it higher the chances it's going to sink a little bit more is still there. The report is right, too much poultry, too much beef, too much pork, too much everything out there plus the psychology. The psychology of the cattle market was so good for so long, over $1 a pound paid and way up from there. Everybody was saying that, no, prices are going to be good forever. Well, now that psychology is the reverse, it's just as bad as it was before, as it was good before. So, until we can change that psychology we're not going to get cattle prices up very much. I think it's probably going to be another month or maybe more before we can get prices moving higher. In the meantime I see now alternative but to sell the cattle as soon as they are finished, get the weights down as light as possible.
Pearson: We don't have a lot of time, Doug, but as you look out down the road are there some hedge opportunities out there for people? I'm hearing stories about, you know, buying heavier weight calves out there and running them through and making a few bucks on them. Do you see that as a possibility?
Hjort: There are some opportunities out there but I would advise that if you can lock in at just a few dollars profit you better do it this time around. There will be better times ahead in years to come but this year is going to be a real tough year to feed cattle.
Pearson: Alright, let's talk about the hog market. What do you see happening as far as the pork numbers go? We had a little bit of a shot up last week on futures. But what is ahead now? Again, poultry is a big factor when it comes to pork too.
Hjort: The hog prices have recovered, this week they were down just a little bit and bouncing around but still holding pretty good. But I think this is a time for hog producers just to keep on selling as the price, or as they reach market weight. I don't trust it yet, kind of relating to the cattle and the poultry, just too much meat out there at this time. Probably in another month or so you could see hog prices starting to firm a little bit. But I don't see big rallies right now. Holding steady, I think hogs can do that, this pork demand is still very, very strong. But with a little too much poultry around if the poultry producers cut back quick enough, I see this week they cut back 2% on their egg sets and chick placements both, and if they'll do that and bring it down a little more by summer we can start taking all of livestock prices higher.
Pearson: Alright, on that happy note, Doug, we thank you. That will wrap up this edition of Market to Market. But if you'd like more information from Doug on just where these markets are headed then be sure to visit the Market Plus page at our Market to Market Website. And be sure to join us again next week when we'll examine the first official supply and demand estimates for the new crop year. Until then, I'm Mark Pearson, thanks for watching, have a great week.