Market Plus: Ted Seifried

Sep 24, 2021  | 13 min  | Ep4706 | Podcast

Podcast

Yeager: Welcome in to the Friday, September 24, 2021 Market Plus. Ladies and gentlemen, I present to you, what's your name again?

Seifried: Ted Seifried.

Yeager: Ted Seifried.

Seifried: Hi.

Yeager: I know I can't call you Theodore, that's a Dan Patrick thing, that's a whole other thing.

Seifried: That's not my name anyways.

Yeager: I know, that's not your name, and that was a whole podcast we did about your name. That is why I think I remember the whole discussion, which we won't go into now. Let's go to Glen in Ohio. You said Glen had three great questions and he did. We only got to one on the program. I want to put Glen's question back up on the screen. To recap, he talked about concerns over '21 and '22. Second part of his, and you kind of alluded to it was, with crop inputs to protect margin. But I think the question you really want to answer now is which crop has the most downside risk?

Seifried: Risk, right, yes, absolutely.

Yeager: '21 or '22?

Seifried: Oh, I took his question to mean which has more risk, corn or soybeans?

Yeager: Oh, okay. We can take it that way too.

Seifried: Let's take it that way. And I'm going to say there is a fair amount of risk in both. Any time you're at prices like this it's sort of a house of cards. Things can happen to change that very quickly. So if we want to analyze the risk of things falling apart, which has the bigger risk, I'm going to say soybeans. You've got, as we talked about on the show, we've got less hogs in the U.S. than what we had thought, we have China pushing for less hogs. Now, ultimately China I think is just being China and I think ultimately China is going to end up having, get back to and above where they were at before ASF. But yes, the risk is Chinese economy, it's Chinese hog herd, our hog herd and if China doesn't buy as aggressively or start washing out some cargos then we really have a problem because our domestic crush has not been terribly strong. So, I'm going to say soybeans but then there are concerns about corn as well. Ethanol, for example, RIN prices dropping below a buck is big time bad news, EPA lowering mandates for 2020, 2021, 2022 big time bad news. So there is a lot of risk out there for really everything. But I would pick soybeans over corn because of that second season corn crop in Brazil. That I think keeps a bit of a floor under corn. But if next year Brazil comes in with a big crop, well, that kind of changes that story too.

Yeager: A couple of weeks ago Naomi Blohm sat where you're at and she said, what about South America impacting that corn and soybean story, because if they all of a sudden put together a large crop, get some rain, get things together that impacts where China goes to buy. Do you buy into that theory?

Seifried: Obviously. China would prefer I think to buy from Brazil for a couple of reasons. One, geopolitical, but also because Brazil has -- people don't like when I say this -- but better quality soybeans from an oil percentage and from a protein percentage. Yes, but Brazil did have a really big soybean crop, which is why we're not seeing the massive numbers of soybean sales, that and a smaller hog herd and perceived less demand. But yeah, from a corn side of things Brazil had problems with their corn crop and thankfully for us they did because that opens the opportunity for more export demand for us. But if Brazil comes in, Brazil and Argentina, South America as a whole, produce a really fantastic corn crop next year then we're back to the whole conversation of overproduction again and we don't want to be having that conversation.

Yeager: Had that one before with you.

Seifried: Phil in Dresden, Ontario. He's asking about Evergrande. What if it collapses? What is the next geopolitical factor we might be missing? Of course we can't predict a black swan. What could affect grain prices and the value of the dollar? You talked about the dollar a little bit during the show as well.

Seifried: Yeah, a lot of questions there too. And Evergrande, it looks like the Chinese government is stepping in on that. Either way it's a problem. What is the next one? Obviously the biggest concern I have is ASF. If we start having ASF what does that do to feed demand in not just the United States but North America as a whole? That is a big concern of mine. But aside from that, I guess more geopolitical, right, I don't know. There seems to be turmoil all over the place and pandemics and everything like that and we have been able to kind of work our way through it. It some ways I think a lot of us have to be sort of surprised that we didn't see more carnage in the markets from an agricultural standpoint but also from a stock market standpoint and things like that. What is the next thing that can happen? I don't know. I feel like we've had a whole lot thrown at us and we have still kind of managed to fight our way through. Demand for things is stronger than ever. Part of that is inflation. But there's really a lot of demand out there, it has been very strong. So, I don't know. That is a really great question.

Yeager: All right, so what I'm going to ask you now though is to go back again to another topic. And Troy in Cobb, Wisconsin is asking what's on everybody's mind, is the harvest low in? And if so, how aggressive should one be on selling cash corn off the combine with no storage?

Seifried: Right. Ooh, that's a good one, no storage, selling cash corn. If you haven't sold corn throughout the year and you've got corn to price. If you don't have storage I wouldn't pay commercial storage. I would sell and then look for ways to reown it on the board, i.e. using calls, probably calls or a call spread most likely. Are the harvest lows in? I really don't think so. I think there is more cash pressure going to push us down. And a lot of people don't understand why we're not rallying right now with the tighter balance sheets that we have again for this next year. Well, we can't price ration crops before we get a big chunk of demand on the books. We can't say for sure that that demand is there because we're not seeing it. Our export sales for corn are abysmal. Again, we had a lot of sales coming into this season, especially with that 10 million metric ton sale that we had to China that it seems like it's been forever ago now. But we can't keep going on with 250,000, 350,000 metric ton sales on a weekly basis. We need to see that daily. So until that demand starts really showing itself, until we get a big chunk of the demand on the books for both corn and soybeans you've got to say we can't really justify price rationing. So, in my mind I still think we need to see lower prices to bring that demand out of the woodwork. I still think you're going to see cash pressure. I do think that demand is there, I think your global end users are very savvy and they're waiting for the right time to buy and they don't think it's time yet. So I think that tells you a lot about where markets are going in the very short-term. But longer term there is definitely the possibility of tight balance sheets, once again, price rationing, the fear of running out of soybeans in particular, but possibly even corn. So the higher prices, those scenarios are still on the table for sure. We just need to see the demand come in first and then we can get excited about price rationing corn and beans.

