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Market Plus: Jul 10, 2009: John Roach, Senior Market Analyst

posted on July 10, 2009

Market Plus: Jul 10, 2009: John Roach, Senior Market Analyst Pearson: Welcome to the Friday, July 10th, 2009 version of Market Plus. We're glad you've joined us here at our Market to Market Web site. If you'd like to watch the show, if you can only see us on the Internet and you'd like to see us on your local PBS station make sure you drop a letter to your local public television station program director and say, I enjoy Market to Market, it's important to know what's going on in the markets to be successful in the business of farming, would you please carry the show and I bet they will. With us this week, our senior market analyst, John Roach. John, not a normal market segment this week at all. We haven't had normalcy since the 15th of September 2006 when this thing kind of got unhinged. We had the explosion in grain prices and oil prices, we had huge economic vitality worldwide and then we started making subprime mortgages, as you pointed out on the show, banks started closing and capital markets contracted, the global market kind of caved in on itself and we've kind of been hit or miss since then. So, we talked about that at the opening of the market segment, you mentioned the fact that everything was kind of going up this spring and now it's kind of going the other way. Hopefully producers took your advice early on and make some sales at these higher levels and are sitting back and enjoying watching this market go down knowing they have at least some price at that higher level.

Roach: Nobody enjoys watching the market go down. Just nobody enjoys it, it's no fun whatsoever. But what has happened that is really unusual as I stand back and look at things, it's the way money moves these days. It used to be that investments were viewed in various ways that today all investments seem very speculative every day, nobody has any confidence in buying and holding the way they used to or accumulating, the money flows in, the money flows out and it seems to happen whether it's currencies, whether it's energies, whether it's the grains, whether it's equities, it doesn't make much difference. It flows in and flows back out and values move ten, fifteen, twenty percent in real short periods of time and a lot of times it really just doesn't make much sense but that's the kind of environment we're in and my guess is we're going to have to live with that for a while, that continual money movement.

Pearson: So, for producers out here and, again, we've seen land prices move up, we've seen farmers expand, purchase a lot of steel to become more efficient. Longer term what is your outlook?

Roach: Longer term the argument is still in place that was in place last spring, a year ago, and that is we are going to reach a point when we're going to have a very difficult time feeding the world. The only reason that we're not having a difficult time feeding the world right now is the whole world is eating less, not because they want to eat less, they're eating less because they don't have enough money. That will change and when it changes we're going to go back into the thought process that we're going to run out of grains, the demand is just going to continue to grow or we're going to have to get lots bigger yields and that probably is the real answer, we'll get a lot bigger yields but it always goes back and forth and prices cycle. We thought a year ago that we put the cycle peak in this new price plateau. We thought now actually for some months that the cycle low for this new price plateau could come at this harvest. In order for that to happen we have to have big crops. Now, it didn't look like we were going to have big crops, now all of a sudden it looks like maybe we will have big crops, we're going to have to wait and see. But either this fall will be the cycle low or the fall of 2010 will be the cycle low in the grain market and that will be our new big, broad trading range and we'll go, just mark my word on this Mark, we'll go back to the top of that cycle, that's going to happen again. It may take a little while for that all to occur but it's going to happen for the same reasons that it's always happened, the supply runs a little short as the demand continues to grow.

Pearson: As we look at this market now and you've said on the show you don't want to sell anything right now, everything is pretty much in a big pullback, there's virtually nothing in wheat, corn, beans that you would want to take prices on right now. You think we'll get an opportunity, weather or something will occur to give us a bump here up from these values?

Roach: Exactly, and it may not occur as fast as the listeners of the show would like to have it occur, they'd like to have it occur next week. It may take a longer time than that and we may continue to be in the doldrums here right on up into harvest. It's possible that the weather is perfect and we could be right in the doldrums. But even so the cost of holding the grain we think you'll be rewarded for holding the grain and waiting for a better selling opportunity than today.

Pearson: Haven't talked about South America very much and they're in their winter period right now but obviously with the dollars that USDA was projecting in values for corn and soybeans and wheat going forward they're going to be back -- do you think there is enough incentive in these prices to see continued expansion down in South America?

Roach: Well, we're going to see it in Argentina, we think that Argentina with a change in politics there that we'll see an increase. But the problem there is that they've got dry weather issues and their wheat crop, we're cutting the Argentine wheat crop right now. But to answer your question, yes, we are becoming more and more of a world production unit, if you will, and money is flowing around to various areas whether it be Ukraine or areas of Brazil to get acres planted.

Pearson: It's going to be an interesting year. John Roach, as usual, we appreciate your insights joining us here on Market to Market this week. John Roach, our senior market analyst here on Market Plus. Again, make sure you contact your local PBS station program director and say if you're not seeing our show on public television, make sure you call your local public television general manager and say it's a program that we want to see. Give them a call right now, it's a critical time period to be touching base with your local public television programmer. For John Roach and all of us here on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news