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Market Plus: Apr 17, 2009: Don Roose, Market Analyst

posted on April 17, 2009

Market Plus: Apr 17, 2009: Don Roose, Market Analyst

Pearson: This is the Friday, April 17th, 2009 version of Market Plus. We're glad you've joined us here at our Market to Market Web site. With us this week one of our newer market analysts, Don Roose, he's one of our newer analysts but he's been in the business for a long, long time. Don, great to have you with us again this week. I want to talk about a couple of things. We talked a lot about soybeans in the market segment on the show but there's still a lot more to talk about. Now, there's all kinds of discussions out there and you brought it up, 7 million acres that disappeared on the corn acres. Where did they go? Could they show back up as bean acres? Could we see some wheat now that we've had some moisture in some of those frozen areas of the Wheat Belt? Could that go back into soybeans? Could we see some more soybean acres? And if we don't see it what could it be this year? You estimated a couple of numbers that I've heard, 110 million bushel carryout, that's unbelievably tight, that's microscopic, Don. What is going to happen with this soybean market?

Roose: Well, usually when we have this much uncertainty and you've hit on a lot of them is we put risk premium into a market and we try to keep it for longer than you think and that's probably what we're going to do this year. The fire on the demand led market which is what we're really in doesn't go out very easy. We've got the classic, the supply shrinking in the U.S., the crop last year is probably overstated which is probably one of the reasons the crop continues to shrink from this 165 million carryover, the exports continue to grow and I think when you add it all up we can buffer this next year with more acres of soybeans but that is going to be the big unknown. And then on top of that we have to get a yield. So, I think there is going to be a lot of volatility, this situation is going to stay pretty tight for quite a while.

Pearson: You didn't seem to be in that big of a hurry to make sales, you said to catch up some old crop, it's a good opportunity to do that. You didn't seem to be that excited about new crop sales.

Roose: Well, the new crop I think really what they are is they are being let up by the old crop and I think that the spread at $1 difference, $1 plus between November beans and July beans it gives that a chance for the old crop beans to pull the new crop beans higher. So, maybe a person can ride the coattails of the old crop to sell the new crop and I think we have just a little more time, you might get a tremendous weather scare sometime during the year, we usually get one or two good weather scares and I would say that we're probably due again this year.

Pearson: Short of that you also mentioned bear spreading is continuing in this bean thing. What is your outlook on that? Obviously people taking advantage of the fact that we have a substantial difference between old and new crop.

Roose: Yeah, I think the big thing that you have to be careful of on the old crop is it's kind of like a poker hand. You have to make sure you don't overstay your hand too long because when you have the big premiums of old over new crop South America can sell a bigger percentage of their crop than you think, that's one thing that can happen and also the domestic buyer can just back away and say, you know what, I'm going to wait and buy the new crop at a cheaper value, a dollar discount. So, what is that magical number? I think we have to watch it day by day and we have to watch the bear spreads. But on Friday we did start to see the bear spreads tip so that might be your first hint of a low short-term top.

Pearson: Supposed to get some good weather this week, there's going to be a lot of planting that will take place and it looks like at this stage of the game we're in pretty good shape weather wise to get this crop put in fairly quickly. I'm talking about corn as opposed to maybe switching acres back to beans. So, we may not pick up those bean acres that we sometimes do because of just the way things look from the short-term forecast.

Roose: Yeah, you're right, the short-term forecast it's wet here just for the weekend and the beginning of next week but after that the six to ten and eleven to fifteen day forecasts are open, we're probably going to have some pretty aggressive planting and the corn acres probably going to build just a little bit and that is probably going to be taken away from the soybeans because remember in the Midwest you really have about a 160, 162 million acres and they'll either go to corn or soybeans so more corn you end up with less soybeans.

Pearson: Talk about the impact of more corn, Don, because we've got a pretty good carryout going now. There are some concerns about ethanol, there's some concerns about exports although they were strong this week. What is your take on the corn market going forward?

Roose: Well, I think the spreads tell you a lot. In the new crop corn carryout this week between the months moved out to about four cents a month carry so what that's telling you is the trade believes that we're going to have adequate supplies and somebody is going to get paid to carry those. Now, that can change at any time and often going into the 27th of April it usually is a down ticking market because it's one that you're getting in the crop, planting pretty aggressively but I think it looks like right now we're going to have adequate acres, a fairly big carryout and we're going to have to deal with a larger supply and somebody is going to have to carry them.

Pearson: I mentioned my buddies down in Oklahoma who are telling me that you guys in the trade are underestimating this domestic wheat situation and how bad it is with the freeze. So, I want you to address that quickly because you're in that camp. You think that we do have a serious U.S. wheat production issue.

Roose: Oh, I most definitely do. I think that we just had tremendous damage in Oklahoma and actually going into southern Kansas. It's a big area in a big producer, Oklahoma, and I think part of the problem is the market is pretty smart, it knows that we have a problem but it also realizes at the same time that we've got a fairly big wheat crop that is taking place, some big timely rains in some other areas that's maybe going to counterbalance some of that, bigger world supplies and a big carryover from this year carrying into next year. So, I think it's just that we have too much wheat in the world market to really make a dent.

Pearson: And finally, better economy? Do you think the bottom is in, in the equities?

Roose: I think we did put the bottom in the equity markets and I think we're starting to see, you know, this last quarter we saw $17 billion of money come back into the commodity business through ETS and stuff but I think if you believe in all the programs that the government is doing which you certainly have to you would have to believe that the lows are in the equity market.

Pearson: Good news for the cattle market.

Roose: I think so and I think we saw it this week. Maybe we've got a little bit of the stimulus starting to show up and working. Choice and select, actually choice beef was trading under select which is ridiculous and that moved back to a premium this week and I think that is the start of it and I think the grocer is stepping in and trying to stockpile a little bit for grilling season, caused the packer to bid up from cattle this week, that's another good sign. So, I think with all this doom and gloom ultimately we know that things go on, it's just a matter of what direction and things will repair themselves and they are starting to.

Pearson: Don Roose, appreciate you being with us on this week. Don Roose, one of our newer market analysts, great to have him with us on the show and, of course, here on Market Plus. I also want to say if you are enjoying our Market to Market on the Internet and you'd like to see it on your local public television station by all means contact your local public television programmer and say we'd like to have Market to Market on our local station and encourage them to do that and I bet they'll put it on. So, check it out, call your local PBS programmer and get Market to Market on locally. For all of us here on Market to Market and for Don Roose, I'm Mark Pearson. Have a great week.


Tags: agriculture commodity prices markets news