Market Plus with Naomi Blohm

Paul Yeager: Welcome to the table for the Friday, August 16th, 2024 installment of Market Plus. Joining us again, Naomi Blohm. You took a trip this week across Wisconsin. I took a trip down into Missouri. What I saw, what I've seen in two different trips down there. It's a lot of green. There's a lot of great pastures. A lot of areas look really good - Southern Iowa I talked to a lot of people in Iowa this week at the state fair. They're very bullish on the size of the crop. Are you getting that from your sense of driving this week?

Naomi Blohm: Yeah, absolutely. It looks really fantastic. And so my husband and my son who are, you know, not as tied into agriculture as I am, even commented how great the crop looked. between fond du Lac to Madison, to Platteville and then, you know, of course, later in the week, I went that same route all the way here to Des Moines. And it looks lovely. It is beautiful.

Paul Yeager: Did you bring up the ‘how the crops look’ first or did they.

Naomi Blohm: So actually, Oscar, my son. Yes. He said mom that's beautiful corn. And it's very even and it's very tall. And I said, yes. Yes, Oscar, you're right.

Paul Yeager: Oh, you have to be so happy.

Naomi Blohm: Yeah, I know.

Paul Yeager: I waited a long time. I waited a long time to, before I said, oh, that looks really good. There's a lot there's, they're going to be good hay crop there, wherever it was. So the regular people are talking about how good things look so good or bad on a market.

Naomi Blohm: Well I think it just confirms what the market's already traded. So in a sense it's old news. We know it's a big crop out there. You know in one regards is something really to celebrate. You know we have clients who are in the sense so optimistic and so excited for how big their crop is going to be. It could be a record for their family. And that's exciting. It just stinks that the prices are of course, so low. But that's because we have the perception of plentiful supplies. So, you know, just like 2014 to 2019 when you have big supplies, you have low prices, it's you can't have one without the other.

Paul Yeager: However, there are those who are on the other side of this right now. And that's our first question, Shamus in Iowa, how can the yield get bigger every year when we have the worst weather and no one is spraying bug dope and fungicide? And we have heard this not too terribly far from here in Des Moines, that that's happening.

Naomi Blohm: Yeah, it is, of course, tricky for places that have had way too much rain and they're struggling or there are still places that are on the drier side. And so you can't spray in the normal fashion that you'd like to, and you're not seeing the, the big yield numbers that maybe everybody on the Midwest is talking about. And that's a very real concern. And, you know, my heart goes out for that situation. maybe depending on how large of a situation that is locally, it becomes reflective in basis, maybe that those regions have smaller production. And so maybe your basis will help make up for it. but with crop tours next week, most likely going to just in general confirm it's a bigger crop now, you know, is it going to be 182 or is it going to end up being at 185? It's a big crop no matter which way you slice it. So I think that's what we need to focus on, not get lost in the detail. But the reality of 2 billion bushel carryout.

Paul Yeager: Well, I've, I've used this line a couple of times. I think Arlen Suderman said it. plan for the 85% good. The crop being 85% good, not 15% bad type thing. Like there's going to be way more good than bad this year, which gets into Georgia and Kansas a tiny bit with his question, Have the corn farmers started moving their corn out of the bins?

Naomi Blohm: Yes, yes, there has been a lot of grain moved over the past three weeks. Absolutely. It's been coming to town and now you're seeing that reflective in basis values in many portions of the Midwest. But we're not done yet. And I think that we're going to get the next big push over the next two weeks, because that's when the September basis contracts have to be fulfilled, that's when September futures contracts go into first notice day. So people have to decide if they're just going to price it and be done with it and dump it and get rid of it, or are they going to try to hold it and then roll it into December? So there's a lot of things to take into account of that in terms of cost of storage, interest rate costs, cost, you know, their carry to capture. So there's going to be I think in the next two weeks. Again, more grain coming to town. And once we get this flushed done, then as we head into September again, then we can start looking for that harvest low, as I was talking about on the show. because we're going to have cheap value here, and the end users have to be drooling and just excited about how cheap of, you know, corn that they're able to secure for their needs. It's been how many years from their aspect that they've been able to get corn at these lower prices. So, then users will show up, demand will pick up, and then we'll get our harvest low.

Paul Yeager: Or we're showing you the corn chart were below four. So I guess I'll flip in one more question about, fat cattle this time it's, Bradley in Nebraska. Have fat cattle prices peaked, or could we see a rally late in the fourth quarter for the Christmas holiday?

