Market Plus with Naomi Blohm

Paul Yeager: Welcome back to the table for the Friday, January 24th, 2025 installment of Market Plus. Back with us is Naomi Blohm. Naomi, first, I have to start with an apology. we did not have the neon sign behind you to have the arrows for what you just said. That was one of the most jampacked market analysis segments. There were a couple times I just wanted my jaw over here was dropping. You crammed a lot into that. What? Of all the things you said specifically, corn and beans was the most important that you wanted to say that you can now say again.

Naomi Blohm: I just want to really point out that we're on the cusp of new price discovery. So because the ending stocks and the USDA report in January were so unexpectedly friendly that justified prices to get to where we are right now. And if there are weather issues in Brazil, if there are weather issues here this summer, if there's not any drama with a trade war, you'd have a reason why prices could go higher in the summer. Just because now we're set up with these tighter ending stocks here in this country. but we're also at this cusp where if things go sideways with the trade war, if we don't get the biofuel news that we want, if Brazil has perfect weather on that second crop, corn and, and if the rains that are supposed to come to Argentina this weekend materialize, I mean, we're also at a cost for things could go back down pretty quickly. So, I mean, this is where it is perfectly balanced. I'm just waiting for, you know, one fundamental to drop one way or the other to justify why we would take the next leg up or return back down a little lower.

Paul Yeager: I had a viewer on the show comment online over last week's show talking about I brought up what Matt Bennett had said here a couple weeks ago about that. That report was a gift, and this producer didn't agree with that sentiment, that it's still way too low of a price. For those who don't believe that this is a good enough rally, what do you want to tell them right now that they need to be doing quickly?

Naomi Blohm: Okay, so let's take it back to 2020 2021. So that was when we had I'm taking you back in a different direction. I'll get you where we're going from us. So remember the fall of 2020. So we had the dreadful storm. It exposed the truth that the bins were empty. The Iowa crop was decimated. China agreed to phase one because they were like, oh, the Americans actually don't have corn and it's cheap. So they agreed to the phase one deal, and it was the demand that pushed the market higher. So actually, I went back this week and I looked at where and then stocks were on the December report in 2020 and what ending stocks became on the January report. And it was pretty darn identical to what we just had. So on the December report in 2020, and then stocks were at 1.7 something on the January report. And then stocks dropped down to 1.5 something. So same scenario prices rallied in early 2021 right to the $5 area. And then it was a holding pattern for two months in 2021. So now this was you know a new administration had come in. Right. But for two months, the price of corn traded sideways a little bit lower. Did it rally because it was waiting to see what the weather was that summer. And then the weather wasn't perfect that summer. So the market price did go higher. But the point is, $5 is fair value for carryout at 1.54 billion bushels. Especially when we're in a situation where, you know, there's uncertainty going ahead with demand. And then I looked in 2021, and what the USDA did with ending stocks on the February was the the march was not really any changes at all.  So there was no fresh information to trade. So I feel very appropriately that where we are right now, it's fair value. And I will add that for the soybeans in 2021, the ending stocks were significantly tighter for the United States than they are right now. They're in the one 20s versus the 380 number that we have. So that's a different story. And we did not have global carry out for soybeans at current large levels like we do right now. So there's a cushion there on the global scene. so it's a similar story, but it's not the same story. And in my opinion this is fair value. But we don't have a reason to go higher than this right now. I'm just going to take the weather and cooperation on the trade front.

Paul Yeager: Yeah, I've watched you before over the years. Come here and you're like, if this, this, this. And it's like it's a, it's almost like a four team parlay or something in the gambling world. You have to hit those things. And one time we did. But it's no guarantee because if one goes off the rails, this is, this isn't going to look pretty.

Naomi Blohm: Right? Exactly, exactly right.

Paul Yeager: All right, all right, let's take some questions. We had great questions. I'm sorry that we didn't get to one during the show. Let's go through some of these. Bradley in Nebraska is going to lead us off. Do we reward the rally and new crop corn and beans or do we hold tight right now? We didn't get a chance to talk much about new crop.

Naomi Blohm: Yeah, I would start with some sales just because of the uncertainty ahead. So where we have corn right now, these corn at the 460 level, the November beans, I think we're up near a 1050. This is a lot better than we thought we were going to get. So I would reward the rally. Unless you know what President Trump's going to do. I mean, maybe you're buddies with him and you know what's going to be the fold.

Paul Yeager: I don't think anybody knows. I think you heard in the piece the senator from Michigan asked the nominee, would you be able to stand in front of the president. . Because that's the concern the ag community agree. The Farm Committee can agree, but it's going to be hard to keep the president with what's agreed. And that's I think that's what that senator's asked.

