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Market Plus: Mar 11, 2005

posted on March 11, 2005

Market Plus: Mar 11, 2005

Pearson: Hey, thanks for joining us on Market Plus this week. We've got Darin Newsom here, we've got Walt Hackney here. We've got wild markets, markets to get wilder it seems like daily. We've got a cash cattle market that has been insane. We've seen the soybean market jump, what Darin, $1.50?

Newsom:Yeah, it's just been a very wild ride here over the last two to three weeks as we've seen -- we've seen the large non-commercial, is the official term for it, go from a record short position to actually holding at a growing long position. And so we've seen a lot of money, a lot of buying coming into this market. Huge rally, a huge rally in a very short period of time.

Pearson: I'm looking around and maybe I missed them -- I went to that USDA report -- I mean, I'm no analyst, I'm no expert but it looks to me like if you do all the addition and subtraction if we have a normal crop this year -- not what we had last year -- but a normal crop of soybeans in the United States this year we'll have plenty of beans.

Newsom: We do, you know, coming into this year USDA did drop our ending stocks down to about 410 million. So, that is what we're going to be looking at to start with next year. But with the acreage that is being projected and a normal yield, yeah, we're not in any threat of running out of beans. This rally is not based on fundamentals, this is based on investments , economic policy and international traders hedging against inflation. That is what is driving our markets right now.

Pearson: Alright, so if I'm looking at this thing as a farmer and I'm saying man, I've got potential threat of Asian rust this year, which I think isn't that a factor? Or is that just...

Newsom: It is, it's a factor that is not even being talked about, it's been pushed to the side here lately. You know, the production problems that we're talking about in Brazil are all weather related. They haven't even been talking about the possibilities of rust still in Argentina and northern Brazil, those haven't even entered the equation yet.

Pearson: Or potentially rust in the United States in 2005.

Newsom: Absolutely.

Pearson: So, this market is nervous but it's like a little flame that is being fanned by a lot of money looking for a place, looking for a home, for one thing.

Newsom: It really is.

Pearson: And so to me this looks like a selling opportunity.

Newsom: It is a selling opportunity. It is one that you want to approach very carefully, especially as we've seen the volatility grow over the last few weeks. But if I've still got some old crop beans, you know, the cash market is coming back, basis is firming again, if I'm needing to make some sales work it into this rally that we're seeing. New crop, same thing, start doing some pricing, setting your targets and waiting for them to get there.

Pearson: Okay, a couple more seconds, let's make one more comment. Are you seeing much farmer selling?

Newsom: I've heard of some in the past. A couple of weeks ago it was much heavier. People are kind of stepping back now.

Pearson: That is just what I'm hearing and you're right, basis is firming. I mean, that is what is driving it. Interesting, alright, so it's been a while Walter, I know you love hearing about this bean market. But I want to talk about beef because that has been really dollar wise probably more wild with the swing we've had in this cash cattle market. You explained it really well on the air what happened. Basically those processors they were short bought, they have been pushing this kill down, consumer demand has been there. We've had some nice days where people have been cooking out and eating beef and everybody got caught with their proverbial pants down.

Hackney: They really did, Mark. A lot of that was the intent of the retail and the packer to have a fully adequate supply of beef come in on top of what we're producing from Canada. When that didn't happen they were totally caught unprepared for how to handle the domestic short supply we got. It's a dangerous area we're in right now, Mark. This market went up too fast and I have to say that even though I'm a cattleman. We weren't prepared to have $155 a head explosion appreciation on fat cattle within ten days. No one was prepared for that. They spent the money, they put the market there at $94 on the cash, on $1.51 on the dress price. I don't think it will hold. I'm not looking for a crunch but I am looking for this phobia that it developed on Thursday and Wednesday of this week. I'm looking for that to go by the by as we get into next Wednesday and Thursday. I think realism is going to set in and I think at the retail level they are not going to be prepared to proportionately price dress beef into the consumer as they priced it going back to the packer this week. We had over ten dollars appreciation as you're well aware of since last Friday, $1.53 for dress cut out choice. That won't get supported by the consumer when her ability as an alternative is to buy much cheaper pork in the counter and poultry. So, as a result I think that there will be a blockage set in there within the next week.

Pearson: About five more seconds Walter, just real quick, what is the future going to hold? What price is going to hold this fat cattle market for 2005, mid 80's?

Hackney: 87.

Pearson: 87, alright. Hey, Walter thank you so much. Darin, thank you sir, we appreciate it. I want to thank our analysts for being with us and of course thank you for joining us right here on our Market Plus Web site. For all of us on Market to Market have a great week.

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