Yeager: It's like predicting the geopolitical thing, you can't predict demand too far out either.

Seifried: I think i8t's there. I think China, even though for all we hear about them wanting to change their feed rations and move further away from soybeans and soybean meal, for China wanting to lower their hog herd or reduce their hog herd, all of these things, that's just posturing I believe. I really do think they want to stockpile because eventually they have ambitions to expand their empire. And when they do that they know that they're going to have a hard time doing business with the rest of the world. So it is my opinion that China is trying to stockpile 5 years’ worth of supplies in order to make the aggressive moves that they want to make. I think China is going to be a very willing buyer, they're just trying to game the system, which China likes to do.

Yeager: All right, Aaron in Ocheyedan, Iowa pays attention to what you said 6 months ago on this program and we all seem to remember it too. I think you were sitting just a little further down when you said this. Is Ted even more bullish soybeans for '22 than he was ahead of this crop 6 months ago? And he wants you to describe why with vigor.

Seifried: Ah, with vigor, all right. It's harder, it's a lot harder to be more bullish something when we're trading $12.80 versus $8.80. So no, I was a lot more bullish at $8.80 when everybody else was so very bearish because I saw problems with the crop to some extent but really I saw the need from China. I still think that need from China is there but we're starting at a much higher price. I can't be as bullish as I was last year. But I'm still rather bullish for soybeans because I think the scenario is there. I think ultimately the demand will be there. I do think production is going to be a little bit stronger than the USDA is currently saying so that will offset a little bit. But I think we can get to or towards the prices that we saw in June, July of last year for soybeans. It's just that's not as much distance to cover. We're not going from $8.80 to $16 and change, we're going from $12.80. So, I'm bullish. I'd like to see the demand prove itself and I will say the lower we go now the better the opportunity we have to go higher because we will find more demand and we'll have more room to cover.

Yeager: Back to what you were just saying earlier, lower price, let some people back in. All right, you liked this question that came in from Mike in Stillwater, Oklahoma. Mike, thank you for watching and thanks for this question. Number one choice, price protection for inputs or crops in 2022?

Seifried: We've been really big on inputs for the last four or five months and just recently in the last 10 days or so natural gas had a pretty significant break off of its highs, about a  33% retracement. We ran into some very key moving average support and we got pretty aggressive on covering some of that. You want to be doing that when you can but wow, we are at some higher prices. So, you really want to do both. But I get that the question is intended to make me choose one or the other. I think you have to sell some new crop corn and soybeans because if you know that you're going to be paying prices higher than what you want to be for your inputs then you've really got to protect the higher prices that we have in corn and beans and as we've been outlining throughout the show. While I don't want to be bearish on corn or beans there are scenarios where there is a lot of risk to the downside when we're up at these prices. So you've got to be locking in prices and then hoping that you're going to get a chance to get a better shot at lower input costs. I think you will. I don't see natural gas going up indefinitely. I do think inflationary pressures are starting to I don't know if dissipate, but at least slow down. So yes, I would be looking at making sales on that new crop corn and soybeans when you've got $5 corn, you've got good prices.

Yeager: The natural gas story might not be done.

Seifried: No, I know. That's why we're buying.

Yeager: Let's go back to one of the first questions I asked on the drive, what you saw out of the field. Beans are running out of the field. I talked to a couple of farmers last week in the field, it was dry, it was 11%, 9%, 8%. Corn down the road 30%, they're waiting. It still looks like the picture behind you, it's green in some spots. Are farmers going to have to wait and risk harvest on a storm that could come through, some October surprise to offset what might be higher drying costs? How do you advise someone right now balancing those two?

Seifried: Look, I can't tell you when you harvest your crops, right? I get it and look, we don't want to pay dryer costs, we don't want to harvest anything under 20%. Well, again, it depends on where you are, guys up in the Dakotas do that all the time. But not this year. Yeah, if you've got to wait you've got to wait, Paul. That's just how that goes. I wouldn't force you into paying higher drying costs just for risk of a storm. The good news is that you have above normal looking temperatures for October. For the month of October NOAA is looking for above normal temperatures and you never know what sort of severe weather might come out of that. But it doesn't look like we're going to have a ton of frost yet. I think if you can wait you do it. If you can manage to wait and dry down a little bit further in the field then I would prefer to do that personally. That would be my choice. But I'm a markets guy. I'm not here to tell you how and when to harvest your crop.

Yeager: I just ask you ridiculous questions and you always go with it. Ted Seifried, good to see you. Thank you so much for your time, appreciate it.

Seifried: It's always a pleasure, Paul. Thanks for having me.

Yeager: That will do it for Market Plus. Next week, we'll look at the effort to keep ASF off shore and Dan Hueber will join us to analyze the markets. Thank you so much for watching. Have a great week.

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