Pearson: This is the Friday, July 1, 2016
version of the Market Plus segment.
Joining us now is Naomi Blohm.
Naomi, welcome back.
Blohm: Thank you.
Pearson: Happy 29th birthday, by the way!
It's very exciting, we get you on your birthday.
Blohm: And it's Canada Day for all of our friends
north of here.
Two reasons to celebrate.
Absolutely.
Pearson: That's right.
Two reasons to celebrate.
And as we talk this cotton market, a little reason to
celebrate, continued that push to the upside.
Going to continue?
Blohm: No.
I think cotton is going to start to trade sideways
for a little while longer.
The December contract has been between 64 and 66 for
a while.
But the USDA just like everything else gave us a
nasty bearish report and they increased cotton
acres and the perception is that the yield is going
to be fine because the weather hasn't been
improving down there and the endings stocks will
grow which also then we have Chinese marketplace
and they're getting rid of all of their nasty cotton
that they've had since forever.
And so there's just not going to be a lot of room
for this cotton to go.
So in the short-term looking for it to go maybe
from the 64 support area, if that fails all the way
down to 60, but that should hold it for a
while.
Not any sort of an epic failure by any means but
we've run out of reasons for it to go higher.
Pearson: Okay.
How is China disposing of or utilizing their massive
stockpiles that are three, four, five years old in
some cases?
Blohm: I know and I don't get it.
I wish we could have eyes there.
That would help.
But yeah I don't know how you can make the cotton
work into clothing or what they're using it for, dog
chew toys maybe, I don't know.
But I just don't have any idea what they would be
doing with it because -- Pearson: But they are
trying to draw down the massive stockpiles.
Blohm: They are, just like they're doing with the
corn, they're trying there too.
Pearson: Having much success on the corn side?
I really haven't heard.
I know their auctions were pretty poor to begin.
Are they picking up?
Blohm: They continue to do the auctions but they
continue to just be poor and so that's where we
hear them back-dooring imports of corn from
Ukraine.
And so they're getting around the issue but they
are I think doing as much blending as they can.
Pearson: Okay.
Makes sense.
That's going to take a lot of blending to get rid of
all of those stockpiles.
Now, we do have a bunch of questions here from fans
and followers of Market to Market.
We want to continue to get all of you to send in
questions.
As we go to the future and continue to work on this,
if your question gets featured on Market to
Market, we are going to ask you to check your
mailboxes.
We're going to try to find some way to thank folks
for asking us good questions.
So please keep it up.
To start with, Glen in Bryan, Ohio is wondering,
besides the weather, from now until harvest, which
we talked about on the program, what will be our
greatest risk or challenge in marketing this crop?
Blohm: The factors that we need to continue to watch
would be South American production, how much are
they going to be growing and planting based on all
of the drama that continues to happen with
the politics down there between both Brazil and
Argentina.
So that's going to be coming up next.
The other things we have to keep an eye on are the
value of the U.S.
dollar, so ever since Brexit, now the value of
the dollar is going to stay probably between 95
and 100, which is high and it's as high as it was
this winter which doesn't make our export market red
hot.
We still export products but it's not going to be
helping us by any means.
So that's the other thing.
And then of course along the way we've got the
political excitement here in our country and what
that would mean potentially to our trades
that we have with other countries.
So that's something to be mindful of too.
So at any one of those times those issues could
trump anything that is happening here, no pun
intended, but yeah those are I would say the three
things to really be watching right now.
Pearson: Alright.
Dollar, South America and North America, the trade
agreements that we have existent and -- Blohm: The
politics that will ensue, yes.
Pearson: You bet.
November is always an exciting time every four
years.
Alright, next question.
Speaking of exciting times, this is from Roger,
@RogerCooper62 on Twitter.
Roger mentions that we have algorithmic computer
programs that can trade 2 million shares, thousands
of contracts, in milliseconds.
And then he asks, do we have fake markets?
Another way to look at that is, what does it mean
for the producer, the actual producer or end
user, when we see these huge moves milliseconds
after a report?
Blohm: Yeah and that happened this Thursday,
the soybean market was down and up within a blink
of an eye.
But what happened as the end result is that the
marketplace found its path.
So the algorithms and things like that, it's fun
for day traders and it's fun for people who are
opportunistic on those little moments.
And so that is for those type of people.
But in the end the market finds itself and so I
don't think it's anything that's going to be bad
going forward because supply and demand usually
wins out in the end.
Pearson: Okay.
So fundamentals still happen or technicals,
people take a breath before they trade or
continue to do that is what we should be saying.
Blohm: Yes.
Pearson: Alright.
Next question, we didn't get to spend a lot of time
on livestock in the program.
