Market Plus with Naomi Blohm and Matt Bennett

Paul Yeager

This is the Friday, January 13, 2023 installment of Market Plus. John is now joining us again and continuing to put up with ridiculous questions. Naomi Blohm and Matthew Bennett. Naomi, I do apologize during the show, but I'm not trying to make light of anything. I didn't try to make you laugh. I'm not. But I'm sorry I threw you off.

Naomi Blohm

That's great. I love your humor. All good.

Paul Yeager

That's the only time - can we put that on loop over and over again that somebody actually likes my humor. Okay, Matt, we had a question I asked you about acreage and cotton. I had somebody send me a note this week that was just kind of, like mysterious, isn't it? How do we lose 1.6 million acres in the revision on corn?

Paul Yeager

Why is it there always seems to be heavy thumbs, omissions, additions, subtractions of millions of things in these reports?

Matthew Bennett

I think that those acres were probably silage acres. That's what most of us feel. Okay. But the thing for me is with the FSA data, with all of our technology, I feel pretty confident that we knew in October, in November, where acreage was better than a 1.6 million acre mess. And so I was shocked, quite frankly, once again, I mean, you see a yield increase, if that's the only thing you saw on Thursday, and then you see corn's up.

Matthew Bennett

You're going to be like, what the heck, you know? But if you see that and let's say the second thing you look at is demand's down, you're going to be like, what in the world just happened here? Well, acreage, I mean, big drop in acreage. I'm surprised, quite frankly. Am I upset about it? Absolutely not. You know, we still kept the the corn market intact.

Matthew Bennett

And I think it goes without saying that there was a lot of nervous people heading into this report. So it's a gift, I guess. But I thought it was an interesting gift.

Paul Yeager

Did you see it that way?

Naomi Blohm

Well, I'll say it. I'll say it. Go. All right. I think it was all about inflation. I think that the USDA, to your point, likely had an idea of what things actually were like. But we are fighting inflation. So to keep from having food prices go exceedingly higher by reporting that information sooner than later, just kind of, you know, hold it back a little bit.

Naomi Blohm

So the the government, in my opinion, is in a situation where potentially they couldn't give us an overly friendly report. They didn't maybe want to give us friendly information too soon because they didn't want food prices to go higher than they need to because that affects that inflation number. At the same time, you can't give us overly bearish news because if prices drop, that's just going to stimulate demand.

Naomi Blohm

And then ultimately make prices go shooting higher again because of the tight ending stocks situation that we have. So it is what it is and that's all I have to say about that.

Paul Yeager

Okay. CPI this week down November to December 1st drop since May of 2020, a 10th of a percent down I think six and a half percent year over year. There are some factors and indications that maybe inflation is is come under a has finally some steam is coming out of it and then we get to Wednesday and Thursday in the mainstream press and it's all about egg prices.

Paul Yeager

And we had a question, in fact, I'm sorry, Julie, again, you knew I was going to do this. We had a question about the egg industry and the layers, and I guess I'll hear it is it's it's Scott in Iowa. It's number six oh six to help you out there. Scott in Iowa, how do larger laying hen operations, mitigation of avian flus and specifically keeping it contained in their confinement?

Paul Yeager

How's that going? How is it that this egg story we've talked about it here. How does that play into any of this inflation? Because it just seemed like it was a one off this time, just on the egg price in all the main.

Naomi Blohm

Yeah. So that was a theme this week. And then on that report, still like the baker as far as flour things, those are all still higher. Also, I feel that the egg issue is going to resolve itself, especially as food prices come down. They'll correct themselves a little. Right their ship. Egg prices will come down eventually. Egg demand, to me, it's a little bit more constant.

Naomi Blohm

We just have to get through the avian flu issue and I think it'll work itself through pretty quick. I don't what have you heard anything else on that?

Matthew Bennett

Without avian flu? I don't think you'd see any of the spike. I mean, essentially, it's what it boils down to. Yeah. Demand still pretty good. But if you go to the grocery store right now, though, most people, you know, I don't do a whole lot of grocery shopping. But obviously, my wife and I talk about it and it's everything's expensive right now still.

Matthew Bennett

And so maybe inflation's coming under control a bit. But, you know, we've still got a little ways to go. I think the consumers still feel a little bit of a pinch. But with that being said, you know, we talked earlier, the consumer still wants to buy beef. Some of the things that they want to buy, they're going to buy, right.

