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Market Plus: Oct 15, 2010: Jamey Kohake Market Analyst

posted on October 15, 2010

Market Plus: Oct 15, 2010: Jamey Kohake Market Analyst Pearson: This is the Friday, October 15, 2010 version of Market Plus. Thanks for joining us here at our Market to Market Web site. I'm Mark Pearson. With me this week, Jamey Kohake, one of our regular market analysts. Jamey, it's been a wild ride for wheat, corn and soybeans really since about the first part of August, as soon as that drought hit in the former Soviet Union, things started exploding, acreage battles started squaring up for 2011 and prices have been going up. A lot of people are kicking themselves going, we sold our corn early, we thought we had a huge crop back in June, we unloaded. What can we do?

Kohake: I think the only option you have is to turn around buy calls on a setback, $5.50 that area, even down around $5.30 buy some more. That's the only way to increase your bottom line and I wouldn't get afraid of this red December, December 2011 and let that slip away either. I think there is some more up side there but I'd get a floor underneath that just to not let it happen again.

Pearson: Fertilizer prices are on the jump. Crude oil is up a buck this week. There's talk that we could see prices strengthen there. So, some of the inputs could be stronger so you've got to pencil all that in and then make a business decision, right?

Kohake: That is right, just get your break even done, see how much money is there and I think scale into it, don't sell the whole crop off Monday morning or Sunday night but start to draw a line in the sand and say, I'm not going to take less than this profitable level and lock it in with options or features and then leave your cash open, try to sell into a tighter basis later.

Pearson: All right. Jamey, walk me through, wheat market first. A very bullish scenario still, very big concerns worldwide about wheat. There's plenty of wheat around the world. Getting it to where it needs to be seems to be the bigger issue. Is there that much -- can you really make much of a bull story for wheat?

Kohake: I don't think we're going back and putting new highs in the wheat market at all. I think $7.50, $8.00 is a top and that's only if corn probably gets back to $6.50 closer to $7.00. It's a follower of corn. I think you have to stay around the $7.00 mark with steady exports, lower dollar or we probably pull back to $6.50. The fund money has shifted out of wheat, it has gone to corn, it has gone to a little bit of the metals and a little bit of crude so you're not seeing the big jumps there like we do in the corn and the beans everyday.

Pearson: All right. You mentioned on the show, obviously, we're going to have a November report from USDA. You're guessing maybe it could be a bushel less an acre?

Kohake: That's what everybody is assuming right now, one to two lower again next month. It is probably factoring in by the time we get there. You're going to be focusing on then more the carryout with the rationing talk of where that's going more than the yields.

Pearson: All right. And soybeans?

Kohake: It's a South American deal here with dryness down in Brazil, acreage battle versus the corn and all the fund buying spilling over from the higher crude trade. But I like this January bean getting along around $11.45 and then back to hedge wise great numbers there out of this November 2011 and starting to step in front of that.

Pearson: All right. So, in other words, take advantage. These are strong markets. Historically these are good numbers. You can't embarrass yourself selling $5.70 corn on the board and $11.50 beans. Historically -- these are times to make sales right now.

Kohake: Exactly. I think longer term it's going to be fabulous numbers and people are going to say, why didn't we do more? That's what I'm saying, just get a line in the sand here and scale into higher prices. Do five or ten percent at a time and if it goes on higher keep selling more and more. I don't think this economy can hold $7.00 corn or $14.00 beans but it's going to be short-lived, tight deal with the fund money pouring in and then they want to get out and show a profit and we'll correct hard.

Pearson: All right. Well, plan accordingly. Jamey Kohake, as usual some great insights, appreciate you joining us here on Market to Market and, of course, here on Market Plus. From all of us here on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news