Market Plus: Angie Setzer

Oct 30, 2020  | 12 min  | Ep4611 | Podcast

Podcast

This is the Friday, October 30, 2020 version of the Market Plus segment. Joining us now, Angie Setzer. Hi, Angie.

Setzer: Hello. Hi. How are you?

Yeager: Good. So, I've got to say, we love having you on the program, always have, it's just I miss being able -- this whole virtual thing talking back and forth to a screen, some stuff gets lost like me trying to interrupt you and it seems like I'm rude. So I want to apologize if during the show you felt that I was interrupting you.

Setzer: No, someone needs to stop me because I'll go on forever.

Yeager: Well, Carl called, he says yes. I'm going to tease a little bit what we're going to talk about. We have the political race coming up on Tuesday. People are wanting to know what that does to the markets. We will get into politics. We'll try to keep it as non-political as we can. And then we have to talk some livestock. But first I want to open up with something you said during the show and it's Michael's question here and it's about farmer selling. You said there are three different times you can tell when farmers need some money because certain things, they call no matter what the price is. Michael's question is, should farmers wait to sell their grain until after the annual August rally or should they sell parcels all along the year at average profitability?

Setzer: Yeah, always the latter I think. You're never going to nail it. You can try to nail it as much as you want but you'll never nail the high of the market. I think when it comes down to it my most profitable growers are ones that are eager to capture the most carry between harvest and selling in the shortest amount of time. And it has worked well for them. My folks that are shipping Dec, Jan, Feb timeframes have been further ahead over the last several years, I think partly because we have created this incentive to put grain away. Farmers have built extra bins, co-ops have built extra bins, we have figured out how to put a boat load of ground piles out and so I think we have created this false vacuum as we work our way through harvest. I'll tell you as an elevator manager, the scariest thing when you're seeing combines running and you know harvest in in full swing, the absolute scariest thing is not being full. Going into harvest the scariest thing is being full and not being able to be open. But when that doesn't happen on day two or harvest you start to panic a little bit. And I think we've really seen that evidenced this year and so some of the early birds captured the worm, we've seen basis really kind of collapse here recently. I think that is mostly a function of barge freight more than anything. I'm talking along the river market structure. But I think you'll see some really good opportunities, especially in those places where harvest is wrapped up, like in Iowa, and everyone is looking out wondering where all the grain is because we're not used to seeing a crop shortage, especially there. And so I think you're going to see some pretty phenomenal basis opportunities here over the next couple, three weeks as we work our way towards Thanksgiving, especially for probably December, first half of January shipment where folks are just going to want to get ownership, margins are good. And so I think one of the hardest things as a farmer, and I struggle with it as a merchandiser, is if it's this good now, how great will it be later? And really when it comes down to it you just have to ask yourself, is this a profitable level? Is this better than historical levels? Am I able to capture the cost of holding this grain because you've got to figure a couple of cents per bushel per month at least and if you can't guarantee that you're going to be able to do that through June and make sure it's worth your while then you really need to start looking at selling. And I'll get farmers that will say, that sounds like someone that wants to take my grain for really cheap. That's not it. But if you want to think that, that's fine.

Yeager: So that opens up our follow-up question which I'll let Scott in Barrington, Illinois ask, a hybrid of a couple of his questions. I put them together, sorry, Scott. Basically he's asking, what are the '21 contracts telling you, to plant more corn or soybeans? And I tie it back to the previous question because you're trying to figure out, where do I go, because last year was we're going to, you should plant soybeans. You know what, I'm going to plant corn. And that's all we heard for a while. So what's '21, what are they telling you, those contracts?

Setzer: I think '21 right now is telling us to plant corn still. Of course Dec corn has backed off a little bit, it's in the mid-$3.80 range. I do think you see some strength. There's a lot of conversation about what we're going to see. Last year the conversation was acreage hot potato. We didn't want anyone to plant too much of any one commodity and we were constantly talking about the overplanting of corn even though the USDA three months later said, oops, that's not the case. And so we are now talking about needing supplies, especially if we see this continuation of export demand that has kind of come out of nowhere over the last couple of months. And so right now I think it points towards corn. Farmers like to plant corn as the old adage and corn in the $3.80 range is pretty decent. Beans have to do some work. $9.80 beans are reasonably competitive but they are not going to really get people convinced, especially when they're selling $10 beans across the scale this year.

