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Market Plus: May 15, 2009: Virgil Robinson and Erin Golly

posted on May 15, 2009

Market Plus: May 15, 2009: Virgil Robinson and Erin Golly Pearson: Welcome to the Friday, May 15th, 2009 version of Market Plus. We're glad you've joined us here at our Market to Market Web site. I'm Mark Pearson. With me this week Erin Golly and Virgil Robinson talking about what's happening in the markets. Ladies first in Market Plus, Erin had to wait while Virgil talked on the show. 2010 -- frankly 2009 started off very good, everyone was pretty excited we were going to see decent returns and we're talking particularly about hogs and then of course we had the flu thing that has blown up everything, blown up a lot of expectations by producers, frustrating year. You said on the show we'd see 70s on lean hogs.

Golly: I think we'll see 70s in the summer, we'll probably see 80s in the fall sometime and I think there's a very good shot that we could see dollar cash sometime in 2010 for the hogs.

Pearson: Wow. 2010 -- you teased us on the show -- you said 2010 is going to be great. So, you think we'll see dollar hogs in 2010?

Golly: Yes, not dollar futures, we had dollar futures last year, we'll see dollar cash just because we are going to be liquidating so much within the pork industry that the supplies are going to be very tight, we're going to have packers fighting over hogs, we have a little bit anyway already going on but the supplies are going to be so small that I think we have a very exciting year planned for 2010.

Pearson: The trick is to get there. Like being in the CIA's pension program, the trick is to live long enough to get it.

Golly: You've got to be able to stay in the game and play it.

Pearson: Give people some hope. So, that's hogs. We're going to see some good demand there, a lot of it driven by a reduced supply but hopefully by '10 you're talking a little bit better economy too.

Golly: Yes, I do think we're going to be shaking off this recession that we have seen. Things will start moving back, I think that the trend is lower for the dollar which does help exports as well. So, I think we've got a lot of things slowly inching towards the positives, towards agriculture, we've got to absorb a lot of losses to get there though. But I do feel good once we get into 2010.

Pearson: You mentioned the Mexican tourism business, the exports are so critical as you've said on the show before for hogs and that is a big market down there.

Golly: It is, I don't know exactly what number they are for our export markets but it's very important. I know when the Mexican trucking industry came out with a ban and they decided to not -- we stopped the trucks from coming up here we were very worried that they would shut off the export market to us and it took a bunch out of the market just hearing rumors of it. So, it's a very important export market for us.

Pearson: Fed cattle market is going to share in this 2010 market too?

Golly: I think so. We've got that CWT dairy buyout that's also going to be going on. I've only read a few details about it but it looks like we're going to start in April and May and it's going to be 15,000 head a week that we're going to take out of the system. So, it's actually an additional 5000 head because we weren't going to be liquidating anyway. And so we'll be taking out dairy as well and that will put some pressure on the hamburger market. But I think generally we're going to clean up supplies within all industries. We've got shortages of feeder cattle right now, feedlots are going under, we can't find enough feeders to put in feedlots so I think it's just all ramping down the way towards a very good year.

Pearson: We've been ramping down to those lesser supplies on the livestock front here for eighteen months really since this lack of profitability started. Some great insights, Erin, thank you so much. Virgil, prices, corn, beans, we've had this May 12th report which I know is kind of squishy, we're going to have better numbers as we go forward and obviously get a clear weather picture, not off to the greatest start for corn and beans for the 2009 crop.

Robinson: Again, I think the bean market as we visit tonight remains the leader of those that we have referred to on a weekly basis and I think are yet capable of moving higher. If that is the case then clearly corn and other coarse grains will benefit to some extent by that leadership. But we did see this week new crop beans had trouble at or near $10 and that is kind of a magic number of sorts given the current S&D that we're looking at. I think we'll make another swing at that number and, again, at this point in the calendar I am more inclined to create a minimum price rather than the finalized price for a whole host of reasons. That being said you might simultaneously entertain that same notion with respect to new crop corn and maybe new crop corn futures again are at $4.50 or something above that. I think on average, assuming a basis of 35 or 40 cents, will create a floor for producers that is profitable and then if over the course of the next many weeks depending on what does or does not develop create some additional opportunities. We should probably mention the aspect of seasonality here tonight. Seasonally corn and soybean future often track irregularly higher into that June, mid-June, late-June time window and we're kind of tracking that direction as we visit tonight. So, that maybe is also part of your thinking here on May 15th with all of these weather issues and all of these other factors that are part of the price discovery process.

Pearson: I don't think anybody is going to complain too much if they can get $10 on beans and if they can get close to $9.50 cash or in that ballpark. That's where it seems like most producers want to be. This could be the great opportunity to do that in this time period.

Robinson: Yes, and as mentioned if that isn't the number that satisfies you maybe you create at least a minimum price there and if over the course of time we do have 78 million acres of soybeans, they all produce at trend line and we grow our ending stocks to 230 million bushel and the USDA is in the ballpark on their forecast somewhere in the $8.50 to $9.50 area you've done a pretty good job of marketing and left yourself many opportunities and a lot of flexibility. That's the key I think to survival here in the next several months.

Pearson: Well said, Virgil, thank you so much. Erin Golly, thank you so much. Thank all of you for joining us here at our Market Plus segment. Again, if you enjoy Market to Market on the Internet don't forget to call your local public television programmer so you can get the show live on your local public television station. Just call your local public television station, talk to the programmer and say carry Market to Market. From all of us here at Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news