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Market Plus: Naomi Blohm

posted on May 3, 2013


Pearson: This is the Friday, May 3rd, 2013 version of the Market Plus segment.  Joining us now is Naomi Blohm.  Naomi, welcome back.

Blohm: Hi.  Thank you.

Pearson: One of the things we didn’t get a chance to talk about on the show was the cotton market and I understand we did see solid exports this week in cotton and we saw a little bit of a burst in prices.  Can you give us a little bit more of an idea what to expect here going forward?

Blohm: Cotton will likely be able to hold the trading range that it's been in and yes the export market picked up which was a nice surprise.  And the other part to cotton is that the planting pace, like corn, is behind and it is actually historically the slowest ever.  It was only 14% planted this week and last week was only 10% and so that market is slow and steady climbing.  It still faces the large, global glut that is out there.  There's a lot of supplies and the International Cotton Advisory Group came out this week and said that they think the ending stocks are going to grow by X amount this next year and just tried to paint a bleak picture on it.  And then this week when China came out with the negative PMI number that really pushed the market lower as well as so cotton went down because everybody thought oh, well, nobody is going to be buying cotton, t-shirts, clothing, that type of a thing.  So the rally that it had today was really a nice, nice surprise.

Pearson: Okay.  And it was just, just a surprise.  People were looking for a commodity to pick and --

Blohm: Well, I had been oversold a little bit so I think it had some value to it and probably the positive economic data that we had today helped.  And specifically if there was anything beyond that I hope I didn't miss it.

Pearson: Well, and positive economic data of course you're going to be buying more suits and shirts, especially as more people get employed and they need clean underwear and so on.  We do have a lot of great questions from our Twitter and Facebook followers.  And you're never going to guess, most of the topic, most of the questions this week, weather.  There's a lot of questions and in fact I think we've got four of them on here.  One of we talked about on the show, are we going to see additional acres switching from corn to soybeans do you think more than the million acres the market has planned?  Is that the number we'll be trading?

Blohm: Well, I was thinking about that because if the trade is already saying that it's 2.5 less corn, so then I was thinking is it all going to go to beans or what else would it go to or is it going to be abandoned acres or that type of a thing?  And that's something that we’ll just have to be seeing in the coming weeks depending on geographically where these delays are coming from, the Dakotas and Minnesota where they just got dumped on a foot of snow.  That is going to be a factor.  And so yeah, absolutely maybe the soybeans could get at least maybe 2 million acres, it's hard to tell.  You know, we just have to wait and see.  But the market is already thinking about it so it won't be a surprise in June when they come out with the report.

Pearson: So we're planning for it, we're anticipating and we'll be continually priced in as this wet weather continues.  Now Adam in Litchfield, Michigan is curious, we've been focusing a lot on weather in the heart of the Corn Belt with the snow and the rain we've been experiencing recently but there have been dry places throughout the rest of the country.  North Dakota is getting some corn in, Indiana.  How is planting progressing in your opinion in some of these drier pockets?  Are we seeing solid planting progress?

Blohm: You know, we are surprisingly.  I talked with some producers in Illinois, Indiana, Ohio and this week on Tuesday and Wednesday they were pushing as hard as they could because they had tiled.  And so that is really what is saving it.  And so they're able to go and they're not mudding it in, they're just going as they can go and they try to get as much done before this current system went through.  So how much they got done I'm not sure totally.  I would guess with two days of planting that maybe the planting progress report would jump from 5%, this is just my guess, to maybe 10%, maybe 11% on Monday.  But then we're still waiting, of course, for Iowa and Minnesota and Minnesota was supposed to be such a key player this year with the corn acres that I'm really curious how Minnesota is going to fare.

Pearson: Okay.  And even if the report comes in at 11, 10, 11, even 12% we're still 30% behind the five year average roughly.  So that is probably going to be a market mover do you think unless forecasts sort of --

Blohm: I would say market supporter.  Market supporter.  Would keep it from going backwards and going down but the bigger factor, like I had said earlier, is whatever the weather forecast is Monday morning.  That will trump it.

