Market Plus: Ted Seifried

Oct 23, 2020  | 14 min  | Ep4610 | Podcast

Podcast

Yeager: This is the Friday, October 23, 2020 version of the Market Plus segment. Joining us now in studio, Ted Seifried. Hello, Ted.

Seifried: Hi, Paul.

Yeager: I know you and I have talked many times over the last few months and trying to get you in here, good to see you. I took your joke, I need to apologize.

Seifried: It's okay, it was a good joke.

Yeager: So what did you see on the drive, Mr. Seifried?

Seifried: Yeah, I saw a lot of political signs, but those will get harvested in the next two weeks.

Yeager: So what is the political impact going to be of those signs?

Seifried: That's a great question.

Yeager: Because we had the debate last night. There's another joke of, did you see the two hopeless entities going back and forth, nobody could win. Oh, are you talking the NFC East football game or the debate? So you've got that sentiment. There's not really many undecideds at this point. We kind of know what the outcome is going to be, we just don't know who it's going to be.

Seifried: Right. Well, I think with Trump we have a very good idea of what it's going to be going forward, it's more of the same. We know that his agenda is very much centered around trade war with China and getting better trade with China and so far that has really worked out especially for agriculture. We've been reaping the fruits of that here over the course of the last few months. So I think if Trump wins that is a good thing for agriculture, it's a good thing for trade in the next couple of years. Now, I have concerns about what China's intentions are in the long run. They remind me very much of the USSR and they have very expansionist ideas. Are they stockpiling in the short to mid-term, two, three, four years in order to prepare for a time where the world may not want to do trade with them for a while? And that could be a very bad thing for agriculture. Either way, right now things are very good and Trump coming back I think would be a good thing for agriculture, at least from an export standpoint to China. I don't know and I don't think any of us really know what Pence means for agriculture.

Yeager: Biden. Is that what you mean? I want to make sure.

Seifried: No, right. I'm not exactly sure we know what Biden means for agriculture. What does it mean for a trade deal? It would be a shame to reverse all of the progress that we've made with China in just a day basically. I'd hope that would not be what has happened but that has to be the concern and that is my concern. So I really don't know. Either way it is uncertainty, markets don't like uncertainty. I think for the most part if you look at the stock market it is suggesting, I think I saw an 87% chance of a Trump win. So I think that is why markets feel fairly comfortable at the moment. But the unknown of Biden could be a problem and if that were to happen I think we would have a rocky few weeks at least before we really do figure it out.

Yeager: Well, we're going to just probably lay out of politics for 10 days but I'm sure that won't be the last time somebody asks you your political opinion. Let's talk weather in South America. Paul in Northeast Iowa, he asks, it looks like South America will be getting better rainfall in the next 10 days. So, Ted, is the run in soybeans over for now?

Seifried: Yeah, so that's the question we all want to answer. Why is China buying? Is China buying because they were worried about La Nina and South America dryness, Mato Gross had been as dry as they've been in 20 years, that slowed down planting. Oh boy, this is going to be a compounding problem. But I don't know about that. I really get the feeling that China is buying for other reasons. And if that is the case, South American weather might not really matter. Now, we're also going to say that when we look at Mato Grosso and things like that and talk about La Nina, that's not really the area that is affected. We're talking more southern Brazil into Argentina. That is yet to be determined. If that La Nina forecast holds up there are still going to have problems down there, that still has to be a concern for China. That being said, if China keeps buying, if China keeps buying, if Mexico and Japan keeps buying, and we keep seeing these export sales roll in at a 2.2, 2.5, 2.6 million metric tons per week clip we're going to run out of soybeans. There's more price rationing that needs to be done. Now, for right now the market is very apprehensive and concerned that China is just going to stop buying because South America looks better or maybe then they'll cancel some. So I understand the market's trepidation and concern about that. But at the end of the day on Friday, wow we found some extra strength, right up at the highs, perfect time to do it. I don't know, again, I really get the feeling that they are in the market and they are in the market to stay for now. And again, I think that means higher prices for soybeans.

Yeager: So if I was somebody that sold to arrive at say $9.80, $9.70 and thought I had a great price, let's go back two months thinking that was a good thing, I'm cussing me elevator manager right now. Our friend Angie takes a lot of phone calls, she tweets about that. And it's a legit concern but at the same time there is the, well did you make a profit? So what do you tell someone who made a profit but now they've seen a dollar and a half, or if they listened to you talk during the market analysis maybe a two and a half dollar rise, what am I supposed to do?

Seifried: Hindsight is always 2020. We all wish we had the hot tub time machines. First of all, you can't cry over spilled milk. If you're profitable, you're profitable, you have to be happy with that. But then the whole idea is what if my neighbor sold a dollar higher than me and what if they're going to have a better opportunity to come in and outbid me on some rents next year, they're expanding, I'm contracting, this is a concern and it's a real concern. I understand that. I haven't had to deal with that as much with my clients, and I'm going to toot the horn here, Paul. As you know I've been pretty bullish soybeans for quite some time, we've talked about making cash sales and having levels and making those cash sales to manage our risk and those cash sales, maybe they're not all at the high, but we have replaced them with calls and we had calls even before we made the cash sales. So we've done very well on that and that's great. Now, I think if you are really worried about missing out you can look for opportunities to come in and reown some bushels, call spreads for example, on a bigger break in the market. Problem is bull markets don't always make it easy to come in and enter, sometimes you just have to buy or cry. That's a saying. Yeah, if you're making sales profitable, if you have made sales and they are profitable you've got to feel happy about that. You've got to look to next year. You've got to look at the chance that, the idea that you’re going to have an opportunity to sell more soybeans and that's great.

