Pearson: Welcome to the Market Plus page here at our Market to Market Website. I'm Mark Pearson. This week our guest, one of our senior analysts, Tomm Pfitzenmaier. Always great to have you with us, Tomm. A couple of things we want to talk about. Grains first and then we'll talk about feed. But I've heard a lot of producers talk, I've heard a lot of analysts talk about the advantage, disadvantage, the problems of selling some of those deferred contracts, I'm talking December '07, December '08 corn contracts. What is your take on all that?
Pfitzenmaier: Well, if you look out at '07 and '08 number one I don't think it's all that great an idea. But having said that a lot of the analysts that talk about that aren't talking about selling much more than five to ten percent. There's a couple of hazards there. One is we have to produce, especially to go to '08, we have to produce three crops before we ever get out there. We're heading into a period where Elwin Taylor and some of the other climatologists have said we have a higher probability of weather concerns. We've got a growing demand base, almost exploding if you read the popular press in terms of ethanol production. And I just think there's a lot of things that can go wrong in the next three years. And I recognize there is some premium in those markets. But I would be very fearful of doing that. The other problem is if you do ten percent and then you have a crop problem maybe that turns into 20 or 30% of your crop on a time where you've had really an opportunity for a big explosion in prices. Here you've got, you know, a high percentage of your crop locked in at a lower price, gives you a competitive disadvantage. So, I'd be inclined to not get too excited about doing that yet. I just think there's a lot of things that could go wrong here. There is a lot of time for them to go wrong. I'm saying go wrong with the crop and go right with prices. I'd be very cautious about doing that I guess.
Pearson: Like you say, three crops, that's a long time to sell through.
Pfitzenmaier: Yes, it is.
Pearson: Let's talk quickly about livestock. We didn't talk about covering feed needs on the show and that has been something that you've talked about off and on. What is your thinking there?
Pfitzenmaier: Again, refer back to what I just got done talking about. There is potential for great upside potential explosion in prices and I think livestock producers where prices of the hogs and the cattle started to struggle a little bit you're certainly vulnerable to price increases in corn and meal. Now, I guess I'm not quite as concerned about the meal side because you've got all these DDG's being produced and meal I think is going to struggle. So, I guess I wouldn't be too excited about the meal side but certainly on the corn side I think you'd want to develop some sort of a, if you don't have a strategy implement, at least have one in the back of your mind of how you're going to react if things start to go higher whether that is, whether that means you sit down and figure out that if corn stays under $3 on fine then go out and buy yourself $3 calls or if it's $3.40 then buy yourself $3.40 calls but figure out where your vulnerability is and then start to cover anything above that.
Pearson: We talked about this ethanol demand and we've also seen an increase, a definite increase in on farm storage. And you've been a big proponent of that one too.
Pfitzenmaier: Well, it's paid and I think the way the structure of agriculture is developing here where when we have fairly good sized crops with fairly good sized carry outs we're going to pay and compensate the farmer to store that for us. None of these ethanol plants are building any storage that really amounts to anything. You've got little hot markets all over the place where they pop up a bid to get their hands on corn. And if you've got a truck and some on farm storage you can really take advantage of those little hot bids here and there and the more ethanol plants you have the more of those hot bids there's going to be. So, I think you're going to be compensated very well. The other thing is I don't think we've kept up with the size of our growth potential in terms of yield. Everybody kind of built storage for that 160 to 180 bushel yield. We keep getting up over 200 and everybody is like well that was a fluke. Well, we've had enough of it now that I think we need to make an adjustment in terms of the amount of on farm storage we have, number one. Number two with the growth in ethanol, the growth in the demand base we're probably going to have to start producing more acres of corn which means more corn on corn, more volume of bushels that are going to need to be handled and that is going to require more grain storage.
Pearson: Good points as usual. Tomm Pfitzenmaier, thanks so much for being with us this week, one of our senior market analysts. For all of here on Market to Market, I'm Mark Pearson. Have a great week.