Market Plus: Ted Seifried

Jan 25, 2019  | 11 min  | Ep4423 | Podcast

Podcast

Howell: This is the Friday, January 25, 2019 version of the Market Plus segment. Joining us now is Ted Seifried. Ted, welcome back.

Seifried: Hey, thanks for having me, Delaney.

Howell: Ted, we got a lot of great questions. People must want your opinion on these things from Twitter, Facebook and Instagram. Starting off here with Troy in Cobb, Wisconsin. He said, I'm wondering if there is any insight as to how basis could move if at all before spring plantings? If so, would one take advantage of the strength or protect against the weakness?

Seifried: First of all, good question, Troy. And everybody thanks for all the questions. As far as basis is concerned a lot of that is really going to depend on which way the markets are going to go between now and spring. If we get a trade deal and it's favorable and again it's going to depend on the details of that deal but we get a knee jerk reaction higher, at least at first that is going to have a negative effect on basis, really quite negative because we've got a lot of supplies up front obviously and if the market is rallying based on the idea of demand yet not immediate demand then yes, that's going to really hurt basis. But if this deal is structured where China is taking things immediately well then if you get a lot of grain movement up front that could really be a positive effect on basis longer term. So a lot is hanging in the balance there. And if we don't get a deal right away and prices go lower well that can be favorable for basis. So there is a couple of scenarios that things could be good for basis. But I think likely if we get a deal and we don't know the details and that comes out later and we spike higher briefly it would be a great time to sell the board but not a good time to lock in basis. If basis is getting kind of good for guys in some areas, which I know it has gotten better for some, it really depends on where you are and what local demand source you're nearby, but if basis has gotten significantly better that might be something you want to take a look at locking into, I would say especially for corn right now.

Howell: Ted, if we do see demand pick up, especially in soybeans, what is that going to do to our carryover number?

Seifried: If we see demand pick up for soybeans?

Howell: Yes, if we get a deal or if China extends an olive branch and starts throwing money at the U.S.

Seifried: And it comes down to so many what-if scenarios. But let's say this, to this point China has bought 5 million metric tons of soybeans since December 1st, at least that is our best guesstimate with the government shutdown, we really don't know for sure but that's what we're thinking. From what I can tell the USDA for this marketing year last we saw had China down for about 11 million metric tons. So there's still 6 million metric tons from catching up to the current USDA balance sheet. So if we get a trade deal and for this marketing year they're only buying an additional 6 million metric tons and we're still sitting at a 955 million bushel carryover it does nothing. But if they say we need 20 million metric tons of soybeans now, immediately, and we're going to put that in our state reserves, not to go to our crushers, not to go into our pipeline, but to go just into state reserves, that's really very friendly because that means they're still going to continue to buy on their upfront demand or their hand to mouth demand and that's just going to get tucked away. Well that's great because that means we're going to move a lot of beans in the short-term and then we start talking about an ending stock number getting down below the 500 million bushel mark, which is not historically tight by any means, but it is a significant difference from where we are right now. And for the soybean market I think that would offer a significant upside potential and something that would be sustainable. Now, when I say significant upside potential I'm not talking $12 soybeans.

Howell: You might have gotten producers a little too excited there.

Seifried: Yeah, yeah, no, no, no let's not go there. We have not had a big enough problem in South America for that.

Howell: Are you talking $10 soybeans?

Seifried: Yes, for sure. China comes in for 20 million metric tons of soybeans we're absolutely I would think going to see $10 soybeans but you might even flirt with an $11 handle at some point.

Howell: Ted I'm going to skip down here, there's a good question I think that plays in nicely to this, we've got Chinese and what's going on there, we've also got South American weather that is something that could also affect the carryover numbers. We've got Doug in South Dakota. He said, how much can the dry weather in Brazil affect soybean prices even though we have a large estimated carryout in the U.S. with soybeans?

Seifried: Yeah, hey Doug, again great question. The thing is if this were a typical year it would have a big effect. If we were seeing South American production estimates, soybean production estimates drop from 128 or 126 where we were all talking back at the end of November down to the 116 to 114 that a lot of people are talking about now, wow that would have a big impact on us and that would mean a lot more potential export business for us. However, Argentina looks really good and we've got massive carryover. So, unfortunately it's not going to have as big of an effect as it would have in a different year. And again it comes back to China. If China takes a whole bunch of our 955 million bushel carryover away then it will, then things get interesting. But at the moment not knowing anything about how this trade deal ends up it doesn't have enough of an impact to really move soybean prices which is why we really haven't been able to go anywhere here this month of January. At the top of the show you were mentioning that soybeans were up 9 cents for the week. That all happened on Friday. We were flat for the week going into Friday and that was just on anticipation of hey we're going to have trade talks next week. Yeah, we really have to get that number down another 10 million metric tons to have a very significant impact on our carryover.

