Pearson: Welcome to the May 11, 2012 version of Market Plus here at our Market to Market website exclusively here on our Market to Market website. Mark Pearson and with us this week is Jamey Kohake. Jamey we didn't get a chance to get to cotton in the show and I knew I wanted to talk about that because $9 sell-off in cotton and there are people who are saying we have just begun to sell off in cotton. What is your take on that?
Kohake: Longer term I am bearish the cotton complex. But we have been on such a steep sell off the market is turning over sold in here where we are at right now. The market was anticipating a bearish report of Thursday, they got one, pushed the limit down and then it falls here on Friday. I think you wait for a correction to sell into. I would be selling December all day long at 87 as we are at, be a correction up in there but I think right now I would stay away from adding new shorts without some type of technical balance.
Pearson: All right. Let's shift over to the corn market because that is such a driver of all of our markets and frankly the news from USDA and you always get the finger wagging you know is this number correct and USDA has had so many different corrections to their reports and restatements and so forth. So and again they're guessing, they're surveying, they are assuming we are going to see perfect yields for 2012/13 for the same kind of crop and we have gotten off to good start for the most part. But that doesn't mean weather challenges aren't ahead. But it seems like people get so bearish at this moment in time when we are planting a lot of corn acres. We are planting a lot of soybean acres. We have a lot of wheat in the ground that looks pretty good. Prospects for double crop if moisture is there certainly are promising. It is kind of a bearish time of year in terms of USDA outlook but there are some positives out there. I think one of the most interesting things is the whole China card and what they could do to corn. As you mentioned corn in China is over $9 a bushel. We still look like a bargain.
Kohake: Yes and they ran from big purchases again this week. Roughly 300 thousand metric tons again. I think they keep coming to us all summer long. But is it going to be enough to get the carry out and blow five hundred or four hundred or do they shift to new crop and try to wait it out too. But yeah this is getting to be a stressful time for a lot of producers. Five dollar basis, five dollar cash corn got wiped off the board this week. Guys are trying to finish up planting and wonder do we sell here. Do we wait? I agree with what you said in the show there is plenty of time, we don't have an ounce of weather premium in the market right now.
Pearson: No, I agree.
Kohake: Not a drip of it. We are turning drier down south. I like 530/540 - just has a retracement without weather. You know maybe 560/580 with some weather. I think we are just in a broad 30/40 cent range right now until we can get more weather down the road.
Pearson: Right. And I think you are right. I think that range will be - the breakout will determine just what kind of things Mother Nature throws at us this year. The acreage, the June acreage, the final acreage number, that could also be a factor here too. How much of a bean acre shift do you think we will see?
Kohake: I think somewhere between two and three is -
Pearson: It is not huge.
Kohake: Right. Not huge right now. I think the bigger shift there in the beans, that is coming to beans is off this double crop. Wheat is yet to be seen but I think the acreage numbers are factoring in right now 75/75.50 in beans, 95.50/96 on corn. So we're going to have to have a big surprise there. The bigger number that is going to be traded is still the carry out. Read down below 150 in beans by the end of June and can corn catch up and get below 5 or 6 hundred.
Pearson: Ok, big money? Are we seeing big open positions being created now? You mentioned soybeans still a big long position going there.
Kohake: Right. Huge length by the fund up over 200 thousand contracts. They have narrowed the corn positions down below 50 thousand there. Closer to -- at times 20 thousand this week, but I think they are going to hold the beans longer term. They carry out is way too tight. China is looking to buy there as well very, very aggressively every week. I am more concerned with the - that they just maybe go flat corn if that weather shows up and then they hop back in there like going out of style.
Pearson: We saw them jump out of the cattle market. We saw what that can do and that can be fairly dramatic. So where they move and where they go is going to be interesting.
Kohake: Right and there is not anything - any other market right now that is really in a bullish run away market. Stocks ain’t doing much. I think we topped out there for a few weeks now, 1400 in S&P. So I think they will hang with the grains just maybe be a little quieter on their footsteps coming back in.
Pearson: And the big funds, big index funds, they have to go long.
Kohake: Yes, they stay long.
Pearson: So energy has no excitement for them right now?
Kohake: Right, they just roll contract to contract and stay long.
Pearson: All right and let's talk about crude oil. You talked about it on the show that there is plenty of oil out there. There is plenty of gasoline out there. There is plenty refined product out there as well. So, it - through the summer you're not expecting anything barring a national security issue in the Persian Gulf?
Kohake: --- geopolitical type deal. I think the highs are in and I am assuming the dollar hangs around at 79 to 82 cent mark and that ought a keep a cap on the crude market. But it is just one of these deals we are cutting right now with global weakness. Financially demand has slowed down. We saw what happened when crude went to 110 here domestically, the demand slowed down and we built our supplies back up very, very quick. And I think you are trending probably between about 92 bottom side up to 99 maybe 101 running some stops here about 4th of July.
Pearson: All right. Well it is going to be interesting to see. It just seems like we always have this link when we see crude oil prices start to deteriorate the whole commodity sector seems to come under some pressure. And real quick because you only had five seconds on the show, the gold bugs out there watching, what are your thoughts and what do you think we will see for them?
Kohake: I still like buying a sharp break there. Like I said on the show August at 15.50 is where I would look at. I don't think it is going back 2000 or 2200 and run over that but just a nice correction off of that. The news in the gold market this week is more linked to Greece again which is not a surprise. European Union Central Banks is the IMF going to release gold and sell gold to start relieving part of Greece's debt. I think it is definitely no. It ain't going to happen but that was kind of the news this week on part of a $60 sell off.
Pearson: I want to thank all our folks who took time to send us a Tweet and Dean in Central Iowa sends a note about the wheat harvest. Hopefully we answered his questions in the show and double crop wheat acres. Any idea of what that acreage is going to look like?
Kohake: I don't think so. I have seen speculation of 1 to 3 million is what they are expecting. I think more than trying to out guess acres right now is going to be moisture. A lot of this is on marginal ground, dry ground, south and west and that moisture is going to be a bigger key than say we have got 5 million acres double crop, let's see moisture.
Pearson: Doug in Washington asked about your outlook for corn new crop prices, but we didn't talk about hard red wheat prices. What are your thoughts there? What is your target there?
Kohake: I like $6.85 for the -- contract. That is KC and I like $6.50 for the July contract.
Pearson: I want to thank Phil and I want to thank Jarrod and everybody for dropping us a note. Keep doing it. We want to get those questions on the show. We appreciate the input. I want to say a big thanks to Jamey Kohake for being with us this week and for all of us on Market to Market, I am Mark Pearson and thank you for joining us and have a great week!