Iowa Public Television


Market Plus: Jul 11, 2003

posted on July 11, 2003

Market Plus: Jul 11, 2003

Pearson:Hey, thanks for joining us on our Market to Market Web site. This is our Market Plus segment and Sue Martin, our guest this week. Always great to have Sue with us. And, Sue, I want to talk a little bit about this fed cattle market. We talked briefly on the show, too briefly in fact, about what's happening in this fed cattle market. Obviously Canada is a big cloud over this market right now, when the beef is going to come, what the impact of it is going to be, how backed up are they up there, how much is in cold storage up there. That's hanging over the market and cattlemen out there, we've had some good times. I mean, we're going to see some real pressure.


Martin:Well, I think we are. Mark, when we look at the retail values, retail margins are declining and when you look at the cut out values because of the fact that the BFC problem occurred and Canada had issues with it and we put the ban on, all of a sudden you have South Korea and Japan and Mexico coming at us hot and heavy for beef. So, that competes with the retailer and pushes the prices quite high for cut out. In the meantime, the retailer can't raise his margins because the consumer will back away.

So, it makes you wonder just how strong consumer demand is for beef, and of course now, if you open the borders and you bring more beef in from Canada, all of a sudden with the high priced cut out still, that's going to say we're going to decline. It makes you think that prices will still decline further. So, I think that we have cash markets that are going to soften. In the meantime, futures might not soften as much. You might get, because I believe futures are going to go premium to the cash market for the August contract.

So, we're going to continue to see aggressiveness and of course carcass weights are starting to pick up weight which they seasonally do and I think that the combination of pushing numbers and the carcass weights growing along with the slowing of demand is not going to be a good thing.


Pearson:Alright, strategy wise, what do you want to do?


Martin:Well, the problem is, it's hard to tell someone to sell futures if we see futures going premium over cash. So, you can't really do that and in the meantime I guess I would say keep your marketings as current as you can and push them as fast as you can and I think that's about the only thing we can really give them. When we get further out into the October time frame, October maybe December cattle, we might have something a little better for those.


Pearson:Let's talk real quick about the bean situation, corn, we talked about some problems there, certainly, wheat has been challenged but rallied this week. But soybeans really are, it's kind of up in the air. You mentioned dry weather actually could be a plus for this year's bean crop around the Midwest.


Martin:It would be very helpful, in the new term especially, if we could start to get some dry weather because beans don't like wet feet and some areas have really picked up way too much. We look for crop condition ratings next Monday to probably show a little deterioration and the bean crop does not look as good as the corn crop anyway if you have to compare crop to crop.

But the one thing about beans is the new crop, of course, is leading the way down and it should. You have inverses in this market. When we get the July contract off the board on Monday all of a sudden with this wide spread that you've got between the July and the August and of course the new crop, you're going to have a market that's starting to leap down on the chart formations. The only thing is August should try to regain some of that and of course getting over $6.10 and closing there is going to be a good sign for August futures.

The Elliott wave traders are all talking another leg up in this market to $6.75, maybe $7.40. Boy, I'll tell you what, Mark, if it happens, if that's going to happen and I have doubts in my mind, but if that's going to happen it will have to be immediately that that starts and would be done by the 24th of July, maybe the 19th. In my mind, that's just not very far away, a week, week and a half, two.

I think that we've got to be very careful. This market looks to me like it wants to leap down further. I could see where beans could still leak off in the Novembers into maybe mid August, now you'll stairstep your way down there. We could have a rally and then break again. But, I could see where November beans could find an early harvest low, sort of similar to wheat in August.


Pearson:Okay, well Sue, some good insights as usual, appreciate you joining us this week on Market Plus. And for all of us here on Market to Market, thanks for joining us.


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