Martin: Well, I think, Mark, that the wheat market first off a week ago we had the KC March wheat his resistance around $4.35, $4.36 but it had been a price target that we had had for some time. So, hitting that first leg up of resistance, it's been a major leg, a big move, the market fell back and corrected like it should have. But the weather stepped in with some cold temperatures, single digits as expected over the weekend and it's fear that you'll have winter kill in the winter, in the hard red winter wheat down in Texas and even into as far north as Kansas and maybe part of Nebraska. And so, the fact that the snow didn't reach a major portion of Nebraska I think, you know, did not leave anything to cover to protect against that or insulate against the temperatures so that drove the markets on Friday to move higher. Now, this next week as we go forward, of course, all eyes are on exports because there is fear that we're pricing ourselves out in the world market. But still cyclically this should be a major bull year for wheat prices and I think that if you start to take out this $4.40 level with any conviction then you're probably headed for around.
Pearson: Alright, if that happens you would not be in a hurry then to make sales?
Martin: No I would not. If you need to be making some sales maybe start at this level. But I would be really willing to hold off in any major portion.
Pearson: Let's talk about the corn market. USDA came out with their estimate of what they thought corn prices are going to be this year. We've also seen the report that we could see a switch from the, from corn over to more soybean acres. We've got more hogs. We're supposedly expanding the cow herd, ethanol has been a huge factor. What is your thoughts? What do you think is ahead for the corn market?
Martin: Well, I don't think corn has reached its highs yet. Last year new crop corn got up to $2.73 and, you know, we've been to $2.62 today which is a new high for the move so far off of fall lows. And so I think that we're still going to push this market a little further, you know, we're going into some dry weather, extremely low subsoil moisture as we go into spring plantings and so that is going to be watchful. Also, it's the first time that we have ethanol usage or industrial usage now expects to be greater than feed usage. And so that is a big, important factor. What it says is when you look at number two exporter in the world Argentina and planting is down 10% or greater it says the U.S. has to produce corn this year and with coming in with nothing but a very dry situation is leaves you a lot of concern that if we don't get the moisture we're going to have corn prices over $3.00 very easily. And here it is only mid-February and you've got prices up over $2.60. That is a pretty high price for this time of the year.
Martin: Maybe if one needs to start pricing fine but again I think corn is going to follow the wheat and wheat is a protein, so is corn so they'll go in tandem together and I would suspect that corn as you go in towards the first planting intentions report at the end of March we'll be rallying, we're trying to buy acres is what this market is all about. As far as old crop corn farmers aren't selling much at the present time. You still have a few piles on the ground around the countryside but I think the March corn is headed for $2.35, maybe $2.40.
Pearson: Okay, so those people who are holding might, that might well pay for itself.
Martin: I think so at the present time. The one mistake that I don't see farmers doing this year unless they really get caught up in a weather issue is hanging onto another crop into harvest like they did the last year and then getting caught with two crops together. That's the only reason we had prices as low as they were in the harvest.
Pearson: That's right. Let's talk a little bit about soybeans. And again, if we look at what has happened in the soybean market and it has been an interesting start to 2006. And, of course -- and I want you to talk about this too, this fund buying, this 140, 150 billion dollars you're talking about now have flowed into Chicago and into New York, into the commodity pits, pension funds and professional money managers wanting exposure to commodities. That has had to have had some impact. Is that what we've been seeing in soybeans? What is keeping the soybean market as high as it is? That's the question a lot of producers have been asking me and I know you've been talking about it.
Martin: Well, I think the thing is -- there's a couple of things -- and the bears will be quick to say if the index fund is holding the market up. To some extent that is true. But you also have other issues going on. You've got Asian rust in a major part of Brazil, a lot of cases of it this year as opposed to last year. In fact, in one week we had 167 cases reported. You've got Argentina on the dry side and in Rio Grande Del Sol it's very dry and it's starting to impact the bean crop there. Yields that are in the early harvest are not as good as they had expected them to be. In the meantime, you've also got bean oil making higher or attempting to come now and take out the January highs and you know, we have to remember bean oil did not close lower at the end of January than it did at the end of December like soybeans did. Bean oil is leading the way, it's another energy product and I think if you look at sugar it's been kind of driven, you know, everything that is kind of somewhat got a tie to energy, with bean oil it's biodiesel, I think that that is helping the cause a little bit. You know, we've got to keep our eyes on Germany and the taxation laws of what they do over there because there is talk that they may change their taxation and maybe even charge imports on seed. If that occurs that could have a big impact on soybean oil out of the U.S. We've got big supplies of soybean oil and those supplies have come off of the crush, crushing for meal and the protein factor out of the soybean this past year is not as good as it should be which means we're getting a subtle disappearance of beans but the USDA won't admit to that for probably another year.
