Market Plus: Naomi Blohm

Dec 4, 2015  | 00:09:31  | Ep4115 | Podcast


Yeager: This is the Friday, December 24, 2015 version of the Market Plus segment. Joining us now is Naomi Blohm. Naomi, good to have you back. Let's continue our discussion from those folks who have tweeted at us @MarkettoMarket, you are @NaomiBlohm if anybody wants to have a conversation with you. Let’s start with Mark in Ontario, Canada. He writes, what is the take in this high basis for old and new crop?

Blohm: The take is the basis is high because no one is selling. And so the end users are saying, bring us some product, we're going to try to help you out and so that’s why the basis is high. It's a gift. And I was visiting with some producers from across the country earlier this week and everyone except for one part in northern Wisconsin had positive basis or better than normal basis. So make sure you're capitalizing on that because that's not normal, that's not normal at all for this time of year and so what you need to be doing is calling your elevator, your ethanol plants and asking about the basis contracts because then you're just locking in that component of the price and you can take advantage of it and then they're happy because they know bushels are coming in. But then you also then truly in theory are going to have the other advantage that the funds separately in the future market are going to continue to short cover. So you have the opportunity to still have a nice price bounce so you can then finish pricing your contract with a better bounce over the next couple of weeks. So it's a gift and as soon as people start selling because you know they've got to sell because they've got to pay bills for the end of the year or the beginning of the year, it's going to go away and then you’re going to say, oh I wish I would have.

Yeager: You always look in hindsight of oh, I didn't realize it was going to be $4.50 and that's where I needed to make profit but I thought it was going to $4.75. You've never heard that before in the real world.

Blohm: No, never, no.

Yeager: You bring in ethanol a little bit and that's something we didn't quite get to in the show as much but it was, the news this week was, it kind of irritated oil and it irritated the renewable industry and it was kind of in the middle. So is that one of those nobody wins or everybody wins type of scenarios?

Blohm: I think it probably was and that way you can kick the can down the road and you still have flexibility for whatever needs to happen in the future. So the good news in my opinion is that the ethanol blend and how much we're going to be using next year was 500 million gallons more than last year. So that is good news. And so is it as much as what that mandate had been from 2007 I think it was? No. But things are happening in the world and you can't quite make it be what in 2007 we thought was perfect. So in my opinion it's an okay balance to keep people happy because at least it's going to keep the corn price supported for right now. Is it that big optimistic one that we were looking for? No. But we'll get there over time.

Yeager: Do you think, crystal ball this for me with oil, oil at below $40 this week. We haven't seen $60, $80, $100 in quite some time. Do you think EPA took that into consideration a little bit in this discussion?

Blohm: Oh, totally. Yeah because if there's like a threat of the price of crude oil going higher then people would get nervous that the corn price would follow and then everybody is complaining about high priced feed down the road. So it definitely was a consideration in it because corn and crude oil really do track. A third of the value of corn is energy based. So it does track the energy markets in a sense. With crude oil and the supply that we have we're probably going to stay in the $40 to maybe $50 a barrel for a while until OPEC finally says okay, we need to generate some cash and our countries need to generate cash. So I don't know, the whole ethanol thing, I think it was an okay thing that we found out.

Yeager: And there was an interesting thing and I know we retweeted it and I think I posted it on the Facebook page as well, there was depending on who wrote the story the headline was dramatically different in the way it read. So everybody reads it differently. Now, Jeff in Kennedy, Minnesota, he was reading different things, he said he has been hearing, he's listening out there, that some people talk about how we are in a 15 year lull in commodity markets right now. Are we in the middle of, we talked about that oh there went that price that I wanted, are we in the middle of something that we just don't know?

