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Market Plus: Don Roose

posted on July 3, 2014


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Pearson: This is the Friday, July 4, 2014 version of the Market Plus segment. Joining us now is Don Roose. Don, welcome back. 

Roose: Thank you, Mike.

Pearson: We've got a number of questions from our viewers on Facebook and Twitter and social media and what not. And Chris has a question. We touched on the wheat market briefly on the show. He's curious, looking for the upside, will the wheat market go higher at all this summer?

Roose: Well, until something changes around the world. We're oversold right now. The funds are short about 45,000 contracts of wheat. So, we can get some short covering, some things that could move us up to the upside marginally. I think you’re talking 20, 30 cents. Big moves to the upside probably are going to be limited if the corn market moves up sharply or we get into some other world weather problems. Right now I would say it's very limited.

Pearson: It's very limited and as we look at that global, worldwide stockpile, it's going to take a pretty severe change in either weather or demand to change it, don't you think?

Roose: Yeah, it really is. And because what has happened now is there is a glut of wheat and so it's a race to the bottom, everybody is trying to sell at a lower price. So, four years of high prices has really brought in too many acres, too many acres into production. And so we have to figure out how to cut that back. So, it's not going to be an easy task. And that is why we're probably limited. But keep your eye on the sky. Weather is always a game changer.

Pearson: You bet. And that leads kind of right into Ben's question. Ben in West Union says, any hope for grain prices to recover? And for both the new and the old crop, is it primarily going to be weather related for upside movement in the new crop?

Roose: I think it is. I always, I look at the grain marketing kind of like a card game, you have 52 cards in the deck and what has happened now is about half the cards plus have come out of the deck. And so you know a lot about the market so you're taking risk premium out, there's not as big a reason to go to the upside as we had. If we continue with favorable weather you’re going to put your lows in probably in the fall. And it possibly could be 40, 50 cents lower. But we're oversold at the end of the week and we could get some technical bounces, 10, 15, 20 cent rallies are probably more selling opportunities than buying opportunities if weather is favorable.

Pearson: Okay. Now, one of the stories that we have been talking about this last year, I've been talking about this last year, is the increase in demand for protein. We're seeing consumers pay these high prices. When do we think, when do you think that will begin to affect, truly affect corn demand? As we mentioned a couple of weeks ago sow numbers haven't increased, it's going to take a while to build the cow herd. Is there an opportunity for the demand side of the ledger on the feed grains to increase here in this next six month period?

Roose: You know, I think it can and it probably does because we are going to build back the poultry first, the pork second and the beef will be built back, we'll build back slower over a longer time. The problem is when you're talking about these carryouts if they're 1.9 or 2 billion or 2.1 you’re going to talk about feed demand that increases 100, 200, 300 million. It's just not enough. We don't have anything new on the block like ethanol that can bring in 5 billion bushels of new demand. So, it's going to be more measured. That is why in the '80s we had the storage years to try and keep it away from the market. So, now we're in a free market and price is going to dictate it.

Pearson: Okay. Alright. We do have a question, J. Michael P. from Twitter is curious, where can he find good futures data on commodities?

Roose: Well, there's a lot of good information out there and I always have to say that at U.S. Commodities we have a good web page and we think there's good information there. We also know that the CME has a web page and they spend a lot of time and a lot of money on their website also. So, I would say look at those two websites, uscommodities.com and cme.com and those are two good areas to look.

Pearson: A couple of places to check out. Now, before we let you go we did have the unemployment data was released. We're seeing the economy begin to improve. And a lot of folks that adds to the bullish factor for agriculture, we're going to see demand increase. What are your thoughts as we look to the future, the rest of this year and into this next year, as the economy continues to recover.

Roose: Well, I think that is really partly maybe a big percentage from the demand side is what has happened is the unemployment has ratcheted way down from where it was, interest rates are really low, the job of the government was to stimulate demand and I think they've done that. The real thing you have to be careful of is that they overheat it, which I think there's a real risk. So, I think what you have to be careful of is the zero interest rate program has been in place by the government for over five years. We're probably going to start to see interest rates move up to more reasonable versus these historical low levels. So, that sometimes can slow down demand a little bit. So, watch for that. It's probably going to be very gradual moving up. They're going to measure it. So, watch the interest rates to increase next year I think.

Pearson: Alright. Get in there and talk to your banker, get those notes fixed as soon as you can I suppose.

Roose: I think when you look at it, short-term and long-term notes probably make sense to have locked down. Remember the early '80s when we went up to big numbers, 18-21%, so that's not in the cards but I'm just saying we're down here pretty low.

Pearson: That's right. Well, Don, thanks for taking the time to be with us this weekend.

Roose: Thank you, Mike.

Pearson: Hope you have a happy 4th of July.

Roose: And I hope you do too.

Pearson: And we hope the same to all of you guys watching us at home. Please continue to send in your questions via Facebook and Twitter. Watch the market Monday morning and shoot us a question. Thanks so much and have a great weekend. 


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