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Market Plus: Dec 21, 2007: Darin Newsom talks about the Markets

posted on December 21, 2007

Market Plus: Dec 21, 2007: Darin Newsom talks about the Markets Pearson: This is the Friday, December 21st, 2007 version of market plus. Glad you've joined us here at our Market to Market Web site. Make sure you tell your friends and neighbors to join us here too. With us this week is Darin Newsom. Darin, it's been a wild, wild world in agriculture. We saw the energy bill signed by the President and, of course, the corn market didn't take long to respond. The demand for corn for fuel ethanol is jumping dramatically under that energy bill and I don't think that was lost on the market at all or certainly on farmers.

Newsom: No, you're absolutely right. I mean, we've seen this demand market building now basically since late 2006 throughout the entire year as you pointed out in 2007. Of course, we hit a lull from about February through the summer of 2007, we did have a lull but we are building momentum again and on Friday taking out some key resistance points not only in the futures market but in the cash, using the DTN national cash index this market looks like it's getting ready to extend its long-term up trend. Again, picture perfect demand driven market. You search for these areas that start to slow demand, possibly create supply, this is what we're looking for. We're in a demand driven market, higher prices over time. Corn I think is just at the threshold of taking the reigns over from soybeans and wheat, what they did in 2007 and you add to that the possibility of putting a supply scare if acreage is indeed smaller in '08 and if we do have some adverse weather which some are predicting then you've got a demand driven market with a supply scare thrown on top, very easy to see a situation where $6, $6.50 comes about in the corn futures.

Pearson: Off the wall, wheat at $9, we're not feeding much wheat these days. I'm assuming we're still feeding corn. I'm assuming the advantage is still there for corn?

Newsom: If we look at the demand numbers that come to us every month and projections and so on we really don't see these being back offs, actually a very consistent demand growing and the sector that is growing has been the ethanol sector. We're at 3.2 billion bushels, something like that, for '07. These numbers just continue to go up, feed numbers continue to remain consistent, exports consistent. This is what you want to see to develop a demand market that can create these higher prices that last longer.

Pearson: Alright, and with the passing of the energy bill, the signing by the President and with ethanol demand as strong as it is, with export demand as strong as it is and with the dollar still cheap what have we got for a run on this corn market? Do you think two, three years, four years out?

Newsom: You know, right now I would say you've got an easy two years. You know, '08-'09 and '09-'10 marketing years. Once you get past that depending on how high the market goes, we even heard in the piece on the show, there's going to be alternative feed stocks. The research is going to continue to go into these alternative feed stocks. So, how long can corn be the mainstay? A couple of years then we'll see what happens.

Pearson: It's going to be also, of course, all the ancillary things but we mentioned the input costs, anhydrous $700 plus per ton, increased seed costs as producers continue to demand more traits on these hybrids, as we also look at the cash rental rates and what they've done and on the show we talked about average price of an acre of farmland nationwide is $2700. At $4.60 don't you think you have to make a sale or two?

Newsom: You do. Logic will tell you and what I tell anyone that I speak to at any meeting I always gauge it by what would I tell my dad? You know, would I tell him not to sell at $4.60? So, it's hard to tell people not to sell at $4.60 but in the long run what could this market do? We're in this demand situation that could possibly be affected by supply. Make some sales if you feel like it's absolutely necessary but keep plenty back to see where this market may go.

Pearson: Alright, as usual Darin, some excellent points. Darin Newsom with us this week on our market plus segment. Appreciate all of you for joining us and appreciate him being with us. And for all of us here on Market to Market, happy holidays. I'm Mark Pearson. See you next week.

Tags: agriculture commodity prices markets news