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Market Plus: Jamey Kohake

posted on August 2, 2013


Pearson: This is the Friday, August 2, 2013 version of the Market Plus segment.  Joining us now is Jamey Kohake.  Jamey, welcome back. 

Kohake: Thank you, Mike.

Pearson: We've got a lot of great questions from people on Twitter.  And I'd like to start with Bob in Columbus Junction.  He is asking a question that I've heard from a number of producers, they were holding onto grain, haven't maybe marketed all their old crop yet.  Now his question is, we received a million dollar rain last week and have good crop coming on.  I don't have enough grain sold from what bin storage I have.  Will there be a better opportunity for grain sales before harvest?  What is the advice to folks who still have old crop corn or beans?

Kohake: Old crop is really, like you're saying, taking a beating on the basis, one day getting wiped out for over a dollar a bushel.  We have bounced back a tad bit here the last few days.  I don't think we get back to where we were here before harvest, could save a few pennies and weigh it out.  But I would be selling, you know, 20 cent rallies late this week if we get one coming into the report.  For the stored grain he's talking about there I like the $5.00 March area.  There's a little bit of carryout on there for him to take advantage of and that is what I would more focus on and look to lay this old crop off on rallies here short-term.

Pearson: Okay.  Just unload it before we get to harvest as you get rallies --

Kohake: Yeah, I don't see basis improving, I don't see future doing much.  Basis will hop out but I don't see much happening until closer to October.  That's going to hold together -- the market is just short covering, profit taking, rallies don't hold in my mind until after Labor Day at the earliest.

Pearson: Now, as we look at the basis what have we been seeing with ethanol plants around the country?  With these high crude prices are we seeing more production ethanol?  Where is that going?

Kohake: Margins are profitable obviously.  We are using a little bit more based on where we were a year ago.  But the supplies aren't near where they were either so it's kind of a wash in here right now, you know, with the ethanol traders.  But we keep those $106, $108 crude obviously it helps the ethanol guys, helps the corn guy.  But margins do look good right now.

Pearson: And now where do you see crude headed?  I mean, are we still trading on that risk premium from everything that's happening in Egypt?  Is that where we're at right now?

Kohake: Yeah, surprisingly we didn't get an Egypt rally this week.  It was more off of Libya, a little bit of unrest over there where there were actually some pipelines, not in Egypt, just plenty of political unrest.  But did see a nice rally there mid week, didn’t hold together Friday.  I like selling rallies in crude.  I don't think the demand stays in the market long-term.  I like $108 October, if you get up in there sell some calls.  But I'm a little bit bearish up in here in the energy market right now.  The rally more based off these outside markets, more a risk on type trade this week.  We saw the China PMI numbers this week, they were bullish, some bullish numbers coming out of Europe, some decent numbers here, we saw the stock market with new highs, crude bounced and just kind of a broader risk on type deal again but I don't think it holds here short-term.

Pearson: Traders were trading a little sunshine this week and we saw some exuberance in the markets.  Alright.  Now, as we take a look James in Kremlin, Oklahoma, we talked about Chicago wheat, his question particularly KC wheat, are we going to see that rally at all?  What are your thoughts?

 

Kohake: Yeah, I like KC wheat just like I do Chicago.  We're pretty much done with harvest and should start to see a seasonal correction.  I think demand will stay good for the wheat market too. 

Pearson: Seasonal correction thinking --

Kohake: 30, 50 cents, that area coming into fall, not based off one or two day trade, three months period.

Pearson: Okay.  Get up there and so as we approach that 30 cent range begin to make some sales.

Kohake: Yeah, begin to make some sales.  Also too look more at corn.  I think we'll be more linked to that there than a lot of spread action.  Watch the fall harvest with the row crops but I like wheat here short-term on its own.

Pearson: Alright.  Now, we've had a couple questions, as we've been talking about the estimates, we've talked about the USDA estimates, we've talked about Informa's estimates, both acreage and just production numbers.  Cornbroker21 is just curious, what numbers do you use?

