Pearson: This is the Friday, June 14, 2013 version of the Market Plus segment. Joining us now is Darin Newsom. Darin, welcome back.
Newsom: Thank you, Mike.
Pearson: We've got a question here, Smitty in northeast Arkansas, glad to see Arkansas asking some questions, we're excited to be on in Arkansas, asking about wheat. And we talked about this briefly on the show. Should he be looking to store some wheat this spring through harvest?
Newsom: I wouldn't store it very long. In fact, the old adage is you never want to be long wheat in December and I think that's probably going to hold true again here in 2013. But, again, if we look at the early yields that are coming in and how much lower they are than expected in many areas or as expected in many areas I think it's going to give us an opportunity here in the summertime maybe as late as early fall to see the market move up, to see a little bit of a spike on just the idea of short supply. Longer term, lack of demand is going to kind of keep a lid on the ability of the market to rally. But I do think there's going to be an opportunity once we get through harvest to see this market move up a little bit.
Pearson: So plan on a few months --
Newsom: I think we've got a little bit of time, maybe 60 days or so after harvest to see this market move.
Pearson: Alright. Now, we also touched on the show, the USDA reports and Jeremy in Onida, South Dakota is asking, do you think this week's production numbers are the biggest or smallest we'll see over the next few months?
Newsom: You know, it's interesting, the corn number just keeps getting ratcheted down so I think we've seen, I think it's easy to say we've seen the largest number it's going to be and it wasn't even the May report, it was probably the February outlook number was the largest number we were going to see. I think it does come down from here. I think weather and acres and overall yield going to start bringing those production numbers down as we go along.
Pearson: Now, a follow up question to that would be, since we did just see potentially the largest numbers we're going to see on a report, for end users this would be a good opportunity to begin to lock in 2013 needs?
Newsom: You know, it certainly could be. Those that haven't locked anything in they can certainly be looking at these opportunities. Also we've got high volatility in the corn markets, certainly brings into play some possibly option strategies as well to take advantage of high volatility, leaving yourself open on price to some degree. So there's a lot of things in a market like this where you start to see a sell off, supply and demand may be changing longer term and volatility stays high. I do think it provides us some opportunities to get some coverage.
Pearson: And now soybeans, similar story, possibly the biggest crop we're going to see reported in a USDA report?
Newsom: Oh yeah, since they didn't change any numbers. I mean, not a single number. It should still be the largest that we see. Now, that is not quite as much of a tap in putt as the corn market is. Some things could change. We could see a higher acreage number here in coming months, it's a possibility. They may leave yield for now until more is known about this crop. So if there's going to be one that could still see a bigger number come in it might be soybeans.
Pearson: Such a late planting season has really added a lot of uncertainty into the soybeans.
Newsom: But you've got more time in soybeans. And you're right, all it does really is ratchet up the uncertainty.
Pearson: Alright. Now, Tim in Crookston, Minnesota is asking, what is your take on the 2013 corn planted acres and yield? What are your thoughts there?
Newsom: My thoughts are nobody knows and anyone that says they know is just kidding. They really don't know. I mean, we can go back to these weekly reports that say we're X% planted but since we really don't know what is going to be planted we're looking at an X% of a vague number. There is no way of knowing what acres are. There's no way of knowing what acres were ever going to be. And so the idea that we've got 95% planted, 96% planted, it could be 100% planted now because we're not going to plant anymore and it's 100% of what? So these numbers are vague, these numbers are really still variables, they're unknowns and I don't see that changing at all over the course of the summer.
Pearson: Alright, so things to keep an eye on as summer rolls through. Phil in Canada is asking a question. Assume weather stays normal, we get perfectly normal weather for the rest of the growing season. What do you think the range in crop prices could be? What sort of volatility are we going to see based on, I suppose, strictly demand scenarios?
Newsom: You know, corn volatility is high. Soybean volatility is low. And I think that's an interesting mix. That could certainly change by the time we get another 30, 40 days into the summer. What could the price ranges be? It's an unknown as what production could be. Let's take corn for instance, let's say we do take 5 million acres off of the projected 97.3 right now and we bring yield down to 150. All of a sudden we ratchet our total production and our ending stocks back down to levels very similar to what we've seen in 2012. So, all of a sudden can we rally the market back up to where we were in 2012? Possibly. I wouldn't look for it but it's possibly there. So these price ranges could be huge here over the next 90 days. Really hard to pinpoint where they might go. a lot of it is going to depend on what other investments are doing, what the dollar is doing, what the Dow is doing, how gold is reacting, crude oil and so on. But there is still a chance that we could see a great deal of volatility in these grain markets.
Pearson: Alright. Now, before we let you go, next week of course the Fed is having their annual meeting. I was hoping you could give us your thoughts on what should producers be expecting interest rate wise in your opinion?
Newsom: Interest rate wise, longer term we're going to see them start to go up. We're already hearing the rumblings of some interest rates starting to go up. So we should be anticipating that. By the end of 2013, early 2014 I think we're going to see the Fed fund rates start to go up and then the ripple effects from there on out. What is going to be said next week? A whole lot. What's important that is going to be said in the next week? Not a lot. It is all going to be innuendo, what's in the word, what's in the wording and so on and I think when you boil it down the bottom lie is going to be they are looking more seriously at a timeframe for raising interest rates.
Pearson: Might start to see some wording that will tell you that we're getting ready to dial something in.
Newsom: We've already seen those hints in meetings past and so I think those tones are going to get stronger.
Pearson: The taper will become more apparent in theory.
Pearson: Now, as we look to this next week, other than the Fed meeting, are there things out there that could shift the way money is being invested in the broader markets? What should folks be keeping an eye out for in this next week?
Newsom: Well, there's some concern. We've seen some rather large sell off in global equity markets here. We'll see like an 800 point move in the NIKEI or a 200 point move and usually high volatility means you're nearing a market top. So we might see global investors starting to get a little bit nervous. Now, does that mean they'll jump over to commodities if the supply and demand situation is such that it provides a good opportunity? If not they may move to the sidelines for a while, they may just take some money out of the investment markets and see what they, see what develops here down the road. So a chance for them to go back into commodities, a chance for them to go back into commodities that have some tightening supply and demand situations but certainly they're going to keep a very close eye on how these equity markets are moving.
Pearson: Right, and we saw them go to the sidelines at the end of 2012, it certainly wouldn't be shocking just to see that happen as well.
Newsom: Yeah, no we've seen it do it time and time again when volatility goes up and it's like we always say, investors don't like volatility and when the equity markets get volatile they get out, when commodities get volatile they get out and they look for something else to do.
Pearson: Alright. Well thank you so much, Darin, really appreciate you being with us here. And thanks to all of you for sending in your questions via Facebook and Twitter, please continue to do so and we'll continue to get expert answers for you. Have a great week.