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Market Plus: May 29, 2009: Jamey Kohake

posted on May 29, 2009


Market Plus: May 29, 2009: Jamey Kohake Pearson: Welcome to the Friday, May 29th, 2009 version of Market Plus. We're glad you've joined us here at our Market to Market Web site. Tell your friends and neighbors to join us here. And, of course, if you enjoy us here on the Web, you'd really enjoy watching us on your local public television station so call your local public television station programmer and say, I'd like to see Market to Market. With us this week one of our regular market analysts, Jamey Kohake. Jamey, a couple of things are jumping out at me right now. The eastern Corn Belt is really struggling, people there are determined to plant corn, I've heard some potential yield reductions, of course, already were past what would be ideal by almost twelve days and you're hearing the same thing I'm hearing talking to folks in Illinois and Indiana and Ohio and that is they're going to plant corn for as long as they possibly can. With that in mind, maybe not the switch to soybean acres, these corn prices look fairly attractive here now.

Kohake: Absolutely, Mark, I think you hedge between $4.60 upwards to $4.80 right now, I don't think we're going to lose a ton of acres compared to where we were six or eight weeks ago with all the bullish activity in the market. I think the upside right now is all based off the dollar and in fund buying off of that and not a shift in acres. The USDA always finds acres and I think they will this year, eight million that was not accounted for in March I think part of that goes to corn and I think $4.80 is a great target right now to be 60%, 70% sold.

Pearson: I got my ears boxed last week because I talked about shorter season hybrids not doing as well, had a couple of seed dealers call me and say, hey, you'd be amazed what short season varieties are still going to be able to do. We may not have the dry down in the fall but from a production standpoint they're going to be a lot closer than what people are assuming. So, we get up in that $4.80 zone ...

Kohake: Oh yes, I would be a very, very aggressive seller in that area. I think the only reason right now we push over $5 would be just because of the dollar crashing further and further. I think we're going to have a short-term top in all of these grain markets, corn, wheat and beans I think within the next three weeks. Everything is factored in and then you go back to outside markets and some weather scare in July or August.

Pearson: You mentioned two things I want you to comment on quickly on the show, one, the price of oil you think is going to stream on up and get close to $80, I think you said $77. And you also credited that with that weak dollar which in our case in the agricultural realm that might be good news for us.

Kohake: Right, we should get the spillover fund buying, inflationary buying similar to what we had a year ago and keep the market supported. I think the key factor is to keep the funds in there. The market is turning overbought, any type of pullback in energies, dollar going back higher to 82, 83 is going to spur some heavy profit taking and very aggressive hedge selling. I think there's a lot of guys wanting to hedge waiting for the signal to say funds are getting out, crude pulls back to all the rallies and we're in for a hedge immediately, it's going to be a quick 30, 40 cent selloff.

Pearson: Let's also talk about the cattle market and livestock. As you look at the fed cattle market for the balance of the year you said something interesting, a little more bearish news maybe for the next couple of weeks, maybe sensing a bottom in this fed cattle market. That could be significant. That could be, with the reduced numbers we've got, that could be something that cattlemen can at least look towards for some potential profitability.

Kohake: I think so, that's past the August contract. Funds are looking right now through the summer at the placement number, they're taking all the numbers from the last three cattle on feed reports, all the weights, adding them up and be enough numbers, enough supply right now to last us pretty much through July, August timeframe and after that we get very, very tight. I think the big buy signal in the cattle is going to be when the heifers start getting back up to increase the size of the herd. I think that's when a guy gets long when that starts happening.

Pearson: So, we're watching the heifer number and see what happens, what that mix looks like. And at this stage of the game what is the best strategy for a producer? There's no hedge opportunities right now in fed cattle.

Kohake: I think you sit on the sidelines right now and wait until some type of spillover effect. We could see a quick $1.00, $1.50 bounce into the market just off the equities or the dollar crashing, we haven't seen that yet, but the market right now where it's sat no one is setting the hedge, like you're saying, intentions are getting short.

Pearson: You mention the equities markets, one thing we didn't cover on the show we should cover in this segment, what do you see as you look at the equities markets from an index standpoint the S&P going forward, what do you see happening there?

Kohake: I think we see a pullback, anything below $8.80 in S&P I think is a sell on a closing basis, below 8300 in the Dow I think is a sell on a closing basis, I think you run into the same type of trouble we did about a year ago. The economy can't handle high priced energy and a softening broader based economy. You get $80 crude, I think it's going to slow everything down worse than it is now. You look at foreclosures too this week, one in every eight houses is in foreclosure right now and I think we're just too far ahead of ourselves right now. I think what we're looking at, for me anyway, is a W technically in the market. We had our big down swing, now we're kind of migrating back up, we need one more pullback and I think the next big pullback is the low that a guy buys.

Pearson: Well, that's going to be interesting to see what happens. As usual, some great points and some great insights. Jamey Kohake with us this week on Market to Market and, of course, here on the Web site with us at Market Plus. Again, a reminder to talk to your local public television programmer and say I'd like to watch Market to Market on television with the live version. And continue to join us here weekly on our Internet address at markettomarket.org. From all of us on Market to Market, I'm Mark Pearson. Have a great week.


Tags: agriculture commodity prices markets news