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Market Plus: May 17, 2002

posted on May 17, 2002


Market Plus: May 17, 2002

SPRECHER:This is the May 17 edition of Market to Market, Market Plus. We're here with Wayne Newton. Wayne, in the program we talked about the problems that drought is having on the wheat market and the wheat producers and how that is affecting livestock producers and is starting to ripple, seemingly, across all commodity markets, yet, no necessarily resulting in higher prices. What's the problem with cattle markets?

 

NEWTON:Well, maybe the old cliche that cheap grain makes cheap meat is coming back in vogue. The farm bill and the cost of running livestock operations have kind of kept the grain farmers at bay and they weren't in and outers in the livestock but if grain stays cheap long enough that increases livestock numbers. Obviously we've seen the swine industry grow and grow and move into much more modern and efficient and much more productive units, pigs per litter was unheard of when I first started farming at 8.8 or 8.9, something like that. The old three pen hog house didn't do that.

 

SPRECHER:Now we've got cheap meat and cheap grain and even as we talk about difficulties in getting the crop in this year, prices are still sort of lagged.

 

NEWTON:Yeah, I really think that Chicago would also say rain makes grain to the guy whose tractor is stuck out in a mudhole. I'm not sure that you'd go along with that. But I'm convinced that if we get three or four days of nice weather come Monday or Tuesday which is kind of in the forecast, these guys will get caught up real quickly.

In this day and age they're so efficient and they have planting units that will plant 300, 400, 500 acres a day so they'll move through that rather quickly. But if you're in those areas it's very, very frustrating to look out the machine shed door at mudholes that you wouldn't expect to take very expensive equipment through.

 

SPRECHER:If we just ran down the lines in terms of strategy, we'll go with the grains and then we'll go with the livestock. What would you do in order, if you were a producer to start locking in some...

 

NEWTON:Well, from the grain standpoint, if the producer hasn't done anything to date and may still have some old crop to sell, this rally needs to attract their attention and get the corn sold based on July. Basis isn't all that bad, on the new crop we've come back an enormous amount on the December contract, I think we got down as low as 2.10, it's now traded this week in the 2.30's, it started at about 2.42, 2.48 when it came on and went clear in the tub and now we've seen a rally.

It would take a disease or pestilence or bad weather at pollinating time to sustain this market or take it any higher. When you look at the potential for 11 billion bushels at the end of the season with the carry out that's still here I would say the farmers need to take advantage of that. Now, if they're reluctant to get in the futures market for fear it could go up there's some option strategies that they need to talk to their broker about to deal with that. Or if on the other hand they want to make some deals with their grain buyer for forward cast sales that may be something to consider as well. But they really need to take advantage of this rally.

 

SPRECHER:Briefly for livestock producers?

 

NEWTON:I really think that the livestock thing, particularly in cattle, it's really been a crazy week. We had boxes up a lot, we had the June board down and the cash is aobut steady. I really think what the livestock producer needs is to sell them when they're ready, shop around, there's a lot of different markets and a lot of differnet grids. We've heard prices this week from 1.11 down to 1.04 and 1.05 on the carcas basis and the farmers really need to be on the phone and hooked into a network to find out where those best buys are, best sales are.

What the market really needs is a nice weekend. The old cliche that we have, it rains on Easter we get seven Sundays after that. We've had those now and now it's time to warm up and get the grills out and get the food prepared and the family leaning into the meat counter and get some product moving.

 

SPRECHER:Alright, well thank you Wayne.

 


Tags: agriculture cattle commodity prices livestock markets news wheat