Market Plus: Ted Seifried

May 14, 2021  | 11 min  | Ep4639 | Podcast

Podcast

Yeager: This is the Friday, May 14, 2021 version of the Market Plus segment. Joining us now is Ted Seifried. Ted, I didn't mean to necessarily say your name like Newman. It just kind of came out that way. But I'm so glad that you picked up that that's what I was laying down.

Seifried: Yeah, no problem.

Yeager: I like how you can go along with whatever crazy idea we're going to have.

Seifried: It's fun. That's why I like this.

Yeager: I had a dry erase board under my chair. Did you have anything else under your chair?

Seifried: No.

Yeager: Okay, so spoiler alert, no corn hat. But we're going to talk a little bit about that. Before we get any further I just didn't quite get a chance to get cotton in before the bell. Cotton it seems, we're buying acres, we're buying acres, and now that we've got our acres the interest is gone. Is that what's going on?

Seifried: A little bit, yeah. And we've had a nice break off the highs. But we're right on trendline. I am optimistic that we hold and bounce back. Demand for everything is really rather strong, both domestically and globally, and I'm hoping that we start to see some stronger exports going forward.

Yeager: Okay, well the trend there on the screen dropping off a little bit. We'll see how that one shakes out. We're going to start with a Twitter question, Ryan in Nebraska. He says, Ted, no one is talking potential above trend corn. What is Dec corn at harvest if USDA starts projecting above and prevent plant acres are nil? So you mentioned somewhere between 2 to 3, there's a report 3 to 5 million more acres out there. Your number, you get to write a number. How many more million acres above what USDA said in late March do you think we'll end up with in the June number?

Seifried: Oh, that's not the number. I thought the number was what is the price of corn?

Yeager: You can do that one too. Fine, let's answer Ryan's question first.

Seifried: I can do both. There's a lot of space here.

Yeager: What is December corn at harvest if USDA starts projecting --

Seifried: By the way, PP acres won't be known. That's just not --

Yeager: It never happens that way. Somebody always has a problem.

Seifried: But I get the point, down sharply because they've been really high the last couple of years because of wetness and whatever. And how many acres for corn?

Yeager: Yeah, that's my second question, follow up to that.

 

Yeager: And the secret answer is ---

Seifried: Sorry, I'm trying to get it to be darker.

Yeager: So $4.85 is the price of December corn at harvest off the combine. And you're saying that we're going to see 94.6 million acres of corn. What leads you to both of those numbers?

Seifried: Well, the $4.85, look, we're taking a total shot in the dark here. We don't know what weather is, we don't know what acres are, we don't really know what demand is going to be. This is before the marketing season even starts. But that's just kind of what I would consider a rather normal price for corn given a 1.5 to 1.8 billion bushel carryover and an inflationary climate where I think soybeans will be trading $14 plus, $12 to $14 I should say. So that's kind of where that comes from. But I'm assuming normal weather, I'm assuming basically trendline yield. I think he started that question saying, nobody is thinking above trendline yield. That's because there is dryness in the west and we have concerns going in. But look, we planted early. I'm not saying that's impossible. It would be a record by 3 bushels an acre. So we're already looking for a record by 3 bushels an acre at trendline. I think that is why people aren't thinking oh 181, 182. A couple of years ago we felt like we were going to do that and then last year we thought we were going to do that and then derecho and dryness in western Iowa. So the trade seems to definitely be leaning under on that number but we certainly could be over and it certainly could be a bigger than 2 billion bushel carryover for corn because of that combination of increase in acres and -- which again we don't know for a fact yet, that is just what everybody is speculating, myself included. But if you have those bigger acres and you put that together with a better than trendline yield and a new record by 4 or 5 bushel an acre and China doesn't keep buying like they have the last 10 days then oh boy, you've got, you have a hard time justifying prices above $6, that's for sure, or even $5 for that matter, hence the $4.85.

Yeager: Let's go back to the story we did in the main program about inflation. Food is 15% of the consumer price index roughly. Say corn, soybeans drop. The farmer is upset but the shopper maybe not because maybe their food stays in line. Or I'm not going to say collusion, I'm not going to say we're all working together on this one, food stays high, food stays strong just because it can. Is there a possibility that -- I guess I'll ask the question from Ken in Michigan as with Roger in Indiana. Are the highs in corn and soybeans in? Or are they yet to come?

Seifried: You left a lot to unpack there, Paul. Let's start with saying this, for the moment the U.S. consumer is okay paying higher prices and a lot of that is because we've thrown an amazing, just a tremendous, unprecedented amount of stimulus into the --

Yeager: Are they ready to pay it in food, though? We usually balk at paying it in food. We might buy a steak. We might have forgotten what a steak cost in the restaurant but we're not going to pay higher food forever.

Seifried: I don't know. Again, I think people are hearing the word inflation five, six times a day. I think people are just understanding that this is a thing right now. But a lot of those same people got pretty handsome stimulus checks and we're happy to spend it on whatever. So, people have been paying. Now, that's kind of what my point was is if the stimys stop, are people willing to pay the higher price of food or not? That's the question. I don't know. To some extent you get kind of jaded to inflation, but on the other if you don't have the same amount of money coming in that you did during COVID when you were unemployed and playing video games, do you go out and get Sizzler or do you go back to McDonald's. Either way, ground beef demand, that's good. But yeah, that is a concern. What happens six months from now if inflation is still rampant and yet we are not pumping stimulus into the economy, which is supposedly that's kind of what the plan would have been or should have been or whatever. So we'll have to see. So that is a longer term concern. But for right now domestic demand for everything is really very strong.

Yeager: Let me make sure -- are the highs in on corn and soybeans?

Seifried: Okay --

Yeager: Old crop and then we can go to new crop.

