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Market Plus: Mar 25, 2005

posted on March 25, 2005


Market Plus: Mar 25, 2005

Pearson: Welcome to the Market Plus page here at our Market to Market Website. I'm Mark Pearson, host of Market to Market. With me one of our senior analysts, Virgil Robinson. Virg, as usual, good to have you with us. Everybody is still talking about this bean market. We had this huge rally. We had all these funds come in and go long in the market. Now they seem to be off on the side somewhere, maybe even going short and the bean market is kind of losing some steam. And yet I looked at those prices and man they're still better than what we had last fall at harvest.

Robinson: Yeah, the market's recovery from February to date, Mark, has just been short of miraculous actually. It's been quite humbling for many of us not seeing this several weeks ago but there is a stocks and all positions report here Thursday, coming up Thursday the 31st. It should show bean stocks as of March 1st around 1.4 billion. We have a pretty good idea of weekly exports and a pretty good idea of the crush, Mark. So, stocks should be about 1.4 billion. If that number is below that, Mark, it would indicate to me last year's crop was overestimated. Between you and I right now I think that is what it is going to show. I think last year's crop, it was a good one but I dont think it was as large as the USDA's current 3.14 billion bushels. So, that combined, Mark, with those near term things we brought to the attention of the viewers plus the fact that export sales and shipments have just remained very, very strong I think the carryout, this year's carryout is going to drop somewhere near 350 or 360 million bushel which is still plenty of supply but does give us a little firepower, I think, given the market's current meltdown. So, I'm looking for a recovery in beans here in the very near future.

Pearson: Okay, and again, then we start the growing season, Virgil, it's not going to be long. You mentioned on the show two big factors and I've heard about them from producers, I've heard about it from ag processors, there is a huge concern about this rust potential and what it could mean if it breaks here in the Corn Belt.

Robinson: Yeah, and I think there has been a tremendous educational effort made to inform the producer, Mark, of this potential problem should it push through much of the central part of the country which remains to be seen. But I think the market must respect that prospect as well and I am hearing, Mark, in the meetings I've been in an equally concerning amount of conversation about aphids as well as other pathogens. So, are we going to see a couple of million fewer acres sewn in '05 than we did in '04? My guess is right now yes. So, all of those things combined, Mark, should underpin new crop values and prevent them from a complete collapse this early in the calendar. That is why I'm suggesting the minimum price strategy for new crop beans beginning as new crop futures trade $6.25 or higher.

Pearson: Okay, I want to talk livestock here for just a moment. The Montana group was successful in getting the border closed to Canada and keeping it closed despite the March 7th opening date from the USDA. We still don't have any progress on Japan. Cattlemen are worried about what could happen up north, what the impact could be here. You were pretty positive, the cold storage report looked pretty good, we're moving beef, we're moving product. Are those really that big a factors?

Robinson: Well, I think, Mark, they undermine the market and whenever there is some type of media event around that issue the markets react. But there are other forces, I think, at play here. I happen to believe, Mark, that our economy, the U.S. economy as well as several others in the world will continue to grow. And with growth comes per capita income increases and traditionally when that happens the demand for high value product, and I would categorize beef as one of those, also grows to some proportion. So, I like the prospects in the market despite the fact prices are high. I think the market can sustain this mid-80 and 90 dollar level, Mark, for the foreseeable future and the USDA endorses the notion as well as they are projecting per capita beef consumption in the U.S. to increase again this year versus last by another three or four pounds per person. So, the demand for beef is strong, supplies are relatively limited. I think the breeding herd is growing very slowly which pulls some of those cattle out of the replacement category. Mark, I think the market is very strongly underpinned and in position to move to higher values.

Pearson: That is the word from Virgil Robinson. Virgil, thank you so much. From all of us here on Market to Market, I'm Mark Pearson, have a great week.

 


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