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Market Plus: Feb 05, 2010: Tomm Pfitzenmaier

posted on February 5, 2010

Market Plus: Feb 05, 2010: Tomm Pfitzenmaier

Pearson: Welcome to the Friday, February 5, 2010 version of Market Plus. Glad you've joined us here at our Market to Market Web site. Hope you enjoyed the visit, glad you're here. With us this week one of our regular market analysts, a long-time analyst with us, Tomm Pfitzenmaier. And Tomm, since that crop report there's a lot of people out there saying oh boy, I missed it. And you're saying that may be the case. We still have some corn to sell. What should we be doing strategically?

Pfitzenmaier: Like I said on the show if you've got old crop corn that is damaged or you think is going to be a problem you need to get that moved, get it in -- there are some places now that are going to let you bring it in and move it out and delay pricing if you want to. I'm not saying you should do that, I'm just saying they're going to let you do that. But if you've got old crop corn that's in really good shape I think there's going to be some excellent basis opportunities because people are going to find out you've got good quality corn and you're going to get some pretty good basis pushes for people to get their hands on that corn. So, that I guess I wouldn't be quite as anxious on. Certainly if I sold it or wanted to sell it I'd be probably doing an HTA or some kind of a futures thing that allows you to leave that basis open. As far as new crop going 2010 corn I still like using some sort of an option strategy that gives you some upside potential if we do have that wet weather this spring. We've got a lot of snow to melt and all that so there's the potential here for a wet spring and that sometimes can give us rallies. So, I guess in that case I'd be out in a December contract looking at trying to buy $4.00 or $4.10 maybe even $4.20 puts on rallies here. You can offset that by selling $5.00 plus calls and get the cost of it knocked down, eventually maybe sell some $3.00 puts even to get the cost knocked down further. But I think there's some strategies like that, that will leave some of that upside open because everybody wants to participate on that spring rally if it comes along but I think you need to get some coverage on, like I said on the show, 10 to 20 cent rallies on December corn.

Pearson: All right, which is about $4.00. At the end of the day it's not a terrible price. You pointed out on the show the last time you were on maybe $100 an acre less fertilizer expense which is going to help some in 2010. Okay, soybeans.

Pfitzenmaier: If you talk to farmers around a general consensus I'm getting depending on what you're paying for rent and equipment and all that, $3.30 to $3.60 seems to be the kind of range you get for people on break even projections for this summer. So, if you can get up in that $4.00 plus range and have any kind of a decent basis or sell the carryout to July later you're probably going to have an alright year yet.

Pearson: Soybean strategy?

Pfitzenmaier: Soybean strategy, same thing, although I would also not be afraid to be more aggressive just flat out making sales on rallies because I think the upside potential is less limited because of this big wall of beans we've got coming from Brazil. If you want to do something on an option strategy on beans you can buy the $9, sell the $11, buy the $9.40, sell the $11.40 call to pay for it is a strategy that gives you some upside potential. I'd much rather just be a seller of futures or forward contracting or something on a 30 to 40 cent rally in beans.

Pearson: Okay, some good strategies, some things you can put to work hopefully in your operation to lock in some profits. We are under some pressure, you mentioned the dollar, that is going to be wind in our face, not at our backs.

Pfitzenmaier: It is, absolutely, and it's been to our back the last year or two and we've kind of gotten comfortable with the dollar being continually lower and continually help supporting us. That's going to be a problem going forward here for a while I'm afraid.

Pearson: As usual we appreciate your insights. Tomm Pfitzenmaier with us on Market Plus. Glad you've joined us. Tell your friends and neighbors to join us here at our Market to Market Web site. From all of us on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news