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Market Plus: Sue Martin

posted on March 15, 2013


Pearson: This is the Friday, March 15, 2013 version of the Market Plus segment.  Joining us now is Sue Martin.  Sue, welcome back.

Martin: Thank you, Mike.

Pearson: On the show we were just talking about hogs a little bit when we had to go.  Can we go into a little bit more, kind of a bigger picture -- you mentioned that you feel a little bit more bullish about hogs than you do cattle -- can you talk about what is going on in China with all of these dead hogs and where you see us going with Japan possibly?

Martin: Well, the interesting thing between China and Japan, in March of 2010, in fact it was about this time of the year, around the 12th I believe of March, that that tsunami hit Japan.  And when that occurred because of all the radiation contamination of rice, pork, you name it, Japan turned to China for imports.  And then they started having this issue over the islands and all of a sudden Japan is not importing Chinese products anymore.  I don't know if that is on China's part or if it's on Japan's part.  But Japanese imports from China were down 70% in the month of January alone.  That could spell good things for the U.S., especially even if it comes back in the form of grain, say corn, but pork as well.  They're probably one of our biggest buyers of pork.  So if they were to come back to us, it depends on how these delays in shipments continue in Brazil and from what I'm hearing out of blogs and different things it sounds like they're going to have issues just peppering throughout most of this year.  And so I think that Japan, they tend to like ready shipments, they're very particular.  I think they may, we may see a pick up in Japanese business coming to us.  Now, the Yen also is dropping so that's kind of a little bit of an issue against the dollar.  So we'll just have to see how that -- but if they're needy they will come.

Pearson: Sure.

Martin: But when we look at the situation of dead pigs in China and the rate of food inflation, even though they say pork prices are dropping in China, I have a funny feeling if food inflation is running that high already they're probably going to be importing pork. 

Pearson: Certainly.

Martin: And so I think the outlook for the hog industry, even though our numbers are to be equal to a year ago, pork is also the other white meat, poultry numbers are up, poultry might compete a little bit for demand but still pork is a very favored product over in Southeast Asia, which brings up another thing.  Southeast Asia, when we talk about that, we're looking at Cambodia, Vietnam, Malaysia, South Korea, Taiwan, Thailand, Indonesia, the Philippines, they have phenomenal economies right now and, you know, their economies are flying through the roof, you've got businesses leaving China and going to Southeast Asian countries like Cambodia or Vietnam because the country's governments are not as restrictive as China's are and the labor force is a lot less, well let's put it this way, they don't cost as much.

Pearson: Certainly.

Martin: So the economies are rolling there and that means more meat.

Pearson: That's right.  People like to eat protein.

Martin: Exactly.

Pearson: Especially when they can afford it so that's another door opened for America's pork industry.

Martin: That's right, that's right.

Pearson: Now, we were talking about cattle, we were talking fat cattle, I'd like to get into a little bit more depth on both where you see fat cattle headed and where you see feeders going.

Martin: Okay. In the fat cattle market I'm concerned because we do have enough pork and poultry to compete against beef and if gasoline prices are high and you have a very wet situation east of the Mississippi, well, you know, and another thing, we've had storms on the East Coast, that has kind of hampered demand and then if you have high gas prices it's going to maybe kind of cut into beef demand a little bit.  I think that the seasonal lows in beef demand may hit us right around the very end of March.  It may come in more in April.  But we do have an early Easter at the very end of March as well.  Now, the other thing that I look at is on a technical nature the April contract has a huge gap, just the reverse of what Dec corn has.  The April contract of cattle has a huge gap that measures down all the way to 119 something.  And I have, I think a wave 4 count that comes in right around 123.  So I think you're going to 123 but I would also not rule out a 119 figure.  If this year's April contract doesn't get that, next year's will.  And when I look at feeder cattle they have it too.  And feeders actually have been working on it real hard.  And the thing is where most of the feeders are raised these cow-calf herds, most of them are out west of the Mississippi where it is drier.  Now we've had some moisture, but does that mean that's the wherewithal?  No.  We've got to move on and get further in to the season.  I fear that we could be very vulnerable this year for the cow-calf man again and then to add to it we're getting cattle, you know, cows coming in from Canada which isn't helping the cause and then we're also getting heifers and steers.  You know, the influx of cattle, I want to say cows coming in and feeders, was up 225% from a year ago.  So, of course a year ago we weren't getting much but we're getting a lot.  And so the dollar, the currency is having a big impact here versus the Canadian dollar.

