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Market Plus: Jan 18, 2008: Market Analyst Jamey Kohake

posted on January 18, 2008

Market Plus: Jan 18, 2008: Market Analyst Jamey Kohake Pearson: This is our Friday, January 18th, 2008 version of market plus, glad you've joined us here at our Market to Market Web site. I'm Mark Pearson. With us this week a new analyst that did a great job, Jamey Kohake. Jamey, good to have you with us. You said a couple of things I want to re-visit. You talked about soybeans. There is a lot of interest out there, a lot of producers who have yet to make sales because they are convinced we have not seen the high in beans. You seem to be in that camp.

Kohake: Yes, I think the highs have not been seen yet based off unknown weather problems in South America and based off our weather here yet to be seen. We are at a 19 year seasonal La Nina forecast this year and a lot of guys are forecasting a seasonal drought which I think would push beans sharply higher.

Pearson: My old friend Elwin Taylor says these droughts start in the southeast and the southeastern United States was definitely dry this year. So, it's got some people concerned. What is that going to look like? We get a weather problem and let's say beans go to $15, $16 what is that going to look like? How much demand are we going to choke off? And what is that going to do to us?

Kohake: It's going to shave exports off drastically especially if South America has a crop and we just have weather problems here all that's going to shift down there, China is going to go to South America. Also, their freight rates are a little bit cheaper for them to go down there right now than to us.

Pearson: The one thing saving us is still the cheap dollar.

Kohake: Exactly.

Pearson: Alright, so you would, again, you've got to understand I'm old, I'm looking at this thing and I'm going wow, $12 beans, $11 cash beans out here in most markets. That's Disneyland for us. I mean, that is where we all want to be. Does it make sense to put a floor in on some of these markets?

Kohake: Maybe on a very small amount is all with a put, you know, $11 strike or a $12 strike is something under there just to give you some cheap insurance. Otherwise I'd leave the top side open and maybe do a little bit first of March. Last year that's when we put the first high in was two weeks before the acreage report and I could see that happening again this year.

Pearson: Alright, you also mentioned on the show you watch open interest closely. What is your feeling of that? Money still pouring in?

Kohake: Money is still coming in, not as fast as we were before Christmas but it is still there but that is a very good indicator to watch when you start peaking out and you see who is coming out of the market commercials, the fund guys or speculators.

Pearson: And the fund guys are still heavy long on this whole deal.

Kohake: They're massive long, up over 100,000 in beans, record length.

Pearson: That's huge. Let's talk on the livestock side, the flip side of all this good news on the grain market is half this crop gets fed to livestock. The fed cattle market, most of our analysts who have been on have been fairly bearish particularly on the fed cattle market. You're thinking we could get back and climb back into the mid 90's?

Kohake: Yeah, I do. I think we've hit short-term bottom in this week. We lowered dress trade, couldn't push new lows and hold them off that lower cash trade which meant to me the market is tired, take some money off the table, blow some shorts out, blow your hedges and try to re-sell them again. And that's pretty much what has happened so far.

Pearson: Alright, so take us out a little bit further. Let's get into 2009. Obviously with these higher feed costs you talk to clients I'm sure all the time who maybe were feeding cattle and are saying, hey, I'm just going to haul this corn into town.

Kohake: Exactly, tighter supplies, all the livestocks out in the deferred contracts, the '09 has been very supportive last week and I think there's more up side there, just guys saying I'm not going to feed in that timeframe.

Pearson: And we're going to see some liquidation, we're going to see some other things happen in this cattle business. So, maybe '09 we could start to see this fed cattle market really start to look fairly strong.

Kohake: Oh yeah, I agree.

Pearson: Real quick, global recession, you talked about it two times. What kind of an impact do you see that having on our agricultural sector if much?

Kohake: It could have a very important factor with the exports. We see a global slowdown, there's no money worldwide, interest rates increase which would slow our exports down. The only thing that would help us out like you're saying is the U.S. dollar, if we keep cutting rates here it's going to keep our dollar but other than that it's not going to help that much.

Pearson: What is your take on crude oil going forward?

Kohake: I think we put a high in at $100 mark and 5 cents, whatever it was in the overnight session. I think top side now is $93, to $95, bottom side $86. I think the range until something happens with Iran, geopolitical uncertain area news with Bush or something like that.

Pearson: Alright, well hey, we're going to see how things work out. Jamey, good to have you with us. Jamey Kohake, joining us on Market to Market this week, first timer and great to have him with us, some great insights, we appreciate it and, of course, joining us here on market plus as well. And thank you for joining us here on market plus and for all of us here on Market to Market, have a great week.

Tags: agriculture commodity prices markets news