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Market Plus: Jun 10, 2005

posted on June 10, 2005

Market Plus: Jun 10, 2005

Pearson: Welcome to the Market Plus page here at our Market to Market Web site. Glad you've joined us. Doug Hjort with us on the program this week. Doug, the one thing I've heard over and over and over from analysts, from USDA, from economists that is we're going to see a lot of volatility this year, we're anticipating volatility. We've already seen volatility for no longer than the corn and soybean crops have been in the ground, we've already seen the volatility. What advice do you have to a producer out there who is going to be outdoors, is going to be on the tractor, is going to be doing stuff to take advantage of that volatility when it hits, not just watch it?

Hjort: Well, the first thing is to be prepared to take some action. Get your frame of mind in a state where you can be able to make decisions even on some minor rallies and so on. It's not too difficult to look at a chart and to see where resistance levels are and where marketing opportunities would be. Remember that on the corn, the beans and the wheat, all three we've got a plentiful supply for the old crop and the projections out on Friday from the USDA says we're not going to run short for the new. Now obviously that is assuming that weather is normal for the rest of the year and so on. But, as you say, we've had a lot of volatility and we've had a lot of weather disturbance and not just here but around the world. I'd point out again that last year there were record yields of corn, beans and wheat worldwide, not just here in the United States. And so now we're talking about production coming down from that level a little bit but we're still looking at those high yields out there and thinking in the back of our mind well this crop is probably as good as the last year was and boy what would happen if we do that. If we do have yields like we had last year were going to see sharply lower prices. So, there is a way, you know, whether its an option, whether you just go to sell some cash grain at harvest time or for harvest delivery rather, whatever. But be ready to take advantage of these rallies. One other thing about rallies, with the funds in control that is my view but I think it's true or where or how far these prices go up or down in any given time frame take a look at those charts and see where the resistance is but then also look past that, where is the next resistance because these funds come in with such powerful amounts of money, large amounts of money that they can drive through the first or maybe second resistance levels. So, I wouldn't sell everything at the first resistance but if you see a market going up and the fundamentals don't really justify that, that is a very strong indicator that doing some marketing, doing some sales there is going to be pretty good.

Pearson: Real quick, Doug, it was the World Pork Expo the last couple of days and I talked with a lot of the producers, a couple of the large integrators, in fact. You had mentioned on the show a couple of months ago that you're not going to have fourteen months worth of strong hog prices without seeing expansion at some point. At that point we hadnt seen any official expansion. Now, USDA is talking 1-2%, you mentioned 1-2% on the show tonight. 1-2%, kind of translate that, what is that going to look like for this hog market going forward. You were talking about taking advantage of some hedges if we saw some $2-$3 rallies from where we are.

Hjort: That's right and you're talking about a two percent increase in pork production probably taking eight, ten dollars off the average price. So, you know, we're not at those levels yet if we would see that sort of expansion. The distant futures contracts are discounted some out there but you really, really need to be careful on that, take a look at locking up whatever profits you've got. Keep in mind your profits in the next twelve months are not going to be anything near what they have been in the last twelve. So, you know, be willing to accept something else. Straight hedges, if you're making some profit at that level, options if you're not something more flexible there. And I don't know if you can even get cash contracting for out into the future any more but if that is available in your market take a look at that too. Profit is not a bad thing. If it's there, lock it up. Pearson: Absolutely, hey Doug thank you so much. Doug Hjort joining us this week. Thank you for being a part of our Market Plus page. For all of us here on Market to Market I'm Mark Pearson, have a great week.

Tags: agriculture commodity prices markets news USDA