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Market Plus: Sep 14, 2007: Doug Hjort, Independent Analyst

posted on September 14, 2007

Market Plus: Sep 14, 2007: Doug Hjort, Independent Analyst Pearson: This is the Friday, September 14th, 2007 version of market plus. We're glad you've joined us here at our Market to Market website. Make sure you share the information about market plus with your friends and neighbors, we'd love to have them join us here too. Joining us this week one of our senior analysts, Doug Hjort. Doug is from wheat country, he tracks the wheat market extremely close. That's been the big one this week, that and soybeans. The big thing is how is this going to fit into the overall equation of acreage for 2008's crop, almost like we're just assuming this 2007 corn and soybean crop is already harvested, people have lost interest, it again becomes the horse race for next year. Talk about the wheat market, we talked about it on the show, a couple of things that stuck in my mind that you mentioned on the show that I'd like for you to expand on just a little bit. First of all, we can grow a wheat crop anywhere in the world, nowhere in the world does it look very good right now. Also, we were talking about eight dollar plus wheat, now we're talking $5.80 plus wheat in July and a lot of people are already starting to kind of sniff at that $5.80 saying that's not enough. In my lifetime $5.80 for wheat is a heck of a price, Doug. What are you telling producers?

Hjort: Well, go ahead and plant the wheat. Obviously it makes a difference where you're at but keep in mind where wheat is really grown. The soft wheat, a lot of it is grown in the southern Corn Belt and up and down the Mississippi River Valley and a lot of those areas they can double crop. And what they double crop after the wheat is soybeans. You've got wheat prices at record high prices, soybean prices extremely high and the difference in the wheat price next year, you know, that's down like you mentioned from where it is now, but in the soybeans the price next fall is much higher than it is today. So, you know, for those people it's a no brainer, plant the wheat, get it off by the end of June if you can, plant soybeans and your yield is cut a little bit but your profit potential is huge. In the plains where the majority of the wheat is raised is from central to western plains. There your competition is sorghum really or cotton because if you've got water out there the chances are very good you're using that for irrigation of corn. And you're not going to plant corn out there dry land, in most years it doesn't do very well. So, I look for a big expansion in wheat acres there in the Kansas, Oklahoma, Texas panhandle on up through Nebraska and probably up into Montana as well. Farmers, I think, a lot of farmers or a lot of people I talk with and was just out -- spent a month in northeastern Montana -- you're talking about the price today and they're excited about that and planting but they're not talking about the new crop price. But like you say, $5 wheat, my goodness.

Pearson: Take it any day of the week.

Hjort: Extremely high.

Pearson: What about Durham? I mean, this has been a volatile, crazy market for beans, wheat, corn. What about on the Durham front now?

Hjort: The Durham prices it's normal for them to be crazy, extremely volatile. But this year spring wheat and winter wheat prices have duplicated what Durham is doing. A month ago Durham prices were probably somewhere around $7 a bushel cash. Now they're over $9 a bushel. I have no idea what sort of a contract you could get for next year, it's certainly not going to be eight or nine dollars but planting the Durham, you don't make that decision until spring, of course, that's a spring planted crop except in southwestern part of the United States where they raise a little bit. But that's going to be a lot of interest in planting Durham again. Keep in mind, though, that because you've got the winter to think this over and you'll get a chance to see what winter wheat acreage is -- now, Durham wheat is not really substituted by the other classes of wheat, might mix a little in sometimes here or there but it's not substitutable totally. So, whatever you do in the regular wheat market may not apply to the Durham market at all. So, I would say wait and make that decision. Where Durham is raised you don't raise hardly any winter wheat either. It's in North Dakota and northeastern Montana for the most part so there is no competition there. The Durham wheat for next year, it's a decision that has to be made down the road. For now, I don't know, if $9, $9.25 is high enough I'd sell some Durham. I think I'd sell some even if you don't think it's high enough.

Pearson: I would tend to agree with you, Doug. As usual, some great insights, we appreciate it. Doug Hjort with us on market plus. Thank you for joining us here and from all of us here on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news sorghum