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Market Plus: Market Analyst Naomi Blohm

posted on February 10, 2012


Market Plus: Market Analyst Naomi Blohm

Pearson: This is the Friday, February 10, 2012 version of Market Plus. Hey thanks for joining us here at our Market to Market Website. Tell your friends and neighbors. We like to make this a big meeting place whenever possible especially when we have Naomi Blohm with us because she is not with us that much. So it means a lot when she shows up. And Naomi, a lot of stuff going on, a big wild week in the market, you got a tale of two crops here, you got your old crop corn, you got your new crop, everybody is talking about crop yield.

Pearson: Everybody frustrated with last year's yield. I was in your native Wisconsin a couple times this week. We are growing more corn in Wisconsin. Wheat or hay productions dropped 20%. Corn production is up, but again yield becomes a big thing and the drag on soybeans profitability and production-wise has become a drag. Corn on corn on corn on corn on corn seems to be whatever body is talking about. So let's talk corn, old crop on the show, you are really not seeing that one ease up very much. What did you say 6.25/6.75?

Blohm: 6.75 is the resistance on the July futures with $6.00 of support and I think it will stay firm.

Pearson: And stay firm. So - channel like that if we need to make sales up near 6.75 you wouldn't be afraid to sell some?

Blohm: Absolutely. Go ahead and pull the trigger just because if for some reason that the global economies drag everything lower you want - that is your opportunity right there at the 6.75 point. But fundamentally it is still a - yet for awhile to come.

Pearson: We really enjoy these questions from our viewers out there and I think one good question came in from Matthew in Iowa and that was what do you think USDA Supply Demand Report and the disappointment on the corn export number? There have been a lot of talk about USDA Reports and the revisions and the problems and some of the things don't make sense. Popoff-

Blohm: It is what it is whether or not you agree with it and I think that the market price is showing what the market believes to be true. And so with the market price staying firm and wanting to support corn at these values it is saying that perhaps the situation out there is tighter than what is being foretold. So I think we are going to see the market place continue to believe that the ending stocks are maybe tighter than they are, and that perhaps export market is going to be stronger than what it is especially with the dollar being down right now. We are going to see the corn price well supported.

Pearson: All right. We have a question from Daniel in New Jersey that is a little too complicated for us about ethanol. We produce a corn oil product which is great. A lot of cattlemen were buying it and using it for winter feed and it was a great product. But now they are converting that into a diesel component, a corn bio-diesel component, and of course they are also doing algae production. So there is a lot happening on that front. You mentioned the U.S. dollar, Pete up in Canada sent us a note, and said what's your outlook for the U.S. dollar because it affects our Canadian basis which has deteriorated a bit lately. And talk about that because this dollar, it has been up on days a lot of times you thought it would go down, and down on days it should go up, but the trend has kind of been higher.

Blohm: Right and I think that right now with the U.S. dollar what we are going to see happen is that we are the lesser of all the world evils in which case the dollar is going to be well supported overall. If Europe has any sort of a default the dollar is going to rally. The only thing that maybe can get the dollar to drop back lower here in the United States is if they implement QE3 which really the Feds are hoping that they not do and I think that it is going to be a long ways off. So, right now the dollar is supported with outlook of a little bit higher but the big picture if Obama wants to have exports increase double-

Pearson: That's right double in five years. You heard on the show.

Blohm: Double? The dollar has got to stay low. The dollar has got to stay low. So it is going to be interesting. That is one of those things that it is going to come in and really allow corn to go racing higher or fall apart just depending on the influence of the dollar and the direction it has.

Pearson: Yep. Unrelated to that, wheat sales 12 and 13, is this a year when we should forward contract this year/next year's wheat crop if we get that rally? You were talking above 7 bucks. Pete in Canada wants to know.

Blohm: Well, that is a great question of course --

Pearson: Canadian Wheat Board is gone.

Blohm: Yes, that is right. That is right. Of course with any time you’re forward contracting that far out, if you can, you have to really know your cost of production and that might be the tricky thing to keep in mind. So, assuming people do know their cost of production I would say start slow and start gradually because there is a whole lot of weather that can happen between now and then, and so I wouldn't go gangbusters over the top.

Pearson: Yes. It seems like every time I have known anybody that has done that they have regretted it. So, having said that, so corn and beans - we had a great question on soybeans from another viewer. Are we basically giving up on soybeans in this country? I have been throughout the Midwest this week and all anybody wants to talk about is corn. Very frustrated. When they do talk about soybeans it is with a certain degree of frustration over lack of productivity in addition to the sudden death syndrome, nematode problems in certain areas, yield issues, there is just some challenges there, and corn on corn on corn has been where we have been going. What is your outlook for soybeans? I mean when I look at a 12.50 soybean I think well, I can grow that and make it work.

Blohm: Right. Absolutely and I think that right now the cost of production with soybeans and the profit per acre right now on good yield is about $425. If you compare that to corn and this is using kind of Illinois numbers and Illinois acres and yields. Things like that.

Pearson: My home state. It is perfectly acceptable.

Blohm: So, right now if you do corn on corn at worst you are maybe going to get $450/acre profit and then on the flip side a lot of people have potential $500/acre profit and $550/acre profit. So, until the soybean yields can become more consistent you are going to probably see corn as the king. It is just how it is.

Pearson: As long as people have calculators that is what is going to happen. All right. I want to talk about crude oil for a minute. You mentioned it on the show. Obviously we always have this ongoing volatility in the Middle East. Sometimes it heats up more than other times. You have a theocracy in Iran that is deathly opposed to Israel; they are building nukes, trying to. Israel is the western most outpost for democracy. It is one the United States needs to protect and they are not going to put up with a lot, a lot longer. Now the intentions have kind of cooled off again this week. We get a flare up; Israel comes in with some F-18s, takes out the Iranian nuclear arsenal, the nuclear build potential, what is that going to do?

Blohm: From what I have researched this last week with some assistance from people who have some insight from the government. I have subscribed to a newsletter from a retired Lt. Coronel from the Air Force and so he has got some insight for me. From what I can tell is that if Israel strikes Iran or if Iran strikes Israel that is going to instantly fundamentally send that crude oil price up $25/barrel in a heartbeat. If Iran gets really ticked off and wants to close the --- that can - that is going to really make the crude oil market rally because -

Pearson: Then you are going to 200-- right? Is that what he is saying?

Blohm: That's what the thought is and because a fifth of the crude oil is coming out of that whole area for the world, and so that is going to just - it could be catastrophic and - was.

Pearson: Wish them luck trying to close the Strait of Hormuz with the USS John Stennis and the George H. W. Bush on the way in and some of the others.

Blohm: Absolutely.

Pearson; We will see what happens. It is a very volatile world and Naomi thanks for bringing it all together for us here tonight. We appreciate it on Market to Market and here on Market Plus. And from all of us on Market to Market, I am Mark Pearson wishing you a great week.


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