Market Analyst Naomi Blohm discusses the commodity markets with host Mark Pearson.
Pearson: This is the Friday, August 12, 2011 version of Market Plus. Thanks for joining us here on that Market to Market Web site. We're talking about the corn market and we showed our ears of corn from our friend Lloyd Funk down in Hillsboro, Kansas and I did want to add that he is going to go ahead and harvest those. It will be silage but it's pretty pathetic display of corn. He had to look to find just some ears for us. Anyway, appreciate that from Lloyd. But we're got so many questions from folks out there. I was in Hooper, Nebraska yesterday, we had a lot of comments on the Internet about multi-year sales. When you see corn up above $7.00 -- Naomi Blohm is our guest this week, this is her first time on Market Plus, she's on Market to Market for the first time today too, did a great job -- Naomi, what do you tell your clients about multi-year sales? The question from Chris says costs in corn production are increasing 50 to 60 cents a bushel, at what point do we pull the trigger on multi-year sales? What do you tell those people?
Blohm: I think for 2012 you can go ahead and pull the trigger, especially if you can really get those input costs locked in because the value is there, I know you can do it. But to go out to '13 or '14 is premature yet because there's no way you can lock in your input costs and so you really could find yourself in a pickle if you tried to lock it in. And with the volatility of the marketplace right now I know that a lot of people are thinking this is tremendous value, most likely it will be a dollar profit but at the same time if this is the type of volatility and if we have a failure in the southern hemisphere production they're really going to be in trouble and the price is really going to be able to actually surpass the $8.00 mark. I think it's going to take a catastrophic failure in the southern hemisphere for that to happen but I wouldn't want to do that at all. I think I just would be cautious and just hold tight.
Pearson: Your input risk is so great -- if you're that nervous about it, or your banker is, I guess you could sell what 10% maybe? Would you do that?
Blohm: I think if you have your lender behind you and you've got a plan and you know what's going on I think I'd be okay with it but I would not at all do anything more than that.
Pearson: Beyond 2012.
Pearson: Okay. Talk a little about -- on the show tonight we talked a lot about the equities in gold prices and oil and gold going to phenomenal levels, oil prices falling off, a nice dividend, an energy dividend for consumers, hopefully it will improve that consumer outlook and that has got to improve the outlook for beef I would hope. You talked about this box we've been in on beef prices. What do you see?
Blohm: I think that that trend is going to continue. If you look at a long-term continuous chart it really looks like we're going to be stuck here, absolutely I think into year end, providing that we just don't have our catastrophic economic failure. At the same time though we have to make sure that demand can stay strong before prices can surpass the $1.25 mark. But I think we're going to be here for a bit.
Pearson: All right. Corn prices, you mentioned $7.25, you'd make sales at $7.25.
Blohm: Absolutely, absolutely.
Pearson: And you'd make sales on beans at about what level?
Blohm: $14.00 if we get up to that resistance level again because it's going to take corn going higher to see if those beans can go up too.
Pearson: All right. And, again, you don't have to be embarrassed by a $14.00 sale.
Pearson: And as far as the wheat market is concerned you pointed out some interesting things. The USDA report generally, this is the first one they have announced that they didn't immediately announce a revision was coming.
Blohm: That's a good point and I think that what we're going to see there is just perhaps a little bit more uncertainty in wheat spinning its wheels, spinning its wheels on prices and it's going to take probably into next year before we really see some major price action there but I think the wheat is going to just be able to stay at these levels for a while.
Pearson: These lousy ears of corn we've been looking at really come from wheat country down in Kansas and there's a lot of concern about getting that fall crop in with these dry conditions.
Blohm: Sure and we're going to see that also in the Midwest. We're already hearing, of course, is that the tips of the ear aren't filling out but I thought that what was interesting is that in eastern Nebraska I have a client who said he went out in his field, he peeled back the husk and what he saw was a nice looking cob of corn, the ear was great. But when he got in there the depth wasn’t there and so the test weights are really going to be down. In the September USDA report they're going to finally account for weights so I think we might see another yield reduction.
Pearson: It was a summer of hot nights, not good for corn. My friend Tom told me something and it's true, you know, all of our corn came from the grass that was around Mexico City which is about 7400 feet, it wants cool nights and you get those down there. We didn't get them in the Midwest and the Corn Belt this year.
Blohm: It's really going to make that crop suffer. Yield is really going to be down and I think potentially even more than what people are thinking it might be.
Pearson: Naomi Blohm, great to have you with us. From the Stewart Peterson Group joining us here on Market to Market this week and here on Market Plus. Thank all of you for joining us as well. Make sure you join us next week. From all of us here on Market to Market, I'm Mark Pearson. Have a great week.