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Market Plus: Market Analyst Jamey Kohake

posted on June 29, 2012


Yeager:  This is the Friday, June 29, 2012 version of the Market Plus segment.  Joining us now is Jamey Kohake.  Jamey good to have you here. 

 Kohake:  Thanks Paul.

 Yeager:  We got a couple things we need to cover.  We talked about in the regular broadcast tonight the euro or at least the European countries trying drove the U.S. currency market towards the end of the day.  I that something that can sustain?  Say this doesn't work in Spain, are we going to set ourselves up economically for some problems?

 Kohake:  Right.  I don't think this is right back to risk-on mode buy metals, buy energies, 100 dollar crude you know by the end of July, something like that.  I think it is a short led type deal.   Europe's economy is not going to turn around overnight and I think it is starting a slow grind upwards for them to expand.  Their growth in 2012 as a whole European economy is still negative.  So, a little bit of - topping to get propped up is not a game changer in my mind.  China is weak right now in their economy. Europe is obviously weak and that's what is going to keep, I think commodities contained, rallies short lived and the markets on the lower end of the range long term.

 Yeager:  Brazil had to pump four billion dollars of money into their economy to get it going for a stimulus.  So, it is not just isolated on that side of the pond.  Phil in Canada via Twitter "What about that U.S. dollar?  Where are you seeing that headed into the summer and fall?"  That kind of ties to what is going on over there.

 Kohake:  Right, I think you are a little more of a range bound.  80 is support now and I still think the 80 cent mark does hold for the Labor Day dollar, September dollar.  I think top side is 84.  I know that is a broad range but I think there is going to be a lot of volatility based off more of what comes out of Greece, Italy, Spain versus Germany and how all this plays out.  So, look for a broad range.  I think the dollar of what will still be supportive on b--  just because there is so much uncertainty worldwide.

 Yeager:  All right.  Tim in Crookston, Minnesota wants to know how many winter wheat acres will be double cropped to soybeans.  We talked about that in the broadcast a little bit.  So you are here and there are some people who are thinking they are going to plant, do that double plant, and stopped.

 Kohake:  Right.  Too dry and beans might now germinate obviously in very dry conditions.  So they have held off.  There are some guys that will still plant beans Fourth of July, get a shower this weekend, next week, I think they will go ahead and try to drill some in.  But as a whole I don't think you care going to see the 76.5 million acres USDA is forecasting right now.  Same way as the yield number.  The 166 corn number is obviously gone.  The 42.5 bean number is obviously gone and see how all that plays out July 11.  That's your next big report day.  We are going to play weather for two more weeks.  Breaks will be bought into, chasing the market higher, if everything stays like it is now.

 Yeager:  You saw the drought map that the University of Nebraska, Lincoln put out and in that Corn Belt, the Southern Belt along the Ohio Valley, it is dry in a lot of areas.

 Kohake:  Yes and you know there's been acres tilled up the last two weeks.  Just can't produce anything at all.  That is south of Decatur going out to Evansville and that area will be expanding further north up towards I-70 next week or if everything stays like it is now being forecasted.  I got customers in Indianapolis I have talked to saying it is a dire situation.  You could literally call the National Guard out next week if they don't get some rain.  That is how bad it is east of the Mississippi.

 Yeager:  Now there is some talk that the Eastern Corn Belt could get some rain but talk is not water in the rain gauge. 

 Kohake:  Right.  We have seen what has happened to these forecasts the last two weeks and it is spotty, it is lighter than expected.  There are some orange and red on the radar and it doesn't last more than a half an hour somewhere and it fizzles out.  Like I was saying on the show there was showers going through Chicago midday Friday.  There were some here this afternoon, even moving across I-70 but it is not near enough to satisfy the trade.

 Yeager:  One of our other Canadian viewers, Pete, wants to know while this recent weather really maybe good for farmers but want about the corn demand?  It can't be good for long term.

 Kohake:  This is what scares me about the whole entire grain complex.  You know we could maybe get seven dollar corn.  Maybe run stops through.  You know maybe run stops through 15 on beans.  Maybe run stops through eight dollar wheat.  I have a hard time believing rallies are going to hold based off of this.  I think the number the USDA has for ethanol is too big.  The feed numbers are too big and all that is going to be offset on the July Crop Report.  Got ethanol plants shuttering down now.  Their margins are in the red, usage is down,  20,000 gallons a day as of last week per day, high corn, numbers don't work.  All this will slowly build the carryout back up.  That is why I have been more aggressive selling coming into Friday's report, coming into this July 11th report, we will make another round of sales and just trying to keep ahead of that carry out beans so high.  It even went to 150/152 trend line crop yield number this year.  That is still a billion bushel carryout for next year.  So, I think you have got to start rallies, they are short lived.  You still run seven dollar corn, I just don't think they  hold just because the economy is so weak; China, Europe, South America and the ethanol is slowing down it is going to be hard to hold these rallies.

 Yeager:  So, Monte in Palmer, Iowa wants to know how high will that corn go.  So you are saying seven dollars?

