Outlook Presentation Updated 3.24.11 Darrell Holaday Advanced Market Concepts/Country Futures...

transcript

Outlook PresentationUpdated 3.24.11

Darrell HoladayAdvanced Market Concepts/Country Futures

dholaday@amcplus.com800.292.4038Wamego KS

AMC COUNTRY FUTURES INC

How Did This Happen?

Is the Recession Over??• GDP improved

• Consumer Expenditures Increased

• Inflation under control??– Food and Energy

• What about Employment?– How do you explain 9%?

Is the Recession Over??• Debt issues still haunting this economy– Public and Private

• Explosion in Asian Economies

Why are Food Commodities so much higher?

• Corn Yield in 2010 was the flame• The drought in Russia was the spark• Asian economies growing at 6-10% annual rates.• US Exports benefiting from other problems.• US and World Consumers are going to see a

much larger piece of their income pie going to food and energy.– Ultimately this is negative for GDP growth.

This was the flame that changed everything!

Corn/ Feed Grains• Corn is still the backbone of the strength• Yields disappointing

• Down 5%-7 from Trend and Expectations• Still a lot of questions as to why

• Energy drives corn– Has been true since US Govt Initiative in Ethanol– Tax Credits Important but the Mandate is much more

IMPORTANT. How would mandate work without Tax Credits.

• What is the impact of Ethanol on the price of corn?

Corn / Feed Grains• Price has not seemed to trim use of corn domestically

(or internationally).– Somebody has to stop. The markets job is to make

someone lose money using corn.– It cannot live with ending stock to use ratio at 5%.– Who will stop first??

• Did the Japanese Earthquake Trim Use??• Tremendous pressure to increase acres to 93 million

with at 160 bushel yield.• Acreage “fight” will be more interesting than any year

in the past.

How is this at a tight stock situation?

Corn• What I Like

• Tied To Energy and Overall demand for energy is still growing.

• We have not rationed supplies. Stocks for the current crop year have to increase.

• The fight for acreage will be fierce.

• Corn Inventory in strong hands.

• There will be much more concern about prospective yields after last year.

• What I dislike• A lot of feed wheat in the

world.• Japan’s purchases will be

reduced in the short run.• Tax credits may be on their

last leg. • How do we exist with no tax

credits and a mandatory blending level?

• Cattle and ethanol use may both decline at the same time.

Wheat• Fundamentally this market is generally the

weakest of the sector.• The Russian drought changed the “ world

psychology”– Started a small avalanche of production problems

• The problems in Russia and Australia have pushed business to the US.

• Also had Canadian and EU Problems this year• USSOUTHERN PLAINS GETTING ATTENTION !!

Wheat• What I Like

• Bullish Psychology• Weather problems in the

world. US and China, Russia.

• Will be another fight for acreage that may trim some wheat acres from the high expectations.

• Wheat is a competitive feed in many parts of the world.

• CORN

• What I dislike• US and World Stocks still

in reasonable shape if yields come through without big acreage increase. Still a lot of wheat in the US.

• Australia will “fill the boat” with wheat acres.

• Could be a false price signal and will attract too many acres

• Basis and the possible contract changes

Soybeans• Overall long term growth in demand remains

strong.– Still a growing protein market and China consumption

reflects this fact.• We are beginning to see the growth in yield

capability.– Started in 2009– New Genetics will promote additional yield gains.

• South American production will slow US exports, but Argentine crop stunted.

• China carries the big stick in this market.

Soybeans• Overall long term growth in demand remains

strong.– Still a growing protein market and China consumption

reflects this fact.• We are beginning to see the growth in yield

capability.– Started in 2009– New Genetics will promote additional yield gains.

• South American production will slow US exports, but Argentine crop stunted.

• China carries the big stick in this market.

Soybeans• What I Like

• Market cannot deal with ending stock number near 100 million bus in the US

• Chinese Consumption• Argentina crop has questions

and a long way to go.• Macro Psychology of inflation

still dominates• Soyoil Demand still strong

despite biodiesel. • The industry cannot let acres

slip like they did the last time US corn acres jumped up over 93 million (2007)

• What I dislike• CHINA, but no sign of trouble

yet.• If inflation play disappears,

soybean values will retreat.• There is no pullback in South

American production.• Price will eventually destroy

some market.

Crop Insurance and Marketing

• RMA offers very Puts and Calls• Don’t Exclude the Harvest Option• Consider selling “Puts”?• Consider selling “Calls”?• Crop Insurance allows for more aggressive

forward pricing.

Meats• Inventories Have declined significantly in US and

Much of the World• Beef Demand Exploding in Asia (Until

Earthquake).– Poultry Increasing supplies gradually– Can’t Build Beef Consumption if Supplies Shrinking

• But World supplies of protein Very Tight• Good Demand in Asia extremely positive– Beef and Pork Exports the big story

Cattle• Corn Price and Overall Economy (Unemployment driving

near term psychology• Cattle have been marketed very orderly and that has been

critical.• Calf supplies continuing to shrink and COF numbers

declining should eventually decline• Numbers do not indicate any herd building

– The lack of grass is the number one impediment to herd rebuilding

• Corn is the next problem• THE LACK OF GRASS IS THE LIMITING FACTOR FOR COW

HERD EXPANSION!!

Meats Cont’d

• Poultry product still grow 2-3% this year. Will gain US market share in the US versus pork and beef

• Cattle and Hog futures have built in steep premium to cash anticipating substantial drop in supplies.

Outlook Presentation Updated 3.24.11 Darrell Holaday Advanced Market Concepts/Country Futures...

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