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Pearson: This is the Friday,
March 14, 2014 version of the
Market Plus segment.
Joining us now is Jamey Kohake.
Jamey, welcome back.
Kohake: Thank you, Mike.
Pearson: Now, on the show we
didn't have a chance to talk
cotton.
It's been on a bit of a rally
here over the past few weeks.
Give us your thoughts.
Where could this market, old
crop cotton, be headed?
Kohake: Old crop I think there
still could be some upside
short-term but I think the
market does need sold into.
China's economy is very soft
right now.
They're a big importer, just
like they are in the grains, of
cotton and so I think this is a
kind of a short-lived type deal
and needs to be rewarded.
I have even started out in the
new crop with a few sales at
$80.
We banged the $80 mark six times
in the last two weeks and just
keep hitting it and hitting it
and coming off.
So that's some pretty heavy
resistance now I think needs to
be sold into.
But you get it sold in here,
30-40%, wait and see how the
crop gets planted, probably see
a weather scare eventually down
south with some dryness and
hopefully push through $80 to
finish the sales off.
Pearson: Alright.
Now, as we take a look -- on the
show we were talking wheat and
with the recent rally no
surprise most of our questions
tonight are concerned with
wheat.
And the big concern from folks
all over the country is this
tough winter and the dryness in
the south.
Is the market really taking that
into consideration on this new
crop wheat?
Kohake: I think it has a little
bit, not near the effect that a
producer would like obviously.
You're probably looking out his
back window and say, hey, we
should be at $8 or $9 by now but
it has done a decent job.
We have rallied $1.30 roughly.
So there is a little bit of
that.
There's a little bit of Ukraine
in the market.
But they did take a beating last
week, like I said on the show,
it looked like the dirt bowl
last week down south.
But I still like the $7.30 mark
for December Chicago and we'd
like to be sold up in there.
Pearson: Now, market enterprise
Kansas, you're a Kansas boy,
things do look tough down there.
Mark is curious, he's looking,
looks like he's going to be a
lot of dead wheat, best advice?
Let it lay foul over the summer
or is there another opportunity
to get in there and -- Kohake:
Maybe try coming in planting
some beans behind it maybe.
But remember wheat is a weed and
it is known for having multiple
lives.
So I don't know what his crop
looks like in person but I think
there's a chance he could come
in and plant something behind
it.
Pearson: Alright.
Now, Tim in Crookston, Minnesota
has a question that a lot of
producers are dealing with and
it was one you touched on, on
the show.
We've seen a nice market on the
board but the basis in the
northern plains, Tim mentions,
has widened way out, he knows
there's poor rail service, a lot
of oil production.
What can they be doing to
capture better basis?
Kohake: I don't think you can do
anything right now but sell
futures or buy options and sell
calls or puts and/or both
against it to cheapen it up.
But he's right, the basis is
terrible right now.
Just about full carry everywhere
you look.
You go further south it has
tightened up in some areas,
crushers aren't making any money
for the beans, rail service is
terrible, every car is pretty
much for ethanol and oil right
now, especially oil.
Trains right now, if you want to
run late April is the schedule
so I think futures and options
are the only option right now
until we see how the crop goes
in the ground and see some
weather this summer.
Pearson: Alright.
Now, how would you play that?
How would you play an option
strategy looking at a terrible
basis situation with old crop
wheat?
Kohake: I'd come in and buy like
at $4.70 or $4.80 for corn, like
a $4.84 December corn put, maybe
sell like a $5.50 up to $6.00
strike against it and maybe come
in and sell like a $3.80 put
where your crop insurance is.
You've got a free put down there
and sell some puts down there
and see what happens.
That's what I would look at if I
was going to trade options.
Pearson: Alright.
Take advantage of the crop
insurance.
Alright.
Now, we've got a question from
ManGravy12 is curious, how much
influence will the Ukraine
continue to have on crude oil?
Kohake: Longer term it could be
a big player.
Germany buys, gets about 9% of
their energy from Russia, big
pipelines running through
Ukraine, if Russia would want to
shut those down or delay them or
slow them down, whatever, they
could.
But I'm more concerned about
China right now than I am with
Russia playing games and doing
something stupid over there.
They're trying for a soft
landing right now.
The banking system is kind of
all shook up.
That's a $6 trillion business.
They did $160 billion in January
and February they did $0.
So their economy is very, very
shaky.
It could affect our exports to
them.
It is already spilling over into
Europe and to us.
It's a big deflationary signal
in my opinion, it's something to
watch out for if you do trade
the equities hard or trade
crude, it has pulled some money
out of there too.
Pearson: Now, speaking of
equities, where do you see the
S&P headed?
Kohake: I think there's plenty
of downside here especially if
Europe and China do soften up,
which I do expect, and if you're
long I would look to be taking
some profits.
We're in a 150 point rally since
early February so I would be
careful about chasing this thing
here short-term without a little
bit more of a setback.
Pearson: Alright.
Now, Jamey, before we let you
go, any trades out there this
week that look especially good
to you?
Kohake: I would take a shot at
the beans, July versus November
at $1.75.
That is a 50% retracement from
where we came.
I like selling off some December
cattle up around $140 too.
I think that's a decent idea to
look at.
Pearson: Alright.
And I guess we do have one
question that I just skipped
over.
Rodney in Edgar, Wisconsin is
asking, as we watch this fat
cattle market, how high can this
market go?
Kohake: I mean, who knows.
It depends on demand.
Can boxes hold up?
I think the boxes are very toppy
but if demand stays together
maybe we go to $160.
I don't think so right now
myself.
I think if you get back to, the
futures get back to $150 here
short-term I would be laying
some off for sure.
Pearson: Okay, because we have
seen boxes, February, just this
last week were topping their
January highs.
We are in uncharted territory
choice box beef -- Kohake:
Yeah, it's just been a wild ride
there.
Like I said on the show, the
cutouts in the pork just ripping
higher.
But boxes did, I think, maybe
start to signal a weakness this
week and I think we'll get back
to the futures, like I say,
$148.
I would take advantage of some
hedging there for sure.
Pearson: Now, would the cattle
market be hit especially hard if
we do see China begin to slow
down?
Kohake: I think all would be,
cattle, hogs, grains here
shortly.
Crushing margins aren't that
great in China right now.
We've seen them wash out on
several cargos with Brazil.
So yeah, it could slow us down
real gradually, just put us into
a big deflationary market longer
term.
Pearson: Gotcha.
Alright.
Well, thank you so much for
taking the time to be with us,
Jamey.
Kohake: Thank you.
Pearson: And thanks to you for
all of your questions via
Facebook and Twitter.
Please continue to send them in
and we will continue to get
expert analysis right to you.
Thanks for watching and have a
great week.