Market Analysis with Naomi Blohm and Matt Bennett

Paul Yeager

Hello, I'm Paul Yeager. There were no shortage of headlines this week impacting rural America. John Deere and the American Farm Bureau Federation agreed to a memo of understanding to ensure farmers and ranchers have the right to repair their own equipment. Supporters of the former Brazilian president stormed several government buildings at the Capitol in Rio de Janeiro over the weekend, while severe weather again slammed the nation with heavy rains on the west that caused flooding and deadly tornadoes that hit the south.

Paul Yeager

And a government report released revealed inflation decreased a 10th of a percent from November the first drop since May of 2020. Another snapshot from Washington, D.C. is prompting us to pause our regular format and spend time with two of our market analysts. Naomi Bloom is the senior market adviser for Total Foreign Marketing, and Matthew Bennett is co-founder of Egg Market Dot Net.

Paul Yeager

We'll get to both of you in just a moment. However, we do need to give you the numbers that we will use as the backdrop for our discussion. A majority of bullish news drove the market higher following Thursday's release. For the week, the nearby wheat contract was even while the March corn contract added $0.21. The USDA report boosted the soy complex on lower production.

Paul Yeager

The March soybean contract improved $0.35, while March meal shed a dollar. 30 March cotton sold off. Three 3800 wait over in the dairy parlor February Class three milk futures gained $0.07. The livestock market was mixed as February cattle were up $0.95. March feeders cut to 77 and the February lean hog contract dropped a dollar 63. In the currency markets, the U.S. dollar index lost 171 ticks.

Paul Yeager

February crude oil rallied 608 or 8% per barrel. COMEX gold improved 4890 per ounce, and the Goldman Sachs Commodity Index finished up by more than 32 points at 605 50. Let's bring in Matt Bennett and Naomi Bloom back to the we'll bring you into the discussion. You're not really back and you never said anything. Now we'll get to you in a moment.

Paul Yeager

We have to start with Naomi. Let's talk wheat. A lot of movement post report now. Was it tied to the report or was that just a sympathetic move to what happened in corn and soybeans?

Naomi Blohm

I think it was a little bit more of a sympathetic move. What happened with corn and beans. The wheat did have some friendly notions to it from the report and some bearish notions to it. So on the friendly side, the quarterly stocks number came in a little bit less than they were expecting. And then just the regular month, the USDA report had lower than expected ending stocks as well.

Naomi Blohm

So to me, that says that, you know, we still have historic tight supplies in this country. Every single category of wheat. And so that is something that we are aware of going forward, especially with the global situation still having overall tight supplies of wheat as well. What I loved about how wheat finished after the report was that we put on a bullish key reversal on that news that was, again, you know, friendly from the ending stocks perspective.

Naomi Blohm

But the acre side had a little bit of a different story.

Paul Yeager

There was one theory that it was a buying opportunity missed before the report. Was it because of the acres that Naomi's leading you to talk about or. My question instead.

Matthew Bennett

I, in my opinion, acres. The thing about wheat, you come into the January report and you typically it's not as big of a deal as corn and soybeans, you know, I mean, corn and beans is what we're really paying very close attention to. Of course, you want to look at what wheat acres look like. Well, with the kind of wheat prices we've had over the last year, it's not hard to believe that you would come in here with three and a half million plus wheat acres for total week total wheat over what you had a year ago.

Matthew Bennett

And the thing is, I guess whenever you look at that, it's going to create quite a situation. Whenever we start talking to acreage moving forward, you know, for convenience. And so, you know, those I wouldn't say they're etched in stone. Obviously this wheat crop went into dormancy and not phenomenal shape. But the nice thing is we've seen a significant amount of moisture other than maybe Kansas.

Matthew Bennett

Down in Texas, we've seen quite a bit of moisture here over the last couple three weeks. And we're healing up a little bit. I'm not so sure that this week crop might be fairly decent. I don't know where you'll see the abandonment we once thought we'd see.

Paul Yeager

In the wheat belt. Or do you think we'll see abandonment in other areas? I mean, California has erased the majority of their most severe drought. Not a lot of wheat a grown is growing there, though.

Matthew Bennett

No, not much weeds growing there by any means. But the thing about it, when you talk to some of these folks looking at whether California snow in the Rockies, I mean, you're changing the environment a little bit from what we've seen the last 2 to 3 years, probably setting ourselves up for the potential at least that maybe we would see a little bit better weather pattern here in 23.

Matthew Bennett

That's something that we can't ignore moving forward.

