Market Plus: Angie Setzer and Chris Swift

Jul 16, 2021  | 13 min  | Ep4648 | Podcast


Yeager: Hello and welcome to the Friday, July 16, 2021 version of the Market Plus segment. Joining us now, Chris Swift you see on your screen there and here is Angie Setzer. There she is. Peter got it to me right in time. Hello you two.

Setzer: Hello.

Yeager: Angie, I cut you off on WASDE. I'll let you discuss that in a moment. But I need to start with we've got a good radio question here. Bradley in Beggs, Oklahoma. He's asking, how much did it rain in Iowa? I'll hang up and listen on the other side. So I asked that to Chris, you made the drive from Tennessee. What did you see through Illinois, Missouri, Iowa?

Swift: So, Kentucky looked really good. Illinois had lots of variations in the crop. There was some that was only just a couple of feet off the ground and there was others already tasseling and you could see where it looked like some ponding in the fields so they've had some weather. In Central and North Missouri and about the same situation there, there was nothing that looked excellent. And then as I got about 50 miles out of Des Moines everything looked just absolutely perfect. It was uniform, tasseling, you just couldn't ask for any better.

Yeager: And Angie -- there was some rain this week that came across the lake. What is the story in the lower part of your state?

Setzer: We love rain for corn and soybeans. We hate rain for wheat that is ready to be harvested. So I kind of have a little bit of a love hate relationship with what is going on from a weather standpoint right now. But soybeans really turned around, we got that big rain event here a couple of weeks ago, five plus inches of rain over a week's time, we busted our drought in one week and so I always warn everyone, well I wish we'd bust our drought, I'm like don't say that. Like in Billy Madison, don't ever say that! Wait until January to bust droughts, just get timely rains when you're trying to grow the crop. But I would say our beans have turned around, done a 180 over the last week or so once everyone was able to get out, get them sprayed, kind of save some of the root rot issues that we were dealing with and things like that. I feel like I woke up and I never left Iowa other than the trees and it's a lot cloudier than what it was out west there. Our corn crop looks phenomenal. And so don't mind me, I'm just basically going to hold my breath for the next two months that it finishes phenomenally because we at least deserve that sort of break here. But yeah, all around the state so far really impressed by what I'm seeing from a corn and soybean sort of standpoint.

Yeager: Just 15 miles from where we're taping this, Chris and Angie, it rained 5 inches and half an inch on the south side of that so it's really different. So let's get back into livestock a little bit here. Jeremy in Lanark, Illinois is asking you, Chris, should we be looking at $1.40 April live cattle as a place to start hedging? Historically that's a good place to sell.

Swift: It is. When you look at price on it and the aspect of what we're going to be placing this fall I think it's going to be interesting. I don't know that I would want to market anything specifically but if I needed some kind of protection out there for a lender or for my own protection out there, just look at the put options out there, get with a broker that knows how to be able to help you, inform you of what those options can and cannot do for you and then just put a little money out there for protection just in case. We seem to have a lot of black swans that are flying around here last year and nothing says that they're gone yet.

Yeager: A year ago at this time we were pre-derecho, the crop was in this weird situation and then the derecho hit and it's been almost a full year so maybe we're -- no don't say that, don't ever say that. That's what Angie just said. I've got one more livestock question specific to you here. AJ in Decorah is asking you, Chris, what are we thinking about feeders? We talked a lot about them in the show here. Should a person be hedging September/October yearlings or just let them ride? Where is the ceiling at on feeder cattle?

Swift: Well, we've got such a negative basis that is so beneficial to the producer now. So we look out and where can we sell cattle at the highest price and clearly it's in the futures market in the fall of the year. So I see no problem with go ahead and marketing with the futures market in some manner, again get with your broker and find out how the best way to be able to do that is. But what you're capturing is a basis that is generally not available to you in that timeframe.

Yeager: Hold the word basis. Angie, we're going to talk about basis in a minute. Chris wants to weigh in on that one. But this one is very specific. I talk about Michigan. It's in the heart of the NFC North. Much of the northern/western belt still need significant moisture -- this is Eric in Moville, Iowa by the way -- to make their corn crop and growers in these areas are nervous. How might this uncertainty affect NFC North fan bases associated beverage consumption and with it the related grain demand?

Setzer: We're going to need an increase in malting barley stat perhaps. But the Lions are going to win the Super Bowl.

Yeager: Haven't you said that before? Hasn't everybody said that before?

Setzer: I'll say it every year until it happens. I'm going to be that person they show on the news like 99 year old lady finally able to watch the Lions win the Super Bowl.

Yeager: But it is a different story though throughout that division. We talked about Minnesota when we discussed wheat. Everybody is going to kind of be celebrating differently.

Setzer: Oh, for sure. You've had some drier weather in spots in Wisconsin, they finally caught some rain this last week. Minneapolis area keeps kind of catching some but not a lot. Michigan should be pretty good. Illinois has that drought that seems to be Chicago-centric so maybe the Bears fans won't be overly excited. And Indianapolis would love for it to dry out a little bit. So yeah, it's definitely going to be a very different sort of year ahead.

Yeager: And you didn't say Packers I don't think.

Setzer: I won't.

