Iowa Public Television

 

Market Analysis: Nov 12, 2004

posted on November 12, 2004


USDA's increased projections for the corn crop and some disappointing export sales are pressuring the grain markets. For the week, nearby wheat futures were down nearly four cents. December corn advanced by just half-a-penny.

The long-term fundamentals for soybeans remain bearish, although the discovery of soy rust is now the X factor. November beans went off the board Friday up more than 18 cents. The nearby meal contract gained $2.70 per ton.

The cotton market continues to move sideways, and for the week gained 98 cents.

In livestock, the December live cattle contract was up by $3.17. November feeders gained 52 cents. And the December lean hog contract jumped another $3.22.

In the financials, Comex gold advanced $4.00 an ounce. The Euro set another all-time against the dollar and for the week rose another 36 basis points. And the CRB Index climbed a half-point to close at 283.50.

Here now to lend us her insight on these and other trends is one of our regular market analysts, Sue Martin. Welcome back.

Market Analysis: Nov 12, 2004

Martin: THANK YOU, MARK.

Pearson: WELL, LET'S TALK ABOUT THESE BEANS BECAUSE THE RIDE WAS THE WILDEST IN THE BEAN PIT THIS WEEK IN CHICAGO AFTER THE RUST ANNOUNCEMENT -- THE ASIAN RUST ANNOUNCEMENT HAD COME OUT OF LOUISIANA. WHAT'S YOUR TAKE? WHO KNOWS WHAT THE RUST IS GOING TO DO? BUT CERTAINLY, THIS WAS AN INTERESTING MOVE FOR THE MARKET AT THIS POINT IN THE HARVEST SEASON.

Martin: WELL, IT CERTAINLY WAS AND, OF COURSE, WITH HAVING FOUR HURRICANES JUST BACK TO BACK ABOUT TWO WEEKS APART, MAYBE NOT EVEN THAT, IT WAS THOUGHT THAT IT MIGHT HAVE BEEN HURRICANE IVAN THAT BROUGHT UP THE SPORES. NOW, THEY ARE THE MOST AGGRESSIVE STRAIN, AND IT'S ALSO BEEN RUMORED AS OF TODAY THAT THERE WAS ALSO RUST FOUND IN MISSISSIPPI. SO I THINK -- AND THAT STANDS TO REASON BECAUSE IF IT WAS BROUGHT UP ON THE HURRICANES, IT ISN'T GOING TO JUST DUMP IN LOUISIANA. IT'S GOING TO COVER MISSISSIPPI. IT MIGHT BE ALL THE WAY INTO ARKANSAS. WE'RE GOING TO HAVE TO DEAL WITH THIS NOW, AND IT IS A POSITIVE FACTOR AS FAR AS SUPPLY GOES TOWARDS THE NEXT YEAR BECAUSE, ONE, WE'RE GOING TO PROBABLY SEE LESS ACRES IN THE DELTA AREA AND ON MARGINAL GROUND THAT GOES TO BEANS. SECONDLY, NO ONE KNOWS WILL THIS WINTER OVER OR NOT AS IT REACHES INTO THE NORTH, BUT YOU CERTAINLY HAVE HOSTS FOR THIS FUNGUS DOWN IN THE SOUTH. I THINK THAT WE'RE GOING TO SEE A SWITCH IN SOME ACRES NEXT YEAR, ESPECIALLY IN THE DELTA AND POSSIBLY ON INTO ARKANSAS AND MISSOURI, YOUR MORE MARGINAL GROUND. AS WE GET NORTH, WILL IT CAUSE FARMERS TO SWITCH? I'M NOT SO SURE BECAUSE INPUT COSTS ON CORN IS GOING UP AS WELL. IT DEPENDS ON WHAT PRICES DO. AND I THINK THAT AFTER THE USDA REPORT OUT TODAY AND MAKING LOWER LOWS, WE HAD A KEY REVERSAL WEEK GOING ON HERE AND CLOSED HIGHER, I THINK THAT WE'RE PUTTING A BOTTOM IN THE MARKET. WE WERE UNABLE TO COME BACK DOWN ON VERY BEARISH NEWS AND TAKE THESE LOWS OUT. AND OF COURSE, THE MARKET HAS BEEN HEAVILY SHORT. EVERYBODY KNEW THAT THIS REPORT WAS GOING TO BE NEGATIVE. I HAVE TO GIVE INFORMA CREDIT. YOU KNOW, THEY HIT THIS REPORT TOTALLY ON THE HEAD, BOTH BEANS AND CORN, JUST LIKE THEY DID LAST MONTH. SO WE HAD KIND OF A CHANCE TO TRADE THESE NUMBERS. I THINK WE'RE SETTING UP TO START MOVING INTO A MULTIMONTH RALLY.

