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Market Plus: Aug 08, 2008: Jamey Kohake

posted on August 8, 2008

Market Plus: Aug 08, 2008: Jamey Kohake Pearson: Welcome to Market Plus. This is the August 8th, 2008 version of our Market Plus segment here at our Web site. Glad you've joined us. Mark Pearson and with me is Jamey Kohake, one of our regular market analysts. Jamey, it's corn and beans. The wheat market is pretty much getting wrapped up as far as the harvest is concerned. Big report August 12th from the USDA, big decline, big bearish move from $8 down to $5 on the corn, from $16 to just under $12 now on beans. So, huge move this week, a lot of people are really second guessing themselves that didn't make sales. Will there be an opportunity to make some sales at much higher prices?

Kohake: I think there will be. I don't know if it's going to be $8 in corn or like they're saying $16 back in the beans. I think we will see support from the market for an acreage fight again this fall. I think if a guy can hold off, store some he will be okay, not to get nervous and sell these lows and start talking $4 corn and $3.50 corn. The market is very, very oversold. The high on corn is under $16 and anything under 30 is oversold and I think if it wasn't for the dollar on Friday I think we would have been higher on Friday and some were short covering coming into Tuesday's report.

Pearson: So, if we look at this thing right now and you are not in favor of making sales in '09 or '10 yet and there are a lot of people nervous about that because of these high input costs.

Kohake: I do agree with the input costs but I think we will see it balance. I think the December '09 contract gets above $6 again. We're just at $5.73 today on the settlement price. It's not going to take much to see a short covering technical dead cat bounce to get back over $6 and give you an extra 25 cents.

Pearson: And you would do that on an '09 contract?

Kohake: Yeah, I would wait until we get over $6 to sell any.

Pearson: And now flip side of that, the acreage battle is going to be between corn and beans again for 2009 and we'll have a few more acres with some CRP coming out. We've got a lot of pasture that's been turned into soybean ground this year. What is your take for soybean prices? Again, just to reiterate what you said on the show, you don't want to make '09 and '10 sales yet on beans. Where do you want to sell some more soybeans?

Kohake: I think beans could rally back up $2. I don't think right now, next week or two weeks away but I think by sometime middle part of winter you could see beans $2 higher. It keeps the beans in the carry outs. We keep the carryout below 130, 135. 135 is the top side on Tuesday where I think it comes in and it keeps the market very, very supported. China was a big player this week. I think China comes in for more down the road and keeps exports strong. Demand is good. We're probably going to have below average yields, about a half a bushel less than what was expected in the last USDA report.

Pearson: Big move in the dollar to the plus side and obviously oil coming down $20, $30. With the strength of the dollar could we see our exports start to fold up here or are we still going to be more attractive than South America?

Kohake: I think we could see them slow down but I think more importantly like you were saying if we can stay cheaper than South America our market will stay supported. If we race back to $16 or something and the dollar we go to 77 or 78 I would say yeah, that's a top, demand is going to drop sharply just like the crude oil did up at $147, usage went down drastically. But I think the areas we're at right now they're still a good value longer term yet.

Pearson: And so, again, no panic selling here, we've had a big sell off, we've had a big bunch of air came out. A lot of this fund money, some people call it funny money, but fund money that has come in to buy commodities has left us particularly on the crude oil price but if you look at the commodity trade and you look at the commodity demand going forward you have to be pretty buoyant.

Kohake: You look at a player sheet this week funds are still long over a billion bushel of corn, still huge, huge longs and they're still long roughly coming into Friday's trade about 16,000 bean futures contracts and all of it we've seen so far I think is just spillover from the metals, from the energies over into the grain market. I think you're exactly right, this dollar would race higher and spill over into other markets and the funds go back and get flat and say hey, prove me wrong with the acres or let's see if demand can hold itself in here.

Pearson: Alright, well it's going to be interesting to see the next few weeks. Of course, August 12th the USDA crop report comes out and we'll get a lot more concrete numbers from them. But as usual Jamey we appreciate your insights on where you think these markets are headed. That's going to take care of Market Plus for this week. Thank you for joining us. From all of us here on Market to Market, I'm Mark Pearson, have a great week.

Tags: agriculture commodity prices markets news