Pearson: This is the Friday, August 11, 2017 version of the Market Plus segment. Joining us now is Naomi Blohm. Naomi, welcome back.

Blohm: Thank you.

Pearson: We are excited to have you. And we know we're excited to have you because we have a lot of questions for you. So let's just kick it right off here. And this is kind of a theme that I think we've touched on a couple of times during the program. We just want to get your thoughts a little bit more. Matt in Amherst, Wisconsin notes that it seems like just about every area of the country seems to be having some production issue, crop ratings continue to slowly slide down yet the USDA says we'll have pretty much trendline yields. What is the real story? Naomi, when you're looking, when you're talking to producers, when you're pricing things in, what yields are you using in your head?

Blohm: Yeah. The 165 number on corn I think is totally where we're going to end up for nationwide yield. In January I think we'll be there, it might even be a little bit less. Heading into this report I personally felt that the USDA would be slow to lower the yield. I was looking though for a two or three bushel drop, not the aggressive -- and I thought that would be about it. But the one bushel drop was, well it is what it is and we all don't agree with it obviously. So it will come, the truth will come, it always comes, it just takes the USDA six months to a year.

Pearson: Yes, yes it does. And soybeans, that 48 you mentioned on the program, is that kind of where you'd feel we'd be sitting today given we've started harvest?

Blohm: Yeah, well what floors me is when they are so slow to admit the truth in corn but yet to just turn around and be like oh it's a shoe-in that these beans are there and they're better than trendline, I thought they'd just keep it unchanged at 48 and I thought that would be a perfect placeholder, it would be appropriate, no one would be upset by that. But here it is.

Pearson: A bushel and a half higher across the nation times what did they say, 88 and change? Because they left harvested acres unchanged. Did they adjust much on corn harvested acres?

Blohm: No, nothing.

Pearson: No, nothing. Okay, so it was really just yield was all that changed.

Blohm: Yes.

Pearson: Alright. Now, we've got a question here from Jake and we've actually got a couple on here, Naomi, since you are up to speed, let's talk cotton a little bit. So Jake wants to know if cotton has broken out quite yet? Have we seen a breakout? And where do we sit today?

Blohm: Prior to the report cotton had been trending higher for about two weeks, so similar to corn and similar to soybeans, stepping back and looking at a year long picture it was stuck in a pretty big range. On the USDA report they increased demand and that was really important and very truthful, but they made the production number astronomical and it was in the low 800 pounds a barrel and now it's almost like a 900 pound. And that was the game changer for that market, such a large increase in production. So that is what made ending stocks from a year ago to this coming growing season almost double. And global production is up. And that part is legitimate because India is supposed to be planting potentially 18% more cotton acres this year, China has had decent production. So I can buy the global increase in production. I'm not in tune enough with cotton producers to know if the production increase is valid for that large of an increase or not. But because of that number that did make the cotton market work lower, substantially lower. Could it drop a little bit more? Potentially but I don't see it just falling out of bed because thankfully demand is so good around the world right now.

Pearson: And now our next question comes from Doyal and he's in Alma, Arkansas. Look out a little bit further to the December contract. He wants to know where will December cotton market prices be before December comes? As we get into harvest we start to really assess what this crop is. What do you watch? What are your benchmarks in the cotton market?

Blohm: It's, again, just like the corn and soybean numbers, in a range. I don't see us really getting out of that range too much right now. A little bit more of a slide but I don't think it goes too much more than that. So I think we're going to be stuck here for a little bit.

Pearson: Not going to be breaking down below 60?

Blohm: Based on information that I know this moment I would not imagine that to happen.

Pearson: Okay, and if we didn't do it on the report by doubling ending stocks then that gives you some hope.

Blohm: Yes.

Pearson: Let's take a look back at corn and soybean country. This question is from Matt and Matt is in Mercer County, Illinois. He's asking, big down market, will it help in basis? And what should guys be looking for to go ahead and lock some in for fall delivery?

Blohm: Here's my fear, my fear is that elevators will blame the USDA and take advantage of the situation.

Pearson: Just let basis stay unchanged and let the prices fall.

Blohm: Now, the reality is that there will be more farmer selling coming up, people needing to clean out their bins. I think it would be a courteous thing for an elevator to do as a business owner who wants to retain their business. If you maybe increased your basis a little bit out of respect because it's a hard time for everybody and I think going forward you should want to do your best to encourage the producers. And I know that a lot of elevators will do donuts or things like that, but it's going to be a hard time here in the next couple of months. So you have your part to stand solid for your inspiring task in agriculture, bring it all back to the FFA creed and step up and do something to help your brothers out.

