Market Analysis with Naomi Blohm

Yeager:  USDA’s Monday report hung over the market for much of the week with the stocks and carryout numbers remaining high.

For the week …

The nearby wheat contract lost 13 cents and the September corn contract fell 6 cents. 

One million soybean acres were added by USDA keeping the soy complex lower.

The September soybean contract cut 50 cents while September meal dropped $8.30 per ton.

December cotton declined $1.10 per hundredweight. 

Over in the dairy parlor, September Class Three milk futures surged $1.22.

The livestock market was mixed. October cattle shed $2.85. September feeders fell $2.10 and the October lean hog contract improved $1.10. 

In the currency markets, the US dollar index lost 57 ticks. 

September crude oil improved 19 cents per barrel. 

COMEX gold gained $69.90 per ounce, and the Goldman Sachs Commodity Index was up a half point, to settle at 541 - even.

Joining us now is one of our regular market analysts Naomi Blohm.  Good to see ya.

Naomi Blohm: It's good to be here.

Paul Yeager: Last week wheat was the story that had positivity to it. This week it fell like everything else. Why?

Naomi Blohm: Well, what happened with wheat was more in line with the Egypt tender from last week. So everyone was excited about that. That was a significant purchase from Egypt. The question was, are they trying to secure a 3.8 million metric tons from now through spring because they're worried about supply, or is it because they're worried about the geopolitical drama? And the whole tender fizzled out. So there were plenty of offers that came through. But with the offers that came through, Egypt was asking to have financing help with it. And so they didn't they didn't like the prices that came with the financing help. And so they actually only purchased or agreed to a small portion of their needs. So then it was, well, okay, we were hoping for a big demand push and it just didn't happen. The USDA report, though, that came out this week, was supportive of we had, lower production than what was expected because of the lower harvested acres overall for all U.S. wheat. And I think the biggest piece of that report is that global ending stocks for wheat continue to trend lower. And so this is maybe the fourth year in a row that global ending stocks for wheat are trending lower. And that in and of itself should be setting off alarms. But for whatever reason, the world is thinking that of the places that grow wheat, everyone has just enough to get us by until we don't. So I'm really keeping an eye on wheat. I think that one might be the marketplace that all of a sudden can come to life. such good value right now at this 550 level for the December Chicago futures. and then of course, with all the still shenanigans, yet with Ukraine and Russia and it's not over yet.

Paul Yeager: Well, that's a place where we it's fallen out of the headlines a little bit. And then when we see news reemerge, we just kind of shrug our shoulders. But it's still a very serious, tenuous situation. But the market doesn't seem to think so. Is the market just immune to any news from there right now?

Naomi Blohm: It does seem to be immune to the news, and I don't quite understand why. So I think it'll be when we start to have maybe other countries show signs of struggle in terms of production. We're seeing the Argentina crop now a little bit smaller. and we know that things around the world aren't perfect. There's quality issues with the wheat and France. So there's I mean, there's a lot of issues that are out there. We test the market that I think is like I said, it's going to eventually it's going to just start to percolate. It's probably going to time out with the seasonals. So it'll take until mid to late September. But I think once it gets the fire lit under it, that wheat market is going to rally.

Paul Yeager: So you found sunshine somewhere. Unfortunately it's not in the next two corn. you mentioned stocks as a lower thing in wheat. It's not the issue in corn. It's the opposite. Right? That's going to hang on us for quite a while. I think you said this week. Is there anything that can chew through this pile?

Naomi Blohm: so corn the issue. Right. 2 billion bushel carry out. That was again confirmed on the USDA report. But the good news was that the report wasn't as bearish as what people were thinking. So they raised the yield. They lowered the harvest in acres by about 700,000. But the end result another year with 2 billion bushel carryout 2 billion bushel carryout justifies $4 corn. But the hope is that we're going to see demand start to pick up here soon. I think the reality, though, the situation is that because of the grain that still is in farmers beans, that needs to come to town, yet we're not going to see the harvest low come maybe as soon as what we're hoping for. To me it feels like with December corn futures staying below the $4 area, it might move down towards 375. We're going to get through, September 1st notice day for the September grain contracts. And then there's a lot of basis contracts where if people are going to have to be bringing the grain to town, price it or roll it. And so we'll get through that in the next couple of weeks. And then as we go into the month of September, then I'm really going to be looking for signs of a technical bottom of a seasonal bottom. And when corn gets that cheap, then I think we're going to see the end users really come in and buy as much as they can because of the value that's there.

Paul Yeager: Last year I think we had an early harvest low. You're not, I don't hear that's what you're saying right now. So let's speak about harvest, this new crop situation at the Iowa State Fair this week. Oh, I had a couple of farmers tell me, yeah, we're here in 300 bushels to the acre. We could be setting a ridiculously large crop. What's that going to do to new crop sales?

