Pearson: Welcome to the Market Plus segment here at our Market to Market Web site, Mark Pearson with Alan Brugler, analyst this week. Alan, what a week it's been, I want to talk about these low markets in corn and soybeans. But first, you mentioned something on the show, tell me about this cattle crush that you do.
Brugler: Yeah, the cattle crush is basically similar to a soybean crush that you hear about in the soybean market where you're -- in the soybean crush you're buying the soybeans and you're selling the meal and the oil. In a cattle crush what you're trying to do is line up the relationship between the fat cattle, the feeder cattle and your main input, which is corn, theoretically you could put meal in there too. At a point where it's profitable you go ahead and lock it in even though you haven't got the cattle yet. You can do those cattle crushes out up to a year ahead of time. For example, right now there is an excellent margin in the May feeder cattle, the October fat cattle. So, we'll put on those spreads for next May's placements and when the time comes we'll pay whatever it takes to get the feeders and put them in there but we already know we're going to make money on the cattle. The problem is that those profitable levels, which runs about $130 a head -- I'm sorry, $100 -- those don't happen very often, it's only a two to three week window every year that you can count on the market trading at that level. So, it's really just watching for that profitable relationship for those three variables to line up in a row and then locking it in. But some of our feeders, particularly our larger feeders, have been very successful with this plan.
Pearson: That works pretty slick.
Brugler: It's a nice way to control your cost and particularly now where we're worrying about the Canadian impact and the BSE issues. If you can consistently lock in these groups of cattle that you already know are going to make money because, you know, the news will offset, you hit the feeders, it will help the fats or whatever. It's a pretty good system.
Pearson: Alright, let's talk real quick, we talked about soybeans, you mentioned Asian rust. You're anticipating a big shift, fairly good sized shift, a couple million acres because of Asian rust.
Brugler: Yeah, I'm certainly not the biggest shifter out there.
Brugler: But I'm saying two million for now and we'll see what it looks like in the spring. I have heard figures five or six or seven million acres. But, you know, we know that the South is going to have it, it's going to be endemic down there. There is just too many host plants and not enough cold weather to get rid of it. USDA says it's going to be a little more hit or miss how it plays out in the North year to year because we assume it won't over winter. But I think particularly in the South you're going to see some shifting away from soybeans back to corn or to cotton or to other plants that won't be affected by the rust simply because the spray cost. If you get it early you may have to spray it three times and it could easily cost you eighty to ninety cents a bushel on a 40-bushel average yield just to treat it. At the moment with the surplus of old crop soybeans in the Brazilian pile you're not going to get paid for that extra spray cost. Now if we were in a tight stock situation the market might rally enough to cover your cost of being a good steward and spraying it and getting it done. But right now we could actually lose about 400 million to 500 million bushels off of last year's crop and the world market wouldn't care. There is enough surplus stocks, USDA says 60 million tons, versus 40 or less every other year prior to this one. The world doesn't care about those first ton so I don't think we're going to get the price incentives until we widdle that pile down.
Pearson: Alright, well, it's going to be an interesting variable for the 2005 marketing year, see just what the impact of Asian rust is not only on planted acres but on production, especially as you mentioned has become a bigger issue in the South and up through the Ohio River Valley maybe. We will address these topics again some more. Alan, as usual, appreciate your insight. Alan Brugler joining us this week on Market Plus. From all of us here on Market to Market, I'm Mark Pearson, have a great week.