Kohake: I use, I scale a lot of different research together but I like 13.8 right now for corn.  I'm a little bit lower than where ____ was this week but there will be a lot of adjustments being made obviously here in the next 30 days.  But I'm more focused on the time period for harvest and trying to outguess acres again or crop size, a lot of this crop going to be black layering in October and I think, like we said during the show, get past Labor Day the freeze talk.  So I think there's a lot of uncertainty obviously on the horizon than trying to outguess the USDA again.  They have been so erratic the last couple of years I don't put a whole lot of faith in anything right now based off estimate wise.

Pearson: Okay.  Alright.  Now, Phil in Canada is curious, as we're talking numbers for December corn crop, Phil is curious, where do you see the bottom on Dec corn?

Kohake: That's the million dollar question.  I think a lot of it depends on how heavy do the funds want to get short?  They already loaded the boat up right now roughly 120,000 contracts.  I could see maybe get to 150, that's a massive position for corn.  I think you could be talking $4.20 then but I don't think we do all that right now.  I think it's the same picture as being kind of bullish longer term that we need proof, how many acres actually to be planted -- are we going to get 156, 158 trendline?  Can Illinois, Ohio, make up for half of Iowa, half of North Dakota, half of Nebraska?  That's what the picture looks like right now.  So I think we did start talking $4.00, $4.20 corn, it's probably going to be October period, same thing the bulls are saying, could bounce back to $5.00, $5.50, we need more information.

Pearson: Combines need to be rolling to see where yield is at and then we can actually --

Kohake: Yield, acres, yeah, see can the east make up for the west.  But trend is down, it is bearish right now, $4.50 is the next line in the sane.

Pearson: Now, I'd like for you to put something in perspective if you can.  You said that the funds currently have about 120,000 contracts short.  Talk to us last year, how long were the funds around this time of year, as we were talking drought and the story was really getting compelling?  How many contracts were they long, do you remember?

Kohake: I do remember a little bit, I don't remember exactly but around 80,000, that area.  I don't think they were as long as they were short.  I know that for sure but I think it was less than 100, closer to 80 roughly this time, 12 months ago.  Last year too we saw a lot more spec money than we have right now.  The specs are pretty much sidelined, they're playing the stock market pretty hard right now with record highs there.  But this is a big position for the funds right now and like I said during the show, freeze, bullish USDA you're back 30, 40 higher no time at all.  But it's going to be just a short-term rally because the funds aren't going to pull out a week long and say now we're back long again, they're going to fight it for a while.

Pearson: They're going to fight it.  Now, before we let you go, as we talk about this farm bill, it's dragging on, what are your thoughts?  Is the market changing the way it deals with anything because of the delay in the farm bill?  Is that having any effect?

Kohake: I don't think it has yet.  I think it could, not the delay, but if they did change some of the direct payments, something like that, you flip some acres around longer term.  But supposedly the politicians are saying they want to keep it in one big package now, they want welfare on one side and actually the farm bill on the other side, that they'd do it all in one big package, they can actually do some revisions and get it updated.  I don't know if that's the case or not but it seems to me just to be one big government bloated program again.

Pearson: Alright, and so we won't really see any effect on the market for some time.

Kohake: I don't think it affects the market at all and I can tweet Jerod my opinion too on the farm bill.

Pearson: Jerod in Seldom Rest, we'll let you --

Kohake: It's not a market mover in my mind at all.  It's more on the subsidy side.

Pearson: Alright, now before we let you go, any trades out there that are looking really good to you this week?  Anything people might consider making a move on?

Kohake: October hogs, $85.90, take a short up there and December Chicago wheat at $6.60, that’s the only two things I really like right now.

Pearson: Now, as we follow up on the hogs at $86 what is a good exit point?

Kohake: $82, yeah, that area, $6.90 for the wheat, pop out in there.  But those are my two favorite trades.

Pearson: Alright, well thank you for being with us, Jamey, really appreciate it.  And thanks to all of you for sending in your questions via Facebook and Twitter.  Please continue to do so and we'll get expert answers for you.  Have a great week.  Thanks for watching.


Tags: acreage agriculture analysis basis commodity prices corn economy Jamey Kohake markets midwest new crop grain soybeans USDA weather wheat