Doyle in Alma, Arkansas is asking, will livestock
prices be high or low by the end of summer?
Let's use today as a benchmark.
Are we going to be higher or lower come end of
summer?
Blohm: Well, I would say for the next month
sideways.
My fear is that we'll actually be a little bit
lower come the end of August, not drastically
lower, but lower because we have cattle, we have
hogs, we have poultry, we have a lot of protein
available, there's not a supply issue there.
And demand domestically is current and it seems to be
as current as it's going to be.
So the fear is if our export market dwindles
because that is what is keeping the hog market
alive.
And, as I said on the show, our cattle exports
are actually up 2% from year ago levels.
So if the dollar goes higher, which it probably
will, it's going to affect our exports a little bit,
which then could attract some technical selling and
if that $110 area fails on the charts for cattle it's
going to be a quick fall technically speaking and
then same with hogs.
If it ever breaks kind of that $82 to $80 area it
could make for a quick run lower but nothing that's
going to make it fall out of bed.
But I do have a little bit more of a negative bias by
the end of August.
Pearson: Okay.
And that $110 level on live cattle, we were right
there at the close of last week, $110.78 and a half
so it's -- Blohm: It's a big line.
It's a big line.
Pearson: Once we break through and race down
towards $1 is that pretty strong support?
Would we expect that to hold for a little while?
Blohm: Yeah, then we see it trade between $1 and
$1.10 and then do some sideways trading from
there until it sees if demand picks up because of
the cheaper levels and then just to take a look
at what the dollar is doing after that time.
But yeah I would say a little bit negative.
Pearson: Okay.
Now a question we didn't get, it didn't get sent
in, it was just talking to a neighbor of mine.
Friday we saw the corn market drop, I forget
where we closed, down 6 cents, 4 cents down,
feeder cattle were off $2.50.
Why would that happen?
What would cause that separation?
Blohm: They were behaving properly earlier in the
day with the cattle and feeders being higher and I
saw that also and I'm not sure is the answer.
I didn't know if it is was just maybe position
squaring ahead of the holiday weekend was my
best guess.
I didn't hear anything bad that happened for cattle
today by any means, I didn't hear anything that
was bad for cash or anything like that.
Pearson: I'll tell you what it was, Naomi, I had
a calf.
I had another calf this morning so the market is
looking at all that -- Blohm: Flooded with
supply.
Pearson: All of this supply.
Okay, so probably some kind of technical getting
ready for the weekend.
Blohm: That would be my best guess.
Pearson: Get out there and grill those steaks, grill
those burgers, top them with cheese.
Blohm: Yes.
Pearson: Now we have a final question for you,
Naomi.
We're asking each of our analysts to break down and
define or explain concepts that get discussed quite
frequently in the ag media.
And given that this was report week, we're asking
you, why do we monitor stocks reports?
And how do stockpiles rise after a harvest is long
completed?
Blohm: Stocks and ending stocks are the most
important factor in USDA reports period in my
opinion.
And the reason it's so important is because
obviously it assesses where the demand is versus
the supply.
But it's not so much the ending number that you get
on any report or what the ending number is at the
end of the crop calendar year, it's the perception
of where it's going along the way because, again,
this is the futures market.
So we're trying to trade that perception of what's
going to happen in the next month for the future.
So, like right now when we're talking about the
grains, we said on the show if the weather turns
hot and horrible now the perception is that yield
is down.
If the yield is down and then you plug in all the
other math about acres and demand, makes the
perception that the ending stocks get tighter.
So the fear of not having food to feed the world
makes the price work a little higher and keeps
everybody on their toes, it makes South America
think about how much they're going to be
planting going forward.
So that's the one part of the question.
Can you ask me the second part of the question?
Pearson: How do stockpiles rise after a harvest is
long completed?
How can we see quarterly stocks increase quarter on
quarter if we've been consuming?
Blohm: Ask Darin Newsom.
I would say it's the same answer that what he says
all the time, I think it's tweaking of balance sheets
to keep food cheap for the world.
Pearson: And we will have Darin Newsom on next week,
so tune in and we will ask Darin that exact question.
Blohm: I defer to him.
Pearson: Alright.
Naomi, thank you so much for joining us.
Blohm: Thank you.
Pearson: Thanks to all of you for sending in
questions.
Please continue to do so.
Keep watching.
As we move on remember if you get featured on the
program we will be sending you something.
And if you believe in this service, if you believe in
Market Plus and Market to Market, it has been
provided every week for the past 41 years, go to
iptv.org/markettomarket, click on the donate button
there on the top of the page and help support
future editions of the program.
Thanks for watching and have a great week.