Pearson: Welcome to the Market Plus segment here at our Market to Market Web page. Mark Pearson along with our analyst, Mr. Alan Brugler, and we're going to talk beans and also talk this calf market too because there are a couple of interesting scenarios going on there. Alan, you talk about freight rates, you talked about a lot of things that are positive as far as bean demand is concerned. The issue we didn't touch upon was this avian flu thing, which has got people very concerned and could impact inventories of birds.
Brugler: Well, it has impacted inventories of birds. The latest number that I've seen is that they've already liquidated 54 million birds, poultry being ducks, chickens, etc. in an attempt to try and control the outbreak. The outbreak is in a number of different countries now. The big news, of course, was that it was found in China and before that it had been primarily in Thailand and Vietnam and a few other places. But that is the reason we had the early weakness in the corn and bean markets because the concern was we were going to lose a lot of meal demand and a lot of corn demand. It is real, the figure that I've seen is that there is about, for every million birds that you slaughtered, there is about 815 tons of bean meal that won't be fed and about 5,000 tons of corn that won't be fed. So, that means for every ten million birds, you're talking a full freighter of corn. If we're up to 54 million, or 55 million birds that is already five or six cargoes and a couple of cargoes of beans, the bean meal. So, we've definitely got a little bit of loss of potential demand there. Now, is that a market and are those birds that were eating US based meal or just something domestic, produced locally? We don't know. But, clearly if they can't get that under control and they have to expand the liquidation efforts further then we've got some potential loss of feed demand.
Pearson: Absolutely and so that is one more reason, again, maybe just to start looking at taking advantage of these rallies?
Brugler: If you assume, yes, that we're going to lose some export sales capability over time then, yes, you ought to reward the rally and that is a good practice anyway. If the market goes up and it meets your timing requirement and your cash flow plan, you know, reward the market with some sales. I think there is also a ripple effect there on the pork market. I won't say that I've seen any statistics to back it up, but there was a train of thought in Chicago this week that if you can't buy the beef because you've embargoed it and you can't eat the poultry because you might get sick and die from it, pork looks good. And there was an undercurrent of that in the hog rally this week.
Pearson: Alright, Alan, I want to talk a little bit about this beef market, this calf market in particular. Cattle inventory report, last week, what did that tell you?
Brugler: Basically it showed that we're still downsizing the herd and that was pretty much across all the different categories. But the beef heifer replacements, that is that heifers are being held back to go to the cow herd, were down a couple percent, a little bit more than expected. And that number has to change somewhere during this part of the cattle cycle. At some point here we have to start expanding the cowherd because the how herd just keeps getting older and older if you have a deficit on the replacements. So, the real question is when that happens. The timing could have a big impact on when the next big rally in the cattle pit is. In the sequence it would be something like this, if we were to get better grass this spring because of improved moisture at a time when the cattle market was a little weak, then that makes it more attractive to take those heifers out into the cow herd. And typically two things happen then. One, you've got a reduced supply of feeder steers, actually feeder heifers for a while, which runs the price of the feeders up. And secondly, you've got a shortfall in the fed cattle because you didn't put as many feeders into the lot and that tends to pull the live cattle back up. So, there is still another chance for a run up here in cattle if we start this replacement cycle. We just haven't seen any evidence that it's occurring yet.
Pearson: Interesting. Alan, appreciate your comments. Alan Brugler joining us here on Market to Market. Thank you for joining us on our Market to Market Web site and be sure to join us again next week. For all of us on Market to Market, have a great one.