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Market Plus: Dec 24, 2004

posted on December 24, 2004

Market Plus: Dec 24, 2004

Pearson: Hey, thanks for joining us here at our Market to Market Web site and here on the Market Plus portion we get a chance to get a little extra time with our analysts and it's always insightful. Doug Jackson and Walt Hackney with us, two of our senior analysts with us this week. Doug, let's -- we talked a lot about beans on the show but there is so much going on in the bean world that makes it so interesting. We have Asian Soybean Rust in the United States now, we don't know what the impact is going to be. That is certainly something that is floating around out there. The size of the South American crop, what demand is going to be, producers are out there trying to weigh all these options. As you sort it out what do you see happening?

Jackson: Well, Mark, you know we talked about the prices have been held up perhaps well above what some of the commercial trade had expected by now because of the tight cash markets. But the other dimension of course, is the unknown, how much risk premium if any are we going to command or the soy rust issue and what kind of a threat it is to production in the United States. This will be very interesting first to see if we can have good weather in South America to see how Brazil handles the rust. If they can have a 42, 43 bushel national yield and their yields can exceed those in the United States, if they can demonstrate that they can manage the rust this year that has spread over most of the country that is going to be a very good indicator perhaps of its impact or lack of impact. But then the United States does now face for the first time a great unknown. Even though the cold weather this weekend is certainly going to kill rust spores throughout the United States scientists think that rust spores could blow from Louisiana to Minnesota in just three days. So, any kind of an exposure close to the United States and Mexico is going to be a threat for the crop that is going to be indefinable throughout the next year. And you can just imagine if we have to go through day by day reports next summer on what county, what state, what areas had rust and then a market reaction to it, it's going to be worse than reacting to daily weather forecasts. The thing is manageable, it can be treated, the producer is going to have to learn about how to deal with it this winter. It's going to be interesting to see if we lose any extra acreage from beans to corn and it's going to be perhaps a supporting factor throughout next summer as we see just how we're going to deal with it.

Pearson: Excellent points. Walt Hackney -- thank you Doug Jackson. Walt Hackney, as you look ahead now we didn't get to talk much about international trade, certainly everybody has got their eye on Canada, people are still wondering when the doors are going to really open in Japan. What is your take?

Hackney: I think the Canadian issue may be more of a real issue for us at this time, probably for the next six months. Mark, you can go back to May of this year, it appeared that there was a strong chance they'd open the border after May of 2004. It didn't happen and if you've noticed there is already indications that there are problems today in Canada due to the way they are developing their feedstuff. They haven't necessarily followed all the rules that they had set forth for themselves. And so it would appear that that Canadian issue that has been an overriding kind of a dark cloud to the industry in the U.S. may not occur until some point in time way down in 2005. Our timing right now in the U.S. with a very current cattle on feed inventory, with the prospects of fewer cattle coming in the first and second quarter to the packers our of our own feedlots, our timing could be as good as any for them to drop the border and let what remains of the Canadian fed cattle to come on down here. You are totally aware, Mark, we've been shipping a lot of Canadian beef in the U.S. now in the boxes. That isn't going to end and it has helped siphon off any backlog of cattle they may have had up there. So I guess I don't see that Canadian issue as anything more than a psychological tool that will be used by the U.S. cattle feeder for probably two weeks and then I think it will level out if it occurs sooner than say June of this next year.

Pearson: Alright, excellent points Walter. That is one that is hanging out there. Walt Hackney, Doug Jackson, thank you both, some great insights as usual. For all of us here on Market to Market, I'm Mark Pearson, have a great holiday week.


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