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Market Plus: Jan 16, 2009: Jamey Kohake, Market Analyst

posted on January 16, 2009

Market Plus: Jan 16, 2009: Jamey Kohake, Market Analyst Pearson: This is the Friday, January 16th, 2009 version of Market Plus. We're glad you've joined us here at our Market to Market Web site. With us this week one of our regular market analysts, Jamey Kohake. Jamey, good to have you with us. Good insights on the show and we want to follow up on a couple of things. The one thing I really want to talk about because we've been in such hard times in the livestock sector here for a while, you're getting pretty friendly.

Kohake: Yes I am, I'd love to see one more pullback in the cattle pit, maybe steady cash next week, see some profit taking here in these longs late this week and turning around and buying off of that. We've got two reports coming up, cattle on feed and monthly inventory report, and I think both are going to be bullish and I think you're due for a seasonal rally in here as well.

Pearson: So, when you say another pullback you're really talking maybe steady, maybe we take a few cents off where this market has been?

Kohake: Yeah, I think if you get lucky maybe $1 lower from where we sat today but I think you've got to be able to buy that and be ready to buy that if we do see it.

Pearson: Calf market as well, and you said the last time you were on we have had a nice rally in feeders so far and you think it's just begun.

Kohake: Yeah, I think there's still two to four more cents of up side there. That is just based off the corn I think probably topping out sometime again late next week and start buying more weakness again in the feeder cattle.

Pearson: We talked about soybeans on the show, at the tail end you mentioned the lunar New Year in China and what that could mean and the potential switch from buying U.S. beans to maybe buying South American beans.

Kohake: That is right, a week from Monday they will go on their two week holiday break. Historically they go to South America with their priced purchases after that. That's very important to our markets because in the last about month on the weekly exports China has bought more than half of our beans and so if we lose that business we could go to exports like corn and wheat are right now and the market would just turn -- Argentina weather you get a week of rain or even a half an inch of rain this market can lose 50, 80 cents in no time at all.

Pearson: So, your advice to soybean growers is to be on top of this thing right now and maybe if you've got some good prices maybe you can take some profits.

Kohake: Just like on the show old crop I would sell a $10 basis and the new crop I think you've got to sell as hard as you can right now as close to that $10.40 mark for the short term.

Pearson: You talked about that level being critical. Why is that?

Kohake: This month's highs -- there's double top up there -- we ran into it a couple of times, can't hold it and come back down. You turn the acreage numbers in and you also throw in the carryout right now I think the new crop is going to be sold into pretty heavy. The bull spreads are keeping the market under control. You look at some of the early trades where the old crop is at 15 and the November is up a penny and three-quarters so these spreads are keeping November up under some pretty good pressure.

Pearson: You mentioned on the show something I want to follow up on too and that was the fact that as we move forward as we start looking at acreage and the Informa number came out today talking about a huge shift in bean acres.

Kohake: Right, you're taking a little bit of loss from cotton, a little bit of loss from the wheat and then you've got 1.6 million acres coming out of CRP as well and some of that going to beans obviously and so that's where they're getting their numbers from.

Pearson: So, if you add all that together longer term, new crop wise it looks like a lot of pressure on the bean markets with normal weather.

Kohake: Exactly, normal weather South America ends up with a normal crop you could see $7.50 to $8.50 beans pretty easy depending on weather. That's the key in here is South America going to end up with Brazil at 58 or 55 and is Argentina going to come out of this drought right now also?

Pearson: So, that's something that will be a question for another month or so.

Kohake: Yeah, I think all the way into the next big crop report March 30th you're going to see one extreme to the other I think, two or three days in a row it's going to look like $12, $13 beans and they get a rain it's going to be back to $8 beans.

Pearson: Volatility is the key word and I know some producers are really trying to fight that in their financial plans and you've been talking a lot about options.

Kohake: Right, I think this volatility is a cheaper way to play the market and I think there's going to be some wide swings so you don't need to come up and buy the money put or call and spend 60 cents on it. There's room out there to get away from that and still catch some of the price volatility.

Pearson: Well, some great ideas as usual. Jamey Kohake with us this week on Market Plus. For all of us here on Market to Market, I'm Mark Pearson. And if you're watching us on the Internet and you say I'd love to see the whole show why don't you contact your local public television programmer and tell them to contact us and line up Market to Market on your local public television station. For all of us here on Market to Market, I'm Mark Pearson. Have a great week.

Tags: agriculture commodity prices markets news