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Market Plus: Jamey Kohake

posted on December 27, 2013



Pearson: This is the Friday, December 27, 2013 version of the Market Plus segment. Joining us now is Jamey Kohake. Jamey, welcome back.

Kohake: Thank you Mike.

Pearson: Now during the show we talked a little bit about the cattle industry and what is happening with beef around the world. Was there any clarifications you wish to make?

Kohake: Just one. When I said Japan, I meant South Korea. The lights in here are a little hot and half of the country is mixed up.

Pearson: It is understandable. I make a mistake a week and we want to keep Twitter followers happy.

Kohake: You bet.

Pearson: Now going on another topic we didn’t' get a chance to discuss on the show was cotton. Saw a little bit of rally in cotton. Where do you see the cotton market headed?

Kohake: I actually like selling into it 84/90 area for the March contract. I am a little bit leery of the export business. That is where a lot of this rally has came from and China doesn't you know kind of keep their foot on the pedal for exports I could see this backing off. So, I have been kind of want to take some profits and even look at getting shorts right shy of 85 for the March.

Pearson: All right. Now how does planting intentions look for cotton here as we roll into 2014? Are we seeing a lot more cotton acres go into beans and other crops?

Kohake: I don't think it has really been decided yet. I think we are going to wait and see how much moisture we see down in the delta. I think it will be a last second type deal down there too to see if we can get a rally yet in the beans for them to see what the margin is then too.

Pearson: Certainly. All right, now as you mentioned Canada relates to cotton is a big story. Phil in Canada, excuse me China, is a big story as it relates to cotton. Phil in Canada is curious are the Chinese cancellations of DDGs related to the MIR 162 unapproved GMO corn are they deliberate, convenient or real? How are the Chinese playing this controversy?

Kohake: I think it is a great question. I like the convenient answer. To me it seems like a game for them right now. I still think we need to do some type of trade regulations with them when you make a purchase there are some penalties for these rejections. We go through this every year pretty much starting mid-January to March with the soybean market. They buy, wait and see what South America has, cancel and come back or not. So, I think there needs to be some type of they have to pay for half the load or a third of the load or whatever. But I think it is convenient right now and they want to see if they can move the board around.

Pearson: And the goal is just to push prices lower and they know they have got the purchasing power to make this happen?

Kohake: Exactly.

Pearson: All right. Now how is the market interpreting this? Do they- does the market tend to see it as a convenient?

Kohake: Not really. It was a big mover when it came out. The meal market fell apart, spilled over into the beans, spilled over into the corn market as well. It could be up around five million metric tons which is a pretty decent amount and you start adding that back onto the balance sheets it could be a big shaker for the meal. The main meal futures here coming into spring/summer time.

Pearson: You bet that would have an effect for the next six months.

Kohake: Absolutely. So, it is something to watch out for and hopefully it is just a quick game of manipulation and they do you know take another load and make up for it.

Pearson: And the story is they are going to try and slow us down. China could have that strand of corn approved by April if I am correct. So that is sort of the end point of when this could fade into the background potentially.

Kohake: Yes.

Pearson: Now we have got a quick question from Zach in Cedar Rapids. He is curious on the stock market's next move. We touched on it briefly on the start of the show. He says you were pretty bullish back in mid November the last time we had you on and you have been proven right so far. So, a little feather in your cap. He wants to know can the equity market continue the Christmas rally into 2014?

Kohake: Well, I think for sure. It can. I think a lot of this depends on money flow right now because we are so far stretched you know to the top side of the -- pretty much. But the reason we keep going higher is because everybody is trying to pick a top right now and out guess the market. So, they will go and flush them out and once that happens the top will occur but as of right now I think there is still more an upside.

Pearson: We are not there yet and there is no other compelling story out there to suck money out of equities.

Kohake: There is not. Really the only bullish story right now in ag is in the cattle market, and the cattle market is not known for huge amount of open interest relative to the grain markets where you know there will be huge -- corn or beans for the summer months. The cattle and feeders and lives, live cattle, don't really see that much.

