Market Plus with Naomi Blohm

Paul Yeager Welcome into the Friday, May 12, 2023 installment Market Plus. Joining us again, Naomi Blohm, who if you caught the end of the show and saw her shoulders drop as the relaxation came from everything that you had put in.

Paul Yeager I'm holding her notebook hostage in case she needs notes, but she doesn't. How do you keep that in, though? Seriously? Doesn't incredible job that you did this week. I mean, you were nervous.

Naomi Blohm Yes. Why? Well, there was so much information that came out today just between the USDA report, old crop, new crop and then so many new pieces of global news and global weather. And I always try to be as succinct as possible. I'm I'm 45 years old and practice in front of a mirror. So any kids or teachers who are saying to their FFA kids practice in front of a mirror.

Naomi Blohm I still do it as an adult. So. Well, thank you for the compliment. Okay. Appreciate it.

Paul Yeager So of all those stories that you talked about, let's I guess wheat was the one that took up the biggest amount of time. What's the biggest story of the week?

Naomi Blohm And it is hard to pick one. I think the geopolitical stuff happening behind the scenes that the China and the US were talking was a big deal. I think this election in Turkey on Sunday is going to be a big deal because Putin is going to use that to his advantage. Whatever happens, he'll have a way to play it. Next week at the G7 summit.

Naomi Blohm So they're going to try to probably do some more sanctions towards Putin. And and the USDA report, you know, just ultimately ending stocks for corn, beans and wait for old crop are tight. You know, I know we knew that for the ending stocks, for corn, that they were going to make that number bigger because our exports had suffered, but it wasn't been priced into the market already.

Naomi Blohm And now we have all these geopolitical issues coming in and weather issues coming in. I did not really realize the extent of what El Nino does for Asia, and that was something new that I learned this week too. And so then I got, you know, doing deeper research and reminded myself how much wheat is grown in all of those parts of the world.

Naomi Blohm And so this weather thing is going to be a big deal, all of it.

Paul Yeager We didn't get any questions this week about why is all this dryness in Kansas and Oklahoma and Texas not impacting the wheat market more? Well, it rained just a tiny bit too little, too late, although wheat, that crop that never dies, but it's in trouble. You said the market finally is realizing how dry or how bad it is.

Paul Yeager And domestically.

Naomi Blohm Yeah. So the wheat market, the Kansas wheat is about a dollar off of its lows. So the the Chicago market is still kind of lagging. But that Kansas wheat market took off. And again, during early trade today, it was up $0.50 because of the news was friendlier than, you know, what they were thinking. The crop tour in Kansas starts Monday.

Naomi Blohm That's going to really show what the recent rain has done. If it's fixed anything from most of my clients in Kansas, they said that it's not going to help the crop, but it's nice to get the rain and just recharge the soil moisture in case they want to plant something else.

Paul Yeager Pastures. Pastures absolutely need a huge thing of that. And in Kansas and Oklahoma, drought monitor did improve slightly, but it's still going to take a lot more to get rid of it. Dairy is something we kind of flew through. Not a lot happening. Or is there?

Naomi Blohm It's kind of repeat the same story. Production is big. Domestic demand is kind of the same. The export market is doing fantastic. So last year was a record year for dairy exports. This year is only behind by just a little bit. So we have sufficient sufficient production of milk. And then the recent activity in class three milk just depends on what the daily spot cheese values have been doing.

Naomi Blohm Earlier this week we saw a spot cheese go higher and then at the end part of the week, everything fell apart to 18 month lows. And that's why we had June milk go under $17. The deferred contracts, those still hanging in there near $19. It's kind of a little bit of an equilibrium. The class three milk has been an overall kind of a downtrend for about four months, which makes sense because production continues to grow.

Naomi Blohm So this time of year, there's usually some sort of a seasonal market rally for milk. But we need a catalyst. We need something to get it going. I don't know whether it's going to be, but it's kind of on the same story.

Paul Yeager Cotton has been on that downward trend, then Sideways.

Naomi Blohm Mm hmm.

Paul Yeager Is it turning higher?

Naomi Blohm I think I finally might be pushing higher. I looked at that chart pretty extensively today between the July and the summer them and trading pretty similar price levels. If you really look at the big picture, it's it's a sideways market but it had you know days or is trending lower than higher. The USDA report today it was on the friendlier side for cotton and our exports there, the lowest in about five years.

Naomi Blohm But we are ahead of USDA projections overall. So the export market is picking up. And I found out this week, too, that the Chinese crop did not have a great start. They had such a cold beginning and and some cold weather. Also, one guy said it's going to be down about 15% from a year ago. So, again, China dealing with more weather issues might be why they're starting to have more conversations with different countries of the world and just extending their web right of where they can buy commodities.

Naomi Blohm I think they are just aware.

Paul Yeager Hedging a little.

Naomi Blohm Absolutely. Yeah.

Paul Yeager Yeah. Different sources. Okay, Great questions. This week. I have to apologize. Doug in Michigan, I didn't necessarily steal your question. I just use the majority of it in the analysis segment. Sorry. Let's go. Paul in Minnesota, he had two good questions. We split them into two. Let's do the first one. How high, Naomi, will interest rates go and how low will land go in the next 12, 24 to 36 months?

