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Market Plus: Sue Martin and John Roach

posted on December 6, 2013


Pearson: This is the Friday, December 6, 2013 version of the Market Plus segment.  Joining us now are Sue Martin and John Roach.  Welcome back, guys.

Roach: Thank you, Mike.

Martin: Thank you, Mike.

Pearson: On the show we didn't have a chance to talk about the cotton market.  John, could you talk to us a little about where we're headed? We did see a little rally this week.

Roach: The market popped up this week, initially on some, on export sales and then faded and then came back today strong on the employment news.  Cotton is a consumer item and to the degree that we can have an improving consumer economic situation that is positive to cotton.  And so I think that is really what the market was signaling this week.  But now we move the March cotton up into the 80 cent plus area and we think that is a price area if you've been waiting to make some sales that makes some sense to us.

Pearson: Alright.  Sue, what do you think?

Martin: Well, I think cotton too being an oil seed and oil seeds I think are going to be coming under some pressure here.  I guess I would be saying watch your cotton rally and be wiling to take some money.

Pearson: Take some cash off the table here as we get into the 80s.

Martin: Yes.

Pearson: Alright.  Now, Sue, one of the things that I had to cut you off on during the show, we were talking about South America growing their record crops and their transport issues that we saw last year.  We had a question here from Doug in North Central, Iowa and he is saying, how long does the market expect for potentially record large South American crop to get to the ports and get out?

Martin: Well, you know, last year things may be a little different this coming year because of the new road that is going in, expected to be open by the end of May.  But a good example of how to describe it is like to reach from Madagroso to the Port of Paranagua, it's like driving from Minneapolis to Miami.  And so it takes time to get those there.  But probably what had the biggest impact last year was the change in government policies where they lowered the amount of time that these truck drivers were able to be driving trucks.  And so therefore it just slowed the whole chain down.  Now they're opening up more, they're going to be opening up more ports, they're in the process of building more ports, it takes time.  But in time they're going to have some pretty nice, new, efficient ports.  But that is down the road a ways.  I think that when we get the, like here, it's not any different, when that crop is almost planted, like 95% or 90% planted, the trade is going to start to assume the very best at that time.  And then we have to prove to the trade that things are different, that the crop isn't going to be that size.  _______ came out this week, yesterday on Thursday and talked about a 90 million metric ton bean crop and also talked about moving 3 million metric tons of corn over to beans of production and that is in that second crop.  So I think that the bean market has to be watched very closely because we do have tremendous demand.  China has huge demand.  The one thing, and I don't know if we'll see it this year, but the one thing we have to keep in mind is if China was to spend just 1% of their total treasuries, of U.S. treasuries that they own it would account for like in corn over 300 and some million metric tons and I forget how much it would be in beans. It's huge.  So if they just started to be building even greater reserves because China is making some big changes in the way they're operating.  They're going to be moving people into cities, 250 million people off of their land into these cities that have sat empty for years.  China is very long-term oriented and their focus is to make sure that they have food on the table, the have changed their policy for the amount of children they can have in a family.  While it's not today, but in time, that's going to change things a lot in China as far as the amount of food they're going to need.  They're going to have more mouths to feed and a more demanding population.  Underneath that you've also got, or on the back side of that you've also got India coming off with a policy where they're going to feed 800 million people that are lower income type people, they're going to feed those people a better diet.  That is demand for commodities.

Pearson: Alright.  Now, Sue mentioned China, one of the stories that came out this week and we've got a couple of folks asking, Mark in Kansas and Kevin in Dunlap, Iowa are concerned about what is happening with China's refusal of GMO corn seed that they have been importing.  Is this going to be a big factor on the market, John, as we go forward?  What do you think?

Roach: I don't think so.  I mean, it may, it may.  It depends on how clean our cargos are as they go over.  So it may.  But my hope is not.  My hope is that this is an aberration and that people are taking better care of those kind of products and they don’t' get into the export stream.

Pearson: Because their demand, as Sue was saying, as Chinese demand is so great they're going to need to continue importing corn.

Roach: They're going to ramp up their corn imports.

Pearson: As we go forward.  Alright.  So Sue, any other thoughts?

Martin: Well, I think that when you look at the Chinese habits, you know, I think also the farmers that will stay on the land will be, they're going to be making a shift towards bigger, better, more efficient farming.  But the problem is, is that they don't have good water supplies and I think that when you look at the subsidized, I think it's the subsidies, the building reserves, and I'm not too sure it's just only China.  It may be other countries like Middle Eastern countries.  We've seen some of these countries having issues where they're seeing riots and it is always pretty much stimulated by lack of food.

Pearson: Certainly.  Certainly.  Now, we've got a question here from Glen in Bryan, Ohio and I think this was a great show for him to ask the question as you two have been in the markets and watching the markets for quite some time.  Glen says, in our bearish market which is more important to monitor at this time, fundamental news or technical signals?  Do you have any advice to Glen or other young market watchers out there?

Martin: I would say technical signals because when you get into -- and it's any market, it can be a bull market, it can be a bear market -- when you get into your extreme price levels you'll always hear the very most bullish news at the top and the most negative news at the bottom.  The market's goal is to trap you in the wrong side of the fence.  And I think that you have to watch technical indicators to kind of guide you through those uncharted waters or those waters that can be turbulent and catch you getting emotional because invariably in down markets the market is like never going to see another good day again and it gets you thinking you should sell.

Pearson: Alright.  John, your thoughts?

Roach: I agree with Sue. We pay very close attention to technicals to time our sales.  We use a technical oscillator system, we issue a specific sell signal based on the technicals.  Our longer term outlook we try to base more on fundamentals.  Do we want to sell early this year or late this year?  We're wanting to sell beans early this year.  We sold beans on a sell signal last week and into the early part of this week.  We'll probably be back doing it again next week based on the fundamentals that South America has got a big crop coming on and that this is our opportunity right now.  But we're using the technicals to figure out where to pull the trigger and where to wait.

Pearson: Fundamentals alerts you to whether or not we're a bull or a bear market and technicals --

Roach: Do we want to go heavier now or do we want to go lighter now?  But we use a specific technical switch that we alert our customers to when this switch is on to be making sales.

Pearson: Now is the time to pull the trigger.

Martin: I agree with him.  I think a fundamental approach is your longer term focus.  And the technical is to kind of, because we use timing indicators as well and so I think that that's, it gives you a more comfortable and maybe more confidence to make your moves.

Pearson: Alright.  Now we've got one final question before we let you two go.  Doug in Moses Lake, Washington is asking, when should we purchase diesel?  What does the market look like out there for petroleum purchases?

Roach: Strong right now.  I mean, we've got crude oil up pressing sharply higher over the last week or so and so I don't anticipate that it keeps on going.  I think we'll come back under pressure.  So my idea would be to be a little bit patient here and get somewhat of a down draft.  Now if your diesel price at your local seller, your supplier, is still at the lower level and has not started to move higher, I'd take advantage of it.

Pearson: If you can get in there before this recent rally in crude.  Sue?

Martin: I would have to agree with John.

Pearson: Alright.  Well, thank you both so much for taking the time to be with us tonight.  We really appreciate it.

Roach: Thank you, Mike.

Martin: Thank you.

Pearson: And thanks to all of you for sending in your questions via Facebook and Twitter.  Please continue to do so and we will continue to get expert analysis right to you.  Have a great week.


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