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Market Plus: Feb 08, 2008: Sue Martin and Mark Gold

posted on February 8, 2008


Market Plus: Feb 08, 2008: Sue Martin and Mark Gold Pearson: This is the Friday, February 8th, 2008 version of our market plus segment here on Market to Market. A very special program this week, an extended market discussion with Mark Gold and Sue Martin. Great to have you both with us. Let's get to our market plus segment. One thing we didn't get to cover even in our extended market coverage was cotton. And Sue Martin, cotton market was stronger as well. We talked briefly about the fact they're trying to buy acres too.

Martin: Well, they certainly are and I don't think they're going to succeed very well. Cotton prices have improved but not enough to buy any acres back and so I think that even though the supply-demand report on Friday was a little bit on the negative side for cotton long-term I think that this is a market that is going to become more of a demand market like everything else. And when you have beans running up in the values that they are and if they go to the values I think they can and you have corn doing what it's doing and the wheat market doing what it's doing eventually here it's going to rub off into cotton and cotton looks undervalued at the present time. I like the Dec. contract very well. You know, we're around that 77.5, 78 cent area and I think that's a contract that I would just put in the drawer and forget about because I think before we're into December we'll see $100 cotton.

Pearson: Wow. Let's talk about beans in the teens, Mark Gold. And Mark, as you track these markets and you track what's happened in the soybean market, you've got the South American phenomenon, you talked about it on the program, for producers here in this country to see these kinds of levels for soybeans it's hard to say not to sell isn't it?

Gold: Well, not only is it hard not to say to sell something but you've got to manage the risk and the balance of it as well. And in today's environment $13 beans, you know, it's what we've all waited for. For 35 years, you know, I spent 20 years on the floor, I only wish I could have seen $13 beans when I was on the floor. But now we've got the situation where we do have the high input costs and one thing we've learned, you know, there's an old saying in Chicago, markets take a stair step case going up and an elevator shaft coming down. And when you look at the bean chart historically and you see how short these bean markets generally tend to last, not to protect these prices for the American farmer I think would be fool-hearty. We know that the Brazilians are going to tear up land and they have the land to tear up down there and with $13 beans they're going to tear it up. We know that wherever we can grow grain around the world with these prices whether it's cotton, rice, soybeans, corn, the only one that seems to be left out right now is the oat market which I'm fairly bullish on because of this acreage war that we have. But the fact of the matter is farmers around the world will respond to these high prices and plant more grain. Now, ultimately without a drought I believe we're going to lead to over production. So, in this bean market we see how quickly -- we went from $10.50 in 2003 when the Chinese quit buying it and sold some back, we went from $10.50 to $5.50 in about two and a half weeks. Now, not to have some kind of protection out there seems fool-hearty to me and I don't want my producers to go through that. We want to protect them and if there is a drought this summer great, they'll wind up with $20, $22 beans or $30 beans, who knows. But if we don't and we have this over production they're going to be well protected on the down side.

Pearson: Alright, so take some steps to do that, whatever suits you risk wise, options, whatever. Alright, some good points, Mark, we appreciate your input. Sue, let's talk about the corn market, the other side of this acreage war really and we talk about the corn and beans and we throw in wheat and we throw in cotton and, like I say on the show, we have to throw in hay with these record hay prices right now and the demand in the dairy front. But between corn and soybeans both of you called for a huge pullback on corn acres which is surprising because the rest of the trade is more in that three to five million acre number, you're both saying eight to nine. Okay, if that happens, Sue, what do we see when that acreage report comes out March 31 and we're down close to 82, 83 million acres planted for corn?

Martin: Well, if we are, you know, we had 93 million this past year, so if we are down around say 84 million acres I think that the market is going to be pretty enthusiastic and I think that is going to send this corn market running through the all-time high and probably run for, you know, $6 corn. I think that the key here is there's a lot of things happening now, just this past week we started hearing because ethanol isn't maybe as profitable some of these plants that are thinking about taking some down time, started liquidating some of their corn that they've been holding from farmers and selling it because it was more profitable to sell the corn than to make the ethanol. And so I think that you're seeing all sorts of things happening, massaging going on within the marketplace. But ultimately I don't think corn is going to come back under five and stay there very much. You might get the March back down to $4.95 but I think the Dec. contract is going to stabilize against the $5 level and ultimately I look for the all-time high to come out in the Dec. contract as well as the July which is the one that printed the $5.54 1/2. I think that the demand is pretty good for corn as well and our exports have been phenomenal and I expect that export market to stay the same. The interesting thing here is, is that when you look at China and the estimates are that they've lost 15.8 million head of cattle, 14 million birds and about 870,000 hogs, well that's a lot of production that has been lost, a lot of corn and a lot of protein that's went through those and now it's lost, you start over. Well, to get food there immediately or as soon as they can it's going to be the fact that they're going to have to import it from somewhere that is feeding it and that's the U.S. So, whether we feed the corn here or they import it over there remains to be seen and, of course, I think as they repop all of their livestock they're going to be probably needing more corn and China is not the exporter. And in the USDA report today they did down size the production for Argentina by 1 million metric tons. Yes, they increased it for South Africa by 1 million metric tons. But, you know what, South Africa isn't number two exporter in the world, Argentina is and so I think that, again, puts more demand back to the U.S.

Pearson: Alright, so with that in mind and price targeting wise and sales strategy wise you're not in a huge hurry to make sales on corn?

Martin: No, I'm not. I think that -- I will say this, I don't think there's anything wrong with selling just enough to get those costs covered. The rest of it I'd let fly until we get more into spring because I think that we're not going to be a March high this year either. I think it's a spring high and then maybe, which is something almost more traditional in years past, and then we start to see from there once the crop is -- because once we see the acres actually kind of going in then the market doesn't have any more, it has to be fed so now the next thing is going to be the weather besides the demand. And, of course, the Canadian wheat board having been short on the futures in the Minneapolis exchange, well they have a deep pocket, it's these little elevators that don't.

Pearson: Alright, well on that note I want to thank both you and Mark Gold for your insights. Sue, thank you. Mark, thank you, great to have you with us. Again, I want to thank everyone putting everything together for us tonight on our special market show. From all of us here on Market to Market, for market plus, I'm Mark Pearson. Have a great week.


Tags: agriculture commodity prices markets news