Pearson: This is the Friday, October 28, 2016
version of the Market Plus segment.
Joining us now is Naomi Blohm.
Naomi, welcome back.
Blohm: Thank you.
Pearson: We are glad to have you.
We've got a number of questions here from our
followers on social media.
We encourage all of you to follow us on Facebook and
on Twitter.
Our first question comes from Doyal in Alma,
Arkansas.
He wants to know, will the prices of lean hogs ever
recover or are they going to continue to hit
all-time lows?
Blohm: The worst is behind us.
I really feel that way.
I think the market has absorbed the threat and
the scare of this production over capacity.
I think it's an old story.
Probably look for a bounce to the market into the
mid-50s but then looking for sideways trade after
that because we have to really get a handle on
where the production truly is versus the demand.
And so it's going to probably get into more of
a boring trading range for a while.
But hey, I think the worst is behind us.
Pearson: Right, but not a recovery to 90 any time in
the future.
Blohm: No, no it would take a true production
issue like a PED Virus or something like that
magnitude to burn through the supplies that we have.
Pearson: Gotcha.
Next question, looking over at the grain markets
we're going to Roger from Facebook.
Roger wants to know, where do grain prices go from
now until planting next year?
He wants to know, do you expect corn to be $3.40 to
$4?
Blohm: Okay, here's two scenarios.
If we don't have La Nina show up then I would look
for corn prices to trade more in a sideways range.
In the big picture what that number would mean at
the very worst $3.25 and at the very best $3.75.
And there's meander back and forth in a very boring
pattern.
If La Nina shows up, and depending on the severity
of it and how that would affect the crop in South
America, the funds are going to jump all over
that and they will make it exciting for us in which
case the first target would be more of a $4 to
$4.50 range.
So you have to be ready for either scenario to
unfold and just really be ready for both because all
we're watching is this La Nina thing and that's
exactly what the funds are watching too.
So that's it, so keep your eyes on the weather.
That's it for the next, from now until planting.
Pearson: Now, given the fact that right now we're
in the middle of your worst case trading range,
do you want to be buying some calls in here on corn
you're selling?
Is this where your bull call spread comes in as
you're looking out for the remainder of the year?
Blohm: Absolutely, because we've seen the funds on
whatever goofy whim show up to the party and then
everybody is all mad because they priced too
soon.
So if you have made sales, strategy for the most
conservative strategy is that bull call spread.
And, again, it's not one that I use often but I
think this is the right tool for this year.
There's not a lot of risk tolerance out there right
now.
This is cheap and it keeps you in the market and it
keeps you going if the market should rally.
For the more aggressive traders you could stick
with buying the call and then on a setback here
consider selling a put under it on the theory
that the big picture $3 is going to hold us or the
$3.25 level.
So if you're a person who can handle that risk then
you could sell a put under the market.
But I don't think I would do that right now just in
case.
Pearson: Okay.
Now, speaking of South America, we did anticipate
larger corn plantings down there due to their high
cash price.
Is that what we're seeing materialize?
Blohm: I haven't heard too much about South America
right now other than it has been rainy in
Argentina and corn planting is behind there
but their soybean planting is done.
That's all I've heard lately.
So I was actually looking for some news on that
before I came here today, I couldn't find too much.
Pearson: I wonder if no news is good news or not.
Blohm: Maybe, I don't know.
Pearson: Well, we've got a question here from a
follower in Iowa, this is from Elizabeth in Miles,
Iowa and she's asking basically a basis
question.
How can the board in Chicago, the Board of
Trade, have a price of $10.14 for soybeans yet
ADM in Cedar Rapids only paying $9.47?
Blohm: Well, it is the basis.
And the board price is reflective of where in
general a price point, starting point should be
for the United States, just to give everyone an
idea.
And then your basis is your actual cash market
telling the truth.
Step back and think about these crazy monster yields
that are coming out of these fields, truly, truly
every phone call that I have is mid-50s at a
minimum with a whole lot of mid-70s.
That's crazy.
So when you have all of this product coming to
town because you can get essentially a pretty good
price for them right now, the elevators or the
processing plants are saying, we don't quite
need it, we'll take it but we have a lot of supply
here.
Also, depending on where you're selling to, if
they're not just using the product right there and
distributing it they have to ship it or truck it
over to the river and that has to get on a barge and
that has to get down the river and then it has to
get on a bigger boat and get across the ocean.
So the transportation makes up the biggest
component of basis.
Pearson: Now, with this fairly impressive rally in
soybean futures prices over the past week, has
basis weakened consistently across the
country?
Have we seen relatively flat cash prices on the
week?
Blohm: I was looking at that and it's wide but not
like the widest but it's not getting wider.
Pearson: Cash prices climbing -- Blohm: I
think the pipeline was really empty.
I think it really was.
And the beans that are coming in right now are
needed for exports.
And even though exports have been so strong right
now, so strong, when you step back and look at the
picture we are at 57% of total USDA sales for what
they thought our exports should be and that
includes the higher exports from a year ago
and normally this time of year we're at 58% sold.
So when you look at the picture we're at a
percentage rate sold of where we normally are, we
just happen to have a bigger number that we're
selling this year.
But we're on target for what we would normally be
doing.
Pearson: Okay.
With the bigger bean harvest.
Blohm: Correct.
Pearson: Okay.
So what does that tell you cash wise?
Same story?
We're just going to have to wait until farmers quit
hauling the excess to town before basis starts to
tighten?
Blohm: That's exactly what it is.
Pearson: Alright.
And some current and immediate export news
would help as always.
Next question for you from Tim in Crookston,
Minnesota.
Tim is on Twitter @6dollarwheatguy.
He wants to know, and this was something that Don
Roose brought up last week.
