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Market Plus: Oct 17, 2003

posted on October 17, 2003


Market Plus: Oct 17, 2003

Pearson:Thank you for joining us here on our Market Plus Web site here on Market to Market. Wow, what a month it's been, what a couple of months it's been between cattle and the bean market. It has been nuts and trying to figure out and make the best decision has been a challenge. We've had just great analysis all the way along from all of our analysts including, of course, Sue Martin. And Sue, you were talking about these beans getting strong back in May, back in May and June. You were talking about this bean market could take off. Weather has certainly played a big part in this thing. Now people are saying, what do we do? What's the best strategy? How can we make this bean thing work?

Martin:Well, first of all, Mark, it's not only weather, it's also been along with it a very good demand. You know, we have to realize that China is in their harvest through October and while they're in their harvest they're seeing ten dollar cash prices, $10.40 a bushel and soy meal prices at $3.10 and yet there's still avid buyers in the world market and of course, we're the benefactors of that mostly.

I think that as a producer we have to look at the price. We know that we've been up eleven weeks, we've rallied $2.37 or .34, something like that, we've come a long ways. But that's the kind of markets we're facing this year and they're dynamic and when the funds get into them, you know, these funds, remember back in the spring when I was talking about high prices and everybody kept saying, but the funds are record long so we can't go up. Well, we found in the cattle market funds could be record long and the market could keep pouring it on. And that's what's happening in the beans. The funds aren't record long yet though.

We estimate them about 53-54,000 contracts long in the beans. Meal they are record long in meal and in oil they still have a ways to go on soy oil. So, between the oil market and the bean market, there's room for more length out of the funds. And I think that they will set new records. What we're going to deal with is because we've had eleven weeks up in this market we're due for a little bit of resting and down time and that's kind of what we're catching against the $7.40 area. The technicians are standing aside, are stepping aside and there's traders out there, farmers who have just flat gotten so accustomed to a dull market, one that didn't, you never thought you could get anything good that, now, when you get seven dollar beans they think we better run and take it. But I have a feeling we're going to see an eight as well.

And, of course, when I look way out and you look at November beans of next year and they're around $5.60, been as low as $5.48 this past week, that is cheap and that's not going to buy acres next year and any hint of a problem in South America and South America is already dry. Only the extreme northern regions caught some showers and the rest of the country is getting fairly dry and farmers are starting to stop their planting waiting for a rain. If that continues then you're going to see an incentive where we have to plant more beans here and they're not going to do it with a five in front of those beans. So, bean prices should, overall, over the next six months, still evolve higher in price.

 

Pearson:Okay, take advantage in strong base of stuff, you want to sell it to combine you can but maintain some kind of ownership if you'd like that May contract.

Martin:Absolutely, and I like the May contract because usually in years when the market has gone counter-seasonal and rallied into November time frame, the May contract has a tendency to still be good.

Pearson:Alright, let's talk about the other wild market which has been this fed cattle market. We don't have as much time to talk about it as I'd like. You talked about the parallels between this fed cattle market and this bean market. And really we're seeing Asian demand here in Japan helping to push this cattle market. What's ahead for these cattlemen out there? The cow/calf guys are getting these tremendous feeder prices. Cattle feeder making a ton of money but he's also turning around and buying some real expensive replacements.

Martin:He certainly is and we have to realize that there is the potential for some tight supply of cattle on feeders as we get down the road around the April/May time frame. There is some potential there for tight numbers. But I think that when we look at this market, we've had November feeders get up to 105, you know, you've had your January feeders get up to probably what, around 98, 99, so we've hit some pretty good price levels. Now that the emotion is coming out of this market we're going to start to settle down and go back to a more realistic high price. I wouldn't underestimate that you get a ten dollar break in cattle.

Pearson:Alright, plan accordingly folks. Sue Martin, as usual, we appreciate your comments so much. Sue Martin, one of our regular market analysts on Market to Market. Thanks for joining us here on Market Plus. And hey, don't forget, tell your friends and neighbors, have them join us here at this special Web site during this very volatile commodity markets. For all of us here on Market to Market, I'm Mark Pearson, have a great week.

 


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