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Market Plus: Oct 03, 2008: Darin Newsom, Market Analyst

posted on October 3, 2008

Market Plus: Oct 03, 2008: Darin Newsom, Market Analyst Pearson: This is the Friday, October 3rd, 2008 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 regular analysts, Darin Newsom. Darin, not a real upbeat market session. We've had upbeat market sessions on the show since the 15th of September 2006. Do you think maybe we're in for more of a reduction in the commodity balloon at this point?

Newsom: I think so. Every time we get one of these bull markets that are never going to end, I'm not going to say it's over but even the corrections can be quite painful and that's possibly all we're in right now. But when we start looking at the pressure coming from the financial markets, we start looking at the world economic problems that are being talked about at this point cutting into U.S. supply and demand, possible problems with the Euro, the strength of the dollar, there are so many things at play right now that we should certainly continue to see U.S. commodities stay under pressure.

Pearson: Circle the wagons time.

Newsom: It could be for a while, I'm thinking for the next three, four, five weeks these markets may not get much relief. Where the relief is going to come from I don't know. We're going to have harvest in that timeframe hopefully, this crop never seems to quite get there, we just never know. But circling the wagons would probably be a safe way to play this thing here over the next few weeks.

Pearson: Tell me this, I've heard several people and you mentioned it tonight, the stocks report the USDA came out with -- bigger corn number and a bigger bean number. What happened here between August and September?

Newsom: A couple of things, higher prices and slowed down demand. We saw a slower corn demand, we saw a slowdown in bean demand over what had been expected. We also saw the U.S. dollar beginning its rally and this might have contributed to the slowdown in demand, more than likely it did cut back on some of our export business. So, again, we had a combination of effects that led to a larger than expected September 1 quarterly stocks report. But the longer term ramifications of that is that it starts to look like we're going to have more beginning stocks with '08-'09 naturally that could then carry forward to larger ending stocks for 2008-2009 removing some of these worries and this concern over tightening supplies this next marketing year.

Pearson: So, now that we have that and, of course, Brazil is going in to plant their crop at this stage and elsewhere around the world, the Black Sea region, Ukraine and so forth some of those areas these high prices haven't been lost on these people around the world.

Newsom: No, they haven't. In fact, one of the reports estimates, whatever you want to call it, is still calling for Brazil this next marketing year to have a record soybean crop. So, there's still that hanging over these markets that yes, the rest of the world is seeing the high prices that we've had and they're going to try to take advantage of it so we're going to see increased production. That is one of the things that has been hampering the wheat market after the poor production of '07-'08 everything was better in '08-'09 and so now we're dealing with that higher U.S. dollar, higher world production, much more difficult competition in the world export market.

Pearson: The stronger dollar complicates literally all those issues. Renewable fuels, what is your thinking on renewable fuels going forward?

Newsom: They were a hot topic in 2007-2008, they seem to be pushed to the background right now. I know they were mentioned in the latest House bill, Senate bill but overall as far as having a huge impact on the markets these days they have been pushed back and replaced by the financial turmoil. Now, we're also seeing maybe these industries aren't quite as profitable as they were months ago, they will certainly hang around, they're going to still be there and we're still going to see them act as a major demand in these markets, not going to go away. It's just not at the forefront like it was for so long.

Pearson: Wheat, corn, beans, you're not recommending sales of any of them right now?

Newsom: No, the sales we have on the books are going to hold and I'm pretty happy with those but I'm certainly not going to rush into a market like what we've seen over the last few weeks. If we get some sort of rebound, some weather that disrupts harvest or something like that and gives us some support in this market or if we do turn the corner here four or five weeks down the road and we start to bring some buying back in we'll wait and see what happens then.

Pearson: Darin Newsom, as usual we appreciate your insights joining us this week on Market Plus. Thank you for joining us as well. Tell your friends and neighbors to stop by our Market to Market Web site and pick up this information as well. From all of us here on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news