Paul Yeager

So, Naomi, I guess I'll ask I want to ask kind of the other question I asked to Matt, do you think we put the low in and we and we're higher forward?

Naomi Blohm

I do think that this was the low. We don't have a reason to just take off and rally. But for Chicago wheat, $7 support is significant. And on the Kansas route in Minneapolis, we'd have strong support of $8 level to match point. We don't know how these acreages are going to come out of dormancy. And I'm thinking back to the administration's desire to have the double crop incentive program between the wheat and beans.

Naomi Blohm

So maybe that's a little bit more of the extra acres that we found. But a lot can happen yet with weather. But I do feel that the low is in for now. Seasonally, wheat has a tendency to rally until March, so just make sure that you're making and taking advantage of those opportunities when the rallies come.

Paul Yeager

Now, what was the headline to you in The Corn Report?

Matthew Bennett

Well, a couple of things. One thing that jumps out at me as I look at afterwards is that you lowered demand 185 million bushels and we had a lower carry. I mean, those two things typically I don't think anybody had that on their bingo card. I can tell you that. And so, yes, you drop acreage significantly, you know, and so you come down.

Matthew Bennett

Yield goes up. I mean, so look at all these moving parts, things that you wouldn't think would necessarily go together, but yield goes up. We thought yield would come up. So because September and October, you went down on yield, you came up in November. And a lot of times when that's the case, you reverse course in November. You see a little bit of a further, you know, increase or reduction depending on what the trend was.

Matthew Bennett

But my thing is, is that you actually kept carry out fairly consistent. But the main takeaway to me is that you're in a situation right now for where demand is lowered, and that's not necessarily a great thing moving for you have to pay attention to it. So I think it's more of a supportive thing as far as old crops are concerned, but new crop, we better pay close attention to what's going on moving forward.

Paul Yeager

The lower demand story has been frequent topic for a while that the numbers were going to have to reflect. There's just not as much interest in us corn.

Naomi Blohm

Right. Right. So the so going forward I'm thinking that we will see exports actually stay a little bit lower because Brazil now is going to be a really big competition for us and helping to take over that Ukraine number. So I kind of I'm a little nervous that, you know, we're not going to stop corn exports, but I don't know that they need to go back up to where they were.

Naomi Blohm

I think you'll see a growth in ethanol demand. I think you're going to see a de-growth in the feed demand over time. So we'll recover that. But right now, we're we're kind of stuck at a match point going forward on the new balance sheets that we're going to start to talk about in the spring, if that is lost demand and if we even plant the acres that we planted last year with trend line yield, with the demand that we just got yesterday, carry out growers to 2 billion bushels with wonderful weather we are still trading and a pennant flag formation on Chavez for corn market.

Naomi Blohm

So what we did on this week after the report put on that bullish reversal, now we're back up to the high side of the pennant flag. If we can get some friendly news, the market's going to work higher towards $7 with the March contract and then that'll help some of the new crop because we'll have to see Acres, the competition for the acres continue going forward and I think you can get a little bit of a better new crop price, but we're just lacking an immediate bullish story at the moment.

Naomi Blohm

But the report at least helped us to not fall apart.

Paul Yeager

I think, Naomi, I shouldn't read the question ahead of time because she's going to we're going to read the question now that came in. Let's do Husker and Nebraska. And this is the question that I think many of you have had is why price or sell anything new crop in 23 related until harvest it's worked in 2020 122.

Paul Yeager

My neighbor with no plan has sold a great price as Matt. Plus we have new soybean crush plants coming online and that will affect domestic demand. Is Husker right?

Matthew Bennett

That's a wonderful question. It's something that we all struggle with, quite frankly, is, as you know, what I've done over the last couple, three years, you know, has it worked? So I'm going to do what someone else said worked for them. First of all, I hope his neighbor is being honest with him, because lots of times what they are this, they're not they're not honest.

Matthew Bennett

But here's what they tell you. Why why would I want to do something ahead of time like lock in? A worst case scenario is the way that I put it. And here's why. What if you plant 91 million acres? Paul? You know, and what if you hold demand constant from one marketing year to the next? Then her trend line yield gives you a two, two or two, three.

Matthew Bennett

And if you sit here with a I don't think that we can't raise a 180 plus crop this year if the environment calls for it. The genetics are there. We have the ability to do so. People didn't cut corners with the money in their pocket that they had this year. They needed the write off. They paid for the fertilizer.

