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Market Plus: Apr 29, 2005

posted on April 29, 2005


Market Plus: Apr 29, 2005

Pearson: Welcome to the Market Plus page here at our Market to Market Web site. Thanks for joining us. Tell your friends and neighbors, we'd love to have them join us too. This is Mark Pearson. This week Sue Martin with us and it's always exciting to have Sue with us. She always has great insights and ideas, a lot of them in tonight's show, hopefully you picked them up. We talked a lot about soybeans so let's talk livestock. Sue, let's talk the consumption end of the beans. This cattle market, you were talking about strong cattle prices through now. Now, what is ahead?

Martin: Well, I think, Mark, that I'm an advocate of getting cattle hedged. I think we're starting into our mature stage of the cattle cycle and I believe that as we go towards the end of this year and into the middle part of next year we're going to see a sizeable break in cattle prices. I think we could see as much as 1000 points or ten dollars under the price of hogs. So, we recommend to producers if you can justify this we think that you can look at hogs as a meat and sell them in the cattle futures as a hedge and just do 40,000 pounds to 40,000 pounds. We're looking at cattle and feeling like this market is going to be really, really under the fire here. And, of course, none of us know when the border is going to open. The problem is, when it does open you won't see daylight for days, you know, on that cattle market. And the other thing is, is that as far as the feeder market goes it's the packers and the large, large feedlots like National and those ones who are really after the feeders because they have to keep their feedlots open and keep them filled and keep people working and the packers want those cattle there so that they have cattle to draw on so that they know that when they start a new month they've got meat coming in or cattle coming in. Plus, they can also use those cattle, that if there is a market coming that looks like it's going to get softer, well, packers will sell on the board and protect themselves more better than probably the producer will. And so they'll be already hedged and in the meantime they use those cattle even though they have paid up in the cash market here as feeders. They will use those cattle and use them as kind of like a weapon against the producer and not good for their cattle aggressively and drive prices down when that starts. That will start at some point and we think we're turning the corner here. We feel that producers were wise if they didn't hedge for the last two years. Unfortunately we hear that some did and they have a little sour taste in their mouth. But now they need to be staying with it. And we're telling producers you hedge and you margin it, you stick with it. You're not going to be smart enough to get the top but we feel we're coming into a time zone where the window is narrowing and you need to be getting stuff done and just staying consistently hedged.

Pearson: We always tend to fight the last war and you're right, people went with hedges, felt like they got burned and so now they're not going to do it any more.

Martin: Especially after BSE broke out and they got a chance, boy, they jumped on it and they got burned a little bit, maybe a lot, but I think that they really need to be treating it as a business now because this isn't going to last and I hear the producers out there, the public is bullish cattle, they are bullish and we know that cattle coming is green, we're pulling cattle ahead that are May cattle. So, yes, that probably is positive and we're hitting low weights. We're probably going to hit our lowest weights or I should say our heaviest weights and start dropping. So, that is a plus too for cattle. But the demand side is I think we're turning the corner there too and we don't have the diets this year that helped drive us a year ago. And so I think that is a big factor. So, I think the diet craze is over with. If they are on diets the government is trying to push these fiber diets. Well, to be honest with you I'd rather eat a steak than something with fiber in it.

Pearson: Amen to that.

Martin: Yeah, so I guess I would have to say I'd be a little concerned about the consumption side of things. But at the moment we still seem to be doing okay in that, I just don't think that is going to last with this. And then you've got the seasonality where prices drop in June anyway. And so I think that I would be very astute and have my cattle hedged. I think your highest prices are in the first half of this year.

Pearson: Sue, some of us are old enough to remember the last energy crisis that we had. You mentioned high energy prices on the show earlier and the impact that had on the beef market.

Martin: It had a big impact and it will again. Most everything, you know, everybody is so quick to be blaming the funds for all the things that are happening, the bears especially are real quick to blame the funds when the market rallies against them. But, you know, I look back at the 70's and things aren't a whole lot different now than they were in the 70's and I was in this business then. It's just that sometimes things present themselves in a little bit of a different manner but it all comes around, you know, like what goes around comes around, something like that.

Pearson: I think we're there. Sue, you make some great points as usual. Sue Martin joining us here on our Market Plus segment. Thanks so much for you being a part of our program. For all of us here on Market to Market join us again next week right here. I'm Mark Pearson.

 


Tags: agriculture commodity prices livestock markets news soybeans