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Market Plus: Sue Martin

posted on October 5, 2012


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Pearson:  This is the Friday, October 5, 2012 version of the Market Plus segment.  Joining us now is Sue Martin.  Sue, welcome back. 

Martin:  Thank you Mike. 

Pearson:  We have a couple questions from Twitter.  Allison in Corydon is asking a question that I know a lot of producers have been asking recently.  Should we think about selling some of next year's crop?  What are your thoughts on that?

 Martin:  I think we can still hold off a little bit on that.  There is a huge spread between like November beans of next year and November beans of this year.  There is also a huge spread between December corn, even though it has narrowed some between Dec. corn and this year's Dec. corn.  I think if we stay dry, you know the Western Corn Belt is still very dry and the rains that they received in the Eastern Corn Belt basically was an event off of the hurricanes that came in the tropical storms and we aren't seeing much of that anymore.  So, they could start to revert back dry also. I think we need to keep an eye on the weather because if we remain dry on this it is going to start to put premium in those deferred contracts and you could do a little bit better. 

Pearson:  Sure.  Now you keep track of the weather.  How long has this dry period expected to end?  I notice a lot of different forecasts out there.  What is kind of the market consensus? 

Martin:  Well, we carry five different weather services and it seems like right now, I think one says that we have gone back into a La Nina but the rest of them have just basically said that you know because the El Nino was always going to be a weak one anyway and we have a Madden-Julian Oscillation and a North Atlantic Oscillation both in motion here affecting - they are kind of distorting this or weakening this El Nino response that we're not quite getting the true picture of it just yet.  If we can get the El Nino to come back and firm back up then what is going to happen is that or what should happen is that you will see moisture in the South and Southwest like Texas, cattle country, they should not have as good of a winter and then we up here tend to stay more mild and open.  It may be cold but you know not with much snow which might not be a good thing, and then as you go on south and east they catch the moisture.

 Pearson:  Ok.  All right.  So, that is something to keep an eye on here as we go forward.  We have had a couple more questions here.  Emily in Northwest Iowa is asking that on DTN they sold 180,000 metric tons of beans to China.  What does that convert to in U.S. bushels? 

Martin:  Well, it is about 36.6 bushels to a ton and so when you add that up then it comes to just under 6.6 million bushels. 

Pearson:  All right.  Good piece of information just to kind of keep in your hat there when you see those number thrown out. 

Martin:  I had to ask my husband.  To be honest. 

Pearson:  Sue in Red Wing's husband is curious.  Where do you think beans are headed?  We talked about it a little bit on the show.  Maybe you could expand on it now.  You are thinking medium - short to medium term we will see kind of a drop off and then prices climb. 

Martin:  Well, it is possible that beans seen their harvest low here this week.  It is almost uncanny because we did have timing for a low around October 4th.  But if you look at the last five years our harvest low for beans has tended to be October 3rd or so to about the 6th/8th.  So it is kind of uncanny.  Will it keep it up?  I have no idea.  But in years past, in years like this one in data that I have going back to 1922, beans tend to put their lows in right around this 3rd, 4th, to the 10th of October in this window.  And I know that a way for, on the downside, on November beans is 14.54 ¾.  And should stop that market like an eight day clock.  If it gets there.  We don't have to get there.  The market has done a lot here technically already.  So, the timing is kind of right.  We will see what happens.  I do think the yield on beans is going to go up in this report coming out h ere next week mainly because if I take the last six drought years, major droughts since 1970, out of those other six droughts the average 10 year trend line you take the final yield and the largest amount of reduction to trend line would have been around 18.6 percent - 18/18.3 some years not as much.  This year it appears we are at this time with 35.3 bushel to the acre estimate we are looking at a 20.8 or - yes about 20.8 percent reduction off of trend line yield.  The ten year trend line yield.  That seems too much to me and we caught our rains at a good time, at a right time as opposed to the drought year of 1988 for example which they kind of sort of referred us back to.  That year your dryness and heat was more May/June.  This year it was more June/July.  Therefore it affected corn, I think much more than it affected the beans.  And so the beans caught rains right when they needed them. So, I think the corn yield at 122.8 in the last report is probably right online.  That is sitting at about 22.8 percent under the trend line, ten year trend line, and out of the six years of drought since 1970/1974, I think we were - the final yield that year was 24/25.3 percent, 1983 it was 28.6 percent, 1988 it was 28.3 percent and here we are 22.8 percent.  It seems to me that yield is not going to go up.  I think that yield is going to either stay the same or drop off a little bit.  So maybe we are like Lanworth.  Lanworth came out at what 120.8, I think or something like that. We might just be - they might be right on. 

Pearson:  So there might be a little bit more bearish news coming out in beans if that yield is raised up as the harvest continues.

 Martin: That is right.  Although keep in mind some of the break we had this week was off of FC Stone's number at 38.2.  You know they increased it what, I think 9/10ths of a bushel.  So to me that seems a little high but I am looking for a number around 36.3 maybe 36.4 average trade.  Bloomberg did a survey and average guess was around 36.9.  So, I do think we will see a little jump though. 

Pearson:  Ok.  But then as we get through - get through harvest, get into December, January, February - 

Martin: I am looking for prices to improve.  I think beans have potential to move back to new all time highs and God forbid if South American has a weather issue.  If they have a weather issue, you know 24, 25, 27 depending on how severe, could be 30-some dollar beans 32 or 34.  I do think that as - if we can come back up and move to new all time highs we will probably look at a 19 number.  I was always kind of looking for a 19 number and thought we would get it with this year's November contract but as yet of course we have not.  So, I think that we have to be a little bit realistic about it but on the same token, I can also see the other side of the coin sometime next year too.  So, we have got to really be alert as to starting to make these sales, and so once these beans go into the bins they are going to be locked up. And you look at areas north of here, I seen a picture the other day of - in North Dakota where an elevator had three million bushels of beans on the ground.  You know it was - the picture was awesome.  But yet around here of course you don't see that and the beans are going into the bins, farmers are not willing sellers of beans too aggressively on this break.  So, I think the key I think this next year is going to be is it is going to be a lot about basis.  I think we are going to see basis huge this next year as they try to pour everything out of the farmers'  hands. 

Pearson:  All right.  Well thank you so much, Sue.  We really appreciate having you here this week. 

Martin:  Thank you. 

Pearson:  Take care.


Tags: agriculture commodity prices economy markets Mike Pearson news Sue Martin