Matthew Bennett

And so the bottom line is we're set up to have a really good year, especially if Mother Nature cooperates. So why would I do something a little different this year? There's nothing that says that you can't lock in the worst case scenario and participate to the upside. That's what a lot of these strategies and tools are that we tried to put together.

Paul Yeager

You almost said a men there, I think preach brother.

Naomi Blohm

No, I said where I wanted to build on what he said because now you lost my train of thought, Paul.

Paul Yeager

Sorry, I got you.

Naomi Blohm

No, it's okay. It's okay. I think my point was just more that going forward we have, you know, just these potential for bigger acres. We have the potential for a fantastic yield. And so the underlying question I think of that is what are the odds of $8 corn again? And so what's different this year is that the dollar is higher than it was a year ago.

Naomi Blohm

What's different this year is that so far the Brazil while there is good and that's different than last year the war element is gone. We have higher interest rates. So all of those extra little friendly things that were there last year, they're not there right now. So that's another reason why. Right. What worked last year isn't necessarily going to work this coming.

Matthew Bennett

Year and I'll continue or is going to keep building here. Okay. But the thing is that you've lost demand. Oh, okay. So what what did high prices do you. We want seven, $8 corn. Right. I always tell people, be careful what you wish for because a lot of us would maybe do a little bit better with five, five, 50, even four, 50 at times with input costs where they were at the time then to raise up to $7.

Matthew Bennett

Because we all know that the fertilizer prices this last fall for most of us were significantly higher than what they are today. Okay. So the bottom line is we've lost some demand because high price of corn did what it was supposed to do. And so moving forward, you can't expect that demand to just magically return. It's not going to happen overnight.

Matthew Bennett

And so I've got to be really cautious. You look at the last three times these last three rally, so oh eight, 12 and 22, look at what happened in 2009. Look at what happened in 2013. Ask yourself if the same type of pattern happens that you saw. Those two years happens in 23, what are you going to do?

Matthew Bennett

I mean, you at least have a have a plan for it.

Paul Yeager

So we joke about I shouldn't joke. Last week on the show, Marc Gold said, I think we're headed lower. I don't see a reason that we go much higher than we are sell now don't store anything given the the 89 points that you have talked about in the last year that you've been on the show of these things all align and a lot of them align.

Paul Yeager

You're already you've already ticked off, I think for you've pulled them back off the list. So was this rally in the last two days a sugar high that we're going to fall off of.

Naomi Blohm

But pay attention to the seasonals and we still have the South American weather to continue to get through and we still have to make sure that these acres get in the ground. So the reality is if the seasonals can continue to work, as they've been working quite well. So soy acres, soy prices and corn prices have a tendency to peak.

Naomi Blohm

Right. At that February USDA report last year, they hit all of their upside technical objectives right into that report. And the only reason that we rallied after that was because of the war. So normally you'll see firmer prices in February and then that's it. Because when we start talking USDA outlook for Forum Happy Acres from here to the Moon and record yield and then prices have a tendency to pull back.

Naomi Blohm

So use the rallies and be more aggressive with the sales.

Paul Yeager

Matt, what's your headline off of the soybean section of the report?

Matthew Bennett

I mean, ultimately, okay, yield comes down, acreage comes down. You lost a little bit on exports, but the carry out went from 222 to 10. Okay. So us it wasn't that big of a deal. But I tell you what, whenever you lower Argentina down to 45 and a half, it gets lowered down. And then you take a look at the world balance sheet.

Matthew Bennett

You're still building stocks year on year. And so you got to ask yourself, we the rally's been profound right over the last few weeks. It was a soybean meal led rally based on the fact Argentina was dry. But if you look at South American production as a whole, it's going to be up very likely that it's going to be up as a whole.

Matthew Bennett

And so if I'm holding on to beans or if I'm trying to figure out what to do with the new crop beans, I've got to understand that typically whenever we're building world stocks, we're not necessarily going to see a big rally from there. And so I think the reports biggest news is that world stocks are growing at a time when the headlines have been all about an Argentine drought.

Paul Yeager

Do you buy that stocks is more of a driver right now.

Naomi Blohm

It's keeping us supported. Overall, I feel that the market, you know, we're in this really lovely uptrend and channel for the soybean prices. I feel that we're going to be able to go back and test the summer highs. We're actually only like 30 or $0.40 from that. When you look at what the March contract had for summer highs and that's going to be your point to be making the sales.

