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Market Plus: Dec 10, 2004

posted on December 10, 2004


Market Plus: Dec 10, 2004

Pearson: Welcome to the Market Plus segment here on our Market to Market Web page, I'm Mark Pearson. So glad that you've decided to join us here on the World Wide Web. Tom Pfitzenmaier, analyst this week and Tomm is a guy who can look at a sow's ear and see a silk purse and he's done it with the corn market. And Tomm, right now you're looking at this corn market and between the LDP and between maybe making some sales in July or maybe even December you talked about on the show, talk about how we can make this thing work and put some money in our pockets on corn.

Pfitzenmaier: Well, in the old crops -- I'll start off with that -- in the old crop, that July corn, if you can catch a pop up in that $2.20, $2.23 area that is probably where resistance is going to show up. If you can sell that you're talking about a market that is almost thirty cents above where the cash market is and that is a tremendous opportunity to lock in a carrying charge for that bin on your home-stored corn. One of the fallacies, a lot of people say well, there is a carrying charge, I'll just store it and do nothing. Well, that carrying charge only exists if you take advantage of it and sell it. Doing nothing means you don't get the carrying charge. And so, you know, people really have to be proactive if they are going to get that captured, get that locked in and take advantage of that opportunity. That is number one.

Number two, on new crop corn, like I said, we've got a huge carryout, we've got the ability to grow corn with our hybrids, it's unbelievable. We're probably going to have a big increase in acreage. You've got December corn, if you can catch a rally up into $2.40 which is only four to five cents away; a great opportunity to lock in $2.40 corn. If it drops to $1.90 like it did this year you've got fifty-cent gain at thirty-cent LDP or more next year. That is not a bad price for corn especially with the yields that we've been getting here recently. So, you know, there are opportunities here and people really -- you have to do something about it to take advantage of it, you can't just sit and watch it and hope it's there because it's probably going to -- in some extent it's a time thing that is going to disappear and erode on you.

Pearson: Absolutely, and that opportunity is there right now. As you look at the corn market, in short of some catastrophic crop failure somewhere around the world, there is going to be some pressure on corn because, as you mentioned, we have the carryout.

Pfitzenmaier: Yeah, and don't mistake me and think I'm not saying there aren't going to be rallies and the market is going to get oversold and there is going to be short-covering and pops up ten to fifteen cents, even maybe rallies. But I think a person has to keep their head about them and when those kind of rallies come along you use them as selling opportunities, not thinking that the whole thing -- we're getting ready to have another moon shot, get along again. You've got to use those and keep your head about you and use them as selling opportunities.

Pearson: You kind of have to get in the mind set of being a little bit negative because...

Pfitzenmaier: Yeah, defensive, I like to call it playing defense because that is an important thing to do when you're storing grain. You know, the corn producers tend to be a little offensively minded and playing a little defense is tough sometimes.

Pearson: Absolutely, but get your thoughts together, get a plan together, figure out how you can take advantage of this market and add dollars for the 2004 crop. It sounds like awfully good advice but you mentioned that December corn contract, pricing some '05.

Pfitzenmaier: Yeah, absolutely. If it gets up there you've got to do it. Like I said on the show, people are worrying about these nickels and pennies on LDPs and that is the wrong -- there is nothing to gain there to speak of on this LDP gain. The big gain is to be made on pricing new crop and pricing the carrying charge on your old crop.

Pearson: Excellent points, Tomm Pfitzenmaier joining us this week, one of our senior analysts from Summit Brokerage. Tomm, thanks for being a part of our program tonight and also being a big part of our Market Plus segment. For all of us here on Market to Market, I'm Mark Pearson. Have a great week.

 


Tags: agriculture commodity prices corn markets news