Pearson: This is the Friday,
July 4, 2014 version of the
Market Plus segment.
Joining us now is Don Roose.
Don, welcome back.
Roose: Thank you, Mike.
Pearson: We've got a number of
questions from our viewers on
Facebook and Twitter and social
media and what not.
And Chris has a question.
We touched on the wheat market
briefly on the show.
He's curious, looking for the
upside, will the wheat market go
higher at all this summer?
Roose: Well, until something
changes around the world.
We're oversold right now.
The funds are short about 45,000
contracts of wheat.
So, we can get some short
covering, some things that could
move us up to the upside
marginally.
I think you're talking 20, 30
cents.
Big moves to the upside probably
are going to be limited if the
corn market moves up sharply or
we get into some other world
weather problems.
Right now I would say it's very
limited.
Pearson: It's very limited and
as we look at that global,
worldwide stockpile, it's going
to take a pretty severe change
in either weather or demand to
change it, don't you think?
Roose: Yeah, it really is.
And because what has happened
now is there is a glut of wheat
and so it's a race to the
bottom, everybody is trying to
sell at a lower price.
So, four years of high prices
has really brought in too many
acres, too many acres into
production.
And so we have to figure out how
to cut that back.
So, it's not going to be an easy
task.
And that is why we're probably
limited.
But keep your eye on the sky.
Weather is always a game
changer.
Pearson: You bet.
And that leads kind of right
into Ben's question.
Ben in West Union says, any hope
for grain prices to recover?
And for both the new and the old
crop, is it primarily going to
be weather related for upside
movement in the new crop?
Roose: I think it is.
I always, I look at the grain
marketing kind of like a card
game, you have 52 cards in the
deck and what has happened now
is about half the cards plus
have come out of the deck.
And so you know a lot about the
market so you're taking risk
premium out, there's not as big
a reason to go to the upside as
we had.
If we continue with favorable
weather you're going to put your
lows in probably in the fall.
And it possibly could be 40, 50
cents lower.
But we're oversold at the end of
the week and we could get some
technical bounces, 10, 15, 20
cent rallies are probably more
selling opportunities than
buying opportunities if weather
is favorable.
Pearson: Okay.
Now, one of the stories that we
have been talking about this
last year, I've been talking
about this last year, is the
increase in demand for protein.
We're seeing consumers pay these
high prices.
When do we think, when do you
think that will begin to affect,
truly affect corn demand?
As we mentioned a couple of
weeks ago sow numbers haven't
increased, it's going to take a
while to build the cow herd.
Is there an opportunity for the
demand side of the ledger on the
feed grains to increase here in
this next six month period?
Roose: You know, I think it can
and it probably does because we
are going to build back the
poultry first, the pork second
and the beef will be built back,
we'll build back slower over a
longer time.
The problem is when you're
talking about these carryouts if
they're 1.9 or 2 billion or 2.1
you're going to talk about feed
demand that increases 100, 200,
300 million.
It's just not enough.
We don't have anything new on
the block like ethanol that can
bring in 5 billion bushels of
new demand.
So, it's going to be more
measured.
That is why in the '80s we had
the storage years to try and
keep it away from the market.
So, now we're in a free market
and price is going to dictate
it.
Pearson: Okay.
Alright.
We do have a question, J.
Michael P.
from Twitter is curious, where
can he find good futures data on
commodities?
Roose: Well, there's a lot of
good information out there and I
always have to say that at U.S.
Commodities we have a good web
page and we think there's good
information there.
We also know that the CME has a
web page and they spend a lot of
time and a lot of money on their
website also.
So, I would say look at those
two websites, uscommodities.com
and cme.com and those are two
good areas to look.
Pearson: A couple of places to
check out.
Now, before we let you go we did
have the unemployment data was
released.
We're seeing the economy begin
to improve.
And a lot of folks that adds to
the bullish factor for
agriculture, we're going to see
demand increase.
What are your thoughts as we
look to the future, the rest of
this year and into this next
year, as the economy continues
to recover.
Roose: Well, I think that is
really partly maybe a big
percentage from the demand side
is what has happened is the
unemployment has ratcheted way
down from where it was, interest
rates are really low, the job of
the government was to stimulate
demand and I think they've done
that.
The real thing you have to be
careful of is that they overheat
it, which I think there's a real
risk.
So, I think what you have to be
careful of is the zero interest
rate program has been in place
by the government for over five
years.
We're probably going to start to
see interest rates move up to
more reasonable versus these
historical low levels.
So, that sometimes can slow down
demand a little bit.
So, watch for that.
It's probably going to be very
gradual moving up.
They're going to measure it.
So, watch the interest rates to
increase next year I think.
Pearson: Alright.
Get in there and talk to your
banker, get those notes fixed as
soon as you can I suppose.
Roose: I think when you look at
it, short-term and long-term
notes probably make sense to
have locked down.
Remember the early '80s when we
went up to big numbers, 18-21%,
so that's not in the cards but
I'm just saying we're down here
pretty low.
Pearson: That's right.
Well, Don, thanks for taking the
time to be with us this weekend.
Roose: Thank you, Mike.
Pearson: Hope you have a happy
4th of July.
Roose: And I hope you do too.
Pearson: And we hope the same to
all of you guys watching us at
home.
Please continue to send in your
questions via Facebook and
Twitter.
Watch the market Monday morning
and shoot us a question.
Thanks so much and have a great
weekend.