Yeager: Here now to lend us his insight on these and other trends in one of our regular market analysts, Jamey Kohake. Jamey, good to have you. Welcome back.
Kohake: Thanks, Paul.
Yeager: First we've got to talk about the Dow. The stock market jumped up. It had a nice rally at the end of the day. What drove that?
Kohake: It really started Thursday night. We got news out of Europe that Germany finally caved in. They've been saying no to bailouts, stimulus, and anything to help the pigs -- Portugal, Italy, Ireland, Greece, Spain --all of the nations that are in default watch. They came in late last night, Thursday night, and said we're going to go ahead and financially back Greece and Spain with some bonds. What that did was that rallied the euro. It really sold the dollar off big time, over a full selloff on Friday with the dollar index. The cumulative factor is that it was pretty much a rally in the raw commodities sector. Crude up over five bucks a barrel at times on Friday, massive, massive short covering rally there. Crude had been on a $30-a-barrell selloff here lately. It's the last day of the month, last day of the quarter, threw in some semi- bullish news, and everybody was making profits and you saw massive move.
Yeager: It's really going to make the market look like it had a good month, when in reality oil really took a beating this month.
Kohake: It really did. Same way with metals as well. They haven't been doing much either. Silver up over a dollar today, same story. It's been pretty much doing nothing, seeing money come out of the market and going to the sidelines and all of a sudden are we back on to risk-on type trade. Who knows, wait and see how we start next week. We do have a short trading week coming up, so maybe it will be erratic. We need to wait and see if there's a risk on again or not.
Yeager: Let's talk about the wheat and harvest. We heard it's coming down quickly, but what is that market doing, it's heading up.
Kohake: Wheat getting a lot of spillover off the other grain commodities, corn and beans. I think wheat is a follower of corn still hear short-term. I would step in around the $8 mark to hedge some December wheat up in there, soft wheat in Chicago. I think the key longer term is still going to be exports. They have kind of a slow uptick with parts of Ukraine, parts of FSU, the former Soviet Union having a smaller crop than expected off their hard winter kill. I don't see wheat separating from corn right out and still looking at the short-term upper trend based off weather.
Yeager: So if you have some old-crop wheat, which you probably don't, but if you do, is it time to sell?
Kohake: I think so. I think it should have already been sold. We've seen that contract go from the July where commercials were pricing off of obviously September and the carry just isn't their. I think it should be sold.
Yeager: Quickly, new crop. When do you make a new sale on new crop?
Kohake: That's the $8 mark that I like. I would step into there and try to get a nice rally starting out of next week. I'm going to try to make some sales ahead of the next big crop report. July 11, that's your next big report day. So if you can get close to the $8 mark, pre-January is where I would step into them at.
Yeager: You talk about reports; corn was one of those that has had a nice rally here as of late. A lot of people are looking at those private estimates compared to the USDA estimates. Where were they and what did that have an impact when it comes to corn?
Kohake: The acreage number is huge, as expected. Stocks number a little bit supportive. But as a whole this morning, there really wasn't that big of a market mover just based off the USDA. The average guess might have moved the market 20-30 cents negative and a good excuse to take profits. As the corn market has rallied at times a dollar since last Friday, and everybody thought the last day of the month, a quarter and get a big number and everybody would be out. But the market could open up lower for about 30, 45 seconds and we're back trading positive most of the day till late in the session and closed it out mixed. Second section and closed it out mixed. But bakers were huge, which is what was expected. The key right now is weather. We are back into weather market by
10.00. July 11, like I seen, is the next big report. The key is going to be how many acres south of I-70 --really south of Decatur, Evansville area are going to be pretty much totaled out. And that would be key as to how low do you deal to go. My personal opinion right now is the market is trading by 155, 157 trend line yield. USDA is still 160 so I think there's still a little bit more short term to the up side, and I would be making sales between 660 and 680 coming into the July 11 crop report.
Yeager: Anything else on corn? It's been dry. Is that impacting the market or has it been more the acres since the biggest crop? Most acres planted since 1937, is that more of the driver?
Kohake: A little bit. Not much. I think that's in the market. Right now we're going to be trading weather for another two weeks and then to carry on July 11. I think we are within ten days of being maybe a total disaster. I think even the Western Corn Belt west of the Mississippi, which has been kind of sitting around on the fringe can be an average crop, maybe lose it yet. And if we don't get some rain, I-70 on south, it could get serious fast. East of the Mississippi is already a serious situation. We need some rains out there fast. Friday afternoon we saw a little bit of rain moving across 180 north to areas, but that's not going to be enough to satisfy the crop at all.
Yeager: Talk about soybeans, they also need a drink as well. is that the big driver for their market?
