Pearson: This is the Friday, June 28, 2013 version of the Market Plus segment. Joining us now is Jamey Kohake. Jamey, welcome back.
Kohake: Thanks Mike.
Pearson: We have had a lot of questions this week on Twitter and Facebook. Folks are curious about the weather. We have had an abnormally cold spring, abnormally wet start to the summer and now we are in a heat wave in a lot of the parts in the country. How is the market trading these weather events? Is it having much of an effect on new crop corn and beans?
Kohake: It has. The Midwest - better corn areas. I am talking I-80 and north and it really hasn't seen drastic heat yet. You look at the 10 to 15 day forecast and there is not much out there major heat wise I am talking 90's/100's and goes back to normal precipitation again. It brought the market lower last week at times and I think we will keep a cap right now on major rallies. But that is what we need to disperse some of these shorts out. Eventually there will be a big heat scare come late July hopefully, you know put some shorts out, give some guys some better prices to sell into.
Pearson: Ok. So in the immediate future keep an eye on weather and don't expect a whole lot on that side.
Kohake: Yes, the weather right now is bearish. We have had some good heat down South, you know 100's down around I-70. It has been good. It has really brought the crop up to where it needed to be. There is some major heat out west 120's out there that could maybe move the dairy market a little bit higher but here in the Midwest it is bearish short term.
Pearson: All right and it is predicted to continue the next 10 to 15 days and then we are just going to have to be keeping an eye on weather scares as we get into late July.
Kohake: Yes. Well there is scares, heat scares, heat ridge or heat dome and set up somewhere.
Pearson: All right. So, that's things to keep an eye on. Be sure to keep an eye on the weather this summer. It is going to be just a big of story as it is any other year.
Kohake: Yes. It is a full blown weather market right now until we resurvey some acres.
Pearson: All right. Well, we have had a lot of questions also and I am sure you have had these. Justin in Rock Rapids is asking a question a lot of people are asking, we touched on it on the show, is the USDA lying in these acreage numbers they threw out today? What is your thoughts out there?
Kohake: There is a lot of frustration today. You know looking for more of neutral report at least. I think it was kind of obvious that there are less corn acres but it is what it is. These numbers were done June 1 and you have to trade it. We can all sit back and yell and scream and should be trading 570 today instead of 510 but hopefully we get some of these acres resurveyed, get a bounce, you know and get back to respectable - more respectable level to sell into, but yes, I don't think it is - the number is accurate but it was June 1.
Pearson: Right and there has been a lot of - there were a lot more planting intentions June 1 that have since been scrapped due to the rain, due to the heat and the other weather problems we have been having. Now Josh has a question and it is a question that we touch on a lot on the show and you mentioned it earlier during the market analysis segment, but maybe you can explain it in a little better detail. How come corn continues to go down on the board but yet we continue to see this historically tight basis. What is driving that distinction?
Kohake: Just trying to pry grain loose around the country pretty much. Certain different pockets of the country and different situations supply-wise and demand-wise. But I think as we get closer to last trading day with July they will merge together. We went into delivery today so there are no limits. Most guys are out. I doubt we see any major types of delivery situation with the July but I think we will get closer to $6.90/$7.00 with the July contract eventually. I think tight basis levels are here to stay and the July will move up but really the situation is most people listening here and watching this aren't trading July, they are trading Sept or Dec and the Sept got hammered with the Dec again today. So, yes if you got some cash corn -- you are trading futures you are probably trading Sept or Dec.
Pearson: All right. Now what are your thoughts on September as we have mentioned on the show, how do you best trade the September contract when it is being treated as new crop even when we know there is going to be tight supplies?
Kohake: Yes, I think eventually it will separate itself and it will be a great spreading opportunity there by the Labor Day sell the Christmas and you guys can take advantage of that and I think it will be soon when that does separate.
Pearson: All right and now another topic that we touched on just briefly on the show maybe you can go into a little more detail, DJ in Dazey, North Dakota is asking what is your outlook on fall feeder cattle and live cattle given the bearish corn number? What is it going to take? You mentioned a $1.57 in November feeders. What are we going to have to see to get to that?
Kohake: 57/58 area, I think will be selling right now unless corn, you know stay on a free fall. Like I said before right around the May lows right now. The key next week is going to be to, you know hold the five dollar mark and keep that in check. It is all going to depend on corn. We get a 450 basis/430 basis yes, these feeder cattle guys hopefully can get back to making some money again. You know if you get some major heat this summer or early frost, watch out we're going back to plus five dollar - corn again.
Pearson: All right and Robert in Columbus Junction has a question. What is your advice on selling the rest is old crop corn and beans?
Kohake: I would hold off. If you didn't sell any pre-report, I would sit back and almost wait until August. I think you know maybe you could sell some late July, check your local elevators to see if they are shutting down for maintenance or something like that in August, but I think it is here to stay and if you hold it to August I think the basis will be better. But these - this question though he might be thinking he is trading off July. July will be at seven bucks and you get on a $1.50 or $8.50 that is not the key, the key then is we are trading off September and September is drastically lower. But I think still hold and get a more positive basis yet.
Pearson: Now what is the outlook on corn and beans imports coming up from South America? I mean with this strong basis obviously there is a lot of incentive to bring grain in from elsewhere. Is that going to be a - put significant pressure on basis as we roll through summer?
Kohake: It could but there seems to be a little bit of corn coming in, you know late summertime period. It usually goes to the east coast hog guys and I wouldn't be a bit surprised if there isn't a large amount happening again this summer to those guys. But I don't think it is going to be a big market move. I think it is expected and supplies are too tight, farmers are too tight fisted yet to - I don't think it is going to crash the basis yet at all right now.
Pearson: And probably won't have much of affect in the Midwest.
Kohake: Not yet. One of the reasons why the guys do it out there is been over the past year it is cheaper to have it transported from South America then it is to have it railed up from Moline or Quad Cities or Kansas City even.
Pearson: Ok. Now Jamey before we let you go, what are your thoughts, what would be your trade of the week in this next week? What really looks good to you?
Kohake: I would like to have the hogs rally back to what they took off today and sell October up around $88.50. I think hogs are getting way extended too fast. We seen a nice jump in the products. Cash has kind of stalled out, I think gotten really toppy. I would like to get short hogs short term.
Pearson: And how long - all right what would you be looking for as your exit?
Kohake: Two to four weeks area, that time period. You could sell some you know 92/94 strike calls -- futures 88.50 area.
Pearson: All right. Well great. Thank you so much Jamey. Appreciate having you with us and a big thanks to all of you for sending in your questions via Facebook and Twitter. Please continue to do so and we will continue to get expert answers for you. Thanks for watching and have a great week!