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Market Plus: Apr 10, 2009: Jamey Kohake, Market Analyst

posted on April 10, 2009

Market Plus: Apr 10, 2009: Jamey Kohake, Market Analyst Pearson: Welcome to the Friday, April 10th, 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 and don't forget if you just enjoy us on the Internet and you'd like to see us on your local public television station so you can see the show on there contact your local public television program director and ask them to run Market to Market. With us this week one of our regular market analysts, Jamey Kohake. Jamey, good to have you with us, appreciate your comments on the show. I wanted to talk a little more in depth on both corn and soybeans where there seems to be almost a splitting in terms of price and activity. You mentioned we're not seeing the outside money flowing in the corn which is kind of limiting a little bit of our up side. Is some of that going over to the equity side or is money tight?

Kohake: I think money is tight, there's not any big fund money playing right now, most of it's still sitting in cash and I think waiting to see longer term with weather and see if they can push $4.80, $5.00 corn or not. I think there's still a lot of nervousness worldwide with the global economy.

Pearson: China seems to still be a big buyer of everything.

Kohake: China is buying beans aggressively. They are pretty much the majority buyer every single week in the beans even though we are roughly six to eight dollars higher per ton than South America they continue to come to us. Most of that is based off of transportation problems down there, they can't get their beans fast enough and they'll pay us a little bit more and get their product on time.

Pearson: So, getting back to producers making acreage decisions, what are you hearing about fertilizer? Everybody I've heard they're waiting for the absolute last moment to pull the trigger.

Kohake: That's exactly something I'm hearing, wait until the day before you need to go and get it bought then. I think the bean acres are underestimated and I think there's probably two dollars of down side in beans longer term and I think anywhere between $9.20 today, $9.50, 40% sold and keep us on rallies. I think the only thing that is out there besides weather that would get bullish for the markets would be if the dollar collapsed. There is talk of a new world currency and stuff like that, it's all speculation but if something like that did happen that's the only other bullish factor I see.

Pearson: That would be a bullish factor because we would see obviously all of that export business coming back to the U.S.. Barring that, at this stage of the game if you look at what this acreage number is if you do throw in another million and a half acres of soybeans it looks like when you add everything up you could be looking at 300 million bushels plus carry out next year. Am I doing the math right?

Kohake: Yes, you are. Right now the average crop just trendline yields you would be up over 300 million bushel. You could throw on numbers from South America -- Argentina had their numbers cut today by four million metric tons but Brazil still has a very respectable crop size up in the 150s, so you take their crop plus our excess and with the extra acres I think you see 650 to 750 beans very, very easy for this crop year.

Pearson: Okay, so there's a couple of dollars right there. So, you'd be getting a little more aggressive on making those new crop sales.

Kohake: I would. I would use the cash market. The puts are just too expensive. Spending a dollar for a put or 80 cents, a lot of time value on it, the market trades sideways and it's not going to do anything. The basis could widen out in the meantime. So, I'd do some in the cash market, HTA, forward contract and use that.

Pearson: Let's go back to the corn market. Not enough juice in there right now to really move that market higher. So, do we make sales here or should we hold off and see if we get a weather rally?

Kohake: I think you start making minor sales in the $4.35, $4.37 area, a lot of resistance up there, you go through it and you keep selling more and I think up to $4.50. There's nobody really wanting to play the weather market game right now, probably I would say anywhere between Monday and ten days out we will start playing that but it's not really like the 80s any more, we needed two weeks across the whole country equipment and going three or four days having the majority of the crop done anymore.

Pearson: Absolutely. Again, as you talked about on the show the genetic material that we have to work with now when it comes to corn can weather a lot of weather problems.

Kohake: That is right, we've seen that for the last three years in the corn and the heat and the stress that we've seen and we've come out with trendline yields every year. The wet spring from Des Moines down to Kansas City very, very wet last spring and they came out with 155 bushel corn.

Pearson: Pretty darn impressive. So, again, maybe a little bit more aggressive, clean up old crop?

Kohake: Exactly, take advantage of that new crop corn, $4.00 May corn, I would take advantage of that. Basis is tight and any type of rally in the May I would take advantage in the cash market.

Pearson: All right, take advantage of this market while it's up. Prospects are good for 2009. You said the same thing I'm hearing from everybody else, weather, cyclically, everything looks pretty normal this year.

Kohake: It does. I don't see any big surprises. The only thing out there with 2009 prices I think 2010 could turn a little more bullish and we have to wait until the new year to start to see this new ethanol mandate, E12, E13, E14, I think that could throw a wrench in this but 2009 I think rallies have to be sold right now and go back to relatively normal prices, not $2.20 corn but I think more normal.

Pearson: All right, Jamey as usual we appreciate it. Jamey Kohake with us this week on Market to Market and with us here on Market Plus. For all of us here on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news