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Market Plus: Jul 30, 2010: Don Roose

posted on July 30, 2010

Market Plus: Jul 30, 2010: Don Roose Pearson: Welcome, this is the Friday, July 30, 2010 version of Market Plus. Thanks for joining us here at our Market to Market Web site. A chance for us to go a little more in depth on particular market issues. The big issue this week, we opened with is on the market segment, we talked about it quite a bit during the program and that is this huge wheat rally. This drought in Russia, hottest temperatures in 100 years, drought, it has thrown quite a hammer into the commodity markets as we expected them. A lot of rain in the Midwest that is totally being ignored by what is happening in Russia. And this wheat rally has just, it doesn't seem to be slowing down yet, Don Roose.

Roose: No, well, like we always say it's not over until it's over and we'll know when we put a good technical top in. We haven't seen that yet, maybe next week but we'll have to wait and see. But like you alluded to, it really does change the dynamics as far as even acres next year, going to be more wheat planted so you're going to have a harder time buying corn acres, we're going to need three to four million more corn acres so it does change some issues, maybe more corn exports than we thought. The balance table may look a little bit different.

Pearson: And you mentioned on the show the ongoing demand for soybeans. Cotton hitting some weather issues down south so acreage battles are already shaping up for 2011. Let's get back to this wheat thing. You pointed out on the show that what we have going on here is we've got just a ton of money being thrown at commodities, period. Right now it's wheat but really it's market wide and the funds really have been a big participant in this thing. They were negative on wheat. I think when you were on six or seven weeks ago, a couple of months ago it was a very bearish market, they were short the market and now they have flip flopped and we've still got plenty of wheat.

Roose: Yeah, right now we really don't have a shortage of wheat. We think that we still have adequate supplies but certainly when you look at the futures market you think there is a shortage. The basis levels, they don't tell you there is a shortage, the carries in the market don't tell you it's a shortage but what we're really trying to do is move that wheat to areas like the U.S., Canada, the EU that has a little bit of excess wheat for them to export and that's what we're trying to do.

Pearson: The new money issue in commodities, which is exciting and has been a huge benefit to farmers, has added really a third dynamic beyond fundamentals and really it's the fundamentals of money flowing somewhere. People are frustrated with equities, real estate and other things. Commodities seem to be the place where people have come almost we're going into the fifth year of this, Don. Increased volatility means producers need to be that much more on top of making sales.

Roose: Well, you do and I think what you really have to be aware of is what stage of the market you're in. Currently like we talked about in the wheat, you're very overbought, anything can happen, you can snap and realize that when the money comes into the market it is a big benefit to you if you're looking to sell the crop and that's where we're at right now. Of course, when they get out of the market the opposite is true so you have to be careful, just realize the state where you're at in the marketplace.

Pearson: But a wheat producer right now needs to dump 2010, 2011, 2012, we've got contracts that are out there we can do that is your recommendation?

Roose: Yeah, I think most definitely. I think when you look on a historical perspective and knowing that we can grow wheat around the world there's going to be a lot of wheat coming at us around the world soon, Australia and Argentina in October, Canada yet to come at us, the United States so most definitely the acres are going to go up around the world and if you feel uncomfortable with those sales we have tools out here now through the options and some other things that you can reown it, just reown it in a different manner.

Pearson: That's true. So, look at what those options are but maybe take advantage of this market. We've been talking about this up market now for a month, it doesn't seem to abate. And how big of a move now have we had in wheat since this rally started?

Roose: Well, we started September wheat about in that mid $4, $4.60, $4.70 and we're trying to get close to $6.60. So, we've had a $2 rally in just short order.

Pearson: Typically those are meant to be sold. Feed a rising market. There's a truism I didn't get in last week. Feed a rising market.

Roose: Well, that is a good truism. A lot of those truisms, Mark, they really come back and they are pretty true when you really look at it too so they make a lot of sense and I think that's a good one.

Pearson: I have not tracked oats this year at all and the old saying there is the oats knows. What have the oats been doing, Don?

Roose: Well, that's the old saying and I think even the new saying is oats may know nothing. So, I think we have to be careful with that.

Pearson: The new truism. All right. Well, anyway, sell the wheat, maybe sell the corn and beans too at this point.

Roose: Yeah, these are definitely opportunities and if you look at it a month ago if you would have had this opportunity with the crop in the current condition that it is you would have said sure, you would have sold it now, you're probably masked a little bit because the wheat is running up so make sure, you know, we didn't talk about the fear and greed, but right now you may be a bit on the greed side if you wait too long.

Pearson: Be fearful when others are greedy and be greedy when others are fearful. Warren Buffet. All right, we try to get as many of these things on in the last couple of shows as we possible can. Don Roose, thank you so much for your insights, we appreciate it. That's going to wrap up this edition of Market Plus. A quick postscript, if you enjoy Market Plus, you enjoy Market to Market on the Internet let me tell you how much greater it is when you can see it on your local PBS station. In fact, it's an educational tool for schools and universities and we like to keep it that way and it only happens because you contact your local public television programmer and say hey, we'd like to see Market to Market on our local public television station, we'd like to see the live version, make it happen and that local public television programmer will be thrilled to respond. So, call your local public television station if Market to Market is not available in your market. And, by the way, if it is on in your market call your local public television programmer and say, thank you very much for running Market to Market, we watch it, we have come to depend on it, we appreciate the insights of our analysts like Don Roose and others bring every week on this program. So, again, have a great week. Thanks for being a part of Market Plus. For all of us on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news