Market Plus with Don Roose

Paul Yeager: This is the Friday, December 30, 2022 installment of Market Plus. Don Roose across from us here at the table and I dared people to come watch Market Plus. So we'll see how this works, Don, because you know how this segment goes. It's usually whatever's on my mind, I don't have as much of a tight script. So the first thing I want to answer or ask is a question from Facebook. Mike in Nebraska wants to know what, Don, which commodity surprised you the most in 2022?

Don Roose: Well, I think in general, the biggest surprise is the fact that inflation, how rampant it was and what it did to farmland machinery, just to a lot of things. But I think that also was a factor in pushing up the breakevens and pushing up the price of the grain. So I guess inflation helps hold things together.

Paul Yeager: Paul was there one, did the commodities all kind of perform the same given the inflation that you're referring to?

Don Roose: Well, I think the biggest surprise you have to say, you know, was the wheat market hitting $13. You know, who would have thought it was almost like the Russian grain robbery that we had in the 70s? You know what? If you anticipated Russia attacking Ukraine, probably not. So that has to be probably the biggest surprise of ‘22.

Paul Yeager: Well, and guess what? We're going to ask you some questions about ‘23 here in a moment. But let's we'll start with Glenn in Ohio. Our friend Glenn wants to know which grain or livestock commodity will generate the largest percentage move in 2023?

Don Roose: Well, I think if you have to look at it to the upside is probably more limited. I'd say the the grain that has the biggest chance for the biggest drop is probably the soybeans because they're pretty lofty. And if South America takes a lot of our demand away from us, we end up with bigger acres and a bigger yield.

Paul Yeager: Are we ignoring Brazil right now in these in the trade, we always talk about Argentina and their dryness. But my goodness, Brazil seems to be putting together a pretty good crop.

Don Roose: Well, let's put it in perspective. Brazil raises over three times the volume of soybeans that Argentina does. Last year was just the opposite. Argentina had a pretty big, pretty good crop. Brazil had a drought. So I would say that the big the big miss will be if people lose track that Brazil compensates and large in Paraguay, they compensate for the losses in Argentina and Uruguay.

Paul Yeager: So if Brazil beats expectations dramatically, or do they not even have to beat expectations dramatically to cause some panic?

Don Roose: No, we're talking about almost a 5 billion over 152 million metric ton crop. And what if that would go to 156 million? I mean, you're talking the ability to put 150, 200 million bushels more on the Brazil crop just like that. So and to put it in perspective, we just started harvesting this week the very early maturities of soybeans in Mato Grosso. So Big Harvest will pick up as we hit February.

Paul Yeager: And we'll find out how those stories work and see how it all plays out. So thank you, Glenn. Let's move to Bradley in Nebraska. You kind of touched a little bit on this in the main program, Don. He says, well, the massive wheat crop in Australia be large enough to offset the reduction in fall planted wheat acres in Ukraine.

Don Roose: Well, you know, Ukraine does have does have an issue. There's no doubt about it. But I think if you look at it from a world standpoint, we still have very adequate supplies in the world. The only tight area that could be is the Black Sea. But remember, Russia had a record crop this last year. They could do it again next year. So they're compensating for Russia's compensating for Ukraine.

Paul Yeager: Will we ever really know what Ukraine grew? I mean, do we ever think we get true numbers out of this?

Don Roose: Well, I mean, I think it's, I think it's difficult. But look at put it in perspective. Europe, the EU had a drought last year also in wheat. Ukraine had a problem. And here we're sitting wheat at this level. Russia continues to sell wheat below the world market. And by the way, Ukraine is selling corn a dollar below the US Gulf in the world. So you've got some people that are in the Black Sea area that are trying to clear some grain and get some currency.

Paul Yeager: So that's all you're saying that's only about a currency issue then that's not necessarily a we're just moving grain to get it out because it's spoiled. You know, something may have I mean, you think of all the power disruptions in some of these countries. You're saying it's more of we just need some money?

Don Roose: I think they just need money. I mean, you know, look at what's happened to Russia, how much they're spending. Ukraine, of course, the US in the world is helping them greatly, but they still have to help themselves. So I think I think it's a lot about just trying to get some funds around them.

Paul Yeager: Okay. All right. Got to get some cash. We know what that's like. Sometimes I have to make deals. Mike in Oklahoma, Don has a question for you. What's going to be 2020 Three's Ball and Bear? You've kind of covered it a little bit. Yes, I think let's recap. Let me see if I've been listening. Right. You're saying the bear is going to be soybeans? He wants you to pick a bull for 23.

Don Roose: Well, I think the bull if you had to say, is going to be A Bulls program, B, the oats market, because I think people look around to other things that are more profitable. Oats are still at a pretty low price. So they have the best chance to go up. So I'd say it's the oats on the upside, beans on the downside. And, you know, I'd say on the upside. Where do you think if you're really bullish, where do you think the grain market's going from here?

