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Market Plus: Tomm Pfitzenmaier

posted on September 28, 2012

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Pearson: This is the Friday, September 28, 2012 version of the Market Plus segment. Joining us now is Tomm Pfitzenmaier. Tomm, welcome back.

Pfitzenmaier: Thanks Mike.

Pearson: We didn't get to talk about cotton in the show. Where do you see cotton going?

Pfitzenmaier: Well, we are sort of in the middle of the harvest pressure on there. So, I think that is going to get wrapped up here fairly quickly. So, that pressure is going to continue or kind of go away here fairly soon. But I think you are going to continue to see pressures on cotton. That is completely tied to what goes on with us in China. Chinese demand for cotton has been waning and I would guess that is going to continue. So, I would guess if you get to catch any kind of recovery rally post harvest, I think you would want to be fairly aggressive seller of cotton.

Pearson: And you see that trend continuing?

Pfitzenmaier: I do. I don't see any sense in holding it.

Pearson: Ok. All right. That is long-term?

Pfitzenmaier: Right.

Pearson: Long-term bullish trend.

Pfitzenmaier: Now maybe next year I think they are going to loose a lot of acres to corn and soybeans. So you are probably, next year's crop is probably going to have some better value. The old crop you are going to have to store that for quite awhile to participate in that.

Pearson: So, definitely keep that in mind as the producers are out there.

Pfitzenmaier: Yes. Yes.

Pearson: All right. We got a couple questions from Twitter here. Matt in Eizetta, Illinois is asking what should producers be doing with their 2013 crop? What do you see for corn producers and bean producers out there?

Pfitzenmaier: Well, the corn producers the expectations are that we are going to have a bigger and maybe even substantially bigger acreage next year. That big concern obviously is that we have practically no -- anywhere. Everybody is dry and so - there is a lot of apprehension about selling that crop. The problem is we are going to have a bigger acreage. Probably, eventually we are going to get some rain. We learned this year we can grow corn on minimal amounts of moisture and we're in a process here of killing off our demand. So, I guess I think that if you can get December of 2013 corn up in that 650 to 680 range, I would certainly want to be a - get right after getting some corn sold there.
Now if you don't like that and you are uncomfortable with it then maybe find yourself some sort of an option strategy that allows you to at least lock in a floor of six bucks cash. But I think you have to use whatever rally we get here over the next two to three months to start getting something done on 2013 corn because we have the potential if it rains and we have subsoil and we have a ton of acreage with poor, poor yield or poor demand, we can be buried in corn again. I mean if you sit and think here what would have happened this year if we had gotten some key rains and a little moderation in temperature we would be burying corn right now. So, don't let yourself get too wrapped up in this tight situation we are in right now.

Pearson: So the time to plan for next year's sales would be from now until South American harvest do you think would be lock it in before then?

Pfitzenmaier: Probably. And on - and on beans the real risk is South America. If they have a big crop that everybody is projecting then we have got a really nice tight situation with some great opportunities being created in old crop beans up until mid/early March. But if you look they have already discounted that 2013 crop price by a couple bucks per bushel and there is a reason for that. Everybody is anticipating and they are some that are talking about a two million acre increase in beans in the U.S. this year. So, you have a big South American crop, we produce another big crop, boom we are buried in beans and all the sudden 1350 to 14 dollars. November 2013 beans look like a heck of a sale. And I think those kind of - I guess those would be my objectives if you can get up in that 1350 to 14, I would start making some sales.

Pearson: Do you have the same advice for wheat producers?

Pfitzenmaier: I think on wheat the same thing. You know the Australian wheat is probably going to be ok. There might be some support in wheat because winter wheat doesn't get planted and doesn't grow because of dry conditions. But, I guess the Black Sea area how they produce is really going to be the wild card there.

Pearson: All right. We have a couple questions here from some folks who are - they have some concerns about their crop insurance prices this October. What kind of effect do you think that is going to have on farmers who are counting on these high prices for their crop insurance?

Pfitzenmaier: Huge. If you get a recovery rally on - I mean you can lock that in just like you can with the crop you are growing. Certainly if you can get, use this rally that was started on Friday, has any carry through and you can get corn back up in that, I don’t know you know 780 to 8 dollar range, I would certainly look at that as a way to start locking in and guaranteeing yourself a good price on that through October.

Pearson: All right. And likewise for beans?

Pfitzenmaier: Likewise for beans. Absolutely.

Pearson: All right. Jeremy in South Dakota has a very simple question. Are the highs in for grains?

Pfitzenmaier: I believe they are. I think that 849 on corn is going to hold and that 1779 or what it was up in that area on beans is probably going to hold to. Maybe if there is some really unexpected thing comes along here that might get tested. I wouldn't rule that out. But I think it is going to be very difficult to take those out.

Pearson: All right. Tim in Crookston, Minnesota is wondering why are we having this, up until today, Friday, this current slide in the markets? Is it just harvest pressure? Are we looking at just a temporary pull back?

Pfitzenmaier: I think a combination of things. One is, one huge one is that the funds have just lost enthusiasm for being long grains. They were - they held it from the middle of June all the way up until recently. Up to now they made good money being long. I think they are just looking at other things that are gold and silver might move and have just lost their interest in being long corn. So, they have liquidated. Part of that has been prompted by the fact that we're getting a better yield report. Everybody thought we're going to have this disaster and it didn't turn out to be the case. Exports are practically zero or -- this week. So, there is some reasons they just - plus a lot of those guys are trading technically and all of the technicals have turned negative which that sorts of feeds on itself too. So, there is a lot of reasons why we - it is hard to maintain corn at 850 dollars. It just is. Demand goes away when that happens and so does enthusiasm for owning it.

Pearson: Now you mentioned demand going away for corn at eight dollars. At what point do you see demand, export demand, picking back up? What sort of price level do you think we have to get that to see that come back to where it needs to be?

Pfitzenmaier: Well that brings up an interesting point because we talk about demand destruction and I don't know that we necessarily had demand destruction. Well, we do in livestock because once you sell the critter it takes awhile to get those herds rebuilt. So, you have got demand destruction in that respect. But if you have cheaper corn, ethanol boom pops right back. That will come back in a hurry. I think export demand would to if you dropped the price of corn. up to this point South America has undercut us. The Brazilian corn has been cheaper. So, they have been going there but if we can go back and get competitive we will win that back pretty quickly. So, it makes a difference for sure.

Pearson: All right. Well thank you so much, Tomm. We really appreciate having you. Really appreciate your words. That wraps up this addition of the Market Plus segment.

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