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Market Plus: Jul 07, 2006

posted on July 7, 2006

Market Plus: Jul 07, 2006

Borg: Hello, I'm Dean Borg, this is Market Plus, I'm talking with market analyst, Doug Hjort. Doug, I'm interested in the crop reports that the USDA will be releasing now in this coming week. Of what significance will they be?

Hjort: Well, there's two separate reports. One is a production report and this will be the first time this year that they have given spring wheat and Durham production numbers. They do this by survey on surveying a whole bunch of farmers to get this number. It's a good number but yet weather is playing a role. So, well first of all, the range of estimates for spring wheat and Durham wheat is so terribly wide that it really doesn't give you much of a guide. I think shooting an arrow through the middle as the average would do kind of helps. But in both cases it would show some deterioration, expected to show some deterioration. And the marketplace has already played that up you see. Spring wheat futures, Minneapolis futures and Kansas City futures as well have both traded over five dollars a bushel whereas the Chicago market is down below $3.50 or around that point right now. So, a vast difference in price between those two.

Borg: Any surprises you think in corn and soybeans?

Hjort: On the corn and the soybeans that is a different report. There is no production report there, it's just a monthly supply/demand estimates that come out. I think USDA is going to increase exports for corn, at least 50 million bushels. Now, that sounds great and it is because of demand rising but that will still leave an abundant amount of corn leftover in the bins this fall before we harvest again.

Borg: Are you saying then you don't think that even if they raise those export prospects that it's going to have much influence on the price?

Hjort: It will not have a lot of impact because that's what the trade is expecting. Now, weather is still they key especially for the spring wheat and Durham crops and the corn right now. We've got to have some good weather, whether that be just cool with some modest moisture or a good rain which usually you don't get at this time of year, it's thunderstorm activity. But we've got to stay away from the heat, that's the big thing. And if we can stay away from that during this pollination period for corn then we could have reasonable chances for yield. Understand the corn and soybean crops are rated about at a normal level right now. They're not in real bad shape. Maybe they are starting to get that way in a few areas but not very much.

Borg: Let's go to feeder cattle there. At the prices that those are being placed now into feedlots is there a way to pencil out a profit there?

Hjort: Well, there is, you can do some of that by cheapening up how you feed them and so on and so forth and looking, as I mentioned on the show, looking out to the distant live cattle futures. Put cattle on feed now and protect them out there at $90 or maybe might go a little bit higher there is a chance that you could do that. One other comment I'd like to make on feeder cattle though and that is pricing out for you cow/calf people, pricing out calves for the fall. I don't think it's quite time to do that now but November feeder cattle futures are approaching the highs that we saw last year at this time, the same as two years ago, very, very profitable levels for you. So, start talking with your buyer now or whoever you're going to sell to, get into a market situation with them so that you can stay abreast of what those bids are starting to be out there for fall delivery. You could have a very, very good profitable year again as a cow/calf operator.

Borg: So, you look for beef prices, the fat cattle market to stay strong?

Hjort: I think it will, I think it will chop around some here for the next few weeks and then move higher on into the fall of the year. Whether we can get cash prices up into that $90 range where the December futures say now I'm not so sure about that. Several things have to fall in place, the export market one of them. But if it looks like we're not going to get there, not now, but in a month or six weeks that hedge out there at a $90 December hedge might be a pretty good opportunity to at least lock in a break even price. Feeding cattle at break even this year might be about as good as you're going to do.

Borg: Thank you, Doug. Comments from Doug Hjort, our market analyst. That's Market Plus. I'm Dean Borg, have a good week.


Tags: agriculture commodity prices markets news USDA