Iowa Public Television

 

Market Plus: Sue Martin

posted on August 16, 2013


Pearson: This is the Friday, August 16, 2013 version of the Market Plus segment.  Joining us now is Sue Martin.  Sue, welcome back.

Martin: Thank you, Mike.

Pearson: We've had a lot of talk over this past week, as you mentioned on the show we've had several weather forecast models come out, show the potential for below average cold in the, oh, 15, 30 day forecasts so it has got people thinking about frost.  We've got two questions.  Jeff in central Iowa and Bill in Storm Lake, who is well known around Iowa, BNorthey on Twitter.  They are asking, what would a September 20th frost do for beans?  And how late can that frost be without the market reacting in a huge way?

Martin: Well, first off, if it was to hit, you know, there's a full moon on the 19th and then you have your equinox I think around that 21st, 22nd.  If it was to hit in that window, the bean crop I think in a major portion of the Midwest would be decimated.  In Iowa especially but Minnesota, North Dakota, part of South Dakota, Wisconsin and part of Illinois, in fact a chunk of Illinois.  I think you would just, you know, the beans are very short, there's not very many nodes and they aren't really filling out very much.  So if we were to get that and the forecast also is for dry, it's not calling for moisture, and dry dirt freezes easy.  And also these beans haven't filled the rows in and therefore they're not canopied to help protect the soil.  So I think it would absolutely decimate the yield and we can't afford that because we're already extremely tight.  We need everything we have.  Now, the bear will try to say, well but South America has got this big crop and probably what would happen at that point is they might even ramp up a few more bean acres if they can at the expense of corn or something else.  But that is fine, they can say that.  But look at how effective they were getting their crops out of the door this year, exported, that China stayed with us the whole year.  And your bears all spring touted that would not happen and they were wrong, although they still were effective in breaking the market into summer, you know, or near summer.  So I think it would be very, very tough, very bullish to the price.  It should be very explosive to prices I would think.  I would think that the market on beans would run up and take out the $16 level, the $16.60 level.  What it would do is I think set a tone or a trend where the market would be higher each month into June of next year.  It might have one down month --

Pearson: -- tighter and tighter and tighter certainly.

Martin: Yes, exactly.  So I think it's a very big thing if that happens.  For corn you won't decimate the crop like you will the beans but the crop has been planted late and you certainly will cut the maturation of it, it won't mature and you'll have to spend a lot of money in drying it down, trying to get it out of the field because the stalks will get mushy and you name it.  It just won't have good quality at all.  So it will be a very bad thing for corn as well.  And supplies are tight on corn but in the meantime I think the effect, although we have to keep one thing in mind, the corn is loaded, just like feeder cattle were back in May with shorts, record shorts, corn has been loaded with record shorts too and on Tuesday when that market gave up all of Monday's move and made a lower low by one cent I think it attracted a few more only to take them to the cleaners the rest of the week.

Pearson: Gotcha.  Now, how late can the frost be before we start to see that explosive price movement?  We'd have to see frost mid-October?

Martin: You know, the average frost date, I even think for us, is around October 15th or 10th, something like that.

Pearson: So, an average frost --

Martin: Yeah, an average frost I think still would do damage.  It wouldn't be as severe as it would be in, you know, because beans are daylight hours.  They mature by daylight hours.  So when they're ready to come home they're coming home.  But in the meantime it would cause green beans, so that in a sense is poor quality, and also very small beans.  So what happens is this next year you'll have to work -- it'll take way more beans to make the end result of what you're trying to achieve and the crop will disappear quickly.  So that would be that.  On corn I think by the middle of October a chunk of it could be safe.  But there's still corn that is awfully late through different areas, Iowa and parts of Minnesota and stuff, that will be real surprised if that happens.  It's still going to create a problem for corn.  What will it do for price?  Probably take us back up towards $5.70.

Pearson: Now, without a frost, if the season progresses, we get back towards more normal weather, get some moisture, where do you see these prices trending frost free?

Martin: I think frost free beans will turn and come back down and look at the lows.  They may come back down and take out the $11.40 low.  Our low so far has been $11.62 and three-quarters on the November.  They may come down and take out the $11.40 low and then going further back in time there is a double bottom at $11.17.  So somewhere in there we've got $11.20, $11.25.  There's some talk of $10.00 beans.  That may happen, I don't think it's going to happen but if they were to come down $10.86 would be the extreme that I would see and I really don't think that will occur because our technical wave counts project around $11.20, $11.24, $11.25 as major, major support and that coincides with that $11.17.  So for this year we have to remember we're coming off of $17.94 and three-quarters for a high just a year ago, the all-time high for November beans.  So you're coming off of that, that's a pretty -- we've had a big come down already and so if we're looking at -- because everybody is real bearish for next year, I'm not but I think things are going to be better than we think next year, there's going to be something for everybody next year.  But I think the market comes down, takes another look at these lows and then starts back up and I think we have a chance of looking at this year's highs, which isn't, even on corn, which isn't what you call super fabulous because on corn it was, what, $6.05 was the contract high this year on Dec corn and most of the time $5.73 stopped us and that $5.70 to $5.74 area is going to be real tough to get through.  If you ever cross it over we have to keep in mind there's huge gaps above the market on corn, Dec and Sept corn, on Sept and November beans as well.  And then the market will have something to drive for and go after.

Pearson: Alright.  But even if we get, stick around those numbers that is historically high prices even if it's not record high drought of 2012 prices, something for everyone out there this year.

Martin: We'll get something for everyone.  It won't be the fabulous prices that we got and it won't be $7.00 corn but I think you're going to -- and even if we're going to make lower lows next year I think we still have a chance of coming up and peaking at these highs of this year.  We have to keep in mind it was the cash markets that set the highs.

Pearson: That's right.  That's right.  Well thank you so much, Sue, appreciate you being with us and taking the time to answer some additional questions.

Martin: Thank you.

Pearson: 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.


Tags: acreage agriculture analysis basis commodity prices corn economy markets midwest new crop grain soybeans Sue Martin USDA weather wheat