Market Plus: Naomi Blohm

Market to Market | Extra
May 13, 2022 | 13 min

Naomi Blohm discusses the commodity markets in a special web-only feature.


Yeager: Welcome into the Friday, May 13, 2022 Market Plus. Naomi Blohm is with us. I teased at the end of the program, I want to talk about your drive a little bit. That's the beauty of making the drive. Normally this time of year you might see crop up. You didn't see hardly anything in the field working to get that crop in the field.

Blohm: Yeah, I remember in 2019, so that was the year that we were so delayed and I drove from West Bend to Rockford to the Quad Cities and then over and it was just scary because there was nothing in the ground. So this year wasn't quite that feeling but it was definitely noticeable how far the crop was behind. So in Wisconsin maybe 25% planted and then coming across Northwest Illinois maybe 40% planted. There were tractors in the field working up the ground but I did not see one planter. And then when I came then across Eastern Iowa it was still maybe only 40% planted but I did see five planters in the field. So that is of course as of Thursday because I came over Thursday night. So a lot can happen by Sunday night when they get all the data together for the weekly crop progress report. But I'm like there's going to be no way nationwide we can be more than 50% planted. I would be shocked.

Yeager: But like two weeks ago the whole thought was well we'll get to this week meaning the week we are in now, we're going to catch up.

Blohm: Right, and we're not.

Yeager: I don't think we did. So what does that mean come Monday?

Blohm: Okay, so come Monday if we are less than 50% planted the market is really going to get jittery because this was the end all of all weeks, we needed to be 50% planted by the middle of May or we are in trouble because then we know for sure that yield has a tendency to work lower, which the USDA already accounted for, so they at least were very forthright with that. But again it'll be interesting to see how those northern states can do now. They went from being so dry and now they are just absolutely saturated, places in Wisconsin got two to three inches of rain this week and we had the strong storms that have come through and so you're seeing storm damage, you're seeing the dust bowl that happened just this week in some parts of the Western Plains. And I'm kind of thinking, well maybe it just puts a lot of pressure on the eastern Corn Belt to get it all right for the rest of us because it's struggling and on question it's behind and that does not bode for record yield.

Yeager: So go ahead and tell Glen it's all on him.

Blohm: Yeah, Glen in Ohio.

Yeager: Glen in Ohio, it's all on you. Let's talk wheat. You mentioned the dust bowl. Louise has a question about wheat. This is what I was going to start asking and I got distracted with something shiny. She's asking, how much of the current wheat price is due to the Russia/Ukraine situation?

Blohm: Okay. So, when the wheat market first dealt with the Russian/Ukraine thing we had that push higher which was overdone because some of that was just euphoric buying and then of course we had the big pullback. So right now I think we're in a state of appropriate pricing for understanding where the Ukraine crop is going to be, the USDA cut it by a third for this next coming year, so we've got that on paper now. We know that our crop is not fantastic and that's why with the USDA report this week the fact that they cut next year's ending crop to be smaller than this year's ending stocks is a huge flag of we're in trouble. So the marketplace I think right now has quantified what has happened with Ukraine. But now we're going to see if we don't get our crop planted here for the spring wheat crop or if our winter wheat crop yields end up becoming smaller the wheat price has every reason to inch a little bit higher. I could see us retesting the highs from the initial euphoric price rally that we had in February and early March. But I don't think we have a reason to go higher than that. So that would be a point to be focusing on sales and forward contracting if you're comfortable with the value and with what your crop is going to be yielding.

Yeager: So the dry story is one and the war. Let's talk Aaron's question here in Ocheyedan. What is the magic number of prevent plant acres to where it really matters to the trade for additional premium beyond what is baked in?

Blohm: Yeah, so there is hardly any prevent plant acres factored into this marketplace right now. The market was assuming that it was pretty dry going forward, prevent plant wasn't really going to be thought of until just this last week. So now the prevent plant talk is more for, as I said on the show, it's North Dakota, it's Minnesota and now you have something where you need to potentially see that soybean price rally a little higher or maybe even the corn price rally a little higher to make sure that they mud the crop in and that's kind of where we're at. And so we know when you mud the crop in that doesn't yield for record yield either. So prevent plant acres, we can't afford to have any, like anything dramatic, we really can't.

Yeager: Like double digit?

Blohm: That would be horrible. That would be bad.

Yeager: But when you look at the weather maps and the way things have happened, conversations we've had with producers, you've had with producers, it's possible in some of these areas. Our friend Tim in Crookston, Minnesota earlier this week said he hadn't turned a wheel on anything.

Blohm: Right and I have heard that from unfortunately at least five or six clients just in the last week and we needed the United States to have a perfect growing season this year. So the prevent plant acres, it's not priced in yet. That's the answer.

Yeager: All right, fair enough. Let's go to Gary, let's talk about this one. This is an extension really of that first question. Gary is asking via Twitter, how can USDA or anyone ever come up with wheat and corn carryout number when Ukraine has wheat and corn that is out there and destroyed but can't be exported? I'm going to add to this given to what you said just to kind of change it. There was a story I think on Brownfield yesterday, talked about talking to a Ukrainian agricultural emissary saying there's mines in the fields. Do you hear anything like that? Does the market hear anything like that and factor that in? USDA?

