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Market Plus: Jun 21, 2002

posted on June 21, 2002


Market Plus: Jun 21, 2002

Pearson:Welcome to Market Plus here on our Market to Market Web site, I'm Mark Pearson, glad that you've joined us. Let's talk a little more detail, we had Doug Hjort and Walt Hackney with us this week. We're going to talk to Walt about this fall calf crop and what that's going to look like. But Doug let's talk about the soybeans. You were friendly of this corn market, at least on new crop, soybeans not quite as friendly. What should a guy be doing?

HjortWell, I think, I don't want to sound bearish on the new crop but the given numbers that we see now from USDA reflect an increase in stock as we go from the old crop to the new crop, only just ten million bushels or something so it's not a big deal. But what my point was that our demand is so strong right now, export sales for example running twenty million over the latest USDA estimate, the crush is running 30 million bushel over the latest estimate. That doesn't mean our ending stocks are going to drop fifty million because that will kind of wash out in the next few months but demand is extremely strong for soybeans, USDA has a history of coming out and putting out way too high in ending stock estimate for the new year. I think they've done the same thing this year although not to the extent of the last three years but they're too high and we run a very strong risk if yields aren't record high here in the United States, we're the larger acreage, of taking our ending stocks down below two hundred million bushel a year from this fall.

But all of that has to develop over the months before the trade starts to see the actual numbers developing from USDA, it might be January or February before you start seeing some of that stuff. Below two hundred million you're getting tight. Very tight and you know you can get down to 150 or so especially with South America having such large production now but then you really start to worry about where the next bushel is going to come from.

Pearson:Good going, Doug, have some good points. As I know, Walter we didn't get a chance to get to some of what we wanted to talk about because of our time constraints of the show but this calf market, talk about what's going to happen this fall coming off these ranches.

Hackney:It's an interesting development this year, a rule of thumb in the feeder calf business for fall delivery calves, particularly in Montana, Wyoming, Colorado or a heavy ford contracting is predominant, for October, November delivery is the buyer group historically have judged a calf to wean out the cow at about 575 pounds. They go back to the mercantile which is predicated on a 750 pound cattle, they break that up eight dollars a hundred basis, positive, and they apply that and try to buy the calf that way.

Well, the last three years that basis has been from ten to sixteen plus versus the eight where it should have been. Those cattle are the ones we're referring to today that are losing a hundred a head in the fat cattle market this year. The cattle feeder is putting his feet down pretty solidly, he's digging his heels in and he's saying, basically, that that calf weighing five and three quarters to six hundred pounds needs to be at eighty-two or three cents, fob Montana, that rancher is sitting there like a deer in the headlights and he's saying, that's a hundred or a hundred and twenty bucks a head less than I took last year on my kids.

The cattle feeder is saying maybe you should retain ownership, maybe you should enjoy the same financial position I'm in today for me having given ten to sixteen over the last couple of years. The rancher is looking at those economics and is starting to say, well if you'll get somewhere in the ballpark but a little better than eighty-two or three cents at six hundred pounds, I might be willing to contract a few.

Now be that as it may, the other things we're looking at and specifically in Montana, is last year due to the drought the cooling effect on those herds was so dramatic that we're not looking at the availability of fall kids this year as we were a year ago. I don't know that the county is down fifty percent, I doubt that, but it's certainly been twenty or twenty-five percent. So, you've got two offsetting influences here that are dramatically going to affect this market, Mark, and it's going to be interesting to see who blinks first.

Pearson:Alright, it is, we're going to track that Walter, thank you so much both Doug Hjort and Walt Hackney for being with us this week on Market Plus. for Market to Market, I'm Mark Pearson.

 


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