Newsom: So to speak. We have to remember first off we are gauging this against the prospective plantings report and prospective by its own title means guess work. So, our June number is our first real look. But we don't have to go back too far, all we have to do is go back to last October when low and behold we were able to find 2.2 million acres of planted soybeans that really we didn't know existed at that point and this is while we were in harvest. So, there's going to be revisions of this report. As we get further into it hopefully we'll have a better idea of what has been planted, what's actually out there but, again, it's just a number, it was their best estimate at this time and now we'll see what happens to these numbers, these acres in all these different crops as we move forward.
Pearson: Which number surprised you the most? Was it the corn number?
Newsom: The corn number caught a lot of folks by surprise but, again, I like to look at the futures spreads as some kind of an indication of what the trade feels that the underlying fundamentals are and heading into this report all of the talk about less acres and less supply and demand and so on and so forth didn't really seem to be reflected in the market itself. We had seen the carry go out to about a 68% full commercial carry Dec. to March, that's a pretty bearish number, that's on the side of the trade not really believing that we were going to see these fewer acres, this less production. So, I wasn't hugely surprised and also, again, just weighing in on the idea that we're going against the prospective numbers so there was the possibility of this number coming in a bit bigger than many had anticipated.
Pearson: You pointed out on the show that if and if and if which, of course, this is why it's the futures market but if this acreage number is correct and if you start plugging in a trend line yield and plugging in the demand as we know it, again, all based on the future but if you plug all this in you're now talking about a substantial carryout. You're talking an almost burdensome carryout, up over a billion bushels and we could be up around 1.3 billion, 1.5 billion?
Newsom: Absolutely, again, it's not too hard to take that out to 1.8 billion and if the dollar gets stronger as it certainly looks like it could we could certainly see this expand out to possibly 2 billion bushels by the end of 2009-2010. So, we're looking at a completely different set of numbers now based on what we think we know at this point. But we still have to get through the weather, we still have the worst of the summer to come so these things are all going to change but knowing what we know now, given the numbers that we have to work with we're working with a far more bearish supply and demand situation than we were four to six weeks ago.
Pearson: And especially as we look at the corn number, your alma mater, Kansas State, used to put out a graph, I haven't seen it lately but it showed what carryout was versus what the price of corn would be. You get up over a billion or so that number starts to drop significantly.
Newsom: And what you can also build into that is another number that's out there is the stocks to use and that takes the ending stocks and it compares it to what the total demand is and that's where you really start to see some changes. And the larger that number gets, the larger that percentage gets usually has a very tight correlation with the lower the price goes. And if these numbers play out we're starting to look at 13%, 14%, possibly 15% of ending stocks to use which could be very bearish for prices later on in '09-'10.
Pearson: With that in mind you're a little more aggressive on making sales?
Newsom: We had been but now we're going to have to sit back, we're going to have to let this market work itself out a little bit. We're actually coming down to some price support levels so let's wait to see how they react down there, we get back into the middle of August, possibly a little later than that and this market starts to react to some weather issues and so on as we head into harvest maybe we can get aggressive again and get this market to rally a little bit so we can start making some sales again.
Pearson: Talk about the bean number too, again, close to what the trade is expecting, not a huge surprise there but based on this number and based on trend line soybean numbers what are we looking at for carryout next year on beans?
Newsom: The biggest thing with the beans is what are we bringing in? That would be the biggest question so if indeed we're bringing in this 110 million bushels which the government itself seems to be disagreeing with after the quarterly stocks number but if indeed it's as tight as 110 we're still only looking maybe 200, 230 and possibly up to 250 million bushels given the numbers that we have right now. But if the quarterly stocks number is right and '08-'09 ending stocks are going to be much larger than that then all of a sudden we could be looking at a bit of a burdensome number at the end of '09-'10 in soybeans. So, it's going to be very interesting to see how this plays out.
Pearson: So, again, fairly bullish scenario has been going and still there probably for old crop soybeans but new crop we could see some pressure there but not quite as much as what we could see on corn.
Newsom: Absolutely, that's it in a nutshell.
Pearson: Okay, Darin Newsom, appreciate it, thank you so much for being with us. Thank all of you for joining us here at our Market to Market Web site. If you'd like to see Market to Market on your local public television station we encourage that and we encourage you to contact your local public television programmer and say hey, I want to see this show on a regular basis on my public television station so contact your local public television programmer and tell them you want Market to Market and they will get it for you. From all of us here on Market to Market, I'm Mark Pearson. Have a great 4th of July weekend.