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Market Plus: Nov 26, 2004

posted on November 26, 2004


Market Plus: Nov 26, 2004

Pearson: This is Market Plus, glad you've joined us here at our Market to Market Web site. I'm Mark Pearson and a new analyst with us this week, this is exciting. Darin Newsom and he is a grain analyst, very well known in the DTN world and Darin, thanks for being here with us.

Newsom: Well, thank you, Mark.

Pearson: Let's talk about a couple of things you mentioned on the show. You mentioned soybeans. This whole Asian rust thing, we couldn't dwell on it too much in the market segment of the show Wednesday. But this whole rust thing can have a bigger impact maybe than what people initially thought.

Newsom: It really could and what we're looking at is the new crop situation with the Asian soybean rust. We're going to lose some acres. I mean, there is no doubt. You know, we're looking at increased costs of anywhere from $25-$40 per acre where they are going to have to go in and spray and many of them are just going to say we're not going to do it. So, we're going to lose some acres. There is really no way of getting around that. Now, after that how much is it going to -- you know, on the acres that they do decide to plant -- are we going to see a yield reduction? Are we going to see these other things that could occur that are going to bring down the ending stocks below what the projections are right now? And is it going to put us back into a tight ending stock situation? I think it's interesting to watch how the November soybean contract has been reacting to this news and the development of this story in relation to the front month soybean contracts and to the December corn contract.

Pearson: We're definitely seeing the move since the soy rust initially came out, first at a research farm down in Louisiana. Now, as you mentioned, it has spread. Where do you think this disease is going Darin?

Newsom: I think, you know, I don't want to be a fatalist and I don't want to be the one screaming the sky is falling. But it is conceivable that this thing can spread up into the Ohio Valley, up into the bigger parts of the soybean growing area. If it is true that Hurricane Ivan was the courier that brought this North, this is the path that it took. Everywhere that it is showing up at this point, the six states that are confirmed, those that have suspected cases, are all in the immediate path of where it moved northward. And so -- and it did get up into Indiana, up into the southern half near the midpoint of Ohio before moving back towards the East. So, this will be a story worth watching over the coming months as we head into the spring.

Pearson: And ... the trade is already watching.

Newsom: Yes.

Pearson: All right, let's talk about livestock. We talked about fed cattle, right, and you're expecting that market to get better. Now, this was an odd week to base it on with the BSE false positive again but you mentioned demand has been up, demand has been good.

Newsom: Demand has been very good, you know, we're coming into a time of year where demand normally stays strong. We had a much stronger than anticipated cash market. I mean, I think what the best of many traders were hoping for, cash traders were hoping for was maybe an unchanged market. Well, when the cash cattle started to trade and we were looking at three, four or five dollar improvements in the cash market. So, this does show that there is still solid demand despite the news, despite all of these things that come out, all of the uncertainty that is created by these incidences, we still have strong demand, strong domestic demand at this point. And that gives -- that does give the market hope as we head on into the winter months and then further on into the first quarter of next year.

Pearson: All right, so good demand. Have we worked through most of those heavyweight cattle now? Are we starting to get closer to being current?

Newsom: I believe we are, I believe we are and, you know, where we've got -- that brings up the question how much problem is the feedlot situation in the panhandles (and) in southwest Kansas? Is that going to start backing things up a little bit? Is it going to be cutting into performance? I think we have moved through a lot of the heavyweight cattle right now, we're getting back more to a current situation. Now, let's see what happens with all these wet pens and this weather situation and see how that develops.

Pearson: It can be a problem.

Newsom: It certainly can.

Pearson: Darin Newsom, thanks so much, your rookie tryout on Market to Market, you did great, thanks so much. For all of us here on Market to Market, I'm Mark Pearson, have a great holiday week.

 


Tags: agriculture commodity prices markets news