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Market Plus: Feb 13, 2004

posted on February 13, 2004

Market Plus: Feb 13, 2004

Pearson: Hey, welcome to the Market Plus segment here on our Market to Market Web site. We're so glad that you've joined us. I'm Mark Pearson. With me this week is Virgil Robinson. Virgil, you talked about a couple of things on this week's show that I wanted you to kind of expand upon. One is the national soybean index, the one that is traded out of the Minneapolis grain exchange. Now, you were talking about a couple of closes below $7.69 and you're saying that's a pretty strong indicator this bean market may be trying to put a fork in it.

Robinson: I'm tracking that index closely, Mark, and again, it's a composite of several hundred country elevator bids on a daily basis, a simple average of all of those. And again, I think it tracks the cash market in most geographies very, very closely and very accurately. And again, the trend of that index, as well as futures, Chicago futures remains up, Mark. But as you've discussed with other guests the last several weeks, we are staring in the breech of the face of what might be, or at least as USDA projected this week, a 97.5 or 98 million metric ton crop out of the Southern Hemisphere.

Robinson: We have competition and our export pace has slowed significantly. So, for those folks, those listeners of ours that do not use futures, do not use options or derivatives thereof, this cash index is one, I think, worthy of tracking and watching. And as mentioned, to the best of my ability, should that cash index drop below $7.69 a couple of consecutive days, I think the trend of that particular vehicle turns from up to down and would signal for those remaining and holding cash inventories, it's time to liquidate that inventory.

Pearson: NSI is not very widely quoted. Where do you get that information?

Robinson: Mark, I get it off their Web site, the Minneapolis Grain Exchange, It is tracked daily, it is very transparent. I think it is certainly worthy of using as a barometer as to the value of your cash soybean inventory.

Pearson: Real quick, new crop bean sales, you're not in a big hurry there.

Robinson: Mark, I've made one. I did make one and it was post the January 12th data. Again, the debate goes on as to acreage, as mentioned, Feb. 19th or 20th USDA in their Washington outlook will give us an indication of what they think. Mark, it's difficult for that November futures contract to push two and above seven dollars. I think at a minimum we need to have 15 or 20% of new crop soybean production priced either in the form of a hedge to arrive, cash forward contract or a futures sales position as that futures contract trades $6.75 to $6.90. I think that is a very good target and a place to begin.

Pearson: Real quick on livestock, eighty bucks, kind of a magic number. Historically, as you've looked back at the last couple of years in this fed cattle market, maybe jump on some of that?

Robinson: Mark, I'm just afraid of the market over the course of the next several months. I know there are more cattle on feed and scheduled to be slaughtered here in the next few weeks than was the case a year ago or even the last couple of years combined with the fact I think there is an adequate supply of pork, an adequate supply of poultry. Should this export ban persist in poultry, which I don't think it will for any length of time, but should it do that, you know, 15% of what we've produced poultry wise is exported.

Robinson: That would have to be absorbed here in the US. Clearly that would be a factor and a bearish factor as it regards to both beef and pork prices. So, I think there is an adequate supply of edible proteins to supply the domestic market and hopefully over the course of the next several months, the reopening of our exporting trading partners.

Pearson: Excellent, as usual, good comments. Virgil Robinson, joining us here for this segment of our Market to Market Web page. I want to thank you so much for being with us. Be sure and tell your friends. And from all of us here at Market to Market, have a great week.


Tags: agriculture commodity prices markets news