Market Plus: Elaine Kub and Walt Hackney

Nov 20, 2015  | 00:09:31  | Ep4113 | Podcast


Pearson: This is the Friday, November 20, 2015 version of the Market Plus segment. Joining us now are Elaine Kub and Walt Hackney. Folks, welcome back.

Hackney: Thank you.

Pearson: Now, Walt, I had to cut you off. You were discussing the pork market. We've lost $12 in this market in a month up to this week and you were thinking where it could go going forward. Can we come back to that?

Hackney: I think it's proper that we discuss the hogs to the extent that there was much said in the fall of this past year about expansion. There was much said as we got into the spring of this year that the expansion may not have been what had been initially expected back prior. Now the analytical community are looking at the hog count on the farrow to finish operations and they're indicating that well maybe we are looking at an additional supply of hogs coming at us. Maybe this 430,000 to 435,000 head of hogs per day slaughter or a 2.3 to 2.35 million head per week is applicable. And possibly we are going to have an abundance of product coming at us as we go through a minimum of the first and second quarter of '16. What will that do to the export/import? I don't know. But I think China is on the cusp of feeding their people more pork and they don't have it there. They liquidated and they got rid of a lot of pork production that they now are going to have to replace with our product.

Pearson: And China has kind of started making some tentative moves into the pork market approving various non-ractopamine processing facilities and so forth.

Hackney: You're exactly right.

Pearson: So that's a really interesting point as we watch -- and we're going to need it if these hogs are there.

Kub: Mid-2016 you said.

Hackney: Yes, ma'am.

Pearson: Take note hog producers. Now, Elaine, we want to go to you on this corn market. We've got Chris in Long Island, Kansas. What positives do you see looking forward in the corn market?

Kub: That's my answer.

Pearson: That's a very short answer. Really, demand growth nothing is grabbing your lapels and getting you fired up?

Kub: Yeah, not in the really short-term. You just got the seasonal idea of a spring high because of either problems in South America or buying acres here in the United States. And the problems in South America, that has not been ideal. They have had some dry weather. So if that gets worse there is something that could come down the pipeline. If the dollar -- if we didn't raise interest rates and the dollar suddenly collapsed that’s something that could come down the pipeline. So there's things that could happen. But if none of these things happen, no, I think this is just the price where we just kind of limp along.

Pearson: Looking $3.40 to $3.90?

Kub: Yeah. If you saw a $4 number, sell that number, in my opinion.

Pearson: Okay. Alright. Now, with that in mind, let's take a look out to planting season here in 2016. We've got a question from Austin in Groton, South Dakota. He's on Twitter @schuelkecorn. Austin, I apologize. He's wondering, at current levels and beans being more unprofitable, is it possible we see more corn acres than the current market anticipates?

Kub: I think it's possible, again, from the technology standpoint, also from the standpoint of this fall when we've had this nice stretch of nice, dry weather for folks to get out there and put nitrogen down. Yeah, we could certainly see a lot of influences that would put a large corn acreage number next year. But I don't think that there's going to be any major change in the structure of the acreage mix between 2015 to 2016.

Pearson: Okay, so you're not anticipating 93 million acres of corn or something crazy?

Kub: No, nothing crazy.

Pearson: Okay, marginally changing.

Kub: Well, let me say one more thing on that matter. In the U.S. where we could see a major change in acreage for corn, for soybeans, for everything is from Argentina because if they do start to export things, their imports might also improve with an improved economic situation from their government. That is where we're going to see a major acreage change whether it happens in 2016 exactly or whether it's more of a two year story or a three year story. They will be a much more important competitor to us if they can get --

Pearson: Because effectively they're four or five years behind the market, they've been locked out of the global chain of --

Kub: They've locked themselves out, yes. And now they're probably going to come back on. So that's where we're going to see major acreage stories.

Pearson: Alright. Now, Walt, Elaine has been talking not a whole lot of bullish news to this corn, not necessarily a whole lot of bearish news. So with a flat corn market we go to Flinton in Zumbrota, Minnesota. Flinton is wondering, if the corn market remains flat to negative, are there any outside influences to push the fed cattle market higher?

Hackney: The only outside influence that would help the cattle market, if you will, would be an improvement in the futures contracts to allow a producer to take some kind of risk protection on the price of the feeders that he's laying into the feedlot, not the corn price, not a feed cost of 60 to 80 cents on the gain cost. That isn't the issue right now. The issue is the breakeven availability that is out there for protection that he can't reach because of your point, Mike, the volatility. The volatility has taken all the confidence out of their market.

Pearson: Now, given this volatility, there have been some situations in the past few weeks on this feeder selloff that producers, on the day they bought cattle, feeders, could sell in December in the deferreds at break even. Would you advise them to do that if it's offered?

Hackney: I'd like to look at their numbers they used because I don't think that the accurate numbers may have been there that would have accurately given them that opportunity unless they lowered their feeder cattle price by lowering their quality requirements in the cattle they bought.

Pearson: Okay. Alright. Well now we want to go back to one more question here, to Elaine. This is from David in Hutchinson, Kansas. David says, we've read about production issues in the Ukraine. It's a volatile country. Any chance their dry weather lifts the wheat market?

Kub: Not at this exact point in time. I think overall northern hemisphere we're just not in the timeframe where dry weather, which certainly we can be experiencing -- I think I mentioned on the show earlier that this is the strongest El Nino that has ever been recorded. But for the feed grain markets that are really focused on the northern hemisphere, we're going into winter, it's just going to be really hard for these feed grain commodities to get much excitement out of that story. Other commodities, your coffee, palm oil. Palm oil could affect soybeans to some degree. But mostly we just kind of sit and wait for something to happen in the spring.

Pearson: Okay. Now, Walt, while we've got your wisdom here with us today, we touched on feeders briefly on the program. What is the general trend? Lower in the feeder cattle market as we look out to 2016?

Hackney: I doubt it. At this level I would seriously doubt it. You do recall we came from and to probably a $250, $300 depreciation of cash value in the cattle in the last very few months. I don't think that it's going to retain that level of decline. I think that we may hold. And reason being, Mike, is availability of feeder cattle, not the "markets" per se, but the availability. The availability is still necessary and the people that are requiring them to offset their capital exposure in the feedlot equipment and so forth, they're going to buy feeder cattle. And so it's not going to be governed by those outside issues such as what we think.

Pearson: And you think there's still a relative lack of availability, still tight supplies.

Hackney: Yes, sir. There is a lack of availability. Now that will gradually improve over the next two years because of heifer retention and so forth but not at the current moment in this crop of feeders that are out there and available.

Pearson: Alright. So maybe a little stability at least on the cash side.

Hackney: I think it's possible.

Pearson: Alright. Well, Walt and Elaine, thank you so much for joining us this week. Always appreciate your insights.

Hackney: You're welcome.

Kub: Thank you.

Pearson: Thank you guys. And thanks to you for all of your questions via Facebook and Twitter. Please continue to submit them and we will get expert analysis right to you. Thanks for watching and have a great week.


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