Paul Yeager: You mentioned oats to sorghum have an uptick to sorghum.

Don Roose: You would think it would, but for some reason, China, they were supposed to be a big buyer or sorghum and they've been basically out of the market. So that's a negative. Sorghum is getting the strength from, you know, the southern plains where they're short of crop. Down through that area.

Paul Yeager: When you say losses or a down, when somebody asked you earlier about percentages, I'll stick your neck out a little bit about some percentages. I mean, how big are we talking here? We going back to 2019 prices?

Don Roose: Well, let's look back two years ago, the government's saying on corn 670 is going to be our average price this year. Last year they said it was $6. I mean, that's in the bank and the year before for 53 for an average. So is this a blip the last two years or are we going to go back to normal?  Now, historically, if you look back over history, we do move to new levels. You know, we're not trading at a dollar corn or $2 anymore. But what happens is we usually bring back to come back to some kind of equilibrium. And the reason we do is because the rest of the world produces, our yields go up and we sell growth dollars per acre. We don't sell bushels.

Paul Yeager: Well, here's another factor, too, to figure into this. And it's Scott in Wisconsin's question again. Thank you, everybody, for your questions. With the shrinking herd, will Americans still pay for the higher price of beef or will demand take a hit in the future? The old saying we said at the beginning of the program, is this a little bit of high prices being the cure for high prices?

Don Roose: Well, I think it's going to be what happens to the economy this next year. It's really quite amazing so far as we went through the rest of the year as beef moved up. Beef was still the protein choice by the producer, by the consumer, followed by poultry, which is surprising then pork. So I would say that's the limiting factor.  And you had to be very careful, Paul, if we go into a big recession, you know, when the consumer goes to the grocery store, it's going to be easy to buy another protein that's a lot cheaper.

Paul Yeager:  But we had a question. I didn't make it on the list. Here was about eggs with chickens. We talk about avian flu. It has been a continued problem in euthanizing millions and millions of birds. Poultry is not going to be able to provide any assistance to this high beef for high pork.

Don Roose: Well, if you look at it next year, they're actually the poultry production is supposed to go up, you know, like 1 to 2%. So add in some. I tell you, the real issue with a lot of things, Paul is just not just in agriculture, but inflation and everything. So does that moderate? Do we have some kind of a pull back and do we get back to a supply chain that's normal? I think that's what we're kind of talking about.

Paul Yeager: Well, that was the story at the end of the year. Was it the supply chain issues mostly were smoothed. But then there's also that question of when you talk about that inflation release, we've seen 2 to 3 months of lower, lower. We talked about I think June was 9.1%. We were down to 7.1 in November. Do you think the trend has turned on inflation? We've hit the as Dave likes to write ‘Hit the bell’.

Don Roose: Well, the Fed the Fed is certainly really bent on that. We're going to go to 2% regardless. So it doesn't look like anything's going to change fast to get down from our area. We're down to 2% is going to take some time. And let's just see how it goes. But I think you have to bank that, you know, it's going to be a long fight rather than a short fight.

Paul Yeager: Lot of good questions here from James and Josh and Matthew. But I think, Don, what I'm going to finish with oh, let's hit you've talked about Ukraine. Let's let's talk Josh in Illinois here. Josh asked us on Facebook about going into next year, will we begin to see demand destruction in corn, soybeans due to elevated price levels? If so, how much?

Paul Yeager: I think I've talked about this issue. Everything else. What about demand destruction?

Don Roose: Well, you're seeing it big time. I mean, our exports in corner down 47%. And I think that's the big risk. You have your ethanol down 9% right now. So you're getting nailed on both ends. And if our acres go up next year on corn, 3 to 4 million, what happens if our soybean acres don't go down steal acres from cotton?

Don Roose: So I would say our exports are up 4% on soybeans, but we haven't hit the big competition. I think that the exports will drop off the scale here shortly and just channels which they're buying to South America and that probably happens starting next week.

Paul Yeager: You cheated. You looked at my paper. I circled the word acres. I was going to ask you about that real quick. So you see cotton is going to lose some acres, you think, to soybeans.

Don Roose: I think cotton loses acres to soybeans. Corn gains acres because of the slip last year. The more profitability. So it's going to be an interesting fight for acres. And then, of course, the weather, we can't say enough about always what happens with the spring. It looks like a lot of fall work was done. So, you know, do we have a good spring could if El Nino starts to look like it develops in the winter?

Paul Yeager: Well, if we change like we did from one week to the other, it's going to be planting season next week. All right, Don Rose, thank you so much. Great to see you.

Don Roose: Thank you.

Paul Yeager: Paul. Happy New Year as well.

Don Roose: Happy New Year to you and all your listeners.

Paul Yeager: Thank you so much. That is going to do it for Market Plus. Next week. We are going to look at one of the nation's leading duck producers as they learn how to hit life's economic curveballs. And we'll also have market analysis with Mark Gold. Thank you so very much for joining us here on Market Plus. We will see you in the new year.

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