Market Plus: John Roach
John Roach discusses the commodity markets in a special web-only feature.
Kohlsdorf: Welcome to the Friday, March 11, 2022 Market Plus. Here to join us for more is John Roach. We understand why you didn't want to come to Iowa this week. You're nice and warm down in Florida, huh?
Roach: Yeah, it's still nice down here. But I look forward to coming up next month.
Kohlsdorf: Yeah, well we look forward to seeing you then. During Market to Market, during the main segment we didn't get a chance to discuss hogs. They closed on the upside this week. Where does the market go from here?
Roach: We think the hog market moves higher. The biggest problem that we've had is that meal prices have been high and corn prices high in China and they have been liquidating their hog herd and putting pork out into the marketplace. That has been bothering the entire world's pork prices. We think that hog prices will move higher and had buy signals actually on them this week.
Kohlsdorf: Okay, let's go to social media for a question here. So this is coming from Minnesota. Paul in Minnesota is asking this week, what are John's thoughts on corn basis in both new and old crop?
Roach: I think corn basis is going to be highly variable. It depends on your particular market and it depends on your particular buyer situation. For most of this year and most of last year we've had very strong corn basis compared to normal. But the cost of hedging corn and all the costs associated with handling corn for your buyer has gone up. So I expect corn basis to widen a bit as we have corn come available. But the demand is strong, particularly into the ethanol business, and so if that is where your market is we could see some narrowing. What we've really talked about with our customers is look carefully at historical basis levels for new crop delivery. And if your basis level is strong relative to history, we'd just as soon fix that basis on a new crop contract rather than do a hedge to arrive. But that is a localized situation where you need to look at history and what is available today for those new crop sales.
Kohlsdorf: All right, well with everything happening in Ukraine we really haven't had a chance to talk a lot about weather conditions here in the United States. And the question coming from Roger this week is, are current drought conditions being reflected in the markets with planting season just six weeks away?
Roach: I think that they are but we have time of course to get moisture. And so you don't get as excited about those dry conditions until you get a little further along. But as the Market to Market show covered at the very outset, we have dry conditions across widespread areas of the western part of the country and that western area comes all the way in past Nebraska and into Iowa. So the situation is concerning with particularly the winter wheat crop, hard red winter wheat crop and the ratings show that. So markets pay close attention to weather during this time of year so you can bet it is already dialed in. But it's not dialed in as much as it will be three or four weeks from now.
Kohlsdorf: All right, well our next question is about something that the government could potentially do, we talked about is last week. Is there any truth to the rumors of some CRP acres being released for early planting? If so, how many acres? And will it likely go to soybeans?
Roach: I really don't have any insight on that, Brooke. So I don't know. Politics are a bit like bizarro world to me these days and so trying to predict what the people do in Washington, I find it to be very difficult and often doesn't make a lot of sense. But it would make some sense to open up CRP ground if they were concerned about availability of supply. But on the flip side, you have a very strong conservation mindset and green mindset with the leaders in Washington. So I really don't have any more insight as to what they will do. And I think that if we were to see it opened up we may not see very many new acres actually come into production.
Kohlsdorf: All right, well Ryan in North Dakota is asking this question. When will wheat start to be priced competitively to corn and beans?
Roach: I'm not sure that it will be if you're looking at historical norms. Wheat is a crop that is going to continue to have all the excitement surrounding it while we're waiting to see what happens in Ukraine with their winter wheat crop and what happens in the United States with our hard red winter wheat crop and in Canada with the spring wheat crop. And so all three areas are important production areas and all three areas are at risk whereas the corn situation right now is at risk in Brazil but it's in pretty good shape and it's still another month away from being at much risk in the United States. So wheat is going to continue to be a strong market relative to other crops for the next month I would think.
Kohlsdorf: All right. Well, one of our questions earlier was about planting season. Is this a good time for farmers to lock in their feed needs if they haven't already done so?
Roach: I think that you have to buy feed whenever you get a softening in the price. We have everything up on the top side right now. We had buy signals in meal two weeks ago and we had buy signals in the other grains back in February or nearby signals. So we've had selloffs in the market, we'll probably have selloffs even though we have all the excitement going on and when we do you need to accumulate feed because you don't want to be running short in this kind of an environment.
Kohlsdorf: All right, well this is a question that kind of impacts everyone and you hear people talking about it a lot, gas prices. Oil closed just below $110. Where do you think we go from here?
Roach: I think oil prices stay high. How high they go we'll have to see. But I don't see a softening in oil prices until we see some policy changes. The administration is willing to have high priced energy, that is a component of getting us all to move away from energy consumption, reduce energy consumption, reduce petroleum consumption. It's a plan and all we've had happen is the situation in Ukraine and now we're not accepting Russian oil and we're going instead to Venezuela and Iran. The policies are all toward high energy prices and those were the policies before Russia invaded. So I don't see that changing.
Kohlsdorf: Okay. Well, John, thanks so much for joining us in Market Plus. Good to see you.
Roach: Thank you very much, Brooke.
Kohlsdorf: And we are entering the time when public television stations like this one are asking for your support. If you value the work of this program or the station in your area, please consider making a gift of support now. Next week, we take a look at a startup that has made advances in preserving pollen and Arlan Suderman will join us to analyze the markets. Thanks for watching and have a great week.
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