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Market Plus: Jun 03, 2005

posted on June 3, 2005

Market Plus: Jun 03, 2005

Pearson: Welcome to the Market Plus page here at our Market to Market Web site. What a week it's been, what a month it's been, and what a year it's been for the soybean market. This is Mark Pearson along with our senior analyst this week, Sue Martin. Sue, you're talking about this bean market -- there is definitely going to be volatility and I had heard rumors and maybe it was confirmed that the Asian soybean rust had jumped another county down in Georgia. I had a nice visit with the Director of Agriculture for the state of Illinois, Charles Hartkey on Thursday and he had been told that and wasn't sure if it was totally confirmed or not. But it's making a move. One county in Georgia doesn't scare the board that much but it's on everyone's mind. Plus dry weather up around the Chicago area from Lafayette, Indiana over to Illinois up towards Chicago, they are dry. Lafayette, Indiana is fifty percent of normal moisture. So, as you pointed out on the show there is some concern about this bean market but the volatility has been phenomenal.

Martin: And it will continue to be. You know, when we get into June, well, we're already in June but I think it's around June 11th maybe, don't hold me to that date, June 10th, June 11th position limits for the funds or the specs is going to increase, it's going to increase sizably. And that is going to add to volatility, it's just going to allow them to buy or sell more than what they already are doing. But what is interesting is that while these funds are doing the type of volume they are yes, we get some nice moves but not thirty cents, not twenty-five, not fifty. So, it's amazing how well the market is consuming it. But I think that one thing we have to look at, the Asian rust. The Asian rust, Mark, I believe is down everywhere they found it before and probably has spread but the conditions have to be right to ignite it and we've had nice moisture in Florida and parts of like in towards Georgia. So, as they continue to get moisture it's going to start to enhance it and it's going to ignite it or activate it. We may even before the summer is done actually have spores up here but if you're hot and dry they won't be activated. They just need a host to land on and stay. But they won't be activated but then you could come in next year and all of a sudden be surprised, oops, we've got it in Illinois or we've got it in Missouri, that type of thing and be surprised how far its spread and how fast. I think the market will react a little bit. Of course, the first time you hear if it gets up into like say Indiana or something like that the market would be willing to react to that. But probably what it will react to more is if you start to hear talk that all of a sudden you're running short of fungicides. That will probably react the market faster and more emotionally because now you don't have any control of it and that type of thing. Right now, of course, the market is dealing with the hot and dry spot and we've been cool so you haven't been real wildly running away because of dryness and the crop is at a stage where it's not drying the moisture and needing it quite so badly. But as it starts to get into June now and you start to heat up and get temperatures it is the heat that will get everybody thinking more towards the dry spell and that will react the market more faster than anything. I wouldn't be surprised if we miss the winds over the weekend you could be sharply higher on Monday, of course, and start to try to move up. But it wouldn't surprise me if all of a sudden the market gave you a sudden break after we take out these highs all of a sudden it just stretches up and then falls apart. Everybody is looking back and they remember last year that the May contract came very close to taking its all time high out of $10.77, we got to $10.64. And that was in the year of 1977. Well, interesting this year is following 1978 pretty close, put in a March high, fell down into May, turned around and came screaming out and in the very tail end of May, May 30th we took out the March highs by ever so little and then that was it for the rest of the year, the market was in a down trend. So, everybody is watching this market very closely and thinking we're nearing that. However, the year of 1950 could possibly be what we're doing more so. Did something very similar that year too but instead you put a low in around mid-June and then you came up and made July highs.

Pearson: You mentioned eight dollars, I'm not sure if everyone is going to remember but you were talking $7.35, taking that out and that might be a great place to start some sales.

Martin: Well, I think so, $7.33, you might even want to look at the $7.12 but I will tell you this, I really -- and I've talked about this since last fall -- that I believe we're headed to eight dollar beans again. And it's based on a May and a July futures contract. So, let's say we went to eight dollars in the tail end of July, first of August can we do that? I don't know as if we'll get that because if we do then that means there is something really severe going on because if you do then November beans are going to be going back up to eight dollars. Well, the past two years, 2003 November contract hit eight dollars and then last year our high was $7.99 1/2. And so you'd be back at eight dollars. If you're going back there then that tells me the November beans are going to take it out and they are all so neck to neck in price that I think if next year's contract of May and July does get to eight the problem is the longer it takes the higher they are going to go. And once you take that $7.12 resistant trend line that I talked about on the show out then that opens the door but the longer it takes then the more potential you have to even go to nine.

Pearson: Alright, Sue Martin, we'll see. It's going to be an interesting year for sure. Sue Martin, joining us here. For all of us on Market to Market, I want to say a big thank you. I'm Mark Pearson, have a great weekend.

Tags: agriculture commodity prices markets news