Iowa Public Television


Market Plus: Naomi Blohm

posted on October 25, 2013

Pearson: This is the Friday, October 25, 2013 version of the Market Plus segment.  Joining us now is Naomi Blohm.  Naomi, welcome back.

Blohm: Thanks, Mike.

Pearson: We've got a lot going on today.  One of the things we didn't get a chance to talk about on the show but is big news, S&P hit another record high today.  The string in the past four months keeps climbing higher.  What is going on in the stock market?

Blohm: It is an amazing feat and a lot of that I think is tied to the fact that our government continues to pump money into the bond program and so investors are feeling that if that's going to continue as is then they're going to just keep their money going into the stock market.  Also there has been some good money in the electronics sector and that has been also pushing the market higher as well.  The funds have their money there so if something happens down the road that makes them want to take their money out then watch out, we could have some sort of a free fall.  And I know that there has been some analysts out there who are calling for major drops in the stock market over the coming years.  Yet to be seen and I'm not sure what news would have to happen to make that trigger point for that.  But for now it's exciting, it's very exciting.

Pearson: It is exciting and the concern is that maybe it's this quantitative easing, it's maybe artificial growth?  Would that be the fear in the stock market from the other analysts' perspectives do you think?

Blohm: That is I think what it probably is because there's a lot of us who are saying well is the economy really that good?  Have we recovered that much?  And so there's a lot of questions around it and it's where you're excited for it but you're cautious about it at the same time.  You're going to want to try to hedge your portfolio and be mindful of sometime down the road just being able to lock in the profits that you might have on your portfolio and put your money in a money market somehow down the road.

Pearson: Depending on how things go on the broader governmental scale.  Now, as we're talking locking in profits, locking in prices, Doug in Moses Lake, Washington is curious about when should he begin to lock in some of our diesel fuel needs?  We've seen crude oil fall for the past little while.  Where is that expected to go?

Blohm: The $90 area is our first level of support and I think we'll then see the market trade between $90 and $95 or maybe $90 to $100 and then try to find the supply and demand balance.  Currently, globally we have plenty supply.  And in America we are, of course, also making more supply.  So it's ironic that with as much supply as what is out there right now, the last time we had this much supply the price of crude was down at $30, to $40 a barrel.  So one would think, well, shouldn't it be down at that price point?  But at the same time, of course, with inflation and things like that and with always just that scare premium that is with the Middle East it's going to be hard for the market to just do a free fall lower, more like baby steps lower.  So any time we're at a lower end of the range it may be worthwhile to lock in portions of it but yet we don't have a reason to see the market go racing higher.  So I wouldn't necessarily lock in all of it because of the potential for prices to slowly slide lower just because of our ample supply right now.

Pearson: Certainly.  And what could drive it higher would be an event out of the blue sky like we saw with the Arab Spring, the most recent uprising in Egypt and Syria and hopefully those are button down for the time being.

Blohm: Yeah, it would absolutely have to be a scenario like that because right now we've got the supply, it's not a supply issue at all.

Pearson: Right. Alright.  Well, thank you Naomi.  Let's take a look at Mitch in Albert City has a question.  He's got, he's curious about with the two reports being put together in November from the USDA, and you mentioned it, his question is, is that going to affect the market heavily?  And do you think it will have a bigger impact than an ordinary October report would or a November report?

Blohm: That is an important question and one that is on our minds.  This week the USDA did come out and say that on this November report they're going to have yield updates, they’re going to have planted acre updates, you're going to have harvested updates so it is going to be a big report and it has a lot of potential to it.  Now, if the USDA is the USDA it will probably be bearish.  So be prepared for that and that's what the market is anticipating right now so the surprise would be if there's anything friendly in it.  But for right now the trade is expecting bearish, you know, bigger supplies of beans, bigger supplies of corn and that is the way the market is starting to try to react.  So be defensive in mindset because if the USDA is true to form there will be something new and bearish and the surprise, again, would be if it is friendly.  But it could really be a big report.

Pearson: Right.  Every year, every report this year we've added either, we've added more corn I believe.

Blohm: Yeah, amazing.  It is.

Pearson: So, now, that would lead us to believe that when the report comes out, if it is bearish, it probably won't be limit down because the market already has a fair amount of bearishness pumped in.  We'd probably be more likely to see limit up if we get good news.

Blohm: Yes.  I would agree with that 100%.

Pearson: Alright.  Now, let's take a look, one of the things that we talked about during the show and it's just interesting, the packer is paying record prices for cattle and that cash cattle price at $132, $134 puts us now over the price on the Mercantile Exchange, it closed today at $132.97.  Greg in Omro, Wisconsin is asking, the basis in cattle is strong in the buyer's favor.  Will it shrink in the nearby?  Are we going to see cash prices drop to the board?  Or are we going to see cash prices pull the futures market higher do you think?

Blohm: I think that they'll both stay firm and that they will come together but to the higher end of things through the holidays and potentially into Super Bowl season as far as the demand staying strong until that point.  But then, by then I'm sure something will emerge as far as demand one way or the other to make prices not fall apart but soften.  I would say you're going to see firm prices for another month or two between cash and between the futures and they'll likely somehow come together.  I would suspect it could be a mix of the cash coming down just a little, the futures coming up just a little and be doing a soft meeting in the middle versus one big tug of war one way or the other.

Pearson: Alright.  So, now, for producers, for cattle feeders out there, would this be a good time to begin aggressively marketing some of the cattle in the lot or hold off and see what pushes what where?

Blohm: I would do some because it is very good value and it is important to be mindful of that because if you're not doing a little bit of something, if some outside event happens that makes the prices fall you'll be just frozen in your tracks and you won't know how to react.  So at least if you have a little something in place it just allows you that much more confidence.  Like we were saying on the show earlier, you can also have like a mental stop under the market or potentially even an order with futures or options or something that if prices fall lower that you're going to have your hedge locked and ready to go.

Pearson: Alright.  Well, there's a lot of exciting things happening and it looks like we'll have a lot more excitement as these reports start to come out fast and heavy from USDA.  So we'll appreciate your advice, Naomi.

Blohm: Yeah, you're welcome.

Pearson: Thanks for being with us tonight.

Blohm: Yes, you're welcome.

Pearson: And that wraps us up for the Market Plus segment.  But please continue to send in your questions via Facebook and Twitter and we'll continue to get expert analysis for you.  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