Pearson: Welcome to the Market Plus segment here at our Market to Market Web site. We're glad you've joined us, we're glad Sue Martin one of our senior advisors is here with us today. And Sue, we ran out of time, frankly. We were talking about hogs, you just barely got it in at the very tail end of the show. You thought Dec. hogs could hit 75. What is going to drive that?
Martin: Well, I think for one thing one of the reasons I mentioned 75, although I didn't get a chance to finish, was the fact that if you take year in, year out Dec. hogs, the December hog contract, one of the few things on the board besides soybeans, cattle had this same situation going and they have all filled their realignment. But last year's Dec. hog contract went off the board between around 75, 77 cents, up in that area. This year's contract, because of all the bearish attitude of numbers coming and the numbers coming in from Canada, was much lower. And we were down in the low 60, 65 range and all of a sudden now you've got the hog market coming up because everybody was willing to sell. Packers were telling people, 'Go ahead and get short, you know, we're going to have a plentiful supply of hogs and have a more traditional fall market' and so people were hedging and all of a sudden here we are, you have one contract expiring considerably higher than the new one coming on and I think you almost had that bearish tone already keyed into that market and therefore it only has one direction to keep trying to come up ... and then you keep the price of cattle so strong and the demand for pork has been, over the year, very good and all of a sudden you've got a market that just keeps nicking away at you and nicking away. And if we can get through the 68-cent level here on these hogs, on Dec. hogs, I think you're going to head for that 75-, 77-cent area. Now, maybe it's next year's Dec. that tries to finish it off technically. It may be, but this market looks to me like it's holding pretty good and I feel you've got to break the cattle market down before you can break the hog market down.
Pearson: And you're right, I think the fed cattle market and the hogs have just had a dramatic up move here. You know, you're always saying contra-seasonal things, this is truly a contra-seasonal move. We've got right after Labor Day and hogs and cattle, cattle had moved seven to eight dollars and hogs have not moved that dramatically but fairly dramatically if you figure in since the middle of August, they've really moved up.
Martin: They have and the one thing we have to keep an eye on is, you know, Canada is talking about embargoing, not embargoing, putting an import tax in on our corn. And, you know, that is kind of giving their Canadian producers a blow because they were expecting cheap corn to feed to their hogs. That could, in essence, send feeder pigs our way, more feeder pigs. That could happen and that could be one of the bearish things we need to watch for down the road. But at the moment these packers are geared to kill 2.1 million hogs a week and they're not quite making that target. So, that is helping hold the price too.
Pearson: Alright, as a producer you'd still say let's not get too caught up, let's start putting some hedges in place?
Martin: I think so because here again if you had hedged a year ago, you know, you kind of bit the dust on the rally. So, I think that you want to use the rallies and hedge but, you know, maybe buying puts here if you can work some put strategies, maybe that is one way to start into it. But I have a feeling, you know, packers have been negative and it's all been on the supply side but the demand side has been pretty good and I think that we need to kind of keep an eye open yet that this market may still try to work its way higher. I'd turn my bearishness towards the cattle market, watch when that starts to turn then maybe get more negative all meats.
Pearson: I want to come back to something you mentioned on the show regarding the corn market. 10.6, 10.7 billion bushel corn crop, you don't seem to be that phased, we've got good demand. You talked about the increased livestock usage, increased industrial use for corn, these ethanol plants are popping up like mushrooms out here. So, that is a positive for corn and we really need these kind of crops to keep this corn market going, almost like the razor is that much sharper in terms of production supply and demand.
Martin: Exactly, what used to be big no longer is big to us. It's the fact we have to have it. And of course producers (are) pleasantly surprised even if their yield isn't great, it is better than they anticipated, even in Illinois. And here is another thing, we hear yields all over the board out in Illinois. So, while they are poor yields they're better than the farmers thought they were going to get and so they're happy. The bean yields though, everywhere I hear bean yields are just darn fabulous this year. I think that we're blessed.
Pearson: You said that on the show I think in June that you shouldn't underestimate what these bean yields could be this year regardless of the dry weather and sure enough we've got it, we're certainly hearing it anecdotally. And the government will (report) in October and tell us what the real numbers are. As usual, great insights, Sue Martin, thank you so much. Sue Martin joining us here, one of our senior analysts on our Market Plus segment. For all of us here on Market to Market, thanks for being with us.