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Market Plus: Sep 11, 2009: Jamey Kohake, market analyst

posted on September 11, 2009

Market Plus: Sep 11, 2009: Jamey Kohake, market analyst Pearson: Welcome to the Friday, September 11, 2009 version of Market Plus here at our Market to Market Web site. Glad you've joined us here. With us this week one of our regular market analysts, Jamey Kohake. Jamey, big numbers, if I could say it any other way I would but it's a big corn number, big bean number from the USDA on Friday. A lot of people are saying this is the Waterloo, this is what we do in the grain market, you go back in history and about every ten years we get a big chance to make sales in grain and if we don't it will be another ten year wait before we see that again. Obviously we're in a global economy and that may not be the case going forward but a lot of people are wondering, you're talking maybe $2.75 with this December corn contract for '09. That's a cash price in some areas of $2.20, $2.25.

Kohake: That is right, no frost scare the crop stays right now as big or larger. I think the crop will get larger next month again. But I think the key with the corn breaking $3 you need beans to break $8.80. Corn fell apart late last week, early this week but couldn't push through $3 just because the bean are hanging flat. So we need help with spillover from the bean market to push corn below $3 but eventually I think you could test $2.75 with a crop comparable to 2004 again.

Pearson: A producer at this stage of the game, let's say he hasn't taken advantage for whatever reason in these stronger markets or he's got bigger yields and now he's got more to sell than he thought he did, what are you telling them to do in terms of sales at this point?

Kohake: I think you store it. You look at December corn and look at July corn, take the difference of those two and there's full carry pretty much in the markets, it's telling you to store the market to pay for your interest, your storage and transportation and work it that way.

Pearson: That means actually making a future sale to accomplish that.

Kohake: Stored on farm and then later make the future sale when that carry comes out when July comes down and December comes up. Eventually the market will need corn and the carry will have to come out and that's when you sell it.

Pearson: In corn what kind of a carryout now are you estimating?

Kohake: I think we're going to be up around 17, maybe 18 if we get yields up to 164 next month, 165. The key is with the USDA being awfully bullish with their demands on the ledger I think exports, especially to Mexico, they're pretty much like the China bean market is right now if they keep up and on the same pace.

Pearson: So, we've got some demand factors. The USDA increased the feed consumption which surprised a lot of people.

Kohake: Right, they have not historically increased that number and everybody sat around scratching their head and I think that number might be revised in here later this month, like we said on the show with the cutbacks and the hogs that we've seen liquidation there, those numbers may not be justified later on.

Pearson: We'll see what happens. Now, you were talking about making sales in December 2010 contracts too. What kind of price are you looking at?

Kohake: I think the high 3s if we can get some type of rally, short covering rally, beans take some profits and push the corn market back up. You can make money, input costs are drastically cheaper than last year and I don't see this corn market doing much even to the up side if we would get a frost maybe until first quarter of next year I think we're going to be range bound to lower between now and probably Thanksgiving.

Pearson: Talk about soybeans, a huge number there and a huge crop out there expected. As we look at what is happening in the soybean world, you talked about it on the show, it's been China, China, China, that's been the whole story in what's happened in soybeans. Do you think they might drop those contracts, cut back and try to re-buy?

Kohake: I think so, they have got a pretty strong record of doing it for decades and I don't think it's going to change this year. If they can make money doing it they'll go ahead and step forward and do it. Another problem with the beans here lately has been the basis. Last week we were $2.30, $2.40 over in Omaha, 24 hours later we lost 80 cents, as soon as we started the combines down in the delta areas down there spraying beans to drop the leaves to hurry up and take advantage of these strong basis levels versus the September beans.

Pearson: And seeing a little bit of movement, the very beginnings of harvest 2009 are underway down in the delta so that's going to take the edge off some of that late old crop demand we had down there. New crop demand you want to sell '10 beans?

Kohake: I do, I think it's a great sell just like December '10 corn is, take advantage of that. If you can make 40 cents on the hedge, take it off and wait until next summer again and re-hedge it then.

Pearson: So, get a little bit more aggressive, do some multi-year stuff even at this point.

Kohake: Absolutely, I think you need to take advantage of these prices like you said in the start of this broadcast here that these prices may not be around next year and if we're going to see a record large carryout, record large crop take advantage of this and stick with your hedging.

Pearson: Maybe we'll have production caught up with some of this tremendous demand that we've seen in the last three years, this may become more of the norm than the exception.

Kohake: I think that is right and the early bean harvest, yields are great, above average down in the delta, there were some beans harvested this week in Nebraska, 70 was the average that I heard, up north in Fort Dodge 66 on the early beans so the beans look to be, I know there's pockets that are late and we won't know for a while, but it looks like we're going to have a carry out that we're going to have to fight through.

Pearson: Big crop, low prices, that's the story. We'll have more with Jamey again down the road. Thank you so much. That wraps up this edition of Market Plus. Jamey Kohake, thanks for being with us and on the show this week. For all of us here at Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news