Market Analysis: Ted Seifried

Market Analysis: Ted Seifried

Jul 23, 2021  | Ep4649 | Podcast

Podcast

Announcer:

Next, the Market to Market report/

Brooke Kohlsdorf:

New of order cancellations by China predictions of much needed rain in the forecast and sales by spec funds made for volatile markets for the week. September wheat lost 9 cents. While the nearby corn contract fell 9 cents predictions of moisture for the Midwest and lackluster export sales pressured the soy complex lower for the week. The August contract plunged 54 cents, August meal drop 960 per ton. December cotton gave back 16 cents per hundredweight. And over in the dairy parlor, August Class III, milk lost 30 cents. A positive week in the livestock sector. August cattle gained $1.32 August feeders put on $4.45 and the August lean hog contract improved $1.70 in the currency markets. The U.S. dollar index added 24 ticks. September crude oil gaining 49 cents per barrel and Comex gold lost $10.40 per ounce. The Goldman Sachs commodity index expanded by more than two points to finish at 53 or 531.85. Now here to provide insight is one of our market analysts, Ted Seifried. Hi Ted. Thanks for joining us. All right, so we are going to start, I'm going to let Twitter ask the first question today. Are you okay with that?

Ted Seifried:

I'm a fan of Twitter. I'm on Twitter. So yeah,

Brooke Kohlsdorf:

I think it's someone, you know, so this is Glenn Newcomer and he's wondering of the three major grain commodities, corn soybeans and wheat, which one has the strongest fundamental support and which one has the strongest technical support.

Ted Seifried:

Okay. first of all, hi, Glenn. Funny thing is Glenn actually came up on my iPhone's memories today. So that's a fortuitous. Okay. As far as technical support is concerned you know what, it's going to be the same answer for all of it.

And, and I'm not going to, I'm going to really zero in on spring wheat by itself because fundamentally that's the crop with the most damage. It's got a really good looking uptrend on a, on a chart. We had a really nice bounce off the lows there on Thursday held that trend channel. Didn't quite get to the bottom of the trend channel, which is, this is what bull markets do. So Glen, I'm going to, I'm going to say spring wheat in particular does, and we as a whole, I think has a good fundamental and technical setup. I'm a little more worried about the row crops, which I'm sure we'll get into here in a few moments.

Brooke Kohlsdorf:

Hmm. Yeah. Well going back to wheat, so that spring wheat story continues to tell us that there is further erosion up north with the severe drought conditions. I mean, it's kind of a drought that we haven't really seen before. Right. So how does that play out in the market?

Ted Seifried:

Yeah, I mean the spring wheat crop is rated 11% good to excellent. Which is the worst crop spring wheat crop we've really ever had. And it's just as bad if not, maybe worse up in Canada. So there is a massive problem there now, and we're also getting to the timeframe. Some rains might not even really help at this point or at least not do a big enough difference to, to really bring those bushels back. So yeah, you know spring wheat as any market is not going to be immune to corrections here and there things don't go just straight up. We started to see signs of that earlier in the week, but it did come back fairly nicely. So yeah, I still think maybe there's a chance to $10 plus, I mean, you know, I was kind of looking at an 11 and a quarter as a possibility for that December spring wheat contract. I don't know if we go straight there, but yeah, I'm still rather optimistic on the prices there.

Brooke Kohlsdorf:

Okay. Well, speaking of weather, so with corn is weather the thing that's going to impact corn moving forward the most, or are there some other factors in there that we need to keep an eye on?

Ted Seifried:

Well, Brooke, there's always other factors, but right now this time of year, the market is very wrapped up in weather, you know, this is a weather market. This is the time of year for that. However, you know, let's look at this, we're at the end of July and this is right around the time where we will put our highs in for markets if we haven't already. And then seasonally had lower because regardless of what has happened with the weather, even if it is a year where we've had some drought issues and we've had some, a supply side concerns, at some point we have to go and prove the demand is out there, right? We, we look at these USDA balance sheets and I'm a big fan of USDA balance sheets, but, you know, let's take them for what they are, they're estimates. They're estimating what the demand is going to be. And until we see that demand, we can't really say for sure that it's there and we haven't really been able to see it in corn. Export sales, as you mentioned, have really been poor. We saw old crop cancellations specifically by China that scares the market. So while I don't think there's a tremendous amount of downside potential in corn because of the issues that they had in Brazil. And the fact that that crop is short. If prices get too cheap, the rest of the world will come and buy more corn from us. They will be buying more corn from us. So, I don't think we see this huge slide, but I was on the show a few months ago. And the question was asked, where do I see December corn during harvest? And my answer was $4.80. I haven't changed that. You know, even with the, the drought issues that we've had in some areas, there are some really good corn out there as well. And, you know, I don't see this as being a big catastrophe for, for our, our corn crop or our national average yield. I don't think we're quite going to be where the USDA has us at their trend line, but I don't see this as being catastrophe. And at this point, the market probably is going to transition a bit more towards looking at the demand side of things in less. It, it really just stays hot and dry from here to the end of harvest.