Paul Yeager

They're buying cheese and milk.

Naomi Blohm

Demand there is okay. Domestic demand for all of the dairy complex right now is just kind of constant. We've had more milk production for the past five months, so that's what's been weighing on milk prices. And then in turn, that milk has become more cheese and so there is more cheese supply out there. So that is why the milk prices come down like what it has.

Naomi Blohm

But the demand is constant and our actual export demand has been still phenomenal for all. Dairy exports up nearly 10% year over year. Butter leads the way over like 100% of year ago levels. Whey is strong cheese. It's all there for the export demand. We just have a little bit of extra production coming from milk. We've got more cows right now and they are doing a great job of production per cow.

Naomi Blohm

So $18 should be support for milk prices for now. But we have a milk production report coming up in a couple of weeks and that'll be the next telltale for new price direction.

Paul Yeager

All right. Now we're going to get to some of your questions. Thank you. For those that submitted via Facebook and Twitter, Matt, you get the first one officially since I went way out of order. Of course. Steve in South Dakota wants to know, he says hedging corn and soybean future prices. Are you hedging corn and soybean price futures out to 2025?

Paul Yeager

He's asking for a friend.

Matthew Bennett

I know, Steve, and he's a good guy. Here's the thing. I don't have a problem stepping in and hedging some and the whole argument over the last year or so, of course, has been with inflation and with fertilizer prices and with the concern, for instance, in Ukraine and Russia, who knows what we're going to be paying for fertilizer.

Matthew Bennett

Right. But my thing is, as we move forward, we know that prices are going to high prices have done their job to an extent and demand's come off a little bit. And we're still looking at this, you know, 545 to 560 type Dec. 24 prices that we've enjoyed here lately. I have no issue stepping in and hedging some.

Matthew Bennett

Now, I've heard some folks talk about being able to write HTAs at fairly decent fees, which I'm surprised with with interest costs going up. I don't know if that's going to be as easy as what you think, but by all means no issue. There with 24. I'd probably try to do with an HDA if I if I can afford to do so.

Matthew Bennett

So if I do the today, I might step in at some point and buy myself some call coverage just in case this thing would take off and go higher.

Paul Yeager

We're going to move a little further from South Dakota to Northwest Iowa, where Mitch wants to know, Naomi, this is a question I actually know. We're going to go to Paul in Illinois. Sorry, I can't read my own handwriting. Naomi, following the report this week, how much risk does corn have between now and spring crop insurance price discovery.

Naomi Blohm

Seasonally, corn works higher until that February USDA report. As you know, the crop insurance number is collected with all that data throughout the month of February. And then we get that magic number at the end of the month. Now, I will say that I feel strongly that the USDA outlook form at the end of February, they're going to say that we're going to have a lot more corn acres.

Naomi Blohm

They're going to start talking about the potential for bigger yield. So I would use any rally that you get over the next a little bit to be making sales for new crop, for old crop, protect the value that's there. Again, going back to what we said on the show, the question is, are we going to see corn and what's it going to take to get there?

Naomi Blohm

And we have really eliminated all of those bullish factors that were apparent last year. So use the rallies and be focusing on the sales.

Paul Yeager

Plus, couldn't you also say it's a cycle thing, too? Not so much all the bullish factors, but on a three year type of a cycle, do you buy into that?

Naomi Blohm

Well, bull markets don't usually last more than two years, but if you look back historically and we're actually a little bit beyond that. So I'm very much aware and mindful of the quickness that prices could fall. And I look back. So 2013, when we actually started to see things fall apart lower, it was in summer. So it was once they knew the crop was in the ground, once they knew that the weather was good enough, boom, dropped like a buck, if not more, just because there was no threat anymore.

Naomi Blohm

So prices maybe overall stay firmer until this crop is in the ground. But this is not the year to be messing around with it. I'm really adamant about that.

Paul Yeager

You don't get to answer that yet because it ties into this question. That's why I'm going to ask you, because I think I know what you're going to say. Mitch in Iowa wants to know what is your strategy from here for those looking to buy corn for their feed operation? Any specific price targets in mind given what she just said?

