Iowa Public Television


Market Plus: Aug 01, 2008: Tomm Pfitzenmaier

posted on August 1, 2008

Market Plus: Aug 01, 2008: Tomm Pfitzenmaier Pearson: This is the Friday, August 1st, 2008 version of Market Plus here at our Market to Market Web site. We're glad you've joined us. With us this week one of our senior analysts, Tomm Pfitzenmaier. Tomm, I'll tell you what, a lot of people are thinking about 2008 but they've got an eye on 2009. And I haven't heard this from people like you who are in the business but I've heard this from a lot of producers who are antsy about getting some coverage for '09. On tonight's show you brought up several reasons why you would not be in a hurry to do that. But producers -- I'm looking at $1000 a ton nitrogen next year, I've got all these input costs going up, should I have some insurance there? You're thinking is we've got a long way to go.

Pfitzenmaier: Yeah, I think we do have a long way to go. And I understand their argument but they still don't know exactly what their costs are going to be, we still don't know exactly what anhydrous is going to cost for next year, the seed companies have yet to set their costs. So, you're not even positive exactly what you're locking in when you sell corn right now. But if you just sit down and look at this acreage battle that is shaping up here you have to entice a lot of corn acres, a lot of acres to be planted to corn. Number one, the corn on corn this year doesn't look that great. Number two, beans are a lot cheaper to put in and there's a big incentive to plant beans. Number three, people kind of like being in a corn and bean rotation. Agronomically it works well for them, it spreads their workload out, it spreads their agronomic risk out and so you have to have a pretty strong price in corn to entice them to plant a lot more acres of corn than they do beans and I don't see that at this price relationship where you've got $6, $6.50 corn and $13 beans, I don't' think it's good enough to entice them to do that. So, we're going to have to have some kind of a rally here over the next six months or so through the winter to kind of get that straightened out. So, I don't see any reason to get in a big toot. You're around $6, maybe a little over that for that Dec. of '09 contract so you're locking in $5.50, maybe $5.25 corn but that's probably kind of a floor price for us right now. So, why get in a big hurry on that? If you do and if you can't stand it and you need to make sales and your banker thinks you've got to make sales, whatever reason, then go in and buy yourself a $7 call or an $8 call for a dime, spend something so if the thing does blow out through the roof you've got some kind of an insurance on that so you don't get to that point where you've got $1.50 margin call and all of a sudden you call your banker and he goes, well, I'm sorry Fred but I can't give you any more money. You don't want to get yourself in that situation. So, buy yourself a little insurance if you think you have to make that sale.

Pearson: At the end of the show I asked you briefly about the weak dollar and there seemed to be some things happening the last couple of weeks. Obviously the crude oil is a big part of it, of the dollar strengthening. That's got to have an impact on these sales going forward.

Pfitzenmaier: Absolutely. You've got to remember a lot of that dollar measurement is against European currencies and we don't sell very much corn to Europe. So, that mitigates that just a little bit and I think if the dollar turns it's not going to be a V bottom, it's going to be a pretty gradual thing. I think export demand, you know, we're the main supplier of corn in the world, export demand is going to continue to be fairly strong even if the dollar does creep up a little bit. Now, maybe it's going to hurt the livestock industry because like I said on the show export demand on both beef and hogs has been outstanding so there may be a little more vulnerability there than there is in the corn market.

Pearson: Alright, so at this stage of the game no big sales, no big movement on '09, be patient, be patient with the balance of the '08 crop too.

Pfitzenmaier: I think so, I think you can wait. I'd wait 30 days to see if we get a little frost pop somewhere in that August 20th through September 20th timeframe and if we do then a lot of times those frost rallies are designed to be sold. So, that's the one I would use to make that sale. Don't let yourself get all bulled up when that comes along but use it as an opportunity to make some sales or buy puts or do something.

Pearson: Well put, Tomm Pfitzenmaier with us this week on Market to Market and, of course, right here on Market Plus. And for all of us here at Market to Market, I'm Mark Pearson, thanks for being with us, have a great week.

Tags: agriculture commodity prices markets news