Martin: So, as we crush we're accumulating good stocks of soybean oil. We'll export those stocks but we'll also support beans to be crushed for biodiesel.
Pearson: That's right, and of course the soy biodiesel is an exciting area. What do you do then? Do you take advantage of this? Do you make sales? Could we have opportunities maybe if Brazil is not as big as what they're saying?
Martin: Well, I think, you know, I've been known to be an eight dollar girl and I still am. This past year we did not, I mean, even though we got to $7.75 it wasn't $8. And I still believe that this is coming. We're in inflation area markets and soybeans are an inflationary commodity and I think that that's another thing we have to keep an eye on. I think it's very interesting when we look at Brazil they're already, even though they're getting ready to harvest a crop they're already talking about 2006, '07's crop and how they're really frustrated with the price of beans, where they're at, the price of the real rallying like it is and the farmers are saying even though they are exporting more beans than they have in a long time and in history in a short period as opposed to a year ago farmers in Brazil are saying they're very frustrated, they're going to switch to sugar cane this next year. So, you're going to lose bean acres in South America this next year.
Pearson: A lot of frustration by Brazilian producers.
Martin: And we have to produce.
Pearson: That's right. Now, let's talk quick about the cotton market which, again, pretty bullish start to 2006.
Martin: Well, I like cotton. You know, we can probably get a little correction here. We've been up around the 58 cent level. I wouldn't underestimate that but the one thing I noticed on cotton that really pleases me and I've talked about production deficits before by foreign countries, well, this year foreign countries production deficits are at an all time record high. That is very bullish, that means they have to import cotton.
Pearson: Alright, real quick the fed cattle market. We've got a real stand off going on with these packers and the feedlots but we've seen futures just drop dramatically. You were a little bit concerned about cattle at the end of 2005, we've certainly seen the fall off on the board. We saw the cash market recover last week and then we don't know what's really going on this week. What is your take in the fed cattle market? What should a producer be doing?
Martin: Well, the producer should be using any rallies at all and getting those cattle hedged. I would really highly recommend that. This next week we might see the cash market try to find a stabilization but packers should be pretty much in line with having used up most of their formulated cattle by the end of this week. So, next week we come in, they'll be dark on Monday, we come in on Tuesday they might need a few cattle and be more willing to price in cattle next week. But make no mistake about it there is way too much meat around, you've got Europe major exporter in the world of poultry and demand in Europe for poultry has dropped by anywhere from 25 to 50% and depending on which country it is. And the U.S. has huge stocks of poultry in the coolers. Pork, you know, relates very well to poultry and we're having more pork. Besides, I don't see anything good about the cattle market at all. In fact, I think summer cattle are headed - and it's going to shock people but it wouldn't shock me -- 70 cents as tested.
Pearson: Alright, real quick Sue, we've got about fifteen seconds. This hog market has been under some pressure as well. You talked about it, there's plenty of protein around.
Martin: Very much. In fact, the hog market was on a good note at the end of the week on Friday. But the one thing I think that is kind of interesting is to be, that we need to be watchful of, I think that everybody is falling into the trap of thinking because of the poultry, the Avian bird flu in Europe that we're going to see more exports of pork and that the demand will pick up for pork. I think that that's not the case. There's too much pork around. There's going to be too much pork around and we're importing a lot of cattle out of Canada as well. I would be selling rallies.
Pearson: Well put, Sue Martin. Thank you so much. That will wrap up this edition of Market to Market. But of course be sure to join us again next week when we'll examine government efforts to safeguard Americans from avian flu. Until then thanks for watching, I'm Mark Pearson. Have a great week.