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Market Plus: Mar 10, 2006

posted on March 10, 2006

Market Plus: Mar 10, 2006

Pearson: Hello, I'm Mark Pearson. Welcome to the Market to Market Web site and the Market Plus segment...glad you stopped in. Make sure you tell your friends and neighbors, we'd love to have the join us here as well. With us this week is Erin and Darin, that's right, the rhyming duo and let's start off first talking about livestock because we talked about the grains first on the show -- with Erin Golly. And like I say Erin, I apologize, it's not a great week to be on to talk about the meats. It's been a blood bath on fed cattle, feeder cattle, cash futures, hog market and people -- this is not the end of the game by any means but it's got people wondering. You talked about this Avian bird flu, now I would think that means there are fewer birds out there and we should have increased demand for our protein product but that's not the way it works out.

Golly: No, it's basically when there is any disease considered with a consumable meat people shy away from it, look for other protein -- they look for other protein sources to substitute for it. That's why if we do get bird flu here in the United States pork product and product demand should jump. You know, in other countries product has surged higher when they discover bird flu in the country. So, it's sort of a double edged sword. Now we don't have bird flu here, you know, it's weighing on the product market, if we do get it, you know, we should see pork product rally.

Pearson: We've seen poultry numbers increase. You talked about the Russian steel tariff issue and we had poultry back up here and it also had a detrimental effect on the rest of the meat sector. Any idea what the time frame is going to be for this to kind of work itself out as far as adjusting production for both beef and pork here in the United States? We've already, on expansion curves in both species.

Golly: Mm-hmm, um, and I was just reading a report this past week that they expect bird flu to be here within six to twelve months. I think that is going to put a wrench in a lot of people's plans, you know, or what they are planning on doing, expanding on the poultry side and such. And I think people are going to sort of wait and see on the beef and pork side what they're going to be doing for plans and how is it going to be -- is it really going to affect us that much or that. But I do think we're going to have to watch our profit margins and just make sure that things are going good. I know it's getting tough right now in the product markets on both.

Pearson: Absolutely, one other thing you mentioned if we couldn't throw enough bad news on this market, that circle virus?

Golly: Circle virus, yep. Just very, it's a very contagious disease and it's spreading really fast. And, you know, I know of a 1200 head finisher that had 400 die in it this past week. You know, it's just very detrimental, you know. And I think people aren't really talking about it that much. But I think that it should be out there talking about it, letting people know that, you know, be asking around if your neighbor has got it because it's very contagious.

Pearson: That's right and it's a mystery disease.

Golly: Yes it is and there is no cure so I know a lot of veterinarians are working on it, trying to come up with something to resolve the issue.

Pearson: Alright, so that could be a factor on the production side. Alright Darin, let's talk about this wheat market which is, like I say, you're a Kansas boy so I know you love to talk about wheat. For those of us who watch wheat from afar it's like you boys down in Kansas are always saying this wheat crop is lost and then in the end we wind up producing this big wheat crop. This has been a particularly devastating year, particularly the panhandle of Texas, a big chunk of Oklahoma and a growing chunk of Kansas. So, I mean, you've been down there and you've talked to all your friends and relatives. What is the word down there?

Newsom: Really it's not looking too good and it's particularly in the western parts of the belt. You know, you get down into western Kansas, you said the panhandles, the crops just aren't looking very good. They could certainly use a drink. Now, we did see some rains move through the southern plains but a lot of that was in the south central part of Kansas through the central part of Oklahoma and then moved off to the east as so many of these systems do. So, while that did hit some of the key growing areas, again down around Wichita, down around Sumner County, parts of Kansas that are really known for growing the best yielding wheat the balance of the state still remains dry and we can see that in the type of conditions that are being reported. Astronomical numbers in the port are very poor in Texas, Oklahoma and growing, as you said, in Kansas. Now, again, the way you phrase it, it's right. This crop will survive many of these deaths through the growing year. Some key examples are we can just look back to '96, you know, when we had that late freeze move through. And that has been a question, what happens, you know. That is just one of the wild cards that are out there right now. Looking at the market, much different than what Erin was just talking about in the livestock. We've seen a very strong futures market, the market just continues to plow higher, a lot of buying interest in the July Kansas City contracts. It's really pulling away from the Chicago market at some 50 cents premium to the July Chicago. So, some really good opportunities there if someone is watching that spread to start getting some contracts on or some type of hedging in place.How long can this last? Probably until the combines start rolling and they see what is going, see what is coming in or when the non-commercial traders begin to lose interest in this market. And that's a real threat as we've seen in some of the CRB movements, the non-commercial traders are losing interest in some of these commodities. If it happens in wheat we could see this thing begin to back off.

Pearson: Okay, of course those non-commercial traders as you refer to them, is that this big hedge fun, pension fund money that has come in?

Newsom: Those are the ones that are getting all the attention now. You know, they can only buy the market and so when they all get in line and they all find a market that they like they can really start pushing higher. I shouldn't say they can only buy, they can only be long in the market. So, once they decide to get out it can also have the opposite effect and it can really drop things quickly, so continue to watch your marketing plans but keep a good mind on what you're likely to produce because it's going to be a very difficult market.

Pearson: Alright, Darin thank you so much. Erin, thank you so much. That wraps up this week's edition of Market Plus. So glad you've joined us. Make sure you join us again next week right here. And for all of us here on Market to Market, have a great week.


Tags: agriculture cattle commodity prices markets meat news