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Market Plus: Nov 01, 2002

posted on November 1, 2002


Market Plus: Nov 01, 2002

Pearson: Welcome to the Market Plus page, I'm Mark Pearson, host of Market to Market. Glad you're joining us here on the Internet site. With us this week, Virgil Robinson. And Virgil, on the show we were talking about what is good for a corn producer out there. You mentioned, you know, we've got that last 25-30% of this corn crop coming in. You're starting to see basis weaken. We've kind of been fearing that, we've been fortunate. Through harvest to date, really the basis has held in there pretty good.

Robinson: It's very strong.

Pearson: Now the basis is weakening and now people are talking about making those cash corn sales. What about, on the other side, should we try and hang in there for some...for some upside, through some kind of an options strategy?

Robinson: Mark, yes, I think we should. Again, it's been well discussed that our pace of export sales to date has been slow, slower than we had earlier thought it would be. However there is some encouraging pieces I think we can inject here, last week, or for the period ended October 24th, corn sales topped a million tons. Half of that business was with Japan. There was some business with Taiwan and South Korea which would suggest to me, all of a sudden our values are becoming competitive, particularly with China and that's encouraging.

Mark, I made mention several weeks ago, I thought at some point in time, corn futures would have a three in front of it. And due to better production in the United States, bigger production in China, continued liquidation of grain consuming animal units, I'm scaling back on that. I don't sense we have that opportunity today like I thought in August.

But having said that, again, I still think even a bull call spread, where you buy an at or near the money call and sell one that's out of the money by thirty or forty cents keeps you in position should we see some kind of a spike in bean prices and some kind of movement higher in corn to participate in that. So, yes, I think it's worth that ten or twelve cents.

Pearson: Alright, now let's talk about when you were on last time you were talking about a better cattle market and you said, well we're going to see, I'd like to see some mid-70 cattle and we're there. I mean, we're looking at the board now and we've got it. You're saying take advantage of it.

Robinson: I think futures have given us a pretty good opportunity here, Mark. Again, I can't speak in general because basis values vary from region to region. But as earlier discussed with February futures at seventy-six dollars or higher and a basis of a dollar or a dollar and a half, Southern Minnesota, all of Iowa you're talking about locking in a seventy-five dollar market which I think is pretty attractive given what we know about the market today.

Now, we're projecting a year over year decline in beef production of about four percent. Exports are forecast increase two and a half to three percent, so there's some pretty positive things underpinning this market, Mark. But again, with today's cash values around sixty-six to sixty-eight dollars, I'm attracted to that hedge which is seven dollars better than that, two months down the road. I think it's a good opportunity.

Pearson: Cash market has been soft and spongy so maybe go to the board and look at some opportunities. Real quick, Virg, I don't have a lot of time left. But you also mentioned something else, this guilt mix has been picking up on the slaughter, may be causing this second drop that we've seen here in this hog price, but may be setting us up maybe for something better next summer.

Robinson: Yeah, I agree. I think the projection on pork production declining two to three percent year over year is accurate, Mark. Exports are projected to grow two to three percent year over year. Total meat inventory is down. Yeah, I think we've got a better market format, groundwork laid for 2003. But again, I'm still reluctant to suggest that live hog prices can be much better than thirty-five to forty dollars given the current meat that we're carrying and the production schedules forecast for the first half of 2003.

Pearson: Forty is still better than twenty-five. Thank you very much, Virgil Robinson, with us this week on the Market Plus page here at the Market to Market Web site. I'm Mark Pearson, thanks for joining us.


Tags: agriculture commodity prices corn markets news