Market Plus: Tomm Pfitzenmaier

Feb 7, 2020  | 12 min  | Ep4525 | Podcast


Yeager: This is the Friday, February 7, 2020 version of the Market Plus segment. Joining us now, Tomm Pfitzenmaier. Hello, Tomm.

Pfitzenmaier: Hey, Paul.

Yeager: Glad to have you here. I know you're always disappointed when you have to talk to me but we'll make it through, we'll struggle together.

Pfitzenmaier: I'll take your assurances on that.

Yeager: I don't think anybody else is going to say it but we'll do it. Okay, let's talk, we kind of glossed quickly over some of the meats. We had to get to hogs. Let's start with feeders. It's a similar case a little bit, you talked on the main program about the packers and the feedlots kind of having a big range. What's going on there?

Pfitzenmaier: I think you're going to see the feeder markets start to firm up here. I don't think corn is going anywhere and usually feeders are highly dependent on corn prices. I kind of indicated on the show that I think the fat price is probably maybe even possibly bottomed out this past week and has a better tendency to work higher. And all of that is positive for the feeder market. So I would expect to see placements continue to be strong and see that market kind of creep up here finally.

Yeager: You talked about the population of the hogs and the production a little high. But you're saying there's room for growth in the feedlots?

Pfitzenmaier: On the beef side I think, yeah.

Yeager: A lot?

Pfitzenmaier: No. 2%, 3%, 4%.

Yeager: All right. The cotton market, that thing has kind of just been dancing back and forth. It's waiting like a lot of these markets for some news.

Pfitzenmaier: It kind of bounced up there toward $66, $68 range. I think if you have some positive news, some pop in exports probably because of China because that is the main export people who buy our cotton then you could pop it up in that $68 to $72 range. If you got up in that range I'd certainly be a seller once again.

Yeager: Keep an eye on that one. All right. We need to get to some of the questions that we get via Twitter and Facebook. These are always fun to read and we know some come when we make the calls out on Wednesday or Thursday or even Friday morning. This one, we're going to start with Brian who is in Brazil. And I looked at his account, he is in Brazil. He wants to know about crude oil. Will producing countries begin to slow production?

Pfitzenmaier: Well, I think OPEC plus has already said that their intention is to cut production. I think they have done a little foot dragging by Russia on that. But I think if you keep crude oil down here in this $50 range you're going to see them cut back and then I think you're going to see high cost producers start to drop out of the market which tends to bring it back up. Now, like everything, this somewhat trades back into China, if this coronavirus has the impact on energy demand in China, they're the number one importer of crude oil in the world, if that happens then I think crude oil prices are going to continue to be depressed. So in order for crude to get going again they're probably going to have to get that thing stabilized, get all their production back going again and get their energy demand back before crude can do a whole lot.

Yeager: We just saw video of what it looks like there in China. When you see the word coronavirus and you know it has impacts on so many different things, what is the one that a producer, farmer should be looking at for the most news or what significant is going to impact me the most?

Pfitzenmaier: I think it's going to be the pork side to be honest with you. I think that is, if they truly need food, if we truly have the drop in pork numbers that they say they do, then ultimately it seems to me eventually that has to lead to pork exports. It certainly would, if all that is true then I don't know that their demand for meal, their demand for corn is as great as we thought. Now, maybe ethanol production, ethanol exports will pop up, that's something that is talked about that really hasn't happened yet so that is sort of lurking in the background. But as far as immediate identifiable demand I think that is going to, it almost is going to have to come from the pork side.

Yeager: And wasn't ethanol production up this week and it was kind of a surprise?

Pfitzenmaier: It was a big surprise.

Yeager: Why?

Pfitzenmaier: Well, that's a good question. I'm not sure because margins are down. Ethanol blending rates are down, which the other part of that surprise is that stocks were also down in spite of the production being up. So I don't know whether that was an aberration, we're going to be really curious to see how that comes in next week because neither the production or the stocks numbers made a whole lot of sense. Now the one thing that is also concerning is that gasoline demand is down I think 4.4% since the beginning of the year. So how much ethanol do we need to have to be able to blend? I don't know, corn prices did drop a little bit last week, maybe that helped some. I don't know. I was surprised that that number was as large as it was.

