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Market Plus: Apr 02, 2010: Jamey Kohake

posted on April 1, 2010


Market Plus: Apr 02, 2010: Jamey Kohake Pearson: This is the April 2, 2010 version of Market Plus. Thanks for joining us here at our Market to Market Web site. With us this week, Jamey Kohake, one of our regular market analysts. I want to go back and cover a few things, Jamey, because your trade of the week was quite interesting. Explain that to me here. This is your speculative trading week.

Kohake: Right, buying September corn, selling December corn, looking for that spread to go out to full carry. Full carry 4.5 to 5 cents right now. So you take September, October, November, December times 4.5 should be 16 to 18 cents is where that should end up at. Right now it's about 9, 9.5. And I'm basing it off our large carryout and the larger acres, the 2 million more acres that we will have of crop, still have a large carryout.

Pearson: The down side would be if we had a big crop or if we have normal weather conditions.

Kohake: Yes, normal weather conditions you might see it go to 7 or so but it's a safe, conservative play. And eventually though with the large crop the carryout will widen out because the market will say we don't need that stuff right now, we'll just sit on it.

Pearson: All right. As we look at this corn market the carryout number was a big number in that USDA report, threw a lot of people for a loop. Livestock numbers we knew were going to be down. Some people were saying, well, USDA has kind of been overestimating what the feed usage is going to be. There's a lot of finger pointing here. Bottom line is a 2 billion bushel carryout is a lot.

Kohake: It's huge and based on the economy, the dollar could go up to 85, 87 and we could be here for quite some time fighting for exports with some of the foreign countries and the key would be bring the dollar back below 80 and getting this carryout cut down or expanding this livestock herd as well would help out. But for the short-term, the acreage number wasn't a game changer in corn, wheat or beans like you were saying with carryout, we're trading all weather right now from here on out. And like I was saying during the show, I think we can get to $3.90 and look to start re-selling there again.

Pearson: You're a happy camper at $3.90 on the board.

Kohake: Short-term I am. Hopefully I'm dead wrong and we go to $4.50. But I think somebody who's listening and has no sales on at all I think you have to start at $3.90 just based on the increased acres.

Pearson: All right. So, again, you said several times you're bearish on this grain complex.

Kohake: I am, I think eventually you see a sub 8 basis in beans, a sub 3 basis in corn in certain parts of the corn belt and I think it's going to take some drastic weather this summer to see a bi sustained rally and see the funds pour in. With the large carryout it's going to take something big to pop this thing.

Pearson: All right. If I'm feeding hogs, feeding cattle this is all great news to me. And not only that, on the livestock front this turnaround, this rally in the fed cattle market has been phenomenal but you're not convinced it's going to hold here forever.

Kohake: Right. I'm selling sharp rallies, looking for a retracement of the previous highs that we saw to sell into. We've run up here so hard and so fast in this cattle market and I think you get to about April 15th, April 20th timeframe I think you're going to start to see a lot more liquidation and sell pressure coming up.

Pearson: Longer term, fed cattle market, bred cows are up high here in this cash market. You talked about the calf market and that has exploded, we've seen that on the board as well as cash trade that we can follow. Have we got a longer term trend shaping up on fed cattle?

Kohake: We could, the market needs to just have a big technical setback, a large flush out, get some of this spec money out of the market and go back to trading fundamentals. But the cash is supporting it. I mean, every week in the cash market and until that slows up too I don't think longer than a day or two setback will hold.

Pearson: All right. Cattle feeder buying feeders this weekend what are you going to tell him?

Kohake: I would try to get a hedge off with some puts just because it's so volatile and any type of bad news can flush out some big, big money quick. I'm not doing much in the futures market because a guy can get blown up in a week so start with puts, you want to cheapen it up, non-marginal positions, sell puts, lock some risk, sell some calls.

Pearson: All right, Jamey, great to have you with us. Always some good insights. Jamey Kohake, our market analyst this week on Market to Market and of course right here on Market Plus. From all of us here on Market to Market, thanks for being with us. I'm Mark Pearson. Have a great week.


Tags: agriculture commodity prices markets news