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Market Plus: Jun 24, 2005

posted on June 24, 2005


Market Plus: Jun 24, 2005 Borg: This is Dean Borg, welcome to our Market Plus page on our Market to Market Web site. With me is Alan Brugler, our analyst and Alan, we have this week some key reports coming out.

Brugler: Yeah, the USDA will be coming out on Thursday morning with their annual planted acreage report. This is the first time since March that we get an official estimate from the USDA of the acreage that is actually out there. We'll also have a grain/stocks report, quarterly grain/stocks that the USDA will use in July to make their food, feed use and residual use estimates for the quarter.

Borg: Is this going to be a big surprise or has the market sort of anticipated what USDA is going to report?

Brugler: Well, of course, we're always trying to anticipate and there are plenty of estimates floating around but there is quite a bit of uncertainty about the soybean acreage in particular with what is going on in the weather. The trades estimate anywhere from one to two million acres of soybeans were not planted that had been intended to be planted in the March report. That is a combination of extra acreage going to corn because of the excellent planting conditions early in the season and the wetness up in the upper Midwest that resulted in some prevented planting situations for the Dakotas and Minnesota.

Borg: So, the markets on Friday could react one way or the other. I mean, they've been strong markets in corn and soybeans so far but there could be some adjustment on Friday?

Brugler: Definitely could be, we'll actually have those numbers in time to trade them on Thursday but the soybean number in particular could move us around because if in fact we've only cut acreage 500,000 then the yield impact isn't quite as great.

Borg: What about beef and pork? Let's take the cattle market first. We had quite a shock wave sent through the market. Or not, it didn't go through the market, it went through producer's minds and buyer's minds on Friday after the BSE announcement.

Brugler: Well, I think that we've seen this show before, we've danced this dance. We had it with the previous BSE announcement we had a tremendous drop off in the cattle market. I think we dropped about sixteen dollars a hundred. But then we found that the consumers weren't all that concerned. We did not see any significant drop in beef consumption. So, I think this time around the trade is going to be a lot more conservative. We've been declining. We broke the three year up trend line in cattle a couple of weeks ago so we have to assume that to a degree this announcement is already in the market and that the trade was anticipating at least to some degree that there would be a positive finding.

Borg: Because they were waiting for the report and they had already built in the fact that it could have been positive, that is a positive test?

Brugler: Yes, so the only people that are left to sell on that news are those who were assuming it was going to be a negative result as opposed to everybody. So, I think that there could be an initial bearish reaction, certainly the reactions of our trading partners that are taking beef like Mexico and Egypt will be key but I don't foresee this being a major collapse like we saw the last time around.

Borg: The weakness in the hog market?

Brugler: Weve definitely been under pressure in hogs. They are in a position where they could actually benefit from the BSE situation as a safe alternative if you believe in fact that there is some risk from the BSE.

Borg: There could be some support in hog prices as a result of what is going on right now in beef.

Brugler: Yeah, we've got the technical support, the oversold conditions to support a rally. We've got the reaction to the hogs and pigs report which could be a sell the rumor, buy the fact situation. But having said that the trend is clearly long-term still down in hogs. We're coming off of a 44 month cycle high then we have to assume that six months or nine months from now the hog prices are likely to be lower than they are today.

Borg: Thank you, Alan.


Tags: agriculture commodity prices markets news