Market Plus: Ted Seifried

Jul 23, 2021  | 8 min  | Ep4649 | Podcast


Brooke Kohlsdorf: This is the Friday, July 23rd, 2021 version of the market plus segment. Joining us is Ted Seifried back for more. All right, so we're going to start with another Twitter question. Um, this is from cambered Camburn climate. He is asking with one-third of the corn soy crop in severe drought, no relief in sight, are trend line yields for 2021, a thing of the past.

Ted Seifried: Good question. Um, I don't think we have a solid answer for that quite yet. And you know, I, I do, uh, uh, crop tour, uh, or I go on crop tour the third week of August every year. So I'm really looking forward to doing that. I want to see what we've got going on. I'm on the Western legs. So I'll be going through a lot of those, um, fields that have been affected by drought. Uh, but there is some really good corn out there. I mean, Iowa, Illinois, well, parts of Iowa, Illinois. Uh, it looks really good. Uh, so you know, the good's going to outweigh the bad to some extent, um, but doing the math, I mean, look, the USDA's trend line yield would be a new record yield by almost three bushels, an acre. So is that realistic to think in a year like this?

Ted Seifried: And I'd say probably not. However, I'm also not in the camp of saying that this is a 172 national average yield or worse. I do kind of feel like at the moment, um, I'm looking at a range between 176 and 178. So it is a reduction in production. We already know what, what acreage is and acreage didn't come up as much as we had expected. So if you put the, uh, the lower than expected acreage in there and lower the yield a little bit, that does tighten the balance sheet down to about a 1.2 or 1.3 billion bushel carry over, which I think is justifying like a five and a quarter price at some point. But as we talked about during the main program, you know, at some point you have to worry about demand, uh, and at these higher prices, that demand seems to have slowed down, especially when we're talking about export demand.

Ted Seifried: So at some point you might have to see the corn market go and find that demand. And, and I've been calling it a demand, hunting expedition, um,

Brooke Kohlsdorf: I like that.

Ted Seifried: I like $4.80 corn at some point during harvest. Now, if we do that and we find the demand that sets the stage for us to rally further when we have our post-harvest rally into the end of the calendar year, and then beyond that into the spring months. Uh, but we almost always set harvest lows unless we're totally surprised by a weather event last year, derecho and, and, you know, late season dryness kinda caught us out of the blue. We were expecting a fantastic crop. And so all of a sudden August came along this year, we've known about this story and we've priced it in. So I do think at some point we go make that harvest low and then if we can find the demand, then we're, then, then we have reason to rally after that.

Brooke Kohlsdorf: Okay. Okay. Well that leads us to our next question. So, uh, from South Dakota, what's the future hold for spring wheat.

Ted Seifried: Yeah, Hi South Dakota and yes, South Dakota wants to know about the spring wheat, for sure. Um, I'm still bullish spring wheat. I mean, this is a disaster of a crop for spring wheat. I mean, we talk about, you know, the corn and suffering and yes, they're, they're seeing something in corn, but man, this is a disaster of a spring wheat crop, both in the U S and Canada. And so there is upside potential in the spring wheat, as long as it doesn't get more than about $3, more than Chicago and Kansas City. So as long as Chicago and Kansas City can go along with it, I see more upside potential in the spring wheat. I think currently my thoughts are somewhere between $10.75 and $11.25 is very possible for spring wheat, but there's so many other outside factors, you know, we're talking to inflation, what if that craters.

Ted Seifried: You know, we saw on Monday we saw big risk off day where everything's sold off regardless of the individual fundamentals of the markets, when you get risk-off and, and investors running for the doors, then that stops things like, you know, people just run away and so prices go down. Uh, but I want to be bullish spring wheat. I think there's, there's fundamental justification for higher prices yet. That chart still looks really good to me. Um, so again, as long as we don't outrun Chicago and Kansas City by, by too wide of a margin, uh, I still see more often.

Brooke Kohlsdorf: Hmm. Okay. All right. Uh, last question from Twitter, this is, uh, another one from South Dakota. So it says in drought stricken areas of the states, if they can hold 100% of production, what pricing opportunities are ahead?

Ted Seifried: Hmm. And drought stricken. Okay. So I think the question is asking, you know, for, for areas that are affected by drought, meaning they will have less production. So that might mean, you know, the storage, if they could normally store 70% of the crop. Well now they might be able to store all of it and what to do with that. Okay. Um, yeah. I mean, storage historically has been, you know, what is it? Eight out of 10 years has been a great, uh, marketing plan, but there are those years where it's not, I have to say I'm a bit concerned that this is a year where it might not be, you know, you look at the, where the prices are right now. You're really very profitable. I think you need to be selling a good portion of your bushels. Now I understand if you're in a drought stricken area that you can't sell a hundred percent of your APH because it's just not going to be there.

Ted Seifried: Right. Uh, but if you go to 40%, you know, I, I think that's a very healthy thing to do right now, uh, to manage the downside risk. There's a, I I'd say a fair amount of downside risk from all the different things that can affect markets and push prices lower. There's also ways to come in and reown calls are reown and bushels, uh, use calls to reown bushels. So using the board to, to manage risk selling the board of manage risk or cash sales or HTAs and of the three, uh, that's how you're gonna manage your risk right now, and use call options, for example, to manage the opportunity of higher prices. But these are prices that you need to be selling to at least some degree.

Brooke Kohlsdorf: Okay. All right. Finally. So between corn and soybeans, which has the least amount of downside right now.

Ted Seifried: All right. So that's a very, very good question.

Brooke Kohlsdorf: This is where the show might come off the rails, right? Yeah.

Ted Seifried: So here's my thing. First of all, I have a corn hat and I don't have a soybean hat, but listen, I am more bullish. I'm more bullish soybeans, longer term because, uh, I just, I look at that balance sheet and I think it's raised within, and I do believe the demand is going to be there, but right now the market rightfully so is questioning whether that demand is going to be there from China. Our crushed demand has really slowed down here domestically as well with the problems in the South America, with the problems with the Brazilian crop for corn. That means that we're probably going to see a fair amount of an increase in, in, in our exports. I think corn has a fairly limited downside potential right now in the here and now compared to where soybeans are, just because of the issues that are, that Brazil had with their second season crop between drought and then frost. Uh, so I'm gonna go with corn again. I have the corn hat. I don't have the bean hat, but like I said, longer term, I'm a lot more bullish soybeans if we actually do find indeed find that demand. And I do think we will. It's just the question of how I'm worried that we're going to have to see lower prices to flush it out. So that's why, corn hat

Brooke Kohlsdorf: All right. Having a hard time looking at you with a straight face, nice job. You wear it. Well, okay. We got a little corny there at the end, but that was, that was nice. All right. Thank you, Ted, for your insight. As always next week, we look at the return of wolves to the upper Midwest and Matt Bennett will join us to analyze the markets. Thanks for watching and have a great week.

Grinnell Mutual Insurance