Pearson: Okay.  We do have a question here from Virgil in Newkirk, Oklahoma and he's asking, everything we're saying, he says, what's it going to take to perk up the cattle market?  Is there anything you see on the horizon that could turn this around?  Is it just a waiting game now?

Martin: Well, once you get Easter out of the way that is one thing psychologically.  But I think a change in the demand shifting because it seems to me the cattle market is all about demand right now.  We certainly know what the numbers are and the numbers is being diffused, our tight supply is somewhat being diffused with cattle coming in from Australia, they're still coming in and cattle certainly coming in more aggressively from Canada.  So unfortunately that is kind of diffusing our situation.  Now if you get the cattle market cheap enough, well, you're going to increase some demand and, of course, also because these cattle producers are not making money and have lost money for at least 18 months they're not going to feed these cattle as heavy as they once did.  The sequestration I don't think is near the problem that everybody wanted to make it out to be.  I think it has been dramatized, whether that's a political ploy against republicans, I have no clue.  But on the take of it is, bottom line, if they just think about it packinghouses pay for Saturday kills and if you take and do the sequestration or the furloughing starting in July through August, well basically you don't have a lot of Saturday kills back at that time so the packinghouses could, if they wanted to get a 40 hour week, they could kill on Saturdays and you'd have everything fine.

Pearson: Okay.  We've got one quick question, Bryce in Nebraska is asking, we're talking corn again, back to the grain markets, and we were talking weather earlier -- he is asking about the USDA's yield projection.  They're calling for 163.6.  Do you think that's going to be accurate?  Or what are your thoughts on yield?

Martin: No, I don't think it's anywhere remotely close.  And data would show that.  But the thing is when you come into a new crop year you always have to assume the best and then you work the numbers down from there when it's proven that things aren't moving along as nicely as you would like.  So I think that is what they're doing, they're moving along with that and they're also looking at the fact of all the moisture that is east of the Mississippi and in the Delta and saying, hey, we've got some moisture here so things should be a little better, yields should be a little higher than they were this last year.  However, we also have a lot of pasture land that should not even be going into production that is and that is going to help drag backwards this yield a little bit.  On top of it the western part of the Corn Belt, yes we've had some wet snow that melted in Nebraska and parts of Kansas and that sort of thing help and the drought monitor shows Iowa may be shifting just a hair.  But to be honest with you we are still very dry and top soil doesn't make it.  We need some pretty good timely rains to keep this crop going when we get it in.  Another thing, our crops are not going to go in as early this year as normal.  And that too might delay the pollination into a more time of the year when it could be a little bit hotter where this last year some of that crop really made it through ahead of the hottest time.

Pearson: That's right, and we'll see harvest pushed back a little bit accordingly and possibly see those strong basis levels continue into and through September.

Martin: Exactly.  The one thing that we do have to keep an eye on though, you know, I'm a big proponent of watching the September corn contract because remember last year we had corn being harvested in late July and that corn probably got us through a very tight situation.  But this year that's not going to happen and we are going to have corn imports coming in especially on the East Coast from Brazil. But in the meantime here's another situation, the sugar producers in this country are losing their shirt and there's talks of around $862 million of defaults and the government is concerned about this and there's talk that they may buy sugar from these producers and turn around and sell it at a loss to ethanol plants.  That could hurt us a little bit and that would be starting as of August 1st.  Well there's your September timeframe too.

Pearson: That's right.  Well thank you so much, Sue, really appreciate having you with us here tonight.  Thank you all so much for watching.  Please continue to send in your questions via Facebook and Twitter and we will continue to have expert answers for you.  Thanks for watching.  I appreciate it.  Have a great week.


Tags: agriculture analysis cattle commodity prices corn economy hogs markets Mike Pearson news soybeans Sue Martin wheat