Pearson: This is the Friday, November 30, 2012 version of the Market Plus segment. Joining us now is Don Roose.
Roose: Thank you, Mike.
Pearson: One thing we didn't get to talk about on the show was cotton. Where do you see cotton headed? What are your thoughts there?
Roose: Well, you know cotton has been in a bear market and where we are really at on cotton is it has just kind of moved down to value about 70 cents, and what you really have is the big person down here that is supporting it is China. China for some reason is stockpiling. They are stockpiling domestically. So, I think you have to say their value buyers and I think that gives you confidence that is probably down at an area that we probably don't go lower. Can we go a lot higher? I think our balance table needs to improve before we do that.
Pearson: All right. Now as we look towards next year are we going to see more farmers switching from cotton to soybeans? Do you think we are going to lose a lot of acres? Is that a thought out there?
Roose: No, it definitely is. I think at this level on cotton and if soybeans stay at this level, even now you can do some risk management to lock in that difference, that I think you will see the acres switch and that is probably one issue for soybeans is we are going to continue to grow acres there as well as the corn.
Pearson: And if we see fewer acres in cotton is that going to have any sort of bullish impact on the price as we look towards the end of next year?
Roose: Well, I think that is the way it is suppose to work and I think that is probably why China sees something that maybe the rest of the trade doesn't. Maybe that is what they see, that we have lower acres not only in the U.S. but around the world and switching to some more value commodities. So, I think that is probably down the road. You are probably looking at months probably a year or two down the road.
Pearson: All right. We have got a whole lot of questions here from folks that watch us and then talk to us via Twitter and Facebook and Andy in Earlham, Iowa is asking, a lot of folks are asking this question, what impact is the weather having here in the Corn Belt as we look towards next year?
Roose: Well, I tell you it is all about weather, Mike. And I always tell people I have been in this business over 30 years and I always tell people probably 80 percent of your grain trade actually, ultimately turns out to be weather. The rest of it is the balance table that moves back and forth. So, right now we have a weather pattern that really is kind of similar to the '88 when we had the drought it was dry and then we had a big-. So, I think that we definitely need to replenish the subsoil moisture, topsoil moisture, 60 percent of the Corn Belt is in dry drought status. So keep your eye on the sky.
Pearson: Now have traders begun to really factor the market into the 2013 prices yet? Are we still waiting to see what comes out of South America?
Roose: Yes, I think that it is. I think where we are really - and that is probably why we haven't been able to go anyplace. We are just stuck. We are stuck around $13.00 on new crop beans. We get down to six dollars on new crop corn. We found support but I think we're trying to take this step at a time. So, I think what we are really doing is watching South America and if they come up with a big crop then that gives us a little bit of a buffer. Hopefully we get some moisture and don't have four years in a row of a short crop. So yes, we will be watching the weather. South America first because we know we are in a drought here that we hope improves.
Pearson: All right. We had a question here from Michelle in Sioux City and we talked about this a little bit on the show but she is asking is this a good time to buy feeders? A lot of folks out there with empty feedlots. What is the outlook for cattle feeders in the next 12 months?
Roose: Well, the one thing the feeder supply is tight and it is going to stay tight just because the cattle numbers are tight and they are going to stay tight until we can rebuild this cow herd which is going to take some time. So, I think if your feedlot, you know you are competing with a lot of other feedlots, you are buying feeders and if the grain market that moves higher, feeders will come under pressure but vice versa if the other happens.
Pearson: All right. So, it is just kind of wait and see type mode. If you have got the cash maybe worth looking at but otherwise...
Roose: They are at value. I would say that. So, I think they are at good value and it is up to the grain as far as which way they go from here.
Pearson: All right. That is great. We have got a question here and this touches on what we talked about during the show. Brent in Freemont, Nebraska is starting to roll the farming operation over to the next generation and he is wondering what sort of advice you might have as we look for changes in policy or just general thoughts on how to do something like that.
Roose: Well, I think one thing if I am rolling over - it is a big business. Farming has grown just huge and I think I would definitely look at the risk management advice because it is so important you can grow a crop but you have to get the crop sold. So, I think risk management is key and I would also say lock in long term interest rates.
Pearson: All right. Take advantage of these low rates and get out there and make that planning start now. Here is a question from Phil in Ontario, Canada. He is asking is the demand driven market for corn over? Or with lower 2013 prices will it all come back? What sort of demand destruction have we seen out there for corn buyers?
Roose: Mike, that is actually a good question because I think demand destruction actually started in 2008 when we pushed the corn market up to that lofty level eight dollars and we had around the world, other countries started to plant more corn. They have done that. Now with this push back up again, same thing, more new players came in and so we are losing some of our demand. There is no doubt about it, we are bringing other people into the market but our demand is still very strong out here.
Pearson: And do you see that continuing? We have talked about exports. Corn exports have been very low all fall with these high prices. What are your thoughts on those going forward?
Roose: Well, I think they are price sensitive. So, I think you have to say you know our export pace is very low right now because people are just trying to do with less actually. You know how we do when that happens. And so I think that if the prices come down I think our exports will grow. But I tell you another factor on our export is a little bit disappointing, with the dollar as weak as it is, that we can't maintain exports strong than they are because the dollar at some point in time probably improves.
Pearson: And now speaking of the dollar that is something that a lot of people have been asking where is the dollar going in terms of value? And you just said it is probably going to improve. Do you know when that might - rough guess?
Roose: Well, I will tell you one thing if we quit printing money that would help. So, I mean - and they are telling us in all these budget debates that is going to be something that they are going to work on and start to reduce the deficit. So, I think that if we send that signal there is no doubt that the dollar should start to find some strength. It won't be good for exports. That is one issue but right we have a weak dollar policy and we think that will change a little bit down the road. But we are at a floor on the dollar.
Pearson: Ok. All right. We did have a question here from Joe in Western Illinois and he is asking about metals and we saw the selloff in metals today. He is asking is copper the new silver?
Roose: Well, I think the one thing you have about copper is it is more of an industrial metal. But I can tell you one thing with all the metals in general it is kind of like farmland - it is an all in program because interest rates are very low, people don't know where to put their money, so they will put it in stable raw commodities. So, that is the one risk that you have with copper. It is an industrial product. So, if the housing industry continues to gain momentum that is a plus but you also have the other risk involved also.
Pearson: Don, just to wrap it up as we look towards this next month heading towards January 1st, what is your prediction on the fiscal cliff? How do you see this working out?
Roose: Well, there is no doubt you have to be positive that things will get worked out. I mean the other is just plain irresponsible and that is their job is to get the job done. So, I think it is more the framework, what it looks like, but I expect that the - that we have a compromise and I think that is what the American people want.
Pearson: So, you think it will be a compromise not just a push the whole thing off for another year?
Roose: I think most definitely and I think if they don't it is going to be a huge risk off type of trade. So, I think from a trader's standpoint that is what the trade is counting on.
Pearson: Looking for that compromise. All right. Well, thank you so much Don. I really appreciate having you here on the show with us and thank you so much for your Twitter and Facebook questions, keep watching and have a great week.