Blohm: Yeah, so let me backtrack it a couple of months where the USDA right at the beginning of their WASDE report when you read it when it comes out on their website, they flat out said we understand that the Ukraine situation is ongoing, this is evolving, we're going to be tweaking and massaging essentially what the values are going to be. So for two reports they did not do much action as far as changing Ukraine numbers on paper and so this was the first report that they did that. And also still their first opening line on this month's report talked about how the evolving situation in Ukraine. So we don't know for sure but I do think that now we have enough information to know that for sure they're probably not going to have a quarter to a third of their crop potential and it could be more, it could be that they have even half a crop or if they grow the crop can it get harvested or does Russia come in and steal it and take it for their own? So those are the questions that we don't know yet. But for the purpose of the balance sheets right now what we have is, in my opinion, truly I think just appropriate for this factor and it's going to keep the global prices steady to firm to higher and it just shows more need to have as many acres as we can get. So that's where I think the Ukraine situation is.

Yeager: Let's dip back into livestock a little bit, another question. Matt in Amherst. He says, is the general economy tanking going to take any hope of the beef producer finally getting a win with it? And I'd like to hear your comments on the hay market. He says, corn absolutely kills hay on profitability at the moment, literally.

Blohm: Yeah, so first part of that, so as I've shared on this show before let me take you back to 2014 when I was wrong for six months, this is not a secret. In 2014 we had $100 crude oil for six months, we had fat cattle prices that were between $150 and $170 for six months. And I was so convinced that we were going to lose demand, lose demand, lose demand. And so demand did fall back some but it doesn't stop because there's no substitute for beef. If you're hungry for a burger, you're going to get a burger. When you have your family taco Tuesday or your spaghetti night you're going to get hamburger. You might buy a little bit less than what you were but it doesn't stop. And I think Angie Setzer on the show said it once where she's like, if you're going to go out and celebrate you're still going to get steak. So the demand is going to be there, it's not going to stop, and I have not seen the consumer change too much now. I think if anything changes it would be next year after Christmas when the credit card bills come due, when people then I think realize more of an economic effect, when we potentially see layoffs start to occur, then I think that's when you could see it. But for the rest of this year I think it's good demand.

Yeager: I'm not saying we have to run Aaron's question but I'm just going to ask it. Aaron had another question this week. He's talking about some of the same things, when the bull market is going to end, cattle market, feeders. He says, or will the economy and macrofactors cause the consumer to eat more chicken?

Blohm: There's always that point that the consumer may find a substitute. Do they go to more chicken? Do they go to more pork? Or do they go into seafood? It's not going to be beyond meat, I can tell you that, because it's hard to cook with and it doesn't taste good and I'm going to probably get in trouble for that, but that is my personal opinion.

Yeager: But it's also part of the thing that is grown in those areas that are super wet right now.

Blohm: That's a good point, I didn't think about that either.

Yeager: That is an impact onto that product too that we can grow our way out of this.

Blohm: Yeah, so a lot of things are going to be factored. And so there will be supply and demand fundamentals always work and high prices will cure high prices, as we all know. But I think the U.S. American appetite and your budget and what you want to eat each week is set. So I think that demand is going to stay a little more constant than what people would think.

Yeager: Let's close with your wheelhouse of dairy. Mitch in Hull, I've got to thank Aaron, Mitch, great questions this week, you had so many. Chad, she gave you love on Twitter. We asked your question during the show so I didn't put it on there. But Mitch here, what is your outlook for Class III milk futures for the second half of the year? You kind of talked about we're coming into the seasonality of not as much school demand. What do you see moving forward?

Blohm: And so it's a tug of war and the answer is I don't know because we want to see what we have for milk production numbers, do we see milk production start to increase? What is our export market going to be doing? How does high feed price affect things? And so the flat out answer right now is I don't know. So I would keep an eye on so many moving parts with it.

Yeager: Okay, we don't know a lot of things, crude over $100, the dollar over now 104 is what it closed at on Friday. We have a lot of unknowns. Does that keep you up at night?

Blohm: Well, it definitely can. Back to crude oil though. That market has been starting to break out to the upside and if crude oil works higher a lot of times those commodity prices work higher as well. So that is something to be watching. And the unknowns are unnerving. So you have to go into every day with a balanced view of what can make the market go screaming higher today or what can make it all of a sudden turn around and fall lower and not be complacent with your marketing and then just remember seasonally a lot of times your high price comes mid-to-late June and usually things are done by the 4th of July. So remember that if you have any grain yet that you need to be marketing.

Yeager: Check your calendar.

Blohm: Check your calendar.

Yeager: Naomi Blohm, if you have any updates on Twitter I'm sure you'll post them about the drive home to let us know if people are still planting.

Blohm: You bet.

Yeager: Look forward to it, no pressure. Thanks, Naomi. Next week we're going to look at the work to repel rabies and Matthew Bennett will sit right there and join us to break down the commodity markets. From all of us here at Market to Market, we say thank you for watching and have a great week.

Trading in futures and options involves substantial risk. No warranty is given or implied by Iowa PBS or the analysts who appear on Market to Market. Past performance is not necessarily indicative of future results.

Market to Market is a production of Iowa PBS which is solely responsible for its content.