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Market Plus: Oct 10, 2003

posted on October 10, 2003

Market Plus: Oct 10, 2003

Pearson:Hey, this is Mark Pearson with Market Plus here at our Market to Market Web site. Thanks for joining us and don't forget to tell your friends and neighbors to stop by our Market Plus neighborhood as well. And boy, what a week we've had, between the beans and the fed cattle market, it's been wild. We talked about the fed cattle market and the bean market on the show. We're going to talk feeders in just a moment, but first, a little bit more on this bean market, Doug. I mean, there's a lot of frustration out there. Yeah, we're happy to see seven dollar plus beans on the board but there's a lot of people saying these beans should be a whole lot higher. and I know we keep hearing the arguments and I know you keep telling us this, that it's the world situation in Brazil and all, but boy stocks are tight.

Hjort:: Well, they are, they're very tight. You know, USDA, some people look at the report on Friday and USDA only lowered the ending stock on soybeans that's projected for the end of next year, five million bushel, from 135 to 130. Well, what's lost in that is that you really can't go any lower than 130 or much anyway without prices just skyrocketing. Well, USDA has already dialed in between this last report and the one before, a tremendous amount of rationing that needs to take place. Now, yes, we can do that rationing just by not exporting as much, not crushing as much, not exporting as much meal, these sorts of things.

But yet, the domestic need, the domestic need for a crusher to continue to operate, for example, is still there. So, prices are going to go higher or at least stay at a relatively high level which maybe we're not to yet, for an extended period of time to get that message across. So, when I look at November beans, for example, and pretty soon we'll have to start extending out to different months, but you know, around that five, excuse me.

Pearson:Old habits are hard to break.

Hjort:$7.55, $7.81 I think it is, $8.15, these are spots you would look at for resistance going back on monthly charts. Well, no reason in the world that we can't go to those levels. I think as we said in the show Friday, you get a little too bullish, very easy to get too bullish. So, you know, we need to watch market action very, very carefully, look for a great deal of price volatility as we go into next week and the week after and so on. But you know that most farmers are going to be locking the bin door now and so, you know, prices, that in itself will keep prices firm.

So, watch price action very carefully but be ready to take advantage of some of these prices. Don't wait for the eight dollar cash, for example.

Pearson:Absolutely. Fed cattle we talked about on the show. Again, we're hearing unofficial reports, you're seeing them, I've seen $104 on fed cattle out there this week, phenomenal. This feeder market has been hotter than a pistol right along with it and now it's the bigger corn crop, corn is backing off some, this feeder thing it seems like a long way for making work, what do you have for these cow/calf guys?

Hjort: Well, it's going to be a tough go for the feedlot operator, for the cow/calf person take advantage of it, market these cattle, maybe get them moved a little bit early if you need to. The expectation is that feedlots are empty enough, that's kind of an odd way to say it, but they're going to be needing quite a few cattle coming up in the next two or three months. So, that's a good opportunity, I think, for the cow/calf person to be looking into that market. The feeder prices are inflated for the same reason that the fat cattle prices are inflated.

If something breaks on this Canadian thing, something happens anywhere that just gives the hint that we could have more cattle available, feeders or the beef, these prices are going to come down in a hurry. They are grossly inflated here, no reason to have them here if it wasn't for the Canadian situation. So, take advantage there of your calf price, get those cattle moved, I think. By, certainly in a matter of months, we're going to have something working out. Either the fat cattle price is going to go and the beef price is going to go so high, it's just flat going to kill the demand at the retail level for beef.

This is a very strong demand, it's still holding in there very good, even at these prices, but the retailer just can not work with it if it goes any higher. So, that's one scenario, the other is that somehow or another, USDA and Canada work together to allow more product or cattle to come in from Canada. And when that happens these front end months are going to drop like a rock, twenty dollars is the first stopping point if it should happen in the next few weeks, probably won't, but that's the kind of risk you have out there.

Pearson:I know people who could make eighty dollar cattle work though. So, it might not be the end of the world for the beef cattle business, but you're right, we'll see some of that premium come off. As usual, Doug, we appreciate your input. Doug Hjort, our guest this week on the Market Plus segment. Thanks for joining us and tell your friends to join us here on the Market Plus site here at our Market to Market Web site.

Tags: agriculture cattle commodity prices markets news