Howell: What about South American weather affecting the corn markets?

Seifried: Yes, okay. So, that is the one that could have a big impact. However, corn has not gotten excited about dryness in Brazil and the main reason for that is because we're going to push soybeans along to harvest quicker than maybe we normally would. That harvest has really gone very quickly. We're off to near record start. So the faster we can get that first season of soybeans off the quicker we can get that second season safrinha crop in. The sooner you can get that safrinha crop in the better chances you have to get that crop to maturity before the dry season hits. So that's good news for that safrinha corn crop. And secondly, you have most of the long-term weather forecasters talking about a return to a more normal weather pattern once we get into the second week of February. So that's almost ideal for the second season corn crop. So to this point it's actually, Brazilian weather is thought to be a negative factor for corn. Now, if this current pattern lingers longer than the forecasters are expecting and does continue to prove out to be the weather pattern that dominates February into March, April, well then we really do have a story to talk about in corn. But as of right now, it's really looking the other way.

Howell: Another question here when we're talking, we talked a little bit about it on the show with corn, soybeans and wheat being in kind of this rangebound area. Philip in Dresden, Ontario has got a great question here. I love how it's worded. He said, corn futures prices have been rangebound since 2014, like forever ago. Is 2019 the year these prices break free or what?

Seifried: Hi, Phil. That's a very good question. We all want to know. We could always have a weather problem, there's so many things at play here in 2019, more than really any other year that I can remember, at least in the 16 years that I've been doing this. So yeah, who knows. I would think that there is the potential for a breakout of the ranges that we've seen the last couple of years is really very high this year and it wouldn't make a whole lot of sense to do it to the downside. Yeah, soybeans I think could have significant downside potential if trade negotiations with China go terribly wrong but I don't think that's going to happen. This could be a year where we get a really nice positive surprise whether it comes in the form of deals with China, China coming in and buying reserve stocks of things, or a weather issue, something like that. But yeah, I think the chances are fairly high for a bigger breakout this year, I'd say higher than they were in the last couple of years.

Howell: Okay. Ted, you and I were talking about this a little bit before we started taping here. We've got a great question, kind of a big picture question here from Glen in Bryan, Ohio. Without access to USDA reports should a producer be focused more on the fundamentals news from private sources or tactically just look at the technical indicators demonstrated in the commodity charts at this time?

Seifried: Well, Glen, as always take everything you can get. And what I mean by that is there is a lot of really fantastic private data out there, so much so that some of us are able to come up with what I would think is pretty close to the USDA on a number of things, not everything. Again, I'd really like to see quarterly grain stocks. But go with the data that you trust. It's the same people that I would be following closely if we did have the USDA because it's just good stuff. that being said, yes, all of us are trading charts. More than normal? I don't know. I look at charts every day, all day. But you can kind of tell the markets are trading charts because again we have this range. We get up to the high end of the range, the technical guys sell it. We get up to the low end of the range, we buy. And we don't have the data to break out of that range. So yeah, charts matter, absolutely. Fundamentals matter. USDA or no USDA there's very good information out there.

Howell: Okay, Ted, I saved the best question for last. Are you ready for this?

Seifried: I'm always ready, Delaney.

Howell: Okay. We've got Baloo on Twitter. Ted, if you had to pick between one of these being your daily driver, which would you pick? The Weinermobile or the Mutt Cutts? And why?

Seifried: Mutt Cutts, wait is that the --

Howell: That's the one from Dumb and Dumber.

Seifried: Oh right, the dog.

Howell: Yeah, the dog looking, yeah.

Seifried: Yeah, I love dogs but I kind of have a thing --

Howell: You're a hot dog guy.

Seifried: I like the hot dogs and I like the conversation about the hot dogs. And it most certainly is a sandwich, by the way. I think, earlier in the week we were talking about the possibility, they're hiring, by the way.

Howell: I know, I'm going to apply for it.

Seifried: I want to drive that, yes. So yeah, I think I would choose that. But if you threw the Batmobile in that mix, really any version of the Batmobile I think that's where I would go.

Howell: All right. Well, Ted Seifried, thank you so much.

Seifried: The pleasure's mine, Delaney. Have a good one.

Howell: Join us again next week when we'll look at how demand for a southwest specialty crop is heating up and John Roach will be at the Market to Market table. Until then, thanks for listening, watching or reading. I'm Delaney Howell. Have a great week.

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