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Market Plus: Oct 24, 2003

posted on October 24, 2003

Market Plus: Oct 24, 2003

Pearson: Welcome to the Market Plus site here at our Market to Market Web site, I'm Mark Pearson, glad you could join us. Our guest this week, Tomm Pfitzenmaier. Tomm, we've been talking until we're blue in the face about these beans and then all of a sudden we turn around and look and corn markets up dramatically. We have a dull market out there. But let's talk about corn and what's ahead there because we do have some corn to get marketed this year.

Pfitzenmaier: This corn market this week probably gave us three quarters of what we would have expected to be the post harvest rally. So, I mean, this was a tremendous move up. We haven't seen a move like this in several years in a corn market and it happened with no news on basically smoking mirrors. So, I mean, I think this is an opportunity to get some stuff moved. We're going to have, we've got a 1.335 carry out and a lot of people think we're going to have to increase that crop size another hundred to two hundred million on the next report which puts us up in the 1.4 to 1.5. That makes $2.48 December corn just look like a tremendous price for corn. I think we're probably going to see an increase in acreage for next year, so even more corn produced. Everybody is all excited, I eluded to it on the show this Chinese business. The reality of it is we've expected them to be down about 275 million in their exports. They've spent the last ten years building export facilities so they sure aren't going to go to zero. You know, they build all this time building up these export customers, they're not going to eliminate that, they're just going to scale it back. The USDA increased the carry out, increased export expectations by 200 million to compensate for that in the last report so a lot of this has already been discussed in the market. If you bought, on a 20 cent rally this week because of that, you've probably gotten all you're going to, most of what you're going to get. I'm not saying that the funds aren't going to buy some more and take it up another ten cents or so. But the upside is pretty limited here.

Pearson: Alright, so corn producers take note. Quickly, Tomm, this cattle market. This has been so wild and I think probably the most dramatic market, record prices, prices frankly we didn't think we'd see in our lifetimes on fed cattle. This has got people extremely nervous and I've talked to a lot of feedlot operators who are saying, hey, we ain't filling them back up. We may repair pens here for the next nine months. What do you tell a cattle feeder who wants to stay full?.

Pfitzenmaier: I think you can do that, I think you're going to have to risk a little bit but I think you absolutely at these kind of prices have got to have a put or something underneath that. If you buy cattle you've got to have some kind of protection because if the Japanese can find a little bit of it, the Canadians can find some problems, it's certainly a possibility that we could see something here. So, I mean, I think anybody that's going to go out and invest that kind of money on a lot of cattle needs to have some kind of protection underneath them. Now, maybe you can't lock in a profit or even a break even but you can at least get yourself some disaster insurance here..

Pearson: Is this going to keep going, this fed cattle market? What's making this thing happen? Canada isn't that significant...

Pfitzenmaier: Canada is not that big, Canada has been getting a lot of credit for this but that's not the big deal. The big deal is new consumer demand for beef and there's only one way that I can see that that's come and that's the Atkins diet. If you talk to anybody that's lost any weight walking around, 90% of them are doing it by eating more beef on that Atkins diet and I think it's been a national craze and it's just had a tremendous effect on our beef demand. You know, Sam Elliott has been out there with those, "Beef, it's what's for dinner" ads and I mean, people are buying it. So, that's the scary part about this big rally and the fear of a choking off demand. Now, a lot of the people that are doing that figure it's for their health and they don't care all that much, up to a certain point, of what they pay, you know, if it makes them healthier, they're going to pay it. But there's a limit to that too I suspect. And you can also eat pork on the Atkins diet, so you're going to see some switching there. So, I think a lot of cattlemen are afraid of this too that it's going to kill off their demand and sort of kill the golden goose here. So, there's hedging, I don't know if there's hedging opportunities but I think there's a need for having a little security blanket underneath you.

Pearson: Real good point, Tomm, as usual, appreciate it. Tomm Pfitzenmaier, our market analyst this week. From all of us here on Market to Market, thanks for joining us and be sure to as a friend to check in on our Market to Market Web site.

Tags: agriculture commodity prices corn markets news