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Market Plus: Mar 18, 2005

posted on March 18, 2005


Market Plus: Mar 18, 2005

Pearson: Welcome to Market Plus here at our Market to Market Web site, glad you've joined us. Don't forget to tell your friends and neighbors where we are so they can join us here on our Web site too. Doug Hjort has joined us this week and Doug, everybody is talking about the soybean market and I mean everybody. And that worries me. I've got people that I'm buying my parking stub off to park my truck this week at St. Patrick's Day and they say how is the bean market Mark? Are we getting out of this thing or not? Got that feeling that everybody has gotten in now. Should we be nervous? Is this thing headed -- are we headed for a softer market going forward?

Hjort: I think people should be very nervous about it. Now, that can go both ways because of the huge amount of dollars that are invested in this market now. The big money people call it an investment; the small ones call it speculating. They have pushed this market up or helped to push this market up to where it's at. When you look at the fundamentals, in my judgment, given the numbers we know today, even taking out ten million ton all from the early projections in Brazil we're at least a dollar higher than where the fundamentals would justify and maybe a dollar and a half right now. Now, there is a fifty cent trading limit in soybeans nowadays. And you get into a swing in this market and we'll probably see one of those fifty cent swings. So, this is no place for the small time speculator to be unless you've got a very nimble broker to work with. As far as marketing goes everything you see, look at the charts, chart action this week. The daily charts, weekly charts, they all say sell. Now, who knows what will happen next week but that is what they say and the fundamentals say sell. So, it's a very negative situation. One thing we didn't cover on the show is new crop if you're a hedger. If you use the futures market there again you might look and talk with your broker about trying to capture something on the down side when this break comes. But understand the tremendous risk that is here. These funds can run this price on up. Again, you know, maybe we'll go to new highs again next week. I don't know but an awful lot of risk there. But once this market does break it's going to break hard and not be over with in just one or two days.

Pearson: Mm-hmm. So, good thought for the small speculator thinking they can cash in on what is happening in the board right now because it is extremely dangerous, you're right, with the big money coming in, the funds coming in and they are a fickle group and they can go short on you. All of a sudden they're nimble enough they'll just go the other way if things go down.

Hjort: Well, just this week I'm told that even the big locals, the big boys that trade their own accounts and so on at the board, they got burned this week, they got hurt in a reversal market and so on. So, if they are being damaged a little bit it is really no place for the little guy.

Pearson: Let's talk about this beef market. And, of course, that one has been a wild one too. We've seen a lot of swings there. Canada and Japan have been factors. No one really knows where this thing is going to end up. The U.S. cow herd really is, the expansion has been imperceptible, which you said last year. Last fall you said, well, with the prices where they are, you know, keeping heifers doesn't look like the way to go. And that has proved to be true. What is ahead now Doug? We haven't expanded the herd.

Hjort: No we haven't and the only thing we saw in the last report were that beef cow replacement heifers were up three or four percent. But this cow herd is relatively old as well so there is going to be more calling this fall, this coming fall now than there might have been in a normal expansion phase. Now, that is going to take more heifers to replace them so therefore if you've got four percent more heifers you're not going to increase the cow herd more than one percent at most, you see. So, it's a slow go there. The Canadian border issues here and so on it's hard to tell just where this market might go. If you gauge it all from futures you would say that the opening of the border isn't going to effect the feeder cattle market hardly at all. Those distant futures are hanging right up there close to that hundred dollar mark. And I think it's January, next January before they drop below 100 and it's like 96 out there. The fat cattle market declines a little bit more, a little more perceptible there. But even that is holding up relatively good with this influx of the beef from Canada. It's going to be more difficult -- it's going to be very difficult to make any money feeding cattle this coming year just because of the exorbitant price of the feeders right now. Look for some way to cheapen them up a little bit, growing rations or whatever, I'm not sure but something there. But as far as the cash market goes instead of the 90's we're going to be looking more around the 80 dollar mark on the last half of this year and that is assuming that the Canadian border is opened by that time.

Pearson: Alright, it's going to be an interesting year. Appreciate your insights. Doug Hjort joining us this week on Market to Market and of course, right here on Market Plus. Thank you for joining us. For all of us here on Market to Market, I'm Mark Pearson, have a great week.

 


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