Market Plus: Ted Seifried

Sep 13, 2019  | 13 min  | Ep4504 | Podcast


Howell: This is the Friday, September 13, 2019 version of the Market Plus segment. Joining us once again is Ted Seifried. Ted, welcome back.

  Seifried: Hey, happy Friday the 13th, Delaney.

Howell: Yes, and it's also hate week in Iowa, Ted. Do you know what that is?

Seifried: I don't.

Howell: It's the Iowa and Iowa State football game tomorrow.

Seifried: Oh no, okay, so I did know that. But that's what we call it? Hate week?

Howell: Hate week, yes.

Seifried: That's rather mean, isn't it?

Howell: It is a little mean isn't it, yeah. Iowans against Iowans. But, all that aside, we promised during the main show that we would tackle the dairy discussion. I know it's not necessarily your biggest forte but we have a question here from Matt in Dyersville, Iowa saying, what's going on with milk? Did the market drive enough producers out finally? And is this rally going to be enough to pay for all the $250 per ton hay that everyone is purchasing?

Seifried: So that's a lot of questions there. Hi, Matt from Dyersville. So let's talk about the milk market. A lot of people are going to say that the rally that we're seeing in milk is related to the better relations that we're having with China right now. I'm going to say that's not true at all really because China doesn't have much of an appetite for milk. They like to buy our whey protein and that is for a feed ingredient that they feed hogs. But with ASF they don't really have a huge need for that right now. So China aside, I think what we need to look at is milk is following along with cheddar cheese prices. Cheddar cheese prices are the highest they've been since October 2014. And the milk that we have in cold storage is relatively weak so we're not really building. So to answer one of his questions there, yes I do think that we've gotten to the point where we've slowed down production enough that we are starting to give us a good reason for better prices. Now, will that justify higher hay prices? Yeah, I don't know, everybody has got to look at their input costs and their breakeven and so on and so forth. I think the hay question was more of a dig on why are hay prices so high. The question is are milk prices going to continue to go higher? Well, getting into the football season, and hate week, pizza demand, cheese, yeah right. It sounds silly but it's true.

Howell: Taco dip with the Rotel and cheese.

Seifried: All of the above. We like that, right? Yeah, so I think demand is good. Once we start getting into October then we start seeing the components start to weigh on things. But yeah I think there's more upside potential here for at least another week or two for milk.

Howell: What should dairy producers be doing then?

Seifried: You want to be, obviously with this big rally you want to be starting to lay off incrementally start setting prices, price targets and start making some sales I think.

Howell: Ted, I know this was one of your favorite questions so we're going to go ahead and ask it, kick it off here with Glen in Bryan, Ohio, He said, USDA numbers came in higher than the average analyst estimate prior to the report. Is this deviation of analysis greater than it has been in the past? Or is it just because of the weather uncertainty? Or is it a difference in the data modeling techniques?

Seifried: Okay, Glen. So, first of all, being one of the analysts that submits out trade guesses to the USDA, we weren't that far off. We were within a bushel an acre for both corn and soybeans as far as what we were guessing and that's really quite good for this time of year. But, when we talk about difference in how we were coming to those yields, each one of the analysts have different ways of doing it. There are some similarities between us but all of us kind of have our own and mostly private ways of doing it but then so does the USDA. We know what their formula is but we don't know some of the pieces of the formula for the September report. It's very important to understand how the USDA does the September WASDE report. And for corn we have ear count but not ear weight. They're going to use their ear weight number. For soybeans we have pod count but we don't know what they're going to use an implied pod weight. So implied ear weight, implied pod weight, we have no idea what they're going to imply that. We all have different implied pod weights. And none of us I think were expecting the USDA to use a record implied pod weight for soybeans. We talked about it during the show, in my book the late planted soybeans that we have would suggest that pod weight would be down, well not record, maybe not down but not record, even with the lower pod counts. So that is where I would disagree with the USDA. When I have my number that would be the main disagreement that I have with the USDA. And I think when the USDA does start actually doing pod weights, which will be hopefully next month, I think that means that yield number is going to come down. So understanding the way that the USDA does their yield estimates on the September report and knowing that they do use an actual pod count number but they use an implied pod weight number for soybeans, I think we can put our analytical spin on that and say, well if that pod weight number starts coming down, even if the pod count number comes up slightly, that means a lower yield. So I think that is a big part of what the market was talking about on Friday and will continue to talk about into next week. There's a good chance that soybean yield is going to come down further. And so I think that's part of the enthusiasm that we're seeing with soybeans right now.

Howell: So with all of that being said, do we reward the rallies that we're seeing in the soybean market? Or do you think that producers should hold on to sell their new crop?

Seifried: I have a price range in mind that I would be waiting to sell my soybeans in and that is $10.25, well actually $10.15 to $10.45.

Howell: And is that on the futures or basis?

