Iowa Public Television


Market Plus: Jun 04, 2004

posted on June 4, 2004

Market Plus: Jun 04, 2004

Pearson: Welcome to Market Plus segment here on our Market to Market website. So thrilled to have with us Sue Martin this week. Sue, let's talk about the bean market and I've talked to you early about, during the show, Walt Hackney said "If I hear one more word about the bean market", but frankly everyone's talking about beans. Alot of volatility again this week. We talked about that in the show but is this volatility taking us higher or not? And you're kind of saying probably not.

Martin: Well, I think that we're gonna get a reaction here and then we have to watch it. This year is patterning alot like the year of 1977 and that was from before on the show I've talked about unless beans can clear $10.77 you know, until we do that, this market has got a problem and of course, over the years to be able to have the ability to close over ten dollars at the end of a month. Well we managed to do it once at the end of April on the May contract but by and large it's been real difficult for any bean contract to stay over ten dollars on a monthly basis. So, having said that, the year of 1977 beans did peek that year with the May contract in the month of April. And then they sold off and that was the one year that the July contract peeked right along with the May and could not come back. It's also, of all the years when you had July beans making new contract highs in April, and went on to make higher highs, there was ten years that this occurred and nine out of those ten years did go on and make higher highs but none of them had breaks like we're seeing in this bean market. Now I know we have ramped up volatility this year but I fear that even with China coming back a little bit, you know you look at freight rates - they dropped 30 percent in the past month and it's all because of China slowing up their buying. The Avian Bird Flu really did have an impact on the usage for soy meal and these crushers are left with alot of meal to sell. And I think until they get themselves squared around a little bit, which could take us another month, I see that rally will probably be for selling opportunities for opportunities to be liquidating. I think producers and traders out there who are long this market, have given up all the profit that they made. And we've talked about how we were seeing so many people making so much money they'd never made before not taking it. Well, they gave it all back. Well those people, if they get a chance to get this market back up towards nine dollars, that $9.30 areas going to be a toughie. And if we can even get there and of course this week's gonna be telling. If you get up to about the over the $8.50 level, and I kind of think we have a chance to swing at last weeks highs this past weeks highs, so I think if we can do that then you know we have a government report on Thursday, the market'll probably step back Wednesday, leveling out its self in front of it, and then we should resurge again. And then we peek the next week, into that week of the 14th through the 21st and then we turn down into July. The timing and the patterns on beans is different than on corn. Corn still has hope because it's going into its most critical time of the year as we go into July and once you give this crop some heat this next week, it's going to green up and start looking much better than it has and that's maybe gonna be a little price negative for it but also, if that heat continues to hang on as we go towards the end of the month of June, towards July, all of this and now we're gonna start looking at pollination, the heat's still there, now we're gonna start to get worried because that really is what could cut the crop.

Pearson: All right. I want to talk about cattle here. You mentioned on the show something's gonna slow down this cattle market. And it could be any one of a number of things, it could be another BSE outbreak, it could be something that's unforeseen at this stage of the game. Smallest herd since 1959...

Martin: Correct.

Pearson: We do have moisture in the western Corn Belt and Nebraska and some of those areas starting to rebuild slowly some of those pastures. But in the Plains states it's still dry. What's your take on this feed cattle market? We'll take these 90 cent fat cattle as long as we can but will the consumer stay with us?

Martin: Well I think the consumer will stay with us providing that we don't have a terrorist attack scare or that we have something happen in of the fact like maybe another BSE that starts to shake their confidence. You know one occurrence that we blamed on Canada we got by with it. But if we start to see find another one or two cows and the USDA's gonna be honest with us, I think, all the sudden the public might say "Wait a minute here". And they might start backing up getting fearful of how much more is out there that they're eating. In the mean time, what else could happen? Well, it's very possible that Canada could surprise us and get their border opened before us with Japan. If that occurs, we have no reason to keep our ban on Canadian beef and our border opens up. Now granted they're tight supply too, so but the psychology of it could be the thing that starts to break the straw that breaks the camels back. The one thing I will say is is that I think producers really need to be watchful. I know that options are extremely expensive and when we look at the cut out, this is normally a time of the year the cut out goes down into the 4th of July. When we look at the cutout, the cutout has increased the largest amount in the last 20 years. There were two other times out of the last 20 years that the cutout went up at this time. 1996, when you had a high corn market and also the year of 2002, when the market was going up in corn. Well, we've got that same thing going on right now. What was interesting was you had a high in the cattle market on August futures around the 12th of June and you broke down into about the 24th, 25th, and then you tried to resume the rally.

Pearson: Okay, keep that in mind folks. Sue Martin, as usual, appreciate your insights. That's Market Plus for this week. Be sure to stop by again and be sure to tell your friends about us. Thanks for watching; all of us here on Market to Market wish you a great weekend.

Tags: agriculture commodity prices markets news