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Market Plus: Sep 26, 2008: Sue Martin

posted on September 26, 2008

Market Plus: Sep 26, 2008: Sue Martin Pearson: Welcome to our Friday, September 26, 2008 version of Market Plus here at our Market to Market Web site. We're glad you've joined us. Tell your friends and neighbors to join us here too. Sue Martin is our analyst this week, one of our most popular ones. Sue, let's talk about corn and beans because right now that's what we're talking about getting harvested, there's some harvest activity going on, hopefully it will pick up even more in the next couple of weeks. It's going to be a long harvest season. Everybody tells me that but I've driven all around the Midwest as have you, a lot of green out there still.

Martin: Well, there certainly is and, of course, warm weather the above normal temperatures we're having right now is going to help bring these crops home a little bit especially in the beans. But I think that when I look at the crops the one thing I notice is area by area we're oging to find a wide disparity in the basis levels between different areas. Some areas are getting harvested earlier, other areas not and so the basis is really going to be different from area to area and we just need to be very cognicent of what the basis is doing because it might give a person an opportunity to lock up some decent basis before if they're planning on delivering during harvest some grain.

Pearson: Of course, we saw all that dramatic basis move hwich is normal from old crop to new crop. So, things got kind of wild there in the the cash market. Talk about '09 and '10 because you said on the show and I think you were talking corn and beans that you would get aggressive this winter if prices get up there you would sell the coming year, 2009, you'd also go out and sell some 2010.

Martin: Absolutely. I believe that when we get into what might take us up and start us out of here is once we get all this other outside influences settled down and I think that's going to happen here, it may not be that it's solved but settled down so it's not as emotional as it's been the last two weeks I think the focus is giong to shift back onto the marketplace and they're going to start to look at the crop listening to the yields and then they're going to start thinking about -- because as soon as those combines roll farmers are going to be thinking about this coming year and what they're going to plant and that acreage shift or that acreage fight is going to already start ebbing us right back out of here and we'll move up higher into the turn of the year. We'll also have some good demand I think coming at us beacuse South America, we know Argentina is planting more beans but I think Brazil with the break that we've had and the problems with the dollar, that dollar starts to go back down which one would think it would with all the dollars we're going to have to print to take care of this and all the bad press of what's going on in the U.S. I think it would shove the dollar back lower again, I think that's not healthy for the Brazilian producer and he's not in an environment right now where he's entertaining expanding acres by very much. So, I think that you get the crop planted down there and then we start seeing demand come at us because we're the only viable supply that they can grab a hold of and that takes us up into prices as that demand comes and grabs a hold of us, a little bit on the seasonal side but I would be watching Janaury on into FEbruary very closely and it may be, I've done some work and I still have more to do on it, but it may be that by the middle of January our highs are in for the year.

Pearson: So, this is not a time to be figuring normal marketing patterns.

Martin: No.

Pearson: Why into 2010 because that's odd for you? You usually don't like to go out that far.

Martin: Well, because I think the bear market is going to last longer. We'll be coming off -- it depends on if we take this year's highs out or not. I don't think we will but yet it wouldn't shock me if we did. The problem is going to be that as we start to come down and other countries start to build the reserves again we'll now be into that second year and if production is halfway decent they're just going to keep coming at us with a hand to mouth basis. And then as we go in through the 2009-2010 at some point here we're going to start to hit a level where our acres are going to start to stabilize out and maybe at that time Brazil starts picking up the acres and our corn starts to stay there. But also we're going to start seeing some shifts in this demand on corn and we're going to find that with corn that produces more, like 300 bushels to the acre or whatever, because that will be coming onto the market here very soon, we're going to find that we don't need as many acres as we once did and, of course, we're going to have less cattle numbers meaning less demand for corn. There's a lot of things coming into that mix and cyclical patterns too show clear out into 2010 that we're going to have an issue. And so we're going to be real aggressive, a total different aspect of what I'm usually like. Instead of seeing the glass half full I'm going to probably be seeing it half empty.

Pearson: It's interesting and we'll see where things go and how things progress and what the catalysts are going to be out there because it's always amazing.

Martin: And it's not a bad thing. We all know we go through down markets but what I'm trying to do is get the producer to listen, to get him to be willing to do some marketing. If you don't want to go to your cash elevator and do it on the cash market then buy some puts. There are ways to do it and protect yourself and yet not feel like you're answering a lot of margin calls. There will be some opportunities and yes options are expensive but when you put it in comparison to price levels and everything else and the risk they're not so expensive.

Pearson: I want to talk about hogs real quick, we didn't get to talk about them too much on the show. We had the quarterly hogs and pigs report. You said kind of not friendly near term, maybe we're getting liquidation and we need to kind of get the hog market turned around longer term? Is that your reading of it?

Martin: I think that we're going to peak our hog numbers in the fourth quarter of this year. All hogs and pigs was at 103%, kept for breeding was at 97% so we're starting to see the changes there. All hogs and pigs I guess was 102% and kept for marketings was 103% and so that tells us taht right up front we've got hogs yet to come to marketplace. But the bright side is that the demand domestically is just tremendous for pork and our export market is not bad either. So, I think that's a blessing and I think now that we're looking at the poultry side of things hitting the fan that just puts more demand shifting back over to pork as opposed to beef. They've got to weigh their dollars and the supply of pork is more abundant than beef so I think that's where we're at. And as we go down the road we'll start to peak out here by December and then start shifting lower in numbers as we go into next year. By the time we get into June of next year we're going to have some pretty dicey markets I think in hogs.

Pearson: Pretty exciting to see how the markets play out.

Martin: I think so. I think the pork market is a good place.

Pearson: Sue Martin, as usual appreciate your insights joining us this week on Market Plus and on Market to Market. And from all of us here on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news