Blohm: We are. I can't speak to the 15 year exact number but overall the CRB Index is definitely lower. And the CRB Index looks at all of the different commodities and it has like a little bit of a weighted average. All of the commodities in general are lower than they have been. Part of that is with the stock market being higher the money of the world is putting their money in the stock market and it's not in the commodities but also globally we have a supply surplus in so many commodities. And that is why we're at these lower values. So when the supply situation starts to dwindle and when people get freaked out about being in the stock market and they take their money and run, that money is definitely going to come back into commodities. So I don't think it's going to be doom and gloom and the prices are never going to come back, be patient, it will maybe take a couple of years but it will come.

Yeager: It can't be 2008 all the time and 2009.

Blohm: Right.

Yeager: And we'll never see that. I can remember constantly hearing growing up the whole if we could just get to $3 or $4 and here we're pushing $5. I know when you've got things to pencil out, when you're figuring $6 or $7 that's a different discussion. All right, Izak in Riceville, who also is in Ames, he writes, what do you expect for corn export numbers ahead of Wednesday's WASDE report? We talk about exports as one of those things to help give us some support. What do you expect?

Blohm: I don't think that they will do too much to it. If they do anything they may reduce it a little bit, a specific amount I couldn't even speculate as to what it would be. But otherwise, so that would be the part of the balance sheet that we're seeing a reduction of demand. But with the ethanol staying solid and the feed numbers being solid it may make the ending stocks number, that final ending stock number just a little bit larger. But it's kind of, it's too early in the year to be overly freaked out about it quite frankly.

Yeager: And there's always the camp that says a number is just a number, it doesn't mean anything, it's really not a true reflection of what is in the stock, it's just manipulation of some sorts, a government conspiracy. I'm not saying names, Darin Newsom. But let's talk about Kuper's crop stock, he writes and also going to couple this with another question, so Kuper's question is, will a weaker U.S. dollar encourage additional exports and create much of an impact on the price of corn? And then we have another question from Phil in Ontario, Phil you can find him @AgriDome. He says, the U.S. dollar fell 2% in one day last week. At what level does it need to descend to for ag futures to be stimulated? You see these together, Naomi.

Blohm: Yes. Okay, so I'm going to start it from the perspective of the value of the dollar and then take you back to what corn exports have done when the dollar has fluctuated. So, right now the dollar is at 100 even. Historically when you look back like 10, 15 years, any time that the dollar has been at this level, corn exports, assuming supply is kind of fine and there's no weather issues, corn exports are always right around 2 billion bushels. Period. That's how it is. But when it was 2007 and our dollar was at like 70, our exports were up at 2.4 billion. And then in other years when the dollar was higher than 100 our exports then went down to 1.7 billion. So absolutely the correlation is there. But I was encouraged because I was just giving a speech on all of this recently, I was so encouraged that oh this is not the end of the world. Our exports will in theory stay around 2 billion bushels and then you can kind of look back from history that if it ends up that the dollar does continue to go higher that yeah, it's going to be reduced but even when the last time the dollar was as high as it was in the early 2000s, it was only like 1.7 billion bushels. So it's not like they stopped. So I was encouraged by that. It's something to just keep an eye on for the balance sheets coming up. But now separately, soybeans, they weren't really affected by the exports like the corn was. I didn't know that. They just have this kind of you can count on the exports, it's solid, it’s steady. That may change a little bit because now there's more global players with soybean --

Yeager: Contributing to the pot.

Blohm: Yeah. But historically it never affected the soybean exports.

Yeager: Interesting.

Blohm: Ta-da!

Yeager: And that was something you talked about this week on your appearance in Chicago. You get all over the place and talk to people.

Blohm: It's kind of fun.

Yeager: It is fun. And it has been fun sitting here having a conversation with you.

Blohm: Yeah, you too.

Yeager: All right, Naomi Blohm, thank you so much. And we appreciate all of your questions that you sent to us @MarkettoMarket and also via our Facebook page, Iowa PBS Market and we appreciate you having us with you in the car or in the tractor or wherever you may be. We'll see you next time. Have a great week. 

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