Brooke Kohlsdorf:

Okay. Moving on to beans, so we're getting into that critical growing stage and with the heat continuing and the possibility of it not letting up, is that going to continue to cause some volatility in the markets what's happening?

Ted Seifried:

Yeah. So weather In the soybeans is a little bit of different story than what we're talking about in corn, because corn for the most part has gotten or is getting through pollination right now. But soybeans they're most moisture sensitive period is when we get into August. So we are really watching that, that forecast very closely for soybeans. And that's what happened this week. When we see more rain in the third week out, you know, we see more rain in as we get into August for soybeans. And that put a lot of pressure on us. We started to see that on Wednesday, that was the first little hint of it. So we just had a bit of a pullback and kind of held it together. But as we grew confidence on that Thursday and Friday, that's when beans really came under under pressure. And here's the situation in the beans. Yes, we're worried about weather, but if it doesn't seem like that weather is going to be a terrible problem there too, we're going to start focusing on demand, maybe even more so than corn because Brazil did have a really big bean crop and we have to be worried that China isn't making their purchases of new crop beans right now. This is the time they normally would be doing that. Now what would motivate them to do that? If the drought continues into pod set and it is, there's a ton of concern, well, that would be a motivating factor for them to come in and buy. And that would flush out the demand because they're going to say, Hey, the prices are high, but they could be going much higher. So we need to buy now before the stocks run out. But if that doesn't happen, if we have a more normal August and there are rain chances, and they're not worried about it, and they're not aggressively buying, they're going to wait for us to bring the price down. The soybeans, I think are on the verge of what I'm calling a demand, hunting expedition, meaning we're going to have to bring prices down to flush that demand, demand out, get the demand cooking again. And then we can start talking about a harvest low, and then we can start talking about how tight balance sheets could be later on. And so the lower we go now, I think the higher we could end up going later, but we need to, we need to prove that demand because right now it's just doesn't seem to be there.

Brooke Kohlsdorf:

Okay. All right. Let's move on to cattle. So the cattle on feed report was out today. Did it have anything in it? That could cause the market to react.

Ted Seifried:

I mean, look, cattle has been in a very sideways range since the beginning of the, of the calendar year and it's not really based on fundamentals fundamentally. I'm really rather bullish on cattle. I think there's very strong domestic demand. I think there's reason to think that we could be making new highs in cattle, but the problem is the cash trade just isn't going there. It's not even really moving for that matter. And as long as that cash rate doesn't do anything, I don't see any reason for the cattle market itself to really do much of anything. Now, as you said earlier, it was a better week for cattle and hopefully we can follow up on that next week, but the cash has been king and cash needs to kind of allow the board to go higher for us to really feel good about any upside potential in cattle right now.

Brooke Kohlsdorf:

What about the feeder market?

Ted Seifried:

Now? Feeders a little different story. I mean, that, that's really sort of a reflection of what's going on with the corn market. And as we talked about earlier, corn had been under pressure late this week and you know, we had a down week in corn, so that's really helping the feeder cattle market and prices go higher. I, my outlook for corn I think is a little bit on the bear side of things. Even if we do have a bit of hot and dry, which it looks like that will persist, I still feel like there's going to be timely rains. And I still feel like we'll make a harvest low. So there's a timeframe here where I think feeder cattle have have a bit more upside potential as well because of the lower corn prices.

Brooke Kohlsdorf:

Okay. And we've got time for one more. We got to talk about hogs. Of course. So there's a flooding in China. We're hearing about ASF concerns again, what's happening with hogs.

Ted Seifried:

Yeah. I mean the ASF concerns again, that's, that's, you know, when we saw the cancellation of corn earlier in the week, that's probably with the root of that. So that is something affecting the corn market as well. But you know, it's a complicated thing with China and their hog herd because they have this real strong demand for, for hogs. And when they have producers pushing their hogs to market, and that creates cheap price pork on their markets, they're going to go through that. And when they do go through that, they're going to have this lack of animals. So for right now it's seen as a bearish factor for the hog market and it has certainly had an effect on ours. We're well off our highs, but as they chew through that literally and figuratively, I see their prices rebounding. I see our prices rebounding. I'm looking at the $1.12 gap in the August live cattle as, as a target to fill that gap to the upside. But really I'm looking at the October, I think further out in time, I'm seeing more demand there. So I, I liked the October hogs. I'm Bullish there.

Brooke Kohlsdorf:

Okay. I think we covered everything. You got it all in. Thanks, Ted. As always for joining us. All right. Well that will do it for this installment of market to market. We will talk more in market plus. So join us there. We've got some fun things planned for market plus. You can find it on our website of market to market.org. We are also part of the millions of minutes of podcasts created each week. So subscribing is key to navigating and not missing out on an episode of the market analysis market plus and the M T O M search for those three by name, where you get your podcasts. Next week, we look at the return of wolves to the upper Midwest. Thanks for watching and have a great week.

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