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Market Plus: Oct 23, 2009: Market Analyst Sue Martin

posted on October 23, 2009

Market Plus: Oct 23, 2009: Market Analyst Sue Martin Pearson: Welcome to Market Plus here at our Market to Market Web site. This is the Thursday, October 22nd version. We did our show on Thursday in Shenandoah, Iowa and we are here with Sue Martin, our long time regular market analyst and Sue, it's been a slow harvest and that is causing processors and the folks on the buying end of the corn and soybean world -- it's causing some problems out there. Are there some opportunities out there for producers?

Martin: Well, I think that right now the market has producers looking to sell. You know there's been producers that didn't get anything sold or didn't get as much sold as they needed to. So, this is an opportunity with the board rally that they can probably go ahead and market some sales, catch up sales. I will say this, of course, if you had anything that was available you can get some awfully good prices right now just in the cash market, and get the weather to break and there is some talk of drying weather starting to come in, but once the weather breaks and you can start letting this crop dry down then we're going to see maybe the basis soften a little bit. The one thing about corn that it has gotten up to technically we talked about wave counts that type of thing and $4.08 and a half is a wave to count and so they're should be some resistance around this $4.08 to $4.18 area and so, if the market doesn't hesitate much here usually the rule of thumb is you'll come up to this level, get a correction, take a breath, and if the market wants to take very much of a breath it could step back to $3.60 again and then from there move back on forward. If it doesn't, if it falls back a little bit -- chatters a little bit and then starts to move forward through this $4.08 to $4.10 area with some conviction you could be headed straight for $4.62. I wouldn't hold on to my last minute sales thinking that that's going to happen. I would probably be making them.

Pearson: Are we going to see these cash opportunities disappear? It's a 13 billion bushel crop and I've heard a lot of producers say, you know what, that's true, but with this moisture situation, the cool weather test rates are down so it's not going to be the quality crop that a lot of producers are hoping for. So, technically it may not be that big in terms of its real impact.

Martin: That's right. We're looking at a carry of around 1.7 billion bushels and that will be a decent size carry. The one thing we have to remember is that with the test rates and see we're only 17 percent harvested, we've got a chunk of this crop to get into. We have yet to know what that late planted stuff is really like. So, when we get into it we're going to continue to probably see low test weights that's dropping the yield to some degree, but also it's a quality issue that means there's a disappearance that we will see over time that will show up in revisions in these USDA reports down the road, and that crop is going to get used up faster.

Pearson: Right. You were thrown a question here in Shenandoah. A producer asked if he should take advantage of an October 2010 cash forward contract of $4.07, $4.08 and you said yeah, take advantage of some of that. Are you a little concerned about what's going to happen next year increasing corn acres, maybe a big South American crop? You alluded to that in our conversation too.

Martin: Well, we're going to see a good South American crop for beans. I mean, it's just going to be huge and you know they've had three years of, I think, some poor crops. This time I think they're going to come off because they're into El Nino and so El Nino tends to bring them moisture into the southern parts of Brazil and Argentina. What we will have is that there is a tight supply of oil seeds and that's a plus for soybeans and that's another reason why we have this huge demand influx. Plus, India did not have very good crops either and they're a huge veg-oil user and their imports are going to escalate I think on soybean oil this coming year as well.

Martin: So, those are pluses but the downside is when they can start shifting away over to Brazil and get that crop, we're going to have competition, and I do not look for a June high next year. We've had it two years in a row. I don't look for a July high either. We're going to have an earlier high I think this coming year, and so we need to watch it very closely. But we have extreme front end loading demand and boy, we just need to get the crop out and the longer it takes to get these beans out one you have less oil content and that's another quality issue - means disappearance of beans because it takes more to get the end result and then of course the other thing is that we'll miss getting all those ships loaded in time to get everything out the door that we really need to.

Pearson: So, some challenges next year and I was moving from corn to beans there and if we can sell cash beans in the ten dollar zone for 2010, would you do that on the board?

Martin: First let me tell you this. Last year's soybean contract expired off the board at $8.78. This year November beans made new lows from where last year's low got on that contract, and then we rallied up nicely, got up to $10.97 and a half, came down and tested for our fall break $8.78 and three quarters. What we were doing was looking at that close of last year. Now, the November beans by doing that - what they're basically saying is that that market is going to go expiring off the board here on November 13th higher than last year after having made a lower low.

Pearson: So, when you look at the November 2010 what are you going to say on that contract year in, year out November beans? Are we going to take out this year's high or this year's low?

Martin: I'd put my money on the high because you're going to close on the year out higher on that contract.

Pearson: Alright, so that portends what?

Martin: I would say probably something that up around the eleven dollar mark.

Pearson: All right, Sue Martin, as usual we appreciate your insights, appreciate you being with us in Shenandoah, Iowa for our Rural Economic Summit on Market to Market and of course for joining us on Market Plus. From all of us here on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news