Podcast

Yeager: This is the Friday, February 9, 2018 version of the Market Plus segment. Joining us now, John Roach. Hello, John.

Roach: Hi, Paul. Thanks.

Yeager: Good to have you here. I always love it when you come up and we give you a nice blast of winter. Does that just make you think, oh that's right, I don't miss the Midwest weather? You miss the people, I know you do that.

Roach: I miss the people and I actually don't miss, I don't mind the weather. It's not bad when you travel for a week or two and you get a blast of wintertime, it's okay. But I know my plane goes back tomorrow.

Yeager: That's right. You spent some time in Northwest Iowa and in South Dakota talking to people. What are they telling you? What are they asking you right now?

Roach: Everybody is trying to put their plans together for this next year and a lot of people are talking about, what do I do with my old crop inventory, but they're actually more concerned maybe with their new crop inventory, when should I start selling my new crop? And the thing I tried to get across in nine meetings today, or this week, nine groups of farmers and that is don't be afraid of next year. We're starting off with the first crop raised in calendar year 2018 in South America and they're going to be about 11 million tons short as far as their corn production is concerned, about 9 million tons short as far as their bean production is concerned and then when you look at the normal growth in demand we'll normally grow the beans by about 10 million tons, maybe up to 15, and we'll grow the corn 30 to 40 million tons. So you have to make up those shortfalls from the ending stocks. So ending stocks a year from now are not going to look nearly as burdensome as they do today, in my opinion. And so don't be afraid of next year, don't be scared, don't be making decisions out of fear. There will be marketing opportunities as we go through this growing season that you'll need to take advantage of but you don't have to be rushing and hurrying right now.

Yeager: That's a lot of, what is the term, it's a lot of singles lead to runs or I'm swinging for a single, I don't need to hit a home run on every sale opportunity that there is.

Roach: Well, there's no home runs out there, you're basically breaking even, you're just maybe holding your money together and that's no way to market when you still have a full growing season ahead of you.

Yeager: Alright. Well, the growing season that is getting close to going is cotton. Let's talk about that market here. In the South we had a nice run-up, now we've had a couple of weeks of pullback. Where is this thing headed?

Roach: Well, the cotton market got pretty high. We got up to 84 cent cotton on the nearby March and that was after weeks of upward move and then it got high enough and shaking the tree and taking a hard break, we think the market will bounce back but as it does you need to be taking advantage of that on rallies and make sales.

Yeager: Alright. Let's get to some of those questions. In fact, Ben in Alexandria, South Dakota, I don't know if Ben made it to your meeting, but he has a question and it's about the stock market. And is the stock market done going down? You touched on it in the show just a tiny little bit in relationship to commodities. But this has been quite the whip saw. We're technically in the correction phase now. So do we go one way or do we go another way?

Roach: Well, I don't know. I wish I knew exactly, Paul. But to my way of thinking we still have very strong economies around the world. I think that we're just beginning this economic growth period. And so I don’t think the stock market is going to fall apart. It may have a further pullback. When I talk to people about buying equities I talk about buying a 10% sale, a 15% sale and a 20% sale. And I don't get afraid when the market is down 10%, I just hope I get more opportunities at some lower price levels. I'm still a buyer of stocks. I'm not cashing my stocks in and living off of the retirement. And so I want to accumulate more in weakness.

Yeager: Well, and Monday it looked like it provided that opportunity on Tuesday because as quickly as it went down it went back up because I think people subscribed to that theory, they bought into that a little bit on Tuesday.

Roach: Next week might be different though. Now you're shaking people a little more. This volatility is frightening to a lot of people. And so you may find more people wanting to go out to the sidelines here and get out of the fray here for a little bit until we get a little less volatility. Remember, we've had several months, month after month after month, of very low volatility, very steady climbing kind of markets. We've got a lot of people in the market that have never been in a great big washout. And so we’ll have some fear to deal with this next week.

Yeager: Washout gives me a shudder. Alright, we have another Facebook question, John. You can always find us @IPTVMarket on our Facebook page. This is from Chad in Dunbar, Nebraska. And he's asking about will the feeder cattle market continue to gain over the next 45 to 60 days even if corn rallies to the planting intentions report at the end of March? And is a corn rally that long even possible? So it's a couple of questions in there. Let's start with the feeders.

Roach: We probably should start with the corn actually --

Yeager: We can do that too because that does impact, you're right.

