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Market Plus: Nov 02, 2007: John Roach

posted on November 2, 2007

Market Plus: Nov 02, 2007: John Roach

Pearson: This is the Friday November 2nd, 2007 version of Market Plus. Glad you've joined us on the Market to Market Web site. Be sure to tell your friends or neighbors and check out our streaming video and pod casts all the time here at our Market to Market Web site. Mark Pearson and, this week, John Roach our senior market analyst is with us. A couple of the big issues, John, which is, just what's driving, we're hearing the consumer, in my mind, kind of get some misinformation, that it's higher corn prices driving this, higher corn prices driving that. Isn't that really reflective of what's really happening in the world?

Roach: I think it is. And I think what's really driving a lot of things around the world is the economic growth that's occurring in China, India, Africa, Asia, and even the United States. Economic growth has broken out around the world and has been for the last couple of years and, as a consequence, the demand for everything that we produce has been increased, particularly our food. That's our one major exportable product that we're very competitive on around the world and we're selling overseas. I think that's the number one issue here, that started this market moving. Then following that the biofuel industry is a secondary influencing factor.

Pearson: You talked about the cheap dollar on the show and the fact that, I've heard you and other analysts say, you know, right now we just don't see what might be the turning point of the dollar and we never know the markets turned until it's turned but, as you look ahead in what's driving the lower dollar, what are some things that could drive the dollar to maybe turn back to the upside? What's it gonna take?

Roach: Well, the economic growth that's occurring can stop. Something can happen to change it. The Chinese government decides that they want to tighten the credit, something of that nature. We see these increasing costs being reflected in some foreign governments where they have problems being able to continue to have the economic growth that they've been seeing. That can stop.

Pearson: That's right. And it tends to be all cyclical. Alright, some great ideas. You also had some great ideas on soybeans. And a big factor that I've heard you talk about over the years and that's been the growth down in South America and what that means for maybe getting soybeans priced. I know you always had zones of time you would like to make sales in and that's kind of changed with the growth of soybean production down in South America, hasn't it?

Roach: Markets have traditionally peaked in March, April, May, and June, both corn and soybean markets peak there, because that's the time of greatest worry. It may not be the greatest worry, but it is as far as the market is concerned. And this year we have the Brazilians raising lots more beans than we're going to raise and this is their spring. And the market, just as expected, rallied right up into their springtime, to encourage them to plant and to adjust for whatever weather issues or crop problems they may have, just they did for corn last February. If you remember the corn market traded nearly as $4.30 in February. That same corn market now is well below those price levels. We think the same thing is occurring in the soybean market. We're printing some high price levels that could well be the high for the year. We don't want to sell like it is but we certainly want to be selling some on these peaks and we certainly want to be selling some of the 2008 crop. I think the biggest risk to farmers is that, right along with these higher prices are coming higher costs. We're going to get our cost structure up so high that if farmers fail to get sales made, and something drives the market back down, farmers could go into a real economic situation, maybe worse than we've seen before.

Pearson: Some good points, some very sobering thoughts from John Roach. John, thank you for being with us. John Roach, joining us on our Market plus segment, our senior market analyst. Thanks for being with us and for all of us hear on Market to Market, I'm Mark Pearson, thanks for joining us and have a great week.


Tags: agriculture commodity prices markets news