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Market Plus: Dec 18, 2009: Sue Martin discusses the commodity markets

posted on December 18, 2009

Market Plus: Dec 18, 2009: Sue Martin discusses the commodity markets Pearson: This is the Friday, December 18th, 2009 version of Market Plus. Glad you've joined us here on the World Wide Web at our Market to Market locale. Tell your friends and neighbors, we'd love to have them join us as well. One of our long time analysts with us tonight, Sue Martin. It's always great to see Sue and have her on the show and get her insights. Sue, we talked about a lot of things on the show but one of the things we talked some about but you think there's a lot more going on is the soybean market. Let me just recap. On the show you talked about a couple of things. Number one in world demand, China getting its reserves built. They have been huge buyers of soybeans as you have talked about on the show for really about four months now. And then you also mentioned the fact that soybean production in South America so far looks huge. As a producer with those two things in mind I'd be getting a little nervous about getting something priced for at least 2010.

Martin: Well, I certainly think so. And today we closed back under, on November beans, we closed back under $10. $10 beans at this time of the year for new crop, well any year, it's a pretty good price. I think that has been part of the issue why the market isn't forging ahead and trying to get through $11, it's just too early. And in the meantime, we've got all of this 76% of our exports are already committed, that the USDA targeted us for and we've got a major portion of our marketing year to go until September 1. I think that we haven't heard much since the approval by Europe, by the EU commission on the Sumjenta MIR-604 of GMO corn, that that should have opened the door for exports to Europe on beans. We haven't heard much about that. And whether we're exporting or not we're anticipating that 2 million metric tons will get sold and exported in January. But still for the pent up demand that has built up there it almost looks like they're trying to drag their feet and wait it out to see if the South American crop makes it.

Martin: And in the meantime, on Friday we sold another 116,000 metric tons of beans to China and they keep taking beans. Everybody is expecting China to all of a sudden as soon as that South American crop becomes ready to just sort of put a screeching halt and roll out of U.S. beans into South American beans because it will be more of a bargain. The surprise would be if they didn't. And we think China had the worst crop in six years. And in the meantime, they have said starting in January the Chinese government said that they were going to enhance the rural ag sector. In other words, infrastructure, way of life, you name it. And so I think that means that they're going to try to support price as long as they can to keep the farmer more happy and more willing to promote more production.

Martin: But another thing we have to think about in that saying is that they're probably going to start because just a couple of weeks ago, maybe three weeks ago they did endorse GMO corn and GMO rice and so if they endorse those two wheat is probably not far behind. Well, corn yields in China lag the U.S. yield by 30%. And with technology in a few years they might only lag us by 15%. I think as they get those reserves built, because they like what happened to them a year ago, we went through 2008 was a year where we had Murphy's Law with wheat production where whatever went wrong could go wrong and they got caught short-handed and there was such a growth pattern there and in India. But livestocks got extremely tight, corn stocks were tight in the world and so was wheat stocks. Those are major food staples. They didn't want to get caught there again. And, of course, veg oil is a major item and soybean oil is probably one of the top of the eight major veg oils. So, I think that when I look at the market long-term down the road I do think there is a day that will come that we will see where everything just sort of goes right everywhere. And China has these reserves and I think while it may not be this year coming up, it may be 2011, but we've got to really keep our eyes open because somewhere around the corner here there is going to be a situation that gels just right and the price of beans goes back to $6.70 and the price of corn goes to $2.00 and I'm not talking $2.30, I'm talking $2.00. And that's not going to be good for agriculture in the U.S. But it's going to be because we gross below -- the last two years we didn't have much competition out of Brazil and Argentina and Argentina is number two exporter in the world in corn and major competition in beans as well. I think we need to think about all of this.

Pearson: All right. Some very deep thoughts and insights, always great to have Sue Martin with us here on the Market to Market television show and, of course, right here at our Market to Market Web site. We're glad to have you here too. Tell your friends and neighbors to join us. If you'd like to see Market to Market on your local PBS station pick up the phone and call your local public television programmer and tell them you'd like to see Market to Market live on your local PBS station. I'm Mark Pearson. For Sue Martin and all of us on Market to Market, have a great week.

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