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Market Plus: Naomi Blohm

posted on July 12, 2013


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Pearson: This is the Friday, July 12, 2013 version of the Market Plus segment.  Joining us now is Naomi Blohm.  Naomi, welcome back.  We've got a lot of questions here sent in from our viewers on Facebook and Twitter and would love to get your thoughts.  Notbeck, who is on Twitter, and he is not beck, he is asking, is Brazil still expected to have a record harvest?  How are things coming in South America with the harvest numbers coming out and with shipping?  How do things look down south?

Blohm: Okay, in Brazil right now they actually are having a dock worker's strike.  Choose the month, they're always having one, but this one actually they're trying to make a little bit more clout with it.  So right now the market is not too worried about it unless China comes in and says, okay we're not getting our supply so knock it off.  So it's one of those things to keep an eye on.  But as far as their production, yeah, they had a real great year for crop, a record year.  So that is something that is keeping resistance on the global prices in general and keeping the global stocks higher.  So it's going to be a factor that makes the market not have to just really rally and take off to the upside.

Pearson: It's just sort of an overhanging cloud on the market as we get up to those highs.

Blohm: Yeah, that's, yeah I would agree with that statement.

Pearson: Okay.  Now as we talk about transportation, as we talk about all of the things that we use oil for, we mentioned crude oil earlier on the show, touching highs, recent highs -- where is the crude oil market headed?  Is this all just predicated on fear in Egypt and the Middle East for right now?

Blohm: Yes.  It is.  We have supplies right now globally that are -- and even in the United States -- ample supplies, the same type of supplies that we had when crude oil was $35 a barrel.  And demand is strong, without a doubt, but we have a lot of supply.  So probably realistically with inflation and things like that $70 would be an appropriate price for crude.  However, we have this Middle East premium and craziness and then you get some technical buying that pushed the market up to some recent highs.  So we're overbought now technically.  We'll probably see the market set back but now support is $100.  So that stinks because now when we set back and have a correction that might only be a point where we shoot off higher, again, depending on what is happening in the Middle East.  OPEC came out this week and actually said that they felt that global demand is improving and therefore we're going to just keep right on up with production and things like that.  So it's interesting to see how it is all going to pan out.  But right now, I mean, there's not a supply threat unless something does get crazy in the Middle East.

Pearson: Right.  And we're going to continue paying that risk premium until things settle down or worst case scenario something crazy happens and the risk increases.

Blohm: Right.

Pearson: Now, as we're talking about increasing prices, you mentioned record, or near-record, crude inventory in America.  Are we seeing that same thing with our -- with unleaded gasoline?  Do we have those same inventory, that same amount of inventory?

Blohm: I don't know if it's quite the same amount of inventory but there's not a threat of a lack of supply right now.  The gasoline prices have stayed low but now we're seeing the futures market rally just because the crude oil market is rallying.  So the energies are kind of all moving up higher together.  There was some thoughts too that demand in the United States for gasoline would pick up also.  So that is something to keep an eye on, it still is the summer driving season, I guess, until school starts in a month, it's coming up again and so there's still a lot of time.  It's hanging in there.

Pearson: So keep an eye on your corner convenience store and see where gas goes.  Alright.  Now something we mentioned on the show, and it's been a big talk lately, of course -- Robert in Columbus Junction is asking, what would the impact on the market be, or what will the impact on the market be, of the House passing an agriculture only farm bill?  It's been so long since that has happened.  What are your thoughts on how the market might interpret something like that?

Blohm: Yeah, it's an important question and it is one that I'm taking an educated guess that it won't know what to do so it probably won't do anything because it's going to see, you know, is it going to continue to get passed or what is the outward reaction going to be?  So in the short-term I don't think it would have a reaction but in the bigger picture as more details come out it may.  But right now I just don't know that we know quite enough yet.

Pearson: The market is going to wait and see if we can make it through committee and conference and everything to see if we can actually get a bill.

Blohm: I think so but that move this week was pretty shocking.

Pearson: Yeah, very different.

Blohm: Yeah, very much so.

Pearson: Josh is asking -- you touched on this just briefly in more of the shorter term -- but where do you see live cattle and feeder cattle market headed long-term?  You mentioned the increase in demand in Japan and China.  Are those countries -- do we expect them, for that demand to continue for some time?  A year, two years do you think?

Blohm: I think it will stay the same, stay as firm demand and whether or not it increases it just depends on the Chinese economy.  The Japanese economy actually is really picking up speed and coming back.  So I could see that continuing to grow but at the same time it doesn't necessarily mean that they're going to continue to buy our product because they're so close to Australia and New Zealand that you can get a substitute or comparable price so that can keep kind of our prices in check.  I think the demand will absolutely stay there.  I read this week about the Chinese consumer and now there are so many people who have been wanting to buy cars that they're saying, no you can only buy one car now.  So they're always curbing the demand in China, somehow, some way, but I don't know, steak is pretty good.

Pearson: Right, so maybe they'll take that money they were going to spend on a second car and go buy some ribeye.

Blohm: Perfect.

Pearson: Alright, things to keep an eye on, things to keep your fingers crossed for if you're in the cattle business.  Christina in Van Horn, Iowa is asking, what is your forecast for new crop corn and beans having heard the USDA reports?  What are your thoughts on those numbers?  Do you think we'll see much change throughout as we get into harvest time?

Blohm: This is going to be I think a very wild ride for the rest of the season.  Darin Newsom, I love reading his columns, he's so outspoken about his beliefs and I'm so thankful that he uses his words as well as he does because I think he's right on.  I think he's right on.  So I think the change will come and it will be when we have a better crop in the ground and better prospects of it and then when we can say, ah, okay, we don't have to worry about not having a crop, then trickles of truth will come.

Pearson: So we will see those numbers adjusted, maybe not this summer, possibly next spring into next summer maybe we'll see some adjustments.

Blohm: It'll happen.

Pearson: Alright.  Well, thank you so much, Naomi, really appreciate you being with us here today.

Blohm: Absolutely.

Pearson: And thanks to all of you for sending in your questions via Facebook and Twitter.  Please continue to do so and we'll continue to get expert answers.  Thanks for watching and have a great week.


Tags: acreage agriculture analysis basis commodity prices corn economy markets midwest Naomi Blohm new crop grain soybeans USDA weather wheat