Pearson: Welcome to the Market Plus segment here at our Market to Market Web site, glad you've found us here. Tell your friends and neighbors, the more the merrier we always say. I'm Mark Pearson, the host of Market to Market. Doug Hjort, one of our senior analysts with us here today. Doug, lots of things are happening right now. You know, you're a wheat guy, I mean, you come from wheat country, you know this wheat market well. Big numbers, big worldwide production. You haven't been as negative as a lot of the, really as a lot of what we've seen from USDA and from some other analysts about what is ahead for wheat. I talked to wheat guys out there who are holding onto the crop and trying to decide what to do.
Hjort: Well, quality is going to be an issue this year. We're running into that already with the freezes and frosts and so on in our northern plains for the spring wheat and Durham up there. It's maybe not a severe thing, we don't really know yet. Up in Canada the same thing. In Europe, England this week we heard that up to 50% of their crop is going to be downgraded to feed value because of persistent rains. And yet we've got this huge tonnage so we just have to work through that. It's possible we could have a record large wheat crop this year. Demand will be up too and consume most of that but it's just the real problem in the wheat market is that it's not just the United States with a fairly good crop. We had a poor winter wheat crop, of course, hard red winter. But it's a fairly good crop but most countries in the world did not have a poor crop this year. Some, very few, have some of the better crops they've had for a while.
We have to come to realize in the wheat market that countries like the Former Soviet Union are strong competitors of ours now instead of strong buyers as they were fifteen years ago and that is not going to change because the reason they are strong exporters is that they've learned how to farm, they have enough equipment and fuel and all of this stuff and also enough combines and so on. They used to lose up to a third of their production every year just in spoilage because they couldn't take care of it and now they've corrected that. So, now they're an exporter.
You've got other consuming countries that have learned to raise more wheat so they don't need to buy as much wheat. The world trade in wheat is pretty level but consumption keeps going up and trade is about steady so that means that an exporting country like the United States is going to be in trouble. So, saying all that you look at price rallies, yeah, you'll get them here and there but it's probably going to be pretty slim. And I mentioned on the show that our export sales have been very, very good on wheat and yet prices have been trending down. Yeah, we had a little bounce here in the last month or so but as of Friday night we were down there searching for the bottom again. So, I think that is typical of where we're at in this wheat market.
Pearson: So, we get a little rally, make sales, the old story. Feed the rising market when it comes. Alright, real quick Doug, we don't have much time. I want to just talk about fed cattle. We talked about it briefly on the show. You mentioned this a month ago you were on or maybe you and I were together at some other event. But you talked about the thing that will kill this beef market is cattle in doing it to themselves and you've got a situation unique in our history where we've got record fat cattle prices, we have record high feeder cattle price and people seem reluctant to open the gate and sell those ready cattle.
Hjort: That's right, I tell you they want to hang on, want to hang on. This week a typical example, again, last week was bad enough but I think we sold fewer cattle this week than last. Weights probably aren't critically heavy yet but this is a time of year that you just can't afford to add those pounds on. Yeah, the feeder -- I mean, I understand it, they're losing money on the cattle they're selling -- even at these high prices in some cases. And they can't go out there and buy feeder cattle right now. If they do and go to the futures market they're locking in somewhere above $50 losses on these cattle. So, you know, the idea is let's keep feeding these, putting a few more pounds on these and hope this price will pop back. And the prices saved them here and there, you know, we've got several weeks this year to where prices would jump two, three, four dollars and then another week like this one to where they come right back down again.
Prices are going to stay high, relatively, historically high, $80 or more for cattle for some time. Obviously the Canadian situation will impact that if and when we open that border. The Japanese thing reported earlier on the show tonight, those things can open up and change our markets one way or another, bullish or bearish, but the fact of the matter is if we don't do a good job of marketing these cattle and start packing too many more pounds on we're not going to get this fall rally that we should because there will be fewer cattle coming to market this fall just because of the lower placements.
Pearson: But they're starting to hit them on those 950 pound carcasses already.
Hjort: They are.
Pearson: Anyway, Doug Hjort, as usual Doug great advice. Thanks for joining us. Thank you for checking in with us too at our Market Plus Web site. For all of us here on Market to Market, I'm Mark Pearson. Have a great week.