Naomi Blohm: I think what is going to happen with cattle is that it's going to be a slow move, lower for prices. So because we have, I think overall still decent demand, especially heading into Christmas, our exports have been okay. That's what's going to keep prices firm overall. But you need to really understand that the whole chart is shifting and so now this is like your equivalent of when we had $8 corn and then it was $7 corn. Then it was $6 corn. And all of a sudden you look backwards and you're like, oh there it went. There it was. So we're in that window. Hey, cattle folks, this is your equivalent of $8 corn. You can still lock this in. And I would be locking things into 2025 because we are just we've we beat at the drum long enough about the tight supplies. We import cattle. Our cattle imports are up year over year. That is a fact. And with prices high still at the grocery store, the beef that's in demand is ground beef. It's not as much the stakes anymore, especially as we are heading into back to school. The grilling season is done. You know, when we get into the holiday season again, we'll see those types of things have a demand uptick. But I think just in the short term, you have to have more of a defensive mentality. As a cattle producer.

Paul Yeager: What about South America and beans? So Gary in Wisconsin has the question with South America having quality issues with soybeans, could the U.S. have a chance to export some beans and soybean meal?

Naomi Blohm: So the question there is more about quality in terms of crushers like American beans. Best they like how it breaks down for the oils for the meal side of it. American beans are the best. So that has become something that people are talking about in the world. It's not that it's a bad crop in South America. It's just not as good as the American. So it's a, better quality. You're comparing, you know, Walmart to Whole Foods kind of a thing. So I think though when we have that soybean market push, that one next price push lower, that's when you're going to see China show up because they want that high quality. They love North Dakota beans, China loves North Dakota beans and the Minnesota beans and that's what gets exported out the PNW. So I think they're just waiting for that one more price drop. And then they're going to start buying those North Dakota beans like crazy and get them across the ocean.

Paul Yeager: So it might not be a political reason. They're not buying it's finances and how much it is.

Naomi Blohm: Well, I absolutely and we're all watching the same charts. And so we're all watching okay. One more price like lower. And then that's the final ticket for buying. And then I think you're going to see that again. That export sale market really pick up.

Paul Yeager: Well let's get into some other technical things shall we. We were discussing we're skipping politics, moving on to down in Texas. why do farmers refuse to cover their total cost of production calculated by the historical. okay. No, we did get political. We have two more that are that way.

Naomi Blohm: I think the answer is hope. That's the answer. Yeah. So it's easy to know what that number is. And it's frustrating to say, oh, it's only a small profit or it only it covers my breakeven or. But look at what you had years ago. And so then there's this hope of one price rally to come, you know, ten more sense of a rally or hey, maybe something's going to go bad with the weather somewhere else around the world or the whole it's an election year, so the price has to rally, which isn't true, by the way. So hope is the answer. So you have to put your business cap on instead and be a little bit more aggressive with your marketing.

Paul Yeager: All right. Let's talk crop insurance. Glenn in Ohio asks us via X in regards to crop insurance. October is the discovery month for fall harvest prices for corn and beans, with lower prices and record yields projected. What can or should producers do to protect or enhance their investment in these crop revenue policies?

Naomi Blohm: This is such an important and timely question, because there does seem to be a very strong tendency for the price of corn to start to rally higher during the month of October for this very reason. So when you have low prices, farmers are thinking, well, at least I'll get an insurance payout. However, if the prices start to go higher through October, that doesn't necessarily happen to the tune like farmers are hoping. So if you are in a situation where you are comfortable with using futures or options when we see our harvest low and hopefully, you know, it's going to come here in mid to late September, that's what I'm watching for. That's your sign to look at some type of a re ownership strategy for what you've sold, but also in a sense to protect that insurance price because if the market price goes higher you're not getting that insurance payout. So you're going to be looking at buying December call options potentially December futures. Again all of these things have risk associated with it. And you need to work with your advisor on that. But that's how you protect it.

Paul Yeager: We have two questions I want to ask Phil's first, because when I don't ask Phil's question I hear from him. But we love every question. At a certain point, these bear grain markets will end. What's it going to take to make it happen? Which commodity will break the trend first?

Naomi Blohm: So it's going to take a weather issue because we need it to be from a production side. Demand high, overall demand for global commodities right now is good. It's solid. I don't know if there's going to be just a sudden burst and uptick in demand. So for a burst of an uptick in demand, it would have to be because of a geopolitical threat where people suddenly want to stockpile again. So if if that should occur, that could create the demand side of it. But otherwise it's got to be production. That's got to be bad weather in South America this winter, or we would have to see something bad happen, the United States weather wise, next summer.

Paul Yeager: And then I'll ask you this to close.

Naomi Blohm: Okay.

Paul Yeager: Scott in Wisconsin, What commodity would you like to be long on?

Naomi Blohm: Wheat and corn in about three weeks.

Paul Yeager:It's that simple as that.

Naomi Blohm: Simple as that.

Paul Yeager: Good to see you.

Naomi Blohm: Thanks for having me.

Paul Yeager: I appreciate you making the trip and the time and the insight. Always good to see Naomi Blohm. Thank you. Next week we are going to take a look at clothing manufacturers surviving in rural America while others have unraveled. We'll also have the commodity market analysis with Chris Robinson. Thanks for joining us. Have a great week.

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