Pearson: Hey, thanks for joining us here at our Market to Market Web site and joining us for a part of Market Plus. Always exciting when our senior market analyst, John Roach, joins us. And John, lots to talk about on these markets. A lot of things going on in the world all impacting agriculture. But at the very end of the show you brought up something that really intrigued me and that was you think the most valuable thing out there is cash corn. Because I'm hearing from a lot of these large commercial operators that, oh gosh, we really want your cash corn. Now is the time to bring us your cash corn. You're saying, well, if you can store some of that yourself you might be better off. How is that all going to work?
Roach: Well, the weakest thing out there is the cash corn market. The speculative demand has all been centered in the futures and there is plenty of cash corn. So, as the board has gone up the cash corn has drug behind and I hear complaints daily from farmers who tell me that the basis levels are very weak, they're very weak. And I believe they are going to continue to battle that situation because when we see bursts of buying come to the futures market it's not cash buying, it's speculative buying and the cash market backs away. So, storage is going to become a more and more important component of a successful farming operation than it has been in the past particularly now as we built ethanol plants and we really change the movement of corn. Being able to control that inventory is going to pay real dividends.
Pearson: So, this is the kind of time and we've had these to a certain extent in the past but not the kind of demand that we're seeing for cash corn, like you say, versus the futures market which is, you know, very much divorced from each other. But if someone is going to manage their cash inventory, particularly if they have a local ethanol plant or local use, that may be where the returns come from so you're not having the local cash market dictated to you.
Roach: That's exactly right, you want to be able to control that cash inventory and realize that we're going to go from a period of surplus, which is where we're at now. We're going to have substantial surpluses that we're going to carry into the fall even though the demand is excellent, we're going to carry substantial surpluses into the fall and we're going to, as we move down the road a year and beyond, we're going to have tighter and tighter surpluses and we're going to see a time when the cash corn leads the way up and that is when having built that storage will make a lot of difference.
Pearson: What about cash beans?
Roach: Cash bean market can do the same. What is going to likely happen is we're going to quit being the big bean producer and become a smaller bean producer as we see acres increase in South America to supply that marketplace. We'll have some strategic advantage as far as corn and making ethanol. They'll continue their strategic advantage with soybeans when the currency gets realigned.
Pearson: Okay, real quick, I want to follow up on a comment you made regarding the livestock market. Fed cattle market we had a record three years in the fed cattle business. You were talking last fall about this thing softening up and we could see things change. That certainly has been the case since January. As you go forward I can't help but look at, and you've been down there, I've been down there, the panhandle of Texas and Oklahoma where we've had these extreme dry conditions, western Kansas where there's been dry weather, it's hard to build a cow herd in drought.
Roach: Well, we ahven't actually in those areas. In fact, since we've been liquidating the beef cow slaughter is up 9% compared to a year ago. So, the dry pasture conditions have brought animals to the marketplace that might not otherwise have come. In addition to that we took feeder cattle off of wheat pasture earlier and we moved cattle into the feedlots. So, that process has given us the increased tonnage at the time when the fed lots were putting more cattle out. We also had the cow herd being reduced somewhat. So, what our thought is that we still have time, we're going to have to go through this. The cattle on feed report today showed we had 99% placements last month but it's going to take some time to work a way through this heavy amount of beef that we're going to be producing here over these next several months. Hopefully this will be a shorter down swing than we've seen in other years. Most years when the cattle cycle turns the losses in the cattle business continue for quite a while. We've only been experiencing losses since about the first of the year. So, this has been a relatively short period of time. Hopefully by the time we get into the late second and third, more likely the fourth quarter we'll be back into some profitable situations. But in many other years when we've changed this cycle it didn't get profitable that quickly.
Pearson: Alright, some good points as usual. John Roach joining us, your senior market analyst on Market to Market, with us here on Market Plus. Thank you for joining us. Be sure and tell your friends and neighbors to stop by here, we'd like to see them as well. For all of us here on Market to Market, I'm Mark Pearson, have a great week.