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Market Plus: Oct 27, 2006: Sue Martin, Ag and Investment Services, Inc.

posted on October 27, 2006

Market Plus: Oct 27, 2006: Sue Martin, Ag and Investment Services, Inc. Pearson:This is the Friday, October 27th edition of Market Plus. With me this week, Sue Martin. And Sue, great to have you on, a lot of insights on the show. And I gave you credit on the show and I'll be honest with you, I couldn't believe it but you said we'd hit the harvest low about the first week of September, it held. We are now just about through harvest and we've moved up a dollar on this corn market. Corn and soybeans are the two crops I hear most people asking me about and I know you're hearing it all the time. What is ahead? You talked on the show about the corn market and what's going on there. What else can you tell us? What should we be doing? We've been trying to store as much of this crop as we can.

Martin: Well, I think that farmers, because the prices went so much beyond what they were anticipating that farmers are selling some of the crop but I think -- and that's a good thing because then down the road as we go towards the spring as farmers are planting I think that the market is just going to keep pulling and saying I want it, give me your old crop because they're so fearful that if there is a weather scare through the summer the market could just go ballistic. Now, do we have something like $6 corn? No. I think that we're going to get somewhere in the fours, with weather could probably get up into the four and a half, maybe $4.80 area. I wouldn't hold out for weather. I would be using, I would dollar up what you've got in your crop and be very happy with it and I would take some to the elevator and gratify the market. But I will tell you this, the market tells me that it's going to keep demanding crop and it tells me that through the spreads, the bull spreads in corn. Long July of '07 versus short Dec. new crop of '07 and long March of '07 versus short Dec. new crop. And I think that's a surprise to some because they think that since we're going to have less acres or we're trying to pull the acres that they keep thinking it's the Dec. that has got to pull up and that's not the case. What it's going to do is make the farmer feel good that they're going to pay them more for what they have in their bins plus on top of it everybody is so concerned about anything going wrong that they want coverage and the world demand exports are very good and expected to stay that way that the market -- and you don't have the infusion of intermingable feed wheat, so the market is commanding and it's going to keep pulling up front. Therefore, we're going to lose carries in this market and by losing the carries all of a sudden it's going to say keep bringing it to us, keep bringing it to us and then at some point when the market feels like hey, we've got those crops in or those acres in the ground you're going to see a nice sigh. Now, in years past when we've had a counter seasonal fall, moved up through the fall and on into spring usually you put a top in the market at least by the end of May, early June. I think this year it will probably be March, April, I'm thinking more April and we'll narrow that down as time goes on. But what it tells me is the last half of the year could be pretty nasty next year. And, of course, beans are going to compete for acres then going on into '08.

Pearson: Alright, do you feel like the board has bought corn acres yet?

Martin: I think certainly, I think it has. I think when you've got the bean, corn ratio at 1.89 that it got to this week certainly it is starting to dollar up, you know, to where farmers are saying I think I'm going to plant more corn acres. And, of course, within the next two to three weeks farmers are going to be looking at that and, of course, this is a good year for the farmer, he should be making money and so as he goes towards the end of December looking at tax time he's going to be thinking what do I need to get, what do I need to buy, do I need to be putting on my fall fertilizer now, you know, with energy prices having dropped maybe it pays off better now than in the spring. He's going to be thinking about doing different things that he can do, inputs, buying those up early so that he can save some tax money. So, that will help solidify some of those corn acres also.

Pearson: Alright, and the flip side you were talking about the beans that you want to get to but also the strong wheat market and you also mentioned on the show we'd see wheat, Chicago wheat over $6, Kansas City wheat well into the $6, $6.50 area. So, we could see some of those bean acres getting bought by wheat at this point.

Martin: Well, I think that is true and I think that is going to happen. I'm hearing just from clients all over in Illinois, you know, southeastern Iowa, Nebraska, I'm hearing all over that there's acres going into wheat versus other crops. But, you know, we're about getting done with this wheat planting. Then the market won't focus on that, corn knows it's lost acres to that so it's got to compete against beans a little bit more. So, I think that as the market moves higher now, Dec. corn, old crop Dec. corn, $3.47 ought to be like a brick wall. But beyond that -- we're not super far away from that -- so that tells me we could kill some time in here but I don't think we're going to kill it for long. I just think that we're in a constant mission, you break the market too much it won't stay down very long because if it does it's going to be in fear that it's going to change attitudes. And so, you know, you look back at the soybean market and, of course, Europe is commanding more soybean oil, rape seed and other oil seeds are in decline in production and so soybean oil is going to be the one that garners the favor and, again, that brings us all back to the bean market.

Pearson: That's right, real quick, Sue, your bean scenario is very friendly.

Martin: Well, it is. I think that, you know, as we go forward I think we're going to have a $7 ticket on us. I think $7.19 basis Jan. beans is very realizable. Then from there we'll see what we do but I think that ultimately we're headed up over $8 as we go through next year. Just imagine in your wildest dreams, Mark, we've already heard now southern Illinois and Indiana does have Asian rust in their soybean areas. Now, they have the attitude that that won't winter over. They might be surprised, it just might winter over. It did in Brazil in areas where they normally would get under freezing temps. So, I think that we need to be very watchful because if you have a wet spring next year it's going to set the stage for that Asian rust to really escalate and just think when the first time it comes out, drained out more important part of the season rather than harvest that you've got Asian rust and that market is going to go nuts.

Pearson: Absolutely, and Sue, fascinating insights, we appreciate it very much. Sue Martin with us this week on Market to Market and our Market Plus segment. Thank you for being with us as well and don't forget to download out podcast, sign up for that at our Market to Market Website. And from all of us here on Market to Market, I'm Mark Pearson, have a great week.

Tags: agriculture commodity prices markets news