Market Analysis with Naomi Blohm

Brooke Kohlsdorf: For the week…  The nearby wheat contract lost 8 cents and the September corn contract fell 9 cents. Good weather made it hard for soybeans to rally.  The September soybean contract dropped 19 cents while August meal dropped $6.20 per ton. December cotton contracted 45 cents per hundredweight. Over in the dairy parlor, August Class Three milk futures declined 62 cents. The livestock market was mixed. October cattle added $3.32. September feeders put on $8 and the October lean hog contract cut 3 cents. In the currency markets, the U.S. dollar index lost 70 ticks. September crude oil declined 87 cents per barrel. COMEX gold weakened $19.90 per ounce, and the Goldman Sachs Commodity Index was down by more than 7 points to settle at 548 - 20. Brooke Kohlsdorf: Joining us now is regular market analyst Naomi Blohm. Hi, Naomi. 

Naomi Blohm: Hi. Thanks for having me.

Brooke Kohlsdorf: Yeah, thanks for traveling to us this week. So there hasn't been a lot of fresh news this week. Particularly with the the grain markets. They've been down just kind of holding steady. Is the trade waiting for a weather story with wheat?

Naomi Blohm: Yes, indeed. So for the wheat market this week, what we've been continuing to hear is that the weather in the southern hemisphere is going just fine. And so the southern hemisphere is growing a tremendous wheat crop to keep global supply sufficient. Now, here at home, the North Dakota wheat tour occurred. And they pegged the the North Dakota wheat crop at about 49 bushels overall for an average, which is down ten bushels from the current USDA numbers. So that's something to watch going forward. But right now, the market just continues to be stuck on the notion of good enough supply where we need it, when we need it. But the one bright note for wheat right now is that our U.S. exports are running ahead of schedule for wheat. And we are so competitively priced in the world that we are considered cheaper. And that's been a big, big leading factor for the increase in wheat exports that we've seen so far. So that's the one bright note. December Chicago wheat has support at $5.50. So that's what we're going to be watching next week to see if that value can hold.

Brooke Kohlsdorf: Okay. So see if it will go up next week.

Naomi Blohm: Yeah that's what we watch. Or maybe just see some more sideways range trade in about a 25 cent trading range okay.

Brooke Kohlsdorf: With corn usually this time of year we're talking about heat damage. Lack of rain. It's so hot. And this year it's kind of been different. We've had too much rain in some parts of the country, and there's possibly been some damage we don't know yet. So are we waiting with corn to hear about yields?

Naomi Blohm: Yes, that's exactly what's happening. 74% of our nation's crop, though, is rated good to excellent. And in historical years, when we see a good to excellent category that strong, it really does indicate trendline yield or potentially higher. So if the yield comes out a trend line that would be $1.81. And that would be actually a supportive story because corn demand is so strong that carry out for new crop would be 1.6 billion bushels. But right now the market is thinking that the yield is probably more like $1.83 or $1.84. And if it gets to that point, well, then we've got corn carryout that goes closer to 2 billion bushels. So we are hearing whispers of corn rust. And so that's like a fungus that the market might need to be aware of because that can zap yield. And of course, there's other pollination issues with some of the hybrids that were out there. And so we're we're waiting a few more weeks to know if there's a bigger issue with some of that pollination or not. So when we get into those crop tours in a few weeks, I think we'll have a better idea. But also globally, I think a lot of end users are waiting to see where that yield ends up, because if it is a number like $1.84 or $1.85, then they're going to be able to buy corn so much cheaper, you know, with a $3 handle and a $4 support breaks on the December contract.

The downside points to $3.75, but if we do get some indications that the yield is closer to $1.81, then we'll I think we'll see a harvest low sooner than later coming in August. So waiting on better yield is where we're at.

Brooke Kohlsdorf: And that's usually you said a couple of weeks maybe.

Naomi Blohm: Yeah. About three weeks is when we'll start to do some of the crop tours, and then there'll be boots on the ground. Now something to keep in mind is that the USDA WASDE report in August is the first report where they start to adjust yield. So I'm concerned that with a good to excellent category being so good that we might see the market increase yield, the USDA increase yield. And then and that might weigh on prices. So that's just something to be aware of. And that's August 12th.

Brooke Kohlsdorf: With soybeans right now we're waiting on China to buy. If they don't buy soon are they going to be waiting for a while then before they buy. Meaning they're buying from someone else?

