Brugler: Well, trees don't grow to the sky, Mark.
Pearson: You're absolutely right.
Brugler: We ran from five bucks to $6.15, $6.20 pretty easily. At some point there is a trade phrase which is buy the rumor, sell the fact. USDA came out and said the acreage was down, the Canadian stats Canada said their acreage was down a couple of million acres earlier in the week. So, we had that news in the market already for the most part and now it's more of a quality issue. What kinds of bushels are we getting, are they high test weight? What kind of sprout damage do we have? What is the following numbers? All those things that the millers care about. You're going to get some interplay I think between the three futures exchanges because of that. You've got, normally your hard red spring wheat from Minneapolis is going to substitute for blending purposes if you've got problems with hard red winter but spring wheat acreage is down, Canadian acreage is where the millers usually go to get the spring wheat if they can't get in the U.S., Canadian acreage is down. So, that makes Minneapolis kind of in the driver's seat at the moment. Soft red winter wheat there seems to be plenty of it right now. Interesting tidbit though, open interest in the Chicago wheat market is over 2 billion bushels, the crop is only 340 million. So, there is a huge amount of speculative interest in this market.
Pearson: Is that a record? That seems high to me.
Brugler: I don't know if it's a record but it is an extremely high ratio of contracts versus bushels produced. And it raises some interesting aspects down the road as to how we liquidate that open interest because obviously you can't take delivery on those bushels.
Pearson: Right, and you haven't quite got enough. Alright, so as you mentioned soft wheat and, of course, the USDA report also talked about some double cropping of soybeans on some of that soft wheat ground over there, soft wheat historically doesn't have the protein content that the other wheats do but, again, from a blending standpoint if that's all that's in the cupboard they're going to use it.
Brugler: They'll use it and the other thing is soft wheat is usable for feed.
Pearson: You bet.
Brugler: And if corn were to get in some problems that helps dilute the process. Flip side of that, of course, is if corn becomes cheaper now you don't need to feed that wheat, you can be exported or used in some other fashion.
Pearson: Let's talk more about corn. Obviously that was the big number and that's the size of number that everyone is really watching is what's going on with this corn market. The fact we did attract those acres I think from the people I talked to on Friday were saying well, we can sure attract corn acres by getting corn up to four bucks. On the show you talked, you know, the $4.20 plus range is going to attract growers, going to attract acres and as you look at this market right now obviously we're at the low end of this range, darkest before the dawn is that what you're looking at in this corn market right now?
Brugler: Well, the news is usually the most bearish at the bottom and what we're trying to do is grope our way through that dark to find out if we're at the bottom. At some point we probably if taken out a lot of the weather premium and if the weather starts to turn dry, starts to turn hot that market will rebound. I think we need to look at the stocks, the grain stocks report was kind of overlooked on Friday, it was a little higher than anticipated, that suggests that there's either a little less corn being fed or a little bit more ethanol DDG combination there. That is going to carry over. Those stocks numbers will be used on the July USDA reports. That will carry straight over. So, from a corn standpoint I think if you're an end user this is a chance to kind of load up. I do expect to see fairly large export sales over the next two weeks. We already saw the South Koreans come in for about a half million tons this week on the price drop. I think price makes an excellent fertilizer but it also uncovers new demand. So, that's what we're watching for over the next couple of weeks is that weather and also a pick up in the export market.
Pearson: Just a real quick comment, you talked about that protect the floor, leave the upside open. Obviously we're not in the bin yet with this crop so that strategy is still working pretty darn good.
Brugler: Still very important and I think in corn's case you have to also remember that we need to have a repeat performance next year and even perhaps another one or two million acres. So, you may be only playing for selling forty or fifty or sixty percent at harvest, that's what you need to have the floor on right now and then try and get back as that acreage war for 2008 kicks in, that's your opportunity to sell the rest of it.
Pearson: Excellent points as usual. Alan Brugler, great to have you with us. And great to have you join us as well. Make sure you tell your friends and neighbors to join us here at our Market to Market Website for more market plus next week. From all of us here on Market to Market, I'm Mark Pearson, have a great one.