Pearson: ALL RIGHT. WE'VE BEEN TRACKING THIS NATIONAL, THIS DTN NATIONAL SOYBEAN INDEX. AND YOU CAN KIND OF SEE THE FUTURES MOVED THERE ON THE TOP AND THEN YOU SEE WHAT OUR CASH MARKET HAS DONE. WE CERTAINLY SHOULD BE IN BOTTOMING TERRITORY FOR THE BEANS.

Martin: WELL, I THINK WE ARE. AND EVERYBODY WANTS TO BE VERY, VERY NEGATIVE AND, OF COURSE, EVERYBODY HAS BEEN TALKING OF FOUR IN FRONT OF BEANS IN THE PRICE, AND IT HASN'T HAPPENED YET. THAT DOESN'T MEAN IT CAN'T HAPPEN DOWN THE ROAD IF SOUTH AMERICA COMES OFF WITH A GOOD CROP, AND I THINK THEY'RE GOING TO WALK A TIGHT ROPE THIS YEAR. CURRENCY IS INCREASING. BRAZIL'S GROWTH IS I THINK AROUND MAYBE 4 PERCENT. ARGENTINA IS GROWING BY PROBABLY ABOUT MAYBE 6 PERCENT. YOU HAVE GROWTH EVERYWHERE AROUND THE WORLD. CHINA'S GROWTH THIS YEAR IS 9 PERCENT. EXPECT IT TO BE 8 PERCENT NEXT YEAR. ASIA IS AT 7 PERCENT. INDIA IS AT 7 PERCENT THIS YEAR, EXPECTED TO BE 7 PERCENT NEXT YEAR. THEY HAVE 1.1 BILLION PEOPLE. CHINA HAS GOT 1.3 AND YOU'VE GOT THE LARGEST MIDDLE-CLASS POPULATION IN THE WORLD IN INDIA. SO -- AND WHEN YOU LOOK AT CHINA, YOU KNOW, THEY'RE GOING TO BE GOOD IMPORTERS. I SUSPECT EVEN OIL WORLD EXPECTS THAT THEY'RE GOING TO IMPORT AT LEAST 21.5 MILLION METRIC TONS OF BEANS, BECAUSE OVER 50 PERCENT -- AT LEAST 50 PERCENT OF THEIR DOMESTIC CONSUMPTION FROM IMPORTED BEANS. SO TO SAY THAT CHINA IS NOT GOING TO BE BUYERS OF BEANS OR AGGRESSIVE U.S. BUYERS I THINK IS DOING THE MARKETS A DISSERVICE. I THINK THAT WE HAVE TO LOOK AT THESE ECONOMIES, LOOK AT WHERE THE DOLLAR IS. I THINK WHAT'S HAPPENING TO THE MARKET RIGHT NOW, MARK, IS THAT EVERYBODY REMEMBERS THE MOST CURRENT TIMES. AND THEY GO RIGHT BACK TO THOSE NEGATIVE TIMES OF '97, '98, '99, 2000, AND THEY THINK WE HAVE TO GO BACK INTO DULL MARKETS. AND I THINK WE'RE MORE INTO THE '70S KIND OF MARKETS, WHERE THE DOLLAR IS DOWN. INSTEAD OF BEING UP AROUND 102, 104 BACK IN THE LATE '90S, EARLY, YOU KNOW, 2000, I THINK YOU'VE GOT A DOLLAR THAT'S SITTING AROUND 83. IF YOU LOOK AT THE LOWS FROM '92 TO '95, YOU WERE DOWN AROUND 80 CENTS ON THE DOLLAR. THAT'S A BIG DIFFERENCE AND I THINK WE'RE GOING INTO THE '70S ALL OVER AGAIN, WHICH I HOPE WE ARE BECAUSE THAT AGRICULTURE IS GOING TO REALLY ENJOY THE RIDE AT THE EXPENSE OF THE STOCK MARKET. AND THAT'S WHAT'S BEEN RALLYING. THE DOW IS UP AROUND 10,500. IN FACT, IT'S OVER 10,500 TODAY. AND I THINK THAT'S ALL COMING FROM INVESTOR BUYERS FROM WORLD BUYERS, LOOKING AT THE DOLLAR BEING SO LOW, THINKING THESE STOCKS ARE JUST GORGEOUS OPPORTUNITIES. AT SOME POINT THEY'RE GOING TO REALIZE INFLATION IS HERE. AND THEN ALL OF A SUDDEN, WHEN THEY START SEEING THEIR ASSETS CONTINUING TO DEMISE, THEY'RE GOING TO THROW THOSE DOLLARS BACK AT US LIKE THEY DID BACK IN THE '70S AND THEN THE MARKETS ARE GOING TO -- THEY'LL TURN TO COMMODITIES AND AWAY WE GO. AGRICULTURE IS IN A GOOD PLACE I THINK.