Yeager: We'll let Naomi talk about that. Okay, Angie, we joked a little bit about this. The last time you were on you laid out a pretty specific date, caught the attention of somebody at USDA and I know that Seth Meyer watches it when you're on. So this is not Seth that is asking this question. This is Doug in Prairie Hawk Estates, Indiana. What date do I need to worry about before I market again?

Setzer: Oh, he needs to worry about any date. I think right now talking about marketing and when I was on the last time, oh my goodness we were on a heater. So it turns out I kind of nailed the Setzer top but I trademarked that so no one else can use it. Yeah, maybe we'll be able to get something a little bit better than that. But I stood by it, I continue to stand by it. Any time we get after about June 15th and we get a better feel for what we're looking at from a production and weather standpoint, obviously this year is quite a bit of a wild card with what is taking place in the north. It's an unprecedented drought that we're seeing but the weather group that talked today about the below trendline kind of being out the window really did make a very good point. There's only about 15% of the corn crop that is experiencing less than ideal conditions right now. So depending on where you're located you're going to have a huge influence on what you need to do. The biggest thing I think is to pay attention for those who are sitting in an area where they're probably going to have above normal production and definitely start to be communicating on what you're going to be doing with your harvest bushels as we work our way towards October. It could be very possible that we would have a hard time -- if we stay dry and warm and have a quick harvest we have a lot of corn coming off in some areas that aren't used to having the type of production numbers that we could possibly see. So any day is a day to market now. It's July 16th.

Yeager: Which is normally when people are emptying out the bins. I remember the end of July was, it was so darn hot because you had to empty it out because you had to get ready for the combine. Now, Tim in Crookston, Minnesota is asking a wheat question here. Short crops have long tails. Should I sell the majority of my new crop wheat off the combine? Will that be the peak once the size of the crop is known?

Setzer: That's the million dollar question. I would look -- if you have to move your crop at harvest time then it's probably going to be a good idea. If you have the ability to sit on it, protect your downside risk with some options or something of that nature then definitely wait and see. Also really depends on your area and what your basis is that you're looking at. I'm a risk manager so I'm going to sit here and I'm going to tell you plain and simple if you're able to sell and make really good money on $10 cash Minneapolis wheat, which I think is about where we're at right now, and you have something to sell what else are you hoping for, keep a little bit behind and see if we trade $20 again. But definitely it's always the most bullish at the top. I don't know when the top is. I was the most bullish at the top of the corn market at this point in time just simply because it didn't seem like China was going to stop and we had no idea what we were going to see from a weather standpoint. So make sure as a farmer you're managing the downside risk whether that is through sales and looking at the potential of buying calls or through puts. But make sure you know what you're trying to accomplish before you just kind of sit and wait it out.

Yeager: Chris, the basis story is one that you're paying attention to as well. Why?

Swift: Well, corn -- what we saw with the July contract going off the board, an 80 cent run in less than a minute for somebody trying to get out of that but we know that it's going to be very difficult to probably get enough corn dried down and harvested before the September delivery goes off the board and there's already some areas in the south where we don't have a great deal of storage anyway that are running really low. And so basis is a huge thing when you're looking at feeding cattle and in areas that don't have a lot of corn or have gotten short of corn the basis could hurt them as much as what the price could alone. And so we've seen in certain areas where the price of corn goes up a dime on the board and goes up 20 cents in the basis.

Yeager: Is there anything that Angie said today that has caught your attention?

Swift: Yeah, a lot of things. I like the aspect that it's going to be a good crop. We're going to need every single bit of it. The USDA went back over 15 billion bushels. I think that 179.5 yield might be just a little bit flavorful for them. But if it pulls back any that could drop that back up underneath 15 and go to 14 and I think anything 14 is going to catch everybody's attention when it comes to feeding cattle.

Yeager: Angie, anything that Chris said that got your attention today?

Setzer: Oh, all kinds of stuff. I think it will be interesting to see how talking about corn, areas that might be tight on corn, it will be interesting to see where they're at when it comes to the need for feed wheat because we had all of our feeders went from no, we don't want any of your wheat to what kind of garbage, we mean wheat, do you have because ours has gone completely out of condition and so now they're looking at the opportunity of booking wheat at $4.75 or so on a feed basis and they have forgotten that corn even exists. Corn who? And they're looking at getting them through to October up here. I've never seen anything like it but I've also never experienced a wheat harvest like this one. We were 66 degrees and rainy today with about 80% of our wheat crop still sitting for the third week in a row. So there's going to be some pretty massive shifts in demand in certain sectors. I know that some folks in the Panhandle of Texas it's a big struggle, there's been some parts of Kansas that have continued to struggle. So wheat availability will help kind of protect some of those folks from vulnerability to corn. But if you're in an area in the north or in an area where you can't really get easy access to feed wheat, yeah, it's going to be a different story.

Yeager: All right. That's Angie Setzer. Thank you so very much for your time, Angie. And that’s Chris Swift. Thanks for making the trip and the insight, always good to see you.

Swift: I appreciate being here.

Yeager: All right, thank you very much for watching and listening here to Market Plus. Next week we are going to look at that increase in local food that has continued to grow post-pandemic and Ted Seifried will join us to analyze the markets. Thank you so very much for watching and have a great week.

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