Pearson: This is the Friday, December 7, 2012 version of the Market Plus segment. Joining us now is Jamey Kohake. Jamey, welcome back.
Kohake: Thanks, Mike.
Pearson: It's good to have you. One thing we didn't talk about on the show that I wanted to, if you could make any pick of the week this week, what would it be?
Kohake: I've been watching bean oil, heavy big time shorts there and I think they'll come out of the shorts, not all of them, but some of them by Christmas and could create a nice short covering type rally. So I'm looking to get long bean oil just based off they'll want to take profits to funds, they're heavy short and could see a big jump there.
Pearson: And you're seeing this through January?
Kohake: No, just the next two weeks.
Pearson: The next two weeks.
Kohake: It's coming to year end, Christmas time period.
Pearson: All right. And what is driving that? What is causing the shift there?
Kohake: A lot of spreads, long meal, short bean oil and the bean oil market has been bearish fundamentally so everybody has been lit up on the short side. And historically they'll clear some of that off, take the money by Christmas so I think you could be a quick pop there.
Pearson: All right. Good to know. Another thing we didn't get a chance to talk about on the show, where do you see cotton going?
Kohake: I'm bullish cotton here a little bit, 2 to 3 cent rally. Dryness, weather market, no rain down across the southern cotton belt and looking to spreads, bull spreads by March, sell the new crop and just as a short-term hedge but I think the bull spreads will widen out and this could be a nice, quick trade.
Pearson: Okay. And now as we look to next year we've had talk about people taking ground out of cotton and planting to beans. Where does that -- what does that make you think as we look through all of '13 for cotton?
Kohake: I think cotton will lose acres even in some areas with corn but I think if we can get those numbers factored in post-Christmas, post first of the year you can finally see a nice rally that would hold. The market has been a little erratic at times. Is China going to stay in the market? They were aggressive buyers over the summer time period and now with the weather. But longer term rally would be based off acres, if we lose a bunch to corn or not.
Pearson: Okay. And we'll just have to wait and see?
Kohake: Yeah, waiting to see weather with moisture.
Pearson: We do have a lot of questions here from folks that are sent into us via Facebook and Twitter, our social media questions. So we'll kind of work through some of these. Allison in Russell, Iowa is asking, what will happen to the markets if Washington doesn't get this fiscal cliff deal worked out? We talked about it on the show briefly. Do you have any additional thoughts?
Kohake: I think it's bearish, bearish for the stocks, equities, see a lot of fund money pour out there and I think psychologically that would just pour over into the raw commodities, the ag sector and just see a couple of days of heavy profit taking, long liquidation. It would be bearish.
Pearson: And it would be bearish just until they get something put together?
Kohake: I think it would be a two day deal like in commodities, maybe three. I think it will be more of a longer term deal in the stock market where guys that want to stay out then until we get the debt limit raised which is the next big deal coming into February. So it could be a 30 to 45 day deal where everybody just goes to sidelines with their cash.
Pearson: Okay. So we'll just have to wait and see and hopefully they get something put together.
Kohake: Yeah, get something done, get resolved here before Christmas hopefully.
Pearson: Okay. All right. Ben in Zion, Illinois is asking, aside from America what other factors are keeping a lid on this bean market?
Kohake: Well, there's a lot of uncertain -- time you just have to see what happens down in South America. They're getting done planting, we need to wait until Jan, Feb to see pollination, see how that crop comes out. So the fund money is waiting on that. Are there more bean acres than we thought because it was too wet in the corn or not? So a lot of uncertainty that people just want to see some more numbers from before they get long and start talking $16 beans again.
Pearson: Now, if you look back historically the reports coming out of South America so far this year, how do they stack up against previous years?
Kohake: Drier, southern Brazil dry and could be more acres as well. But a lot of that uncertainty makes guys say, I want to know more especially with the outside markets being concerned with this debt deal we're talking about.
Pearson: Okay. And we have a question here on livestock. John in Belle Plaine, Minnesota is asking, even though we have all time low numbers of cattle around, how can cattle feeders make any money or will they make any money?
Kohake: I don't think so. That's what I was saying earlier, end users need to be buying these breaks if you can lock in a profit, just lock the profit in and I think forget about it. But yeah, it has put a crunch on guys last year, the hog and cattle guys and it's going to do it again this year. That's why I think demand does not hold this market together longer term sharply higher, it's just going to be kind of a short-term type rally, we get it priced in, demand backs off and that's it.
Pearson: All right. So not good news out there for livestock producers?
Kohake: I don't see any good news there. Like we were saying, pasture is dried up, $7 corn doesn't work so we'll see what happens.
Pearson: All right. Phil in Ontario, Canada is saying, corn demand continues to drop, feed ethanol -- at what lower price will we see demand grow again?
Kohake: I think we need to be, like I said on the show there, about $25 to $30 a ton cheaper than where we are right now and that's why Taiwan went to South America this week. So I think that's the break even roughly, about $30 a ton cheaper.
Pearson: All right. Do you have anything else you'd like to add before we let you go?
Kohake: I think see what happens with the debt deal. Watch the January crop report. We have a little one next week but everybody is waiting on the January one and then start guessing acres. We saw Elwynn Taylor came out this week talking 148 trendline yields next year, ballpark guess on acres is as high as 98 so that probably puts harvested acres maybe down around 91, 92. So those are some numbers to write down and start to focus on for January.
Pearson: All right. Any protective measures producers should take before that January crop report comes out?
Kohake: I like selling the new crop corn at $6.60, some beans up around $13.80, just put a floor underneath this thing just so there isn't a big surprise, a big wipeout.
Pearson: If you can take a profit --
Kohake: Lock it in and trade it a couple times between now and next harvest.
Pearson: All right. Well thank you so much, Jamey, it's a pleasure having you here. And thank you all so much for watching. We appreciate your questions coming in from Facebook and Twitter and we hoe you have a great week. Take care.