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Market Plus: Jamey Kohake

posted on May 24, 2013

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Pearson:  This is the Friday, May 24, 2013 version of the Market Plus segment.  Joining us now is Jamey Kohake.  Jamey welcome back.

Kohake:  Thanks Mike. 

Pearson:  We have got a lot of questions here and I think they are really great follow-ups to what we talked about on the show.  We will start off with - continuing talking about corn.  Rob in Chicago is asking what is your take on the cash corn market in July and August after the July futures roll off.  Will we see a $1.50 to $2 over the September contract?  What do you think?

Kohake:  I think you will see a dollar over pretty much where we are now - $1.25.  I think that is pushing that because the game seems to be seems to be late summer/early harvest we shut down for a little maintenance trick and I could see that happening again this year despite the short supplies.  I also think feed yards will be more aggressive then they already are now using wheat to blend and so I think we will see a little bit of that help out with the supply situation.  But I think Rob is right, the big move is going to happen post first notice day when there is nobody in there but a few commercials and pretty much nobody is left again.

Pearson:  Then the gloves are off and we will see what happens?

Kohake:  Exactly.

Pearson:  All right.  We have got Denise asking about the new crop corn.  We saw a tremendous amount of planting happen in the last week.  We moved from 28 percent to 71 percent completed and she is asking is planting all those corn acres in such a short timeframe put those acres at risk for pollination at the same time or if it frosts early as we look at summer heat or early frost?

Kohake:  Yes, I think she is exactly right that it does.  We planted roughly 43 million acres last week, about 9 million just in Iowa, I mean some guys just running daylight to dark 24/7.  But yes the market is not reflecting that at all either and that is why I said during the show that I don't want to stay married to my hedges.  Hundred day moving average, I think has to be an exit plan.  You get short at 550, you close above it, you have got to be out based off of weather.  September call options I think are a great play for something like this.  If the late harvest like Rob was saying tight situations August time period and those September calls give you some time to see what is out ahead for that.  So buy some cheap calls in September to protect you. 

Pearson: And to be able to possibly take advantage of any large price swings there with the weather scare.

Kohake:  Yes weather scare, early frost you know late - we don't start combing across Iowa until Halloween or something crazy like that.  You know you get to you know play around a little bit more than July would give you.

 Pearson:  Certainly.  So, the market isn't reflecting it now but by planting that 43 million acres we have really potentially sown the seeds for a large weather scare. 

Kohake:  Very easily could be.  Yes, dire heat something like that.  Like I was saying the market does not seem to care one hit yet right now which could make a stronger, longer term if we did get - get wild. 

Pearson:  Well now Phil in Ontario was asking as we switched to beans how high could old crop soybeans go potentially go before August 15th?

Kohake:  I am in the same situation here and I was telling Rob that this - I think the big move; the big money is made into delivery after first notice day when the specs are out.  Agridome and I and you were out and we can't play it.  I think they could go plus 16 but I don't think it is going to be before first notice day.

Pearson:  Ok.  So wait until we get that notice day and then -

Kohake:  Yes and I think -- and that was like you were saying the gloves are off, the limits are off and here we go but there is nobody in there but a couple commercials.

Pearson:  All right.  Now as we talk about soybeans Dave in Illinois is asking why does China continue to buy our soybeans and soy products?  Is it simply a price difference or are we still looking at significant trouble out of South America?

Kohake:  We have had trouble there lately.  We got strikes down in Argentina.  There were rumors they were off last night, Thursday night that was not confirmed on Friday.  But yes there is port strikes and a little it at times has to do with pricing.  That is not the case right now.  It is the ports backed up to strikes there.  That has shifted the demand to us.

Pearson:  Now as we look as these strikes and even if the strikes were called off yesterday night, Thursday night, how quick is it going to take to turn around to get that demand off  America's back or are we going to continue to benefit from those strikes for another week, month, two weeks?

Kohake:  Oh, I think it will take probably a month to two months.  Just here a couple months ago, I mean there are miles and miles backed up at the ports.  Three miles at one time.  So that demand routine business would still come to us short term.  I think it will take about 60 days to see a big difference but right now the beans aren't seeing a monstrous amount being exported.  It is routine business.  China has released some out of their reserves.  So, I think they are just pretty much going hand and mouth right now. 

Pearson:  Waiting until prices break and they can get a better deal out of South America.  Now speaking of Argentina and particularly the ports in Argentina, Troy in Iowa is asking if they privatize the ports in Argentina will it make grain movement that much faster and how long would it take to make the infrastructure changes to make that happen?

Kohake:  I still think they are years away from really being a big player which they could be with us worldwide.  It is just not the ports that are backed up, it is not that the dock workers are off on strike no stop every year, it is the transportation to the ports, the roads are horrendous, there is not a lot of storage, Cargill has got some plants down there but there is still you know along the road moving forward.  I think it is probably two to five years before they become a major player and kick us out of the market. 

Pearson:  That is assuming they start now on really ramping up their infrastructure improvements.

Kohake:  We are still going to be the major supplier to the world.  Always have been.  Always will be.  We are more efficient, more productive and I don't think there is any fears at all that we are going to be playing second base behind South America. 

Pearson:  With that in mind assuming they get this privatization and the infrastructure improvement is completed here in the next five years what affect would that have on U.S. soybean producers?  We would essentially loose export demand in the summer?

Kohake:  Demand would slow down, prices could essentially go lower to attract new demand to be more competitive with them, but it is a long ways down the road.  China has got a lot of tricks you know with their purchasing here -- you know with the futures market that they seem to do.  They sell it off, buy it and back and forth.  So, I don't think it is anything to lose sleep on here short term. 

Pearson:  It will be a market change that we will adjust to as we have adjusted to so many before.

Kohake:  Yes.

Pearson:  Now before we let you go Jamey, I was wondering if you had any thoughts on a trade of the week?  Anything that really jumps out at you this week?

Kohake:  I like the bottoming formation that is starting to occur in cattle.  I like selling - out of the money puts like some 114/116 August puts get some decent premium there.  I would write those.  Look for the cattle market to go more sideways and slow for the bottoming action to occur. 

Pearson:  All right.  So, something to keep in mind for those of you watching.  Thank you so much Jamey for being with us tonight.  And thanks to all of you for continuing to send in your Facebook and Twitter questions.  We really appreciate it and we will continue to have exports - experts get you excellent answers.  Hope you have a great week.  Thanks for watching Market to Market.  

Tags: agriculture analysis cattle commodity prices corn economy grains hogs Jamey Kohake markets Mike Pearson news soybeans wheat