Market Plus: Naomi Blohm

Aug 27, 2021  | 14 min  | Ep4702 | Podcast


Yeager: Welcome into the Friday, August 27, 2021 Market Plus. Here is Naomi Blohm. I thank everybody for all their questions. I'm going to do my best to get everybody's question in but we have a ridiculously tight amount of information to get out here in this moment. So I'm going to stop and first start to Naomi Blohm and say, this cotton market, you mentioned the battle for acres. That is not the only story in cotton as we sit here right now.

Blohm: Right. So it starts with ending stocks being cut in half from two years ago, we have demand strong and now we have a hurricane approaching Louisiana. So not good when over 40% of those bolls are open and this has been potentially one of the best crops that we've had in a while so we needed to have this big crop and now we have a hurricane coming. So between Louisiana and then if it skirts towards Mississippi then most of the, I think it was about 35% of their bolls were open and that was as of Monday so I'm sure more has progressed this week and now it's just going to decimate it.

Yeager: And this is an area that has been wet, like three weeks ago I seem to remember a huge amount. And if you look at the weekly precip they have just been wet in a lot of that country all season.

Blohm: Yeah, and so not great at all for those cotton producers who are probably finally excited to have something go their way and then to have this hurricane come through, category 3 so it's going to do damage between the rain and the wind. So prayers for those producers down there, it's a horrible situation to be in.

Yeager: And there is a situation of the ports of New Orleans, a little bit of grain goes through there. So you think of the front end where you get to what you said the old crop. Say it is major damage, can they get it repaired in a month before the crop starts rolling? You're asking for a Herculean effort. So that too could be something we have to watch.

Blohm: Yeah, absolutely, great point that we need to be monitoring. And I think too, you think about those southern states, they were going to be the savior to have corn and beans available for exports and be that first crop available to help fill the gap from the tight ending stocks and now it's going to be delayed. So lots to talk about.

Yeager: And I have questions. Again, another topic we haven't even gotten to and Dave in Minnesota brings it up. He is @beetfarmerDave on Twitter. What are the retroactive blending mandate exemptions going to affect domestic soybean demand in the near-term if they are granted?

Blohm: So part one we don't know for sure what they're going to say but the rumor was that they were going to lower it for the rest of 2021. But I think the date, so the recommendation, the proposal went in, but it's going to take a few weeks for us to know what was said on it and then it maybe doesn't go into effect until November. And there would be lower for biodiesel and I think for ethanol for the rest of this year but then maybe an increase for 2022. So we don't know or it might be too little too late, maybe we already talked about it, the market is aware of it, we had one big down day because of this news so maybe it is priced in. My mind goes to well, maybe this administration does know how tight the ending stocks are so they need to have a story to justify that the supply is not there so we need to reduce the demand. Something to think about.

Yeager: #conspirarytheory from Naomi Blohm. All right, sounds good. No, you're totally right.

Blohm: You just don't know.

Yeager: All right, another question. This is from Gary in Stephenson, Michigan and this one is about the dairy market. What should dairy farmers do to brace for impact when it comes to feed costs this year?

Blohm: Yeah, there is going to be producers that are going to be hurting because just depending on where they're doing their dairy farming at. So if you're in Minnesota and you've got a smaller crop, so there's going to be probably your cash market a little bit stronger than normal on top of higher prices on top of the milk price going down. So my thought would be on this dip that we've had recently you do that you can to lock in some cash to make sure that you have it because that fall of course that is usually your cheapest prices. And so essentially the only things that are going to make it cheaper would be if the USDA makes the ending stocks larger in September, if they make the yield bigger in the September report, if the dollar goes up. So a lot to have to digest and work through. So do what you can to lock in some cash. That would be my biggest thought and hopefully we can get some of this dairy demand to kick in and just get that milk price back up.

Yeager: Is the same hold for the feeder, the cattle feeder themselves as well as the dairy cattle feeder side of the discussion same thing because the feeder, one of the stories that we heard at the Iowa State Fair last week, I had no shortage of three conversations with different people from different areas talking about hay and where there's hay challenges, where they have some hay. What does that do to the feeder market? If you don't have hay let's go to corn. Oh wait, corn is ridiculously high.

Blohm: Yeah, everything, everything is ridiculously high. So yeah, that is going to affect things too and you've seen the feeder market just climb higher, climb higher, climb higher and so it is a tricky thing for the entire livestock complex to have to absorb all of this. And you see that even I'm thinking about how we had news from India this week that they need feed so they're importing soybean meal from the United States, well we don't know for sure if it's the United States, but it is going to be importing soybean meal and they need it stat, it's got to be there by the end of October. So it is everybody, it's everybody.

Yeager: The unknown maybe this time is India, not China. All right, Mitch in Hull, Iowa asked us on Facebook, what are your thoughts on marketing some 2022 new crop corn and/or soybeans?

Blohm: Yes, absolutely.

Yeager: How much?

