Brugler: What I'm hearing is that El Nino is still in full force at the present time and we know that the correlation there is for warmer than normal temperatures north of I-80 and for wetter than normal conditions in the plains states and the western Corn Belt tending to go towards dry conditions in the eastern Corn Belt. Now, that is in the Jan., Feb., March period and it shifts a little drier as you get into April, May and June. But it looks like as El Nino starts to reduce and that is the forecast right now, that it's going to back away from being in full force to basically going away by summer, that does shift those rainfall patterns. But what I'm hearing at the present time from our weather sources is that we should continue to see this pattern of above normal moisture in the western Corn Belt and in the plains. That will be good for the wheat crop, it'll be good for corn, for irrigation purposes, might even get the snow pack built up a little bit that we rely on. We haven't seen the dry aspect of the eastern Corn Belt yet that normally goes with that pattern. That may not happen until the El Nino actually starts to fade away.
Pearson: Okay, trade is watching us too, they're watching us seeing what these El Nino prognosticators are thinking. So, this is kind of critical information at this stage of the game. And as El Nino goes so goes corn production. There is a correlation.
Brugler: Yeah, the wetness that I alluded to has a big impact on how much we're able to get planted in April and May. If you get behind on planting there's a strong tendency to end up with more bean acres and a few less corn acres than you intended and, of course, towards the end of the July period we're into pollination, we want to see a warm and moist kind of a scenario during pollination.
Pearson: Well, it's going to be an interesting summer. And, again, your strategy on corn is put a floor in and leave the upside open. How are you doing that?
Brugler: Basically floors and no ceilings and for the most part we're buying puts or even put spreads which is where you buy an at the money put and sell something below the market, something your computer says is probably not going to be hit. We're not wanting to do short futures hedges because of the potential of volatility and we're not real fond of doing short call options for the same reason. We're just afraid that if the acreage doesn't get in or the weather turns dry or hot for some reason we could go to $4.50 or $5 at some point and we're not married to that concept but we're not wanting this early in the season to get in the way of it happening.
Pearson: Alan, we saw oil prices drop $5 a barrel this last week. If that happens again, if we see further erosion of oil prices are we going to see this ethanol demand back off?
Brugler: I don't think it's going to have any impact in the short run. We've already got by some counts 67 plants under construction, you know, concrete on the ground, towers being put up. I don't think you're going to see a halt to those particular projects just because of a dip in fuel costs. What it could do is slow some of the anticipated building and construction plans for 2009, 2010 but the tightness that we're seeing in the balance sheets, the argument for $4 corn if you will is that all these plants are coming online in 2007, 2008 and they're all going to need corn and I don't see that even a $10 drop in crude oil is going to stop the construction that's already underway.
Pearson: Good point, Alan Brugler, appreciate your insights very much. That will wrap up this edition of Market Plus. Thank you for joining us. For all of us here at Market to Market, I'm Mark Pearson. Have a great week.