 Kohake:  I think it could.  I think 680/ 7 dollars and that is based of obviously staying dry out East more than it is out West and it is really burning everything up and we maybe push it hard.  But I would be selling into it.  I wouldn't sit back and get caught up talking eight or ten dollar corn or 16/18 dollar beans.  We need dollar to sell off, we need crude to go back over a 100, in my mind, to get a big risk on type trade again by the funds.  Funds haven't been in a big appetite mode.  Just get long and close your eyes and let's do what we did last summer.  That is not there yet right now.  I think this whole weather market could be over by July 15th.  After that the public will know about it.  It will be all over the news and it is too late then and then we have to wait until harvest to get confirmation of how small or how large the crop is.  So, I would take advantage of these sales here in the next two week.  Look at 680 corn, look at 14/16 November beans, look at six dollar December 13 corn and just lay some off it in those zones.

 Yeager:  So that kind of brings me to Allison in Russell, Iowa wants to know.  When will weather start playing a role?  So you are saying weather is somewhat of the market right now but it is more of the - you are thinking it is more of the stocks and the usage is more driving this than weather.

 Kohake:  That will be the focus coming into July 11th. Yes, the carryout numbers then.  Coming in a couple days before that.  I think still next week Fourth of July a day or two before or after and before it is going to be weather.  But once you get closer to July 11th and if the ethanol plants are still shuttering down right now like they are which I think they will be, I think there will be more and more talk about the carry out being, you know sustained at longer term if the numbers do stay like they are. 

 Yeager:  I need to move along here.  Joseph in Illinois, he has been talking about weather.  He is saying “Is irrigation water going to be enough to save some of these areas?”  Is irrigation used enough in areas to help us keep some of that corn alive?

 Kohake:  I think it does every year and that is in Nebraska where they, you know 200 bushel corn pretty much every year.  But yes, I think it has to be used at a huge factor to keep it.

 Yeager:  All right.  We didn't talk cotton.  That is a market that has you know a couple years ago was just outstanding and that kind of went back, now it is headed back up, where is that headed?

 Kohake:  I would be selling 75 December cotton.  Globally cotton supplies are large.  That is the overhanging factor on the cotton market.  I think that the market is going to have a hard time rallying through and holding a 75 cent December.  Until we starting eating off the global supplies, China usage creeps up, I don't  think rallies hold in cotton.  Be the dollar and fall apart, get back around 80, see exports take off to really get above 75.

Yeager:  Live cattle.  Where are we at on those?

 Kohake:  I think more short covering.  I like the trade we saw mid-week.  Double buying action on the daily charts.  I think you get it up to 127 October and I would take a short stab there, but great, great trade to make the late week even though cash didn't do that much the futures really got into a nice short covering rally.

 Yeager:  What about the feeders and is that any different?

 Kohake:  Yes, same way right now.  I think get around 154 August.  I like their action as well.  Feeders have been a big sell off and we saw a big spike low early in the week in this little short covering off that.  I think we will still see a bounce here short term especially if the stock market can follow through next week for a few days.  I think that will help the cattle out as well.

 Yeager:  We talked about hogs in the show.  That was one of the bright spots again.  I should say really it has all been bright spots.  Hogs continuing to have good days.

 Kohake:  Yes.  That is the nearby contracts especially, you know?  The July trading mid-90s and they have been really supportive off cash, lighter weights with the heat and the report today pretty much being neutral.  My attention like I said on the show is for fourth quarter, first/second quarter next year to really step in there, put a floor underneath these hog contracts so we don't seem to slip back and eat away our profit margins.  So, I would be careful below 82/81 those contracts, get a floor underneath them, some puts or futures, and just be safe.

 Yeager:  There is one report I saw this week or at least one of those internet fun things.  The USDA is no longer using the ethanol.  They are calling it biofuels.  Have you heard anything about that?

 Kohake:  I have heard rumors of it.  I don't know whether it is true or not, but I have seen that, had some calls from ethanol customers that weren't too happy about it. 

 Yeager:  Do you think that is something - is that one of those PR posturing things or is there a legitimate reason for that?

 Kohake:  I think it is more PR right now.  Maybe more than somewhat down the road.  I am not sure what excuse they would try to use.  USDA is not in very high standing right now with the producer with their carryout numbers.  You know suppose they would be off the mark by maybe 30 percent.

 Yeager:  I think we let you let talk a little too long.  You are starting to spout off the talking points now?

 Kohake:  I am getting a little bit off hinged here.  Finish the last seconds up.

 Yeager:  Anything else we should look forward to in the next week?

 Kohake:  I think take advantage of the weather rallies.  Take another leg off your sales.  Take a stab at 770 before the July 11th report so there is not a big surprise.  The trade is going to be expecting a big cotton carry out number come July 11th so that’s factored in and any type of weather forecast of rain you could see a quick drop.  So, I would be selling rallies.  Like I was saying 660 December and 1460 beans. 

 Yeager:  Rain makes grain is what they say.

 Kohake:  Right.  Two good rains and -

 Yeager:  Could change this dramatically.

 Kohake:  Exactly.

 Yeager:  Jamey Kohake thank you so much for stopping by the Market Plus segment.

 Kohake:  Thank you.

 Yeager:  Good to have you here and that will do it for this edition of Market Plus.  We appreciate all your questions that you submit via Twitter or Facebook.  We love having conversations with you.  Thank you so very much for all of those and until next week we will have a whole bunch of new things to talk about and we will be back with you then.  For the entire crew at Market to Market, I am Paul Yeager.  Have a good week.

     


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