Pearson: ALL RIGHT. SO THERE'S SOME POSITIVES THERE. LET'S TALK ABOUT THIS CORN MARKET AND WHAT'S HAPPENING THERE. AND THE INTERESTING THING ABOUT CORN IS, AS YOU MENTIONED, A LOT OF POTENTIAL DEMAND OUT THERE.

Martin: OH, VERY GOOD DEMAND. AND OF COURSE, I THINK THAT WE'RE GOING TO EVEN DO BETTER DEMAND AS FAR AS IN THE ETHANOL'S SEGMENT OR INDUSTRIAL USAGE. THINK CORN WILL GROW. WE'RE ALREADY USING MORE CORN THAN THE USDA KEEPS EXPECTING US TO, AND SO I THINK THE MARKET THERE IS GOING TO COMMAND MORE CORN. I ALSO THINK CHINA AGAIN, THREE ETHANOL PLANTS BUILT TO THE NORTH -- OR TO THE SOUTH I MEAN AND NEEDING CORN TO PRODUCE. I THINK YOU'RE GOING TO SEE CHINA IMPORT MORE CORN WITH TIME AS -- SEE, THEY'RE KIND OF WHERE WE WERE A COUPLE YEARS AGO OR SO. THEY'RE GOING TO CONTINUE TO MAKE STRIDES TOWARDS ETHANOL, GASOHOL, AND BIODIESEL. I THINK THE DEMAND FOR CORN GOING TO CONTINUE TO GROW. CHINA JUST THIS PAST WEEK DROPPED THE BAN ON U.S. IMPORTS OF U.S. POULTRY. AND I THINK THAT JUST CONTINUES. YOU KNOW, EGG HATCHINGS AND EGG LAYINGS AND ALL OF THAT FOR POULTRY NUMBERS JUST CONTINUE TO ABOUND EVERY WEEK, YOU KNOW, 3-, 4-, 5-, 6-PERCENT INCREASES. THAT'S A LARGE PROTEIN AND CORN USER. I THINK WE'VE GOT GOOD CHANCES HERE, BUT THE ONE PROBLEM WITH CORN IS FARMERS ARE GOING TO NEED TO CASH IN SOME MONEY SOMEWHERE. I THINK THEY'LL HANG ONTO BEANS UNTIL THEY SEE THAT MAYBE SOUTH AMERICA HAS GOT A GOOD CROP. BUT I THINK BECAUSE OF THIS ASIAN RUST NOW, THEY'RE GOING TO HANG ONTO BEANS AS OPPOSED TO CORN. AND SO WHEN THEY NEED TO GENERATE CASH, THEY'LL PROBABLY SELL CORN. I THINK THAT ONE THING THAT LISTENERS MIGHT DO IS GO ON THEIR WEB SITES AND LOOK AT THEIR UNIVERSITIES OF THEIR STATE UNIVERSITIES OF THEIR STATE, LIKE EXAMPLE IN IOWA, IOWA STATE UNIVERSITY, AND GO TO THE EXTENSION PLANT PATHOLOGISTS, AND THEY HAVE A BEAUTIFUL WRITE-UP ABOUT THE RULES AND REGULATIONS ON HOW TO HANDLE ASIAN RUST.

Pearson: ALL RIGHT. SO SOME GOOD THOUGHTS THERE, SUE. LET'S TALK ABOUT THIS CORN MARKET, SUE, AS FAR AS MAKING SOME SALES. WE TALK ABOUT FUTURES A LOT. MOST OF OUR VIEWERS OUT THERE ARE STILL CASH MARKETERS. LET'S TAKE A LOOK AT THAT DTN NATIONAL CORN INDEX. AND YOU'LL SEE JUST WHAT YOU WOULD EXPECT AT HARVESTTIME, CORN IN THE SUB $2 RANGE PRETTY MUCH AROUND THE COUNTRY. WHAT WOULD YOU RECOMMEND TO A PRODUCER RIGHT NOW? YOU'D RECOMMEND -- OBVIOUSLY YOU'RE FRIENDLY TO CORN, SO YOU'D HANG ONTO IT IN ONE WAY SHAPE OR FORM.

