Market Plus: Tomm Pfitzenmaier

Jun 26, 2020  | 12 min  | Ep4545 | Podcast


Yeager: This is the Friday, June 26, 2020 version of the Market Plus segment. Joining us now is Tomm Pfitzenmaier. Hello, Tomm, again.

Pfitzenmaier: Hey, Paul.

Yeager: Had you in studio, you're one of the last humans I've seen in this building, but now we see you virtually and we'll talk about that in a moment. Cotton market is what I need to start with here. We've been hugging that 100 day moving average for quite some time. We hear about China maybe buying. But we've got a weather story of our own developing in the Delta. Is that more of the market mover?

Pfitzenmaier: Well, maybe. That cotton market is kind of stuck in that 59 to 61 range, maybe China is going to come in and buy, I don't know. All of the people in the U.S. are locked up and they're not out buying any new cotton pants so that hasn't helped matters any either. We have had some production problems in Texas which has been catching some attention, like you said the Delta there they've been talking that up just a little bit too. So I think the cotton market will be well supported but it's going to take some demand change in order to get the market to break up above that 61 level. Now, maybe if everybody starts moving around, the lockdowns start to back off a little bit, maybe that will help on the demand side. Consumer sentiment seems to be hanging in there fairly well. So I guess I'm hopeful that will be all right on the cotton market but rallies are going to be difficult for a while I think.

Yeager: And we just haven't seen them. So yeah, you'd know it when you saw it. Let's get to some Twitter questions and Facebook. By the way, thank you everybody, we had just a huge amount of discussion on Twitter and Facebook. And we're going to start here with a few of those. One is from James. He's asking, is there currently a single bright spot in the corn market that can give us hope for a rally? Or are the past few days of down markets just a sign of what's to come?

Pfitzenmaier: Well, I guess my bias is probably to the latter. Now, there is, like we said on the show, there is the potential for this report next week to have some friendliness. I hate to even say this but there is China potential business sitting out there that could happen. We haven't gotten the crop pollinated so if you start to see heats get turned up in the middle of July that could give us some up here. So there's the potential for the market to rally some. I don't think those rallies will go very far, maybe $3.45 to $3.50 on the top side. But overall given how things kind of look, the crop condition rating and all that, I'm afraid we're just going to go lower into the fall time period, probably down to the $3 or maybe sub-$3 area briefly in the December contract.

Yeager: Brian in Illinois was asking, is corn at $2.70 a possibility?

Pfitzenmaier: I think if we go through the rest of the summer without any crop problems, we lost this export demand to South America, yeah, I think you could see it spike down to $2.70. I don't see it staying there for very long but that certainly can't be ruled out.

Yeager: We talk about the December corn and if it does stay low that opens up some issues when it comes to crop insurance as well. So there's a lot of people wringing a lot of hands over that December contract.

Pfitzenmaier: Well, I think yeah, I think there are insurance prices established at a fairly high level so I think we're okay. My big concern is how it gets established for the '21 crop because if we keep these prices that number that gets established there in March is really not going to be very good. So that's the one I guess I'd pay some attention to if I was a producer.

Yeager: Be watching March. We kind of rushed through the meats again and not trying to do that on purpose but just time wise. Ethan in Iowa is asking, he's talking about fat cattle here. They've been losing anywhere from $5 to $8 a week this month. Is this due to finally catching up on the backlog of cattle due to COVID? Or is this a combination of packers killing less cattle and a seasonal downtick in the fat cattle markets? During the show you cited heavy on the word fat, we have some overweight cattle.

Pfitzenmaier: Yeah, I think we've just got cattle backed up that we have to get moved. Some of that basis got a little wild here in the middle of the COVID situation and when all those packing plants were shut down. So I think some of that is that basis getting itself corrected back to where it should be. To me those losses, not little losses if you’re a producer, those $2 to $4 drops I think are basically just basis corrections that are happening. We're starting to get basis back in line so I would guess that situation is going to slow up quite a bit for the cash basis, the futures contract.

Yeager: There was another question from Dustin about boxed beef and futures holding strong. But he's wondering, what is going to push the market lower?

Pfitzenmaier: I don't know that it's going to get pushed a lot lower. There may be $2 or $3 down as we bounce around but I think as we chew through the beef demand starts to pick up, we start to see weights gradually slim down, which I think they will, I think you'll start to see some support come under that cattle market. I have no reason to get terribly bearish about that market.

