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Market Plus: Jul 13, 2007: Elaine Kub, DTN Analyst

posted on July 13, 2007

Market Plus: Jul 13, 2007: Elaine Kub, DTN Analyst Pearson: This is our Friday, July 13th, 2007 version of Market Plus. I'm Mark Pearson. Glad you've joined us this week here at our Website and with us this week a brand new analyst, Elaine Kub. Elaine, great to have you with us and great job your first market analysis portion on the show. I want to follow up on a couple of things that we talked about. First of all, the big news this week is what's happening with soybeans, the market was wild, we're up well over $9. Everybody is talking soybeans. You mentioned right at the close of the show about the products, meal and oil, of course, have been extremely strong, meal in particular for livestock producers. What is your take and what is your best way to handle this big bull market that's going on in this bean future pit?

Kub: Right, from the futures market it's actually not that interesting, we've just got a very steady trend that just keeps going higher and higher and higher. But what is interesting is this huge disconnect between what's happening in the futures market and what's happening on the cash market. There's a very bearish supply situation in the United States and there's really not the demand that people perceive. So, that is why we see this dollar basis in the futures price and the cash price and that's just bound to continue as long as there is this huge open interest coming out of the funds that there aren't just tied into the end users as the commercial traders tend to be.

Pearson: Alright, so a whole new group of folks are out there buying beans. They've all heard about the soy biodiesel and potential demand for that product, of course, demand worldwide for soybeans. And so these people are here and it's kind of the volatility we've always wanted in agriculture. But we haven't been able to take advantage of it. What kind of strategies are you utilizing, what kinds of things farmers should be doing specifically?

Kub: Well, they can be selling. I mean, as long as the beans are growing in the field and if they have beans left in the bin this is a great time to clean out their bins just as far as the timing goes. And the price is supportive, from a historical standpoint it's a good price for beans. The other thing they can do is they can wait for the market to keep on higher and, you know, if you wait for a couple of days, even if we see some sort of big, long liquidation by the funds you'll have a couple of days where the limit is 50 cents, if you see that happen that's the time to really start locking in the prices to put in your call options and things like that because until that time here is an opportunity for you to just sit back and wait for the market to take it as high as it will go. It could go as high as 2004 levels and we were above $10 in April of 2004.

Pearson: Alright, let's talk about hogs which we didn't get much of a chance to talk about on the show. You mentioned it's been a very interesting week on futures for hogs and also on trade for pork all culminating in an interesting week overall, hopefully getting some more hogs sold because based on the hogs and pigs report there are more hogs out there than we thought a quarter ago.

Kub: Yes, the inventory is higher and this could just be part of just the trend or the cycle of hogs in the United States. But it could also be a market response or a market prediction of this higher demand. If the rumors that were going through the futures pit on Thursday are true we could be looking at a whole new situation for Asian demand for U.S. pork. Those rumors were based on, you know, part of this whole commodity boom is just coming out of Asia really and the U.S. dollar being very weak. So, if we see more export demand, if we see this Asia thing really take off and start affecting the livestock markets the way that it's affected grains and other commodity markets here is an opportunity for lean hogs to be in a whole new situation. What it's based on, on Thursday, when it went limit up was this idea that hogs in China they're diseased, they are very high priced for the consumers there and China is going to buy our hogs which is great news for the U.S. producer.

Pearson: Absolutely, so what are you saying to producers who are coming to you thinking about getting pork sold, getting hogs sold on the hoof? Are you in a hurry to price any? Do you see opportunities out there yet?

Kub: Absolutely not, there's really the chance that we just saw a bottom in the hog price especially if you look at the seasonal trends and if you look at the demand. From a day to day perspective we may have to correct some of Thursday's gains. They didn't do that on Friday, they held pretty steady on Friday but they could do that in the next couple of weeks but if you can wait, a number of months even, if you can wait through this seasonal trend through autumn that would be the best option.

Pearson: Alright, some great thoughts, some great ideas. Thank you so much, Elaine Kub, for being with us this week on the show and, of course, right here on market plus. And from all of us here on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news