Martin: ABSOLUTELY. I THINK AT THIS TIME YOU'RE COMING OUT OF HARVEST. I MEAN WE STILL HAVE SOME LEFT, BUT YOU'RE COMING OUT OF HARVEST. PRICES ARE LOW. I EXPECT BEANS TO PUT IN A MULTIMONTH RALLY. THEREFORE I THINK CORN IS GOING TO COME ALONG WITH IT TO SOME DEGREE AS WELL. YOU'RE GOING TO SEE UNWINDING OF SPREADS BETWEEN LONG WHEAT AND SHORT CORN. THAT'S GOING TO HELP PUSH PRICES UP A LITTLE BIT MORE. BUT IF YOU GET CORN FUTURES UP AROUND 210 TO 215, MAYBE 220, THEN YOU MIGHT WANT TO THINK ABOUT SELLING SOME CORN. AND OF COURSE, IF YOU'VE TAKEN YOUR LDPs I WOULD MARKET THAT CORN.

Pearson: ALL RIGHT. LET'S TALK ABOUT THE WHEAT MARKET. USDA NUMBERS, SURPRISINGLY, ARE A LITTLE BIT SMALLER THERE. IT WOULD SEEM AS IF WHEAT HAS ITS ACT TOGETHER. ARE WE JUST LOOKING AT A SLUGGISH DEMAND?

Martin: WELL, THAT'S EXACTLY IT. WE HAVE TO HAVE SOME NEW BUYERS COMING AT US, AND WE'RE NOT GETTING THEM. YOU KNOW, CHINA -- WE'LL PROBABLY GET A LOT OF BUSINESS INTO CHINA. YOU KNOW, YOU'VE GOT ARGENTINA IN HARVEST RIGHT NOW, AND THEY'RE LOOKING AT PRODUCING A GOOD CROP. BRAZIL IS GOING TO TRY TO BE MORE INDEPENDENT AND PRODUCE THEIR OWN WHEAT SO THAT IN TIME THAT'S GOING TO LEAD ARGENTINA TO LOOK FOR, YOU KNOW, NEW EXPORT MARKETS THAT'S GOING TO COMPETE AGAINST US. SO I THINK THAT THE WHEAT MARKET HAS GOT ITS SHARE OF WORK CUT OUT TO DO. AND SEASONALLY WHEN YOU PUT A LOW IN IN AUGUST AND RALLY INTO NOVEMBER, THAT'S USUALLY A TOP. WELL, THE K.C. WHEAT HAS DONE THAT, AND IT'S RALLIED INTO NOVEMBER HERE. I'M WONDERING IF THE K.C. WHEAT MARKET HAS PUT IN A TOP. MAYBE CHICAGO WHEAT STARTS TO TURN AND GAIN ON IT. BUT I THINK THIS MARKET -- I DON'T LIKE THE WAY CHICAGO WHEAT KEEPS COMING BACK TO $3. BUT IT MIGHT BE THAT WE CHANGE THE SPREADS AND THAT'S HOW WE WORK THIS, THAT WE TAP DANCE BETWEEN THE VARIOUS TYPES OF WHEAT, YOU KNOW, BETWEEN MINNEAPOLIS, CHICAGO, THAT TYPE OF THING. BUT I THINK CHICAGO WHEAT MIGHT TRY TO GAIN AGAINST THE K.C., BUT I DON'T TRUST WHEAT VERY FAR HERE.

Pearson: ALL RIGHT. SO TAKE THAT FOR WHAT IT'S WORTH. WHAT ABOUT COTTON, SUE? WHAT'S YOUR FEELING ON THAT.?

Martin: WELL, THE ONE THING ABOUT COTTON, THE USDA TODAY SHOWED CARRYOUTS THE LARGEST ALMOST RECORD, NOT QUITE BUT PRETTY CLOSE. BUT THE ONE THING THEY DID GIVE US A RAY OF SUNSHINE IN, BECAUSE THEY DID INCREASE PRODUCTION, BUT THE ONE THING THEY GAVE US A RAY OF SUNSHINE OR HOPE WAS THAT IN WORLD PRODUCTION, THEY DID INCREASE IT A LITTLE BIT ON FOREIGN PRODUCTION, BUT THEY ALSO RAMPED UP FOREIGN CONSUMPTION. AND THE CONSUMPTION IS OUTSTRIPPING THE PRODUCTION BY A LITTLE WAYS. SO THAT GIVES US HOPE THAT MAYBE THE U.S. CAN GARNER SOME OF THAT EXPORT MARKETS.

