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Market Plus: Oct 22, 2004

posted on October 22, 2004

Market Plus: Oct 22, 2004

Pearson: Welcome to the Market Plus segment here at our Market to Market Web site. Thanks again for joining us. And, you know what, we always ask for the referral, be sure to tell your friends and neighbors they can plug into us here on our Market to Market Web site too. Real excited to have a new analyst with us on Market to Market this week, she's Erin Golly, she's got a lot of experience in the commodity trading business. And Erin, you were really friendly to this corn market. When you're looking at an 11.3 billion bushel or 11.6 billion bushel corn crop, I mean, for a lot of people it's hard to get excited. But you think the demand is going to be there.

Golly: I think demand is going to be there and we think that the harvest lows will be set sometime in the November/December time frame. But demand has been really strong and I think it's going to continue to be there. You know, it's hard to look at demand -- at a demand picture with this large crop in front of us but I think we'll move into it next year.

Pearson: Alright, you talked about a strategy, we're taking advantage of the carry, going out to the summer futures. Talk about how you do that with a customer.

Golly: Sure, sure. We go out and we'll sell something in the July futures, you know, sell calls or sell in the July futures and capture that basis that will narrow. It's about 30, between 25 and 32 cents right now that you can capture. So, I think it's real important that producers take some advantage of that.

Pearson: Absolutely, so good corn demand, you don't think it will be a problem eating up a 1.6 billion bushel crop?

Golly: I think we will have some strategies that need to go into that but I think it will turn out alright.

Pearson: Alright, now I want to talk about livestock, the fed cattle market. The cattle on feed report was released Friday afternoon. Again, just a little bit disturbing in terms of placements and also in terms of marketing, it just looks like we're starting to put too much weight on cattle.

Golly: Yeah, it just feels like the market is getting really sluggish in here and we've got to get these producers to sell these heavy weight cattle. You know, there has just been no, they keep thinking there is going to be some kind of rally out here that is just never seeming to come. So, we've got to get these producers some kind of incentive to get rid of those heavy cattle and it's going to have to be a flush out somehow of lower futures or lower cash.

Pearson: And so you're talking maybe a five, eight dollar...

Golly: It could be a five or six dollar downfall in this thing. But I think that is the only reason people are going to get rid of their heavy cattle.

Pearson: And then turning around and buying these high priced feeders.

Golly: Mm-hmm, yeah, it's a real risky operation right now. We've actually seen a lot of packers discounting the Y4's and the Y5's in the cattle and we're hoping that will be enough incentive for the producers to get rid of their heavy cattle.

Pearson: Alright, as usual, stay current, always good advice from the cattle business, livestock business in general, particularly timely right now.

Golly: That's correct, it's very timely.

Pearson: A strategy standpoint, what would you do if you were a cattle feeder?

Golly: I would expect prices to stay right in this area. You know, we're seeing that a lot of cattle feeders want to feed corn to their calves right now instead of putting it in storage. So, I think it's, you know, it's sort of a risky thing right now.

Pearson: That's a good point and that's what we're seeing out there. Well, Erin, some great insights, appreciate your comments. Our rookie analyst here on Market to Market this week, Erin Golly joining us. And for all of us here on Market to Market, I'm Mark Pearson, have a great week.

Tags: agriculture commodity prices markets news