Yeager: Have you anticipated that, you said it was a surprise so you haven't really anticipated that that's going to happen. Is it a quality of corn issue? That's what we always hear and if you read and listen to what people are saying. I don't believe who the people are, I don't know who the people are.

Pfitzenmaier: I don't know how the quality of corn would have an effect on the amount of production. You think if quality of corn was lower the production would be lower. I can see that it would affect the amount of corn maybe that is utilized. But I don't know how that would necessarily factor into a jump in ethanol production. That's why I'm curious, going to be curious to see -- the other problem is with a lot of these is that we're comparing them to a year ago and a year ago the government was shut down. So those year to year comparisons are getting a little flaky here now for another couple of weeks until we go back to when the government reopened a year ago.

Yeager: It's hard to believe, a lot of these happened. That polar vortex too, you've forgotten about that too haven't you from a year ago?

Pfitzenmaier: Right.

Yeager: You've hit on a couple of topics that we already have questions on so let's pick one of these last three that we're going to talk about. I want to start, let's go to Tuesday's report. Let's talk with Charles in Lancaster, Kansas. He wanted to know, with Tuesday's report what is going to have the biggest impact? What market is going to be impacted the most by Tuesday's report?

Pfitzenmaier: I guess I would take that corn beans or wheat and I don't think any of them are going to be changed that much. The production numbers were established in January so that's not going to be affected. The export numbers I don't think are going to be changed much because we still have the unknown of the China phase one whatever that is going to mean. I don't think the USDA is going to change much. Now maybe the exports on beans have lagged a little bit and probably should be adjusted. But again, I don't think they will be because of the phase one business. Now maybe corn demand could be bumped a little bit because we've had fairly good feed demand and there was some correction made in that in the January report that could carry through into this report. But other than that I don't see a lot of change being made.

Yeager: Well and we had a question from Austin in Belmond. He was asking, it kind of ties into the tail end there which you had said, is when can we expect to see grains, namely soybeans, shipped to China? So how does that play into the report?

Pfitzenmaier: Well, all the purchases they made last year they only have like 580,000 metric ton of beans of all the stuff they purchased last fall and early winter left to be shipped. So we've had good shipments right up to this point, good shipments last week even, but that's going to come to a grinding halt because everything they have purchased has essentially been shipped out. So now we're going to need to have new purchases before we know anything about what gets shipped out. If my contention is correct, that they buy all their beans from Brazil and through the summer and then come back to us in the summertime, it could be three months before we ship many beans to China.

Yeager: China has been a word that I think agriculture has been looking a lot to try to figure out what type of these trade deals are going to help. Has there been too much stock put into that, that they're going to be a savior to give us a boost?

Pfitzenmaier: I guess I'd say yes in that I think we've discounted way too much to impact South American production and how much they have increased their production, how their yields have improved right along with ours, so I guess my answer would be obviously that's important, Chinese business particularly in the soybean side has been super important but I think the competition from South America has been pretty important also.

Yeager: I've got one more curveball and this one has to do with the markets. NASDAQ, the S&P hit a new record high, the NASDAQ has been trading higher, the Dow Jones has been higher, the President says the economy is strong. When I'm in rural America sitting there with a whole bunch of grain that needs to be sold how does that translate to what I'm trying to do to get rid of my grain?

Pfitzenmaier: I don't know that it does. I think it translates to companies that are producing things in the country. I don't know that it has a whole lot -- Deere and CAT stocks haven't done all that well. I guess I have trouble drawing a parallel there. I think you've got technology companies, all these companies that are doing things are what is driving that stock market and I don't know that has a whole lot to do with agriculture, that agriculture is participating all that well on that. Land values haven't changed all that much. Low interest rates haven't really helped, they've helped but they haven't stimulated much on the ag side. We need good prices before that's going to, that is basically what it comes down to and that's either going to come from a crop problem some place or some source of demand that we don't know about yet that pops up.

Yeager: We'll see how it unfolds in the rest of 2020.

Pfitzenmaier: Right.

Yeager: All right. Tomm Pfitzenmaier, thank you so much.

Pfitzenmaier: Thanks, Paul.

Yeager: Always appreciate having your insight. That will do it for Market Plus. Next week on the program we will look at how a group of beekeepers are using groundbreaking methods to help fight colony collapse disorder and John Roach will be back with Delaney as they will be at the Market to Market table. So until then, thanks for watching, listening or reading. I'm Paul Yeager. Have a great week.

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