Yeager: And there's very few people that will hit the top of the market. They might get within 5 cents or 10 cents. Mike in Stillwater, Oklahoma, it's good to hear from you again, Mike, it's been a while. Thank you for the question. Will grain bulls go wild while the livestock will be mauled by bears for the next year or so? How long -- you were a little more optimistic on the livestock in the show.

Seifried: I'm not terribly bearish livestock mainly because I think domestic demand is going to stay strong, I think global demand stays really rather strong too. We're in a day and age where we've got so much political question marks and so many health and COVID and economic question marks, so short of a big black swan event I really think that domestic demand stays rather strong. I think disposable income stays rather strong. I think we're willing to continue to eat. We all need to eat and beef, protein, we like our protein, we like our beef in particular. So I think things stay really rather well. The big problem would be if packers start going down again and we just have this glut of animals that we have nothing to do with. That is the problem, that is the thing that we really, really want to avoid. As far as grains are concerned, we've had a sizeable rally already and now you see all of the loudest bears now finally turning bullish and that has got to be a little bit of a concern. Have we done enough work for now? And that is a question that I've really been wrestling with over the past 10 days. I kind of don't think we have. But that being said, we could see a pretty sizeable pullback in these markets, specifically when we talk about corn how very overbought we are, we talk about soybeans, we talk about South American weather looking better, maybe China doesn't buy for a couple of weeks, then you're going to have very loud voices saying, that's it, the rally is over, and then you can have that correction. But then they come in and buy again and all of a sudden, oh boy we're running out of soybeans and then new highs. So it doesn't have to be a straight up sort of thing. I think everybody can win. If we give livestock producers a chance to hedge at lower prices on a break then things could be good for everybody. So you just have to be on top of your risk management. That is a really big thing that is going to be very important this year with all the volatility that we're seeing.

Yeager: Volatility is a word we talked about last week. Erin in Ocheydan, Iowa was asking -- can we get a fourth quarter rally in livestock?

Seifried: I think so. I hope so. What does the fall and winter mean for COVID? What does it mean for health? What does it mean for packers? That is the big question mark that we don't know. That uncertainty is scary, it's part of the reason why we've seen a bit of a selloff. If things go well and we don't have a big resurgence and we're seeing 10 packers go down, I think so, I think domestic demand going into the holiday season is going to be rather strong. So I'm optimistic, I'm hopeful.

Yeager: We're going to be home and there's going to be more meals made because we're not going to have one person doing the meal, there's going to be six different people. But the turkeys I saw this week they're heavy on their weights and they're like, there's going to be too much big turkeys there. A couple of questions here to wrap up. Jerod in Mattoon, Illinois, it's the end of October, where are the corn piles at?

Seifried: Where are the corn piles? Wow. Go back to the wind damage and knocking all these empty bins down. Where was all the corn during that? And now that we're more than halfway, 60% plus through harvest, where are all the corn piles? Man, that's a good question. This is something we've been kind of scratching our heads on for a couple of years now. I'm not going to say conspiracy theory, but a lot of people disagree with some of the USDA numbers whether there is or has been this much corn out there. But that's a great question. I suppose you can say that we've put up a lot of storage and continue to put up a lot of storage. But I've been asking the same question and I really don't have a very solid answer for that.

Yeager: They can tag us in their tweets and we'll maybe find out where these piles are at.

Seifried: Yeah, I'd love to see it. But maybe the market knows something that the USDA doesn't and maybe that's part of the reason why we're over a dollar off the lows now at this point.

Yeager: Speaking of dollar, got a question, Bradley in Upland, Nebraska, will the U.S. dollar continue to trend lower? And what is the current dollar versus real ratio?

Seifried: It's pretty good. It's better than what it has been over the past couple of years and that is because of all the pressure that we've seen on the dollar. Now, will the dollar trend lower? That is a wonderful question that we're all trying to figure out. The smartest guys in Wall Street are trying to figure that out too. And it all comes down to stimulus or no stimulus? And when. I think likely we will get stimulus. But how much? How much money are we just throwing into the economy? Trillions of dollars. So, and then it also kind of depends on what other countries do too because it's a relative thing. I think there is more downside potential to the dollar. Do we get much below 90 or 88? I'm not so sure about that. If we do then we start getting into a bigger inflationary move and we start talking about fundamentals of individual commodities might not really matter as much because as the dollar is worth less and less commodities become worth more and more and it makes all of our exportable goods, which agriculture is a really big one for that, it makes them much more attractive on a global scale. So a lower dollar is a really, I'm not going to say silver bullet, but it's a very helpful thing for commodity prices and that has been one of the things that has been a big thorn in the side that we don't talk about on a daily or weekly basis or haven't been for the last three or four years but the dollar had been so very strong. That had been a big problem. That lower dollar could be a really nice thing for us for a few years. And I do think that the dollar will either go lower from where we're at or stay at low levels for a fairly extended period of time. And again, I think that opens up the door for opportunity in commodities and agricultural commodities specifically.

Yeager: So the dollar is one story. This is the last one, real short answer here. Doug in Thornton, Iowa. What is a bigger commodity story in the next six months, the cattle market or the low subsoil moisture?

Seifried: The low subsoil moisture I think will be a thing that we talk about when we get into January, February, if that is the case, if La Nina pans out and we do have less precipitation, that is going to be something to talk about I think early in next calendar year. I think between now and the end of the year I think livestock might be the more interesting topic.

Yeager: Ted, good to see you. Thank you so much. Ted Seifried, thanks for joining us.

Seifried: Hey, it's great to be here, Paul, thanks.

Yeager: That will do it for Market Plus. Next week we'll learn more about the damage weather has caused whether it's drought or floods or hurricanes in 2020. And Angie Setzer will join us to analyze trends in the commodity markets. I'm Paul Yeager. Thanks for watching, listening or reading. Have a great week.

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