Howell: This is the Friday, May 11, 2018
version of the Market Plus segment.
Joining us now is Tomm Pfitzenmaier.
Tomm, welcome back.
Pfitzenmaier: Thanks, Delaney.
Howell: Well, we didn't quite hit feeders there in
the end of the broadcast portion so let's make sure
we touch on that today in Market Plus.
We lost a couple of dollars compared to last
week in the feeder market.
Are we finally starting to see some of this large
supply having its toll, taking its toll on the
feeder market?
Pfitzenmaier: I think the feeders have got a couple
of things going against them.
One is I think the trade in general is fairly
friendly the corn market.
Higher corn prices tends to drive down feeder
prices.
And if I'm correct that this $120 cash trade in
the fat market is probably going to work its way down
toward $110 or lower, both of those are big negatives
for the feeder market.
So I don't see the feeder market falling apart but I
think you're going to continually see that, the
price of feeders drift lower here.
Howell: Okay.
What should producers be looking at specifically
for strategies?
What would you be recommending to your
producers?
Pfitzenmaier: If I'm a producer that is selling
feeder cattle I guess on any rallies at all I'd be
looking to find some way to either buy puts or
hedge them off somehow.
I'd be looking to be a seller.
If you're a producer, somebody who feeds out fat
cattle and looking to buy feeder cattle I think you
can be patient and you're probably going to have a
chance to buy them a little cheaper.
Howell: Okay, perfect.
Let's move on to cotton.
What are you looking for, for support in the new
crop?
Pfitzenmaier: I think it will be pretty well
supported here just under 80.
I don't see it falling apart a lot.
There's some dry conditions, particularly
in West Texas.
Export demand has been fairly good for cotton and
I would anticipate that's going to continue.
So I think it's going to be well supported and then
we're going to watch and see how the weather and
the crop condition ratings go.
If this hot, dry weather in those southern
production areas where they grow cotton persists
then I think you could see a little more up in
cotton.
It's starting to risk pricing itself up, out if
it gets much about 82 or 83 though.
Howell: That's really what you're looking for a top
end is 82, 83, even with some weather problems?
Pfitzenmaier: Yes.
Howell: Okay.
Let's move on here and take some social media
questions because we have some fun ones this week as
we look at what has been going on geopolitically
and in the oil industry.
So let's start here with Jon and he wants to know,
with the heavy rain, wet conditions and rain in the
forecast, do you think prevent planting and/or
switching to beans will have any effect on the
market?
Pfitzenmaier: Well, standard analyst answers
is it depends.
If we can get something done in the next week or
two by the 20th, 25th of May I don't think it's
going to have much of an effect.
If you start pushing beyond that then I think
you're going to start to see some acres potentially
rolled into beans from corn.
So that could be supportive for corn, could
be a negative for the bean market.
Traditionally you can plant beans quite a,
pretty well into June and still get decent yields so
I think in terms of a negative for the bean
market or a price supportive factor we're a
ways down the road on that I think.
Howell: Okay.
June really is when you're looking for that?
Pfitzenmaier: Yeah, and that prevent planting
thing, everybody likes to talk about it and things
have to be really bad before farmers take that.
And they've kind of adjusted the way that
works too a little bit so it's not quite as
attractive as it had been so I think that might be a
bit of a factor too.
Howell: Okay.
Let's take another social media question here.
Bill in North Dakota with the increase in oil prices
he wants to know, how high will diesel fuel go?
Pfitzenmaier: Well, I don't know how high it
will go but I think there's going to be upward
pressure on diesel fuel and there's no doubt the
distillates have been inventories are down below
the five year average on the inventory, demand if
the economy is strong like it appears to be that
means industrial usage is strong, trucks, tractors,
everything that uses diesel fuel is going to
be, the demand for it is going to be solid.
So I would expect it to continue to work higher.
I guess if the question is should I be locking in
some diesel fuel for summer or fall I would
probably be looking at doing that, yes, because
it's more likely to go up than it is to go down in
my opinion over the next few months here.
Howell: Okay, so we're looking to lock in those
fuel prices or fuel needs now.
Pfitzenmaier: Correct.
Howell: Okay.
Another one here from Tony in Manning, Iowa.
We had of course the Iran nuclear decline this week.
With President Trump backing out of the Iran
deal will that further hinder the ag trades?
Pfitzenmaier: I guess it depends on how you look at
it.
If it continues to push oil prices higher that's
going to continue to keep ethanol quite competitive
I think and the demand for that should be pretty
solid.
So in that respect I think it will.
In terms of its impact on exports or any of that
stuff I don't really see it having much effect.
Howell: Why is it that we've had such a strong
increase in oil prices?
Is it the Iran deal?
Is that what really led the market this week?
Pfitzenmaier: There's a whole combination of
things.
One is this OPEC agreement to cut their production,
they've been quite successful, they have
really hung together, Russia and the OPEC
countries, to pull back their production so that
has been the big one.
Obviously demand worldwide, geopolitical
demand has been quite strong for fuels.
That has helped drive it higher.
And then this potential reduction in Iranian
exports just sort of adds fuel to the fire here.
So the Iranian one is going to be interesting
because China, India, Turkey, for example, are
probably not going to comply with this and
they're going to buy Iranian oil anyway no
matter what we saw.
Saudi Arabia has said they're going to increase
their production to fill in the gap.
So I guess we're going to have to see if maybe the
oil market hasn't gotten over its skis a little bit
too much here and pulls back under that $70 level.
I know some of the OPEC nations would like to see
$80 oil.
I guess I'm not sure if that's in the cards.
I guess if the economy and global economy stays
strong maybe it is.
I don't know, I don't see that that's a hindrance
for agriculture, it should be a supportive factor I
would think.
Howell: Okay.
Let's tread here just briefly into talking
economics of the economy.
What, first of all, what are treasury yields?
Pfitzenmaier: They're, right now they're just,
that's the big issue here is you're bouncing just
below 3%, we popped above 3% here recently.
That is what we're trying to decide is how strong is
the economy?
How strong is inflation?
Does the Fed need to have two or three more rate
hikes this year?
Howell: Because they didn't have one this past
meeting.
Pfitzenmaier: Right, this last one but there's
almost 100% chance that we're going to have one in
June from everything we read.
And then there's a couple more in 2018?
They've hinted that they're probably going to
have a couple more in 2019 so you're going to start
to see interest rates go up and that's going to
push yields up.
Whether that is a killer for the economy, we're
still at relatively low interest rates
historically, if we're doing it because the
economy is strong and everything is smoking
along here like it's supposed to then I don't
know that it's necessarily a negative.
It does create better for retired people and those
who are support of dependent on collecting
interest.
It's a benefit to them.
Howell: Should we have any concern in the back of our
minds that this is 2007 era pre-recession?
Pfitzenmaier: No, I think you always have to have
that.
It just doesn't feel like an economy that has gotten
itself overheated yet.
So I'm not, that's probably something to
worry about down the road.
I'm not too worried about it in the next six months
to a year I guess.
Howell: All right.
Tomm Pfitzenmaier, thank you so much.
Pfitzenmaier: All right, thanks Delaney.
Join us again next week when we look to the skies
for vital aerial applications and Elaine
Kub and Walt Hackney will sit across at the Market
to Market table.
Until then, thanks for watching, listening or
reading.
I'm Delaney Howell.
Have a great week.
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