Yeager: We talk about ethanol a little bit with you. That's one thing that you'll write about in your newsletter and we did get a question from Jess in the Pacific Northwest and she was wondering what I think a lot of people are kind of wondering about this energy market. When are the processing facilities going to start reopening? We see some, not many, but will it be before all U.S. commodities on the farm and in the field have died of old age?

Pfitzenmaier: I think you're going to start to see that. You've gradually been seeing the production levels on ethanol increase and as the margins improve, which they have been doing, I think you'll start to see more plants come online. We've kind of got that situation where the ethanol is sometimes a little higher than gasoline, sometimes a little lower, and really to get ethanol going in any decent way you're going to have to consistently see ethanol prices under gasoline to incentivize the blenders and then that helps the producers, helps the farmer. So it's going to be a slow process though because gasoline demand has picked up but it hasn't picked up to any great degree. We need to see people out driving around and using gasoline before the whole thing can get improved a whole lot.

Yeager: You made a drive here the other morning driving across, did you notice more people on I-80 in the mid-to-western part of the Plains or in Colorado, Nebraska? Are you seeing people on the road?

Pfitzenmaier: Certainly across I-80 it was busy. There was a lot of traffic, a lot of truck traffic, although there always is across I-80. Not so much in 76 down toward Denver. It was a little thinner. Coming up into the mountains it was a little thinner too. Like I said, it's going to take a while for people to start moving around in any kind of a normal fashion.

Yeager: Producer/director Josh Buettner and I were talking before the show, he was mentioning we're not flying anywhere, we're going to be driving if we take a vacation, if anything is going to be open here in a few weeks as Florida, Texas, Arizona having massive spikes in numbers. We're not going to be going there. At least those folks aren't going to be going anywhere. But some of the bump in crude has not been about demand, or consumption, it has been about production issues.

Pfitzenmaier: Absolutely. And inventories, crude inventories are at record high levels. Nobody is going to start producing huge amounts of crude oil until those inventories get whittled back. Crude oil up into that 38 to 40 certainly makes it more profitable for some people but it's not going to bring the frackers back in, in the U.S., for example. We really need to get gasoline moving and get that spread improved so there's some incentive for them to start processing that crude oil and get some demand driven rallies going and then I think things can get better.

Yeager: Phil in Dresden, Ontario, Canada was asking about a question similar to the one we talked about on the show, June is normally an opportunity. But he's now looking, let's take his part of the question about beans. With soybeans will there be an August window to price new crop better than the one we have right now?

Pfitzenmaier: There may be. Historically you tend to top corn out in that middle of June to that July 4th area as we sort of figure out how the weather is going to shape up in the middle of July. And as we all know August is the key month for soybean production. So if we get to the middle of July, late July and you start to see weather forecasts that are a little bit scary that could give us a nice pop in soybeans. If we continue with this good weather that we've had right into August it's going to be tough for the soybean market too.

Yeager: You said the Nebraska corn crop looked pretty good. And then you had said something about the western folks were like, it's not as good, but it looked pretty good.

Pfitzenmaier: It wasn't rolling, it didn't have that silver color to it or anything like that. It looked decent as far as I could tell driving down the road. Now, maybe you get off the Interstate and things don't look as good, I can't address that. But it sure looked pretty good.

Yeager: Final question, this is a fun one, Cindy in Illinois asked us via our Instagram feed. Are the markets being driven by weather, charts, sales or the Wizard of Oz? Who is controlling things right now? What is controlling things?

Pfitzenmaier: Well certainly fund selling has been a huge thing and that is driven by the fundamentals in my mind in that we've had good weather, we've got rising carryouts and attribute that to whatever you want to. If the Wizard is behind that then so be it. But that is kind of what is going on.

Yeager: Well we love a conspiracy theory.

Pfitzenmaier: Yeah, you've got to have those.

Yeager: Anything else we need to be watching this week?

Pfitzenmaier: No, all eyes are going to be on those reports Tuesday and I think that is going to be the big feature and obviously the weather going into pollination.

Yeager: And that July 4th bump we just don't see that happening do we in the next couple of days --

Pfitzenmaier: Not without a weather change.

Yeager: Tomm Pfitzenmaier, appreciate your time as always. Thank you so much. That will do it for Market Plus. Next week we’ll follow the effort to turn gardeners into farmers. And Elaine Kub will join us to analyze the markets.      I’m Paul Yeager, thanks for watching, listening or reading. Have a great week.

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