Market Analysis with Naomi Blohm

Paul Yeager:  Slow slowed export demand in wheat coupled with improving South American weather reports, inspired the trade for the week. The nearby wheat contract dropped $0.30 while December corn lost a penny. Mail rocketed higher early in the week before export sales failed to impress in the soy complex. The January contract shed $0.03 and December mail improved 340 per ton. December Cotton expanded by 240 per hundred weight. Over in the dairy parlor December Class III milk futures decreased $0.39. The livestock market was mixed as December cattle improved $.140, January feeders added $3.57 and the December lean hog contract fell 47 cents. In the currency markets, the US Dollar index shed 195 ticks. December Crude oil added $0.28 per barrel. COMEX gold put on 1880 per ounce and the Goldman Sachs Commodity index decreased 15 points to settle at five 5635.

Joining us now is regular market analyst Naomi Blohm. Hello.

Naomi Blohm:  Hi, It's great to be back.

Paul Yeager:  Good to have you here this week. Market, just whenever we think the worst could be in, we get another week like this. So I guess I'll just ask this question that has been the easy question for months. Is this still all about Russia selling the cheapest product or one of the cheapest products on the market?

Naomi Blohm:  That's a big component of it. They definitely have enough to supply the world, even though different places in the world are not having record production. So there are still production hiccups with Australia now in France, with too much rain, Brazil just reduced their wheat crop. So the notion still, though, is that there's enough Russian wheat at cheap prices that it'll just get everybody by until we have more of a flip side of a story with larger production. 

You know, as is the world goes, we are still using more wheat than what we're growing. And so we're seeing ending stocks continue to trend lower on a global scale. But the market is ignoring that for now, because I do think the other component of it is that world leaders do enjoy having cheaper priced wheat because that brings peace to the regions.

But there's not enough of a reason yet for the funds to exit those short positions. I'm curious if maybe as we get closer to the end of the year, if they finally start to do that, there's a seasonality of the wheat that starting in December, it has a tendency to start to grind a little bit higher. And if the funds would just exit some of those short positions, we could have a good 50 to 75% rally.

But we don't have the fundamental catalysts to make that happen yet.

Paul Yeager:  We shall for months at a time on the graphics, we're about to head out of a very large range and head into a small range. Do you see that small range continuing? You mentioned December could grind a little higher, but do you see some type of wide swing either way ahead?

Naomi Blohm:  Not in the next couple of weeks. We'll probably continue to be quiet range trade. And then like I said, heading into December, then I think we'll start to see things happen and things occur. But the again, it's just so bizarre because the global energy stocks are trending lower, but the world seems complacent or wanting to believe that things are going to be just fine. So unfortunately, that's just the cards that we're dealt with right now and probably quiet markets for a couple more weeks.

Paul Yeager:  Corn moved higher. Is this an attempt to try to price something onto the market off the farm?

Naomi Blohm:  Well, it's an attempt. Earlier in the week we had that rally to start the week and then prices finishing on support levels. You know, that corn market has just been trading sideways in a 30% range for four months now. And it is, of course, suffering under the reality that there's 2 billion bushel carryout. But what I loved on the most recent USDA report is that they increased export demand, they increased demand for ethanol, and they increased demand for feed.

So the friendlier story is there for corn because the product demand is there. And our export sales this week, 1.9 million metric tons were fantastic. And we are on track for USDA projections. So that demand side of the story is friendly. It's just that we have 2 billion bushel carryout right now. And so what we're going to be watching in the coming months is going to be the South American crop.

It's not perfect weather in Brazil right now because that could that could be a component going forward. And I think you're actually going to continue to see the exports actually pick up a little bit more than what people are anticipating now that the dollar started to retreat a little bit lower like wheat. I don't think corn's going to do too much of anything into the holiday week next week and then the week after.

But starting in December, usually corn has a pretty darn good rally throughout the month of December heading into the New Year.

Paul Yeager:  Beans weren't listening to that. Don't move before Thanksgiving, business started starting the week, but then just fell apart. And I believe someone wrote the word Debbie Downer about this market because of the export sales. Not as good as expected. Yeah, you mentioned the exports in corn. Why was that export story not seen so positively in the bean market?

Naomi Blohm:  Right. So we had export sales this week for beans that were just fantastic, almost 4 million metric tons. And it got us caught up to where we needed to be. So that's the point, though. We're caught up to where we need to be. As far as USDA projections go, the market on Sunday night rallied big because of dry weather concerns in central Brazil.

But then as the week went on, prices set back two reasons. We were up near major overhead resistance on these charts, the $14 area. So it's big resistance for now. And with weather chances, rain and chances improving in Brazil, that set the market lower. So we're range trading for soybeans. We finished the week about 50, $0.60 lower from where we started and we're on support.

