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Market Plus Video: Market Analysts Roach, Martin, Pfitzenmaier and Robinson

posted on June 8, 2012


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Borg: Hello, I'm Dean Borg.  This is the June 8th Market Plus segment of Market to Market.  And our market analysts here, we have four of them -- John Roach, our senior analyst, Tomm Pfitzenmaier, Sue Martin, Virgil Robinson.  You've been with us over the years the longest.  What memory do you take away about Mark Pearson that will linger with you?

Roach: His humor.  He brightened every day with ongoing humor and it would range from singing a song to doing voices to telling a joke to telling you a story to talking about something that happened in his family back when he grew up.  He just was continuously entertaining with the humor.

Borg: Virgil?

Robinson: I think his vision.  I work for a science orientated company and Mark would make an acquaintance of one of the scientists, remember that person's name and their projects and would ask me details.  I may not have even met them.  But he had vision regarding what was happening years forward, not years past.

Borg: And he had a great memory too back.

Robinson: Absolutely fabulous.

Borg: Sue?

Martin: Well, I think the thing that stands out for me is Mark's selflessness.  He was so always worried about everyone else and agriculture as a whole.  We couldn't have asked for a better spokesperson or advocate than Mark Pearson.  And even for the show of Market to Market he was just awesome.  And that's going to be very tough shoes to fill.  So, for me I would say it was selflessness because whenever he would be on the show and we'd be talking he didn't have to be talking all the time -- God knows I kind of talk too much, he'd be going like this, nobody would see it but he was telling me to hurry up and wrap it up.  But it would be for me his selflessness.  He just always was so -- and it just came so naturally.

Borg: And he found time for his family all the time didn't he?

Martin: Oh, that was always part of it.

Borg: Tomm?

Pfitzenmaier: For me I guess it's Mark as a friend because he was somebody that if I had an idea or I wanted to bounce something off of I could call him up and he'd give me an honest opinion whether I was crazy to even think that or support me if he thought it was a good idea.  So I really valued his counsel and his friendship.  So to me that was -- in addition to all these things these guys have said, that to me was probably the most important.

Borg: So you're relationship went far beyond the program, the Market to Market program.

Pfitzenmaier: We were very good friends for a long time.

Borg: Well, let's get to some of the market analysis here, John.  Corn this past week, what about it?

Roach: Well, the corn market started to pay attention to the weather.

Borg: It's dry.

Roach: It's dry.  And it's dry across a wide area and the forecast really does not have much relief in store.  There's some rains around for the first part of the week but we really don't have that change in weather pattern.  We don't have the cooling weather and more rain and so forth.  So we're worried about the corn crop.  It is pushing markets higher.  And the challenge is going to be for producers in the midst of the weather worry to get some sales made on the higher prices because if the weather doesn't last too long, if we can get this hot spell over before pollination we could very well have prices slide drastically lower by fall.  But, again, it all depends on what the weather conditions are like.  We have a good crop right now.  But we need the rain bad.

Robinson: Lots of planted acres, John, lots of planted acres.

Martin: Lots of planted acres.

Robinson: The other thing I would mention, I guess, quickly is to this point export sales have tailed off pretty significantly as I believe users have found alternative sources of protein.  So let's not forget the fact there's still a pretty healthy position of wheat globally.  So we do have some competition regarding price.

Martin: I also think that the quality of the wheat crop and going from large yields and being cut back because of the weather we've seen as it matured all of a sudden kind of stole some of the wheat's thunder away from the ability of compensating from very tight old crop supplies.  And I think the basis is going to hang in there but we have to watch that basis because it's going to slip away before super long it will be moving out to further months.  But I think that we are extremely tight supplied and we have to remember pollination accounts for about 905 of that yield.  And about 45%, 50% of that crop is going to be pollinated before the 4th of July.

Borg: Go ahead.

Pfitzenmaier: Just to offset a little bit of what Virg said, certainly exports are a problem but I think a lot of that is going to be shored up by ethanol.  We've had weekly production numbers that have been extremely good.  I think by most people's accounts USDA is a little low on their estimates of ethanol use.  So I'm not expecting -- we've got a report coming out Tuesday morning -- we're probably going to see a reduction in exports counterbalanced by an increase in ethanol usage.

Robinson: Even though ethanol economics aren't very good, frankly.  They're not very good.

Martin: The other thing too is that we have to remember that China, the world's second largest producer of corn, is also having major issues weather wise.

Robinson: The northern plains of China are dry.

Martin: Yes, very.  And so we have to watch that.

Robinson: Sue, excuse me, one thing weather wise just popped in my mind.  I saw Elwin Taylor, Dr. Taylor's tweet this morning --

Borg: Iowa State University climatologist.

Robinson: Yes -- addressing weather specifically the next 30 days.  Good read, everyone should read that.  It's concerning.

Borg: Well, it's concerning.  Is the same thing affecting soybeans?  They're planted, a lot of them aren't even coming up yet.

Robinson: To some extent, Dean.  But the more pivotal time for beans is al little deeper in the summer months.  But in the context of talking about beans there are some other issues that are taking shape.  Reports of rust have developed in quite a number of southern states so there's some concern there.  The strike in Argentina, I'm not sure if it's duration but the farmer's anti-government strike.  There are quite a number of factors, variables in the bean market that are hard to, I think, define.  Bottom line, however, and I think these folks would agree with me -- the dynamics in the bean market are very explosive.

