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Market Plus: Jun 17, 2005

posted on June 17, 2005

Market Plus: Jun 17, 2005

Pearson: Welcome to the Market Plus segment here at our Market to Market Web site, glad you've joined us. Mark Pearson here with Tomm Pfitzenmaier, our senior analyst. Tomm, it's volatility time in the soybean market. You kind of surprised me tonight, you're not in a big rush to sell this rally. You think we've got a ways to go?

Pfitzenmaier: Well, there is a pretty strong historical for soybeans when they go to seven to go to eight and I think with the weather forecasts as they are, the funds comfortable buying the market with plenty of fire power to continue to buy it I dont think there is a reason to get in a big hurry. Now, if you get up into those, you know, like I said $7.70 to $8.00 area then I think you at the bare minimum need to start looking at some place to, you know, buying seven dollar puts or something to start putting a floor under this market or sell the futures at eight dollars and buy yourself a call and put a synthetic put on, some sort of strategy because those are too good a prices to go passing by. I mean, if you look at two years ago and we thought we were going to run out of beans and we didn't even come close to holding those levels, in all likelihood South America is going to increase, this is certainly going to give them incentive to continue to increase acreage next year. The odds of them having three bad crops in a row probably aren't real great. So, this is definitely a rally to take advantage of I just don't think you need to get quite in a big hurry yet.

Pearson: You mentioned something on the show about the dollar strengthening which is another factor that has kind of been largely ignored because the dollar has been cheap for so long. And we were a little bit softer this week but we have seen the dollar definitely trending to the up side.

Pfitzenmaier: Yeah, and that is going to -- when you're in a bull market everything that is bearish gets totally ignored. But that is one that is going to come back when all this falter all gets kind of worked through, that is a factor that is going to come back in and we're going to start talking about.

Pearson: Alright, speaking of falter all, the cattle market, this BSE test last week, we didn't see a huge market impact, I mean, we're down a couple of weeks on fed cattle. As you pointed out there were some other factors at work there. I talked to a lot of people in the beef business who are convinced that the good times are going to keep going. You've been a little bit negative on the beef market for a while now and you make a couple of good points.

Pfitzenmaier: I mean, there is no question there is a big cattle cycle and I think we've topped that big cattle cycle out. And in that case you're probably going to have three or four or five years here where you're going to have down trending cattle prices. You know, maybe we are at a new plateau and we're not going to go as low as we went in the past but you are going to have a downward trend in the cattle market and in a downward trending cattle market you need to sell the rallies. That is not to say you won't have rallies, I'm just saying they're probably, you know, the highs aren't going to be as high as the previous highs and you're just going to have to keep feeding sales in when those rallies come along, I think.

Pearson: That $1.55 in the beef may have just been as good as we're going to see for a while.

Pfitzenmaier: I think it may have been, yes.

Pearson: Alright, so sell the rallies, hold onto the soybeans for the time being. We could see seven, we'll see eight. So, it's one of those truisms that you want to remember in times like this. Hey, we're going to have more coming up next week, be sure to join us. For all of us here on Market to Market, for Tomm Pfitzenmaier and the whole crew, I'm Mark Pearson, hope you have a great week.


Tags: agriculture commodity prices markets news