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Market Plus: Jan 30, 2004

posted on January 30, 2004

Market Plus: Jan 30, 2004

Pearson: Welcome to our Market Plus segment here at our Market to Market Web site. I'm Mark Pearson with our analyst this week, Doug Hjort. Doug, we're going to talk about a couple of things here. This bean market, if you go anywhere out in the countryside they're talking about beans. Mom calls from Texas and she wants to know about whether she should sell her beans or not. I said, Mom, you've still got '95 beans to sell. But people are out there, these prices are looking awful good, Doug.

Hjort: Well, they are, they're looking very good. And when you look at the fundamentals, we're digging ourselves a big hole here. We're looking at using beans way too fast, much, much faster than we can afford to use them. Some people will say that well, we'll slow down, usage slows down going into the spring and through the summer. That's true, but it happens every year. We have two six-month marketing years for beans, one in the US and one in South America. And when South American is busy selling theirs, our export sales and even our crush, drops off rather significantly. So, what we're doing, we're using beans at a pace about 270 million bushels faster than what we should be. And there are some, by the way, that figure that number to be as high as 350. Now, how do you ration that much out? We haven't rationed anything out in four and a half to five months of this marketing year. So, how do you ration that out in what's left of the marketing year? And you really start pushing a pencil to that and you get extremely bullish on soybeans come about springtime. You know, we might have a strong rebound here and take prices back up to where they were, I expect we will. Whether we go higher than where we've been now, I'm not sure, maybe a 50/50 chance, I think. But that's a selling opportunity as we move on up in the next few weeks here. Within four to six weeks the South American crop will start hitting the world markets, that is, the actual shipments starting to come out. And then for several weeks after that, our export sales drop off. They don't stop because Brazil can not possibly ship enough to satisfy all world buyers. So, regardless of what their price is compared to ours, it doesn't make any difference. If people want beans some of them have to come to the United States. So, we don't drop, we don't stop but we drop off sharply. So, not only do we have the seasonal break, Cargill and ADM were saying here a week ago that they were going to reduce crush in February ten percent. Well, of course they will, they do every year. That is just a given. All crushing drops off ten percent at that time of year. And then it drifts lower and lower and lower into the summer. We have to take our demand usage below those figures, you see, well below in order to come out and have any beans left over. So, it's really an explosive situation. So, use rallies here in the short-term to make some sales, alright, but I wouldn't clean all the beans out until we see what this spring looks like.

Pearson: Real quick, Doug, do you think if we do get that spike and say it comes April, May, June, maybe into July, is that going to help propel that new crop some?

Hjort: Yes, it will. As a matter of fact, that could be a very, what is the word I'm looking for, a real strong pull for the new crop. And again, South America plays into that because of the huge production that they have assuming they get it all in the bin now without weather problems. But, you're looking at a real strong pull where that new crop has to come on up because I think new crop corn is going to be coming up too.

Pearson: Real quick, a word on this fed cattle market, Doug. Boy, what is ahead? People are awful worried and these calves are awful high.

Hjort: They are, I know it's awfully difficult to buy cattle now that you can make them work. You've got to try to do it though. Who knows how long this beef export ban is going to be in place, it might be months. And that is going to limit our price rallies. We've seen in the last three weeks how volatile this price can be, well, the last month and a half I guess actually from the Mad Cow thing, of course. But that is going to continue, that volatility is going to be there. Beef demand has stayed very strong in the United States, but this eight, nine, ten percent of beef exports that we've lost, that is going to really come to roost as we get every month down the road more and more. So, we're going to have a strong deviance of price in this beef thing, a lot of volatility, be ready to sell when they're finished.

Pearson: Very good, Doug Hjort, as usual, appreciate you joining us. Doug Hjort with us on Market Plus. Thanks for joining us here at the Market Plus segment on our Market to Market Web site. Tell your friends and neighbors.


Tags: agriculture commodity prices Mad Cow markets news