Golly: Well, the one thing I want producers to be wary of is this Mexican, potential trade issue with Mexico right now. And right now in the Mexican newspapers there's articles written on a daily basis on how the United States is ruining their pork market right now and there is a lot of pressure being put on the government with petitions and anti-dumping legislation to stop hogs and product from coming in from the United States. Now, of course, this has happened before but we just need to pay attention to it and if something does happen that we, you know, need to be cautious of it because Mexico is the second largest importer of U.S. pork.
Pearson: On the show you mentioned the impact pork has had bottom line for producers it's been huge.
Golly: It has been and it supplies a great deal of amount of support for the pork producers. And looking forward we've got a lot of trade deals coming up that could also provide great support. So, these TPA's and trade authority is very important for pork producers.
Pearson: You mentioned when you were on in May you said we'd see this circle virus vaccine was being successfully administered and is working great. Sure enough we saw an expansion in that hogs and pigs report which surprised a lot of people just because of what the corn market was doing. With those bigger numbers are we going to be able to maintain profitability or are we kind of headed towards a train wreck in this hog business based on Mexican situation, based on overseas trade? What's ahead?
Golly: I do think we're going to have a lot of hogs this fall to contend with. Next year is going to be very interesting to see. If we do see a lot of acreage shift next year it's going to certainly paint a different story because $3 corn, in my opinion, is just going to grow demand. And if we see higher bean and higher wheat prices that could steal acres away in '08 and it could paint an entirely different situation for pork producers into next year.
Pearson: So, with that in mind you mentioned on the show some kind of an option strategy, put a floor in. Would you extend that out a ways or not?
Golly: Well, especially on the soybean meal you have basis to contend with but as far as that makes sense with the basis to do that and to go out and buy the cash but go ahead and put some options out there, be buying some calls in the soybean meal to protect yourself.
Pearson: Alright, appreciate it Erin. Darin, let's talk about the wheat market which, again, a year ago at this time if you were down in Oklahoma, if you were down in Amarillo, Texas they didn't want you throwing a cigarette butt out the car window because you'd burn down half the state. This year the opposite story, the rains that won't stop, harvest is way behind schedule, what is ahead for these producers down there/
Newsom: Well, unfortunately a lot of the producers just simply aren't going to be able, they just don't have anything left out in the field or what they do have is of such low quality much of it might get turned down or heavily docked. So, you know, having much to sell throughout the course of the year probably isn't going to be a problem and that is being reflected in the market right now, not only in the winter wheat markets of Chicago and Kansas City which are putting in some very impressive rallies but even in the spring wheat market of Minneapolis where they've actually had some better growing conditions throughout the early part of the year. It's looking pretty good up there with the contracts pushing up towards $6 and better. You know, so the producers are really in trouble, you know, you look at the eastern third of Kansas, they're under flood right now, the central part has had consistent rain and drizzle just knocking down test weights right and left. There will be some wheat produced out in the western third, there will be some wheat, you know, out in the Colorado area, western parts of Nebraska up into the Dakotas. So, those producers who are going to have some wheat above and beyond what they may have contracted can certainly sit back and watch this market because, again, it looks very similar to the '95-'96 situation where we saw the market begin its rally in July of '95 and extended, June '95 and extending it all the way through April of '96 actually topping $7 in both Chicago and Kansas City. It certainly looks like we could do that again. The problem is going to be from the investment side of the market and it plays such a key role in so many of these commodities and its price relationship between Chicago wheat and corn. Right now we're at an all-time high premium of $2.50 plus. If that continues to get out of line and let's say the corn remains under pressure for whatever reason, fundamentals, non-commercial, whatever and it stays under pressure it could put a damper, could act as an anchor on the Chicago wheat market and not allow it to rally as much as it probably could. So, we're going to have to be watching all of these things, these price relationships and ultimately it could be the thing that provides some backbone to the corn market and at least stabilizes it in this area until we know more about the possible supply-demand situation further on.
Pearson: Alright, well it's going to be interesting and our sympathies go out there to those people who are facing this calamity for 2007.
Newsom: It is, it's going to cost a lot of folks some farms I'm pretty sure. Just hearing the stories coming out of central Kansas who I get to visit with on a regular basis it's just a horrible situation down there right now.
Pearson: Who'd have guessed it compared to last year?
Newsom: As you said, in Oklahoma and Texas you would have never expected this and there's some farms that, I don't mean to belittle them at all, there's some farms in the same situation in those areas as well, I've been visiting with the ones there in Kansas.
Pearson: Well, they need to make as much as they can on whatever it is they've got to sell. That is our purpose here on market plus and we thank you both, Darin Newsom and Erin Golly. We'll have more next week. From all of us here on Market to Market, I'm Mark Pearson. Thanks for being with us.