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Pearson: This is the Friday,
October 11, 2013 version of the
Market Plus segment.
Joining us now is Elaine Kub.
Elaine, welcome back.
Kub: Thanks.
Pearson: One of the things we
didn't get a chance to talk
about during the show was cotton
prices.
We had a little rally going on
heading into last week.
This week it fizzled, we lost
about $3.00.
Explain to us a little bit about
what's going on in cotton.
Kub: I think that rally was tied
to the Tropical Storm Karen,
they were concerned that that
was going to damage some of the
U.S.
fields so the U.S.
cotton futures, they respond to
that.
And then the tropical storm
fizzled out so the prices
fizzled out too but it's a good
demonstration of how volatile
the cotton market is because
it's in the same timeframe, I
mean it's a harvest timeframe
for it so it really will respond
to news like this.
Pearson: So, looking at the
demand picture, this $83 and
change level that we're at now
in cotton, does this seem to be
a reasonably well supported
level going forward?
Kub: It doesn't have a lot of
support beneath it and I do
think that they're, particularly
with Informa increased their
projections for cotton.
In the absence of USDA we rely
on these independent
forecasters.
They increased their cotton
production forecast.
There generally seems to be good
yields expected here in the U.S.
so I think the natural direction
for cotton at this point would
be to go down and there's not a
lot of support so it could
continue to be volatile.
Pearson: Okay.
Something to keep an eye on.
Well, let's take a look at some
of the questions we've gotten
throughout the week on Facebook
and Twitter.
We've got a question here from
Brianne in Moville, Iowa.
They were one of the places hit
with that, the remnants of the
storm that came through South
Dakota, tornado touched down in
Moville and they lost their
storage.
So her question is, what is the
best strategy for pricing both
corn and beans off the combine?
And is NPE with a storage charge
going to be worth it?
Kub: Well, not for beans.
And let me just say that's
pretty heartbreaking too.
I mean, I am very bullish for
storage and not just for Brianne
but for anybody, to rebuild that
storage or to rebuild as much
storage as you can, because once
we get out of a pattern of wild
weather and we have great
yields, and some areas of the
Corn Belt are having great
yields this year, we're
demonstrating that we can grow
huge crops and it will be nice
for the farmers, there's
opportunities for farmers to
capture the carry by building
their own storage so it's really
too bad.
And so to answer her question,
yeah, the soybeans I don't think
it makes a whole lot of sense to
store, it certainly doesn't make
sense to pay somebody else to
store it so forget about paying
for the DP or whatever for
soybeans.
As for corn, with her NPE
program or DP program, I think
it pays to shop around and
perhaps some co-op even 50 miles
away would have less punitive
fees on that.
But I think, yes, it would make
sense at this point.
Like I mentioned on the program
we're in harvest pressure for
corn prices right now and I do
believe that there will probably
be better opportunities after
the first of the year.
Pearson: Okay.
Alright.
Now, as we take a look, Neil in
southern Minnesota has another
question coming back to the
story out of South Dakota, the
cattle losses there.
What effect, if any, is that
going to have on cattle as we
talk about -- especially as we
look towards next year with
feeder cattle prices being in
uncharted territory?
What does 2014 look like?
And then also if you could talk
a little bit about hay prices.
Are we going to see much of an
impact there?
Kub: Yeah, well I think it will
be a cut to the feeder cattle
supply in 2014, which was
already, we want to be
expanding.
I believe that the industry has
been paying for us to be
expanding feeder cattle in 2014
and that is obviously, has not
helped that goal at all.
As for hay prices, actually the
northern states have been
recovering their, I mean they
have not been in a drought the
way that western Kansas has
been, for instance, or even
Oklahoma and Texas range has
not, the northern areas have not
been as bad.
So gosh, I don't want to say
that a 4 foot blizzard is good
for future range but it probably
is good for future range and
bearish to hay.
Pearson: Right, certainly be a
little bit supportive looking
forward.
Kub: Yeah.
Pearson: Now, as we take a look,
obviously a lot of the concerns
from people on Twitter and
Facebook, a lot of concerns from
people in the field, a lot of
concerns of yours are, where are
the hard numbers that we can
trade?
Kub: Yes.
Pearson: Thomas is asking, are
you freaking out about the USDA
reports not being issued?
And just on a bigger level,
we've got a lot of questions
here, Phil in Ontario is asking,
in the vacuum of no October 11th
USDA report where are soybeans
really at stocks, acreage and
demand?
Without the USDA how can
producers find this information,
where can they pick it up?
Kub: Yeah, well let me just say
that I kind of like not having
an October crop report.