Naomi Blohm: Yeah. So that's that's the big question. So we're going to actually see have one of our U.S. representatives meeting with Chinese officials in Sweden early next week, and they're going to try to start to do some more trade negotiations before their August 12th date. Also, the same day as that USDA report. And I feel like China might be waiting to see what our yield is going to be if there's risk that our yield maybe for soybeans isn't as strong, I think that they might come in and buy beans early, because then, of course, if we have a less than stellar crop here, that would be a reason for prices to go up. So China would want to get in ahead of that price increase. But if we go into August with good weather and if the perception is that the yield is bigger than the current USDA, 5253, then that would be a reason for prices to work lower in November. Beans right now have really good support at the $10 area, but we are very behind on our export sales. Right now, we're only at 5% of USDA projections, and normally we're about 15% sold to where we think we're going to be. We still are looking to have exports at 1.75 billion bushels. And that's a it's a big number. It's a little bit less than last year. But we really do need China to show up soon to meet some of that demand.

Brooke Kohlsdorf: You said this was a big week in the dairy world.

Naomi Blohm: Yes. We had a milk production report that showed that milk production is really fantastic. Larger than anticipated. The milk production report was up 3.3% year over year. And in the milk world, when you have a 1% production increase, that's considered a big deal. So a 3.3% increase was just, sent the markets a lot lower just a few weeks ago. Well, late June, we had the milk prices for class three milk up at $20, and now it's down to $17 because we've had two different milk production reports that showed increases of supply. So it's not only it's we have more cows that are milking and each cow is producing more milk. So the combination factor is what's weighing on the class three milk prices right now. But the good news is that cheese demand overall is strong domestically. And our dairy exports are pretty good overall. It's just we have a lot of milk right now to be working through. So I'm curious in the future if some of the older cows that are milking might, go to market sooner than later to try to help alleviate the situation? But we'll see if $17 milk can hold for the class markets next week.

Brooke Kohlsdorf: So the cattle on feed report came out just a few minutes ago, as a matter of fact, and you were kind of sifting through it. What was in it that caught your eye?

Naomi Blohm: Well, it was bullish. You know. And just when you think that this market can't get any friendlier, we have a report that had, the on feed number at 98%, the placement number at 92%, the market odd number at 95%. And all of those numbers were lower than the average guess. All of those numbers were lower than the lower end of the guesstimate range. So it continues to be a friendly story in terms of the lack of supply. So I'm not quite sure you know what this means for the market because this would be fresh news. Do we see the market, you know, continue to work higher as it has been, or where is the point where we start to see maybe the consumer cry, uncle, because prices are so high.

Brooke Kohlsdorf: That kind of leads me into the next question that we are taking from social media. And this was from Cannady Farms in Oklahoma, and he's asking, is the beef market in tune with fuel markets? Consumers used to think $3 gas was outrageous. Well, now it's the norm. Is the beef consumer just buying beef at these prices because they see it as the new normal?

Naomi Blohm: Yeah. So ground beef for sure. And the question is so important. And there was an article that was written this week that actually talked about this. So what has happened is that, the normal, like any American right now, their wages have been steadily increasing over the past five years. And so the wages have been increasing faster than what the beef price has been rallying. So the consumer is still buying the ground beef. We're still having okay exports. And so the demand is strong. So at what point the consumer starts to walk away. I'm not sure because as you know, in 2014, I was convinced that the consumer would stop buying ground beef, but they didn't. The demand stayed so strong because, there's just really not a good substitute for it. So that's what we're going to see. And I think as long as Americans are working, we haven't had a lot of big new rounds of layoffs that they're going to be able to continue to buy the hamburger, buy the ground beef. But it is remarkable that people are still paying, you know, higher prices at the pump. They're paying higher prices for the proteins. But protein is so in right now from a nutritional standpoint. The keto diets are so strong. You talked to a lot of, just folks throughout the Midwest and in America, and they're trying to do whatever they can to get more protein intake. And definitely beef is high on the list.

Brooke Kohlsdorf: That's an interesting, interesting observation for sure. Okay. I think we have about 30s left, so we have time for the other protein, the white meat. What about the pork? Markets right now. Yeah.

Naomi Blohm: So pork market had a nice two week rally, but the overall trend is still lower since June. The, futures market is trading at a discount to cash. And what we're seeing is that our exports are a little bit less, their bond behind about 4% from a year ago. So we've had that big rally up. The correction has happened, and now we're going to be waiting to see in the coming weeks, you know, where our export demand is going to be. And domestic demand as we start to get back into tailgate season, who is going to be grilling what at those tailgates. Yeah. So yeah. Yeah. So that's what we'll be keeping an eye on. But the pork story I think still supportive overall.

Brooke Kohlsdorf: Okay. Thanks. Naomi we'll continue this conversation a little later. So you've been watching the analysis segment. And in a moment we'll continue our discussion in an online segment. Only you can search Market Plus with Naomi Blohm. Wherever you get your podcast to hear that conversation or go to our website of markettomarket.org this week on our YouTube channel. It was a step back in time to 1990 for a classic episode of this program. Subscribe to find out what retro program we put up next week when you go to YouTube.com/markettomarket. Next week how rural communities are keeping tabs on decision makers while connecting readers. Thanks so much for watching. Have a great week!

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