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Market Plus: Nov 21, 2003

posted on November 21, 2003

Market Plus: Nov 21, 2003

Pearson: Welcome to the Market Plus page here at our Market to Market Web site, glad you've joined us. Be sure to tell your friends and neighbors that we're here on the Internet each week with ideas and comments about the very active commodity markets. This week one of our regular market analysts, Tomm Pfitzenmaier, is with us. Tomm, let's talk again. We're starting to sound like a broken record since we've been talking about beans so much but they've been so volatile. It looks like there's a lot of beans left to be sold out there. Maybe I'm wrong on that but it seems like the market still wants them. You said on the show, hey, get these beans sold.

Pfitzenmaier: Yeah, we kind of ran out of time but I think making cash sales is important if you have the opportunity to re-own them. If you're comfortable buying the futures or buying a call option, I don't think you want to totally lose control of these beans because if there's any hiccup in South America or, you know, demand comes rushing in, there is upside potential in the bean market. So, I think, my only point was the cash market is very strong, the market is begging you to sell your cash product. So, if the market goes up you're going to get the most bang for your buck being long on the futures in one way or another. Now, if you don't have that alternative and you have enough money to hang in there then maybe you do have to hang onto your cash beans because that's the only way you've got to participate in any recovery rallies that come along.

Pearson: Alright, or on farm storage.

Pfitzenmaier: Right.

Pearson: As you point out, it's inverted. You go forward, this thing is upside down.

Pfitzenmaier: Absolutely, I mean, every successive month is lower so the market is telling you, if you hang onto them, unless something phenomenal happens they're going to be cheaper down the road than they are today.

Pearson: Good point. So, maybe look at re-owning either futures or an option or something.

Pfitzenmaier: Right.

Pearson: Alright, let's talk about livestock too. Fed cattle market, you got, when this thing got bullish in August you said, well no, we have some legs under this thing, we don't have the production out there, blah, blah, blah, blah. So far that's been the case. How long is this going to carry us?

Pfitzenmaier: Well, you know, one of the big things we have yet to face and are going to start to face a little bit next week is weather. You know, this cattle market hasn't had to deal with weather yet. So, that's why I said on the show, I think you have to totally stay away from the December contract. If you get some kind of a weather pop in that February then that's going to be the opportunity to get some hedges on and you know, whether that means flat hedging them or buying yourself a put or buying a put and selling the call or some deviation of that, at least to put a floor in because there is definitely downside potential. I mean, if the demand starts to shift away, there was just a dealing on the national news this week, an investigation of the health of the Atkins diet and a lot of this demand base has been built on people on that Atkins diet. Well, if they come out with some finding that says that's going to hurt you again, you could see this demand fall apart, especially in light of the fact you've got expensive beef. So, there's a lot of things that could go wrong here. There's a lot of ways the wheels could come off this and I think as expensive or as much money as you're paying for those feeders, you need to have some kind of a protection underneath you for those, you know, February on out cattle.

Pearson: Tomm, we don't have much time but we touched on hogs at the end. This has been a really sad story, this hog business. We keep thinking it's going to get better, we keep thinking these numbers are going to drop. They haven't, they get bigger, as you noted on the show they're getting heavier. Normally we would see a shift to pork.

Pfitzenmaier: Yeah.

Pearson: I haven't seen it.

Pfitzenmaier: And like I say, we haven't yet and I think that's one of the things that could change, you could see that. Like I said, when the holiday bills come in and that beef is expensive and there's a report or two out saying that beef is not as healthy as they thought it was, you could start to see that shift in hogs. So, I mean, there is upside potential in hogs but as it sits right now it doesn't look very encouraging, that's for sure.

Pearson: Tomm, as usual, really appreciate your insights. Tomm Pfitzenmaier, our analyst this week on Market to Market. Be sure to join us again next week right here on our Market to Market Web site and right here at our Market Plus page. For all of us at Market to Market, I'm Mark Pearson, thanks for being with us.

Tags: agriculture commodity prices markets news