Pearson: This is the Friday, September 14, 2012 version of Market Plus. And joining us now are Elaine Kub and Walt Hackney. Welcome back guys.
Hackney: Thank you.
Pearson: All right. We do have a couple twitter questions. Figure we will start this off Ben inCedar Rapids,Iowais asking should a guy lock in a futures price right now. We are thinking 2013 crop year lock in a very marginal profit or ride it out and see where prices go? Elaine what do you think?
Kub: Well, so – the December 2013 corn futures, we will just stick with corn as the benchmark is about 650. So, if you were going to lock it in, it would be about 650. And that sounds historically that all everybody has experienced farming that sounds like a wonderful price to be a corn farmer at. But there are a lot of unknowns going into 2013. There is certainly the chance that fertilizer prices could get very, very exciting here with energy - global energy prices back on an uptrend with the global uncertainty in theMiddle East. So, it is not even certain that 650 is going to be a fantastic price anymore, and there is some uncertainty that South America will have an excellent crop because they don't have excellent conditions right now. They certainly have time to turn around and get great conditions and grow a big crop. But there, I mean there are a few uncertainties out there that could leave you. If you have - are a gambling frame of mind to kind of leave some upside open.
Pearson: All right. So, would you say it is worth locking in a certain percentage now? Would you be willing to throw a number out there or just - go with what your guts is -
Kub: I think it goes with your personal risk profile. So if you are the kind person that wants to run a very, you know if you have a banker that really wants you to lock in profits, this would be the time, but to do it you not only need to lock in the sales price of your products, you also need to be locking in the purchase price of all of your inputs and that is the trick. Is to find the input providers that will lock in those fertilizer prices, seed prices, everything that you need.
Pearson: And you mentioned inputs. Where do you see fertilizer prices going?
Kub: That, I guess I don't want to stick a number on that. I don't know but I mean at this point I would say that they are going to follow that global energy trend higher here for the foreseeable future.
Pearson: All right. One thing that we didn't get to talk about on the show was cotton.
Kub: Oh yes.
Pearson: Do you have any thoughts on cotton? Where do you see that market going?
Kub: It doesn't, you know just looking at its own chart and looking at its own fundamental is it doesn't seem like it is going anywhere. But on the other hand it - to ourU.S.futures, you know you are talking about the same sort of stories with the dollar and global commodities sort of being a little more bullish from the dollar perspective.
Pearson: Ok. All right. Well now another thing that we didn't get to touch on very much were hogs. I had to cut you off there a little bit. Walt, could you go into what you are seeing here in the hog market going forward.
Hackney: To be able to say what we are seeing in the hogs, you got to recognize what we have seen, and we have seen nearly a seven maybe larger percent increase of code sows out of the hog units due to the liquidation process because of ruptured profits in the producer sector of the hog industry. That is starting to dwindle to a certain extent. I don't know the percentage. We may have come from six or seven percent over a year ago maybe at the end of this week we are more like three or four percent. Which is in hog numbers a significant amount of hogs. One thing we are seeing however in the she or female side of the slaughter we are seeing a continue increase of the gilt to barrow ratio in the kill. Which purely means that the producers are still liquidating the female stock in the breeding herd. One of the most interesting things in our anticipation, if you will, is occurring this week. One of the major hog packers in their matrix, their carcass merit system, have started eliminating the penalty for light carcass hogs in their kills. To us in the grass roots that means one thing. They are anticipating some time within the next month, possibly six weeks, that we are going to see a reduction in availability of market hogs and producers are going to continue liquidating hogs off the feeding floors because of cost of production and extreme losses. And if they reduce that hog market or the live hog inventory in the field that is going to cause an abrupt change in the market posture and we will see a cash return much different than what we are looking at today.
Pearson: And so we should expect that you are thinking a month to six weeks out?
Hackney: I think it will start developing and - and I don't know that it will be our December cash market for sure. We may see it start developing, level out and then we will see a considerable jump in the market due to availability.
Pearson: Due to availability and then is there much on the demand side that is going to drive it? I mean is there anything world economically that could help boost that up as we go forward that you are seeing out there or is it strictly supply?
Hackney: Well, your point in regard to the anticipation of the money exchange this week, your idea of export - all of those things.
Kub: Slowing down. Those pork exports have been slowing down a little bit.
Hackney: And all of those things would with availability would tend to level out. You have got to understand that this week we are in is going to se a record for September slaughter of 2.4 or more million hogs this week. And that is phenomenal and the port pipelines Monday morning is going to be jammed packed full of pork going to retail.
Pearson: All right.
Kub: Well, to that point of slowing down exports in pork and it is not just pork, it is everything. That in fact was the impetus for this QE3 is that the Fed was seeing kind of slower global economic activity everywhere and China is seeing a little bit and they are not in a recession but they are not growing as fast as they once were and the Fed was apparently very concerned about us slipping back into a recession. So, if it weren't for the cheaper dollar the actual indications of all of their activity was not promising from a - from a demand standpoint.
Pearson: So now - and the market has taken all of that in to consideration already.
Pearson: What would it take to change that mindset? What kind of international news will we have to see to really see more encouragement on the export side?
Kub: Well, I guess and that is going to be kind of a slow grow thing. You just have to see a better CPI ratio, CPI numbers, better numbers coming out ofChina. But yes, that is sort of the reason why even these sudden lows in the dollar are not creating new highs in commodities. You know this wasn't really bullish. It just kept things from slumping in response to the global, I don't want to call it a slump, but the global sort of --.
Pearson: Slow down.
Kub: Are sort of questionable. Yes.
Pearson: Ok. All right guys. Well, we got a little bit of time - anything else you guys want to talk about?
Hackney: Well on my side of the industry which is livestock, we have seen a huge interest developing in feeder cattle. Particularly lighter cattle coming off of the fall pastures and coming off the cattle herds in the western ranch areas. It is being created by the demand placed on those live cattle by the interior corn producers and we have discussed that. But the availability is going down faster than the market is increasing on those cattle and we are at the very tail end of the run, if you will, of the fall delivery calf crop.
Pearson: All right. All right. Elaine anything else?
Kub: I think we have it covered. Did we cover everything you needed to cover?
Pearson: I think so. I think we are good. So, thank you so much for watching. Elaine and Walt thanks for being here with me. Really appreciate it. Have a great week.