Howell: This is the Friday, November 8, 2019 version of the Market Plus segment. Joining us once again is Naomi Blohm. Naomi, I’m sorry I had to cut you off there right at the end of the program. We were talking about the lean hog market.
Blohm: Yes. So looking at things, watching the support levels for prices, with the fourth quarter production just being so record large and our export market to China had picked up but then we’ve kind of lost some of our other traditional partners with Mexico, South Korea, just not exporting as much as we normally would to them. So we need to have more exports to our traditional buyers, keep up with that Chinese demand. But then what’s interesting I was reading from Hightower this week and he was saying that for first quarter production next year and even into second quarter production next year the production numbers are support to come down. And I thought, well that makes sense because those deferred prices are so much higher and I had figured they were higher just thinking of more demand and that’s why they were up but it’s actually because production was supposed to be down as we go into 2020. So that was something that was new to me and I want to keep an eye on that also. But those nearby contracts continue to just waver in a sideways fashion because they hope for this export market every week and that’s all we can cling to right now.
Howell: Was it lower production value that was a significant amount?
Blohm: I’m trying to recall. I believe at the first quarter production was supposed to be, I’ll have to double check, but I feel like it was over 200 million pounds because it was quite significant and it was one of the bigger drops in five years. So then going into the second quarter it was like another big drop like that. So I’ll try to remember to tweet out what the actual numbers were.
Howell: Okay, people can find you on Twitter then. The other thing I wanted to ask about this week, I don’t know if you saw the headline, but China made a big purchase, I don’t know what the number was, from Denmark. What do you make of that this week?
Blohm: Well, they’re trying to make sure that they are not pinched to buying from only one place. Canada, also that announcement came that they were going to be able to export to China again. So now they have two more customers. That way the global prices for hogs don’t have to just continue to go up because they’re trying to say we’ll be buying from everyone so prices from their perspective hopefully don’t just ramp higher would be my thought.
Howell: That makes sense. Spread the wealth out a little bit. Keeping with the idea, the theme of livestock here, we’ve got a question from Linda in South Dakota and I think you got at this during the main program but I want to make sure we hit that point home for her. She wants to know, are there signs of increased cattle prices and a positive sign through the spring?
Blohm: Okay, so the cattle prices, the demand has been stronger, the boxed beef values have been really fantastic. So that is what had led this price rally thus far. And we are absolutely deserving to be of every price that we are at right now. the only caution for the rest of fourth quarter is that seasonally prices a lot of times will slide lower for cattle in the month of November and then also the futures price right now is trading at a premium over the cash price so that makes me a little cautious as well. Going forward into 2020 production is actually supposed to increase and so that is something that makes me a little bit cautious because we had been trading this less production but now it’s supposed to increase. So the demand needs to stay as strong as it is right now and we need to see more export demand, which absolutely could happen. So I had been really bullish going into 2020 but now I’m getting a little bit more cautious. I don’t think that prices will fall apart by any means but we need some more demand news to make prices rally.
Howell: Okay, demand news is what seems to be driving a lot of markets including maybe the lack of demand in the corn market. we’ve got a question here from Tim in Northwest Iowa. He said, is there any hope for the corn market with trade and exports or will we have to rely on the local market such as feed mills, ethanol, etcetera?
Blohm: That’s something I’ve been wondering also. I’m actually a little surprised in a sense that our corn exports are as slow as they are because the soybean and the wheat are actually on target for USDA expectations. But as we know the corn market has been suffering. So the dollar dropping would sure help. Beyond that local markets. And I think that the basis is showing that the demand is there in terms of demand for feed, local ethanol demand and like we talked about on the show ADM in Illinois clearly wanting corn, that they’re willing to pay for drying, and that’s a lot of places too we’re hearing that the demand is strong that way. So we need that export market to come up. If China would come in and buy some more that would really be helpful. But they have so much competition right now from South America. So I hate to say it but maybe something will go bad for South America. That would help our corn price go higher.
Howell: And as you look at the prices in South America, Argentina, Brazil, obviously they’re our biggest competitor, are we priced comparatively to their corn markets?
Blohm: We had been coming down to get more equal and I’m not quite sure where it’s at right now.
Howell: That’s something we’ll just have to wait and see. But it seems like if we’re not priced comparatively to them that will not help our exports.
Blohm: Yeah, but I almost thought I read that Brazil and Argentina were about out of what they could export. So hopefully then some of that business will come out way. And also remember that we’re only two months into the calendar year as far as the USDA calendar year goes so there is still time for corn to catch up but it needs to get going soon.
Howell: Right because this marketing year just started on USDA’s calendar. Okay. Naomi, the other thing I wanted to ask about tonight was weather because this year has been so unusual. We got another snowfall across Iowa, across some of the Plains and your neck of the woods there in Wisconsin. What is this year’s weather like for you guys up there? What are you hearing from producers?
Blohm: Yeah, so we’re on our third snow already in Wisconsin and this one is going to stick because it’s so cold and producers are frustrated, just flat out frustrated. One of my clients, I had tweeted out a picture this week, he’s harvesting corn in it’s like a pontoon, the field was under water, so it’s unfortunate. The one maybe good thing is that with this colder weather our guys in Wisconsin can maybe get into the field because the field is now at the point where they can actually drive into it but now we have 30% moisture on corn so it’s the pickle of well do you want to harvest it and then pay through the nose to dry it down or do you want to try to let it sit out there and then get to it as you can. So this is the year that will not end and it continues to just be a black eye for all of us.
Howell: I hate to ask this, but what do you think the likelihood is that we’re still in the fields, we’re not harvested, we’re well behind our five year average on corn and soybeans, so that means fall fieldwork probably not going to get done. Do you think we’re going to repeat this same cycle? Weather is unknown of course. But do you think we’re going to repeat that into next year?
Blohm: Based on what the Farmer’s Almanac has just come out with I am scared to say it seems like it might go that direction. And you hit the nail on the head about the fall fieldwork. That was the other thing that didn’t get done last year so when spring came around it was an extra delay for producers on top of the wet weather pattern. So you hope it changes, you just really hope it changes. But with the rivers still being so high and the snow pack that is already starting to happen out West you hope it can change, that’s all you can do.
Howell: It’s a tough situation, that’s for sure. Okay, so with all that stuff being said, Naomi, it sets us up nicely here for our last social media question coming to us from Jamie wanting to know which crop should we plant more of in 2020, corn or soybeans? And which one of the two will have more profit potential given today’s current prices?
Blohm: That’s a good question. That’s the first time I’ve been asked that question so far because normally yeah, with harvest wrapping up people are already getting ready to go with their seed purchases for the next year. And I almost say it’s too soon to answer the question because we don’t have enough pieces of the puzzle yet to know exactly where we are right now with our balance sheets because if the harvested acres come down and if the yield comes down more that could really allow for a nice price rally yet to come for both corn and soybeans. And then if South America has any weather issues it’s a whole new ballgame. So I don’t know that we can answer that question quite yet. But also if you’re in a situation where you know you’re going to be planting corn and beans both, be thinking about the pricing opportunities as they come because there will be opportunities and a lot of times those best sales are the ones earlier in the year. So don’t be complacent even though you’re out still harvesting.
Howell: It’s a weird year.
Blohm: It is a horrible year, just horrible.
Howell; Naomi Blohm, thank you so much.
Blohm: Yeah, thanks, Delaney.
Howell: Join us again next week when we’ll explore how one farmer prevailed in a six-year battle with the U.S. government and Matt Bennett will join us 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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