And I'm not just saying that to
be facetious because it was less
stressful for me this morning.
I mean, really, that if we've
only got about 25% of the corn
harvested right now, we don't
know how much, how could anybody
measure or make a very confident
prediction about what those
yields even are?
I think we should just skip
October crop reports going
forward.
If the whole point of this
government shutdown was to
figure out what programs to keep
and which to shut down I say
keep the crop progress reports
that show us how much has been
harvested and whether we're
passed the guts of harvest or
not or how much basis pressure
we can still expect and perhaps
cut the October supply and
demand report, don't even need
it, don't want it.
Pearson: Now, Elaine, looking at
your complaints about the
October report, we don't have a
good idea on yield, we don't
know exactly what is out there,
couldn't you make the same
argument about every other month
of the year?
Kub: Right, yes, you could.
And, I mean, what I shouldn't
leave out is that it would also
weigh forth on the economic
projections for demand.
And that particularly is
important to the wheat market
right now.
We're not worried about yield so
much in the U.S.
but we want to know what the
demand is looking like for
exports.
And that is also true of
soybeans, we're very conscious
of domestic demand for soybeans.
So, yes, we do want to take a
look at some official
projections for those demand
numbers.
But does it need to be monthly?
I don't know.
Pearson: Well, and while we're
in this government shutdown,
without knowing how much longer
it could last, where is the
trade getting demand
information?
Kub: You know, I think the trade
is getting demand information,
like I mentioned, an efficient
market just knows.
If China has been buying beans
or buying U.S.
corn over the past couple of
weeks, you know, the commercials
have been hedging that on the
futures market and that may have
been a source of support even
without official confirmation
from the USDA.
But do I freak out about not
having the numbers?
Yes, I do, because I want to be
able to go and see the
historical database of all of
this information so that we can
compare one timeframe to the
next.
It is really frustrating not to
have those databases available.
But these day to day reports,
the market can get by even
without that and I think that it
does completely disregard these
independent, I mentioned Informa
gives out numbers, lot of
independent forecasters do but
it's been kind of interesting
the past couple of weeks to see
how the market does not really
react to the independent
forecasters numbers, they only
really react to the official
number.
Pearson: Certainly.
There's no barometer to test
whether the other estimates were
accurate because that's what the
market uses the USDA for --
Kub: Right, nobody else has an
army of 4,000 observers to go
out and see how much and then
average out and have some power
in the quantity of the numbers
to average out and see what your
harvest pace is or what your
condition ratings are, nobody
else can do that but the USDA.
Pearson: Alright.
Well, perhaps we'll have those
numbers back eventually.
Kub: I hope so.
Pearson: Before we let you go,
Elaine, Corey in central Iowa
has a question that is on a lot
of minds of a lot of younger
producers.
And he is asking you to kind of
gaze into your crystal ball,
take a look longer term, he is a
beginning farmer concerned with
high inputs and lowering prices.
I know you preach diversity on
some occasions for a beginning
farmer.
How do you handle this downturn
in row crop prices?
Kub: Yeah, and you know, so I
really started in this industry
in 2006 when things were really
getting hot for corn and I feel
like me and anybody my age who
started as a farmer then we've
had some pretty gravy years here
and it seemed pretty easy to
make money and to be, make some
kind of a profit lately.
And I think that definitely
going forward the next five or
ten years if we can avoid major
weather disasters it's going to
get a lot more lean because
we're going to be back to the
world of producing at or barely
above the cost of production.
So, what was the question?
What should he do?
Pearson: How should he be
preparing, as a beginning
farmer, to address this
producing at or just above the
cost of production?
Kub: You know, be more lean with
your purchases.
This is no longer the time to be
really extending yourself on
operating notes.
And you mentioned
diversification, there are great
opportunities I believe in the
livestock industry, which is a
lot riskier because there is no
equivalent crop insurance,
federally subsidized crop
insurance program to pay
somebody for death loss if a
blizzard takes out 50% of your
herd, for instance.
So it is more risky but if you
can diversify your operation
that is one way to do it and
certainly just be more mindful
and more conservative with what
you're spending on those inputs.
Pearson: Maybe while you start
farming some ground, Corey,
don't tear out all the fence
lines first thing, maybe leave a
few in.
Kub: Yeah.
Pearson: But thank you so much
for being with us, Elaine.
Kub: Thanks, Mike.
Pearson: Really appreciate your
comments.
And thanks to all of you for
sending in your questions via
Facebook and Twitter.
Please continue to do so and
we'll continue to get expert
analysis right for you.
Thanks for watching and have a
great week.