Martin: Thank you, Mark.
Pearson: Sue, you said on the show on Market Plus you were going to talk more about soybeans because we ran out of time on the air, it's only a 12 minute segment. So, we need to talk about soybeans because you had a lot of factors that you think are building here that make a somewhat bullish case for soybeans. This kind of flies in the face of the huge numbers and huge crops and all of the stuff we've been hearing domestically. Tell us what you're looking at and what you think could happen.
Martin: Well, Mark, we're looking at a soybean crop that even if we come off with a decent crop like is projected we still are going to have world stocks at a three year low. And in the meantime, on exports we note at the end of August 13th we had 405 million bushels sold into new crop or on the books for new crop, we also have 120 million bushels that is marked for 2008-2009 that will not probably get shipped and that will be moved into the new crop as well. So, as you come into September 1st you're already looking at over 500,000 bushels of soybeans already sold and that probably, if we meet the kind of pace that we've been working on for export sales and, of course, China had said they weren't going to buy as much in August and September and then this week they step up and buy 18 cargos of beans. So, you have to watch what they do and not listen to what they say because that seems to be the mode they're in this year.
Martin: But in the meantime, the USDA, if we keep this pace up we're going to end up exceeding the USDA by 185 million bushels and we'll probably have an export number of around 1.450 billion bushels. Okay, that's a pretty good sized number but if you look at that September 1st we're going to be hitting over 33% of our sales already by the 1st of September. Now, the last time that we had anything like that happen was in '97-'98 in that new crop year and I went back and looked at beans and it was real interesting because that year soybeans put, November beans put their harvest low in, in the first two weeks of July, this year we've put our harvest low in the first two weeks of July. That year November beans went out and made new contract highs. Interestingly, corn kind of followed through September into the first of October and then just turned tail as they were deep into harvest and fell all the way into the Dec. expiration.
Martin: So, I'm wondering if we aren't going to see that same thing again because corn doesn't quite have the bullishness underneath it, it's kind of caught, it wants to follow beans but yet it's got the weakness of wheat and the big supply and world stocks of wheat so it's kind of got all of that hanging over it. In the meantime, though, we do have Argentina, number two world exporter of corn not going to be in our back pocket competing and, of course, Brazil is going to be planting less corn as well. So, we are going to have a good export picture I think down the road. Ethanol is going to command 4.2 billion bushels of corn. But in the meantime it's the beans that I think that the world is going to look at. They can't go to Brazil and buy them because of the inverted markets we've seen in July and August, Brazilian farmers took advantage of that and sold right away instead of carrying and also looking at the fact we might have a huge crop in the U.S. And then on top of it you have the Argentine crop, a disaster and so they don't have anything to sell and the farmers are upset about the taxation and nothing has changed there on that so there's no competition there. So, China has to rely on the U.S. for soybeans.
Martin: Okay, fine, but now China knows our weather has been awfully cool, abnormally cool and so they're no fool, they're watching the same things we are and they're saying to themselves, we only have the U.S. to worry about, we have to get our supplies from them. What if, what if they have an early frost freeze and this year is so possible when the last time I was on this show I compared it to 1965 because of World Weather's study and so it's a big possibility this year. What if we have even a frost, an early frost? That will take the top edge of maybe five bushels off of this crop. We can't afford that. Our carryout was at 110 million bushels in the last supply and demand, you've got super good exports, China is going to look at that and they know that the U.S. crusher is having to compete with them. If we have a frost freeze that U.S. crusher is going to step up to bat and he's going to buy up those beans in September and the September contract is going to be the one that surprises everybody and has a squeeze because they're going to command those beans and China is going to be right in there with them. So, I think they are booking beans just trying to protect themselves, maybe later on down the road they back out, but if their economy grows they just may need them anyway. In the meantime, Stats Canada showed a surprise today on the canola crop up there that it's a lot less than they thought.
Pearson: Tightening up oil see production worldwide when you add that in and the situation down in South America and, of course, the big China card.
Martin: Well, exactly and here's the thing, last month I talked about the crop condition ratings and how in years when conditions were equal to or higher than this year there were eight years out of the last 40 and out of those eight years, five of them put a harvest low in for November beans in July like this year and one year was in August by the 15th and then the other two fell in October. There was one analytic study and then the next one was the August expiration in the month of delivery August beans making new highs, again, seven years out of the last 40, five of them November beans makes new contract highs. And then this study off of looking at a comparison of 1997 to 1998 I think we have a very good chance beans could make new highs. The down side is if our economy turns end tails on us and we're disappointed but to be honest with you, we've been sideways all year on bullishness, if we start to feel this economy is getting better in the fourth quarter I think the door is open and if you get a frost freeze you'll probably see $20 beans.
Pearson: And you think that will come in that September contract?
Martin: I think, well, if you see a frost around Labor Day I think they'll load their boat on September contracts just in case. If we get that frost freeze before the expiration on the 14th which would have to be probably a Labor Day frost I think that will set the stage, they'll go for those beans because they can't gain control of beans until the end of November.
Pearson: You also want to talk about the hog market in the time remaining. You said there are some things happening there. You thought we'd see liquidation, we haven't seen liquidation yet. What do you think is going to happen to hogs?
Martin: I think first off we met my fourth count on the down side, well, we got close, 43.25 was that number on October hogs, we got to 43.80, 43.70, something like that and we're seeing a good rebound. But usually every year around Iowa State Fair time hogs tend to rally and they have done it this year but they were so oversold. Now, the key will be can they hang on because normally a seasonal on October hogs you peak around the 24th, which would be Monday, of August and you tail off into the end of August then you stage another rally in September and peak at the 1st of October and then you're down hard into November. That is the seasonal. In this year we see numbers staying with us as we go through September so we're going to have a good supply of hogs. I thought the cold storage report gave us a nice surprise today, it showed that cold storage stocks were down about eight percent from a month ago. Yes, we're still three percent higher than a year ago but that has come down some too. And down from a month ago killing all the hogs that we're killing I think says there is demand out there, it is going somewhere, it's not going in the coolers so that says there has to be demand especially when you look at the retailer and he hasn't dropped his prices. That tells me there's something underlying in this market that is positive.
Pearson: Sue Martin, as usual we appreciate your insights, appreciate you joining us on Market to Market and right here on Market Plus. A reminder out there, contact your local public television program director if you'd like to see Market to Market live on your local public television station. Call your local program director for your public television affiliate and tell them you'd like to see Market to Market. For Sue Martin and all of us here on Market to Market, I'm Mark Pearson. Thanks for joining us on Market Plus.