Pearson: Hey, welcome to the Friday, December 16, 2011 version of Market Plus. Glad you joined us here at our Market to Market website always a special time when Darin Newsom comes over to join us.
Pearson: Darin we get these amazing tweets from our listeners and viewers out there and folks that watch us right here on the internet which is great to. Although if you would like to see us on your local PBS station not a bad idea to pick up the phone and call your local public television programmer and say agriculture is the hottest area in the world's economy. I would like to hear more about it on my local public station. Just mention that to them and get on your local show and of course you can continue to watch us here at our Market to Market website as well with our special Market Plus segment.
Pearson: Comment from a viewer inOklahoma named Jared and he wants to know how high you think 2012 December corn could do before it expires? Now obviously a lot of factors can go into that.
Newsom: Yes. There is a lot of things that can come into play. If we just look at the seasonal index alone is pure averages of what we normally see over the last five years indicates upper $6 is a good price target. Now if we just look at the charts it is a bit different story it is not quite as bullish maybe getting up to 6. Probably should get it back up to that six dollar range - rally about fifty/sixty cents maybe pushing up to that $6.30/$6.40 range. Not a lot past that. So whatever we look at whichever indicator we are looking at it does look like this spring and summer we should see a move, you know another rally in the corn market. So it looks like we should be able to see better prices later on.
Pearson: I am just going to - and I am no technician at all here, but determine where our corn on a continuation chart what our high prices would be in corn would be about what? $7- what?
Newsom: Yes, on the continuation chart we came one tick short of $8. $7.99 and 3/4 this past summer.
Pearson: Ok. So figure we are bottoming out at some point in here and you guys are always talking about this fifty percent retracement. That is going to get us around that $6.30 mark?
Newsom: Right. If we - if we looked at the Dec. by itself that is when we would starting looking at that 6 to 6.30 mark. If we look at the corn market as a whole, you know, start falling from about $8 down to about $5.50 we are looking at about $2.50 there bringing back about a $1.50. Now we are starting to look at that $6.60 to $6.80 range. So there is a chance that this market is going to post a pretty solid rally. There is a lot of things as you have said that is going to come into play acreage, weather, and all of these things yet to find out. So, going to sit back a little bit on this corn market and see what happens, see what develops over the coming months.
Pearson: I keep bringing up the lack of farmers selling and if you really think about it we have built a lot of on farm storage. Ethanol plants didn't build storage. They want it to be, you know, pay as you go, just in time processing. So farmers have kind of filled that gap and it has been very profitable the last two years to wait and move into that summer market with cash corn. Cash corn has been king and it looks like that is a lot of what is happening right now, but historically the trade is very bearish when farmers are the owners.
Newsom: Right and we have seen those adjustments being made in the market itself in the future spreads. Now does that mean that we are not going to see a spring rally? No, but I do think that is one thing that could keep us from as strong a seasonal rally as we normally get is the fact that we do or at least we think that we have as much corn in storage right now waiting for that spring rally that we are going to unload in that time frame when earlier this marketing year the thought was we were going to start running short and supply and demand was really going to pull us down.
Pearson: You talked about it during the show but obviously our world is a lot more exciting when those big commodity funds come strolling into town with their pockets full of money buying everything, and we had a tweet from Dan in Iowa who said where did all the traders go? And you talked about buying dollars, I jokingly said Spanish debt, I don't know that that's not true. I think maybe some of that higher value foreign sovereign debt might be what some of these people are buying.
Newsom: Yes, I think you are seeing money flowing back into those avenues. We are not seeing a lot of strength in the stock market.
Pearson: No, equities aren't happening.
Newsom: But you are seeing it in the dollar. I think you are seeing and I hate calling the U.S. Dollar Index a safe haven market. I hate calling anything a safe haven market. There really isn't such a thing. We have found that out over the last few years but it does look like we have a flow of money out of commodities back into cash in some way, shape, or form that is keeping pressure on commodities in general. You talked about the sell off in the dollar. You talked about the sell off in crude oil. So it is not just the grain sectors.
Newsom: Yes, even gold. Yes, gold is getting hammered right now and people say why? I mean we have got all these economic troubles globally. Why is gold getting hammered? The reason why? Money is moving to other areas despite the fact gold should be a good investment it is still coming out of that market just like it is grains and energies.
Pearson: All right. Money is moving and it never rests and find out what is going next is always a good place to be. Hopefully we will see it cycle back into the commodities markets with some kind -. It could be a January crop report as far as that goes Darin. You think we will see some surprises with that one?
Newsom: The January one there is so many numbers in that crop report that there is always a chance that we can see something big and often we do. My bet would be that we are going to see it closer to the springtime. Let's say get into the later February, early March, I think the markets really start to get active again then.
Pearson: This stronger dollar helped influence this oil market some but also are we seeing some negative fundamentals in oil right now. Is that trying to paint a picture for us?
Newsom: Again I always go back to looking at the spreads and they are pretty neutral right now. We haven't seen a lot of movement.
Pearson: We are talking Brent vs. WTI?
Newsom: Well, Brent vs. WTI and the WTI spreads themselves. You know the future spreads from one contract to the next. We still have got a little bit of a carry out there in that market. So we haven't gone inverted. We are not in some sort of supply crunch right now. So - and we are in that time of year when seasonally energy complex comes down. So I think that is going to be weighing on energies as a whole as well.
Pearson: Darin Newsom as usual some great insights. I appreciate you joining us on the show and of course right here on Market Plus and of course we appreciate your tweets as well. We try to get to as many of them as we can. Make sure you tweet us at Market to Market and go to our Twitter feed and we would love to hear from you and of course the Facebook page too. We pick them up from all of those and again from all of us here on Market to Market, I'm Mark Pearson, thanks for watching and have a great week.