With maybe 4 million, and Don mentioned 5 million,
more acres of soybeans next year, should I use
this rally to sell some '17 crop?
Blohm: And the answer is yes.
November '17 prices are at $10 for futures.
That is the highest it was this summer on the big
rally, or spring/summer when we had that rally.
This is an amazing starting point.
You should be getting started, 5% to 10% sales,
absolutely, why not.
But, again, if La Nina shows up this winter or if
we have production issues next year be ready to
defend that and reown it in case the market should
rally because then I don't want to hear the
complaining about everybody told me to sell
and then the market went higher, because this is
part of your planning and understanding your
weighted average price.
You've got to really be mindful of the whole
picture and weather can really turn this thing on
a dime this year.
Pearson: Now, given that we're selling a year into
the future, is that an outright future sale?
Do options make any sense with the years' time value
in them?
Blohm: I would not buy a put out that far.
I wouldn't sell futures out that far.
I would focus on your cash market.
Call your elevator and see if you can do perhaps a
hedge to arrive or just a full out forward contract
and just keep it simple that way.
Pearson: Alright.
And then be ready to reown should La Nina actually
come into effect.
Next question from Glen in Bryan, Ohio.
Glen is on Twitter @glen_newcomer.
He wants to know, with the recent gains in corn and
bean prices, what are your greatest market concerns
fundamentally speaking?
What keeps Naomi Blohm up at night looking at the
market fundamentals?
Blohm: There's always seven or eight things I'm
watching.
The dollar, the funds, supply, not just here,
demand, keeping an eye on global riff raff from the
standpoint of politics, things like that, and
global economies.
And so every morning I'm really kind of keeping
tabs on everything that is happening and it's almost
like, what do they call those weighted scale
things, scale, one of these kind of scales --
Pearson: Right, the justice hold for the
courthouse.
Blohm: Yeah.
So sometimes they're evenly balanced with all
of these seven or eight things that I'm watching
but all of a sudden three or four of them get a
little bit friendlier or then all of a sudden five
of them are friendly.
And so you have to watch when even just one little
tidbit of news becomes friendlier for one of
those seven or eight segments how it effects
the whole.
And so it is a lot harder to do marketing than it
ever used to be.
And then you have to keep in mind the funds are
their own fundamental.
And then we're watching the charts.
And so there's a lot to balance.
And every week it's different.
But as long as you're keeping an eye on all of
it as a whole you can find that balance a little
easier and know when it's going to go -- Pearson:
As we sit here on Friday night, are the scales
pretty well balanced?
We know we've got the strong dollar but
hopefully growth in these emerging economies.
Are we pretty well at a wash?
Blohm: Well, from that standpoint, from the
dollar and the economies I think we're at a balance.
But when you look at it from the whole picture of
course it has been balanced to the friendlier
side of things and now I think we'll see that
setback down this way a little bit for November
because now we'll get into the next USDA report,
which will likely show a larger yield for the beans
and probably not too much action for corn.
So nothing to talk about, so it will go back into
sideways trading.
Pearson: What is your bean yield number from USDA?
53?
55?
Blohm: I don't have any way to gauge it just
because of how big these yield numbers I'm hearing.
I have no idea.
Pearson: I don't either.
The reports I've heard just from neighbors, 60 to
84 in East Central Iowa.
It's going to be an interesting year.
Another question for you.
This one we like to have our analysts define terms
every single week.
And this one is our question to you.
How is resistance, when we're looking at a chart
perspective, how is resistance set up or how
do you determine where a line of resistance is on a
chart?
Blohm: Okay.
So the way I like to explain it, it's a little
goofy but it makes sense, if you've ever done weight
training and you're on your back doing a bench
press, right, so you're pushing higher, pushing
higher, pushing higher and then obviously your arms
can only extend so much, so you have been at
resistance.
And so that is the higher level of things.
And to figure out where that is on a chart, when
you think about your barbell that you're
holding up, it's obviously a straight line.
So when you're looking at a chart figure out kind of
where the lines can connect as a dot and
sometimes you're straight up with your barbell and
sometimes you're like this because it's going to fall
off and you're about to need your spotter to come
in and rescue you.
But it's connecting the dots and you have to find
your highest dots on the chart and connect them.
So it can be like this or this or this.
Pearson: And how telling is resistance to somebody
watching the charts?
How much should you rely on it making a marketing
plan?
Blohm: I would say they're accurate 75% of the time
and you put a lot of, what's the word I'm
looking for, you put a lot of weight into it.
Is that the right word?
Pearson: Yeah, you put a lot of stock in it.
Blohm: Thank you, that's the word I'm looking for.
Pearson: Alright, Naomi Blohm, thank you so much
for spending time with us.
I have one final question.
Well two questions actually.
Iowa State, take the win tomorrow?
Blohm: I hope so.
They've come all this way.
Pearson: We'll be there cheering them on.
Blohm: Yes.
Pearson: Final question.
Cubbies, Indians, who takes the series?
Blohm: Well of course we're all hoping for the
Cubs.
Pearson: We are.
We're all rooting for the Cubs.
Rooting for the Cubs in 5, right, or 4, however many
games it takes to win it outright.
We don't want it to go to game 7.
Blohm: Don't make me laugh.
Pearson: It takes 4.
Blohm: 4 out of 7 right?
Pearson: And we're 1-1 so they can win on game 6.
Blohm: I guess.
Pearson: Yes.
Blohm: 5 if they keep going.
4?
6?
Pearson: Right, if they win tonight, tomorrow,
they've got one win already, no we'd have to
get to five games.
Blohm: Right, in a row.
Pearson: Yes.
Your market experts at work, ladies and
gentlemen.
With that we'll let you go.
Blohm: I'm fired.
Pearson: Go Cubbies Go!
And thanks for tuning in.
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Have a great week.