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Market Plus: Nov 13, 2009: Darin Newsom

posted on November 13, 2009

Market Plus: Nov 13, 2009: Darin Newsom Pearson: Welcome to the Friday, November 13, 2009 version of Market Plus. With us this week one of our regular market analysts, Darin Newsom. Darin, good to have you with us. We covered a lot of stuff on the show, there's a lot of stuff going on. You look at the grain markets, we've got this weather deal which we're finally wrapping up the bean harvest three weeks late, four or five weeks late on the corn. You can argue longer, the five year average -- slowest harvest since the 60s, since I was a boy. So, we've had that weighing on things. You know how these things go in the financial markets, the balloon like rising of gold prices. You've got a lot of people running around talking about inflation. You've got a Dow that continues to get up and fall out of bed. Farmers are out there sitting there going, hmm, should I be taking advantage of these corn and bean prices right now and unloading product? Should I be selling next year's product? Should I be buying more ground? Should I be hedging against inflation? What are you telling them? You talk to them all the time. What do you tell them?

Newsom: It's a very difficult situation. I think you have to be very cautious and the problem is you have to take all of those things into account that you just mentioned because they all come into play these days, more so than they have in years past, in decades past. So, you have to take a cautious approach. If you're sitting there looking at the markets and you see soybeans trading at $10 not only for this year but further out say into 2010, 2011, yes, you want to probably bank some of that, you want to put some of that -- you want to go ahead and contract and corn is a similar situation. If you see this December or next December or so on getting out to that $4.00, $4.50 I think you want to go ahead and do some because there's so much uncertainty over what this crop is and what the situation is as we go into the next few marketing years.

Pearson: I'm going to throw another one into you and this is going to be about the crop production report this week. The USDA keeps putting in this 50 million bushel increase in feed demand. I've talked to a lot of pork producers who are exiting the business. Where is that number coming from? We keep waiting for EPA to announce E-15 for ethanol. Ethanol plants are coming back on. They're making some money again so we're starting to see some more demand there. But with a 13 billion bushel corn crop, 12.9, whatever you want to call it, it looks like there's plenty of corn out there.

Newsom: There is and that's one of the problems in this market is that the higher prices that we've seen since about mid-2006 is all based on the idea that we're in a demand market, that we've got this new demand that are going to continue to hold our markets, our prices at these levels. The feed demand question, it's one I was asked a great many times over this past summer as we were making the rounds of farm shows and I honestly don't have an answer because it isn't logical. We've heard of herd liquidation, we've heard stories that we're not going to see as much feed in 2010. So, is this actually going to occur? Ethanol demand is holding relatively steady going into 2010 so we're not seeing huge jumps there either and we're actually backing off export demand which is somewhat bothersome on the idea that the dollar is so weak yet we're seeing our corn exports being ratcheted down. So, I think it's going to be an issue as we get deeper into 2009, 2010 whether or not we can maintain these types of demand levels to offset the type of production that is still being talked about.

Pearson: You talk about next year an acreage battle and, again, it looks like we should set ourselves up for it but if South America comes through -- obviously the late harvest and the lack of a hard core harvest low like we're normally used to for soybeans certainly has provided an incentive to increase acres down in Brazil and Argentina I would think. So, some of these higher acreage numbers are kind of based upon that. So, if they have good numbers down there, 115, 120 million metric tons down in South America that pushes your world carryout to a huge number, as you mentioned on the show. How are we going to get $10 beans then?

Newsom: Well, you're not and I keep going back to my trip to Brazil when I spoke to some producers down in that area, down in Madagraso and my talk concluded with the idea that if all this does occur, if they plant and produce as much as anticipated and the U.S. crop however it happens to do it comes in at this record level that is being discussed right now we could see soybeans with a 6 in its first column. I still believe that at some point in 2010 because I don't think the demand side is going to support markets up here in the $9, $10 range. So, I do think we're setting ourselves up for a large sell off later on in 2009, 2010 in the soybean market.

Pearson: All right, Darin Newsom, we're going to leave it there. Thank you, we appreciate your insights as usual. That's it for Market Plus for this week. Thank you for joining us. Tell your friends and neighbors and, of course, contact your local public television station if Market to Market is not on in your area. Talk to your program director and tell them you'd like to see it. From all of us on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news