Market Plus: Naomi Blohm

Feb 7, 2019  | 8 min  | Ep4425 | Podcast

Podcast

Howell: This is the Friday, February 8, 2019 version of the Market Plus segment. Joining us now is Naomi Blohm. Naomi, welcome back.

Blohm: Thanks, Delaney.

Howell: Okay, Naomi, we've got some pretty interesting questions this week, a couple of we'll call them softball questions. Starting off here with Tim in Winona, Minnesota. He said, thoughts on corn used for feed number in this week's UDSA WASDE report?

Blohm: Yeah, so the question stems from the fact that the USDA actually lowered that number. So that was quite a surprise, especially when we have such big production of cattle and hogs and dairy. So it's interesting to see how they maybe came up with that number. I would be curious to understand where it came from. But to me it seems interesting.

Howell: Does it pencil out, especially when we look at, obviously we keep hearing wall of cattle coming, okay maybe that's not going to happen. But we still do see the beef demand there, we see feedlots continuing to be at capacity or near capacity. Does that number make any sense?

Blohm: Not so much, no. I'm having a hard time understanding where it came from, especially with it's not like they're substituting corn for wheat because we still have all these wheat supplies and the wheat ending stocks get bigger. So it's interesting and I think that will be one to watch going forward. I think that the feed use category needs to be a little bit larger than what was represented today.

Howell: Okay. What about this question in general, we've got Hair Farmer on Twitter. Was this USDA report as boring as I thought it was?

Blohm: Yes, as boring as the Super Bowl, as boring as the Super Bowl commercials.

Howell: That was very boring. We've got a question about the Super Bowl commercials.

Blohm: We'll get to that. Yeah, it was boring. But what I really appreciated about it, and we talked about it on the show, I really liked how the USDA lowered that corn number because as far as yield goes that's now a big cornerstone going forward for this entire year for production. And they didn't give us any surprises but that's maybe okay because there's still so much outside global market events happening that we have to be in tune to, there's the potential of production issues here in the United States, so I can see how they didn't want to necessarily ruffle any feathers right now. But yeah, boring. So we still have to break out of this trading range yet one way or the other. For corn the bias now after today's data would be supportive to the upside unless the USDA comes up with a super humongous corn planting acres number in a few weeks. That would be the only thing that would throw this off. But yeah, boring.

Howell: Does the yield number released today, that 177.4 or whatever it was, does that change any more acres into corn?

Blohm: I don't think so. I really feel that of the producers I've talked to they know what they're going to plant. So the only thing would be last minute weather issues. And from the producers I talked to a lot of them are going to add more corn acres or stick to a regular rotation. And up in North Dakota they're going to be planting less soybeans and instead potentially doing more spring wheat up there. And yeah, it will just be something to keep an eye on. But at least we've got this firm cornerstone where we can now just do math going forward and at least be able to be able to understand quickly where ending stocks could go as far as perception and then ultimately how that leads to price movement.

Howell: Right. But realistically, as you mentioned on the show, here two or three weeks when we have the Ag Outlook Forum is when we'll probably have some pretty concrete acreage numbers.

Blohm: Yes, yes. And then the market from there will, you'll see it come out on Twitter. That will be if acres are this, harvested acres are that, here's three different yield scenarios, this is what ending stocks could be, this is what it would mean for prices. So we'll start to see that in a couple of weeks.

Howell: IS that enough to break us out of range in corn?

Blohm: I think it could potentially be one of the pieces to at least get us moving. It's not that it would be something that dramatically moves us higher or lower but at least maybe can kind of get us out of this slump that we've been in.

Howell: Okay. Talking about another slump here, we've got weather that has been obviously a big issue. I wasn't on the show last week and I missed the polar vortex but that has been impacting the commodity markets as well. We've got a question here from Glenn in Bryan, Ohio. He said, Groundhog's Day was last week and even though we now have USDA data, are we destined for six more weeks of typical winter marketing patterns until the planters start to roll?

Blohm: That is a clever question, Glenn. I like it. So as far as six more weeks of data or price movement, seasonally what normally would happen for prices is that seasonally corn and soybean prices have the ability to work higher into late February and early March. So I'm quite curious to see if we have that normal seasonality, which would be fantastic, we could get some more cash sales made and things like that. But at the same time if we don't get any outside market information from trade deals or if we don't see any additional new weather issues develop from South America I'm not sure if we're going to see our normal seasonal tendencies for this market. I think there's a lot of producers who had been doing their storage based on this normal seasonal tendency that would happen but I don't know. Good question, Glenn.

Howell: It is a good question. We've got another good question here. I made reference that we had a question about the Super Bowl commercials and a couple of other things into this one joint question. Adam in Wisconsin, we've got a lot of Wisconsonians that must want to send you questions, Naomi. He said, what issue is the market going to pay the most attention to, the Chinese trade dispute, the planting intentions report or the beer commercial controversy?

Blohm: I think the beer commercials are more fun to talk about. But as far as that, it will be a combination between the weather and the acres going forward. Acres I think matter most quite frankly unless there is a bigger South America weather issues that develops because there's a lot of people that think that the Brazilian crop is not 117 million metric tons, it could be smaller because it has been really hot down there. But we don't know that quite yet for sure. And more importantly, that temperature issue down there that is happening, a third of their second crop corn is planted and so we'll see if that heat affects the second crop corn because if that becomes an issue that might be our catalyst that finally gets the grain market moving also.

Howell: What about you mentioned I think during the main program here that corn was going to be the driver for soybeans. If we see corn break out of this range soybeans will likely follow with it. If we get a weather issue in Brazil or Chinese trade deal in place will it flip flop and soybeans pull the corn market up with it?

Blohm: That could be. If the weather is an extreme enough issue or if we find out that for some reason Brazil can't meet some of the export commitments that they had to China, something like that. But we don't quite have that information yet. But that would be something that would make the market move. If we get something like that, I think the reality is that it would allow the marketplace to go back to testing close to the highs from last summer. But with the fundamental information that we have it wouldn't be enough to get us through those ranges yet. That would depend on our summer weather in June and July.

Howell: Okay, sounds like a lot of uncertainties, a lot of weather and things to watch for the future.

Blohm: Yeah, just make sure you're making cash sales on any rally that you see. That's the most important thing right now.

Howell: All right, Naomi Blohm, thank you so much.

Blohm: Thanks, Delaney.

Howell: Join us again next week when we'll look inside a prison dairy operation with outside benefits and Mark Gold will join me at the Market to Market table. Until then, thanks for watching, listening or reading. I'm Delaney Howell. Have a great week.

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