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Market Plus: Market Analyst John Roach

posted on March 9, 2012

Market Plus: Market Analyst John Roach

Pearson: Welcome to the Friday, March 9, 2012 version of Market Plus. Thanks for joining us here at our Market to Market website. With us this week, a special treat, our Senior Market Analyst John Roach. John, always good to hear your thoughts and very common sense overview regarding making business decisions, making prudent market decisions, and you think on the corn and soybean front would you be making those decisions right now?

Roach: I think you have to. I have been doing this since 1973 and I gave up a long time ago trying to know where prices were going to be six months from now. I mean good luck with that. Instead what makes better sense is you develop a program, a plan, for making sales where you are trying to take advantage of the oscillations of the price, and as the price swings up then you look for opportunities to make sales, and then we try to focus our sales during the right time of the year. And this is the right time of year. We are in March and so strong prices in March, April, May, and June are meant to be sold and what invariably happens, and it doesn't happen immediately every year the way maybe people would like, but invariably what happens is farmers figure out a way to produce more than what we can use and that is going to happen. Will it happen in 2012? I don't know. But I know that every farmer out there is going to do the very best they can to accomplish that. And they are going to do it not only in this country, they are going to do it around the world, and we are right now able to take advantage of a drought problem in South America that is coming following a drought problem in the United States. So, you have two weather markets coming together at the exact time of year when we have learned over a lot of years of history is the exact time of year when you want to make sales. And so we think the soybeans are poised here to go into a swing to the downside. So, we think soybeans need to be sold today. We would not sell all of them, but we would certainly sell some, and we would have an eye toward selling the peak of the next two to three months. We want to be done selling by the time we get to the middle part of July.

Pearson: One of the fun parts of the show now is we are three dimensional thanks to social media. So we get Twitter Feeds from clients, we get Facebook, and it is great. Pete in Canada asks a great question just to follow onto what you were talking about, about a big acreage number. You have been talking about this for awhile and like you I have been out in the countryside and I have seen farmers up in North Dakota with big bat wing motors cutting the heads off cattails up there to get ready to get this corn crop planted. So, Pete up in Canada asked the question if the U.S. plants 95 million acres and let's say we hit trend line 165/166 bushels per acre, it is going to be a lot of excess corn, and so corn goes to five dollars or less. Could we see a ramp up in demand?

Roach: Well, the demand could certainly come in the ethanol business if we pull the price of corn down enough and we hold the price of energies high. We could turn that demand switch back on with the ethanol business, and we saw how it can ramp up there just before year end. We have been running at a pace that is bigger than what the government forecast expected. We certainly could see a big ramp up in demand out of China where they really would like to re-inventory some corn. They moved out something like 40 million tons worth of inventory and they would really like to add some of that inventory back in for their own food security. Plus we have other places around the world that have really been running tight on inventory because of the price levels. And so demand could certainly come roaring right back if we move price levels down.

Pearson: John, I was with a group down in Southern Indiana and a lady came up to me and she said why is my tenant constantly planting corn? Corn, corn, corn, corn, corn. And I turned to her and I said because he has got a calculator. Which is true. The corn thing has been a lot better, but Tim up in Minnesota sends us a note, I heard this last night up in Kasson, Minnesota in fact, he said is this surge in new crop soybean prices put a cap on how many acres we will plant to corn looking at crop budgets for Northwest Minnesota and Eastern North Dakota? And he makes the point that the market is done which still you need to do and that is corn is that much more profitable than soybeans right now? And you get lower input costs with beans.

Roach: Well, there is certainly some acres that could move back over toward beans that people anticipated planting to corn. But farmers are really pretty solid with their rotations. They are pretty solid with their plans. Most farmers that I talk to don't make fast changes in their acreage mix. They make those changes only because there is a huge price differential, profit differential, or because there is a problem. Otherwise most farmers will do what they planned on doing last fall.

Pearson: And with the good weather last fall a lot of anhydrous was applied.

Roach: And that stopped the beans from going on that ground if there is anhydrous already applied.

Pearson: John, as usual some great insights, appreciate you being with us this week. John Roach, our senior market analyst joining us on Market to Market and of course here on Market Plus. And by the way we look forward to all of your comments on social media whether it is Twitter or Facebook. So be sure to join in. We would love to hear from you. From all of us here on Market to Market, I am Mark Pearson reminding you that this is Festival.

Pearson: Festival is a time when it is a chance for you to come out and say I really appreciate that program. We don't do 13 or 26 weeks of reruns every year. We don't produce shows 5/6 years ago and rerun them. Every Market to Market we do is a brand new program produced every Friday 52 weeks a year. We do that because that's what you have told us you want to see. In that spirit we provide the programming if you help provide the support in any way you can. It is greatly appreciated particularly in these times. So, get ready to become a friend of your public television station. Make sure you give us some support this week. If you just watch us on the internet I would call in during your local public television fundraising and ask the programmer why Market to Market isn't on in your market. Ask and you will get a response. Hopefully one that is we want to add it. Thank you all for being with us. For John Roach and for all of us on Market to Market, I am Mark Pearson. Have a great week!

Tags: agriculture commodity prices economy markets news