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Market Plus: Oct 25, 2002

posted on October 25, 2002


Market Plus: Oct 25, 2002

Pearson: Welcome to Market Plus here on our Market to Market Web page, I'm Mark Pearson, host of Market to Market. With me, our analyst this week, Tomm Pfitzenmaier. Tomm, you were talking about these grain markets. We're kind of getting focused really on what's happening here short-term, basis is strong and people are trying to make decisions. You think maybe we should be looking a little bit further out?

Pfitzenmaier: I think that Dec. of '03 corn is setting up a great opportunity. Everybody's selling early last year didn't work so a lot of people aren't going to want to do that because it didn't work last year. Well, it's worked about eight years out of ten so I would guess we're going to go back to doing that.

If we have a big acreage next year which we're anticipating and a good production cycle we have the potential to take corn right back down to $2.00 again and you've got an opportunity or you can buy those $2.40 December of '03 corn puts for eighteen cents, you can sell a couple $2.80 calls against it to pay for it at nine cents or ten cents each and you've got yourself a nice floor. Dec. of '03 corn is trading at $2.42 to $2.43 so you're buying yourself a floor basically right at where the money is at and I think there's a great opportunity here to continue to lock in some good prices on down the road.

Pearson: Alright, so maybe not get too myopic on this year's harvest, make those decisions move on.

Pfitzenmaier: They have the potential to be totally different markets here. You've got a tight carry out, a tight situation, strong basis for this year but that doesn't necessarily mean that that's going to translate to what happens next year with our unbelievable capability of producing crops here and the probable increase in acreage. It could be ugly a year from now, I mean, things can turn that quick.

Pearson: Alright, the other end of the barrel. Let's talk about livestock, Tomm, for just a minute now. Let's peg the cattle market. You keep telling us it's kind of been channeling up since May but this is about the time you're getting a little nervous.

Pfitzenmaier: Well, yeah, I mean like I said on the show, there is a big disparity in the cash, the futures are strong, they look good, it's always a little bit nerve-racking to sell cattle as you go into that wintertime period because you always have that weather situation, particularly in January and February that can make that market pop pretty good. I guess that's why when you ask me on the show what my strategy would be I would probably be more inclined to use put options, just simply because if you do get in that weather situation you've got some up side and you're going to be allowed to participate in it and not be disgusted if you just went out and sold the futures market.

But with that disparity between the futures and the cash, at some point there's going to be a correction made here.

Pearson: One way or the other.

Pfitzenmaier: Exactly.

Pearson: Tomm, thank you so much. Tomm Pfitzenmaier, our guest this week on Market to Market. That's Market Plus for this week. Thanks for watching.


Tags: agriculture commodity prices markets news