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Market Plus: Oct 19, 2007: Elaine Kub, DTN Analyst

posted on October 19, 2007

Market Plus: Oct 19, 2007: Elaine Kub, DTN Analyst Pearson: This is the Friday, October 19th, 2007 version of market plus. Glad you've joined us here at our Market to Market Web site. Mark Pearson -- with us this week is Elaine Kub, one of our newer analysts. Great to have her with us and getting her perspective. I want to come back to something we talked about on the show and that was the weak dollar and strong soybean, in fact, strong exports everywhere and the weak dollar which you see kind of continuing.

Kub: Yes, I don't see any reason for the dollar to come up. How it affects soybeans is really sort of surprising this week is they were the least responsive market through this entire commodity surge that you tend to see when the dollar goes down. And part of that is, like I mentioned to you on the show, the really, really uncertain underlying fundamentals of the soybean market, you see soybean oil and soybean meal going up and yet there are still people that aren't willing to purchase soybeans, soybean futures and that's really puzzling. And part of it may be just because, you know, we seem to think that South America is going to plant a lot of soybeans, that they're going to relieve the perceived shortage that the U.S. might come up with and that's just something to keep in mind. And it's interesting that you mention the dollar about it because the dollar is very bullish for a lot of the other grains but soybeans tend to struggle.

Pearson: Well, the interesting thing that's been happening is what's been going on in South America because it was dry and then they got some showers and now crops look pretty good so I'm sure that's probably where springtime in Brazil may be a good time to sell in the U.S. if you're a producer?

Kub: Well, it should be. I mean, the market should be trying to buy a lot of Brazilian soybean acres and that's why we've seen the soybean market come up a little off of its low a few months ago, or just last month even. But if you look at the long-term trend of the market it's really holding very steady, it's not willing to take a stand and whether it's going to re-test its old high or head lower -- like I said, that's really uncertain. If you see people expecting Brazil just because they got started planting that they're going to get what they want to plant planted that is still uncertain, we still need a lot more rain down there before we have any idea how much they're going to be able to plant. And even if they do get the soybeans planted it also affects their second corn crop and that's something else to keep in mind, another reason to be bullish on corn.

Pearson: Alright, bullish on corn but, again, it's going to be a wild winter, acreage buying everywhere, wheat acres are expected to be up, you mentioned soybean acres are supposed to be up and literally demand wise we need to produce about as many acres of corn or as many bushels of corn as we did in 2007.

Kub: Right, through this entire push higher in grain prices, soybean prices demand has never fallen off. We expected to see it in wheat somewhat, we expected to see some rationing and none of that happened. It didn't happen for corn. Japan is still buying corn. Lots of people are buying this grain, they don't care about the higher prices, the weaker dollar is helping it but as far as soybean acres we could see more of that even in the U.S. because people who got burned trying to plant corn in areas, marginal areas where it didn't really work out as well they could go to soybeans. You're right, soybean acres are just as much a competitor as anything else.

Pearson: Let's talk about livestock for just a minute. And we talked about hogs, we ran out of time. You're not friendly to hogs longer term and that's going to pop some bubbles out there because a lot of people were talking about big demand from China and with the Olympics and everything else going. But you think domestically they've been able to turn their own domestic pork production machine around.

Kub: I think they're at a point where this is the point where we will see them turn it around. They've started to come up with the actual management techniques to manage that disease, the blue ear disease and start to re-grow their populations of hogs. You're right that Asia in general is only going to have an increasing demand for pork and all other meats. Some of that can come from the U.S. in the immediate term. I'm bearish on hogs very short-term. I think that we just saw kind of a bounce but they're going to head lower. I think in the mid-term we might see a push higher as part of the hog cycle but in the long-term I really do think that China has, you know, they've learned to grow more corn, they've learned to manage their hogs better. They may be able to meet a lot of that Asian demand.

Pearson: And are you crediting the success of the circle virus in this country for maybe giving us a lot bigger numbers than maybe what we had anticipated this last winter in our hogs and pigs outlook?

Kub: Well, I think, you know, it's not the prices, it's not feed prices. Nothing is really encouraging anyone to grow more hogs right now and yet we do see more. You know, we've seen record large kills and it's not, they are being replaced. We keep on seeing more and more hogs come into this country or be produced in this country and, you're right, it's sort of contrary to what the market is telling the industry to do.

Pearson: Is there a place right now you'd want to go out and hedge hogs for next year?

Kub: As a purchaser this would be a fine price for hogs. As a seller I think, like I said, in the mid-term we should see a bounce sometime before spring.

Pearson: That will be your chance to lock in something.

Kub: Right.

Pearson: Alright, very good. Elaine Kub, thank you so much for being with us. That's going to wrap up market plus for this week. Thank you for joining us, make sure you tell your friends and neighbors to join us here at our Market to Market Web site. From all of us here on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news