Pearson: This is the Friday, December 28, 2012 version of the Market Plus segment. Joining us now is Sue Martin. Sue, welcome back.
Martin: Thank you, Mike.
Pearson: Good to have you here. We've had our questions submitted via the social media. And I'd like to start off here -- Phil in Ontario is asking, what scenarios have to play out for corn prices to have a 3 in front of them by the fall of 2013?
Martin: I would have to say that one, we've ruined our demand, our usage. Two, that would be with having $7.50 corn, $7.20 to $7.50 for so long. Two, good production. We pick up the 99 plus million acres and we have very good weather, the drought starts to disappear in the western Corn Belt and all of a sudden we see -- will we see corn trendline yields? I don't think so. I wouldn't hold my breath on that one. It's a matter of how far back towards trend can we get. There's been one year that you did get back quite a ways but another year, most other years similar to this one you don't. I think the yields will be, production is going to be better this year than in 2013-2014 than it was in 2012-2013 mainly because of the increase in the acres and too because the eastern Corn Belt seems to have plenty of moisture now. It's catching up moisture.
Martin: But we have to look back at a year ago at this time and I remember in January being down in Ohio, Hillsborough, Ohio and it was wet, wet, wet. Those guys had been just deluged with water only to turn around and see a drought. And now they're back wet, wet, wet. But I guess I tend to think that to get that we need a good scenario where the demand has sort of left us and we also need to see a situation where all the acres, the percentage of acres harvested increases substantially and it produces.
Martin: Now, we have to remember in Iowa I would say it is half and half, from north to south in the state of Iowa taking I-35 corridor the eastern half might do a little better than the western half this next year. The thing we have to remember is the only reason we had these good yields, surprising yields this past year was because we had the moisture coming in and we got the crop planted early and then the roots followed the moisture down. If it hadn't have been for that we would have been really biting the dust. Now it's a matter of how important will we see -- how much will our demand stand back? Exports, well if you don't have the crop you can't export it and we're certainly having our share of issues with our exporting channels. So we need that to get settled down too.
Martin: I would say, for me, I would watch -- if they are fearing a 3 in front of corn this fall first off, they need to realize huge gap between December 13 and December 12 and that usually, even though you'll fade away for a little while, eventually it turns and comes back and looks at it. And as we go into spring I think you're going to see some weather premium added back into this marketplace and that is your chance to get some hedges on.
Pearson: So start looking here. As we get into January, February? Or February, March? When do you think we'll start to see that premium added?
Martin: I think it will be more February to March, maybe at that time. You have your outlook meetings I think February 21st, 22nd, something like that out east by the USDA. And I think what I would do is right now if they're nervous buy some put spreads, get them as much as you can maybe cheap, maybe take a $5 spread and then -- because remember the low on Dec corn this past year was $4.99. So taking out that low tells you you're now into a bear market. And in the meantime I would also say the other thing we keep forgetting is the dollar, the value of the dollar. And also crude oil. Crude oil looks to me like it's going to rally this next year and if I'm right that should be supportive to corn underneath.
Pearson: All right. We've got a question here from Brad in Illinois and he's asking about soybeans. He is noticing that demand is high domestically and for export. Why are we having trouble pushing this market past $15? Do you think a strong rally will come to fruition before the planters roll in the spring?
Martin: Yes I do. But I think it's coming off of -- we need to see some weather issues in South America. They're looking at in Brazil 81 million metric tons, some are saying higher, some say maybe a little lower around 80. You drop under 80 now you're going to start to price enhance the market a little bit. And then you've got Argentina looking at 55 million metric tons. There were some analysts that just recently lowered their estimate down to 54 million metric tons just because it's been so wet and beans don't like wet feet. And the corn production in Argentina is thought that it's going to fall back and those acres will start to go towards soybeans.
Martin: So that is kind of keeping a little bit of a lid over us. It's all this thought of production out of Brazil. And we do have to remember we are very front end loaded with exports. That's nothing saying though that we can't be front end loaded on exports of beans but make a shift to where we export the products. And all of a sudden our demand is there. It hasn't gone anywhere, it's just we're crushing it here and shipping it over and saving them the problem of crushing.
Martin: China's crushing margins are good right now. And so I can’t' see them just walking away from us and nothing is written in stone yet as to that crop. But you start getting through January and if the weather has been turning dry then you're going to start to see some weather premium put back into this market off of the South American crop.
Pearson: So things to look for, keep your eye on South America. That's going to be the prime mover as we roll into spring.
Martin: Yes. You know, you've got to look at South America and they're kind of on the flip side of us. Our January is their -- their January is our July and a lot of times you'll rally, you'll peak a market around that first part of July and drop off but for soybeans you catch into August and you'll turn and get your rally. In years ending in a 3 beans tend to make new highs over the year before. The only thing is we had such a phenomenal rally this year that I keep asking myself did we put it in a little early? And that's a possibility. But at the present time I still want to be very open minded in this market and give it a chance to work itself out.
Pearson: And see where things go as South American news comes out.
Pearson: We've got a question here related to something we've covered on the show, it's something that has been talked about a lot. Buresch is asking what kind of effects will happen if the Mississippi River closes?
Martin: Well, that is not a good thing for us because usually we do ship so much down the Mississippi and when you look at those ships that have been sitting pretty soon it's going to be like, we'll be like Brazil where this past summer when they were loading corn it took them, they went from a 25, 30, 35 day period to a 50, 55 day waiting period to get stuff loaded. We may end up all of a sudden looking the same way. But I think what is happening in the U.S. with all this talk of dock worker strikes and port strikes, I think it tells you keep an eye on South America because they are going to be caught between a rock and a hard spot needing to move a lot of crop if they come off to fruition and all of a sudden what a better time for their producers, their farmers in Argentina who did have a strike here this past Sunday, have that go on and then turn around and in the meantime you have your dock workers and stevedores and everybody else, truckers who are only supposed to work so many hours all striking because they want more money. And what a better time to do it when there's a huge crop that really needs to get moved.
Pearson: All right. And there may have been a late breakthrough, I think they have to an agreement for 30 days so we'll see how that plays out as they hammer out the rest of their details.
Martin: That's right.
Pearson: Now Sue, we're going to let you go. Do you have any thoughts on how 2013 might turn out big picture wise?
Martin: I think 2013 is a year of volatile moves. You've really got to keep your eyes open. I think it's a year where we look at in the latter part of the year I think interest rates they might stay low going into '14 but I think we're going to start to see some inflation. I look at the CRB index and the CCI index and I'm making beautiful head and shoulders bottoms and that to me speaks bullish for commodities in general. Crude oil charts look friendly. I just am not really ready to sail everything down the river yet.
Pearson: All right.
Martin: No pun intended.
Pearson: Thank you so much, Sue. Pleasure having you here. Really appreciate it. Thank you all for watching and thanks for submitting your questions. We really appreciate it. Have a great week and a Happy New Year.