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Market Plus: May 04, 2007: Darin Newsom and Erin Golly

posted on May 4, 2007


Market Plus: May 04, 2007: Darin Newsom and Erin Golly Pearson: This is our Friday, May 4th, 2007 edition of our Market Plus segment here on our Market to Market Website. We're glad you've joined us. With us this week two of our favorite analysts, Darin Newsom and Erin Golly. We're going to talk about what's ahead in the corn market, the cattle market. We started with Darin on the show so on Market Plus, Erin, I'm going to start with you. And you mentioned on the show that you wanted to talk on Market Plus about corn availability. That's become a big issue out there.

Golly: It has become a big issue and it was brought to my attention by some producers that have been trying to buy corn anywhere from the May until the September timeframe. They've been calling their co-ops, they've been calling their elevators and they can not buy any corn, it's a very serious issue that these cattle and hog producers are having to deal with right now.

Pearson: Is it because the co-op is committed to an ethanol plant or what is going on?

Golly: Part of it is that, part of it is that it is contracted for it, but part of it is that whatever grain is left because we have very low corn stocks right now, whatever grain is left in the farmer's bin they're not going to sell it because the next two years looks very bullish for the corn market, they're going to participate in these high prices at some point. They didn't get to last year but they're going to this year. And we're -- the big shortage time is right around the August, September timeframe so I'm really recommending the producers get out there and call your co-ops, you know, everybody seems to think that we have enough corn around but call and see if you can get it.

Pearson: And, of course, historically with the farm program that we've had for the last decade this hasn't been a worry.

Golly: No, it hasn't and the big problem this year is that everyone delivered against the July contract because you got the full carry in the market. That's why we're having the big shortages in August and September.

Pearson: Alright, I'm going to follow up with Darin because, Darin, you follow this national cash market. That's kind of what you're seeing there isn't it?

Newsom: It is, you know, we've seen a very strong cash corn market and, you know, whether or not we're going to run out of corn this fall, you know, you would certainly look at the market structure and you would say it certainly doesn't look like we're going to, there's probably some corn available, it's probably in fairly tight hands. We will, you know, knowing what we know about the acreage going in or at least what is expected of the acreage going in we'll probably see that corn move. If there is some corn in tight hands that didn't make it to sales against the July contract it'll probably come to market in the August, maybe early September timeframe before we start to see this next wave of harvest come in. So, there could be some, it is sitting fairly tight right now, I guess we'll have to wait and see but the cash market is certainly indicating it's still out there trying to buy corn.

Pearson: Is this localized? Is the western Corn Belt more of a problem, more of the livestock feeding areas? Is that where more of the problem is?

Golly: Right now it's in north central, northeast Iowa.

Pearson: Okay, that seems to be that would be a hot spot of the western Corn Belt. You mentioned the fed cattle market and before I go over to Darin I want you to talk about that. You think we'll hold 90 cents in this fat cattle market?

Golly: I do think so, cash wise though, not on the board because I think we'll actually have cash higher than the board but I do think the scenarios are sure lining up and the stars are sure lining up that it looks like that this year.

Pearson: That's right and, of course, who knows what's going to happen with weather and pastures and everything else. That's all anyone talks about all week long, everybody I talk to it's been weather, weather, weather, weather, weather. Darin, as we look at this corn market, and for that matter the wheat market and the frost that we had there the kind of spring that we've been having and I know there's El Nino's and La Nina's and we always get the crop planted. I guess we should always remind ourselves we always get the crop planted. But when it comes to time limits how much of an issue have we got this year?

Newsom: You know, what's interesting is that we did move into a weather market much earlier than we have before and it's because, you know, as we've talked about on the show and as we've heard others talk about we have to get these acres in. You're right, we'll wind up getting whatever acres we get planted are going to go in, it just always does. At that point then it becomes yield and yield is actually a derivative of the weather market. So, it's very important right now, it's very critical. Our DTN weathermen have become more popular here over the last couple of weeks just hour by hour, day by day, are there any changes coming about all because we just simply have to get these acres in, that's the first hurdle we have to get past. Once we get what we're going to get in the ground what are we going to be able to produce off those acres?

Pearson: Final comment, Darin, from you and that's in this wheat market. We were hearing all these tales of the wheat crop had been frosted off both in Kansas and the soft red crop in southern Illinois, it was going to get torn up and it was going to get planted to corn. According to Informa numbers look pretty good.

Newsom: Well, yeah, you know, and that's the thing that we've been saying for the last three or four weeks is you've got to give wheat the time. This is a very similar situation to what we saw in 1997 where the crop healed itself. This was the hard red crop that healed itself that year. That's what wheat does, wheat is wheat and it will try to survive, it will try to continue to make a crop. So, the market is realizing this, it looks like we're going to have a much better crop than earlier anticipated. Those acres that were supposed to be going into corn or theoretically were going to go into corn I have my doubts, I think it would have probably wound up in grain sorghum but those acres don't look like, it's not going to be the same amount now. Will that have a huge effect on the corn market? Probably not but it will have a very small effect.

Pearson: Alright, Darin Newsom, Erin Golly, thank you both. Great job, we've enjoyed having you, some great insights as usual. And, of course, from all of us here on Market to Market, I'm Mark Pearson. Thanks for tuning into us here at our Market Plus site. And be sure to join us again here next week.


Tags: agriculture commodity prices markets news sorghum