Paul Yeager Currently, interest 5.08 is the benchmark. Last week was our 10th consecutive increase in interest rates and it's the highest we've been since September of ‘07.

Naomi Blohm The Fed has said that they're going to put a pause on it now, so we'll see if that happens because now at least we have CPI or the inflation has come down and that's around 5%. So I'm hoping that they do the pause to actually let the market take a breath and see what's happening and what is actual any new construction going on, what is the consumer doing?

Naomi Blohm Are they buying cars or not? Are they you know, what is their demand doing? So I don't know if it's going to go a lot higher or not. My best guess is that it goes nowhere for maybe three or four months until we get a feel for what the economy is doing. I hope to gosh, it does not go higher.

Naomi Blohm I think just that would be devastating for the big picture. But I'm also hoping the economy doesn't have any huge crash and then they try to fix it quick by bringing it all back down too quickly, too. So that's I think the smartest thing would be to just do nothing. Yeah. And just wait and see. That would be that would be, I think, the best thing.

Naomi Blohm And as far as land prices, I mean, overall land prices are going to just continue to trend higher. We know that to be true. I don't know, probably is just different depending on where people live as far as when it happens in the short term. So definitely not my forte. Sorry, I can't answer that question. Anybody.

Paul Yeager How about how about this one from Paul? Will we see $4 corn and $10 soybeans before the end of the year?

Naomi Blohm Well, obviously, that's up to Mother Nature. So if we end up having a absolutely perfect crop here, if we have those record yields like the USDA called for today, if there is no other issues in Asia like we talked about on the show, if it's perfect, perfect, perfect. Yeah. You're going to have $4 corn at harvest and you'll have $10 beans at harvest.

Naomi Blohm But there's definitely going to be some ebbs and flows along the way and any time it's on the higher side, make sure you're making the cash sales. So the overall trend is starting to move lower with all of these things and take advantage for this year and next year. And, you know, and I remember when Matt and I were on the show in January, we both in January said make cash sales for this year and next year, and those are your best prices of the year.

Naomi Blohm Nobody wanted to do it because it was.

Paul Yeager It had been higher all the time.

Naomi Blohm Right? Understandable. Understandable. That's human nature, you know, But that's marketing where what works one year doesn't necessarily work the next. And so you always have to be ready for anything. But ultimately, Mother Nature, It's up to her. That's where it's at.

Paul Yeager Okay. This one I don't think is Mother Nature, but Robert in Minnesota wants to know, could the hog market turn into 1998, in the fourth quarter with plant shutdowns, talks about Prop 12. But there is this discussion about sow reductions, plant shutdowns.

Naomi Blohm So in ‘98, prices got down into the low twenties, that was horrible. Um, so my we had friends in college who were dealing with that and that was really devastating to hear their stories. And I hope it doesn't happen. You know, there's, there's just so much, you know, when we had COVID prices got down into the forties and I don't think we we have a full understanding of, you know, what this prop trial was going to do for the American farmer yet.

Naomi Blohm And I think that is why the hog market the last two days just kind of sat there and waited. So I don't know is the answer.

Paul Yeager Okay, fair enough. Let's do one more on impacting of strange, more speculative markets. Neil in Ohio What impact will these biodiesel plants coming online have on our soybean market and how soon will these plants start producing? Can we overcome the lack of Chinese soybean imports with more usage by these plants?

Naomi Blohm The biodiesel story is absolutely friendly and the renewables is friendly. If they all come online like they're supposed to, the thought is that the U.S. is going to need 10 million more acres of soybeans in the next five or six years if they all come online. And so we won't be exporting soybeans as much. We would be exporting the meal.

Naomi Blohm We, of course, would be using the oil. So we would be, I think, overall less of a soybean exporter. That's where Brazil is going to pick up the slack. But we'll be a major soybean meal exporter. I think that would be the reality. So it's a friendly story for the soybeans. That's good news.

Paul Yeager All right. Let's finish with Jake in Indiana, who will hopefully, by the time he sees this, will have gotten closer to being done planting. But he says historically, June is always a bad month for cattle that seem to be sideways right now. Are we staring at a cliff or a rocket ship ala 2014?

Naomi Blohm I think it's neither. I think we'll be trying walking at a sideways plateau for a little bit because there's there's too many factors at play. You know, he's right. Seasonally, things do usually start to work lower, but we still are in a situation where we are tight on supplies. And so far, demand is keeping up. So that's a little bit of a different tell for now.

Naomi Blohm I think sideways, that's my best guess.

Paul Yeager Well, looking at that cattle market, we were looking at the feeder market and just how high it is. Historical. At some point these have to just technically retreat.

Naomi Blohm Well, while we had a nice correction actually, and talking to my guys, the demand for feeders is strong. It's getting stronger. I think pasture conditions improving, of course, for some places and it is encouraging. We'll find out over the next couple of months for sure. And a lot of it depends on feed and pasture conditions. That's the biggest thing right now.

Naomi Blohm Demand has been okay.

Paul Yeager Thank you, Naomi Bloom. Appreciate it. All right. Great insight as well. Next week, we are going to look at how the new farm bill may affect industries that sprouted from hemp farming. And we're also going to have the analysis of John Roach. Thank you for joining us and have a great week.