Naomi Blohm

Circling back to that soy meal or the soy processing question, I look back at USDA reports all the way back to May, and the USDA has not put in New demand for these upcoming crush plants. And granted, they're going to take 2 to 3 years to come on board. But if you do the math, slow math, conservative math, it should increase demand for the crush by 200 million bushels a year.

Naomi Blohm

That's just between now and then if everything comes online. So be 200 million this upcoming year, another 200 million after that, another 200 million after that if they all come on line. So then we will need to see additional acres. But I feel that we are going to keep our export numbers on the more conservative side because of what Brazil has the ability to do.

Naomi Blohm

So we'll see increased demand for crush. But I think that our export numbers are going to stay a little bit more modest, 2 billion bushel mark. But the USDA has not accounted for the increased of crush demand yet. And so that's what I want to wait when they get to their USDA outlook form in February, I want to see them talk about that.

Naomi Blohm

I want to see how they're going to account for that. And I want to see then because the soybean market will need more acres because of that.

Paul Yeager

Right. And that's been talked about. But I guess, is that one of those you it's not a pie in the sky thing. You got to do a whole lot of work to get a plan on line. So if we know that the plant is under construction, we should figure that those things are coming. So I guess, Matt, you get to answer this question that is a little bit of a tie out of what Naomi was kind of around.

Paul Yeager

And I probably should have asked this in corn, but it still applies. And beans can't. This is from Steve in South Dakota. Can U.S. producers handle pre-COVID pre Ukrainian war grain price levels, or did we just run up our tab with wishful thinking, assuming these high prices are here to stay? And the reason I ask that, are these soybean prices here to stay?

Paul Yeager

You get the sugar question now, are we just slipping up for something lower? Okay.

Matthew Bennett

So as of the calendar turn, July beans were the highest that they'd ever been as of June one. By buck 51 a bushel. Okay. And so at that point, you know, and to go back to what you were saying about Mark, a lot of what Mark said last week made a whole lot of sense. He didn't know what the report was going to say.

Matthew Bennett

But the bottom line is, how bullish do you want to be at $15 beans? So you got to ask yourself, okay, what am I willing to risk here? Because a lot of times that extra 20, 30, $0.40 can cost us two bucks because it's so hard when the market turns to get ourselves away from the idea that, oh, it's going to go back and visit highs.

Matthew Bennett

And so soybean prices here to stay at these levels. I think right now we've got some support, no question. But if you would, turn off wetter in areas of Brazil that are that are dry, we've got a few, but mostly southern Brazil and Argentina. I would not want to be in a situation where I had a ton of risk to the downside because as a producer, I feel like you could be sitting around a couple, three months from now saying why and what was wrong with $15 means what was wrong with $7 corn.

Matthew Bennett

And so I don't think they're here to stay for perpetuity by any stretch of the imagination. And I would much rather quantify my situation if I really want to see the upside, put a floor under the thing, let the upside run if he gets an opportunity. But don't just sit here and do nothing just because you think that whatever someone told you, they think beans are going to 16 bucks.

Paul Yeager

Or your neighbor had success doing something.

Naomi Blohm

Else. Yeah I agree. Store and ignore. I just really still strongly feel is not the theme for this year and take advantage of the rallies and assume that the weather is going to improve. I mean, we're already seeing that weather patterns different. The the weather pattern for South America. There are thinking that it's going to be improving starting in February.

Naomi Blohm

The question is, is it going to be anything helpful to that Argentina crop or not? And so I just if it was mine, I would absolutely any rally we see into the February winter rally, I would be making all crop sales in new crop sales without question.

Paul Yeager

Okay. Matt, we talked a little bit about some acreage. We have a bit better acreage reports coming on in the sense of cotton. We've been rangebound here. There's been a couple of breakouts and then this week hit and we are wondering, are we buying acres at this point?

Matthew Bennett

I don't think so. I mean, we've got some work to do if we're going to buy acres at anything in the eighties. To me, is is it's tough to get somewhat, especially after triple digit cotton this past year. So I'm not so sure you're buying any acres there. I think it's going to be tough. And so, you know, you've got 50 well, $14 level beans, you know, for November, obviously.

Matthew Bennett

And in some areas of the delta, that's what you're going to substitute. You know, corn prices obviously in, for instance, Texas and parts of Kansas basis has just been incredible. I still think those folks are going to go towards corn. You mean you can sit here and talk about $6 days corn all day long. But when someone had $2 over a buck 90 over this past fall, do the math, that's eight bucks.

Matthew Bennett

And so, you know, I think Cotton's probably got some work to do to buy Acres.

