Market Analyst Sue Martin discusses the commodity markets with host Mark Pearson.
Pearson: This is the Friday, October 7, 2011 version of Market Plus. Thanks for joining us here at our Market to Market web site. With us this week Sue Martin one of our long time market analysts. Sue a lot going on in this market. You said several times that we are at a congested phase. I think that really says it well. There is a lot of confusion about the capital markets, the equity markets, the commodity markets. What is gold? Is it a commodity? Is it a currency? There has just been a lot of confusion out there and it impacts agriculture in a big way. A weakening dollar now a strengthening dollar which has been wind at our back the weakening dollar as far as ag exports are concerned. Do you think the dollar is going to strengthen some?
Martin: I think the dollar is. I think as we go into 2012 maybe through the first quarter of 2012 the dollar is going to strengthen. And I think that maybe that gives us a little bit of a testy time. The one thing is we are going to have to watch is South American weather because we are into a La Nina. Argentina is dry in some areas and Brazil, their crop looks pretty good or let's put it this way, their weather is good for getting crops in, but there is some areas that could turn dry. We need to watch their weather because Brazil is looking at a huge crop. They are estimating a 75 million metric ton bean crop this year and if that doesn't come off and you have China who produced - I think their production on beans was down 10.3 or 10.5 percent and you've got the rapeseed crop was down. I think China needs protein. I think they need soy meal and they are going to need soy oil and I think they are going to be importing beans and therefore if South America has an issue we are the only other game left in town that they are going to have to come to.
Martin: And I think this is what we have to watch is for right now everything seems very dark, very dismal, and without much promise and like everybody wants to reminisce going back to 2008 saying oh, my God it is going to be just like this. We are just going to drop and beans can go under ten and maybe back to nine. We might see beans get to ten eighty or ten seventy but when the way we are moving and we've already been to eleven fifty-two, how much more are we going down? I think we have got a chance for a pretty good rally here. We could see November beans bounce right back up or maybe it is Jan. beans but get a rally back up to around twelve fifty to twelve seventy, might get to thirteen, but the extreme for me would be thirteen twenty. Will we get that far? I am not sure. I don't think so. Without - we've got to have help. Something has got to propel us to get us there. Maybe we finally lift the dark clouds over us of all this economic issue overseas because right now it is almost a ten and it ebb and flows and it has been percolating for almost two years. And so now we will see what is happening because they are getting to the point where they have to make their decisions of what is going to happen and I think the euro is going to fall apart. And I think Germany is going to leave the euro zone too and they are probably the largest economy in that.
Martin: So I think we have got some very important times with us and yet you have India who doesn't have any economic problems. You have Asia, China, yeah they are slowing a little bit, but they really don't have the issues that we have or that Europe has. So it is more of Western World situation at the moment plus Europe. And I think that once we get that settled down we can - maybe people will start hearing something positive out of Bloomberg, CNN, FOX News, you name them, but right now we don't seem to have that and God knows on the internet there is a boatload of this kind of negative rhetoric that is scaring everybody and so I guess I would have to say that find your spots to invest in. You know these funds have been liquidating. They haven't gone short yet. They're long getting out. Ok? But they are going to cash but what are they drawing for interest? Nothing. So they are not going to want to stay there very long because these managers only get paid on performance.
Pearson: At some point money is going to come back to the market. Sue, we've got just a couple of minutes left. Where are they going to go? They may go to the dollar for awhile. It may go to the Forex Market for awhile. That's never been very satisfying for them. The equities are still a struggle. There are still issues there. Bond market has been in the rally for, my gosh, twenty years.
Martin: One better be careful with bonds.
Pearson: Yes and one that is, you know, may look a little toppy here. So when I look at this thing again I see them seeing wow, corn goes to five twenty or four eighty. Beans go to eight fifty and there is world wide demand. Energy pops back up, whatever. You name it happens in the Middle East. Oil starts to jump. The ethanol thing is still going to be there.
Martin: Well here is another thing Mark, the crude oil has come down. We have been under eighty cents and after having been right at the hundred dollar mark. So cheaper gasoline coming off of these highs -
Pearson: Another stimulant. The tax break if you will.
Martin: Yes. That helps put a little more money in people's pockets to pay for food. You know it costs crude breaking back is going to create less input or energy costs for the manufacturing. That is going to be helpful. Mark, in September auto sales were up huge, and that in the old days, for me, it used to be within six to nine months. If auto sales were dropping it was a sign the economy was going to slow. So I would think it would have that adverse affect and if people are buying more autos, I would have to think that is a positive sign, and then the cattle being able to hold like they have. I do think there is some things out there that do give us promise but we still have to feel a little more comfortable with Europe and we just aren't there yet.
Pearson: Right. Big issues over there. Sue, we are out of time. Thank you so much for being with us. Sue Martin joins us regularly here on Market to Market and we look forward to her visits. And from all of us here on Market to Market thanks for tuning into our Market to Market web site. Be sure to join us again next time. Be sure to visit with your local public television programmer if they are not carrying Market to Market on your local public television station give them a call and tell them that they should for the good of all man kind. And for all of us here on Market to Market I'm Mark Pearson have a great week!