Matthew Bennett

If I'm looking to buy corn right now, I'm probably going to be a little more hesitant. I don't see a huge sense of urgency. I mean, here's the thing. On the sell side and I don't want that's my answer for what your question is. Yeah, I'm sorry, but I have to go back and just say something because I'm going to reemphasize, I think, something that Naomi would agree with.

Matthew Bennett

And here's here's the thing. I do a lot of profitability analysis for folks. And a lot of these people are anywhere from I'd say the average is maybe five, ten. Okay. Cash price for corn in my neck of the woods right now are going into the report. It was down to like 555. All right. And so there's not a lot there.

Matthew Bennett

Okay. And I feel like whenever we've made so much money in 21 and 22, we think, oh, $0.35 a bushel. That's ridiculous. I'm not settling for that. Well, there's been a lot of years we would have loved to have seen profit margins $0.35 a bushel. So we have to be cautious is to sit here and snub our nose at a good situation just because things have been so good over the last two years.

Paul Yeager

Okay. It has been I mentioned it in the program. I forgot to get it into the analysis. But we talk about South America a lot. But there's a political story going on there as well. William wants to know, is the unrest in Brazil going to affect the soybean price?

Naomi Blohm

I would say based on what I know about it, it would be those things that make for a good storyline and you can get like a bump up in price for a day or two. And I feel based on what I know about the situation right now, that might be about what it's good for. I do not have my hands deep into the understanding politics of what's happening in South America, but again, the simple surface knowledge that I have, that's enough for a day.

Naomi Blohm

Trading bump.

Paul Yeager

We have a couple of of our regular folks that ask us questions, and I appreciate you asking them. But I'm going to let Naomi and Matt get a final comment in because, you know, you're so good. I was just amazed that the questions this week I didn't even get to ask you. What do you want to talk about, Matt?

Paul Yeager

What's the what was on your mind on the drive?

Matthew Bennett

Well, you know, the thing is, is that, again, we've had a couple of really good years, Paul, and I'm a little bit concerned that we can talk about all the things that might drive prices higher. Right? We can talk about all the things that, you know, may be able to keep us in a really profitable situation. But as a producer, you have tools available to you to be able to have your cake and eat it too, so to speak.

Matthew Bennett

And in a lot of times we sit around after the fact and say, Man, what were we thinking? We should have been marketing some whatever, $6 Dec. corn. You know, I know some people right now are going to say I'm not sell anything until we get back to 650. Well, if we don't get back to 650, what's your game plan?

Matthew Bennett

And so for 2023, there's opportunity to have a really good year is still on the table, but I can't guarantee you that the next time I come here that that will be able to be said. And so we let's let's be careful is to make too many assumptions that this economy is just going to be good for perpetuity.

Matthew Bennett

And let's take advantage of the tools that we have to lock in something good and stay flexible doing it.

Paul Yeager

Your final word.

Naomi Blohm

Pay attention to the seasonals. They they really help paint a picture for when you should be making those cash sales. Usually your best times are early February to mid February and then a lot of times it kind of falls apart after that and then you'll get your summer hurrah in some capacity. So use those to your advantage. And I agree with Matt from the standpoint of really you need to understand all of the marketing tools available to with your cash market work, with your elevator's work, with whom you're selling to understand, you know, what they're going to be able to offer to you this year, what the fees are, and also be aware of the

Naomi Blohm

marketing tools with futures options, advanced options strategies. We have a sense of complacency starting to be with some producers and we have a sense of urgency with other producers and the bottom line is that you have to really understand all the tools that are available. You have to I haven't said this in a while, sit down and do the math and know what's going to work for you.

Naomi Blohm

Understand what the rate of return is on these different marketing strategies and and make sure your lender is on board and make sure that your lender understands the strategies as well.

Paul Yeager

Okay. Naomi Bloom, thank you so much. Yeah, thank you. Great to see you. Matt Bennett, good to see you, too.

Matthew Bennett

Good to see you.

Paul Yeager

Thank you both. Appreciate it a bunch.

Matthew Bennett

Better to see Naomi though.

Paul Yeager

I know exactly. And no snowstorm for you to head home in. True, no snow. All right. Well, thank you very much. Next week, we are going to look at how solar is adding to the bottom line on the farm and commodity market analysis with Elaine Kub. Thank you for joining us and have a great week.

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