Naomi Blohm

Yeah. You know, prior to the report for Cotton, I really thought that Cotton needed to buy 2 million more acres because the earnings stocks were so tight. But with the way that the USDA increased the ending stocks for cotton on this report and now I think cotton only would maybe need to buy 1 million more acres than last year in order to get the earnings stocks to just be at a comfortable level.

Naomi Blohm

I disagree with the USDA that they think U.S. consumption, global consumption is going to be down because China is opening up again. And people here in this country still have jobs. They might not buy as much as they were, but I'm going to be shopping. And so and I think a lot of people in this country still are going to be shopping.

Naomi Blohm

So I feel that the demand is going to be there a little bit more than what they think it's going to be. Again, especially with China opening.

Paul Yeager

We're still buying beef, too.

Naomi Blohm

Oh, yeah, we're buying beef.

Paul Yeager

I mean, absolutely cash business, though, a little slower this week in the live cattle market, but consumers still appears to be buying beef.

Naomi Blohm

Yep, domestic demand continues to be strong. Our export market, fantastic weekly export, the sales this week, 14,000 tons, I think is what I saw, which was the best I'd been in a couple of months. So the demand is there. We're getting up to some higher prices, low demand's there.

Matthew Bennett

And also supply is is not there like it was before. And so, you know, highest cow slaughter you'd had since 1984 in the in the year of 2022. I mean, that's kind of a big deal. I mean, you look at this cattle herd inventory is just not what it was a year ago. And this is at a time when people still feel like they can pay for, you know, beef.

Matthew Bennett

We know consumer sentiment maybe as a has got a little bit of a shine off of it, you know, with interest rates. We understand that. But at the same time, it sure seems to me people want to eat beef still, demand's been strong and whenever supplies where it is. I've told you, Paul, in the last few times that I'm fairly friendly to fed cattle and I think of the equities market holds intact.

Matthew Bennett

Yes, prices are already fairly high, but I think in the third and fourth quarter in the futures markets. So it could happen before I still look for, you know, maybe even on the board of 175 type price for fats. I think it's possible.

Paul Yeager

Oh.

Naomi Blohm

Yeah. And there's a January 31st cattle report coming up with the big cattle inventory numbers. So that'll be really important to watch in terms of what are we actually doing to potentially have replacements down the road. So that'll tell.

Paul Yeager

Us which gets us to live cattle or to feeders here a little bit. Naomi, is. So you're saying that's a factor? Not as much of a factor tied to the grain price, the feed price right now?

Naomi Blohm

Well, it's all of a moving component. So feeder cattle fell below support today. 184 had been support and that went below there. I think part of it was more of a technical move. Plus the fact that corn did not fall apart made the cattle feeder cattle market just have a pullback. It still is on an uptrend. On the big picture.

Naomi Blohm

It just broke that short term upward channel line. But I feel that there's no feeders out there. So there's still is it's a friendly marketplace.

Paul Yeager

Are there hogs out there and are they they're cheaper right now.

Matthew Bennett

They're cheaper right now. But a lot of this has to do with, okay, is China going to reopen? Is demand going to be as strong as we once thought that it would be? And I happen to think that it will, but they've been pretty darn cheap. I'm still friendly protein overall. I feel like maybe they've gone down enough for now.

Matthew Bennett

But still the triple digit hogs that you see on further out. I have a hard time getting your front months anywhere near that. So the market where it's at, I don't have a big issue there.

Paul Yeager

Any issue on.

Naomi Blohm

Hogs is down near the October lows. So near the 77 level. I feel like we're going to see recovery bounce to about 84, 85. If you were looking to do a spec trade this upcoming week, I'd be jumping into hogs for just a short term correction higher, but we don't have any friendly news. That's just the reality right now.

Naomi Blohm

Our exports sales continue to be slow, so we've got to get some friendly do somehow, somewhere, you.

Paul Yeager

Know, we also have to get in our goodbyes. Goodbye, Naomi. Thank you. Thank you, Matt. Thanks, Paul. Appreciate it. We are going to put a pause on this analysis and continue our discussion about these markets and more in Marketplus. You can find those segments on our website of market to market dot org. All of these resources mentioned are free.

Paul Yeager

We have three podcast the drop each week the market analysis which basically you've just heard the market plus which we're about to record and the MTOM show. Subscribe today where you get your podcasts. Next week, we look at how solar is adding to the bottom line on the farm. Thank you so much for watching and have a great week.

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