Blohm: I would say if it was mine and I knew that I had my inputs mostly accounted for and it's a profitable point because it's most likely still going to be highly profitable, I think new crop corn was right around $5.10 for Dec of 2022. So take your basis off, it still is a profit, and if that is your worst sale to get started at I think you're winning compared to past years because again, so here would be my take. We've got, again, these tight ending stocks in these 9 commodities. So the 9 commodities, I've just got to get it out there, it's corn, soybeans, spring wheat, all wheat, oats, canola, cotton, barley and sorghum. So 9 commodities with tight ending stocks and I think that you're going to just continue to see a fight for acres. So I think you see potential for all these prices to work higher into winter. So now he's saying, well why are you telling me to price my grain if it's going to go higher? Because, again, it goes back to this dollar and it goes back to all commodities and we already have South America planting more acres of corn and beans and if they don't have a weather issue this winter and we have increase in acres and then no big weather news here then our rally doesn't need to go too much higher. So we're still asking for Mother Nature to do a lot. But Lord have mercy, if it was mine I was definitely be pricing some. It's a good value. It's a good value.

Yeager: All right, let's take the other side of that issue because what if you don't have the crop? We've talked about the dry conditions. Tim in Crookston, Minnesota asked me this week, he says, I have fixed the basis on all my soybeans but I think I can only fill half of my commitments. Do I buy back now or wait for harvest and hope the market adjusts? Tim in his area, yes, it's that too little too late rain if it comes now. But weather is still a problem for many people. He's not the only one with that question. What do they do?

Blohm: He's not alone. I think you have an honest conversation with whom you were selling to, your elevator or whomever it was, because they'll know I think in a sense what to do, how to get out of the situation as far as buying contracts back. Sometimes they'll allow a roll into the next year, sometimes, not all the time. So just have the honest conversation because they want to work with you, they do. This is a different year for certain parts of the country. The other part to that is where is the price going to be going here for the short-term? And I think we talked about it five thousand times already, value of the dollar, all those types of things. But yeah, I would say start with a conversation and just be honest.

Yeager: I have two questions to finish here. We're going to go with Michael in Joice, Iowa, finish up the livestock discussion we had. Is there more downside risk in the lean hog trade than most people realize right now with ASF in the Dominican and the Delta variant heating up? Or is all of that priced in already very wide basis in the October contract?

Blohm: So the October contract, again today, finished up near this down trending resistance line on the charts. So we need a close, I think it was above 91, I'd have to go back and look at my chart, but to get through that resistance point. Do you have where they closed today?

Yeager: Well, no I don't have that one.

Blohm: Oh, okay. That's okay. So part of it I think the notion of ASF because we knew about this back in July that it was in the Dominican but now it's coming up again and it is absolutely at the top of everyone's minds. So is any factor of it priced in? No, it's not, I don't think so because it hasn't crossed over and we don't know what our plan is here -- I'm sure the people in charge know what the plan is here, I don't know what the plan is here -- but to deal with it should it have the outbreak and how that affects the market. And then what does that do for the cost of grain if there is potentially less animals needing feed? So a lot of components. It is a big unknown. But it has everyone on edge.

Yeager: Okay, lastly, a few years ago we did an education project where we asked the various analysts different takes on things like what commodities should I start trading if I haven't traded? What are some career options? We're going to revisit a couple of these topics again over the next few weeks and we're going to ask the same question to a couple of different analysts. Easy for me to say. Naomi, I want to ask you about a new producer. What are the challenges of acquiring and purchasing farm land and getting into agriculture right now?

Blohm: I think similar to what they have been in years past as far as having, you have to build your team and you have to have a lot of hats that you wear. So you're building a team with maybe a local neighbor, your lender, you're wanting to work with an insurance agent, you need to maybe talk to your extension agent because they can help you with cost of production sheets so you're thinking like a business person. But you also need to talk to your local elevator to know and keep track of what is basis doing or what is their delivery schedule. So you just need to have those conversations and build those relationships. Tricky now to come into farming when prices of course are high. So I remember this 2012, 2013, 2014 everything goes through the roof, land prices go up, rents go up, we're already starting to hear about it. So this would be a harder time to come in. But then of course when farming and agriculture is in the slumps it's not as attractive and it's not as fun and it's harder work. So I think it also goes back to the FFA creed and if you grew up with it you probably have it memorized still or parts of it. I keep it right on my wall in front of me at my desk because there's good times and there's bad times in agriculture. So if you love it, you work through it. So don't get discouraged. The lifestyle is wonderful. We still have amazing people in agriculture who truly just want the best for agriculture and our country and these are the people, these are the core, this is the part of America that is the best. So if you want to become part of that team, awesome, do it.

Yeager: Speaking of being part of the team, an anniversary of sorts this week for Naomi Blohm. 10 years since your first appearance here on the show.

Blohm: 10 years.

Yeager: Hard to believe.

Blohm: Yeah, my first show I was like this in the back of the chair, freaked out.

Yeager: Sitting with Mark Pearson.

Blohm: Yes.

Yeager: You two had met on the speaking trail if I have heard the story.

Blohm: Yeah, at the Wisconsin Corn and Soybean Expo in February. And so that was February of 2011 and then asked for me to come on the show a couple of months after that and it didn't work with my schedule and so then this August one worked. Boy was I nervous. Driving there, I drove here on that day and Mark was so sweet. He sensed it, he knew how nervous I was and he sat in the foyer and just talked with me and cracked jokes and tried to get me to loosen up and it worked for a while and then I would panic and freeze up again. So it has been a great 10 years. Thank you for having me be part of it.

Yeager: And we've always appreciated it every time you make the trip to see us. Thank you, Naomi. Good to talk to you. That will do it for Market Plus. Next week on the television show we will look at the fight against rabies and Jeff French, one of the new guys, he will join us to analyze the markets. Thank you so much for watching. Have a great week.

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