Pearson: This is the Friday, October 26, 2012 version of the Market Plus segment. Joining us now is Naomi Blohm. Naomi, welcome back.
Blohm: Hi there.
Pearson: We've got a bunch of questions here from the Twitter fans and we'll just kind of start with those and build on that. Phil in Ontario is asking, what will the failure to solve the "fiscal cliff" mean for the U.S. dollar and ag commodities?
Blohm: That's an important question. And right now I saw on the news today that if the fiscal cliff is not solved that unemployment will rise to 12%. Of course, it will not be good for anyone in that situation. The likeliest scenario and what I really think is going to happen is that they are going to extend the Bush tax cuts for one year because that way whoever is new in Congress and a new president potentially or not can start to learn how to work together. So we'll see that extension for one more year and then we'll see how things play out from there. So I'm not looking for a cliff to be had. I think we'll be okay for one more year.
Pearson: And if they do just go ahead and extend the Bush tax cuts for another year, things will just kind of continue as they have been? It won't have any major affect on --
Blohm: Absolutely. It will just be a smooth, seamless transition.
Pearson: Until this time next year.
Blohm: Yes, and then we'll have a moment of panic potential.
Pearson: All right. Travis at Pine Point Farms is asking, what happens to the corn market when the bin doors shut after harvest and farmers are sitting on the corn they got?
Blohm: That's a great question. And I would say right now your cash market is going to respond to that and it is already happening. So you'll see the basis improve as a way for the end user to, the processor to pry it out of their hands. The futures market won't react to it right away and the futures market won't probably react to that market getting any higher than the $8.00 level unless something happens in South America. And then also we'll see if the funds want to come back into the marketplace into year end or at the New Year so the basis is how it's going to be lured out of the farmer hand.
Pearson: All right. And so you see exports and the outlook for corn exports changing as we go forward towards the New Year? Or is it going to be light for the foreseeable future?
Blohm: It will stay light until they have a better idea what is happening in South America. The end user isn't going to want to pay any more than they have to. They just won't. And our export market is actually down 35%. The USDA thought it would be down 25% but it's worse and it makes sense, though. And actually, Ukraine is getting most of our business. Their exports were up huge in October and so people are going to buy wherever it's cheaper, that's just how it is.
Pearson: All right. Tom is asking, we touched on this on the show, maybe we can go into a little more detail -- what is your strategy for the 2013 soybean sales?
Blohm: That is a great question. The new crop beans potentially, depending on this weather in South America, that is the whole thing, they could absolutely fall apart or they can stay firm. And I would say that the new crop beans won't have a reason to get down really much over $14 unless it is an absolute disaster in South America followed by some sort of a planting hiccup here next spring. So that would be the only way in my opinion that the new crop price can get higher, which it could happen because it happened last year. So it's a good time to be starting some sales. And then if the weather in South America continues to just look okay and things are progressing just be making some sales a little bit, small sales as the market maybe works lower but not anything aggressive because any weather hiccups along the way can allow that market to pop right back up.
Pearson: All right. D.B. is asking, he talks about natural gas and he's saying, natural gas plays have fueled domestic oil production. Is the recent oil price decline indicative of a bubble?
Blohm: That was a great question. Natural gas supplies are at, near all-time highs, same with crude oil supplies growing. As far as indicative of a bubble I'm not sure. I don't know. That's a great question. I would have to look into it more and try to find a way to get back to him.
Pearson: All right, all right. Well, John in Columbia is bringing us back to livestock. And he is asking, why are cattle futures not reflecting what should be a very bullish situation?
Blohm: There's a lot of emotion behind that question and cattlemen often times think that the supply is so low the price should just be astronomically higher. And it could be from the supply standpoint but there is this other little factor called demand with price discovery. And the market can't let the price get too high because then all of a sudden people are going to say, okay, tuna noodle casserole sounds great tonight so sorry about it beef but you're not going to get my business this week. So that is the factor that it is really having to watch. And that is going to be that way for a while yet. If supplies get much lower we'll see that futures price go higher. Now it is impressive that with the high prices that we do have on cattle right now that the consumer hasn't balked any more than they potentially could. So I think as we touched on, on the show, with gasoline prices down and maybe the economy humming along here a little bit it is keeping people more excited to be buying beef but it is a very delicate walk.
Pearson: And now kind of a follow up question to that. Has beef consumption dropped noticeably in America or are we still seasonally right around where we should be?
Blohm: I would say that compared to years past it is not necessarily what it has been. But for -- it's not bad at all for prices being so darn high. It's really good. So I think we'll continue to see that.
Pearson: Consumers are paying the prices out there for now.
Blohm: The cuts are thinner at the store though. That is what people notice and then a lot of people are buying the cheaper cuts too. But the demand is there.
Pearson: All right. Chris in Rowley, Iowa -- we talked about this a little bit -- he is asking, where is a good place to start 2013 sales for corn and soybeans? We have talked soybeans. do you want to go into a little more detail on corn?
Blohm: Absolutely. The corn contract for the new crop I think will be stuck between $6.00 support. It needs to stay above $6.00 to make sure we plant corn next year. So we'll see that as support. On the flip side, though, I don't think futures will go above $6.50 unless there's weather issues along the way. So range trade it and any time that the market gets to the higher end of that range plug along with some more sales. But have a strategy in mind that if all of a sudden things are not good in South America you have a way to reown it or you know where your next target price would be higher and what percentage you're going to do ahead of time.
Pearson: And is there -- he's asking for a price and time. Is there a timeframe you would give to folks as they are planning their next year's sales?
Blohm: Fabulous question. I would say just that between now and year end we will probably have multiple times to see that new crop price kind of pinball back and forth between $6.00, $6.40, $6.50. So you'll have some opportunities along the way. Into next year it's such a cheesy answer but it just depends on the weather in South America.
Pearson: Sure. And so with regard to the near term focus on the market not the calendar.
Blohm: Great advice.
Pearson: All right. Ned in Royal, Iowa wants to know what affect the presidential election is going to have on the markets whether it is President Obama re-elected or Mitt Romney elected?
Blohm: I would say that the next day it's not going to have a factor. It's not that the market is going to say oh yeah, somebody won and we go immediately up or boo hiss someone lost and that type of thing. We're not going to have that. It's going to factor more along the lines of when Bernanke is done and he is done in January of 2014. So the market is going to be more focused on if Obama is re-elected would he offer the job again to Bernanke or would he step down? And if Romney wins once Bernanke's term is done what is Romney going to do? And more than the perception would be will the feds, independently, will they do things to keep QE3 in place? Are we going to try to keep interest rates low or would potentially a president try to persuade things one way or the other to say, things are better or things are worse, and make things go that route? And also depending on who wins would be a factor for the funds. If they feel that the economy could come back rip-roaring maybe they would be more intrigued to be investors in general. So it's going to be more of a bigger macro picture that will drive the market rather than just a one day event.
Pearson: All right. Well, thank you so much for being here Naomi. We really appreciate it. Good words of advice. Take care.