Naomi Blohm: Oh, absolutely. That was the point of that. And so that's that's the thing, though, where Rollins said, she essentially said, we are ready to go with Trump bucks. If the train falls apart, they are ready to, you know, bring money into the farmer that way. And I also read that she had talked with Sonny Perdue, the former secretary of AG, you know, the last go around. So she understands what happened before, what they did about it then probably ways they could improve on the situation. But that's the plan. So again, the 45 see 60 day delay until they can get the trade stuff figured out first.

Paul Yeager: All right. I want to take the second part of Phil's question here. That's, Phil in Ontario. He asks about some ratios and things, but I want to just finish up here in this last sentence. Is $5 a credible target for mid June 2025. You've talked about a couple of month's cushion. It's mid-June possible, without hitting all the targets.

Naomi Blohm: We're either going to be at $7 corn in summer, or we're going to be right at 450 or $5. So it's going to be one or the other. And it depends on weather and all of these, of course, uncertainties unknown. If it gets to a situation where, you know, our export market stalls, if it gets to a situation where they kick the can down the road on the biofuels front, we don't have enough bullishness to take it higher. But the ending stocks would still be supportive enough unless they really have to somehow take a wash on export demand. I mean, that would be a changer to justify why ending stocks would have to potentially grow. But I mean, we're like I said, we are at this perfectly balanced situation right now fundamentally. And what happens over the next two weeks is going to dictate what is going to be happening to prices.

Paul Yeager: This question got your attention. Doug in North Iowa wanted to know what is the price ratio that makes feeding wheat an option?

Naomi Blohm: Yeah. So, wheat now is getting cheap enough. Definitely. With corn prices going higher and especially in different parts of the Midwest where I have heard farmers talking about the point where they would substitute wheat. And I know that we at our office have talked about what is that point. And from a nutrition standpoint, where does that value come in? What does it mean to us producers versus global producers. So I think we are starting to get closer to that window, especially with corn prices rallying and wheat prices staying low.

Paul Yeager: We had great questions from Boyce, Jenny, William, Matt, Mitch, Eric, Rodney. But I want to finish with Rob, and Rob is a question that kind of came up a little bit last week, but it is. It is on mine for, I think, many people looking at my break even data. Rob says I will lose money planting beans this year. I would assume more people will plant corn on corn, which will be less bean acres, which should make the bean price go up, correct?

Naomi Blohm: Right now, the market is already assuming that there's going to be 3 million more corn acres, 3 million less soybean acres. So based on everything we know right now, if things don't change, you would think at some point it would be a little bit of an incentive for that bean price to work a little higher. But because there's just so much, I think, uncertainty with all the things that we talked about on the show, things could flip around quick. And I hate to be crass, but I'm going to be truthful that there have been years in the past where you don't get a year of breakeven price, you don't get a year of a profit price, or you have 3 or 4 days in a year where it's profitable. And those are the days where it's hardest to market, because it's potentially in summer where you're not sure if your crop is growing or you're busy doing something else. This might be one of those years, and it's not what anybody likes to hear, but we've seen it before, and it might be what's unfolding now. And that's why with this rally that we've had, you know, make sure you're doing something to take advantage of it or looking at puts underneath the market to protect the value that's there, just because of the uncertainty that is unfolding.

Paul Yeager: And this played out this week a little bit last week, market would start at a certain level at the beginning of the day, quickly lose steam, go higher or lower depending on what the big market volatility is. Back from everything I think I've heard you say and read this week how you mentioned some protection, but again, things can change so quickly within the day. What do I need to do?

Naomi Blohm: Within the day, within the tweet right here. We're back to that. So I would really start looking at buying puts underneath the market. And it's two separate things. Buying puts potentially on price old crop. But then I would use a short dated option to protect new crop. So you're not spending as much money because you're not spending time all the way out to Thanksgiving. But you still are able to protect the value of new crop price with these short dated options. For a third or a half the cost. I think that there's a lot of merit to that just because of the uncertainty that's here. because if things just don't go right in this whole trade situation, the funds are going to leave that long position that they have in corn was probably over 300,000 contracts and then go short again or right now they just got too long beans. And if they don't have a reason to continue the buying we could see them, you know, quickly exit that position and go short. There's just too much uncertainty. And we've had too much of a rally. I mean corn is rally nearly a dollar since summer and and the beans have had over a dollar rally just in weeks. So the value is there to protect. And I think make sure you're doing something.

Paul Yeager: We've done a lot of something today with your conversation. Naomi, thank you so much. Great to see you. All right. That's going to do it here. And I want to remind you to get signed up for that market to market Insider newsletter. It's free. Sign up at Market to market.org. The next issue will be Monday. Next week we are going to expand on the livestock market, and we'll have another commodity chat because Jeff French and Ross Baldwin will be here.  Thanks for joining us. Have a great week.

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