Market Plus: Naomi Blohm

Aug 16, 2019  | 12 min  | Ep4452 | Podcast


Howell: This is the Friday, August 16, 2019 version of the Market Plus segment. Joining us once again is Naomi Blohm. Naomi, welcome back.

Blohm: Thanks, Delaney.

Howell: I like that we color coordinated our outfits today.

Blohm: I know, we planned that, right?

Howell: It looks really good on TV. I'm seeing the monitor over your right shoulder. Naomi, one thing we didn't get to talk about during the main program was the live cattle markets. We of course know that they had a pullback this week from the Tyson fires. but seasonally are they due for a correction or a pull back at this time anyways?

Blohm: Seasonally cattle futures usually do work lower into the month of August. So check, we got that done. What has been important to know this week is that the choice box beef value has actually improved by 8% in light of this whole scenario. So that just says that the demand is there. That says that the retail end needs their product. So I think that for the specific places in Kansas it's going to be a cash issue as far as their local cash market is going to suffer because of the fire. But other places are really seeing the residual benefit because of it, because they're moving production to different plants, they're working longer hours and clearly the demand is there because that beef price is improving.

Howell: Well and that sets us up for a great question we got sent in talking about those box beef prices from Justin on twitter. He said, why is box beef at $2.36 but packers are only buying beef at $1.70? Seems a little corrupt if you ask me.

Blohm: They are definitely in a good situation, the packer right now and they are making oodles of money. So they're going to take advantage of this for as long as they can. So they're going to run production more than they can, they're going to work Saturday, they're going to have people working overtime and eventually it will even itself out but they're just taking advantage of this situation for the moment.

Howell: Another question here factoring in the live cattle and feeder cattle markets was the flooding. We really haven't heard a whole lot about the impact from Nebraska especially which has a lot of cattle on it. And Daniel from West Branch, Iowa sent in a question that said, did the mortality of the flooding not help increase the feeder market?

Blohm: That is coming into effect down the road yet. And so right now the industry is actually aware that going into first quarter production numbers are supposed to be down, it's going to be one of the biggest drops that we've ever seen. So that is coming down the road yet. It just feels like the market is distracted by other issues, not just the fire, but other things in general with exports, export markets to Japan, to China, into Europe now. So once we can get some of this other stuff simmered down I think we can start to focus on what those numbers are. There's a cattle on feed report coming up in a week. That might shed some light on things too.

Howell: And once we get all those other things, that noise factored out there heading into first quarter what can we expect to see some of these cattle prices rebound to when all of those other factors like the mortality in Nebraska and the flooded areas come into effect?

Blohm: The only way I could answer that would be looking at a chart. And so my recollection of a continuous cattle chart would be that once we can keep those prices back over a buck then you could see a rebound up to like $115, maybe $120 at the most. That's going to be some major overhead resistance. So I'm still longer term friendly to cattle. You're not seeing any reduction at all in demand domestic wise. The export market is still strong overall. So I'm still bullish cattle for the long-term.

Howell: Okay. Are you bullish other commodities, for instance, the corn and soybean markets, Naomi?

Blohm: Why yes, yes Delaney, I am. I am because I really don't buy this yield number at all, I really don't at all.

Howell: Well that sets us up nicely then. We've got a question here from Dave in South Dakota. He said, now that the dust has settled from that August WASDE report will the grains markets trade into a harvest low or is there still uncertainty on the size of these crops to trend higher into harvest?

Blohm: Seasonally the December contract, December futures finds its low at the very end of August into the middle of September. It correlates around the September contract going off the board and then we're going to usually find out some of our early harvest data. So this year I feel that same type of harvest low will happen during that timeframe. So you're looking at the next two weeks. We don't have a bottoming signal yet on the charts but I do feel that we're going to be forming a bottom over the next two weeks, especially as we get some fresh data on the Pro Farmer Tour. And I've got to think that that Pro Farmer Tour must be interesting because the USDA is actually coming out to participate on the latter half of the tour. He'll be in the western Corn Belt where the crop is expected to be a little bit better. But the eastern Corn Belt I think is what everybody is really wanting to know about because of how late that crop got planted. 40 million acres of corn planted in June. We have a marketplace that is used to seeing corn being harvested and ready for export on the rivers in the early part of October and boy is it going to be a surprise when it's not available. It's not going to be ready to be harvested. Is it going to even be dried down in time? Parts of Central Illinois, to my understanding based on co-workers who live there, have said that they don't have the drying system like we do in the Upper Midwest so that's going to be a whole other factor going forward. This story is not done yet, it's not done yet and if you remember '93 and '95, in those years we found our harvest lows in mid-August to early September and then it was straight on up into the next crop year.

