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Market Plus: Aug 27, 2010: Jamey Kohake, market analyst

posted on August 27, 2010

Market Plus: Aug 27, 2010: Jamey Kohake, market analyst Pearson: Welcome to the Friday, August 27, 2010 version of Market Plus. Thanks for joining us here at our Market to Market Web site. With us this week one of our regular market analysts, Jamey Kohake. Jamey, it looks like there's been a shift. You talked about the wheat market has pulled back from those spike highs that they had and it seems like there's been a lot of attention turned to the corn market, to the demand story, you mentioned China, obviously biofuels are still in the mix as well. Some people, you talked about this, that some of the early harvest numbers on corn have been somewhat disappointing, I can counter that with some up in dairy country who are chopping silage saying it looks huge. So, a lot of anecdotal stuff out there at this point. But the story with corn remains demand.

Kohake: It is, it is a demand market. I think it will be through winter right now, that's the big story, can we sustain these huge numbers every single week. If not, you're pulling back into the low 4's probably pretty quick. But we're just at about a 20, 25 cent range just back and forth. Tuesday this week we're in the bottom side, Friday we're at the top side and funds buying and selling aggressively and I think that will continue. But, yeah, China is going to continue to be the big factor in here if they continue importing our corn or not.

Pearson: All right. Technically when we are in these, when we're range bound like this typically we're building a base. Your thinking is that is going to break out to the up side?

Kohake: I think based off what we know right now I would say yes. I think you're looking at $4.50, that is your next level of resistance and then I think you have to factor in how big the harvest actually is, every 165 or 160 and then you trade off of that. But I think short-term the way the funds have been buying the trend is still up short-term. They are long over 300,000 contracts and I think we'll just see a little more strength short-term.

Pearson: If you look at the corn market going into 2011 and we talked about this on the show there's question marks about ethanol, there's question marks about what support level the government is going to be, mandates without some kind of an encouragement, it may not amount to much, building infrastructure is great down the road, some saying that's not going to have much of an impact right now. A third of our corn right now is going to ethanol, that is really the baseline here for what has been driving this rally since the 15th of September 2006. How much is the trade worried about this? We've got this rally going, the trade seems to be thinking that either the biofuels demand is going to continue at a sustained pace without much of a change.

Kohake: Right. There's not a whole lot of talk at all in Chicago about either one of these bills getting passed this fall or not.

Pearson: Or the E-20 ...

Kohake: Exactly. They're just focused on exports and close your eyes and get long in here right now and see what happens. Longer term though like you're saying what does a producer do with these prices? I think you have to step in front of it and say, hey, I'm not going to pass up $4.40 corn, I can make a ton of money here. If you're wrong, come out and buy some cheap calls and reown it that way. I think that is the most prosperous way to do it is get your baseline, your profits locked in and if you need to reown do it.

Pearson: Absolutely. All right. So, again, you're friendly to corn.

Kohake: Short-term in here I think there's some more up side but I don't want to get too wild in here blowing out on my hedges or getting net long for anybody until about the middle of September. I'm going to see if we have any harvest pressure and go off of that.

Pearson: Everyone I've talked to, a lot of agronomists, I've talked to a lot of farmers throughout the Corn Belt are telling me this crop is maturing fast, it could mean a normal harvest low both for corn and beans.

Kohake: Yeah, and I think, like you're saying, you're right, you're going to have a low in here, maybe if this thing is off to the races, end of September, middle of September in here and funds get back to double what they are now or something wild. But, yeah, that is going to be the key in here and the better yields too, Mark, are probably up north that you see later so my kind of opinion in here holding a lot of short corn hedge wise in here, let's kind of stay in this $4.40, $4.10 range and see how big this crop is up in here.

Pearson: All right. We'll know soon. Jamey Kohake, thank you sir, we appreciate it. One of our regular market analysts Jamey Kohake joins us regularly on Market to Market and, of course, right here on Market Plus. From all of us on Market to Market, I'm Mark Pearson. Of course, remember to join us on the 15th of September at Husker Harvest Days. You'll be glad you did. We're going to have a great time out in Grand Island, Nebraska. I look forward to your comments and questions at our Market to Market Web site, be sure to check that out. If you're not watching Market to Market on your local PBS station I think you need to ask why. Call your local PBS programmer and say we'd love to see Market to Market on our station every week and I'm sure he would like to provide it for you. So, from all of us on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news