Market Plus with Ted Seifried

Paul Yeager: Welcome into the Friday, August 26th, 2022 Market Plus. Ted Seifried's here. Uh, Ted, we talked a lot about crop tour. We're gonna continue to talk about crop tour. However, there are other things in the market that are to be discussed and Roger in Indiana wants to lead off our discussion this way. He says, how reduced is the Chinese corn crop and will it cause increased U.S exports in spite of the strong dollar?

Ted Seifried: Yeah, that's a great question, Roger. Um, the fact of the matter is, I don't know if we'll know until after it happens because the Chinese are not extremely forthcoming with anything. In fact, um, you know, think about earlier in the year where we were talking, we were hearing from China that it was one of the worst wheat crops in decades and then turns out, oh yeah, it was actually a pretty good wheat crop. Um, and, and, you know, wheat is a different animal. We, we say we can kill it 10 times and it'll still produce, um, not always the case, but yeah. So I, I really don't know. I, I think the proof there will have to be in the pudding, right? Is it, are we gonna see it on our export sales? I, in a situation like that, if, if China has a short crop, the dollar won't matter. If they need it, they will have it.

Ted Seifried: That's how China works. So I you're just gonna have to wait to see if we're gonna see those export sales. And then the question has to be are the U.S.- Is the USDA going to be able to give us export sales numbers, because after the debacle last week, they have to be scrambling to try to figure out how to go back to the old system or fix the new one. But I'm, at this point, we're not even sure if we're gonna see last week's export sales ever, or when, and we're not even sure if we're gonna get export sales next week. So I don't know. That's, uh, that's a problem.

Paul Yeager: Does the dollar still matter talking commodities?

Ted Seifried:

Of course the dollar matters,

Paul Yeager: But I mean, the dollar is so strong right now. Yep. Which traditionally tells us that's bad for US commodities

Ted Seifried: When the dollar strong dollar index is strong. Right? You, you think about the, what it is and, and who, the currencies that make up that index, the Euro, the Yen mostly, right. Um, it's not who's buying well, the Japanese do, but it, it's not. Who's buying from us. It's China, right? China is mostly pegged to the dollar. So for them, it doesn't really matter. Um, when we talk about the strength of the dollar index, that's mostly a reflection of domestic, right? If the dollar is worth, worth more, it has more purchasing power domestically so that it could buy, uh, it can buy more of something at a cheaper price right. Uh, as far as exports are concerned, yes, it has an influence on it. Um, but again, in times of shortages global shortages, when you have Europe burning up, you have China burning up, you have Ukraine that can't ship much, and who knows what their corn crop's going to be. Uh, it's not as much about the dollar as it's just about need.

Paul Yeager: Okay. What about this topic? Mitchell and Orange City wants to know in Iowa is one of these is this one of those years where the low has been put in and we're gonna trend higher into harvest.

Ted Seifried: That's a really good question. Um, you know, it's very rare to have a harvest low in, uh, in June, uh, but it's not impossible. And it happens in years where we get surprised by something. And we just spent a whole lot of time talking about how we were surprised by the corn crop and the lack of the corn crop. I should say, um, a different story for soybeans. Right. But I don't know. Um, again, I I'm, I'm really conflicted right now with my views on a smaller crop and being bullish on the supply side of things, but then also my concerns over what's going to happen fall into winter from the economy, from the macro economy, global economy. I worry about Chinese demand for corn being there. If we haven't seen it yet, I can't say for sure it will be there. Um, so I don't know, like I said, I think there's a tremendous amount of risk on both sides.

Ted Seifried: I can't, I don't think you can take for granted that that low is in. I really don't, uh, that being said, you know, a much shorter crop is probably gonna raise the potential low, higher. Um, and, and ultimately, Paul, the best thing I can say is this. We have had prices at near historical highs, historically high prices going on over two years now. And it doesn't work like that. We don't stay at high prices for very long because ultimately what happens supply comes up- i.e. Brazil planting and looking to harvest 150 million Metric tons, soybean crop coming soon to theater near you, not that soon, but soon enough, I mean, four to six months out. Um, and then you've got high input costs. So, you know, if, if the prices of things start coming down, meaning the prices of the products, right? The price ethanol, if it starts coming down the price of, of beef and cattle, the things that we make with these, these inputs, right? If they start coming down, we're gonna see demand destruction. If you lose inflation, you're gonna see demand destruction. So that can fix a supply problem pretty quickly.

Paul Yeager: Well, it's a little bit what you talked about during our main discussion. Yeah. When you were saying the me, the media interviews and the me, uh, the Wall Street Journal had a story Friday morning, right? That what that's always that, well, once it shows up on the front page of this, the end is near, right.

Ted Seifried: The end is near the Wall Street Journal in particular is the one historically that we all look at say, oh, no, oh no, <laugh> it's there.

