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Market Plus: May 02, 2003

posted on May 2, 2003

Market Plus: May 02, 2003

Pearson: Hey, thanks for joining us on our Market Plus page here at the Market to Market Web site. I'm Mark Pearson, glad that you're here with us. Be sure to tell your friends and neighbors to join us on the Market to Market Web site. Joining us now is Walt Hackney and Doug Jackson, our guests this week and Walter, we're going to start with livestock. You talked about the cattle market on the show. You're fairly friendly there, near term, until we get to the fourth quarter. What about buying these feeder cattle in here?

Hackney: We've got some real touchy points here. We're getting right back to price levels that would have been in excess of a year ago. We were hitting near record prices on feeders then. But the profits, $100 to $150 a head on these fat cattle is a fair incentive for these people to go ahead and buy back on these feeders. We've got a limited supply. We're going to have two or three percent fewer calves this fall. The drought conditions in the grass country and the ranges is going to restrict summer yearlings coming off grass.

So, the hunt is on to get immediate possession of these feeder cattle. And I don't know if they're going to be excessive but I do know that to break even on a lot of these feeders they're buying right now has got to be eighty cents or thereabouts when they become finished. That's a reach, that's a real stretch considering going into the fourth quarter when we know we're going to have an extraordinary amount of hogs available in the market, we know that competition is going to weight heavy again in any kind of a raise in the beef price.

Pearson: So, we're within two dollars of record high beef prices now and it might be asking more out of this market than is going to be there. Maybe not jump on these feeders?

Hackney: Well, there's people that are saying that, Mark, but on the same token there seems to be a buyer in every case for these cattle as they become available. And there isn't a question about us having a shortage. We will have a shortage of yearling cattle in the grass areas, the calves we know are going to be two or three percent short this year. We know there's going to be a herd rebuilding process start at some point this fall so there will be more of those heifer calves kept back for a replacement. So, you've got a situation where the cattle feeder is going to be pressed in order to get enough supply around him.

Pearson:You mentioned big hog runs in the fourth quarter. What's your outlook now on hogs?

Hackney:Well, it would appear that we're going to become, probably will have to become used to a three hundred and seventy-five to ninety thousand head a day kill as we get into November and October we'll start building toward that. Any time that occurs in our market today we're going to build heavier carcass weights. As a result we're going to have some problems and you know, Mark, we haven't seen real profits in hog production for over two years. We keep hoping this hog market will get to a forty cent live cash price as we speak. It's having a hard time getting there. It will bump forty and back off to thirty-six and that's where we are as we speak on that market.

Pearson: Pork producers need to sharpen the pencils.

Hackney They do.

Pearson:Big time. Doug Jackson... the bean market, we talk about this old crop. There's a lot of excitement there on the old crop. What about this crop that's going in the ground this spring, what about new crop beans?

Jackson: Mark, on May 12 we're going to have our first official projections of all the new crop balance tables. We don't think that the new crop bean balance table from the USDA is going to look as bad to people as they think. Now, ultimately the government may overestimate demand relatively rarely I might add in this May report. During the next year the story may not be the Chinese demand as it was this past year but rather it will be a constant downgrading of our demand ideas from what the government is likely to put out on this May report.

But in the short run, if the market internalizes, if the market endorses, if the market believes that May demand projection which we think could be as high as $27.90, people are going to look at that balance table on the 12th and say, boy, we don't have any room for any weather problem even again in this next crop cycle. And any kind of a weather problem would push the carry out down to intolerable levels again in 2003-2004 despite this constant drumbeat of record production in South America.

So, that could be an interesting situation come the 12th. The new crop balance table on corn of course is going to be blah. They're going to probably project a carry out about 1.2 billion, a small increase from this year with a big yield. Of course, the corn market has no room to tolerate a weather problem but it's not going to look exciting to people come the May 12th report. Of course in the case of the weed, of course they'll incorporate their first official winter wheat production estimate but that's clearly going to be higher than last year and I expect the government is going to project a moderate increase in carry out of wheat next year that's going to be relatively unexciting.

As long as we still think major exporter production is going to rebound this coming year with better weather in the U.S., better weather in Canada, and hopefully better weather in Australia, the world is going to rebuild inventories in exporter hands and that's going to be a price depressing situation. Interestingly though, Mark, on a worldwide basis the world wheat crop this coming year will still be smaller than usage for the fourth year in a row but it depends, what's important is where the exportable supplies are.

Pearson: Very good, Doug Jackson and Walt Hackney, thank you so much. That will wrap up our Market Plus segment here on our Market to Market Web page. Thanks for joining us. We'll talk to you next week.


Tags: agriculture cattle commodity prices livestock markets news