Roach: Because the feeders will probably have a following effect to what the corn market does. If the weather problems in South America continue to reduce that corn production both in Argentina and Brazil then the feeder cattle market is going to weaken as corn prices move higher. And yes the corn market can move higher. These are cheap prices that we have and what we're doing here is we're changing the world numbers and we're tightening world numbers here with that situation and we still have the U.S. growing season to go through. So the corn market could do that and it's going to depend on their weather conditions in South America. The feeder cattle market, we think it's a little high actually. We think the feeder cattle market should back off a little bit in here. And so we're not in the camp of expecting a strengthening market over the next 45 days. But, by the same token, we're willing buyers if they'll give us a break, a break in the price.

Yeager: Alright, you talk about, we've kind of tap danced around weather a little bit. The drought monitor this week down just about one-tenth of a point, 66.95%. Do you have any concerns about the dry areas of Texas, Oklahoma, Kansas, spreading up, backing up into the corn states, moving across Nebraska, Iowa, Illinois? Do you have any of that? The saying goes if you plant in dust your bins will bust. Do you subscribe to that theory of maybe the weather is going to impact some of these other crops?

Roach: It's a question I can't answer. But think of it this way, we'll have enough concern that it will give us a weather scare, which is normal. All I'm saying is, we look back over the last five years from winter low to summertime high on corn is something, the low move is about 50 cents, the upper move is about 90 cents. And so each one of the last five years we've had that kind of a move and we've had big surpluses. Beans it's even bigger. And so yes, we'll have weather rallies, whether we'll actually have a weather problem or not that will last long enough, I mean look at last year's example. In June we were scared to death about some of the crops we were going to have, I had people sending me pictures of how bad their crops were and so forth, and then by the time they got through the month of July the rains had come and the crop recovered and we ended up with above trendline yields on both corn and beans. So it's difficult to know whether the weather will be bad enough to hurt the crop but I believe it will be bad enough to rally the crop, rally the prices.

Yeager: They lost your email somehow, huh? Couldn't send any more of those photos. Our last question here is from Mitch in Sauk City, Wisconsin. And Mitch is asking you, John -- you can find him @mysticvalley on Twitter. Do you see the carry in the corn markets holding or is it going to narrow?

Roach: I think it's going to hold. I think that there's plentiful supplies, everybody out there has a few more bushels than they really wanted to have this time of year and so I think the market forces a carry really for quite a period of time yet.

Yeager: Alright, John, one other thing. Sorry. You talked about energy and we've talked here between shows, crude oil down 10% nearly on the week and you answered that question at the end. But natural gas has just been one of those, we don't usually discuss it, up, down, up, down. What is driving all of that volatility?

Roach: I think we just had a lot of people betting on upward energy prices. It became a very popular bet. Let's look at commodities as being profitable maybe here as we move into more inflationary time period, more expansion and economic activity and quite a bit of that money went into the energy sector. And as the price of energy ran up we saw the production crank up in this country and it's just amazing how quickly it reacts to the movement of price. And now we're back on the other side of it and then we put all the uncertainty in there from the equities, once again, chasing people to the sidelines.

Yeager: Well, you talk about oil production, we set another record here. We haven't been -- we've produced 10.25 million barrels per day. That's a 47 year high. Then all of a sudden we're pretty good at producing this oil thing. What does that do to our U.S. economy, or U.S. standing in the world, because all of a sudden we have this oil that we're exporting?

Roach: Well, it's an amazing turnabout as far as money is concerned. When you start talking about ten million barrels per day it's huge amounts of new wealth that is coming out of the ground that is staying in the United States and that is an amazing economic stimulus. We did some calculations about how many dollars that is and it's a staggering amount of money, it's really staggering.

Yeager: Good for you to do that math, I'm very glad that was you and not me, John. You didn't ask me to do that. Before we leave, dollar back above 90. Does it hold or does it fall back down a little bit?

Roach: I think the dollar probably does better. I think there has been a lot of uncertainty about what were we going to be doing in Washington? Could we get a budget passed? Could we get our house in order, so to speak? And what was our economy really going to be able to do? And I think we've settled some of those questions and I think that the general economic outlook is positive. And so I think the dollar attracts some investment again. But remember what happened was some of the other countries around the world were actually doing better than us and so that is what took the money from here and moved it overseas and I think some of that will come back.

Yeager: Alright. John Roach, thank you so very much for spending time with us, always good to have you here.

Roach: Thanks, Paul, great to be here.

Yeager: That will do it for Market Plus and we greatly appreciate him standing by. And join us again next week when we examine how one community was able to harvest dividends after a devastating tornado and Mark Gold will sit across from me here at the Market to Market table. So for all of us here at Iowa Public Television and the Market to Market program, thank you for watching, listening or reading. Have a great week.

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