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Market Plus: May 20, 2011: Alan Brugler, market analyst

posted on May 20, 2011

Market Plus: May 20, 2011: Alan Brugler, market analyst Pearson: This is the Friday, May 20, 2011 version of Market to Market's - Market Plus. Glad you joined us. Mark Pearson with you and with us this week one of our regular market analyst Alan Brugler. Alan you brought something up on the show that frankly is something that I've been thinking about, I've had a lot of calls from people asking me about it this Eastern Corn Belt situation is getting to be dire. I mean were getting later and later. You mentioned in the show we could see some switch to some shorter season hybrids but you've done a pretty decent analysis of what you think crop inquiry acreage losses could be in the corn belt what is that telling you?

Brugler: Well it is telling me that we had started out thinking that we you might even start out with 93 million acres more than the intentions report because the prices had rallied after the crop report but if you go through the state-by-state numbers you have two-three-four hundred thousand acres in some of the big states like Iowa or Nebraska but then you are taking away two hundred thousand or so in Ohio or three hundred thousand your taking a little out of Indiana, your taking some out to Kentucky taking about North Dakota actually taking out quite a bit North Dakota. It does a couple things. First of all it got my total to an estimated 90.2 million planted acres. Second thing is that it starts to mess with the national average yield because the states that are losing acreage are typically lower yielding states than the states you're adding acreage to. So you end up with a projected production at about thirteen billion bushels based on what we know today. Yield is a wildcard though. The whole concern with late planting rather than never planting it is that you have too much of corn pollinating during the harvest season. But we know that in 2009 where we had a cool and wet summer we had record yields. So it's not a sure thing that you plant late and you get the stress but your odds of having stress during pollination are much higher this year is because of the late planting. So I think the yield that I have come up with, which is based with a hundred fifty-seven and change is a very defensible number given what we know today.

Pearson: And that puts us at 13 billion carry out which puts us right back where we were at the end of 2010/20----

Brugler: Yeah, USDA, we think has decided you can't go below 675 million but that's pipeline. That's the bottom of the barrel, if you will, by the time you allow for barge freight and railroads and so forth. That's about where it puts you back to and you probably have to run the price up to choke off/discouraged either livestock feed or export demand or potentially ethanol. You know the thing that about ethanol but the trade tends to overlook is a lot of those bushels are not actually gone gone but when you go through that ethanol plant the DGTs are coming back or if they put out a number today 35 tons of DGT production last year. That is a tremendous amount of feed being manufactured. And-so that and of course we know fuel prices are fairly high right now which is supporting both bio diesel use -bio diesel production is going back up and ethanol production. So I think that's a harder one to slow down than the other two.

Pearson: Here's another question I've heard. Let's say this all comes- we are short that many acres in Eastern Corn Belt. we are going to have a lot of corn in the Western Corn Belt we are going to have basis issues, aren't we, moving this crop around?

Brugler: Yeah that will tend to tighten the basis in the Eastern Corn Belt both row crop and new crop. Okay what little old crop corn is still available becomes very valuable plus producers haven't gotten crop planted or are reluctant to sell whatever is left. On the Western Corn Belt where you are looking at potentially, you know, record or near record acreage in Iowa, probably second-largest acreage in Iowa ever, you've got this tremendous potential supply of corn and will tend to put some puts them pressure and the basis next fall.

Pearson: It's going to be an interesting year coming up. We didn't get to the stuff that we normally talk about because we have a shorter market segment Alan real quick this week the dollar we had a little bit of rally came from the euro kind of rally back from the big hit that it's taken. What's your take right now looking at the dollar, what impact that could have on us? Also precious metals were stronger this week. What's your take in that world? Where is the big money I guess I'm trying to ask? Where's this big money that has been flowing in? Did it flow into corn this week? Is that what we saw happen? Corn and beans and wheat?

Brugler: There's definitely been a movement of money that had been in gold and silver and in a short dollar position and that's gone out of those positions. It went to the treasury market to a degree and something is coming out of the stock market into the treasuries to. You've seen that bonds and notes have been going up. But this week yeah we definitely saw a flow at least a little tippy toeing back into the grains. It didn't show up in the livestock but so they're not buying-commodities but they're willing to buy into this weather story and the tight world grain story. So yeah I think you throw on top of that, as you mentioned, the euro started to rally at the end of the week that this dollar correction could be over or at least need to go down and retest the previous low and a weaker dollar would tend to support the commodity prices in general.

Pearson: All right Alan it's always good to have you with us. That's about all the time we got for Market Plus thanks for your insights we appreciate it. From all of us on here on Market to Market, I'm Mark Pearson thanks for watching and have a great week.

Tags: agriculture commodity prices markets news