Naomi Blohm: Well, that's what we're also waiting to find out. So we have to. There's all the crop grain that has to come to town. There is going to be a crop tour next week, so we'll see what that has to say. But the biggest thing is that we're not hearing farmers complain about what's growing in the field. So that usually tells us that things are alright. So but again, once we get out there, once we know what's in those fields and confirm it's as big as what we're thinking, once we get that harvest going, there's going to be tremendous value for end users to come in and buy a portion of it. I think with as much global turmoil as is what's still out there and our U.S. election coming up, global end users are going to say, you know what? This is good value. I better show up and I better buy something just in case things get a little shaky in the world. So I really feel we're going to see the export markets pick up. And I really strongly feel that when we see that harvest low occur. And again, I'm looking for it sometime mid to late September. Then if you had been making any cash sales recently, that's going to be a really good re ownership opportunity. But I don't think we're at the low quite yet.

Paul Yeager: In beans I've put it off long enough. This is a tough week. Any sign of positivity there?

Naomi Blohm: Unfortunately no. So the reality is that we have 560 million bushel carryout. That was more than what traders were looking for. And with that, that is the most we've had in six years. And so with corn or with soybean prices breaking below $10 and then going down to the 950 area November beans to me on a chart look like they're potentially ready to go one leg lower to $9. But then that's when China's going to show up because that's tremendous value. Our export sales to China overall right now are about 1 million metric tons. Last year we were just over 4 million metric tons. So they're watching the charts, too. They're watching the seasonality of this. They're waiting for one more price cut lower. And then I think they're going to show up in a big way and purchase their needs.

Paul Yeager: So if you can hold out.

Naomi Blohm: Well, I would say this. There's a lot of producers, you know, who are going to be needing to sell it at harvest here. So I think it's going to get worse. But when it comes back for the price rally later, you know, it maybe only comes back to where we are now potentially a little higher because we are still dealing with 560 million bushel carryout. It's going to take a weather issue in South America come December January to really get the market excited.

Paul Yeager: Spark in the dairy market this week. Is that a long lasting spark?

Naomi Blohm: It was a wonderful spark. And it's all about the cheese. So cheese demand is strong. Our export market has been so solid. Our cheese supplies are down from a year ago levels. So the cheese price gained over $0.30 just in ten trading sessions. And that's what pushed class three milk prices higher up to the $22 area. I would say on this price spike higher, it would be a great opportunity to be locking in some sales because of the value that's there. And we do have a milk production report next week, Wednesday. So the milk production reports prior to this have been showing less and less and less production. That's been supportive to prices. But now that we've had cooler temperatures in the Midwest, we have cheap feed. It is kind of a formula for production maybe to start to increase for the milk. So I would say take advantage of the opportunity that is there.

Paul Yeager: Live cattle - good exports. Is that a sign of a peak or something else?

Naomi Blohm: I think the exports picked up because the cattle price went on sale. So we had that big sell off, and that's what pushed that export market higher. USDA is looking for export demand to just hold steady and increase into the end of the year. but overall, the technical damage has been done, and we've played the record of low supplies for a while. So it doesn't mean that cattle prices are just going to crash and fall lower from here. But we've run out of a friendly storyline to get it to really rally significantly. So I feel that any bounces that we see for pricing is an opportunity to be making some sales, buying some puts, because I feel like the friendly story is kind of been played and long term technical support levels on charts have been broken. So from a technical perspective, it looks weaker and the funds are starting to exit those positions as well. So I would get defensive with the cattle market.

Paul Yeager: How about on hogs. You going offensive there yet. Or you

Naomi Blohm: Although the hogs are just kind of been in a sideways trading range, a kind of a bigger one. But they're in kind of a lull for news. So the export news has been kind of stagnant. Our production numbers haven't done too much for changing. So I feel like we're going to see more of a sideways trading pattern for the hog market. I don't think it's going to be anything horrible for prices from here, but it's going to take some kind of a big new demand catalyst to get prices to rally. So, probably a quiet market compared to all of the protein complex. The hogs are going to be maybe quiet for a little while.

Paul Yeager: Well, I'll tell you what. We have an incredible amount of questions. We're going to get to a marketplace and it covers a big gamut. So thank you. And we'll pause it for right now. Thanks, Naomi.

Naomi Blohm: Thank you.

Paul Yeager: All right. Naomi Blohm. And we do continue this discussion -  because that was analysis. Then we're going to go to Market Plus. And that segment you can find both analysis and plus on our website of Market to market.org. We spent some time at the Iowa State Fair this week kicking off our 50th season. We recorded two new episodes of the MTOM podcast and will be releasing those each of the next two Tuesdays.

Next week, we’ll take a look at clothing manufacturers in rural America surviving while others have unraveled.. 

Thank you so much for watching. Have a great week.

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