Pearson: That will be the big, the big mover in this next week.  And now this was something we touched on, on the show but I think William in Hiawatha, Kansas would like you to get into a little bit more detail.  As the market looks at this wetness and cold that we're experiencing across the Corn Belt, how and when are they going to start to position themselves for potential troubles during pollination?  What are your thoughts there?

Blohm: Um, it's a tricky thing because like from the wheat perspective if you think about the wheat crop just really suffering and not going to be validated until harvest that's something where you have to be ready and anticipating just this defunct market and then all of a sudden the funds are going to wake up and they're short in a market right now.  So if they just short-cover their positions that should allow for at least a 50,60 cent rally and then if someone wanted to come in and be a buyer on top of that it would be a rally that could happen of over a dollar within a week and if you're, you know, sleeping you're going to miss it.  So you just have to be scenario planning and anticipating that move to potential, to happen.  And the same would be true for the corn market.  So if we have a rally right now and we sell it in May and then the market kind of just peters out, goes sideways to lower you have to be ready to think okay, if we have some weather issues in July what am I going to do to capitalize on that?  So you have to be thinking on both facets of this entity right now and not that you're bullish or bearish, it's just how you have to deal with it.  So be ready to be long and short at the same time.

Pearson: Really that would be the advice is be prepared for either scenario especially as we get closer to summer and that's how the market is going to be trading.

Blohm: Yeah because if the corn market does end up having weather issues in July it is going to bring, I think, the funds back in, in a big way because they've been all happy in the stock market land and they're going to stay there until they need to go away.  And so when they come back they're going to have a whole lot of money they made in the stock market that they can put back in commodities and boom, there goes your $8.00 corn to potentially higher than that depending on what the weather scenario is in July.

Pearson: And so you mentioned we've got net shorts in wheat.  Where are the funds sitting at in corn currently --

Blohm: You know, it's interesting because I just found out that they had actually gone short, just a little bit, and now they're I think it was like 15-20,000 contracts long, I mean, small, miniscule.

Pearson: Alright, it was kind of that Monday move brought them back into --

Blohm: Right and so they still have potential to come in and be extreme buyers because, you know, when they're along and this is, you know, the trend following funds, they're like 150,000 to sometimes 200,000 contracts long and that is what gets us the big $2.00 moves.

Pearson: And soybeans, do we know where they are in soybeans?

Blohm: No idea.

Pearson: Okay.  Alright.  I don't either.  I haven't looked at all this week.  So that is kind of your general thought there.  Now before we let you go a topic we've been following a lot is the dollar moving amongst the world's currencies.  Could you give us some thoughts, with this employment situation we've seen and with the Dow spiking, where do you think the dollar might be trending here in the next week or so?

Blohm: I would say in the next week it's going to be tug of war and between the values that it has been at and then beyond that it is more, you know, the battle of is the United States the lesser evil?  How is our economy doing versus the rest of the world?  And so every report that comes out every day is going to make that market move one way or the other until finally the tug of war happens so big that it pulls it out of the range that it's been in.  So that is just dependent on news down the road.  But in the next week or two I would say all the commodities are going to just be volatile and back and forth and just moving.

Pearson: Okay.  Alright.  So that's what it's going to be, that tug of war watching those reports. 

Blohm: Right.

Pearson: Well thank you so much Naomi, really appreciate you being here.

Blohm: Thank you.

Pearson: And thanks to all of you for continuing to send in your questions via Facebook and Twitter, especially this week we really appreciated all the pictures of the, the sad pictures of lonely farm equipment trapped under blankets of snow.  We just wanted to let you know a big thank you as well, we did top 4,000 followers on Twitter.  So thanks to all of you following us on Twitter.  With that we hope you have a great week.  Please tune in next week, continue to watch Market to Market, continue to send us your questions.  Have a great week.


Tags: agriculture analysis cattle commodity prices corn economy hogs markets Mike Pearson Naomi Blohm news soybeans wheat