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Market Plus: Mar 26, 2004

posted on March 26, 2004

Market Plus: Mar 26, 2004

Pearson:Welcome to the Market Plus page on our Market to Market Web site, glad that you've joined us. Be sure and tell your friends or neighbors to join us here as well. This is Mark Pearson. Alan Brugler with us this week, always good to have the sage of Omaha here. Al, let's talk a little bit about what happened in these markets. We didn't get to talk as much about really the wheat market, which impacts the food grains, the feed grains as well and you're saying this Minneapolis wheat, spring wheat, we need to pick up some acres?

Brugler: Yeah, we've got a pretty consistent uptrend going in the Minneapolis futures contracts and that is because we need to buy some acres. As you know, the winter wheat acreage was down, the USDA told us that in January, down a couple of percent. And the, at least portions of that crop out in western Nebraska, western Kansas and Colorado are not in very good shape because of moisture concerns. So, the market knows there is a shortfall in hard red production and it's trying to buy some spring wheat acreage to make up for that but what is happening is corn and soybean prices have gone up tremendously and the crop budgets just don't work.

Brugler: Out of 13-14 crops in say eastern North Dakota or central North Dakota, the spring wheat is about 11th on the returns after direct cost. So, we think that has dropped production, production potential considerably because the acreage isn't there. Now, it's still time, there is still time to buy some acreage if the price rallies far enough. But as we saw at the end of this week the rally was immediately sold into and I suspect we're going to be a little tight on acreage all year on the wheat.

Pearson: Let's talk about hog market. We didn't get much of a change on the show because there is so many things going on with beans and corn and everything else. But this pork business has actually seen a little bit of an uptrend here of late. Numbers are big, Friday's hogs and pigs report kind of told us pretty much was in line with what people were expecting. Going forward, you're not seeing that much pressure on hogs?

Brugler: As long as the export market stays good I think hogs are good because hogs are priced on the margin. That last one or two percent of production or of sales makes a big difference on the price and we've been moving the product and that has allowed us to keep the price up and actually in an uptrend. I think there is a little fun participation in hogs, they start looking around for things that are cheap and hogs raised our hand and said, we can go higher. But I think we've got some things to watch in that hogs and pigs report that came out on Friday night. We've got the under 60 pound pigs were up three percent, some of that may, in fact, be Canadian imports but that says there is some supply there. The Canadians, of course, have more hogs they'd like to sell us. The summer contracts have been particularly strong, June and July contracts and that is tied to the NPPC petition for countervailing duties on Canadian hog imports. That is assuming that there will be some kind of an escrow tariff set up while the case is being heard that might make it more expensive to bring in Canadian hogs over the summer if that transpires and it's not a sure thing, then you would expect a little firmer prices over the summer. I think the biggest concern in the short run is we're coming into a bigger beef supply, we're starting to see relative supplies of beef and pork in the US market tip more towards beef, we're coming into grilling season, which tends to favor steaks and hamburgers. So, a continuation of the rally is not a sure thing in the hogs.

Pearson: Alright, so again, as we mentioned on the show, producers take note, this may not, we could see some seasonal pressure probably fourth quarter?

Brugler: USDA has the cash average price dropping each quarter from the first to the fourth quarter. So, they see a declining trend over the course of the year. It's only five or six bucks for the year top to bottom in the way they calculate it. But they are seeing increasing supplies of both the pork and the beef starting to affect the market as we go forward.

Pearson: Good enough, as usual, Alan Brugler, we appreciate your insight. And thank you for joining us here on the Market Plus page of our Market to Market Web site. For all of us here on Market to Market, have a great week.


Tags: agriculture commodity prices markets news wheat