Market Analyst Jamey Kohake discusses the commodity markets with host Mark Pearson.
Pearson: This is the Friday, October 14, 2011 version of Market Plus. Thanks for joining us here at our Market to Market website and of course remind your friends to stop by here as well. Jamey Kohake on the show this week. Jamey as usual some great insight in to the market place. People, you know, we talk about a lot of things but most the people that write in on this program want to know about corn. TheU.S.is the corn producer and yes we talk aboutArgentinaandBrazilthey are starting to grow some and even the Black Sea Region, the FSU, but when it comes to corn it is theU.S. So here we are, we have had some pressure, harvest has been upon us, the seasonal pressures as well. What can you tell us about your thoughts of the corn market? You think we are range until what, December?
Kohake: I do. Coming in towards the big January in the year report. Maybe even just coming into the November report there is already some speculation USDA could be down around 145 for the November report. This later harvested crop in most areas is not coming in as good as the early stuff. So there is just some speculations that maybe the lows are in, but a fifty cent range right now back and forth. This market has kind of been in a tailspin. The first probably sixty/seventy/eighty percent wasn't fundamental. It was all macro European stuff. Funds liquidated a ton of money across commodities. Twenty billion dollars in the ags came out in a three week span and a lot of that was just macro news.
Pearson: That is a lot of air coming out of a very volatile market.
Kohake: Yes and hard to get them back in right now with really no fresh news. We have got this talk ofChinabuying corn, but like you were saying we are still going through the last fifty/sixty percent of harvest yet. Other than that we are still fighting with European news. So everybody is just kind of sitting on their hands saying come back down one more time. Don't put new lows in. Yes, we will get long there but buying Dec. corn up here at 640/650 not ready to yet.
Pearson: All right. With that thought in mind and with what has happened so far if I go out to 2012 and I am a nervous producer and let's say I am on the hook for some 350 to 450 to 500 dollar cash rent out there and I am concerned about where this market might be going, what is out there for me?
Kohake: Right. Something that far out - you could go out to March, May and find some decent basis out into that area but you start getting out in July and wanting to price next fall stuff the most advantageous ways either in HTA, hedge-to-arrive contract, basis is going to be a full carry, why give up thirty-five/forty-five cents. So do an HTA, lock your basis in later, but go ahead and guarantee that flat price on the board. Say I will take 680 July, your 620 the Dec. 2012, I will sell 620 Dec. I think that is a great spot right now to sell into. Then lock your basis in later. The only other option is selling futures and you get your open to margin calls. So, I have been telling guys find an elevator that can do an HTA and call them back next December and lock the basis in.
Pearson: Well, that is not a bad idea. Of course they kind of got a bad name about ten or fifteen years ago, but we have kind of worked through that. We have cleaned up some of those problems. It might not be a bad strategy. Same thing is true when I look at the soybean market going forward. A little bit stronger demand there little bit stronger demand picture, a little bit better pricing going forward.
Kohake: I think beans you are fine. I would buy breaks if I was a speculator. Like I said on the show at 1225 area for Jan. beans, I would be long at that, I think you are going to see thirteen dollar beans and that is where I would start putting a floor underneath the crop that's there. Chinastays in here short term, I think, splitting some withArgentinabut I think the beans are fine.
Pearson: All right. Well, it is going to be interesting to see where we go once we wrap up harvest which seems to be emanate at the rate that we are going with the weather conditions we have going for - looks pretty good for things to keep moving particularly in the Northern Corn Belt, and we will start to see that cash basis start to pull off. So then maybe January once we have got this crop put away they are going to start bidding it back out again?
Kohake: Bidding it back up. The basis has already firmed up quite a bit. That's just because the bean harvest got so aggressive two weeks ago and there was very little corn harvest being done. I was selling some ethanol plants out inNebraskatwo weeks ago forty cents over the board, forty over.
Pearson: Desperate for corn.
Kohake: Yes and this time of the year that is absolutely ridiculous and that was when everybody was on beans, worried about moisture, cut yields, so that helped out. But yeah corn basis will stay firm. Everything is going to the bins. They are getting locked up. So longer term this corn market, I think, we will have to be supportive.
Pearson: Jamey Kohake as usual appreciate your insights and thank for joining us on Market to Market this week and right here on Market Plus. And from all of us on Market to Market, I'm Mark Pearson, thanks for watching. Have a great week.