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Market Plus: Oct 09, 2009: Market Analyst Jamey Kohake

posted on October 9, 2009

Market Plus: Oct 09, 2009: Market Analyst Jamey Kohake Pearson: This is the Friday, October 9, 2009 version of Market Plus. We're glad you've joined us here at our Market to Market Web site. With us this week Jamey Kohake. Jamey, we talked about a lot of things, I kind of put you on the spot. I didn't mean to, but yes I did because that's what the show is all about but you were talking about gold maybe being a bubble in here, the inflation fear is probably getting overdone, rumors about the dollar, a lot of extreme talk. It seems to be pervasive in our media world today. Its benefiting commodities in a way, the cheaper dollar makes us more attractive overseas. But you don't think this thing is going to stick with us for too long and you seem to be a little bit concerned about corn and bean prices going into the fall of 2010 because you're wanting to make some sales, $4.19 which based on reduced input costs should work for a lot of producers.

Kohake: Right, the $4.19 mark too is a better way to hedge right now than selling cash via basis contract. You can find a place to do an HTA and that would be great but the elevators relatively don't do those anymore because of the risk, they are writing the paper and you're not so it would be great for you. So, the other option is coming and selling the board, there's probably a 50 cent, 48 cent carryout there right now so it's not worth it to sell on the basis. You can sell the board, look at your break evens, maybe knock in roughly 40% profit which I've done for a few guys this week.

Pearson: So, with that your soybean strategy is the same thing. You're counting on a big crop in South America.

Kohake: I am, they have got estimates up over 60 million tons, they do that every year, that's no surprise, they're up there every year talking about their crop and more than likely they won't end up there but I think we will get the carryout built back up and I think the exports longer term in here like we talked about in the first part of this last spot is the dollar. I don't think we're going to go to 60 cents or 50 cents, we will see a correction there and I think China got a little over extended with their imports. They have got huge stockpiles now, they have had trouble selling it and I don't think they're going to be on a buying spree the first, second quarter of next year so maybe we could have a setback coming into winter and then they go back to the weather game in the spring.

Pearson: What about the China weather game? We're hearing about crop problems over there. How serious do you take that? How serious is the market taking it?

Kohake: It has not taken it that serious at all. Supposedly their corn areas have had a drought and they have talked about importing some corn but I don't think substantially it's a large enough number to affect our carryout right now.

Pearson: So, as we look forward big crops coming in the U.S. this year. They keep putting a big number on increased feed demand and yet we keep hearing we have to have this setback and we've seen it in poultry, we've supposedly seen the start of it in the hog business in terms of liquidation. What do you think strategy wise?

Kohake: I think it's on the bullish side of the ledger the USDA always has, that and with the export number as well it might be a little bit overdone right now. But if you look at the numbers we are 30 year tightness in feeder cattle right now, we're seeing the cutbacks in the dairy and in the hogs so I think it's going to be very, very hard to sustain that number and that's why I'm thinking build a carryout larger than we are now, you could stay supported in here until the combines get going in another week but I think this is a very, very short lived type deal in here right now.

Pearson: Option strategies, is that what you're utilizing mostly to make the sales on the board?

Kohake: There have been a few of those, covered calls is one to reown with if a guy hasn't already done that he can look at a setback to do that, buy a call, sell a call but otherwise protecting down side buy a put and sell a call, use that short call as an incentive to come in and sell more grain. If you don't want to sell at the combine right now you can come in and buy a $3.50 corn put, a $3.70 and sell maybe a $4.20 call, the board goes to $4.20 great, you got use out of your cash.

Pearson: Crop insurance becomes a critical part of everybody's management and cost of return and return on investment and this year is going to be no exception so it's going to be interesting to see how those numbers start to play out here as the month of October wraps up.

Kohake: That is the key this week, the 30 cent rally in corn, 50 cent rally in the beans, we pretty much exited the zone of the crop insurance this weekend and it's not going to be around anymore but, you're right, it's a huge, huge expense, $50,000, $100,000 crop insurance bill is nothing anymore and I think that's something that a guy has to figure in the first part of the year with his break evens and use that with the $4.19 December '10 corn I like selling, we work that in with our numbers.

Pearson: Absolutely, Jamey Kohake, as usual we appreciate you joining us. That's going to wrap up this edition of Market Plus. Thanks to you for joining us as well. Make sure you tell your friends and neighbors, they can join us here at our Market Plus Web site and watch our market segment if they can't catch it on TV and, of course, join us here for Market Plus. For all of us here on Market to Market and for Jamey Kohake, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news