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Market Plus: May 22, 2009: Darin Newsom

posted on May 22, 2009

Market Plus: May 22, 2009: Darin Newsom

Pearson: This is the Friday, May 22nd, 2009 version of Market Plus. We're glad you've joined us here at our Market to Market Web site. Tell your friends and neighbors to join us here for a little bit extra on what's happening in the markets. With us this week one of our regular market analysts, Darin Newsom. Darin, there's a lot of things we could talk about, you could talk about crude oil, you could talk about the copper market as you did on the show which has become such a critical barometer in what's happening in the general economy, you could talk about the fact the dollar fell apart but, you know what, it's the soybean market that seems to drive so much of everyone's thinking and there's such a diverse opinion out there about what 2010 is going to look like and what this acreage number is going to look like. I reported on the show a buddy of mine is in the seed corn business, a bunch of trucks left his seed plant headed to the state of Illinois, shorter season varieties. Farmers there would rather plant corn and keep their rotations in tact is what he's telling me and I think he's probably right. Maybe we won't see all those bean acres over there.

Newsom: I don't think we will and that certainly seems to be what the market has been indicating for months on end now, even going back to this last fall and winter we just didn't see the carry building in that November/January spread and January/March and on out. The new crop soybean spreads that would indicate that we were going to see this huge influx of acres if the ending stocks were going to grow to this gigantic degree -- so there's always been a bit of a shadow of a doubt that we were going to see this anyway and now with those spreads, with the November/January moving more to an inverse situation certainly starting to indicate that not only are we not going to see the acres but the traders are getting more concerned about what the ending stocks may be as we go forward into '09, '10. There's all this talk we're going to be well over 200 million bushels, now I think what the market is trying to indicate is we're going to be dropping back down below 200 million bushels and could be creeping back towards these levels that we're seeing in '08, '09.

Pearson: Darin, we've had this before the situation where literally it looked like we were running out of soybeans, I think it was 2004, 2005 where we had a very similar situation, bean prices did go up dramatically higher and then through a series of things we were able to fill the bean pipeline but it was very pricey to get it done and get into that new crop. If that happens this year and we go into next year at 200 million bushels carryout or less you're back about $10, $12 beans again. If we're at 350 your people are telling me that we're going to see $6.50, $8.00.

Newsom: Exactly, and that's exactly right. The one thing that we don't have this year that we've had in some of these other tight U.S. supply situations in the past is that the world situation has tightened up so dramatically. We had crop problems in Argentina where their crop was dramatically cut from what earlier expectations were, even the Brazilian crop didn't quite come up to muster, Chinese demand remains very strong both for soybeans and for soybean meal so we have a different set of circumstances, a different set of fundamentals are at play right now and this could certainly keep the support underneath the market and if we do start to drop those ending stock numbers again I do think we will be able to stay up in these double digits for soybeans as we go forward into '09, '10.

Pearson: So, you're optimistic on beans, you're not in a big hurry to make sales?

Newsom: Not in a big hurry. I think even if we look at the seasonal index we've got time through mid-July before these things tend to fall apart and if our future spreads continue to indicate that the market is as bullish as we think I think it may give us a bit more time a little later into the summer beyond that second week of July.

Pearson: We've got another minute or so, I just want to ask you to quickly recap on your outlook on corn. Again, with the challenges we've had in the eastern Corn Belt and I've talked to agronomists out in Ohio, Indiana, Illinois, where we're looking at shorter season hybrids maybe not hitting trend line yields in corn this year?

Newsom: We may not but I think there's still going to be enough acres and enough ending stocks turning into beginning stocks for 2009-2010 that we're not going to really get into a tight supply situation in the corn market like what we're seeing in beans. I think we could certainly tighten up from where we are but it's a long way from being tight. Again, the spreads are certainly indicating that also out into the new crop market.

Pearson: Darin, as usual, appreciate your insights. Darin Newsom with us this week on Market to Market and here with us on Market Plus. A lot of wheels turning out there, again, we always remind you to stay safe out there but also keep in mind if you enjoy our Market to Market on the Internet and you'd like to see it on your local public television station and catch our live version make a point to call your local public television programmer and say I enjoy Market to Market, I'd sure like to see it on my local public television station. For all of us here on Market to Market, I'm Mark Pearson. Have a safe holiday weekend.


Tags: agriculture commodity prices markets news soybeans