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Market Plus: May 09, 2008: Sue Martin, Market Analyst

posted on May 9, 2008

Market Plus: May 09, 2008: Sue Martin, Market Analyst Pearson: This is the Friday, May 9th, 2008 version of Market Plus, glad you've joined us here at our Market to Market Web site. Be sure to tell your friends or neighbors to join us here as well. Sue Martin is here with us this week, our analyst on the show. I don't want to slight any commodity but there's so much happening in the corn and bean world, Sue, let's talk about it. The corn market -- you mentioned the fact that we're behind this year. The USDA comes out with their supply-demand numbers, kind of friendly to corn and beans, we're posting some pretty big numbers on corn right now and you talked on the show about posting some even bigger numbers on soybeans. We've got a weather market really to work our way through yet. What's ahead? What should a producer be doing?

Martin: Well, I think that first off in the corn, you know, when I talked on the show about the USDA coming out at 153.9, a little bit below trend line, I think that the one thing that may have helped this number be larger than a year ago, even though we're behind somewhat they did come out with a lower number because we are behind and they were quick to respond to that but in the meantime they also look at a year ago. And remember, we had 93.6 million acres a year ago, we had a lot of areas that were fringe areas that they don't produce as well and I think that also dragged our bushel per acre even deeper below trend. This year because we are getting past, you know, this weekend is the 10th and 11th and all of a sudden you're starting into that window, the 10th through the 15th where once you go beyond that you lose a bushel and a half per acre a day. And I think that we know that if the weather gives us a window and a break in all this moisture we know that with the big equipment that farmers have and less acres to do this year than last year they'll get it planted in a timely fashion, maybe not as timely as a year ago or what we'd like to have and even a year ago wasn't as timely as the five year average. But we'll get it done. There's only been one time in the last 40 years that we really were extremely late and seen some acres not get planted and that, of course, was the 1993 flood year. But having said that, I think the market is anticipating the crop will eventually get in but they realize it's not going in under good conditions. Farmers are going to push the envelope here and it will go in under murky conditions and therefore that jeopardizes yield as well. And then the next thing is if all of a sudden with the mud and the moisture underneath, if we all of a sudden start to turn hot and dry you could see a crop that just doesn't have a root system and then if we turn and the hot and dry stays with us you're going to have a market real enthusiastic. Now, I think this market is going to be really on edge as we get closer towards pollination. It always usually kind of is very watchful of that because 90% of their yield comes at that time. So, I think that the markets are going to be real dicey and probably in a nice up trend. So, I think that any breaks in this market over the next 45 days are probably going to find an opportunity and will be well supported. Dec. corn, if something was to happen and it fell back to $6.10 that would probably be all it could do. And it would turn around and start to come back. I think this market is deserving of a 7 at some point in time here and if weather really hits us, you know, the later the corn goes in the later it ends up pollinating, if it hits a pollination period or just stays dry beyond then I fear we could see something closer to 9.

Pearson: What about soybeans? What kind of a scenario do you see happening there?

Martin: Well, this next week I think beans are going to pull to corn. We have to remember that these guys on the floor are spreading everything. They're buying corn, selling beans. And I think today they were kind of shocked to see in March, you know, we had 145 carryout on the old crop and then in April go to 160 to turn around and take that back and put it back at 145 and now you've got Argentina on strike and it's like saying, wait a minute folks, this thing is tight as it is. It could make us even tighter. And I think that when you look at the new crop and we realize that we're going to have the acres it may be such a thing that we don't gain the extra one, two, three million acres on corn like we originally talked in early April. And it may be that it stays where we were, 86 million acres on corn and maybe where we were on beans. But until we get more down the road in May I don't really want to say we're going to catch a lot more acres of beans. I think that corn, even though the inputs are extremely high, they dollar up awful good and much better than beans and I think we'll still stay with that. But when you look at the bean complex the world is still so hungry for protein and unfortunately as you go towards the Olympics I think the demand is not going to slack off and therefore when you've got crude oil making continuously record highs, all-time record highs it continues to keep that demand base for biodiesel so strong that I think our exports for soy oil is going to be continuing to be pretty good and therefore the beans will be good in its own. I fear that bean oil could possibly go to 90 cents and if that's true that could very well take the beans up to a $20 price.

Pearson: Let me ask you this, off our normal commodity run, but crude oil. You mentioned on the showing quoting Goldman Sachs, $150 to $200, do you agree with that? And what kind of an impact would that have on us?

Martin: Well, I think it's possible and they said the next six to twelve months. Let's say that they're wrong on the $200 mark and we get to $170, that's still a lot higher than where we are right now. And who knows, maybe gasoline gets up around $5, who knows. We're starting to feel what Europe has been feeling all along except they have a lot more taxation. But we're starting to feel it and I think we're into a time where we can no longer believe or anticipate that we're going to have the cheap prices of food that we once enjoyed or the cheap prices of fuel that we once enjoyed. I think that while we may have times or periods when it's cheaper I have a feeling we're going to be competing with the rest of the world now and unless we go into recessions we're going to be seeing very good demand around the world as we see these third world countries grow. And, you know, China has so much more room yet to grow and they will. They might slow down the last part of this year into next year but they will continue to grow. Once you start that engine you can't turn it off.

Pearson: That's right, and speaking of engines, time for me to go fire up my moped and head back to the farm. Sue Martin, as usual, good to have you with us. Thanks so much for joining us. We want to thank all of friends for joining us here at our Market to Market Web site. And we look forward to talking to you again next week. From all of us here on Market to Market, have a great one.

Tags: agriculture commodity prices markets news