Market Analysis with Naomi Blohm

Paul Yeager: Low demand, strong production and growing conditions in much of South America and even oversold concerns played on the trade. 

For the week ..

The nearby wheat contract added 13 cents while March corn lost 17 cents. 

Despite sparks of higher prices, a lack of exports held back the soy complex. 

The March contract plummeted 39 cents and March meal fell $14.10 per ton.

March cotton expanded by $1.53 per hundredweight. 

Over in the dairy parlor, March Class Three milk futures went up 42 cents.

The livestock market was higher. April cattle added 35 cents. March feeders strengthened $3.55 and the April lean hog contract improved $1.97. 

In the currency markets, the US dollar index decreased by 34 ticks. 

April crude oil shed by $1.60 per barrel. 

COMEX gold increased $23.50 per ounce, and the Goldman Sachs Commodity Index lost more than two points to settle at 552-80.

Joining us now is regular market analyst Naomi Blohm. I won’t say made fun of Jeff last week with a smile when we started, but it’s been hard to smile. But we’re going to start with something that has been able to make you smile. WHEAT How can wheat rally given the cheap product and the surplus or the amount that Russia is dumping on the world market right now?

Naomi Blohm: So what was interesting this week, we did see wheat to have a little bit of a short covering rally and that was more due to concerns about how the US might put those sanctions on Russia in response to some of their not nice activities that they’ve been doing.

Paul Yeager: And the two year anniversary.

Naomi Blohm: To the anniversary of the war. Yeah, absolutely. So we saw the short covering their prices are on support. And the thing with wheat is that in the world, we’re still not growing enough wheat to meet demand. Global carry out continues to inch lower. But yes we are seeing Russia still cheapest wheat out there and continuing to undersell everyone else. But the wheat prices, especially the Chicago wheat price, has been trading sideways in about a 60 cent trading range for six months now. I think what’s also interesting is that at the end of 2023, the funds were short over 100,000 contracts of wheat and very slowly they’ve been exiting those positions to where there are only about 60,000 contracts short now.

So if there is actually a piece of news that can make that wheat market work higher, the funds are in a really good position to quickly respond and quickly push prices higher. And from a technical standpoint, the more a market trades in a sideways fashion, the bigger the breakout is going to be down the road. You know, we’re keeping an eye on our wheat crop here in this country. It’s dry in the plains. There’s not a lot of rain in sight watching in Russia and in China. It has been really cold there. So now we’re going to be watching for signs of winter kill. So to me, it feels like the wheat market is trying to form a bottom. But we just don’t have the new specific news to get it to just finally take up and rally.

Paul Yeager: How has Wheat been able to shake the problems The other two commodities of corn and soybeans have been having? Because last week and the week before, the two were much tied, much more tied together. Has wheat finally separated?

Naomi Blohm: Yeah, I think there was some spread trading going on between those commodities. And so the wheat though, again it’s it’s the funds, it’s the slow and it’s like watching Andy on Shawshank Redemption when he’s slowly chiseling out of his cell and then, you know, at the yard he’s dumping out the cell parts and it’s like what the wheat market is doing, slow exiting by the funds. Like, nobody watch what we’re doing, but we’re actually exiting those positions. Meanwhile, they’re distracting us by the sell off that they’re doing in the corn and soybean market. So something is brewing with wheat. Something is going to be happening.

Paul Yeager: Put the pin and all the Shawshank gifts that are going to come. I’m going to come back to that in a moment. But I need to start with a question about corn and soybeans that I think pretty much is the elephant in the room that we haven’t talked about. This one comes from Matt in Iowa, and he wants to know, are we still circling the drain lower on grain or are we close to putting the plug in the sink and perhaps bounce higher?

