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Market Plus: Dec 12, 2008: Tomm Pfitzenmaier, Summit Commodities

posted on December 12, 2008

Market Plus: Dec 12, 2008: Tomm Pfitzenmaier, Summit Commodities Pearson: This is the Friday, December 12th, 2008 version of our Market Plus segment here at our Market to Market Web site. Thanks for joining us here, a chance for us to delve a little bit deeper into the markets with one of our regular market analysts, Tomm Pfitzenmaier, one of the senior analysts here, he's been on the show for a number of years and some good comments Friday. But, Tomm, Kip Cullers made a comment that really rang and that was he's the soybean guru and if anybody can produce a lot of soybeans it's Kip Cullers. He said you make more money marketing than you do producing and it's true, that profitability out there is when you get the actual product sold. We had a great opportunity to sell a lot of product this year, some people took advantage of it, some people didn't. Now, we're getting near the end of the year and a lot of the corn and soybean and wheat crop has all been locked away and now they're waiting for this market to come back and maybe we've got an opportunity here.

Pfitzenmaier: A lot of new bins went up this summer and those are creating some opportunities for people that actually happened this week. This week when everybody was asleep and recovering from harvesting and all that we saw basis tightening which is one of the main reasons you own a bin is to wait for that basis to tighten up and the basis in that February through July timeframe there's a lot of people that need corn, are not buying any from the farmer, they have been tightening that basis up to try and get it pried out of their hands and so that's what you have that bin for is to give you an opportunity to take advantage of that. On top of that you've got fairly good carryout out into that March, May, July timeframe. So, there's another reason you own a bin is to take advantage of that carrying charge. On top of that we've had a 60 some cent rally in the corn market. So, some really good things happen for people that have corn in the market and it's out into that timeframe so you can defer the income to next year, defer the sales to next year because I have this big fear that after the first of the year when everybody wakes up from their nap everybody is going to come to the conclusion at the same time that they need money and they may need to make sales and all of a sudden that basis falls apart and the bin that had done you so much good is going to become a noose. So, there's opportunities here, you need to really check them out here in the next couple of weeks while those opportunities still exist. I said on the show I think you need to have the cash sales on the '08 crop bumped up there in that 60% to 75% range between now and the end of the year.

Pearson: So, to accomplish that there's a lot of corn and a lot of beans that need to get sold then don't they?

Pfitzenmaier: Yeah, and I'm not talking about some few fancy futures options strategies, I'm talking about flat getting out there and getting some corn contracted.

Pearson: So, something big that we should be keeping an eye on. What about '09 sales? You talked about it a little bit on the show, making some scattered sales. We actually came close to the number you were talking about this week which was $4.25.

Pfitzenmaier: Right, I think that's a good place to start. There is up side potential if we have reduced acreage and we have some weather problem this summer there is good up side potential in corn. We've been looking at buying some $3.80 to $4.00 puts on the December of '09 corn. If those are kind of expensive, if you don't want to pay that much for them you can go sell $6.00 calls to help finance that and get that cost knocked down, that's one thing. I think you can do the same thing on beans, you can buy a $9.00 put, sell an $11.00 or $12.00 call to help pay for it, it gives you an upper limit on the up side but without the funds participating and without some of the people we had pouring in there to buy commodities that we had last year we probably don't have the up side potential we had last year. So, there's some good strategies here but, again, as these are created over the next week, two weeks, month or whatever it is you need to sort of be aware and ready to pull the trigger on some sales.

Pearson: So, cash basis needs right now and then maybe looking at maybe getting some '09 priced for corn and beans.

Pfitzenmaier: Right, exactly.

Pearson: Real quick we talked livestock on the show and we haven't talked as much about it as certainly we'd like but as we look forward right now the next few months this cattle market looks pretty sick.

Pfitzenmaier: Yeah, it does. Like I said on the show, $2 or $3 rally on the February, April, June cattle and I think you need to start making some sales or buying puts or doing something defensive and not just be making long cattle without any protection at all.

Pearson: And not all gloomy -- you talked on the show about the second half of the year and you thought we might see the consumer show back up again.

Pfitzenmaier: And when that happens we've got the potential for some pretty good cattle prices because like I said the numbers are down.

Pearson: As usual some great information. Tomm Pfitzenmaier, thank you so much. Tomm Pfitzenmaier with us this week, one of our senior market analysts on Market to Market. From all of us on Market to Market and here on Market Plus, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news