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Market Plus: Sep 18, 2009: Tomm Pfitzenmaier, market analyst

posted on September 18, 2009

Market Plus: Sep 18, 2009: Tomm Pfitzenmaier, market analyst Pearson: This is the Friday, September 18, 2009 version of Market Plus. Glad you've joined us here at our Market to Market Web site. I'm Mark Pearson. With us this week one of our regular market analysts, Tomm Pfitzenmaier. Tomm, talk about soybeans. They are profitable, they have been certainly volatile all year but I keep reading in all these magazines and I hear all these experts talk about literally unquenchable soy protein demand in Asia and everywhere out in the former third world where they just can't seem to get enough of this stuff. We've seen it, China, that's all we've been talking about is China, China, China buying beans and it looks like a big crop this year, it looks like a bigger crop coming from South America but a lot of people are wondering how long is this thing going to stay afloat?

Pfitzenmaier: You've got the bean to corn ratio favoring bean production next year. The thing that bothers me, Mark, about that as much as anything is we are so dependent on one customer and you get this tire tariff thing going on and that particular client could have direct retribution against the United States by virtue of just stopping buying soybeans for a month or two. So, there's a lot of risk here in having all of your beans, 80% of your beans going to one client and so I think that even by itself is a reason to have some sort of support under your prices because if that client goes away, stops, slows up, whatever we've got substantial down side pressure that can be exerted on the soybean price. These are at good prices, we're at $9.50 isn't that bad a price for beans to have something covered whether you buy yourself a little -- sell yourself a mini bean if you don't grow a lot of beans or buy some sort of a put strategy and sell calls or do something, be creative but I think you need to have some price protection underneath yourself at these kind of levels.

Pearson: Not just for '09, you said 2010 you would look at that probably about 20, 30 cents up from where we are now.

Pfitzenmaier: Right, for all those reasons we talked about all that is really going to come to fruition in 2010. It's going to be really interesting, we get into that March, April timeframe when those South American beans come available, demand for beans by China in particular has been phenomenal but how much of this is front loaded demand that's going to disappear and come to a screeching halt in March and April. There have been opportunities especially for these guys this week that have harvested beans there's $1 premiums. Number one, southern beans weren't available and so all of a sudden they had to bid up for the beans that were available up here so keep your eye open the next three or four days if you're a producer with some beans ready because there's some opportunities for you. But beyond that I think you have to look all the way down. You have to sell it nearby because there's no carrying charge in the market. The corn has got huge carry that is going to make your bin work for you. That does not exist in the beans. So, if you have to make a sale you might as well reown them on the board or something because it's virtually the same as sticking them in a bin.

Pearson: Tell me this, this soybean market, obviously this isn't lost in South America, this $9 price is not lost down there and we're going to see some expansion of acres. You talked on a show a pretty hefty increase in metric tons coming out of South America but we do have this huge demand out there, everybody keeps talking about this huge demand. I've seen huge demand get satisfied.

Pfitzenmaier: Well, the Chinese have been building stock so it's not like they're hand to mouth over there. They have been building up the reserves so they could possibly disappear for a month or two. If they decide this tariff policy makes them mad enough or they want to cause troubles they could do it.

Pearson: Tires and chickens would be the combination here which is kind of humorous. But if we look at this thing going forward and for a producer out there who is concerned it seems like once a decade we get these markets, ballpark, it seems like every ten years we get a big opportunity to make sales and then the rest of the time we're back trying to make the best deal that we can and hopefully our profit comes from better technology, more efficiency, whatever. But this thing is still, it's been on the south side of that mountain now for a while so you're going to try and stretch it out.

Pfitzenmaier: Corn has already kind of done its thing but the beans are hanging in there and you're in a down trending market, generally speaking the faster you can sell the down trending market the better off you're going to be. I guess that's all I can say.

Pearson: Tomm Pfitzenmaier, one of our regular market analysts joining us this week. As usual we appreciate his insights. Thank you for joining us here at our Market to Market Web site at the Market Plus nodule, glad you're a part of it. We will be back with you again next week. From all of us here at Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news