Pearson: This is the Friday, October 9, 2015
version of the Market Plus segment.
Joining us now is Don Roose.
Don, welcome back.
Roose: Thank you, Mike.
Pearson: We covered a lot of stuff during the
program, but looking back at soybeans, we've got a
Facebook question here from Denise in Iowa.
And Denise is wondering, as a lot of producers are
today, do we hold our unpriced beans or do we
let them go?
Roose: I think a lot of that depends on the basis
level.
I think if you're sitting in areas where the basis
is 30, 40, 50 cents wider than it probably should be
at its best times in the spring I think the
question is you hold onto the cash, you try and do
some kind of hedge to arrive and see if you can
improve on the basis.
From a flat price standpoint there's really
not much carry in the market so you're going to
have to move them quicker.
I would say you should get a basis improvement going
into November before Thanksgiving and I'd have
a tendency to sell them and hopefully the price
does the same thing, it rallies up a little bit.
But if you're afraid of the price put a hedge to
arrive contract on them and sit with them, let the
basis improve.
Pearson: Okay.
And if you're thinking flat price maybe plan on
spend the money, hold them a month, see what happens
when we get to November.
Roose: That's what I think, yes.
That's what I'd say.
Pearson: Alright.
Now we did talk a little bit on the program about
how the Fed hasn't raised interest rates.
We saw the dollar pull back a little bit.
And we've got a question from Chris in Cuba City,
Wisconsin.
This week is the exception, but with the
strengthening U.S.
dollar that we have seen historically over the past
six months leading to commodity price deflation,
when will it pressure input costs?
It's time to start making those decisions.
When are producers going to get a break?
Roose: Yeah, and I think really what has happened
with the dollar is we are a three week low on the
dollar.
So it has given us a little bit of a boost on
the export and I think that actually did help the
values of a lot of commodities pushed up here
this last week and not just the grain market but
the metals market also.
So when are we going to get a break on the input
costs?
That's a good question because I think if you
look at it a lot of us feel that the inputs are
too high.
Fertilizer prices should come down with energy
where they're at and I think they probably do
over a course of time.
Land values are coming down, rent values are
trying to come down.
The chemicals and seed that's always a struggle.
But hopefully we get some relief over there soon.
Pearson: Alright.
Now we've got a question, again from Wisconsin,
we've got Rodney in Edgar, Wisconsin.
He's curious, what does the next six months or so
look like for the dairy markets?
Roose: Well the dairy markets are very similar
to some of the other markets that we have in
the commodity markets.
We had our best time to sell, forward sell milk
six months ago, a year ago.
So those numbers are kind of behind us, kind of like
they are in the grains.
But I would say when you get some sharp rallies in
milk prices production is still on the increase, I
would go to work and take advantage of it.
The plus on the milk side of it, we've had really a
struggle with the input costs with the feed and
the meal and the protein.
That is at least manageable now so there's
some good things from that standpoint.
But I would say rallies are meant to be sold in
the milk.
Pearson: Okay.
Now, we talked on the program about the TPP
agreement being signed, not yet passed by Congress
and enacted, but should it be enacted what would we
expect to see over the next three to five years
on the commodity side?
I'm looking particularly at milk, pork and bean
meal.
Is it going to be a big impact?
Roose: I tell you, I think it's a jump ball.
I don't think you can really say.
I don't think you can say oh we sign it and it means
instant business because the big issue that we've
had with all these commodities, even right
now look at the Brazilian real, it's at a record low
and that has just caused real issues.
So I think the whole thing with the whole trade pact,
you can make these agreements but it really
comes down to the currency.
If the currency moves you've got one end locked
down and not the other and I think that's one issue
that I think really needs to be addressed and is
really tough when you're dealing with currencies
around the world.
But that's the downfall of the whole issue as I see
it.
Pearson: Now you mentioned the real being at a record
low.
We've talked for quite a while about Brazilian
farmers increasing their soybean plantings and the
USDA on Friday increased their production to 100
million metric tons.
What are your thoughts?
Roose: Well and that's the real problem, their
soybeans down there are running back to the
producer.
Of course they have to export and get it out of
there, they're over $13 a bushel, they're sitting at
near record prices.
So how do you compete?
Their soybean acres are going up because they have
big profits over there.
Between Brazil and Argentina they're going to
raise about 5.7 billion bushels of soybeans.
We're going to have 3.9 billion.
So we continue to lose market share because of
that.
And it's really the currency is what is the
real issue.
Pearson: Okay.
Now we've got a question here from Brock in central
Iowa, he's in Baxter.
He was on Twitter.
And Brock is wondering, you hear from a lot of
producers, how much variation is there in
yield reports?
He says, central Iowa will likely set a new record
field averages in both corn and beans.
What are you hearing from outside his back yard?
Roose: Well I think it's pretty clear on soybeans,
we're just hearing just huge, monstrous yields on
soybeans across the whole Corn Belt.
I mean, even in the areas where we had some tough
growing conditions, Indiana, Ohio, yields over
there are much better than they thought and the same
thing we're seeing across the Corn Belt.
Now the corn -- and that's why we think the yield
could continue to go up on the next report.
Corn is very much variable but as we saw in this
report not enough to move us out of these areas that
say the government's not accurate at 168 plus.
Pearson: So variable but still high yields.
Roose: Yeah, variable.
I think disappointing from what they thought it was
going to be but still just huge yields overall in the
western Corn Belt.
Pearson: Not variable enough to kick us to $4.50
on corn.
Roose: No.
I think that's it.
We know now that we're going to have a big yield,
a big production, a big carryout.
Pearson: Now we talked on the program about the
price of feeder cattle, you've talked about the
cattle cycle quite a bit.
We did see huge herd expansion coming into this
year, record prices paid for bred heifers, cows
retained forever it seems.
Does herd expansion stop with this big of a drop in
both fat and feeder cattle?
Roose: Mike, my experience says that we did put the
cap in the cattle market in 2014 but I don't think
it changes quick because this has just been a very
short-term pain situation that we've seen in the
cattle industry.
Typically I think you're a couple of years out before
you see a real change.
So no, I don't think you see the liquidation.
I don't think people give up that easy in the cattle
business.
This is a tough business.
So nope, I think you'll need to get prices that go
down, stay down long enough that people just
liquidate.
Pearson: Okay.
Maybe we'll see some older cows go in this next year
but other than that we're going to keep right on
trucking.
Roose: Yeah.
I think we're going to keep working with the same
numbers we have and hopefully the demand stays
up because that's what we really need.
Pearson: Right.
Now we do have a final question here from Phil in
Ontario, Canada.
And you've touched on this briefly, twice now.
But with the October USDA report benign is it
setting up the January report for bigger yields?
And in soybeans you think possibly.
What about corn?
Roose: Well big crops get bigger and I would say
that the corn has a chance to grow a little bit also.
Just because we've had an extended growing season
and historically when you have an extended growing
season the tendency that the yields continue to
grow.
We haven't had an early frost any place.
We've had some test weights that are pretty
good.
So I think it probably does have a chance to
grow.
I don't think it gets smaller as we go forward.
Pearson: Okay.
Don Roose, thank you for taking the time to join us
this week on Market to Market.
Roose: Thank you, Mike.
Pearson: Thanks to all of you for sending in your
questions via Facebook and Twitter.
Please continue to do so and we will get expert
analysis right to you.
Thanks for watching and have a great week.