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Market Plus: Feb 08, 2002

posted on February 8, 2002


Market Plus: Feb 08, 2002 Pearson: Time for the Market Plus segment here on Market to Market on our Web site. Mark Pearson here with Doug Jackson and Walt Hackney. Doug, It's been one of the more depressing outlooks, frankly, of the last few weeks, really for the last five years on this corn and soybean market. You were talking about maybe some optimism as far as the corn market is concerned. Talk about that.

Jackson: Jackson:Yeah, Mark, I think maybe the most interesting story developing is the corn situation. We have less export competition from China, Argentina and Brazil next year. I think that's inescapable. We're going to have much higher US corn exports, much higher ethanol demand, perhaps a little bit bigger feeding demand. I think it's pretty easy to project the 10.2 to 10.3 demand base or record demand base next year. Obviously anything other than a record 10.2 or 10.3 type of a crop that will require a record yield will find carry out dropping next year. That leaves the corn market extremely sensitive to any kind of a weather disruption next year. The only reason we're not factoring that in any better than we are today is we're still really reeling psychologically from the demonstrated productivity last year when we had the third worst rated crop conditions ever and the second highest yield. So, people understand that this increased productivity is part of the picture. Also, the subject of bigger corn acreages crept in here in the last few weeks. People now are talking two, three, maybe even four million more corn acres as people were disappointed with bean performance last year. So, the idea of more acres and big yields, of course, is tempered enthusiasm now. But as we get into spring and summer anything other than good weather, this corn market can have a decidedly bullish story very quickly.

Pearson: All right, good point. Something to keep an eye on. Walt, we talked about the smaller calf crop. You talked about more heifers going to the feedlot. That's got to be setting up a pretty expensive deal for these feeder/buyers out there.

Hackney: I think your point is precisely the problem. We're getting set up for a possible bust in this thing because you can pay too much. We learned that the last two years. We've had phenomenal losses and it's been for one reason. They paid too much at the time they bought the feeder animals. I know that doesn't wear well with the ranch community but the fact remains. These cattle feeders are very necessary to this industry and if they can't buy cattle that are somewhat equitable to a profit picture we're going to lose them and they're going to go out of our business. The optimism is sky high as we speak on the possibility of this fed cattle market. There are those analysts that would suggest eighty dollar cattle in six weeks. I think I would almost hope not. If we can liquidate the inventory we have as we speak at around this seventy-three to five dollar level, that may help deter some of that blind optimism we get, historically, on the price of feeder cattle. We saw calves, Mark, the last two weeks come from a buck a pound on a five hundred and twenty-five pound calf up to $1.08 today as we speak. We saw calves at four hundred and fifty pounds anticipating this grand market projected for the fall. We saw calves at 450 come from a dollar four or five ten days ago to a dollar twenty, twenty-one today. That isn't going to work. You can not feed your way to prosperity on these cattle. You've got to own them correctly to start with.

Pearson: Absolutely. Good points. Appreciate it. That's Market Plus for this week.

Tags: agriculture commodity prices markets news