Borg: How is that affecting, Sue, the cattle and pork markets knowing that we may have some very expensive corn and soybean meal in the future here?

Martin: Well, I think what is happening this year is next year's story.  And I think that livestock producers need to watch these breaks because I don't think corn stays under $5.00 very long.  And so that said, they need to be using, end users need to use these breaks, be it whether it comes into fall, they need to use those as opportunities to lock up for some of next year's needs in corn.  The other thing that we need to watch on this weather pattern is what does it do to pastures.  Now, granted the Dakotas are in good shape.  The northern half of Minnesota or northern kind of an angle of Minnesota is in decent shape.  But we need to watch because Nebraska is one state that could be very vulnerable.  You hurt these pastures and these conditions deteriorate we can't afford a liquidation in the cattle market because unlike last year when we were exporting at the same time and demand was very hungry for hamburger or whatever, this year is going to be a little different story, it will add more bearishness to the cattle market.

Robinson: Sue, I think Missouri, biggest calf producing state in the union, abnormally dry and quite concerning.  So that is an area --

Roach: The pasture ratings are actually drier than they were last year.  Even though they were quite dry in the far southern plains, this year it's drier through the Midwest.

Martin: There's another thing too when we talk weather is looking at Texas.  The weather -- we have a source that we use out of Europe and it gives us outlooks for the whole month at a time and is usually pretty on target.  Texas is the state, Texas, Arkansas and right up in, like you say, Missouri lots of issues with weather, heat that keeps coming up.  And that is going to be a big concern because, of course, Texas is going to go by the wayside I think this year and then Arkansas there's a lot of beans there and then you've got Missouri, like you say.  I think we've got to watch this because it is a detriment for the livestock producer.

Borg: Tomm, we're talking about weather being the linchpin here.  That seems to be the central focus.  But in the overall fiscal situation everybody is watching Europe, nobody's talking about the weather.  But we've got a fiscal condition in Europe that may be affecting agriculture as well.

Pfitzenmaier: I don't think there's any question it's going to be affecting it.  It is affecting it.  It's an ongoing problem that I don't see how it's going to be resolved in any good way over there.  It just for the last year and a half, two years it's just an every other month or something else coming up.

Borg: But what are the implications?

Pfitzenmaier: Well, I'm not sure we all know that yet.  But it's hard to paint a scenario where it's positive for our agricultural problems.

Borg: For the economy in general but you're saying agriculture specifically?

Pfitzenmaier: Unless farther down the road, like we alluded to on the show, you start to see some inflation.  Then probably who knows what could happen.  But the next three, four, five years, probably not helpful.

Robinson: They import quite a bit of stuff.

Martin: The one thing is what happens if -- everything looks the darkest before dawn and I'm accused of being an eternal optimist sometimes -- the $8.00 girl on beans.  It took a while but we got there.  But what happens when you get this little thread of confidence coming around the world -- get things sort of maybe settled down, get Spain -- because they are the 12th largest economy in the world -- get that sort of stabilized a little bit.  What happens when you start to get that little thread of confidence?  My goodness, where's prices going to go because food and energy is where it's going to hit.

Roach: Or let me come from a different side, we're going to come into this next week scared to death about weather and that could last a week or two weeks very easily and we could have a very, very explosive grain market that just -- that takes that all into consideration.  We put prices up to high levels and then later we have to deal with the ramifications of Europe that doesn't repair itself and the ramifications of the United States that has its financial situation and the ramifications of China who have their issues.  So, we really have two different things here -- one being internal within the crop which is quite positive right now which can certainly change and then we have the environment that we're dealing with.  And what Tomm said and I'm agreeing with is that we really don't see a solution there.  And if anything the likelihood is we have more bad news to come out of Europe before we get that positive thing that you're hoping for later.

Borg: You touched a little bit on ethanol but just as you were speaking it seems to be you've got a dichotomy here.  You have crude oil prices dropping, you have the raw material price of ethanol rising.  Am I correct in analysis there or not?

Robinson: Not at the moment.  Corn prices have come down, Dean, the last several weeks.

Borg: But the future is a little bleak isn't it with corn prices maybe going up or not?

Pfitzenmaier: The future for ethanol you mean?

Borg: Yes.

Robinson: There's policy to consider moving forward.  We have a major election approaching us in November.  I happen to attend Mr. Romney's caucus activities and I get the impression -- I hate to talk politics so I'll be as diplomatic as I can -- I don't think he's on board with the use of corn and other feedstocks as a feedstuff to produce energy.  So there could be enormous policy changes. 

Pfitzenmaier: I think the political wind is not just Romney, I think the political winds in general are blowing against ethanol right now.

Martin: I think so too.

Pfitzenmaier: So not that we're going to destroy the industry or anything --

Roach: But you still have a mandate.  You have a mandate and until that mandate changes we're going to continue to produce for that mandate and I would say today we all feel that while there's more ethanol being produced than what we would have guessed back in December as we faced the end of the subsidies.

Borg: Thanks for your comments.  And thank you for watching.  That's our Market Plus for this day.  


Tags: agriculture commodity prices economy John Roach markets news Sue Martin Tomm Pfitzenmaier Virgil Robinson