Naomi Blohm: I think the plug got put in the sink this week. We had option expiration today, Friday with the March grains. And a lot of times prices have a tendency to gravitate lower. We’re also dealing with farmers having to do price or roll with their grain contracts, basis contracts with first notice day approaching next week. Now, the biggest thing for corn right now, two things that I’m watching. We all know that the funds have a hefty short position, but now it’s at a record amount. And the last time they were short over 300,000 contracts was 2019, 2020. And the thing to be aware of is that they went short their most amount and then they stayed short for another 2 to 3 weeks. And then the slow exit began. And then finally the news occurred to get the market to respond and then boom, we went higher. So from a fundamental standpoint, we have the funds severely short in the marketplace. Now, from a technical standpoint, and if you look at a continuous monthly chart, front month chart of corn futures, if you look at a continuous monthly chart of just the December corn futures, with the benefit of hindsight, there was huge pennant flag formations on those chart charts, which then pointed to the downside. Now, today, with March corn hitting $4, that was the downside target for the March contract for the December corn. That pennant flag formation suggested that we go to $4.50 for the downside target and we hit it today. So now I think we’re at the bottom. We’re going to probably just stay here for a while. But I think the worst is behind us. And now we’re going to start to look for some news to get us to go higher.

Paul Yeager :Okay. You wrote today the similar thing, but to me, I read it as we’re falling, we’ve stopped. But I took it that you think there’s possibly more room to fall? But what you just said sounds like we might be stabilizing before going higher.

Naomi Blohm: I think we’re going to stabilize. It’s. We’re at that point, we hit the downside targets. There were not a lot of sell stops that got triggered below the $4 level today. And so we’re going to be watching now. We’re going to be watching for weather in Brazil. So they’ve got that crop and a crop over half planted in another month. We’re going to really be watching the weather down there. We’re having our farmers here, you know, thinking about contemplating their planting pace for the spring. And is there going to be any last minute switching of acres? The market has, in my opinion, I think we’ve priced in enough bearish news to last us. So think of it from an opposite perspective. If market prices were higher like they were two years ago when we had $8 corn, all the news was bullish, all the charts were getting overbought, the funds were record long. And that was the point where, you know, you couldn’t find any piece of bearish news and prices surely were going to stay higher. And then everything started to fall lower. So now we’re at the opposite side of that spectrum where we’ve hit technical downside targets. We’ve got the funds with a record short position. We’ve priced in all the bearish news you can get everybody and their brother is bearish right now. So now is the time to start to be thinking proactive of like if people are making cash sales right now, for whatever reason, you’re going to want to be thinking about re ownership opportunities, because by the time the market turns around and rallies, we’re already going to be up $0.30 before we realize, oh, that was the low. So start to be thinking, you know, both sides here where we know the news is still negative. We know it’s going to be hard to see $6 corn for quite some time. But we’re also, I think at the bottom now.

Paul Yeager: The $3.99 is going to scare some people for sure what we closed out on Friday, but let’s look at beans for a minute because do you see some of the same scenarios formulating around beans?

Naomi Blohm: Yeah. So with the beans, they hit their technical downside target lower. We’re back in testing the May 2023 lows. The markets oversold. Funds are short, large amounts. So we’re pricing in a lot of that negativity. So now what we’re going to be focusing on for the future is the new additional demand for the renewable fuels for the biofuels. The USDA is slow to address the growing demand that’s going on there. They have to take baby steps on each on each report. But that demand is there and it’s growing. We are seeing with Brazil, we know that their crop is smaller than what the USDA is saying. The USDA just has to print it. It’s kind of known information for sure, but, you know, it’s not as big as what they were saying. And here in our country, I do still think there’s going to be a lot of less switch for acreage, because when you look at how the cotton price lately has just been screaming higher and is actually at the highs of 2022, now you have a cotton market that says, hey, don’t forget about me. And a lot of those producers in the South might be wanting to plant cotton instead. So I think we’re at the point where we’re going to be, you know, near the low. We just got to get some news to get this market to move higher.

Paul Yeager: So you’re saying maybe more of the cotton story is a little bit more of a buying acres? Not a we’re out of U.S. cotton story.

Naomi Blohm: It’s a lot of things. It’s low ending stocks. It’s that the acres are lower than years past and they need to increase those acres. The export demand has been pretty solid. And actually, when you look at the global economy, you know, it’s not perfect, but people are still buying things….

Read More: Market Analysis with Naomi Blohm

2024-02-24 01:07:15

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