Seifried: That's January futures. So yeah, that's a pretty sizeable rally, one that we haven't really seen in soybeans for a while because, again, soybeans didn't have that big of a spring rally, which really they should have because that's where we lost all the acres. It wasn't in corn. So yeah, I'm very optimistic for soybean prices. And unless things completely blow up with China and even then not so much because we're not doing a ton of business with them anyway. But I think there's significant upside potential for soybeans and I think soybeans are going to lead the way higher for the grains going into the end of the calendar year and possible into the early part of next year. My concern for grains as a whole is what happens when we start talking about acreage next year because if we're going to plant 92 to 94 million acres of corn and 84 to 86 million acres of soybeans and we have good crops next year that's a problem. So we need to be looking for a harvest rally, if we get one, but I think we will. That needs to be opportunity, that needs to be seen as an opportunity to make some sales in both corn and soybeans. But I would be a lot more patient on making soybean sales than corn.

Howell: Ted, what will be the indication in your mind that we are in fact having a rally and not just a couple of days of upside?

Seifried: Well, hindsight is always 20/20 so if we're up to my price levels at $10.15 then I'll say hey, we had a rally. But I will say what we saw this week is very constructive. It changes the market mentality of what we had at the end of the last week which was this is never going to rally, grains are never going to rally, it's just going to go down, down, down, down, down. Everybody was so darn bearish at the end of last week. That mentality changed a bit this week and the charts changed a bit this week. So I think there is good footing both on the basis of charts looking better, fundamentals may be getting better, the seasonal timeframe of which hey this is usually around the time we start to put our harvest lows in and start to see a bit of a bounce, the market make up with the funds being rather short corn and beans or were rather short corn and beans going into the USDA report on Thursday compared to how they had been long pretty much since the spring, lots of different factors make it kind of suggest that hey, now is the timeframe where we should start to see some sort of a bounce. Again, we'll be news dependent. We'll have to keep an eye out and see what happens with South American weather, trade deal, ethanol, so many different things going on right now that we have to keep an eye on. But, without any major hiccups I do think now is the time where we start to see a bit more of a bounce.

Howell: One thing that maybe was a little overshadowed this week too besides not only South American weather but what was going on in the PNW. We've got a question here from Phil in Dresden, Ontario. He said, is the increased soybean levels in the PNW the first sign that the announcement from the Chinese news agency of tariff peace on beans might be real? If it's over, can we expect November soybeans to take off? Or is it like a blind man looking for a shadow of doubt?

Seifried: Blind man -- hi, Phil, very poetic. I don't know if I really followed you there, Phil. But thank you for the question. Again, lots of moving pieces in that question. You really like the complex five-part questions.

Howell: Yes, I'm throwing them all at you today.

Seifried: Anyway, okay, why are we moving beans to the Pacific Northwest? Yes, that was very much in response to the idea that China would be buying, making purchases before the next trade meeting in October. And then on Thursday we saw confirmation that they had bought at least 10 cargos or 600,000 metric tons of soybeans. So we're going to need that because they were buying them out of the Pacific Northwest. And the idea is that there's going to be more. So, that explains that. Do we like the prospect for November soybeans? Okay, I'm focusing my attention to the January just because I want to see the timeframe past or sort of into the late December timeframe. But yeah, I think November has room to run. Just keep in mind that we have about a month left or a little bit less than a month on that November contract being legitimate. So if you’re picking contracts right now, if you're not in something already, I prefer to look at the January. But as we've been talking about this entire show and this entire Market Plus I think there's pretty significant upside potential for soybeans. I've been saying that since basically June. I'll say it again. Corn was the story of the spring, soybeans could be and in my opinion now are the story of the fall.

Howell: So with all of those factors added in when you look at the grains, the livestock, dairy and softs, I think I know your answer but I'm going to ask you --

Seifried: It's going to be soybeans.

Howell: What market are you most bullish about?

Seifried: Soybeans. Yes, because again we cut acreage so dramatically and I've spent the last four or five weeks, really all summer, but intensively the last four or five weeks going through soybean fields all over the place and I just don't see the soybean crop out there. And I don't think that we are going to add this major pod weight. We're certainly not adding a whole lot of pods in a lot of areas that we would have still been say last year for example. I just don't think that soybean crop is there. And I think we're going to see ending stock levels to the point where if we do get a trade deal with China we're going to run out of soybeans and I think the market has to respect that. So trade deal or no trade deal, even though things are feeling more like we might get one, but trade deal or no trade deal I think there's a good reason to see soybeans rally $1 to $1.50. I think we're just too cheap in soybeans based on what we know right now at this second. Again, go back to July. We're talking a billion plus, 1.08 I believe billion bushel carryover, now we're talking a 640 and most of us believe that number is going to go down because production is still going to go lower because the pod weights are too high. That's without a trade deal. That's pretty friendly. And again, prices have not reacted to that quite yet or at least not enough in my opinion.

Howell: The tables have turned.

Seifried: I'd say so.

Howell: Ted Seifried, thank you so much.

Seifried: The pleasure's mine, Delaney.

Howell: Join us again next week when we’ll look at an industry seeing changes blowing in the wind and Sue Martin 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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