And so on Sunday night, if the weather in Brazil goes back to hot and dry and it has been 100 degrees and with a heat index, we're talking 130 degrees. So this is even if it's raining, it's not helping anything. The drought is still there. So Sunday night's grain trade is going to be definitely dependent on the Brazil situation and I think there is some pretty significant upside for soybeans.

And starting in December, usually those beans take off to the upside as well from a technical objective, if we can clear the $14 hurdle on those March beans, we're going to see $15. And I think that could happen by year end, especially with the weather in Brazil not being fantastic.

Paul Yeager:  Well, that ties into one of the questions. Let's see, this came from Cordon in Illinois. Thank you for submitting this one. And it's do you think the delay in soybean planting and Mato Grosso is going to have a significant impact on production potential for Safari, a corn production, and could help us export potential on the tail end of the U.S. export season. And you can add both corn and beans because I think it impacts both.

Naomi Blohm:  Yeah, and I love this question and is it is absolutely going to become top of mind in another couple of months. So right now this whole question is lurking in the background. But here again is the significance of it. So this being crop in Brazil is slow to get planted because of the dryness and a lot of it is going to have to be replanted.

So the slower its planted means, the slower it's going to be harvested, the slower its harvested. That means there's delay on the Safrinha corn getting planted. And remember that 70% of that Brazil production and this is the corn that gets exported to the world and it comes in just that niche time when the United States is running out of beans at the end of summer.

So yeah, it makes the point of if their crop is suffering from the beans, it is pretty good potential that the corn crop would suffer too, because that corn crop is grown right going into the start of their drier season. So that could be a reason for corn prices to rally later on. It could be a reason why we see corn export demand pick up and actually extend a little bit further into our season than normal.

So it is going to be the story to watch for 2024. It's that Brazil weather and the Brazil's soybean harvest and getting that Safrinha corn planted.

Paul Yeager:  Dairy real quick dropped again 2.3% on the week. Is this a trend or a blip?

Naomi Blohm:  It's more of a just we're stuck in the mud. We ran out of immediate news of any magnitude to get the market moving one way or the other for the short term. We saw the market more react to spot cheese prices, but the bigger catalyst is going to be on Monday when we have a milk production report.

The last milk production report showed production down just two percentage points, 0.2 percentage points. So we'll see what Monday has to say. We have holiday demand coming up. That's a good thing for the milk market and then also on the negative side, though, our exports are down 12% from a year ago. So that's negative. So that's why, you know, milk is just kind of stuck here for a little bit. And and we'll see what Monday's report has to say.

Paul Yeager: Cattle on feed on feed. October one, 101%. Fed cattle are placed on feed 104 Fed cattle market during October, 97%. What number stood out to you as the biggest? 

Naomi Blohm:  The placement number coming in at the 104 because that was less than expectations. And that feeder market has been just looking for a reason to finally get a corrective bounce. So I think on Monday you're going to see fat cattle and feeder cattle finally have a corrective bounce higher. But I don't think we're going to go back up to where we were just a few months ago because the notion is set that with these imported feeders coming into the country, that it's not fixing the situation, but it's not as dire as what it was.

What I was surprised to learn was that for the first three quarters of this year that our imports of cattle are up 19%. And so that helps to explain why we've seen prices start to come lower. Our exports have also been a little bit sluggish. We are behind our five year kind of normal place for this time of year, but domestic demand continues to be strong. So but good news is that the recovery bounce is coming. Monday should be a better day.

Paul Yeager:  Hogs, though, they haven't had many better days.

Naomi Blohm:  No, no. So they had a recovery bounce higher over the last couple of weeks. But now they've just been trading in a little bit of a sideways pattern. The notion there is that production overall for this fourth quarter has been a little bit larger than normal. The way it's a little bit bigger than normal. The bright point is that our exports are doing great.

They are better than a year ago. They are on track for the five year average. So that's a that's a nice component, but we've got plentiful supplies. So I think for the hog market, you continue to see it just trade lackluster in a continued sideways pattern until we get to know a little bit more news on maybe more global demand.

Of course, we're heading into winter so as virus season for some of these herds. So that's something to be watching and that is of concern in the back of my mind.

Paul Yeager:  We're just getting you warmed up. We have some more questions for you. Okay.

Naomi Blohm:  With that, I would think that would be great.

Paul Yeage:r All right. Naomi Blohm, thank you so much. Appreciate the time. That'll do it here for as we are going to pause this analysis and continue with our Market Plus section, that's where you contribute our questions and you can find both analysis and Plus on our website of MarkettoMarket.org. 

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