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Market Plus: Jun 25, 2004

posted on June 25, 2004

Market Plus: Jun 25, 2004

Swalwell: Welcome to Market Plus, I'm Rick Swalwell sitting in for Mark Pearson. Joining me this week are two regulars to lend us their insights on the market trends, our regular market analysts, we welcome Walt Hackney and Doug Jackson. And Doug, let's start with you. How are we doing with long-term oil seed? And we also have a big report coming out next week. Let's touch on those two things.

Jackson: Well, we do, the market, of course, is fixated right now at the shortage of old crop soybeans and the old crop volatility could still be tremendous. But the market is also torn with the long-term idea that the world could replenish, in fact, dramatically rebuild oil seed supplies a year from now. The USDA, in their June report, projected that South American production would explode, the Brazilian crop could be up sharply, Argentina acreage up again to the point where we could just reflood the market with surplus oil seed supplies if we can achieve those crops in the spring of 2005.

So, the market has really got this super long-term focus on November beans. You have a number of private analysts talking about November futures going to $5.00 to $5.50 from the $7.00 level today and that is very reasonable if we achieve those kinds of crops in South America very long-term. But between here and there we're going to have numerous opportunities to have tremendous market volatility. If this report next week shows less bean acreage and then we would combine that with any indication of any kind of a weather problem whatsoever, not the 40 bushel optimistic yield the government is projecting right now, all of a sudden the US carry out again is near zero.

So, we could certainly have a transition to lower prices very, very long-term but a very erratic road between here and there. And people that have been selling these November beans could see these things flare up dramatically in the aftermath of that report next week of this acreage is down and, like I said, we have any weather problems. So, the super long-term trend is down possibly down $2.00 if South America has those huge crops but a lot of volatility between here and there and we might get a good market scare to refocus people's ideas on a continuation of a tight situation of the US for another crop cycle before we eventually have those big crops in South America.

Swalwell:Thanks Doug. Walt, everyone aware of the record high prices for feeders. But let's not overlook what's going on with pork. Talk a little bit about that if you will.

Hackney: Well, I think it's apropos to talk about the pork right now. We're blocked with our export capabilities on beef, we're blocked with the inability to bring in additional feeder cattle to help offset these lack of feeders we have domestically. So, we have the exact opposite in the hogs. Granted, a sixty-cent cash market or a sixty-five-cent cash market on hogs might let the producers make some money on the hogs. That has been the one sector in the livestock industry that has not been financially healed up over the last two or three years.

So, what we're seeing is an ability today at sixty, sixty-five for producers to reduce some of the debt load they've occurred over the last years. The problem has been the importation of the Canadian live hogs coming into the US. It's been an open door policy with the USDA and our government to allow those hogs to flood our markets. They have restricted the cash market domestically of our own producers by a minimum of five bucks a hundred and maybe ten dollars a hundred weight.

The Commerce Department through encouragement of the National Pork Producer's Council have promised that they would investigate the possibility of a dumping action by the Canadians on our markets. Now, that doesn't mean they're going to act on it. It simply means they'll look into it. That was a promise they made maybe six weeks ago and they've done nothing. And as we speak there is nothing been done and until something is done to stop this 75% increase this year in Canadian imports over a year ago, if something isn't done and if we do, in fact, go along with the pig report today that shows that we could increase some productivity this year. We will see the hog market flounder again but it will be because of the outside influence of the imported live hogs.

Swalwell:Thanks Walt, thanks Doug. That is the latest on Market Plus. Thanks for joining us, I'm Rick Swalwell. Mark Pearson will be back here next week.


Tags: agriculture commodity prices markets news