Pearson: ALL RIGHT. LET'S TALK LIVESTOCK, SUE. THE FED-CATTLE MARKET. YOU WERE GETTING A LITTLE CONCERNED ABOUT MARKETINGS AND CARCASS WEIGHTS. AND IS THAT CONCERN STILL THERE?

Martin: I'M A BEAR IN CATTLE. THE ONE THING YOU'VE GOT GOING HERE THIS WEEK, FIRST OFF, YOU'VE GOT THE SPREAD BETWEEN CHOICE AND SELECT, WHERE CHOICE IS RUNNING PREMIUM OVER THE SELECTS. IT'S THE NARROWEST IT'S BEEN IN OVER TEN YEARS. IT'S RUNNING UNDER THE TEN-YEAR AVERAGE, WHICH I THINK IS INDICATIVE OF DEMAND, HOW POOR DEMAND REALLY IS. YOU'RE CATCHING HUGE IMPORTS FROM VARIOUS SOURCES. AND THE OTHER THING IS THAT THE CALF CROP, YOU KNOW -- I THINK WE'RE GOING TO COME OFF WITH A FAIRLY GOOD CALF CROP. YOU'VE GOT CHEAP CORN. YOU HAD HIGH MILK PRICES SO THE SOW SLAUGHTER IS DOWN. OF COURSE, WE AREN'T GETTING THE COWS COMING IN OUT OF CANADA. AND CONSEQUENTLY YOU'VE GOT GOOD PASTURES FOR THE FIRST TIME IN A LONG TIME, SO EVERYBODY IS TRYING TO KEEP THE COW AND BREED HER ONE MORE TIME. I WOULD HIGHLY RECOMMEND TO CALF PRODUCERS, IF YOU'VE GOT CALVES OUT THERE AND THEY'RE FAIRLY READY FOR MARKET, KEEP THEM MOVING AND GET THEM GONE BECAUSE WHEN THIS BORDER OPENS -- REMEMBER, CANADA COULDN'T SLAUGHTER ALL THE COWS WHEN THEY WENT THROUGH THEIR BSE PROBLEMS, SO THEY KEPT THEM AND KEPT BREEDING THEM. THERE'S GOING TO BE A LOT OF CALVES READY TO COME TO MARKETED TO THE U.S., AND THEY'LL SEND THEM SOUTH.

Pearson: ALL RIGHT. SO THE FEEDER CATTLE, THOSE COW/CALF U.S. PRODUCERS, YOU'VE GOT TO BE ON TOP OF THAT BECAUSE THAT COULD HAPPEN, BUT WHO KNOWS WHEN?

Martin: EXACTLY. IT COULD HAPPEN AT ANY TIME. AND OF COURSE, PRICES HAVE SOFTENED IN THE CALVES AS WELL, BUT THERE'S STILL PHENOMENAL PRICES BY OVER THE LAST TWENTY YEARS OR MORE. SO, YOU KNOW, I WOULD RECOMMEND TAKE YOUR MONEY AND BE THANKFUL AND SAY IT'S NOT AS MUCH AS I MADE BEFORE BUT IT'S STILL AWFULLY GOOD PROFITS.

Pearson: ABSOLUTELY. LET'S TALK ABOUT THE HOG BUSINESSES, WHICH HAS HAD SOME NICE RETURNS THIS SUMMER. AND PORK DEMAND HAS HELD IN THERE PRETTY GOOD. BUT NOW IT SEEMS TO BE SLACKING OFF JUST A LITTLE BIT.

Martin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

Pearson: OKAY. GREAT MARKETING STRATEGIES AS USUAL. SOME GREAT THOUGHTS. THANKS, SUE, SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." BUT IF YOU'D LIKE MORE DETAIL FROM SUE ON JUST WHERE THESE MARKETS ARE HEADED NEXT, THEN BE SURE TO VISIT OUR "MARKET PLUS" PAGE AT OUR "MARKET TO MARKET" WEB SITE. AND OF COURSE, BE SURE TO JOIN US AGAIN NEXT WEEK WHEN WE'LL VISIT AN OREGON COMMUNITY THAT'S CONVERTING WASTE TO ENERGY. UNTIL NEXT WEEK, THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK. CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

Tags: agriculture commodity prices corn markets news USDA