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Market Plus: Nov 19, 2004

posted on November 19, 2004

Market Plus: Nov 19, 2004

Pearson: Welcome to the Market Plus page here at our Market to Market Web site. We are so glad that you've joined us. Doug Hjort, one of our senior analysts with us this week. And we want to talk about the hog market because we didn't get into much detail on the show. But first, Doug, you talked about the wheat market, we talked about quality issues, always a problem in wheat, particularly acute in 2004.

Hjort: It really is and the hard wheat has probably got hit as much as anything although some of the soft wheats did too. You look at the world situation, had a little bit of that there too. England, for example, I saw a report back a month ago or so where they figured that 65% of the England wheat crop would be downgraded to feed. I haven't seen anything since that but that is pretty astounding. It adds to the feed supply so therefore a little negative to corn prices but for quality wheat it makes a difference. There are two kinds of wheat out there, the good and the bad this year. And if you've got the good don't be giving up on that too fast because you should be able to pry a few more cents out of that, maybe a lot of cents out of that before it's all over.

The durum market, we don't talk about that much on the show, and that is kind of in the same boat. You go up into Canada, Canada being a major producer and exporter of durum wheat and our northern plains, they had a lot of trouble with durum again; too wet, stood in the field a long time. Now, durum wheat, excuse me, can't stand nearly as much weather stress and that sort of thing, quality problems arise in that crop quicker than in others. We haven't seen that reflected in price yet and there doesn't seem to be a two-tier price on the durum but I think there will be. And again, if anyone has top quality milling durum I would hang onto that at least for a while here because I think along by March/April you could see that price running up real strong.

Pearson: Alright, literally a bushel of gold on that high protein, high quality wheat. Let's talk about hogs, we didn't get to talk about them much during the show, Doug. We had this nice price improvement this summer, obviously they didn't ban pork to Japan so our export markets are strong. Consumers in the United States are pretty strong buyer support. You said on the show the brief time we talked about it we didn't see much of the pork sellout this year. You know, October is pork month for a reason, that is usually when we have the worst prices of the year. It really didn't happen this time.

Hjort: It really didn't and I'm really not sure why. Demand, obviously, pork demand is good although during the month of October pork cutout values declined most of the month. So, kind of a typical thing there but the cash price did not give it up as much. Futures prices held very strong and then rallying for the last two or three months actually, putting in new contract highs probably every two weeks. So, the hedging of hogs was horrible this year when it did and I recommended some and that was not good. Pork demand, I think, I've talked about this for a long time. Two, three, four years where pork is becoming a, not necessarily just the other white meat ... you know, and all of that. But it really is a good product, it's an improved product over what I ate as a kid, for example. And the roasts and everything are so much better. So, the demand is building and it's solid demand. It's built on good quality meat, something that people really like. That is not giving up and that might be -- not sure of it -- but it might be the reason that hog prices did not sell off too much this fall. If that is true then we could probably see hog prices trending at a higher level and a more consistent level over time. So, I think it's something to watch for, too early to say that that is going to happen. But something that I think could be happening which would be good news in the long run for the hog producer. Of course, part of that, too, is the fact that you've got more and more factory type hog producers. So, you've got a steady flow of hogs coming all the time and now it seems like we're leveling off or smoothing out that demand curve as well. So, that is not up as much -- up and down as much as usual.

Pearson: Alright, so, again, long-term prospects appear to be good for pork, consistent high quality product is definitely attracting consumers. Absolutely, some excellent insights as usual from Doug Hjort. I want to thank Doug, I want to thank all of you for being with us and for all of us here on Market to Market, I'm Mark Pearson, Have a great week.


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