Hjort: Thank you.
Pearson: Hey, a lot of things to talk about. One of the things that I've heard a lot about lately has been this continued dryness down in the southern plains. There were some relief of rainfall in parts of Texas in the last couple of days but still in the Oklahoma, panhandle Texas, big parts of Kansas, extremely dry conditions for that winter wheat crop.
Hjort: Well, it is and it's been that way all winter. The Texas agriculture department is talking in terms of 88% of their winter wheat crop is in the poor and very poor categories. Now, Texas can get dry but that is pretty bad situation. And really not much in the forecast. But we've really got the Kansas City wheat market moving higher late this week was the report from the government, the NULA group that we could be seeing a La Nina weather development out in the Pacific Ocean. And that means that usually you would have very dry conditions across the southern U.S. or parts of it anyway. So, in other words no relief coming this spring for that wheat crop. Some of this dryness has been creeping up into Kansas and Colorado as well and the drought monitor shows more dryness into those areas. Obviously there is time, wheat isn't in terrible shape there. If they get a good rain the wheat crop can survive. But certainly top yields are out of the question now as far as the hard red winter wheat crop goes. And now it's just a question of how much you really salvage out of that.
Pearson: Alright, and when you're facing a situation like this and a year like this what do you recommend for making sales?
Hjort: Well, I'm not recommending sales right now on new crop. I'm saying let's just kind of stand aside here. It's a day by day thing obviously depending on what weather, how weather develops. This La Nina forecast, even the NULA people said it's kind of iffy yet and others are saying nah, they don't see it at all. So, that will develop over the next few months. But don't sell right now but be ready to take advantage of that. The reason I wouldn't sell is the world wheat situation. The international grains council a week ago came out with their new projection for the new year cutting 20 million tons out of their wheat production estimate from the previous year. That would put the world wheat supply/demand balance at the tightest level we've ever seen. So, there is potential for this market to come on up here yet and could continue to rise significantly. So, I would not sell anything right now.
Pearson: Alright, again some weather development. What about in the far west, your home state of Montana and that region?
Hjort: Well, they've had variable weather conditions. Planting progress last fall was just kind of slow, dryness in many areas. Dryness developing up in the northeast corner, well it's mostly spring wheat and durum area. But yeah, it's a little touchy up there this year. Those folks in that area for the most part have had very, very good weather for several years. So, I suppose the worm is going to turn here perhaps. So, there is some weather stress that those folks are looking at too.
Pearson: Alright, let's talk about the corn market. What do you see ahead there, Doug? Obviously we're in a time period now where we're trading off what the USDA reported last month and with an eye towards will we see some shifting out of corn over to soybean acres? I was in Lincoln, Nebraska this week, had a show of hands, several producers said just that, particularly in the irrigated area.
Hjort: That's the general perception out there that that is going to happen and it makes sense given energy costs, fertilizer costs and so on. We've got plenty of corn on hand and in the bins and on the ground and so on yet. So, that is the bearish part of it. The bearishness also goes down into South America. It looks like even though they have had some weather stressful periods their crops have probably come through or are coming through in pretty good shape. Don't really know that yet but it's not like last year to where it was clear there was deterioration and especially in Brazil. Now you look at that whole picture and prices are coming up, especially late this week, a good share of that could have been on the back of the wheat market rallying so strong. I'd be very cautious here on the corn, if you've got any old crop corn look for making opportunities to sell that. We're right up against a major resistance area within a quarter of a cent of it on the close Friday, very key if we can keep pushing through that then we may have another five, six, seven cents from a technical standpoint. But very key here. If we get rejected at this price level these prices could fall back off very, very quickly. So, same thing on the new crop, you're up here touch the $2.60 in the December futures on Friday, that's a pretty good area when you've got an abundant supply in the bin already. Now, soil moisture is somewhat short in parts of the Corn Belt so that is a concern for the new crop. But that is down the road, a couple of good rains in the spring will take prices down real hard.
