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Market Plus: Jun 16, 2006

posted on June 16, 2006


Market Plus: Jun 16, 2006

Borg: Welcome to Market Plus. I'm Dean Borg and we have two of our regular market analysts, Virgil Robinson and Walt Hackney. Virgil, first of all, what is the significant thing going on in the soybean market?

Robinson: I think of most importance, Dean, to me is the realization that in this most recent net weekly export sales report China surfaced in both old crop soybeans and new. What is unique about that is the time of year. Normally beans being sourced by China at this point in time come out of the southern hemisphere, they're coming out of the United States at least in this report and I think that is important to note. China is projected to import this coming year about 32 million metric tons of beans. We will certainly be part of that nex. I think that is underpinning the soybean market in addition to the biodiesel explosion that is going on. And I am of the opinion that once we get past this harvest, assuming a normal harvest, that demand will ramp up and ramp up pretty significantly. So, I'm of the opinion, Dean, there will be an opportunity between now and sometime in August, which is the pivotal period for soybean production when prices will give us one last opportunity here before harvest time.

Borg: Is China also giving quite a lot of support in the corn market?

Robinson: They are, as mentioned earlier, they are less of a presence in the export arena than they have been in years past. They are guarding their corn inventories as they are using more and more of that commodity.

Borg: So, it's not that they're short on corn, it's that they're guarding what they have?

Robinson: Correct, with the intent, I think, of eventually maybe even importing corn to sustain this booming swine, poultry and aquaculture industry.

Borg: And that provides, Walt Hackney, a transition to you. Is because they are developing in China that livestock industry, is that boding some warning signs for the United States in the future?

Hackney: Well, I think the pork industry should take good alarm at what your point is there, Dean. China is a wonderful market opportunity for pork export, for instance. I don't know so much about the beef. I doubt if it will be a big figure for the beef industry. But pork could be a real number for the U.S. pork industry. If that occurs that could cut down on some of our export industry. Asia in itself, of course, is a wonderful export pork market for us.

Borg: Yes. What are you seeing in the hog market right now?

Hackney: Well, we've missed this market, all of the analytical groups have missed this run, if you will. Historically, seasonally at this time of year we would be in a flush for hog production and it simply isn't out there. And we've dropped two and a half, three pounds a head on our average market weight which is enormous. It looks like now that we're going to run somewhere in this 80 cent value of a carcass going in through July very possibly we'll hit mid-August with a shortage. After that going into the fourth quarter we should have plenty of hogs.

Borg: In the pork and beef markets it seems like the demand stays strong there but producers aren't making as much money, especially in beef as you'd think.

Hackney: Well, it would probably appear the promotional aspect of the U.S. beef industry has been phenomenal as it pertains to the consumer groups. They have accepted the fact of a superior product that we are producing and they're buying it. Retail is having a wonderful run. The packing industry on beef is having a wonderful run on selling that product. The problem is it isn't being passed back to the producer groups and so they're running into not record but phenomenal losses on the production of beef. Pork, it's a different thing. The pork producers are making good profits. The pork packer is caught in the middle on that one. The consumer is accepting U.S. pork wonderfully. Export has been phenomenal on pork. The packer can't catch up with it. The value of the pork is going up but the value of the cash because of a short supply is going up faster.

Borg: Thank you for your insight. Walt Hackney and analyst Virgil Robinson. I'm Dean Borg. That's Market Plus.

 


Tags: agriculture commodity prices markets news