Market Analyst Elaine Kub discusses the commodity markets with host Mark Pearson.
Pearson: This is the Friday, September 16, 2011 version of Market Plus. Thanks for joining us here at our Market to Market web site. Make sure you tell your friends and neighbors to join us here as well. With us this week is one of our regular market analysts Elaine Kub.
Pearson: Well, Elaine you seem to be talking a lot about this strong dollar and there seems to be with a concern in Europe more parts of the world are interested in owning dollars again. Now we will see what happens in Europe over the next couple weeks. You mentioned the Fed and what they are going to do next week. So those are all currency impactful but the stronger dollar going forward this becomes a head wind for ag export business.
Kub: It does and I'm not super concerned about the dollar continuing to rise because its status as a safe haven if we can get the economy to stabilize and more confidence in just investing in stocks and other categories we can get a lot of money pulled out of the dollar pretty quickly. I mean, I don't think that the dollar strength is necessarily a reflection of what they think the U.S. dollar should be worth. I think that they can't think of any place else to put their money at this point.
Pearson: We talked about the funds and you are saying that is part of where the funds money has gone has been into the 4x market and buying - specifically.
Kub: Well and you talked about Europe and their problems what I thought has been really interesting this week is to hear how China and Brazil and Russia and India, these BRIC countries, are the ones that are now possibly thinking about going and buying some of these European bonds and bailing them out which obviously the United States is not in a position to be saving Europe and nobody is politically going to suggest that they do so. So to see those BRIC countries come out and be a really big international force towards saving Europe is a major sea change in world politics and world economics and it reminds me of a story I saw last week that Iran is now the largest exporter of Brazilian beef and that would be a great market. The Brazilian Ag Secretary says that they buy expensive cuts of meat and they pay on time, Iran does. Obviously we are not going to go out and sell our beef to Iran at this point but it just makes you think about all these markets that are out there for exports that we definitely depend on for our ag exports that for whatever reasons the world is not necessarily our oyster at this point in time for our ag commodities.
Pearson: But you mentioned we talked about pork and pork exports on the show, and talk about - because the beef exports have been very strong as well. We've recovered a lot of that loss from back in the mad cow problem back in ‘03. So we are starting to recover some from that. We're seeing good demand, good export demand, the - of declining beef supplies here in the U.S.
Kub: Yes and it is a great thing. Going back to the pork, twenty-nine percent of our pork is an export market and it is largely to Asia, China, South Korea, Japan and what the U.S. Meat Federation said sixty dollars a head that amounts to for each hog and I cannot remember the figure for the cattle. But you are right this is definitely - if we want to maintain these prices even if and when we ever do start expanding the herd again we have to be looking to these outside markets.
Pearson: All right but for producers who are looking at what's happening to the dollar currently you don't think that trend is a long lived one?
Kub: I hope not. I mean it seemed very fast, very sharp, and it also seemed to kind of falter this week. So, I think, hopefully we have seen the end for now of that weird rally in the dollar.
Pearson: Wheat prices going to go higher?
Kub: They could. When you think of these grains tight ending stocks, wheat does not specifically have tight ending stocks in the world, but grain overall - all grain and oil seeds if you add them all up together the supply and demand situation is very tight world-wide. So, a rising tide lifts all ships etc. etc. I don't see wheat falling off while corn and soybeans go up. I see them all kind of moving in the same direction.
Pearson: And stronger corn and bean prices in the next two to three months. Take the crop off the combine unless you can sell it as an old crop commodity for a cash market. You mentioned ethanol plants. That would be the most logical one. You're going to put it away, let's store it; we will deal with it later.
Kub: I think that is the right thing to do. It is maybe not the right thing to do from a business decision because these are obviously profitable prices to sell at now, but I think - certainly what I have heard out at Husker Harvest Days is that many of them intend to do this and the crop really isn't there. So if enough of them do tuck it away the end user is going to have to get into a bidding war to get it this spring.
Pearson: Well one place where it is is where you were, and that was over in Nebraska at Husker Harvest Days. If there is a garden spot it is the Husker State.
Kub: It certainly is. I mean there was some hail, some green snap here and there, but largely that is a great looking crop.
Pearson: Yes and we've had plenty of rain. Elaine as usual appreciate your insights, thanks for being with us here on Market Plus, and being with us on Market to Market this week. Again make sure you talk to your local television programmer if you are not seeing Market to Market on your local public television station, like to watch the live version, make sure you give them a call and say hey, how come you are not running Market to Market? You need to. And of course you can always join us for parts of the show right here on our Market to Market web site. So from all of us here on Market to Market, I'm Mark Pearson, thanks for watching. Have a great week!