Howell: I want to go back to something you said there. You said you're watching for a bottoming signal in the corn markets. What is that signal? What are you looking for? When will we know if that has happened?

Blohm: So it would be either a combination of on a daily chart or on a weekly chart that I'm looking for, the big obvious one would be a bullish key reversal. That is usually your tell all and we just haven't had that yet. If you're watching candlestick formations, if you're watching Bollinger bands, things are close to happening but we just don't have the official signal yet but I do feel that we are going to be finding it soon.

Howell: The Pro Farmer Tour, as you mentioned, is coming up. Do you think Lance from the USDA is going to use that tour to adjust the yield or acreage or any of that stuff from what they find?

Blohm: I think that he'll use the data just to help with the next yield numbers going forward because then they'll use more of their traditional methods of coming up with yield, it will be more of an objective view, there will be people out there measuring. So it will be good for a stepping stone and boy if I was an end user, if I was a country who maybe wanted to buy some corn it is on sale and make sure that you are doing everything you can to secure it because this is going to be something, in my opinion, that is going to be lasting going into 2020.

Howell: Naomi, what do you think the acreage and yield number will actually be when we get all of it said and done?

Blohm: I don't have a good feel for the acres. I really don't. But I do feel that the yield would come down and I would go with more of a conservative number to start because if you try to do anything more aggressive then you're assuming an early frost. But I would guess based on conversations that I'm having with producers balancing out what is good in Nebraska and Iowa with what is not good in Ohio and Indiana, I would say yield may be coming in around 160 or 161 on corn. I think that is a very realistic number. And for soybeans I feel that the 45 to 46 number is very realistic as well. And that would ultimately be quite supportive for prices as we head into 2020.

Howell: Let's take the flip side of that and have just a hypothetical here. We've got a question from River Farms in Virginia. They said, if we do fulfill the USDA's current yield and acreage number and there is no drastic downward change by them through January do we say goodbye to future summertime weather rallies for good?

Blohm: Ooh, that is a good hypothetical question and I'm going to say no that we would not say farewell to those rallies because there are, that is what gives us our spark every summer, there's always something that isn't quite perfect and the market has a reason to bounce higher. It's just unfortunate from a producer's standpoint with the rally that we had it feels like some maybe didn't participate in as much cash sales as they'd want to and I don't feel that was anything out of greed, that they were hoping for higher prices, I really don't at all. If people had old crop they weren't selling it because they're not sure what their new crop is going to yield with as late as this crop is planted. And so if I have a farmer in Illinois, Indiana or Ohio who has never dealt with the situation before of how late their crop got planted I would be scared to death to forward contract anything not knowing for sure when it's going to be harvested or harvestable period. So people didn't forward contract because they didn't want to have to deliver on something they didn't have.

Howell: You mentioned earlier that you are bullish for the grain markets. We've also got a question here addressing why are farmers bullish from Schuelke in South Dakota. He said, why are farmers emotionally always bullish? We have the highest corn price in 5 years just about six weeks ago yet the only chatter is how wrong the USDA is.

Blohm: It's a fair question. Going into this summer there were a lot of producers who were ready to be disciplined about taking the seasonal price rallies that we see in June or early July and making sales. This year it was legitimately the most different year we've had since 2012 from a production standpoint of really not understanding how a crop planted this late is going to fare because this was later than '93, it was later than '95. This was the first time that Illinois, Indiana and Ohio are suffering as much as they're suffering in terms of potential production. We've got satellite imagery that is suggesting that those three states' yield is going to be substantially less than what the USDA is planning out. So the emotional part I think is normal. You know what your crop is supposed to look like, you've seen fabulous yields for the last four or five years and so you know what it's supposed to do and now you're not seeing it, you're not seeing it out there. So you have, if I was a farmer I would be the same way. I would be like, um no, something is not right about this because I remember being in Southern Illinois last year around this time and being in a soybean field and the bean plants were about thigh high and the whole plant was just peppered with pods, I've never seen anything like it. Now I go to the bean fields and they're knee high, it looks like how bean fields used to look ten years ago and I'm like, this is not the same crop, this is not the same bean crop out there at all.

Howell: It's going to be an interesting harvest season that's for sure.

Blohm: Yes it is.

Howell: Naomi Blohm, thank you so much.

Blohm: Thanks, Delaney.

Howell: Join us again next week when we explore why land rights activists view a new policy as more of the same and Dan Hueber will join us at the Market to Market table. Until then, thanks for watching, listening or reading. I’m Delaney Howell. Have a great week!

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