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Market Plus: Nov 16, 2007: Darin Newsom talks about the Markets

posted on November 16, 2007

Market Plus: Nov 16, 2007: Darin Newsom talks about the Markets Pearson: This is the Friday, November 16th, 2007 version of market plus here at our Market to Market Web site. I'm Mark Pearson. Thanks so much for joining us. With us Darin Newsom, one of our regular analysts. Darin, good to have you back. I want to go back and re-visit this soybean market because all week long I'm going to be out seeing farmers and I've got a whole slug of them coming to my house for Thanksgiving and they're only going to hear one thing that you said in 11 minutes. Soybeans at $16.50. Talk about that scenario. People are really getting concerned about U.S. available supplies of soybeans going into 2008.

Newsom: They really are and what we're seeing is a lot of projections that the U.S. ending stocks could start to work down to 100 million bushels if not below. Now, realistically we're not going to see a report show them actually getting down below the 100 million bushels. But the perception on the floor, the perception of the traders is that we're going to get there. The possibility of being 75 to 80 million bushels is just an incredibly tight situation. We've seen this before in the past and we haven't been able to get to the beans in the teens as everyone likes to call it. But we've got a whole different mix going on right now. We've got the U.S. dollar continuing to go down, we've got strong demand coming in from China, just unending demand, we're seeing exports continuing, weekly exports continuing to be strong so I think we've got this solid mix of different factors coming into play that could help push us past the 1988 high of $10.99 1/2, go through the $11 and then on up to $12, $15, $16 really without breaking much of a sweat. We've got a lot more investment money coming into these markets right now and if they see the opportunity to take advantage of a market this way it's going to continue coming in. What does that mean for the other markets? More than likely we're going to see corn follow, play that whole corn, soybean ratio price through 2008 so I think it's going to help support some of these other markets. It's going to be a very explosive year in soybeans and I think the up side potential in this market is just incredible.

Pearson: You've mentioned the non-commercial interests, the speculator out there. Where is he right now in beans?

Newsom: Right now they're holding in that long futures position. They've been buying for quite some time and they really don't seem to be shaken at all by, you know, events that are going on. They are very confident in this position and I think it has to do with the idea that we are, that there is a strong possibility we're going to take U.S. ending stocks below 100 million bushel, at least that's the talk out there right now. So, they're very comfortable, very confident in their position and they've shown no signs whatsoever of doing any long-term liquidation that would start to put some pressure on the market. Looking at the biodiesel situation and all of this interest around vegetable oils and soybean and so on I just think there's too much interest out there worldwide to really see them back off quickly.

Pearson: Alright, let's talk about -- we talked about hogs at the end of the show. Hogs are so important to this meat sector and because the numbers are so huge they are impacting prices for poultry, prices for beef and everything else. You've got a little bit of a hopeful note and it used to be called the Christmas ham rally. We'd see it in December and you're saying we're getting set up to see that perhaps in 2007.

Newsom: I think we are and I think we can even take it to the next step and say this could be a long-term cycle that should be forming in here, tends to happen every three to four years, you see a low come in the market and then, you know, going back through time it projected to this October, November timeframe, we moved through October and couldn't break out of the down trend in either the futures or the cash market but then we get into November and we spike lower and then start to come back. Two weeks ago we had a very nice week in the futures market, cash starts to stabilize, it certainly looks like the market is trying to at least build a little bit of support in here. And another thing to look at, you know, we were just talking about the non-commercial traders in the soybean market, what position they've had, that same group had gone short in the lean hog market and they had ridden that for quite some time. Here over the last couple of weeks they have moved from being in that short futures position to a net long futures position. This, you know, is interesting because normally once they do that the market starts to trend in that direction, they set the trend of the market. So, if they're willing to continue to put money into this market I think we could see a pretty good rally, a decent rally through the bulk of the winter on into the spring before we set our next high.

Pearson: Alright, Darin Newsom, as usual, some great insights. We appreciate you being with us on the show and, of course, right here on our Web site at market plus. And for all of us here at Market to Market, I'm Mark Pearson. Have a great Thanksgiving. Thanks for being with us.

Tags: agriculture commodity prices markets news Thanksgiving