Darrell Holaday

(Jim) Good morning welcome to AGam in Kansas. I’m Jim Shroyer and with us this morning we have Darrell Holaday with Country Futures. And Darrell just gave a presentation at the Commodity Classic and things don’t look all that peachy for some of the commodities, so let’s just kinda go through ’em. (Darrell) Well in the big picture, one of the big things I tried to point out is the fact that the sky’s not falling, but there’s a heavy fog. What I mean by that is it’s pretty negative. What we’ve really got to have is some type of production problem somewhere in the Northern Hemisphere and right now we just don’t have one in line. But that can happen. Without that, we are looking at significantly lower prices. We’re down from last year, we’re gonna be lower again next year. (Jim) Now you’re saying for all commodities. (Darrell) This is OK. That’s a general picture, that’s true of all commodities. The one I’m the most concerned about is soybeans. And that I believe that the market has signaled that it needs a lot more beans that it really needs. And now with a big South American crop coming on and we’re cycling trying to put more acres in the ground in the United States, I don’t think the demand can keep up with that. And so, the down move in the next 90 days that I’m afraid will be worse than people think is on the soybean side. Corn and wheat, I think in the next 60 days will stabilize, stabilized where they’re at. I don’t see a lot of downside in those. The downside in those markets come later as you get into summer and like in wheat, we get the wheat harvest, that would come in low in September. (Jim) New crop basically. (Darrell) And if we don’t have any… if we don’t have that problem that I’m talking to you about that we really, quote, could use you know we’re talking about $4.00, $4.25, prices, futures prices in the September low on wheat. And then the $3.00, $3.05, $3.10 level on corn, but that would be next fall. Not in the next 60 days. (Jim) OK. Now where do you think soybeans are gonna go? (Darrell) Well my concern about soybeans is I think there’s a lot of pressure on soybeans in the next 60 to 90 days. (Jim) Right. (Darrell) Right now, if you use a future’s based for a marker, we’re in the $9.60 area $9.70 area on beans. I think we will test $9 dollars. And as we get on into May and we get to planting then, U.S. plant crop planted, I wouldn’t even rule out $8.50 to $8.80. Then I think we’ll hold for a while. But if we do indeed put two million more acres in, we don’t have that problem as we talk about, by next Fall we would be talking anywhere from $6.50 to $7.25. Major down movement. (Jim) Wow. (Darrell) If that were gonna happen. Because we’re just simply… the world’s stocks of soybeans have grown on us. Demand is extremely strong for beans. I don’t want… the Chinese demand… but we’ve really exceeded that. I’ve tried to analagize people with the soy bean market. It’s a little bit like the crude oil market. For a period of a couple years, the market hung at $90 to $100 dollars, despite the fact that crude oil stocks were building, production was building because everybody wanted to own crude oil. Everybody thought crude oil was something you ought to own. And it encouraged a lot of production that to be honest with you we really didn’t need. So when the market broke, it was in a lot of trouble. And that’s the way I see soybeans. We’ve encouraged the production that I question where we need and we break below even $9 dollars or get down in that $9, $8.50 level. We may go significantly lower than they think and that’s a problem (Jim) OK. So, let’s switch to corn. It costs a lot of money to put corn in the ground. And you know it’s been a great crop with good return the last few years. Do you think the price on corn is going to push people to grain sorghum or back to wheat? Do you see any movement that way? (Darrell) I think we’ll see some, but I think it’s very limited. We’re still a year away from that happening because of the yields last year. Now I do think they will be moved to grain sorghum out here in the west areas because the premium grain sorghum has. And that’s because sorghum’s going to China. That’s the MR 162 issue. That premium will stay there and I think we’ll see more sorghum this year. Now next year from now, we may not have that premium, but I do think that will happen. I do not see as a big shift, we’ll put more bean acres in, corn acres will hang in there just because the yields have been good, the technologies good. (Jim) Right. (Darrell) We’re a year away from making that major shift. And I also think that you’re going to see corn supported in the next three or four months until it knows we’ve got those corn acres in the ground. (Jim) Right. (Darrell) Because the market doesn’t care what the cost of production is, but it does over the long haul care what your cost of production is because if it reduces acres it will have it. And corn’s gonna move a lot with what the energy market is, what ethanol’s able to do. (Jim) Exactly. (Darrell) And that’s what we’ve seen happen. That’s what’s happened the last 60 days. Why we’re 40 cents off our high because of the decrease in ethanol values. (Jim) Darrell. I appreciate you taking time to talk with us this morning. Folks, thanks for being with us on AGam in Kansas.

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