Brugler: Well, we've hope for beans in the teens for decades and now we've got them. But, again, the product values continue to go up. We didn't really get the production response in South America that we needed to diffuse the situation. We're looking at 71 million acres, everybody's working estimate for beans I guess. If that's all we get things are going to stay tight. The market needs a slow down crush -- if that's all the production we have the market has to either slow down crush or slow down exports and we don't really see the mechanism to do either one right now. I think the biggest wild card there is actual producer intentions. You know, we can draw all the nice diagrams we want of how many acres of corn the market needs and how many acres of beans, how many acres of wheat but producers don't have access to that in a collective decision. They're looking at their bottom line and they're going to throw one of these crops off. We're going to plant more beans than we thought we needed or we're going to plant more corn than we thought we needed and the other crop is going to go ballistic.
Pearson: Alright, so we're not going to know that until about the 31st of March when USDA's number comes out. And so it's going to be a guessing game -- until then the market is guessing that they need to attract more bean acres right now.
Brugler: Yeah, and I think part of the reason for the rally in February here is this is the pricing period for crop revenue insurance, that ratio between corn and bean prices can have a real impact as we found out last year, last year it was 2 to 1 ratio approximately and corn pretty much ignored sell signals all spring and kept planting corn because the one price that didn't change was the insurance guarantee. At the present time beans would appear to have the edge there but we've still got a few days left in the period and producers still have to look at their input costs and their crop rotations and some other issues.
Pearson: That's right and not everyone was thrilled with the corn on corn response they had last year. We heard a lot of people, I know you did, I did from people who were not thrilled, it was decent but it was not what they had hoped for. And so maybe you'll return to more normal rotations is what I keep hearing from producers but I don't know, I don't know if I'd trust them on this until we get down to the end. I want to talk about the beef market real quick, cattle market. Cattle on feed report came out Friday, what was your take on that?
Brugler: Basically the placements are a little lighter than the trade had thought, about 105.9%, trade average guess was 109% so this was quite a shortfall. But particularly in the context of last year's light placements for that month. So, it really wasn't that big of an increase. I think that's friendly to the summer or fall contracts for finished cattle. The marketings were a little lighter than we would have liked to see based on the placed against numbers. We do see those placed against numbers starting to drop a little bit in March which could be supportive of the cattle market. But initial reaction is probably going to be steady to a little lower on the front end and then a little more supportive in the back.
Pearson: Alright, again, your numbers -- we talked on the show about if you're buying cattle now, if you didn't get those feeders hedged when we had that break then you're probably stretching or scratching or praying to make them work.
Brugler: Yeah, you're stretching. We do a thing called the cattle crush spread. We put some of those on for March feeders, about three or four weeks ago, at that time that ratio was $133, break even was about $130. Today it's $109. So, if you're doing it today you're $30 in the hole compared to someone who locked all that in three weeks ago.
Pearson: Alright, something else to keep in mind. As we look at the general economy let's talk a little bit about the fact that right after the show we were teasing next week's show talking about what are the fundamentals behind these markets. And you do start scratching your head when you see beans making the moves that they are making, when you see this wheat market which like you say has some underpinnings and some things that are unique right now in terms of deliveries and so forth helping to drive that. But if you look overall at the broad commodities everything is dramatic. Crude oil closed up over $100, you add onto that what gold is doing, the dollar is flowing into commodities. Do we see that changing? Is it going to be unchecked? You said we don't know?
Brugler: Well, we don't know. I think the mechanism behind it is the fed cut the interest rates because of the debt problems, because of the housing issues. I think they know that they increased the money supply further than they really want to. But the nature of the derivatives this time around makes it very hard for the fed to get at the problem. It's spread out, it's diffused out into the economy so they're kind of using a firehouse to fill a glass of water. And they needed to do that but the corollary effect is you're weakening the dollar and you're raising commodities in dollar terms. And that is not done yet. I think the fed will reverse it as quickly as they think it's safe to do so because they know that they're being inflationary. They know that they're raising the cost of imports. But they're also helping us in agriculture by exports, our exports are cheaper, we're looking at setting record revenues for exports and that's good for agriculture.
Pearson: Alright, that's where we're going to leave it tonight. Alan Brugler, thank you so much. Again, that will wrap up market plus. Glad you've joined us. Tell you friends and neighbors to join us here at our Market to Market Web site too. And from all of us here on Market to Market, I'm Mark Pearson. Have a great week.