Market Analysis with Ted Seifried

[Paul Yeager] Questions about pollination started chipping away at the ideal growing conditions. Sentiment while harvest nears completion in the wheat belt. For the week, the nearby wheat contract added a penny. And the September corn contract rallied $0.13. Soybean oil led the charge higher in the soy complex. The September soybean contract gained $0.26, while August meal put on three. 70 per ton. December Cotton expanded by $1.26 per hundredweight. Over in the dairy parlor. August class three milk futures improved by $0.06. The livestock market was mixed. August cattle added $1.35. August feeders cut one. 33 and the August lean hog contract, strengthened by $1.80. In the currency markets, the U.S. Dollar index increased 68 ticks. August crude oil declined $1.10 per barrel. Comex gold weakened 1111 per ounce, and the Goldman Sachs Commodity Index was up by more than four points to settle at five 5555. Joining us now, regular market analyst Ted Seifried. Hi, Ted.

[Ted Seifried] Hi, Paul.

[Paul Yeager] You know, prior to today, we were going to talk about a negative wheat market and came today.

[Ted Seifried] Yeah.

[Paul Yeager] Is this the beginning of a change?

[Ted Seifried] Oh, I don't know. We just set a new recent low yesterday. So, one day does not make a trend, Paul. However, you know, it's really nice to see that December contract close back above 560 again. It had been holding on to that level where it had dipped below, but still managed to close above. Thursday was the exception to that. And it made you feel like, hey, we're headed back down to those lows again. But then a nice little recovery day there on Friday makes you feel a little bit better about that now. Certainly a lot of that was spurred on by the strength that we were seeing in the row crops. And it makes you wonder if wheat can sustain a standalone rally without further strength in the row crops. But who knows? I mean, we're going to talk about what's going on in the row crops here momentarily. I have a feeling.

[Paul Yeager] Well, hot and dry is the theme. That was part of the reason for the rally today in wheat, which is also the story in the other grains. Let's finish that off with wheat, though, in the sentiment. Is it too late, though? Why is this making this move with hot and dry, considering the spring or the winter crops almost out of the field?

[Ted Seifried] Yeah, I'd say by the time we get to Monday's crop progress report will be well over 70% harvested in that winter wheat crop. So, there is not an effect really there. It's about that spring wheat crop, which, you know, the USDA has a pretty lofty expectation for that spring wheat yield. Even though we look at conditions being almost 20% lower in the good to excellent category year over year. And so, you throw some hot and dry weather up at the plains. And it makes you wonder about spring wheat. But, you know, it's the smaller part of the whole. Obviously, the winter wheat crop is a much bigger crop. The biggest problem for wheat, Paul, is that you look at the USDA's domestic carryover near 900 million bushel. 900-million-bushel carryover. That is a big carryover. We can talk about some points on the global scale that are a little bit friendly for wheat, but it's hard to rally wheat prices here unless we shrink that carryover. And the only way to really do that is to say, well, we're going to get a lot more wheat exports, or we're going to use a lot more wheat for feed. And at the moment, the USDA is already expanded wheat exports. It's really tough to come up with 600-million-bushel carryover in wheat. So, an extended wheat rally is probably not in the cards unless we see a whole lot of new exports coming in, or if it's spurred along by that strength coming from corn and soybeans.

[Paul Yeager] Do you want to put air into the balloon about pollination troubles in corn, or do you want to take it out?