Pearson: Because the banker is not going to take donuts when that operating note comes due. I've tried. Alright. We've got another question for you, Naomi. This one is from EZ$ in Northeast North Dakota, he's on Twitter @bankerfarmer1. He wants to know, again, North Dakota, what is the acreage battle going to look like in the spring? Is there going to be one?

Blohm: For North and South Dakota I think there really could be one because of the higher prices that they're going to be receiving for spring wheat, especially in a month or two when the truth comes out about the abandoned acres and what the harvested acres actually are going to be. You'll see a price spike higher. So those two states will have a fight for acres but every place else I don't think they're going to be doing too much of anything, just kind of their same rotation or we'll see where things end up.

Pearson: Now, a little mental game here, let's say that August finishes out relatively well, we finished with 48 as a national average bean yield, let's say corn USDA works us down to 167, so we're still trading $3.30, $3.50 cash corn and $10 beans, that's a pretty, that's bigger than 2.4 isn't it?

Blohm: Yeah, actually yeah for as far as the ratio.

Pearson: Yeah, the ratio. I can't do that math in my head.

Blohm: Right, and so that would encourage more soybeans at this time for sure. But again, when the truth comes out about these combines and what the corn fields are actually going to say you might get your post-harvest rally that could finally make things where they ought to be.

Pearson: Alright. Final question for you, Marty up in Buxton, North Dakota, @SatMonstor wants to know, he says, new crop bean exports have been very slow so far. When do you think they're going to pick up the pace?

Blohm: Definitely at harvest time here and you're going to see it in the coming weeks for sure because the Chinese demand is so strong. The one hiccup of course could be if we have any issues with North Korea, that's a game changer. But, based on things I was reading today, there was a response in a Chinese like newspaper or something, so it's not from the government but it's an editorial comment that I don't think would be put out there unless there was permission for it to get out.

Pearson: Yeah, I don't think there's a whole lot of editorializing allowed to happen.

Blohm: So the commentary essentially was, they were saying North Korea, don't you dare do anything to pick a fight with the United States. But they did say, United States, if you pick a fight with North Korea watch out. So they're doing their part to try to help make sure things are stabilized in the region. They've got people to feed and I think you're going to see the exports in general pick up for pork.

Pearson: Into China, not North Korea, into China.

Blohm: Yeah, into China it's a strong thing so demand is going to stay, it's going to be strong.

Pearson: It's interesting looking at a Cold War with a country like North Korea. Who would have guessed we'd be here in 2017? Now, before we let you go, Naomi, we do have a question for you from a student at Iowa State University. We encourage all of you who are ag students of any age to get out your phone, shoot a little video and send us your questions and we will make sure we have an analyst get it answered for you. So this week the question is from Iowa State University. Naomi, here is the question for you.

Erica: Why is it important to have ag ed in schools?

Blohm: Awesome question. Agriculture education in the public school system, even the parochial school system would be nice, it is so important because when you have the disconnect right now that you do between consumer and where their food is coming from and the misconception that is there, if we could start to clean that up in general with kids in the classroom in middle school or high school that would be tremendous. I think it also puts more value on the work that farmers do and the farming community. Agriculture is still one of the larger growing segments of jobs and there’s so many different things you can do within agriculture that I think -- people gotta eat, so you've got to have people in the industry who really respect where it's coming from. In addition, I think about all the valuable lessons that I learned from my days working in tobacco fields, from my days just doing anything I could to help at my friend's farms and things like that and I'm the hugest fan in the world of the FFA creed and so when you have to force your freshman class to learn that it can change lives forever. I feel so strongly and adamantly about that. So ag in the classroom needs to be right up there with mathematics and science and things like that because it's life lessons, it is life lessons and it's the future of the most important thing that we deal with every day.

Pearson: And for those of us who learn best hands-on, what a great way to learn science and math in a practical setting.

Blohm: Bingo.

Pearson: Well, Naomi Blohm, always appreciate your insights. Thank you so much for taking the time to join us.

Blohm: Yeah, thank you.

Pearson: Be sure to join us next week, we will be doing all sorts of interesting things here on Market to Market. We will be joined by John Roach on the program and we will also take a look at how veterinarians are stepping up in rural America. So with that folks, thanks for watching or listening to Market to Market and Market Plus and be sure to join us next week. 

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