Pearson: That's right, and a prudent business decision, may want to take a look at that contract. Alright, let's talk about soybeans. You mentioned South America, most of the reports we've seen have been fairly positive. I mean, it seems like the crop down there seems to be rolling along pretty good. At the same time we've seen this market here strengthen and we just talked about the fact there may be more bean acres. What is taking this market higher?
Hjort: Technical buying, speculative buying and the strong grain markets. I think soybean prices this week would have dropped off rather significantly had it not been for the wheat market recovering on Thursday and Friday. Soybeans were ready to tank in my opinion and I think they will just given confirmation that that South American crop is there. Traders are saying, you see it on the wire service every day that well remember last year at this time the numbers were big for South America on production and then they really fell off hard, especially Brazil. Well, they're kind of assuming that might happen again. So, once we get a solid indicator of what that yield is down there and like you say, it looks like it should be normal, if we get confirmation of that I think soybean prices are about done. So, here again like the corn, be ready to take advantage of this price. There are some private forecasters that are predicting that soybean futures, November futures could easily drop a dollar a bushel if there are no serious losses in South America and we don't have any serious planting concerns here and maybe more than that but at least a dollar a bushel. I think you need to be looking at new crop sales and cleaning up old crop as well.
Pearson: That new crop looks pretty attractive...
Hjort: It sure does.
Pearson: ...$6.40. Let's talk real quick about cotton, we had the Chinese New Year and China stepped out of the cotton market, we went down. Low and behold they're back in this week, we're back up. Is there much else going on in cotton besides whether China is in or not?
Hjort: I think the cotton market is very much like the grains, it's hopeful for next year. Plenty supply both in the U.S. and the world and yet these prices have come right back up, some of these contracts are touching contract highs now.
Pearson: Let's talk about livestock. Fed cattle market, you talked earlier about the worm turning weather wise out in Montana. Has the worm turned on this fed cattle market?
Hjort: Well, it sure did. It got hit hard. Two weeks ago we had some scratched tops out there at 97 or even 97.5 for fed cattle. This week we were scratching trying to hold 92. Well, 97 is just too high in my book. I don't think we can justify that even with good beef demand. So, I think we're just getting the wash out from that exuberance as Greenspan may have called it. So, I think beef demand though is still okay, yeah we took a hard hit this week and we may start out next week under pressure as well but I would look for beef prices to stabilize here in the next week or two and hold at this level for a while, maybe come up a little bit more into spring. I wouldn't be real aggressive seller of fat cattle now, if you have a choice. But and as far as hedging from here on, no I wouldn't do anything right now. On a pull back though I'd be pretty serious, take a look at that.
Pearson: Take us out to this summer and fall, Doug. Are we seeing enough of an increase in heifer retention now? Is the factory getting rebuilt?
Hjort: Well, it is. Four percent more heifers held back for breeding purposes, herd replacement. That is tough, could be tough but the cow herd is still relatively old. We're culling quite a few of those old mamas too. So, I don't think we're really building that cow herd. The cow herd was up about one percent this past year. I look for that to happen again next year.
Pearson: Alright, let's talk about the hog market, Doug, because we have seen pork prices take a precipitous drop since the first of the year. And numbers there seem to be increasing based on the last USDA report. What is ahead for pork producers? What would you tell them to be doing?
Hjort: Well, probably don't do any hedging right now, after 10 bucks down in four weeks you don't want to grab a hold of that one. But I think there again like the cattle I think this hog market is trying to stabilize here. IT doesn't look like it, like Thursday and Friday of this week we just continued to plunge down. Cash, pork product, everything has been going down with the futures. But I don't think this market is ready to really collapse. You've got very cheap chicken breast prices at retail. That is competing strongly with the pork loins and really creating some demand problem at the retail level. So, don't play around with this market, keep your marketings current but I do think we'll have better marketing opportunities in two or three weeks.
Pearson: Very good, Dough Hjort, thank you so much. That will wrap up this edition of Market to Market. But be sure to join us again next week when we see how President Bush's 2007 budget plan may affect agriculture. Until then, thanks for watching, I'm Mark Pearson, have a great week.