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Market Plus: Jul 04, 2008: Alan Brugler

posted on July 4, 2008

Market Plus: Jul 04, 2008: Alan Brugler Yeager: This is the Thursday, July 3 edition of Market Plus and joining me this week is Alan Brugler. Alan, we saw one USDA report come out this week, we have another one that is going to come out next week. What is that report? And what do we expect we'll hear out of it?

Brugler: Well, on Friday morning the USDA is going to give us the monthly supply and demand estimates, what they call the WASD report, world ag supply and demand. There will be a few less surprises in this report because what they'll be incorporating is the information from the planted acreage in the grain stocks reports that we just had on June 30th. Those numbers will be carried over into the WASD report. But what we'll be watching for is particularly what USDA does with yield. In the June report they reduce the estimated U.S. corn yield but they weren't able to change the acreage because they were waiting on this other long month report. They may choose to leave that acreage number as it was in the June 30th report and they may not change the yield. That's the big debate in the industry is whether they lower the yield further because of the wet conditions and the planting delays or if they leave them alone. In addition I think we have to look at the world production numbers. The USDA has got to look at what's going on in Brazil and Argentina and the European Union has got a huge feed grains crop this year and those affect our exports. The corn market rally is basically telling us to use less corn out of the U.S. pile.

Yeager: So we have more to export is what you mean?

Brugler: Well, either to have more to export or just to make it fit, to have enough for ethanol, have enough for feed use and have enough for export. Export is one of the sections that could be cut if the world is getting by with adequate inventory. If the EU has a big crop they'll import less. I guess what I'm saying is that I anticipate for the year we're probably going to be down five or six million tons easily on exports.

Yeager: That's a big number. Let's also talk about soybeans and their impact as soybean meal and soybean oil and some of their ties to energy.

Brugler: Yeah, we mentioned the big increase in soybeans on the show. But soybean meal has also gone to multi-year highs and soybean oil, while it hasn't gone to new highs, has been very volatile. And we have to remember that it's biodiesel, it can be used for biodiesel, the food vs. fuel debate is there. The Chinese market had a huge sell off in both soybean meal and soybean oil on Friday and that pressured beans there but didn't affect the market here. But, again, if energy continues to go up, if you continue to see these increases in heating oil, which is diesel, you're going to see upward pressure on the soybean oil. There's eleven and a half pounds of bean oil in every bushel and that pushes the bean price up further.

Yeager: So, we'll see almost kind of what we've seen how corn had gotten a target on its back, it's now the soybean that is going to get a target.

Brugler: Yeah, we hadn't seen it to the same degree because it hasn't been very profitable to make the soybean oil into biodiesel but the higher that diesel number goes the more attractive that becomes and the more that becomes a part of the behavior of the soybean market.

Yeager: Another market and another potential crop gain for a farmer in producing. Alright, very much appreciate it, Alan Brugler coming in tonight to have a conversation with us here on this Market Plus analysis. I'm Paul Yeager. Thank you and have a very good July 4th holiday weekend.

Tags: agriculture commodity prices markets news