[Ted Seifried] You know what's funny, Paul? I feel like we find something every year, right? And part of me thinks, like, okay, you know, we don't have, you know, pictures of terribly drought-stricken crops or, and or, you know, super flooded crops. So, what are we going to find? And we're going to find some pollination issues, which we find every year. By the way. And part of me is like, wow, okay, maybe this is something that's happening on a on a much bigger scale. I'm not really sure. I'm very curious to see what happens when I go out on crop tours in about a month and see what I see with my own eyes. But I also find it kind of funny that we are talking about pollination issues. But in the same breath, we're talking about a forecast two weeks from now causing pollination problems. Now I realize it is a big growing area, but on my way here yesterday and today, Paul, I mean, every field that I'm driving past is pollinating. And this is in northern Illinois and driving through central Iowa. So, two weeks from now, are we pollinating corn? No, we'll be done by then. Right. So that is the most threatening short term forecast we've seen since we started this growing season. But it is not happening at a time where we're going through the thick of pollination. And so, yeah, I don't know, it's tough to tell. I feel like every year we find something and you wonder if that these pollination issues that you're seeing across social media is just the this year's iteration of, oh, here's a problem.

[Paul Yeager] Do you find, I guess, on this? Let's continue on the new crop discussion. Is this enough to prompt any sales?

[Ted Seifried] The 23-cent rally we had off the low that we put in on Monday, is that enough to prompt any sales? Well, hopefully you had some resting orders $0.20 higher to get some sales done. I do really think that that would have been a really good thing to do. I think you should be making sales. I think even if this weekend you might call in and make some sales because this is what we do in the summertime, we find something and this is the right time of the summer to do it. We find something that gives us this rally, but we could walk in Sunday night and Monday and look at that two-week forecast. That's now progressed a little bit further into the future, showing us returning to more normal temperatures and more normal precip. And if that's the case, a lot of the strength has just been short lived. Could be short lived. I'm also going to say that from a technical standpoint, we hit our objectives to the upside that I had for just a technical bounce. That technical bounce was sparked by weather concerns, but I feel pretty strongly that I think we should have been making sales on this 23-cent bounce in corn off that low that we just scored on Monday, and it was about a 43-cent bounce in November. Beans that we put that low in, I think on Tuesday. Not contract low but recent low at $10. Even. Again, I think a good opportunity to make at least some sales.

[Paul Yeager] I said in the open to soybeans that it was oil that was driving, that was weather at all at play in soybeans.

[Ted Seifried] Yeah, in soybean oil did cool off a little bit on Friday, but that was after six consecutive higher closes. But yeah, soybeans. So, the weather for soybeans is a little bit different. Obviously we're not talking about soybean going soybeans going through pods that are the most moisture sensitive time frame for them. And soybeans deal with heat differently than corn does. Soybeans grow very well in tropical areas, so heat's not as big of a problem. The way that we were looking at weather for soybeans was, hey, is this a change in the weather pattern? Is this something where we're going to start seeing these ridges build and stick around with high temps and lack of precipitation into the month of August? More importantly, or to get to the point, Paul, is this a repeat of last year? And if this is a repeat of last year, that would significantly cut into soybean production and therefore, yes, we have a concern about weather for soybeans. So those specific forecasts I don't think were what the market was terribly concerned about. It's whether those forecasts are indicative of what's to come through the month of August and into September. Honestly, Paul, I don't think it is indicative of what's to come. This is something that happens during the summertime where we have these ridges build and then subside and come in and out. But the market is a little bit more nervous about that this week than it was last week.

[Paul Yeager] The chart that was on while you were speaking showed a lot more volatility here has returned. Do you see that continuing for the near term?

[Ted Seifried] Look it's a weather market. And we're sitting here in the middle of July. This should be when we have that volatility. Because you know our crop hopes and our thoughts and our market thoughts. You know they hinge on every single forecast we look at. So, this is the time of year for that volatility. It's very normal I'd say last year was the exception where we got hot and dry at the end of the year. And we didn't have that big reaction. At least we didn't have that reaction until January and February, when the USDA did finally reflect that. On their production numbers. I think the market looks at last year and say, hey, we really should have rallied into August and September, October. And so, we've got this heightened sense of, of that, this year. So that volatility, I think is, is kind of indicative of the overall climate in the time of year. But I don't know if that necessarily means like, hey, we're trying to carve out a bottom here again. That's all going to depend on what the weather forecast looks like.