Yeager: Okay. But stick on that December '21. But I want to ask you a different way about that contract, not so much what to plant, but what to sell and when. You're starting to throw some prices, which is Phil in Ontario, in Dresden, his question is, it has become a trend to be bullish corn compared to where we were last summer. And as we move ahead, is it likely the high for December '21 corn tops in December '20 or more traditionally the mid-'21? I know I keep asking the same question but there's so much of this that everybody -- frankly, Angie, nothing has made sense for the last six weeks.

Setzer: Yeah, no, not even a little bit. I don't think Dec '21 corn tops out. I think you'll see some continuation of support. I think even if the spread is out of line, which you saw that here today as the spread really unwound on Friday, the front month December board was down a couple of cents at one point with the Dec '21 up 3. That is really off kilter from where it normally is and so I think you'll see Dec '21 stay supported. I think you'll have some additional opportunities to sell $3.90, $4, especially depending on what happens in South America, you're really going to want to be watching what takes place from a production standpoint and a rainfall standpoint as we work our way towards January, February. Their initial planting, we're not going to know what takes place in South America really until June and so I think that is going to keep Dec '21 corn especially supported in the idea that with La Nina you could have a crop failure and that would definitely be bullish corn.

Yeager: Don't know if it has any spillover to this next question, but if might. Robert in Sanborn, New York -- good to hear from the state of New York watching the show -- why did you tell us to sell wheat at $5.50?

Setzer: Because I always will look at selling wheat at $5.50 and I'll do it again next year, even after this year simply because of the fact that if you look at a five year or even a ten year wheat chart, $5.50 to $5.75 are very good prices. For my growers in Michigan here especially they tend to average 70 to 80 bushel plus per acre and that's a money maker for us, the basis even to 10 under. And so for me my job isn't about trying to nail the high, although it is much more ideal to be able to have your customers sell everything at the top of the market, you look pretty smart even if it is pure luck. And so my job isn't necessarily to do that. But I've always said, you start selling at $5.50, you sell more at $5.75 and you sell your neighbors above $6. So the last one is not necessarily trade advice, but still it makes guys laugh at winter meetings.

Yeager: That's a good line. Here's a line that we're going to cross and it's about the election on Tuesday. Dave in Minnesota as well as Keith in Illinois, Aaron in Iowa, have all asked this same question. What is the election going to tell us? Who is going to be better for commodities on the presidential side? Do we know that?

Setzer: I don't think we do. -- the million dollar question obviously is what is China doing right now? Is this a phase 1 thing? Is this a cabinet stocking thing? Is this a nefarious sort of motivational thing? And obviously President Trump has indicated that he's not afraid to come at them head on and manage, try to keep them in line to a certain extent. So obviously right now a good portion of this surge in the market structure is because of the idea that China is in buying, continuing and is going to continue to buy. Do we run into a situation with a President Trump re-election where China does push us a little bit further with the Taiwan thing or with the Hong Kong thing or with the -- just pick your poison on what sort of China issue you want to talk about. And so I think there is a real question there on do we see the COVID, that's the other conversation that we've had is we're going to make them pay. How is that? Is that sanctions? Is that additional tariffs? Do we see some issues there? And so obviously we're probably going to continue with some uncertainty. I think a Biden presidency has a whole host of other negatives that you could throw out there when it comes to farm management and economics and all of these things that have to be concerning. I would say with China though I think you see him just basically put on kid gloves and China continues to do what they want. Whether that is right or wrong I don't know. Obviously we'll see after some time. But I do feel that a Trump presidency would probably maintain the volatility that we have grown kind of accustomed to over the last four years and maybe that's a good thing, maybe we like that whereas a Biden presidency, I look back on the Obama years and outside of '08 through '12 the first go around I guess is a little volatile but I think those were things outside of his control when it came to the economic crash and ethanol and then the drought. The last few years were kind of pretty boring. So it's always a toss-up.

Yeager: All right. I'll let you off the hook with that's an easy question. This is the most ridiculous question, hard, that I've probably ever asked. You ready?

Setzer: Yes.

Yeager: Z in Texas wants to celebrate a day. Today is National Candy Corn Day. So Angie, what is the basis on candy corn?

Setzer: I don't know, it's a very regional thing. But I will tell you that for me I will always pay premium if it is a blend of Planters nuts and candy corn, otherwise straight in the garbage.

Yeager: All right. Angie Setzer has spoken and we're all listening. Angie, good to see you, thank you so much for the insight. We'll talk to you again soon.

Setzer: Thanks for having me.

Yeager: Next week we'll look at how the results of the election may shape the future of rural America and Naomi Blohm will join us to analyze trends in the commodity markets. I'm Paul Yeager. Thank you so very much for watching, listening or reading. Have yourselves a great week.

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