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Market Plus: Jan 04, 2008: Elaine Kub, DTN Analyst

posted on January 4, 2008

Market Plus: Jan 04, 2008: Elaine Kub, DTN Analyst Pearson: This is the Friday, January 4th, 2008 version of market plus here at our Market to Market Web site. We're glad you've joined us. Tell your friends and neighbors. With us this week is Elaine Kub. Elaine, great to have you on the show and appreciate your insights. I wanted to just talk about a couple of things, and we're not making a big deal about this, but because we don't track these on the show on a regular basis some of the other grains are experiencing phenomenal demand, phenomenal price swings that I don't know if we'll ever see them again in our lifetimes.

Kub: Right, and it is worth talking about. It's hard to track because they're not exchange traded, we don't follow them on this show because it's hard to track them from day to day. But they're worth talking about especially in the context of this battle for acres because they are as much a competitor for these northern acres and Canadian acres as corn or soybeans, certainly more so than corn. We've got Durham wheat. I was told today that if you had old crop Durham sitting around in a bin at home you could probably find someone to buy it for $25 a bushel. So, if you have ground that you could plant Durham wheat on I think that would be a pretty obvious choice for some people. And the situation is equally bullish for barley, malt barley, lots of these specialty small grains. Canola is also following soybean oil higher. And basically if you're in any area where these kinds of things are grown they really are competing. They're staying very competitive for the acres.

Pearson: Let's talk about, of course, the hard red wheat and the soft red wheat markets and, of course, the spring wheat markets all phenomenally high right now and they are exchange traded. And as we look at those and we look at what's happening in this wheat market and the question I asked you at the start of the show, wheat is trading in a little bit different universe than corn and soybeans in terms of demand driven. It really looks more like the short crop, long tail phenomenon.

Kub: That's the idea of wheat and I would say even within wheat your spring wheat is trading in kind of a different universe than the winter wheat. And that is particularly interesting because winter wheat was the one that was short. Spring wheat actually production was fine. But because there was so much of it and because of the export situation that is where the demand is coming in. So, I would say spring wheat would have more sustainable gains. If you'd see anything where it's not going to trail off as much it would probably be the spring wheat. They might stay a little more stable. But as I mentioned on the show I would be not too surprised to see the tops in for winter wheat already.

Pearson: I want to talk about another key factor and that's this cheap dollar. I keep hearing that the dollar is cheap, had a little bit of a rally there at the end of the year but really hasn't done a lot since then. What is your take on the dollar? When you talk to people in the industry what are they telling you about what this dollar is going to do?

Kub: Well, the take on that rally at the end of the year is you can pretty much discount it as short covering, people trying to book their profits, get rid of those positions. So, in that sense I think we've still got a very bearish trend but you see the Wall Street Journal and economists that know more of what they're talking about than I do say that there is a reason that the dollar will bottom out here in 2008, that pretty much all of the ideas, all of the new information that can be attributed to that market has already been done so. So, now we're just looking at where that bottom is going to be and I don't know where that is. But it's interesting that you bring it up in this conversation because it's interesting in relation to the Canadian dollar. So, while they have the same worldwide demand for these grains and these ag products they're not getting the opportunity to take as well of an advantage of it as the U.S. farmers are.

Pearson: Right because the Canadian dollar remains relatively strong especially compared to the U.S. dollar, of course. A final comment, you're not in a big hurry to sell corn or beans? You want to see this thing play out?

Kub: Well, I'd think about selling corn. I mean, both of these are profitable. I wouldn't begrudge anyone who wanted to book these profits now. But my idea is that there is no reason for this trend to really stall out necessarily within the next month or even in the next two months. Once you start getting into February approaching March I would definitely look at booking your profits because historically that's just how the seasonal trends go and also because we're looking at that South American soybean harvest coming off. That's where you could see some pressure on the market.

Pearson: Five dollar corn and twelve dollar beans in my lifetime has been pretty darn good.

Kub: Thirteen dollar beans, I forgot to mention that. The July market says $13.

Pearson: And that's going to count for a record.

Kub: Yeah.

Pearson: Yeah, that's great. Elaine, as usual, appreciate you being with us, Elaine Kub. I want to thank all of you for joining us here at our Market to Market Web site. Tell your friends and neighbors, look forward to having them join us here as well. And from all of us here on Market to Market, I'm Mark Pearson. Happy New Year and have a great week.

Tags: agriculture commodity prices markets news