Pearson: Have we seen an increase in open interest in the cattle market since this rally started last May to June?

Kohake: We have at times, it hasn't been steady, just you know close your eyes and keep piling on like sometimes we see in the grain market.

Pearson: Ok. So, there is no August of 2012 spike like we saw in corn that gigantic spike in open interest in the corn market.

Kohake: Not a steady one.

Pearson: Ok. All right. Now we have another question Phil in Canada again he is very curious this week. What do you expect from the USDA on January 10th? What are we going to see more corn, beans, demand going to increase? What does the market anticipate?

Kohake: I think the market is anticipating a bearish report but I think it has been talked about for so long that a lot of it is in the market right now and guys have pretty much talked themselves into a bearish report too. I could see the report being bearish but not bearish enough to make the bears happy. So, they are short covering and we go on higher short term. It is not a permanent low set in place but we could see a little bit of some short covering upwards.

Pearson: Now as we watch on January 10th what sort of numbers do you think we are going to be, benchmarks for the market, what are we anticipating to drive us one way or the other?

Kohake: My number that is - I am going to watch all the way to next summer is the carryout number. I think we can play with the yields, you know half up and half down on that but on this 1.7, 1.9, 1.8 that is the number to watch out for and can we keep up this million metric ton per week export figure to start eating away that. Then of course the big wild card is the RFS. How does that play out next year? So, there is a lot of wild cards to be played out with this 1.7, 1.8 carry out.

Pearson: Now as we mention the RFS we have seen ethanol continue to be very profitable with the RBOB being so high and with corn prices hovering in the $4.30, how long do you think that is going to continue? What is the market anticipating? Ethanol production regardless.

Kohake: Yes, these are good margins but the last few weeks we have seen that margin dwindle and dwindle down even more on the numbers that came out today the margins have shrunk. They are still positive but they are shrinking but I think that is the big wild card because at times you know the last several years we have been up around you know in the high 30s percent-wise of the total corn crop.

Pearson: You bet. You bet. Now as we take a look over at the dairy market we saw a big rally last week a $1.12. A big jump last week. A little bit of a sell off this week $.17 in the Jan., $.23 in the Feb., where do you see the diary market headed?

Kohake: I am a little bit bearish coming into January on the milk market. I see cheese getting very week and that pulling the milk market down. So if we could retest these highs that we saw I am looking to - you will get short or even sell some calls but I am really leery of the cheese market pulling the milk down sometime in January.

Pearson: So watch 1950 to make some sales? Make that a point?

Kohake: Yes. Near close to 20 with a stop close over 20.

Pearson: Ok. Now why do you feel the cheese market is going to fall apart.

Kohake: Supply-wise and a little bit of demand weakening too.

Pearson: Ending the holiday season meat and cheese trays.

Kohake: Exactly.

Pearson: Now let's talk gold. We haven't talked about gold on the show in quite awhile. We did see a little bit of a ten dollar run up this week. Where is the gold market headed in light of the taper, in light of the new year, in light of everything that is going on?

Kohake: Yes, we have actually seen some good positive economic news here the last few weeks. Gold did see a big sell off after the tapering news came out and the QE talked being over with so that did flush some money out. But I actually think we put in a short term low. I am looking for the Feb. trace back up around the $12.48 mark. That is where some good resistance is. Dollar stays weak, like I said during the show gets back below 80. I could see gold at the $12.50 area. We need some more news to get through that but I could see a $30 rally just on some short covering.

Pearson: All right. Well now before we let you go, Jamey, as we head into the New Year what is your trade of the week? What is looking good?

Kohake: Coming to next week despite another lack luster volume type week and short week if we could retest this week's hog lows for February, I like the sound of this Feb. 83 puts.

Pearson: Get those puts in at 83.

Kohake: Yes. If we can hold the lows, retest it on Monday/Tuesday and it hold I am going to come in and sell some puts.

Pearson: All right. Well thank you so much for being with us Jamey and thanks to all of you for submitting your questions via Facebook and Twitter. Please continue to do so. We will continue to get expert analysts. Thanks for watching and we will see you next year.


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