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Market Plus: Market Analyst Don Roose

posted on March 2, 2012

Market Plus: Market Analyst Don Roose

Pearson: This is the Friday, March 2, 2012 version of Market Plus. Thanks for joining us here at our Market to Market website. Great comments on the show tonight from a good friend, Don Roose, and appreciate his insights. Don, we can talk about where the markets are going to go but until someone comes up with an accurate weather forecast that we can actually trust what this growing season is going to be like, this thing is going to be volatile.

Roose: It is going to be volatile and we always say about 80% of the market is weather and if you don't believe it just look at the last two years. So, you are exactly right, Mark, it is going to be volatile.

Pearson: You can go around the country and talk about wheat and beans and cotton but all anybody really wants to talk about is corn. That is the driver. We are the Saudi Arabia of corn in the United States and that is what people want to talk about. And you talked about it on the show tonight, others have talked about it, farmers are holding tight. Don, it seems like in my memory that is a bad thing for markets. Am I wrong?

Roose: Well, we think so and of course if you are holding tight, you know what card you are trying to pull out, and that is the fact that we are going to have weather problems very similar to what we had the last two years. So, I think you have to really look at what the market is doing. It is trying to tell you to sell this market. There is no carry in the market, spreads are inverted March over July, basis levels are tight, and there are other ways to re-own a crop if you think - to own a crop if you think the market is actually a positive.

Pearson: All right. And if you want to know what the dollar is going to be doing, Don took a five second weather forecast which I thought was - dollar forecast for us at the end of the show. So, make sure you watch that too if you ware here on our website.

Pearson: Don, let's catch some of our viewer's questions. We get these great comments that come into us via Twitter and we really enjoy it. Pete in Canada sends us a note, and I think you talked about this, but does the new crop corn price hang in there because beans are getting more acres? You talked about that on the show.

Roose: Yes, most definitely. We think that the producers geared up for corn plantings. We think that is what he wants to do and we think that is probably what he ends up doing at the expense of soybeans.

Pearson: I have been watching the Dakotas really closely. I went up to Fargo a couple times and well, all over North Dakota the last couple of years, and this is a state that has really got it going. They have got oil production going out in the Williston Basin and Bakken Shale. We are getting what almost a half million barrels a day of crude oil and then you have a state that is moving into corn and soybean production with great gusto, ethanol production- Brian is up in North Dakota and he sent us a note. You can do this on Facebook too. There is a lot of talk about world wheat supplies being big. Does that include quality spring wheat?

Roose: Well, not necessarily no. I mean the big surpluses is in the spring wheat but - or in the soft red wheat, but the other wheat classes are actually starting to build also. So, we think overall the wheat supply in general is fairly burdensome.

Pearson: But durum is always - is always valuable. It is always - it is a trick to grow it.

Roose: It is a little bit different class of its own really.

Pearson: Absolutely. So Brian, I hope that answers your question. A lot of folks up in Ontario and up in Canada that tune into the show via the internet or some bleed over from some of our U.S. stations, and the same question are soybeans stealing acres from corn on the recent rally? You talked about it. You have got some interesting acreage numbers. You think this bean acre is going to be - bean acreage is going to be bigger than what a lot of people are talking. A lot of people are just talking - just creeping up to 75 million. You are leaving the window a little bit open on that.

Roose: Yes, we are - mostly because we think the prevent plan of acres come back into production. So we think it is very possible to get a 94/95 million corn acre in a 75 to a 77 million soybean acres. So, you know double crop soybeans off of wheat is another area.

Pearson: Down in Evansville, Indiana and that is just exactly what they were talking out and there may be some better ways to do it, integrated planting and so forth. So a lot of thoughts out there that are going to impact us. Joe over in Wisconsin, the dairy state, one of our - really becoming more of the corn state as of late, one of the major factors potentially driving the market if we get early planting opportunities? Is that going to be negative? Is that going to be bearish if we get in there early?

Roose: I think so and I think that is what you have to be careful of. We are probably about 5 percent planted in Texas now and we are off to fast planting pace and historically what the market says if we are in a fast planting place then it takes some of the risk premium out of the market.

Pearson: Some of the gas for this has been taken away because of the federal crop. You won't get your coverage if you go in too early. So that limits a little bit up here. But you are right, down south they are jumping on it pretty hard.

Roose: Yes, they are and I think you will see the producers up north, if the weather is right, that they will - as soon as the dates are right that they will be planting. Early planting usually equates to a large yield. So, I think that is what they will shoot for.

Pearson: Key point. Joseph in Illinois, gold versus platinum versus oil, I love this one, which is the best investment? What would you buy right now Don? Would you buy gold, platinum, or oil?

Roose: Well, myself, I think all of them are pretty lofty. So, I would be careful. I mean probably would buy the crude oil with puts underneath it to protect yourself is what I would say.

Pearson: And he also wants to know gas prices. Where do you think we are going to go? Obviously we are up to $3.74 a gallon average in the U.S. We have popped half a buck here since January. You mentioned right at the start over a 110 you really start to - in fact every economic recession in my lifetime of 54 years really has been caused by a spike in energy costs.

Roose: Yes, it really is. It is a great tax. It is a problem tax is what it is. So, I think the wheels have been in motion to try and get our energy dependency down and I think that with the efficiencies that we're starting to see, and we actually have an excess supply of gasoline, and so I think that somewhere around this zone if crude oil stalls here at 110 we should have the same thing happen with the gasoline.

Pearson: All right. Don Roose, as usual great insights, I appreciate your outlook and what you see in this marketplace. Like all of our analysts always bring a lot to the table week in and week out, 52 weeks a year, and just a note if you appreciate that and if you appreciate the service that we have here via the World Wide Web, we come to you thanks to the efforts of public television and supports of public television. So, if you enjoy us here on the web and you would like to be a part, we would like to see these programs continue as the majority of you apparently have decided you want, we survive on your support. So, if you can support this program through your local public television station during this time of, in some cases dire need, support for public television, by all means if we provide some value, please take the time to pledge your local public television station. If they don't carry Market to Market now is a great time to call your local PBS station and say hey, we'd like to see this program live, we understand what it does for the link between farm and city, and we understand the production and marketing link it brings to our farm community. This is a program of great educational and profitable value to those in agriculture. It needs to be on our local PBS station. Make that argument right now to your local PBS provider or your affiliated group up in Canada or whatever. This is the time to do just that. Support public television if you believe and enjoy and appreciate and watch programs like Market to Market. Now is your time to step up, be leader, and make a difference with your dollar. So, from all of us here on Market to Market, a big thanks to Don Roose this week, I am Mark Pearson and thanks for watching. Have a great week!

Tags: agriculture commodity prices economy markets news