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Market Plus: Jan 09, 2009: Alan Brugler

posted on January 9, 2009

Market Plus: Jan 09, 2009: Alan Brugler Pearson: This is the Friday, January 9th, 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 us this week one of our regular market analysts, Alan Brugler, always has some great insights for us and he sure did on the show tonight. By the way, if you'd like to watch Market to Market in your local market, on your local PBS station simply call your local public television station, call them up and say we'd like to watch Market to Market, can you get it for us and I'm sure they'd be happy to oblige. We have Alan Brugler with us this week and there's a big day on Monday, Alan, it's such a difficult time for an analyst to be on Market to Market because it's the Friday night before all those big Monday reports. You acquitted yourself quite well. 2008 was such a wild year and this report might put the exclamation mark on the end of it. What is your take as we go into this report? What did you see on Friday that made you kind of wonder that they're feeling pretty good about certain things?

Brugler: Well, it always impresses me when you have people willing to put big money on the line the day before the report and the beans did that. We were charging 40 cents higher for most of the day right ahead of the report. It's not like we were afraid of what the market was going to see on Monday. What concerns me is that's coming at the end of a $2 plus run in beans and potentially no matter how bullish the report is it may not be bullish enough to drive prices higher. I'm looking for ending stocks to be dropped to 185 to 180 million bushels. That would be bullish because they were at 205. But that's probably not bullish enough to count for a 40 cent move on Friday let alone for a $2 plus move. So, what I'm watching for is that initial reaction. Do we gap higher and then sell off or do we get a bearish number and start lower and then does anybody come in and buy it? I think that gives you a hint as to what happens over the next couple of weeks. The seasonal tendencies are to drop into what is called the John Deere low or the February low. That's when farmers are having to make their payments and they're moving cash product. So, that is the bias but, again, the last couple of years we've had rallies into February because the market has been trying to attract acreage and that's still an issue here. We still have that battle for corn versus soybeans. Soybeans were winning handily two or three months ago because of input costs primarily. Now it's a little more mixed. You could make some money in both crops, it's becoming more of a crop rotation issue or what your local fertilizer market is doing and it will be spring weather I think. Can you in fact get the corn planted on time? Typically if you can't then you end up with a little more beans.

Pearson: That's right and, of course, that will be our next big number and that will be what those planting intentions are for corn and soybeans and that will be here before we know it. But as you look around right now and on the show you mentioned exports and you talked about the fact that soybeans were looking good primarily because of China. Looking around in the world right now with this global contraction that we're having could this all start to fade off some for some of our demand? We didn't get to talk about it on the show but I know you wanted to visit about it and that was the strengthening dollar.

Brugler: The rally in the dollar since the June and July period has really been a background factor. It doesn't drive the price of the commodity directly but over time it can mean a 10% or 15% switch in pricing or swing in prices to that foreign buyer particularly in a country that allows the currency to float like the EU or Japan. It's not as much of a factor with China because they peg their currency and really it's been about 6.83 to 1 to the dollar for quite a while now. What we're seeing though is the Chinese are accumulating inventory, they're buying a lot of different things probably because treasury rates were so low. They own a lot of U.S. currency because of the trade imbalance between the two countries. When you're getting zero percent something for interest it makes sense to spend the money, to repatriate it for their own currency and so they're buying a lot of soybeans right now. They have got a massive stimulus program to try and get their own economy jazzed back up because they had to lay off a lot of people that used to make stuff for shipment to the United States. If they fail in that then you've got a real demand problem. Right now it looks like they are buying, as I mentioned, a lot of soybeans. They have got their New Year coming up, that is a week long celebration. There is a lot of soybean meal demand right now and oil demand heading up to that holiday but then we tend to have a slack period when they get to it. As you look around the rest of the world we're seeing a lot slower activity in wheat, in corn and in cotton exports because of that slowdown. We've got a glut of feed wheat out of the Ukraine, Russia, the Black Sea area, that is eating into corn export sales, it's getting into some of our traditional wheat markets even on the lower end of quality, it's had some perverse effects like big protein discounts in North Dakota. Again, we need some evidence that the world economy is starting to stabilize and pick up. I think we're probably further along in that process than the news would let you believe but we'll start to see those exports pick up when the freight starts to pick up which in turn will be because the economies in some of these countries is starting to improve.

Pearson: Hopefully that will happen in 2009 so we can have more exiting markets as we did in 2008. Alan Brugler, thank you for being with us, we appreciate it. Again, if you'd like to watch our program in your local market on public television you can catch the TV version, just call your local public television program director and request Market to Market. And from all of us here on Market to Market and for Alan Brugler, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news