Seifried: It's the same answer for both. They could very well be in for corn. It would be very strange to see the highs in April and May for corn but all things considered I believe it's possible that they are and it's really going to depend on weather. Now, we'll probably have a weather scare to get us back towards the highs at some point but whether we make new ones or not will really depend on whether we have an actual weather deal or if China just decides to buy all of the corn, which by the way I have reasons to think that could be possible too. But I would be less surprised if the highs were in now for corn than I would for soybeans. As we've talked about, I really feel like there's more upside potential in soybeans and I think you've got a soybean question so I'll save the soybean commentary.

Yeager: So Aaron in Ocheyedan, Iowa, another good question on Twitter. Can you, Ted, outline a case for all-time new highs this summer but also a case for going back to $10 to $11?

Seifried: Yes, yes, yes and I like this question a lot because this is really the question we should all be asking. So, I think the path to new highs in soybeans or potentially record highs in soybeans is really fairly clear. You talk about maybe we get 88, maybe 89 million acres of soybeans, if we have any problem with yield, say we're at 47.6, somewhere in that neighborhood and demand is a little bit stronger than the USDA is suggesting, we're very much in a position where we have to price ration soybeans again. And you can see how this last year going to $16.60, flirting with the idea of $17 didn't ration soybean demand quite as much as I think we had thought it would. Now, there's a big difference. We started at $8.80 so there was a long period of time where soybeans were really very cheap and we sold too many of them to China for very cheaply. So we won't have that same scenario here so it will be a big test for demand. But if that demand is there and it's as strong or stronger than it was last year look out. There is definitely a case, an easy case to make for record high soybean prices. Now, is it likely or not? I don't know about that. I worry about demand for a number of reasons. But to this point, you don't have any major reason to go and say it can't be there. So we'll leave it at that for now. Back below $12. I think that is the less likely of the two, whether above $14 or below $12. Now, by the way, we can get above and below both of them and still not finish there at harvest, but a sustained trade below $12 would take a couple of big events or one or the other or whatever. Demand destruction in a big way, we stop doing business with China, China invades Taiwan, something like that.

Yeager: You had mentioned that.

Seifried: Yeah, another one would be ASF everywhere or really big deal in China, whatever reason China either stops buying soybeans or we stop selling soybeans to China, that would be a big one. But there's another one and that would be maybe we're surprised and we actually did get 2 million acres of soybeans and end up with a 53 national average yield and okay, we thought we were going to have razor thin tight margins but we're actually at about a 400, 380 million bushel carryover, which isn't great, it's not abundant but it's definitely a different story than what we're talking about right now and that disappointment would probably push us back down lower. So there are things that can happen to make it go either way which is why we want to be managing price risk right now when you have really fantastic profit margins. I want guys to be close to 40% to 60% sold on new crop soybeans at this point. Cash sales and then we can use call options to replace the opportunity. Manage risk by making sales, manage opportunity by call options or futures on the board. I prefer call options in this sort of volatile market. But again, you have to manage. Don't do nothing. If you're doing nothing you're really leaving yourself open to a tremendous amount of risk that you really don't need to be.

Yeager: Okay. I'm not asking you to answer the questions of previous analysts but you know that certain things have been said on this show. Dylan in Iowa asked us on Facebook, he's heard multiple analysts in previous episodes of this show say they were very bearish about the second half of 2021 for grain markets. Now, you're laying out other scenarios that could happen and prices, doesn't necessarily make you bearish. The question is, why is that? Why were they bearish? And do you agree?

Seifried: I think a big part of that was the idea that we're going to get more acreage and an improving weather forecast. I suppose, I don't know. I was kind of more bearish corn right now, I felt like we'd have a big spring break and then kind of ramp up into the summer again. But as I've said a number of times, I don't know if we ever really had a position in corn where we had a definite need to price ration aggressively. The cash market made it feel that way a few times. But I don't know, I really don't know if we'll have that situation for next year. So I just struggle with being uber bearish corn, especially at these price levels. But then I look at soybeans and I say, wow, the story could be really massive there and soybeans can pull everything higher and using corn for substitutes when available could mean more corn demand. Yeah, I'm not tremendously bearish for the second half of 2021. Tell me what the weather is going to be like and I'll tell you what we should be doing.

Yeager: Okay. Last thing, this is the last time you can use the board since I didn't really even ask you any board questions. In the next two weeks, what contract and commodity do you see the most excitement ahead for? Anything that we talk about on this show. In the next two weeks.

Seifried: I'm going to give you two.

Yeager: Okay. And Tiffany, I do apologize because I know I went past the certain timeframe. So Ted is going to be quick on his explanation.

Seifried: One of these we talk about on the show all the time, the other one we don't. All right, for guys that don't know, ZSXQ is November soybeans and I tried to draw a little soybean there. It looks more like a buckeye. Anyway -- the other one says dog money because I think this Dogecoin thing is really very interesting and entertaining. But for all the reasons we've talked about I think the realization, the market is remember now how tight the new crop carryover can be for soybeans and I think that November beans are maybe the most undervalued thing on the board right now. If we’re going to rally I kind of feel like it should be led by November beans. And then also I think the dog money is funny.

Yeager: It is. I'm going to have to watch the video.

Seifried: The YouTube video, you've got to watch it, it's amazing.

Yeager: Thank you, Ted, good to see you.

Seifried: Always a pleasure, Paul. Thanks for having me.

Yeager: I appreciate all the questions. Ken, Confused Cornhusker, Tim, Glen, Mitch, Dylan, Judd, sorry we didn't get all your questions in but thank you. I hope Ted was able to help and we appreciate him coming by. Next week, we will look at a year of struggles for one hog producer and Naomi Blohm will join us to break down the markets. Thank you so much for watching. Have yourself a great week.

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