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Market Plus: Market Analyst Tomm Pfitzenmaier

posted on July 27, 2012


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Pearson: This is the Friday, July 27, 2012 version of the Market Plus segment. Joining us now is Tomm Pfitzenmaier. Tomm let's talk a little bit about strategies for our 2013 crop. I hear you have been a little busy fielding those call. So, what are your thoughts?

Pfitzenmaier: Yes, there is a lot of interest in that. It is always difficult because that corn is priced about a $1.50 to a $1.75 under where the 2012 crop is. But I think a lot of people understand that we are in all likelihood there is a good probability of an El Nino could come in and replenish subsoil into the fall. There is a high probability we are going to have a big acreage next year. There is a high probability we are going to do demand destruction that is going to be hard to bring back. I mean you can shut down an ethanol plant and they can come back, but you start liquidating livestock herds and it takes awhile to get that back. So, we have the potential here next year to be a wash in corn if we go ahead and have a good crop on that acreage. We had December of 2013 corn get as high as around 645. If we get back up into those levels I would want to be a seller of 2013 corn at least getting started on making some sales up in that area. Options are a strategy a lot of people like to use normally. If you do that you are probably going to have to do some kind of a put, call, buy a put, sell the call sort of strategy to help pay for that. But I would certainly look at doing something up in those levels.

Pearson: Now is the time to start thinking.

Pfitzenmaier: As far as beans, we can't forget that we are going to probably have a huge South American crop last year. They were inhibited by a La Nina and El Nino will probably mean they will have a good/better prospects for a yield next year. They are also going to ramp up acreage. We hear all kinds of reports about that in South America, in Brazil and Argentina. So, if you can get a strong rally up in that 13/1350 for the November of 2013 beans, I think you start making some sales there too.


Pearson: All right. We got a couple questions here from folks talking to us on Twitter and Facebook. We have got Chris here. He is asking what are suggestions for farmers wanting to carry corn into the inverted futures market.

Pfitzenmaier: The market is telling you not to do that. I mean the basis is - well the new crop basis is tight. So, I think you have to hold corn if you haven't made sale and you have got a bin. You hold that corn until that basis tightens up and then there is no incentive to store it. The market is telling you it wants it now and it is not going to pay you to reown it. So, holding is something you want to do on a carrying market. It is not something you want to do - now if you have made that sale and you still think the market price is going to go higher, then you reown it some way that is a possibility. But as far as marketing that cash corn and you want to max out the basis and get it moved.

Pearson: Ok. All right. Phil in Canada is asking us how low can soybean ending stocks realistically go.

Pfitzenmaier: Well, the general consensus is that we can't take stocks much under 135 to 145 million bushel. That's why these USDA supply and demand reports are kind of - there is not a lot the USDA can do. They can't go below a pipeline. They have - so they just make adjustments for what they think demand is going to have to do and then ultimately the market is going to have to sort it out. So the next year's pipe - is already pretty much projected to be pipeline.

Pearson: All right. And do you see much threat of demand destruction on the soybean side? Is that something to be worried about if prices -

Pfitzenmaier: See that is the interesting thing about soybeans. With corn we know that livestock producers above a certain level can't make money. Ethanol producers above a certain level can't. With soybeans, with so much of it going to export particularly going to China, we really don't know how much they are willing pay. That is why a lot of people think there is much more upside potential in beans because you don't have that profit limitation for lack of a better way to put it.

Pearson: Sure. So as far as we know right now kind of there is no ceiling.

Pfitzenmaier: Right. I mean they may be willing to pay 21 dollars. We really don't know.

Pearson: Until we test it a little bit and find out. All right. LeAnn in Rushford, Minnesota is asking the drought will inevitably raise prices across the board. And she wants to know if we as consumers will be gouged by prices in 2013? Is that a threat do you think?

Pfitzenmaier: I hesitate to use the word gouge, I guess. But certainly there is going to be upward pressure on it. I mean you can't liquidate all these - this livestock and not have pork, chicken, and beef prices go up. There is - corn is a pretty small component of most of what we use. So it is not going to be a big deal but I think you said in the show three to four percent and that is probably pretty close.

Pearson: All right. Kevin in Yale, Iowa is asking us a livestock question. He wants to know when will be a good time to sell spring calves.

Pfitzenmaier: Probably the sooner the better. If grain prices continue to go up it is going to continue to put downward pressure now. Like I said on the show that maybe offset some by higher beef prices but I think on a downward trending market which we are in with feeders. I don't think there is any doubt about that. The faster you can sell stuff the better off you generally are.

Pearson: All right. Get them off your plate and make that somebody else's cost.

Pfitzenmaier: Exactly.

Pearson: Do you have any final thoughts for us? What do you see - any pick of the week from you at all?

Pfitzenmaier: No. I think we're going - it is going to be very interesting to watch the trade next week because we have had this sort of pattern of maxing out prices on the Sunday night trade and everybody has kind of gotten that down and they think there is an expectation of that. And with a lot of the other technical indicators the momentum indicators, the trend indicators on corn and beans have both rolled over. So, I think we are starting to head into a time where we are going to see some head winds and it will be interesting to see if the Sunday night trade reflects that.

Pearson: All right. Well, thanks so much for all of your insight Tomm. We really appreciate having you here. Have a great week!


Tags: agriculture commodity prices economy markets Mike Pearson news Tomm Pfitzenmaier