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Market Plus: Dec 13, 2002

posted on December 13, 2002


Market Plus: Dec 13, 2002

Pearson: Welcome to the Market Plus segment on our Market to Market Web page. I'm Mark Pearson. A lot of Mark's in this start isn't it? (Laughs) John Roach is with us this week with Roach Ag and John, you brought up several points and you've got a lot of folks out there who are on pins and needles and it kind of sounds like the trade is on pins and needles. We have a lot of corn and soybeans in farmer hands in the country and people are just kind of waiting to see what's going to happen next. What are you telling them?

Roach: Well, the first thing to realize is that we have cut our surpluses down dramatically whether you look at corn, beans or wheat. All the surpluses that we dealt with for years have been cut dramatically. In the case of soybeans we might even argue that the ending stocks that we're going to have left over when we put the combines in the field next fall, they're going to be the smallest they've been in six years they way it looks currently, maybe even smaller than that.

But the problem is that we also have competition in the world. In the case of soybeans we know the competition is down in South America. In the case of corn we found out again this week that the Chinese inventory is bigger than we thought. They raised the inventory by 12.5 million tons, they raised their export forecasts so we've got more competition. They're taking away one of our better customers, Taiwan, had done business for 50 years. So, at the same time that we're having stocks look smaller we're also finding the competition is even bigger.

So, we don't know for sure how to evaluate those stocks. It used to be we would have thought these levels of stocks would give us high prices. But now with this level of competition we're struggling with that and so we're getting markets that are struggling. In the case of wheat, clearly the competition is beating us to the punch, they're selling cheaper and that's driving the wheat market down after having a strong price this summer. We've really just continued to evaporate up until making lows this week. So, we're worried in the corn market that maybe the same thing might happen. I don't think we'd have quite that same situation. But anyway, what we have is we have a market that's going back and forth trying to evaluate our level of tight supplies together with increasing competition in the world.

Pearson: Your advice is to hold off on corn sales.

Roach: Yeah, I'm going to hold off on corn sales on small balances, ten cent rallies in the market, I'll sell enough corn to take care of bills and so forth. But I really want to make my corn sales during the four best months which are March, April, May and June. I've talked for years with producers if you concentrate your sales in those four months your averages will do better. We try to get people to make sales back in August and early September but I know people didn't get that job done necessarily and so now you sell enough to take care of the bills, you put the corn in the loan and you make your sales in March, April, May and June.

Pearson: And you are selling beans?

Roach: Beans, however, March, April, May and June will be when we run into full fledge competition out of Brazil with a crop that's going to be in Brazil and Argentina, the total will be a larger crop than we raised in the U.S. this fall. So, my worry is that if we don't make sales on beans until the South Americans are in the market place then we're going to really have a difficult time. So, I'd much rather be making sales on bean strength and not holding off until the spring.

Pearson: Real quick, you've been friendly of this cattle market since spring of 2002. Worked out real well, you're still friendly.

Roach: We won't peak this market until probably May in the cash market. Now, the futures have obviously anticipated that as they have really for several months. The futures have been leading the way up. But from a peak in the cash market standpoint we probably won't do that until May. Demand has come back nicely and we've got tightening supplies, our placement levels have been reduced, we have probably the best supply/demand ratio in the cattle market for a lot of years.

Pearson: Good, keep eating that beef. John, thank you so much.

Roach: Thank you Mark.

Pearson: John Roach, Roach Ag Marketing with us on Market Plus this week. From all of us on Market to Market, have a great one.


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