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Market Plus: Feb 18, 2011: Market Analysts Walt Hackney and Jamey Kohake

posted on February 18, 2011

Market Plus: Feb 18, 2011: Market Analysts Walt Hackney and Jamey Kohake Pearson: This is the Friday, February 18, 2011 version of Market Plus. Thanks for joining us at our Market to Market website. An extra long session on the program this week because the fact we're in record territory for everything and Walt Hackney actually could be excited about markets this week. So that's always good to see the livestock sector perform. So that was good and Walt as we left you on the program we were talking about the hog market and the hog trade and despite these high prices you don't think we're going to be building the sow herd any time soon?

Hackney: Well, it would be a corporate that is probably a line directly or very closely directly a line with a packer and can enjoy some of the subsequent profit that might be there because as an independent hog producer you can't pay these prices today in the cost of feeding in your ration mix. You can't do it at the current cash level. Now, with that being said the product is going to be a leader in the retail counters because it is under priced compared to poultry and then again to beef. You've got to understand poultry might sound cheaper but when it's boned out it's a high price item today. Pork is the same the same thing. The only problem is they can't get the cash to move and the cost to gain is far over riding the price per pound they are receiving on these hogs.

Pearson: You're saying pork producers need to take advantage of this market. This is time to place some hedges. This is time to lock some of this money in at least at some of the prices that are out there at this point?

Hackney: On the pork side, that's a difficult question because, Mark, at the current level of the Merk you might even look at locking in a loss. There is - you can't sustain a break even right today on the hog industry. There's a lot of hogs loosing money right now. As aggressive as the market sounds that's contrary to where the beef industry is. The beef industry is enjoying probably the paramount year they've ever had and as it appears we're going to continue doing that availability of feeders is going to be totally restricted again this year more so than last year. So many of the heifer calves came off last fall that may have been kept for replacement. The price dictated to the ranchers sell them into the market and he did. That's why you got bearish cattle on feed report today, Mark, is because of those calves that came in. The heifer mix was so high that appreciated beyond the on feed in the placements and then of course you had the drought in the southwest push those cattle in December or in January.

Pearson: With the cattle market where it is today and looking at - you mentioned feeders which are hard to come by, very expensive, it would look like we would see expansion in the beef business? Are we starting to see some heifer retention Walt? Are we seeing anything that even indicates that two years down the line we're going to have more cattle?

Hackney: No, we have not seen that trigger at this point. If we maintain the level of asking prices from the ranch community today for October -- delivery cattle/calves you probably won't see any retention again this fall. We had none last year. We're not going to have any this year if the cost, the price of them maintains this pace.

Pearson: All right. Well, that's the question we will put to Jamey Kohake. Jamey we've got wheat, corn, beans, cotton record prices. Is it sustainable into 2011/2012 crop marketing year or should these feeders be locking up some of these - some of these breaks particularly in corn?

Kohake: I would be locking up, depending on your numbers, lock it up somehow with some type of hedge on them absolutely.

Pearson: What about on the going forward and let's talk about wheat too because we've had some wheat that has been shifted to feed wheat because of quality issues particularly the stuff that's over in Australia and elsewhere. Is that where we should be looking? Is that where the cattleman is going now to start to share some of his supply at some lower prices?

Kohake: There has been some of that going on for about six months now and where you have seen this rallied a lot in this Kansas City wheat down by the feed yards, you know, buying some of this is like you're saying Australia had a flood and they have the dryness over in China. We've had these weather problems in Asia for the last two years and Russia said today they may shut their exports down all the way through October now. And so there's not any big surplus of high protein wheat world wide. So we have seen a rally off this and corn stayed firm and we've seen some of the - on some wheat. I think they still keeping doing it short term.

Pearson: As a livestock producer you want to try and lock as much of your inputs as possible and you think you're going to have to get that done just on breaks near term?

Kohake: Right. If you haven't done it already I think if you're -- if you're out long, you're out long right now. I think Walt is right it's bloody for some of these guys out here that don't have any inputs locked in buying - amount. You can't lock in a profit but yeah, if I'm trying to get a break even in flax, corn, or meal something like that I would take a shot at $6.04 for December corn and that's $7.10 for May - buys in that area but it might be too late to be able to do that right now depending on your numbers.

Pearson: I have enough time for Walt to talk about the poultry business although I know it's an area of particular favorite of his and he has a lot of expertise there in chickens and so forth but let me ask you this we talk about rationing this corn demand and we're not really seeing it anywhere. Walt is talking about a cattle herd remaining basically the same. A hog herd that's going to remain basically the same probably not going to see expansion but -- and a poultry production that hasn't changed much we haven't seen these broiler sets come down that much. So that means that it is either going to have to come out of the exporter or it is going to have to come from the ethanol world. Are we starting to see that?

Kohake: I think we are a little bit. I don't think it is anything major that the market has already factored in or priced in. I think this thing stays an upward firm. We've got to get the crop planted and the market has to see that first. We're at fifteen year tightness right now. We've got to get the acres. So, I think you hang around the seven dollar mark for the old crop all the way through spring. There is no margin for error with any of these grains right now and the market has to see that.

Pearson: All right. You're ten to twenty percent sold on new crop. You move old crop sales now?

Kohake: I like selling the old crop May $7.40. There is carry from March to May. Take advantage of that. You know $6.40 for the --. I would look at that if you haven't sold any yet and that will give you a $6.00 basis. Beans short-term $14.60 for May. I like the new crop above $14. I think we will blow through that again one more time and I like the July Chicago Wheat that's at $9.80 at a sell level.

Pearson: Jamey appreciate the advice. Walt as usual, loved it. Thank you both very much. That will wrap up this addition of Market Plus. Thanks for joining us here this week at our Market to Market website. By the way if you're - and I talk to so many people that say I watch the net. If you like to watch the show live if you find what we do beneficial call your local public television programmer and say we'd like to see Market to Market on our local public television station the live show. Also if you find some benefit in this program and hopefully you do, hopefully you've taken advantage of the advice people like Jamey and Walt have given you over the years, hopefully you'll take a moment to send if your pledge of support to public television, your local public television station. If you haven't done so yet I would urge you to do it very soon and for all of us here on Market to Market I'm Mark Pearson thanks for being with us. We will talk with you again next week.

Tags: agriculture commodity prices markets news