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Market Plus: Market Analyst Don Roose

posted on December 30, 2011

Market Plus: Market Analyst Don Roose

Yeager: This is the Friday, December 30, 2011 version of the Market Plus segment. Paul Yeager along side Don Roose. Don, a couple things, I want to talk about wheat. The world market you are talking in the regular analysis segment how wheat has grown in South America and that the market seems to be - stocks seem to be going - if you are in the Wheat Belt in the United States what are you viewing that news from South America as and how you are planning ahead for the future?

Roose: Well, I think you know with the South America weather problems that we had you are viewing that as a good relief rally for right now. You are optimistic that maybe the corn - the problems in South America continue wheat can keep moving up but realistically you realize that you have a lot of wheat in the world and rallies are meant to be sold.

Yeager: Do we see any of those acres of wheat maybe going to corn? Maybe going to soybeans? Where it could grow in this country?

Roose: Well, I think where it is possible I think you will. I am not so sure that we haven't got the easy acres already dialed in to the market from the last two years but I would say that is right. I mean where possible you are going to plant corn or soybeans.

Yeager: Would you be doing that if the wheat stocks weren't as high as they were? Would people already be thinking about going into corn?

Roose: Well, I think it is the wheat stocks but I think it also translates into the price. I mean when you have corn and wheat is trading at the same price it is pretty much a no brainer, if possible, to try and plant corn.

Yeager: All right. Let's talk a little bit about corn. This is a Twitter question we got from Matana Invest. Why has December future rallied in the face of ethanol federal subsidy death? And that death coming here at the end of the year why has the market rallied? Has that helped it at all?

Roose: Well, we have moved into a negative as far as the profitability in ethanol, but the reason that we rallied in the face of loosing those subsidies one the exports aren't going to be affected by that at all, and we already have a market that is pretty mature and we are mandated to use so much ethanol. So, I would say it is a part of all those reasons.

Yeager: A number of factors which any market it isn't one flood or one storm. It is lots of factors that figure into the market.

Roose: Yes, I think that is exactly right and hopefully we have moved to a place where ethanol is mature enough that it can function on its own and I think that is the goal of the government is to help the child along and then they mature and they are on their own.

Yeager: Good analysis and that is what the politicians are using as we come here, we are just about to have the Iowa Caucuses, the New Hampshire. The presidential candidates keep talking about that. That they want to cut federal subsidies. Well, they are already down the road doing that. Do you see that becoming a political issue, I guess, the future of ethanol in this political season? Do you think that will be something the candidates talk about?

Roose: Well, I would hope that they would. You know ethanol is very important to the Midwest from a production standpoint. When you are talking about using five billion bushel - or five billion bushels of corn for ethanol when you are producing thirteen billion it is a big deal. So yes, it is a big factor and I hope it gets a lot of attention.

Yeager: Another question. Peter in Canada wants to know assuming the weather doesn't significantly reduce the soybean acreage corn crop, will we see big competition for acres? I know we talked about that a little bit earlier but where do you see that competition for acres if it is price, if it is ending stocks, weather, what are the big competing factors here?

Roose: Well, first of all it is going to be price and I think the profitability of corn over soybeans definitely has the head nod. The rotation is going to play an important key, but I think it is going to be weather is going to be the other factor as we move along because if we have a decent spring then we will plant more corn if possible.

Yeager: Do we see weather as the big competition for acres?

Roose: I think it is price and then it is weather and so I think yeah, weather is going to be a factor.

Yeager: All right. Other things? We talked about cotton. You talked about that demand to a certain point. What is consumer - how is the consumer appetite, the consumer price, they are watching pennies when they go shopping, they just got done with the holiday shopping season. Does that have any bearing on the market now that is done and that product is under the tree and being worn back to school?

Roose: Well, the - the problem cotton has is we have synthetics that compete with it. So the price has to be right and the other thing that has happened is we have had a slow down in China which is a big consumer of cotton and sells around the world of course. So I think it - it is going to boil down to price and I think it is going to be eighty-five to ninety cents, you know is the area that you are going to find the demand and I think if you get close to a hundred plus you are going to have trouble with the demand and of course weather down south is going to be another big factor.

Yeager: We didn't talk about it much in the regular analysis Don, but La Nina and the impact. I mean there is suppose to be a loosening of that grip in the south. There has been some rain in the south but there is still a lot of moisture to make up in those areas.

Roose: There is a tremendous amount of moisture to make up and you know we talked about the wheat area but that is true for the cotton area and I think the risk is in that dry factor if it happens to bubble up into the Central and Northern Corn Belt and you know then we are in a full blown weather market again. So, weather is just going to be key in this La Nina year and you know a year ago La Nina was weakening the middle of December and now it is still staying very strong.

Yeager: So you can't predict her. There is no trying to figure out where she is headed?

Roose: That is right. The weather is very tough and very unpredictable, but I think what most people are optimistic that we are hopefully going to see the La Nina die down by the time we hit the end of January.

Yeager: Other things on livestock you want to cover or things we should reiterate?

Roose: Well, I think when you look at the livestock overall, you know, we are going to have more poultry, we are going to have less beef, and I think it is going to be the competition from a demand standpoint as the demand is probably going to be soft this next year.

Yeager: Don Roose one of our regular market analysts sticking around here for the Market Plus segment. If you have a question send it to us on our Twitter feed or on our Facebook page and we will ask our analysts and you can hear your name mentioned right here in this free segment that we offer here for Market to Market. Don Roose, I'm Paul Yeager, have a good week and Happy New Year.

Tags: agriculture commodity prices economy markets news