Pearson: This is the Friday, February 8, 2013 version of the Market Plus segment. Joining us now is Jamey Kohake. Jamey, welcome back.
Kohake: Thanks, Mike.
Pearson: We've got a lot of questions here from folks on Facebook and Twitter. So we're just going to kind of start off here. Ethan in Fargo, North Dakota is asking, why are we seeing this downward trend in the corn market this past week?
Kohake: A lot of tech selling and we broke at 50, we broke the 100 day moving average and that spurred long liquidation and no fresh news either. Exports pathetic. We are the bottom side of the estimates again for this week. And we couldn't plow through $7.50 so we saw spec money saying, I'm out, kind of like the $15 bean mark, we've had enough, pull back and it will get long again. We're range bound, $7.10, $7.50 I think a couple more weeks. Don't look for much next week as China is on break. They aren't going to be buying anything. I think we're still choppy but we broke down technically this week.
Pearson: With the slow news week and the breakdown this week, be a good opportunity for folks to start meeting feed needs if they have been buying hand to mouth?
Kohake: Yeah, end users, commercials, I would look down here -- $7.08 March is a great spot. I know first notice day is coming up, short term play there for a week or so if you had to. Sell puts, $6.80 Mays, $6.70 Mays you're still over a dime out there those and start with those would be a great opportunity for end users.
Pearson: Good opportunities in this market. All right. Speaking of end users, cattle producers in particular, Jason in Murrayville, Illinois is asking, at what price level should we begin hedging cattle for the summer and fall? And what about next fall's feeders?
Kohake: Next fall feeders I think you get October $163, $164. We've been there before, very light volume, there's not much out there right now so you'd probably have to wait two months but we have been there and depending on what corn does I think you see $163 again to sell into.
Pearson: And on live?
Kohake: On live $140s. I like $141, $143 area there. A lot of it is going to depend on corn. Are we going back to $8 this fall on tight supplies? South America kind of a stop gap to our short supplies or not and how that spills over into the cattle.
Pearson: All right. Good news -- good advice there to keep in mind.
Kohake: Yeah, I'm bullish longer term cattle and I'd wait on higher prices.
Pearson: Okay. One of the big topics or at least a topic this last week in the markets was Chicago Mercantile Exchange closing the Kansas City Board of Trade and moving all the wheat to Chicago. And Marcus in Manhattan, Kansas is wondering how the KC pit traders will enjoy the move to Chicago? And is it going to give people more trade options? Are we going to see increased liquidity? Is there going to be any impact in the market with this move?
Kohake: There might be a little more liquidity at times but to be quite honest there's not much volume traders taking their orders to the pit anymore. Everything is in Globex and you'll see some of the commercials still go to the pit with some large spreads, stuff like that, but specs they're going straight on the screen. I doubt they like it but I don't think it was that big of a secret when the CME bottomed out that they were going to be having two different locations.
Pearson: The writing was on the wall.
Kohake: Yeah, the writing was on the wall and it might do some liquidity but I would say no.
Pearson: All right. Brianne in Iowa asked a question and we talked about the first part of her question a little bit on the show. She says, will it pay to hold off soybeans and corn into the summer? And like you mentioned on the show, at least let's wait through this slow period and see what is going on into March.
Kohake: Yeah, that is for new crop I'd wait until March on. That's a great question for old crop contracts. The market is inverted right now meaning nearbys are higher than deferreds even for the old crop. That is a sell signal for producers which I would go and sell some into, not all of it but some. Basis is historically tight right now which is in the producer's favor as well. But the numbers today we saw signaled to me exports will pick up, basis will get stronger, tighter and tighter beneficial to her. So I would leave some behind to sell into probably July time period, early August if possible. But I do think you have to sell some now because the market is flashing.
Pearson: Take advantage of these prices while they're out there.
Kohake: And reown it. Come in and buy some calls out into like July and stay long if you have to.
Pearson: All right. And that touches on the second part of her question. She was asking, have we destroyed enough demand that corn will suppress both markets? Is there still enough demand in corn to really help us get another spike as we look at old crop this summer?
Kohake: I think so. Energy prices continue to spike. Ethanol used more. They're still in the red right now but we did see an uptick this week. And also too South America still comes in small, demand shifts back to us. Yes. I think $8 is out of the question but you could still see $7.50.
Pearson: Okay. And as we're looking at new crop, Matt in Eliza, Illinois is asking, if you had to choose one crop to forward sell would you choose corn or soybeans?
Kohake: At current levels after today, I'd wait. But earlier this week I would say beans. I thought the $13.40s were a great spot for November beans but we knocked that 60 lower at times this week. I think you still sell beans on a rally here short-term, tough to get married to and hold it until fall but I think you sell rallies in beans, new crop beans short-term.
Pearson: Okay. All right. And other than that plan on waiting for this --
Kohake: Yeah, plan on waiting but right now the trade feels like Brazil is big enough to offset Argentina. So beans new crop rally should be sold into. I'd hold off on the corn closer to $6. But beans, yeah, you could probably be in and out of that half a dozen times by late spring.
Pearson: All right. Keep in mind, Jamey, now as you look to the future, you trade these markets every day, you live and breathe these markets -- if you could make one trade in the next week, what would you do?
Kohake: Hog puts. I like the April $83s. Like I said during the show pull back to $85.40 April futures and sell the $83 puts. I think hogs have got a bearishness factor to end the seasonals, the bellies, all that negativity is in the market. So I would look to get long hogs on this break.
Pearson: All right. Now as far as looking for the future of hogs we are down, we're testing the lows. Is there anything on the horizon right now that could drop hog prices lower in the near term?
Kohake: Spill over from the cattle. They keep falling out of bed, you're getting that sentiment for spill over. Something crazy happens with corn. That as well. Fundamentally we did get a little bit bearish last year at this time. The only thing that makes me nervous is last year we were bearish at this time, seasonals are bearish but I think a lot of that is factored in. I don't think you get married to any of these trades. You get to $87 in Aprils -- moving average I think you get out of it. The market is very thin right now compared to where we have been and I think be nimble, it's a trader's market here until the end of Feb.
Pearson: All right. Thank you so much, Jamey, for being on the show with us today, really appreciate it. And thank all of you for submitting your questions. We really appreciate them. And please keep them coming. We'll continue to ask our analysts each week they're on and hopefully get you kind of the inside scoop. With that in mind I thank you so much for watching, I'm Mike Pearson. Have a great week.