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Market Plus: Jul 21, 2006

posted on July 21, 2006


Market Plus: Jul 21, 2006

Pearson: Welcome to the Market Plus page here at our Market to Market Website. And some time in August these are going to be available as pod casts. That's right, Market to Market will be going to pod casts. So, that will start in August. A very special day today, Tomm Pfitzenmaier, one of our senior analysts is with us. And Tomm, you said something on the show I want to explore a little bit more because I've heard a lot of people talk about it, you've talked about it now two or three times and that is that the merchandising of grain is changing on a cash basis. Producers are being paid to store grain.

Pfitzenmaier: I think there is some great returns to be had by erecting grain storage. I know a lot of people are starting to pick up on that. Number one the market is offering incentives to do so. But number two, I think we've gradually seen a ratcheting up of corn yields and you're going to have to add additional storage in your farming operation to accommodate that. Not to mention the fact that with the growth of the ethanol industry we're also going to have to plant more corn acres which is going to require even more corn storage. So, I think anybody aside from market analysis and where prices are going I think you need to put a pencil pretty hard to how you can erect more grain storage on your farm.

Pearson: Get more control over those cash sales.

Pfitzenmaier: Absolutely.

Pearson: Alright, now a couple of weeks ago or a couple of months ago I said what about these deferred contracts up around $3 and you were kind of shying away from those. Now, Friday night you said that July '07 is one people should be jumping on.

Pfitzenmaier: Yeah, I mean, we used to think, last year we got out to a 26, 27 cent carry out to July and we thought holy smokes, that's the best carry we've seen in years. And now we've banged up around 30 cents going out that far this year. So, I mean, if you want to forward price July corn, I mean if you could get it sold up to around $3 at a 50 cent basis that's still $2.50 where I think they're offering $2.02 today for new crop. I mean, that's 50 cents above what they're offering with a 50 cent basis and I think maybe a 50 cent basis is being ultra pessimistic personally. So, I mean, there is some opportunity here. As far as the Dec. '07 and Dec. '08 I still think at $3 with the price of beans where they are I think you're going to have to maintain December corn of '07 above $3 to entice people to plant corn. So, I'm not excited about selling that at all. And Dec. of '08 is two crop, two or three production years away and I sure wouldn't want to step in front of that the way demand is growing for corn.

Pearson: Alright, let's -- the other thing you mentioned I thought was critical is the fact that soybeans now are going to take over in your opinion, they're going to start taking the lead in terms of price. And obviously we're coming in at a critical production time for soybeans. But Tomm, underneath all that aren't there a ton of beans out there?

Pfitzenmaier: There are a ton of beans but we've maintained that premium and I think the market's also looking ahead saying, you know, we've got bean oil that is potentially going to be diesel fuel, we've got declining acreage in beans which could gobble up a bunch of the bean carry out. So, I think that is part of the reason you're continuing to maintain that. There's a lot of uncertainty about how the South American crop is going to be, you know, there's some talk about declining acreage there even and switching to cotton and other things. So, I think there's been a tendency to want to maintain premium in that market at least until we get our production through, at least have an idea of how our production is going to be and we'll know that probably by the 10th to the 20th of August.

Pearson: Alright, so we'll be watching for that and watching well enough to make sales and again, if you enjoy these Market Plus broadcasts, again, we'll be making them available in pod casts sometime in the month of August and you can get Tomm on your e-mail, we can just forward them to about anybody you want to forward to. So, with that, Tomm Pfitzenmaier, thanks so much for being with us. For all of us here on Market to Market, I'm Mark Pearson. Have a great week.

 

 


Tags: agriculture commodity prices markets news