Kohake: We're still in a weather market there. We did see being makers today and that was bearish there, the acreage numbers were. I think the actual bean acre could be lower. I don't think we're going to see double crop acres down south. It's just too dry to plant beans right now.
Yeager: So some are thinking about doing a double crop and they said no because they haven't got any rain.
Kohake: Saying no as of right now. I think there's going to be a weak window. Guys would try a double crop. It stays like it is right now, there's probably not a very good chance of seeing that 76, 77 million-acre number.
Yeager: And you've been around Iowa most of the week getting a look. What do you see in corn, beans? Does it match up with what the reports are saying?
Kohake: Just across I-80 and I-35, it doesn't look too bad from the window. Obviously the soil moisture is depleting fast and we need rain fast. I think it could turn serious mid to late next week. If it stays like it is right now, it could be a dire situation. You throw in couple rains, though; I think we are fairly priced right now. Along with pricing this new crop stuff at 660, 680 coming to the July '11 report, I think producers ought to be looking at the Red Christmas --the Dec. '13 contract. I'd be looking for sales up there around the $6 mark and sell the futures contract, risk a stop closed over six, and take advantage of that as all.
Yeager: We'll cover cotton in the Market Plus, but let's move on to livestock here. Cattle had a nice week last week. Rallied a little bit toward this week. Where are they headed?
Kohake: I think there's still a little more short covering to come. Like you were saying tonight, mid week to late week rally. Cash didn't do that much. It was supposed to be on Friday, 116, and technically we saw a bounce. The stock market rallied and pulled some short coverings out of the market and we still have some bottoming action. I think you could take the October live-cattle contract around 127 and start to look to make sales on a nice correction. Same way with the feeders, double bottom action this week and so a bound Wednesday, Thursday, at times on Friday. And I think you can get the August contract up over at 154 to sell into, just looking for kind of a dead cat bounce to sell into. Oversell technicals and start back over again.
Yeager: There was a report this week that I saw out of Arkansas. They're trying to liquidate some of the herds. It's been the biggest cuts in quite some time. It's been too dry. Texas has rebounded. Have there been buy-ins to Texas, whether it's live cattle or feeders? Are they starting to beef those herds back up, I guess, is the bad pun would be?
Kohake: Slowly maybe trying to. I don't think that it's anything that the trend is shifting around and pointing straight back up. I think some that it's something that's paid attention to longer term as we get into the winter months. I think the contracts, you know, third, fourth, first quarter; live-cattle contracts are fine. I think you have a $2-$4 cash rally into those and see what happens, but that is something we will keep an eye on.
Yeager: Big day for hogs. there was a report --what was that report about and what did it tell you?
Kohake: Quarterly report there in hogs, surprisingly it wasn't a surprise. Pretty much a neutral report today that we saw. What that report reiterated to me was that produces need to be nimble with their fourth quarter through second quarter of next year's sales. That's talking 82 cents for December and looking out into February, April, two of the 2013 contracts. I think numbers get big out in there. We've seen some expansion. And of course, then we'll play out and -- see how the corn plays out. I think the 82 mark in December to step in with some hedges there next week.
Yeager: Do you have anybody expanding herds on a big scale, or is this kind of a cautious dip they're putting into the market?
Kohake: Cautious right now. I do have some guys that are expanding not on a rapid pace. They want to see what the corn market does. See if they can get corn locked in at a decent price, even though they took a big step.
Yeager: So again, the livestock is still hinging upon what that corn price is going to do.
Kohake: Right. Also, are the guys hedged up, is it all forward priced already, can their breakevens work. livestock, feeder cattle especially and deferred hogs and deferred cattle, based of this corn market, can we go back up to where we were last year, 775 if we turn into a total disaster or not. I think rallies are going to be hard to hold just because of the fund money.
Yeager: Five seconds. Your pick of the week.
Kohake: I like buying breaks in corn still.
Yeager: Jamey Kohake, thank you so much for your market analysis. It's always good to have you here on the program.
Kohake: Thank you.
Yeager: That will do it for this edition or "Market to Market." If you’d like more information from Jamey on where these volatile markets just may be headed, visit the Market Plus page at our web site. You'll find expanded market analysis, audio podcasts, streaming video of our program and links to our Twitter feed and Facebook page all free at the “Market to Market” website. Many of you posted comments on those sites in the past weeks expressing your sentiments on the passing of Mark Pearson. We thank you for your support and want you to know that “Market to Market” will name a successor in the weeks ahead. The new host will be rooted in the same tradition of Mark and Chet Randolph before him, and we believe viewers will be pleased. So until next week, thanks for watching. I'm Paul Yeager have a good week.