Iowa Public Television

 

Market Plus: Sep 13, 2002

posted on September 13, 2002


Market Plus: Sep 13, 2002

Pearson: Welcome to Market Plus, part of our Market to Market Web page, I'm Mark Pearson, glad you could join us. Tomm Pfitzenmaier of Summit Brokerage with us this week and Tomm, been on the show for many years. We talked about making sales and taking advantage of stronger markets and extending our selling period and so forth. One of the things we didn't have time to get to on the show Tomm, you know you've got some thoughts about selling this 2003 crop.

Pfitzenmaier: You know, if you talk to farmers around the country and you look at the economics of it and you compare growing fifty bushel beans at five bucks which grosses you $250 an acre and look at what corn is grossing with the yields we're getting in corn, there's no incentive whatsoever to plant beans. I think you could potentially see a huge jump in acreage plus in addition to the fact we've had a change in the farm bill which is going to give further incentive to people to plant corn. Corn up in that $2.55 - $2.65 range just looks to me like it's screaming to be sold. I know there's some optimism, that everybody's a little afraid of how things are going to work out this winter but with this rally in corn that we've had you're probably going to see demand back off a little bit and you could very easily have a huge crop next summer and end up with a two billion carry out at the end of next year and we're right back in the dumper again. So, you know, $2.55 - $2.65 in recent history has been a pretty good price and I don't think it's a bad idea to take a piece of that somehow. Now, maybe if you're afraid of doing that, I think there's going to be opportunities to buy the $2.50 put, maybe sell the $2.80, $2.90 call to help pay for it, get that cost of that option down there and you know, five to eight cents which is fairly reasonable for that much time. Most of the reason you can't use an option out that far is because you're buying such huge chunks at a time, nobody wants to pay that much for them. So, if you can lock yourself into trading range with a little bit of upside potential to take advantage (tape skips)...certainly worth a close look at, I believe.

Pearson: Let's talk real quick about livestock. You mentioned hogs up from the bottom's end, may retest these lows, there's still a lot of concern out there about this eight, ten dollar hog market.

Pfitzenmaier: Yeah, and that certainly is a possibility. We're going to have to see, you know, the numbers have backed off here recently and we need to see how that shakes out, I think there's a general feeling that we're in a liquidation mode in the hog market and if that dries up then you're probably going to, if that continues and there's more sows coming to town maybe you're going to go down and retest those highs. I guess I'm not in, no matter what I don't think we're going down to the ten or sixteen dollar level again but you could maybe retest the twenty dollar cash market.

Pearson : Maybe look at an option strategy there?

Pfitzenmaier: Again, like I said on the show, the thirty-two dollar put for a buck gives you disaster insurance, it's not a price that anybody is all that excited about but it's also a price, you'd want some protection if you started going under that number. I eluded to it on the cattle side, but there is just a lot of stuff going on around the world right now that can, extraneous of the livestock industry in the United States that could affect us and cause us problems. So, I don't think it hurts to have a little protection just for that reason if no other.

Pearson: Very good, thank you so much, that's Tomm Pfitzenmaier. That's Market Plus for this week. Thanks for joining us, for Market to Market, I'm Mark Pearson.

 


Tags: agriculture commodity prices markets news