Howell: This is the Friday, March 2, 2018 version of the Market Plus segment. Joining us now is Elaine Kub. Elaine, welcome back.

Kub: Hi.

Howell: Elaine, there has been a lot going on this week when we look at international news. We hit on a little bit during the show about President Trump's retaliatory tariffs. There have been a lot of Twitter questions and social media questions about this as well. How long do you think we're going to have to wait and see before this really plays out in the markets?

Kub: I really hope, Delaney, that it gets reversed, this decision gets reversed or rethought very quickly. But obviously you and I talking here maybe doesn't do much but if folks get in touch with their legislators maybe that will motivate people. I know that all of the trade organizations have come out saying this is a bad idea. So I think we just need to keep on repeating that refrain and hopefully that message will get through. And so hopefully this never even happens, right, fingers crossed. But how long would it take for our trading partners to respond? I think they already have started responding. I think we saw Europe has already declared that they're going to have retaliatory measures against Harley Davidson, etcetera. And like we mentioned on the show --

Howell: -- I think too was another one.

Kub: Oh great. Like we mentioned on the show, China has already demonstrated, they don't say it in so many words, but already demonstrated with the milo export scenario that they don't like having import restrictions or export restrictions placed on them. So yeah, it's not a great idea and hopefully it gets reversed quickly because the responses will be lightning fast.

Howell: Do you see any more impact on the soybean export markets from China specifically? We're already way behind USDA's pace.

Kub: Yes we are, we're I think 13% behind. We could certainly get father behind, especially when Brazil's crop is going to meet its expectations probably. So they don't have to come ot the United States, certainly not.

Howell: Elaine, you had a really great Twitter graphic earlier in the week about how we were almost penny for penny on pace where we were at this time last year in the soybean markets. Do you expect us to continue following that trend from last year?

Kub: I think the corn market, I kind of think it will just sort of dwindle downwards toward the summer now. The soybeans are slightly different because last year there was sort of a run up because of some flooding as Argentina was harvesting. I don't know exactly that soybeans will follow penny for penny as they have continued but it is uncanny how closely they have followed, not just the same pattern because analysts see that all the time. You see a same La Nina weather pattern and you say oh, 2018 will be just like 1995 or whatever year there was a La Nina and you do see those same seasonal patterns. But with the 2017 to 2018 comparison it's not just the same pattern, it's the exact same prices, it's the exact same futures spreads, it's the exact same outlook, it's the exact same everything and it's the exact same crop insurance reference prices from February, those are exactly the same.

Howell: It is. And crop insurance reference prices this year were a couple cents higher I think in corn or soybeans compared to last year?

Kub: Corn is $3.96 exact same, soybeans is $10.16, $10.17, which I think is a few cents lower than last year, but profitability wise most of the projections that you see, you still see that favoring soybeans profitability wise compared to last year and certainly compared historically. That is almost a 2.6 to 1 ratio which is favorable to soybeans on a historical basis.

Howell: Okay. Elaine, let's take it to a social media question. We have Philip in Ontario, Canada @agridome. He says, corn has been a reluctant follower of #soybeans, in 2016 June 18th was the new crop high, in 2017 early July. What calendar time slot does December 18th top out this year?

Kub: Is he referencing corn or soybeans or both I suppose?

Howell: That's a good question. Corn, yeah.

Kub: Okay, so yeah we do tend to see, like I mentioned, these seasonal patterns and you do tend to see a summer high. This past summer that summer high didn't come until July but part of that was because planting was late, everything was just development wise a couple of weeks late this past summer. So this summer I guess it depends on planting and weather. Just really I think fundamentally what we're looking for is when the crop is at its most agronomic risk, when it has the most production risk in its growing season. So whenever that is usually late July, mid-June to early July, that is when we watch for those opportunities. But I don't think it's a great idea or anybody to be looking for the one magic date, as much as I put out these charts about this is the date that this happened in certain other years, that's not really the game. The game is to make nice average sales that you get many opportunities to have a good overall average price in your sales, in your marketing.

Howell: Definitely. Elaine, when we look at other news in the corn markets projections this year are supposed to be, production is supposed to be outpacing our total corn usage. Do you expect that to hold true?

Kub: Yes. I think it would require multiple years of a crop disaster for us to ever draw down these extremely large inventories. We are looking at a long-term or at least a mid-term, near-term, several years’ term aspect of having large supplies, large inventories and therefore no real chance of a really strong supply driven rally.

Howell: Okay. Elaine, let's talk about cotton because we often times throw that one to the side during the regular program. We've seen a pretty good rally here in the cotton markets. Do we expect that to continue? Or have we put in our price high for the moment?

Kub: I think it's sort of, it ran up to 84 cents and then it dropped back down and it looks like it's bouncing again but I personally think that it's going to find resistance there. I think the end users in East Asia have decided that they are not willing to pay more than that. They have already bought up most of the supply that they feel they're going to need to spin this year so I don't think we're going to find a lot of buyers who are willing to pay much more than that 84 cent level. It's still a fairly good bullish-ish market from a supply perspective, especially internationally, so I don't necessarily think it's going to fall too far. It may just bounce along near that 84 cent level but I don't think it will be able, if it wasn't able to break past that before I think that we've established a top.

Howell: Do you expect that we will continue to sit at these levels even with Brazil's weather impact? I think the Mato Grosso area is a pretty key cotton producing region.

Kub: Yeah, it's hard to say but the marketing patterns or the buying patterns of those East Asian spinners suggest that they have already made the purchases that they need for this year. So I don't know that at this point for the next six months or so that La Nina, no matter what happens, can affect that too badly.

Howell: Okay, Elaine, I kind of want to end on, again, going back to the trade boards. Do we expect cotton to get hit with this too?

Kub: Very possibly. It could be everything, it could be anything, to the degree that China is the one who directly goes out there and makes these decisions to not purchase U.S. goods, they're maybe not as big of a player in cotton as they are in some of these other markets that we are so dependent on soybeans being the big one. But still, this is not great, it's not a great reputation to have internationally that you are going to be an unreasonable or unpredictable trading partner.

Howell: Alright. Elaine Kub, on that note, thank you so much for joining me.

Kub: Thank you.

Howell: Join us again next week when we'll examine the potential for a trade war and breaking the impasse in Washington over biofuels. Sue Martin will sit across from me at the Market to Market table. So until then, thanks for watching, listening or reading. I'm Delaney Howell. Have a good week.

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