[Paul Yeager] Let's have Glenn's question in Ohio put a bow on this. You've kind of answered part of it already, but this one came to us via X. What could potentially happen first or have the greatest impact on prices. Increased demand increase, decreased supply, a change in government policy or a black swan event? You really talked about weather, but what about those other factors?

[Ted Seifried] Right? Hi, Glenn. Yeah. You know, right now the market's focus is weather. And I'm not going to go into that further. You don't want me to you know, the other big one for soybeans would be a trade deal with China. And I say for soybeans because it doesn't feel like China would buy corn unless they absolutely had to. They're not buying corn from Brazil, which is a reflection of what we already thought. And that is the Chinese corn crop is really very good. So oh, and by the way, I do really feel like the Chinese want to protect their corn relationship with Brazil, even more so than the soybean relationship right now, because it's a new relationship. So, I think if the Chinese were to buy any corn, it would happen from Brazil. That Brazilian second season crop is a lot bigger than what anybody was thinking. And what the USDA is currently saying. So, a trade deal with China and a ceremonial or a token purchase of a lot of U.S. Soybeans would be the next best thing compared to a big supply crunch. But I don't know if that will happen or not. I mean, the Chinese have not explicitly bought anything for new crop soybeans yet. It's a growing concern. There were rumors earlier in the week that China was around looking for something. We had that flash sale of 120,000 to unknown destinations for new crop that a lot of people are speculating was China. So maybe they're starting to come back. But it's that time of year where we should expect to see that.

[Paul Yeager] Let's talk about live cattle for a moment. Box beef prices were falling a little bit this week. There's still a gain for the week, but I have to ask it again, indicative of maybe the end.

[Ted Seifried] Maybe, you know, Paul, it is that time of year where we see the seasonally box beef prices come down. It's a function of, you know, for us in the northern states, we spend all winter wishing we could be out grilling, and then the weather gets nice and we go out and our enthusiasm is through the roof every day, sometimes twice or three times a day. We're outside grilling. We do that into the Fourth of July holiday weekend. But then, you know, shortly after that, we kind of lose a little bit of that enthusiasm and kind of slow down a little bit into what's called the summer doldrums. And then that ramps back up heading into the Labor Day holiday. So seasonally, this is the time where we would see a little bit of a break in those box beef prices and seasonally, that also a lot of times correlates in a little bit of a break into the futures market as well. So, I think we could see something like that. But the underlying tight supply situation has not changed. And there's a lot of policy things that are continuing to keep that tight. So, unless there is a big change in consumer's habits and I'm talking about something more than just a seasonal slowdown, I really see a hard it's a it's a hard path for a big break in the cattle complex. However, that could happen if you get a big break in the stock market. If there's concerns about the global and domestic economies, again, if that all comes back, then you might see people get a little bit more conscious of their spending habits. That would create a bigger and deeper break in the cattle market. But it's been very hard to predict that sort of thing. A lot of people have been calling for a big break in the stock market, and it just hasn't happened.

[Paul Yeager] Ted, we'll get your thoughts on hogs and feeders in Market Plus in a moment. Thank you, sir.

[Ted Seifried] Hey. Thanks, Paul. Thanks for having me.

[Paul Yeager] All right. Good to have you here. And you have been watching the analysis segment. And in a moment, we will continue our discussion. As we mentioned, feeders and hogs. We'll cover that in your questions as well. In that online segment, search Market Plus with Ted Seifried. Wherever you get your podcast to hear that conversation, or go on to our website at markettomarket.org. This week on our YouTube channel, it was a step back in time to 1985 for a classic episode of this program. Subscribe to find out what Retro program will put up next when you go to YouTube.com, Market to Market. Next week, a look at a simple strategy to lower temperatures and open up miles of new habitat. Thank you so much for watching. Have a great week!

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