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Market Plus: Dec 24, 2010: Don Roose, market analyst

posted on December 23, 2010

Market Plus: Dec 24, 2010: Don Roose, market analyst Pearson: This is the Friday December 24, 2010 version of the Market Plus Segment here. Glad you could join us here on our Market to Market website. I'm Mark Pearson and with us this week our regular analyst Don Roose. Don good to have you on the show and always some good comments. Don, I'm getting old. I'm 53 now and I've been through bull markets before. I've never been through one like this. We're getting some lofty levels from Christmas to New Year's to see the markets moving like they are and typically a time that - industry been falling for a long time is typically pretty dead. We had the cattle, feeder cattle, hog markets, jump to the moon. We had beans up fifty cents, corn up seventeen cents, wheat up twenty-six cents, seems like there's an awful lot going on the upside. Some of us are getting stars in our eyes. Should be taking advantage of these markets and let's talk first because we had to give it a short - because of time. But let's talk about livestock first. If you look some of those April futures positions, boy these are good prices.

Roose: Yeah, they are. I mean like for April cattle back in 2008 when crude oil went to one fifty, we took April cattle to one twenty. So, here you're sitting about one twelve and you have to ask yourself how much upside potential and you have profits at the present time. So, yeah we think these are places that you use some type of risk management. You be careful here and see how mature the market really is.

Pearson: But you'd be favoring getting some prediction on.

Roose: Well, I think you should. It's a matter of what type of protection. Do you use some synthetics or do you have type protection on and I think that depends on your risk tolerance, but most definitely these are levels particularly after this last week that you should have some protection on.

Pearson: What drove that market this week? Was it thin trade that drove it? Was it the funds showing up again? What's going on?

Roose: The funds just have been all over these markets and that's what happened again this week. On Wednesday funds came in just a short hour. Thirty minutes bought eighty-five hundred contracts of cattle. The market wasn't able to absorb that so we shot up limit. Well, sent the packer out from our opinion out to the country paying up one to four dollars on cash cattle. So, when you see that type of activity you use it to your advantage.

Pearson: Absolutely. We've got very strong markets now and going forward all the way through December really going into 2012 where producers can lock in some very strong values for wheat, corn and beans. What's your scenario? What do you tell your farmer customers out there right now about again either getting some protection or taking some of this money? There's still a lot of stuff out there and you mentioned South American crop which is a question mark and becoming a little worrisome in this market right now. You also mentioned soybean demand from China which has been unquenchable to date. Whether or not that continues is a question nobody knows but we do know where prices are today. Should we take advantage of these markets Don?

Roose: Yes, these prices are up here at very lofty levels. You've never seen prices at these levels this time of year ever, and so when you look at from a common sense standpoint you should be using some kind of risk management and not get caught up in the euphoria because it's a fragile market. What's happened is we're inching higher and all the commodities are in a delicate balance going higher. Well, if any of those break serve then we're in trouble the other way. Doesn't look like it right now, may not happen in the future, but that's what risk management is about being careful and doing your job and protecting the bottom line.

Pearson: You mentioned crude oil. It's up over ninety dollars this week, another high, and the dollar. Where do you see the dollar, crude oil, where do you see that going? The world economy strengthening? More crude demand? What's happening there?

Roose: It's just more demand as we're coming out of this world recession. Some people like China never were in a recession and what's happened is that was a big problem in 2008. That's really what blew the markets apart in all sectors and now we're moving back up to ninety-two and who knows - the upward pressures continuing so far. So, the demand is picking up. So, that is a real worry for all of the bulls out here if that ever changes and if any of the governments start to change their direction.

Pearson: All right. Dollar, where are you on that?

Roose: Well, I think the dollar, you know, it's kind of like we're the best of the worst. That's the bottom line and so as our spending policies continue it's hard to see the dollar move up but at the same time the lofty levels -- the push back to the upside probably isn't there right now but I'm really not dollar negative. I think I'm dollar positive for the poll just because I think we look a lot better than a lot of other countries.

Pearson: Well said. Don, Happy Holidays to you and yours and from all of us here on Market to Market. I'm Mark Pearson wishing you all the best this holiday season from all of us on Market to Market.

Tags: agriculture commodity prices markets news