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Market Plus: May 09, 2003

posted on May 9, 2003

Market Plus: May 09, 2003

Pearson: Welcome to the Market Plus segment here on our Market to Market Web site, glad that you've joined us. Hey, be sure to tell your friends and neighbors to log on. We'd like to have them tune into this particular extra program on the Market to Market Web site, so spread the word. Doug Hjort is our guest this week. And Doug, we got off on this wheat and corn thing in detail on the show and soybeans are really the interesting player here in this commodity market.

Hjort: Well, they really are and I think it's interesting to see how the commodity funds can have an impact on a market. We've definitely seen that in the soybean market all winter long. We would run up to that oh $5.75, $5.85 area depending on the contract month you were talking about and it would hit that and it was just a solid wall there and you could not get these prices through there. Finally, a month ago or so they went through there and now just on commodity fund buying and they've run prices up 50 cents a bushel from there. Now, on Friday the corn and the wheat took off, a dramatic move pushing through major resistance levels again. Now, the fundamentals are somewhat bullish on, especially they're very bullish on the US soybean picture but not on the world. But in the corn and the wheat they're not very bullish at all, as a matter of fact a little negative. But if these funds decide that it's time and they can make money by buying these commodities, the grains they might just do it. The funds have unlimited amounts of dollars that they can push at these markets. When you have someone in there that's so large and their trading activity that the commercial grain companies have to run for cover you know that's a lot of power. So, who's going to go against the funds? I don't believe that corn and wheat prices can keep on going right now but I would sure watch the fund activity and trading activity in the next few weeks to see what their plan is.

Pearson: You mentioned this cash market in the show really not picking up much of this move. That's usually, that's kind of a bearish signal.

Hjort: Yes, it is. Now, you know, honesty about that market Friday, most of the gains came within the last half hour of trading. So, the elevator managers out there didn't have time to do any hedging. So, they're just stuck out to dry and they're not going to give nine cents up on the corn. I talked to a couple of clients late Friday and they were only, the elevator was only offering two cents more. Well, the futures were up nine and a half. Well, in that case I wouldn't sell the corn because even if we get a negative report on Monday these futures prices will come back down but the chances of selling something better than two cents higher is certainly in the cards. Same thing on the beans I suppose, I didn't check those cash prices. But on the wheat it was pretty much the same way. Chicago wheat up twenty-two and a half cents and one client in Michigan was only able to get about eight or nine cent better bid. So, don't take that but be ready to take advantage of a big jump like that in the futures to make some cash sales.

Pearson: Even if it happened in the last five minutes or ten minutes of the trade as you're talking about. I think we'd have to get out the dusty charts to find out what we didn't have simply evening up prior to a major USDA report. It's going to be interesting Monday.

Hjort: Yeah, it really will be and especially if the corn old crop and new crop corn and wheat numbers are a little bit negative, it's really going to be interesting to see how much buying power the funds want to come in with, with somewhat negative numbers.

Pearson: Real quick on livestock, you mentioned this cattle trade really hanging in there. You've been friendly to cattle, you've been a little bit concerned about mid-summer but really this market is really holding on pretty good.

Hjort: Well, it really has and of course it all centers back on the demand. The demand for beef remains very, very strong even though we have been sitting up here, the carcass values have set new record high levels here this spring and yet the beef moving through the retail level, I presume through the restaurant trade, stays right in there. The demand is very, very good. Now, one of the most important things we've seen in the cattle market in a long time is that our carcass weights are down twenty some pounds from where they were last year. Now, that sounds great, a great change and it is. But still, we have to remember that last year the weights were record heavy. We're still just a little bit lighter though than we were two years ago. That took cattle prices, that twenty to thirty pounds less on a carcass over the last three months has taken prices up ten dollars a hundred weight. Now, they're starting to back off a little bit now in the last two or three weeks but that just shows you how important it is to keep those weights down. If you could get all the producers to do the same thing and market as soon as those cattle reach market weight they could make themselves some good money.


Tags: agriculture commodity prices corn markets news soybeans wheat