Paul Yeager: The rally's over. Yeah, it's done. After the par, after the love is gone. All right, Phil and Dresden, uh, our friend Phil wants to know soybean crush premiums are very healthy soybean future spreads into 23 are telescoping a continued bullish trend. However, there is this, as you said, mythical, Brazil '23 crop, do farmers sell more soybeans or do they engage in more creative risk management scenarios?

Ted Seifried: Creative risk management scenarios? Uh, yeah. You know, that's what we talked about that during the main program too, you know, I, I think because there is this tremendous amount of potential for volatility from where we stand at these already high prices, they could go higher because of a global shortage, uh, of grain. In fact, you know, there is a world that exists where, you know, inflation, cools off a crude oil, comes down, things like that. And we do keep grain prices high, relatively high until that Brazilian crop comes online. But then also, you know, maybe not, you know, maybe, maybe there is a tremendous amount of downside potential too. So I, I think you really need to set price window strategies. I think that's the best thing you can do, right? Just, just put a band around it, you know, and what I mean by that is, uh, for, for November soybeans, you can, you can own a $16 put, or I'm sorry, a $14 put and sell a $16, $16.40, $16.60 call somewhere in that neighborhood.

Ted Seifried: If you can get those done for even money's an even swap. And so what happens then is, you know, you have a floor defined and the cost for you to have that floor is that it's going to give you a profit target to the upside, right. And if it doesn't hit either one of them, then that means the market stayed within that range. And you're probably sitting pretty good from a cash sale point of view. Worst case scenario to the downside. You know, that puts gonna, at least on the board perspective, it, it's gonna give you your worst case scenario to the downside. The real problem with it is one. You gotta margin that call, but also it limits how much you can get to the upside. So, you know, if you think, if you're in the camp that thinks you're going to $22 soybeans, then maybe just buy a, put, define your risk and leave the upside open. I'm fine with that too.

Paul Yeager: All sorts of strategies out there. Um, I'm gonna get to the crop in a minute. Uh, I, I asked you about feeders. Is there anything in cattle that we needed to discuss? I mean, we've seen the trend, uh, was higher. Yeah. And then towards the middle of the week we started going lower.

Ted Seifried: Yeah. We kinda lost some steam there. Well, you know, hogs have had a big correction too. I, I think cattle kind of following along with that, we saw box beef prices coming down. We were worried about packers margins, kind of shrinking a little bit, potentially putting some pressure on the cash, but ultimately, you know, at least it feels like domestic demand is still rather good. You know, we worry about what happens after, uh, the labor day holiday. And, you know, we tail off before we get back into the holidays. Uh, you, you look at feeder cattle under pressure because of the amount of strength in corn. So, you know, that's kind of the double whammy that you don't wanna see. Uh, but we've been in an up trend for quite a long time. And I don't think this is quite the end of it. I, I think we do find some footing at some point and try to bounce back towards those sides.

Paul Yeager: So finish up with crop tour crop tour got two questions that I wanna get to for sure, Justin in Wisconsin is where I wanna start, Ted. Will areas not covered by the crop tour makeup for the lack of yield found on the tour. Michigan and Wisconsin looked pretty good,

Ted Seifried: Michigan and Wisconsin looked pretty good. I, you know, um, yeah, I mean Minnesota, which obviously was covered by crop tour. It's just really mostly Southern Minnesota. Uh, a lot of people on Twitter talking about Minnesota being the opposite. Right.

Paul Yeager: That's what I was gonna say. You took the most heat yesterday.

Ted Seifried: Yeah, I did

Paul Yeager: -about the Minnesota.

Ted Seifried: I did.

Paul Yeager: - a lot of people coming back at you.

Ted Seifried: Yep. But that's okay. Uh, but, but the crops that you see in Southern Minnesota, those crops exist elsewhere too in Wisconsin looks really good. And like you said, Michigan, but I'm gonna bring this back to, to South Dakota, right? Because South Dakota night day one, the first night you see a Pro Farmer number where you've got South Dakota, corn down 27%. What, what I don't think a lot of people realize is that the Pro Farmer Tour only goes through about 13% of South Dakota's growing area. There's a lot of other crops growing in South Dakota that Pro Farmer doesn't reach. Um, and, and I know Chip and, and company, they take that into consideration when they're doing the numbers. So I'm not arguing with their final number right now. But what I am saying is that there was really good corn that I was looking at the day before a crop tour started in South, uh, or sorry, Northeastern South Dakota.

Ted Seifried: And I know that corn is really rather good all the way over to, uh, you know, through Sisseton to, to, um, Britton and even over to, to Aberdeen, even if it's not the best they've ever had, it's certainly a lot better than it was in those areas last year. I think the South Dakota number might surprise some people, maybe even the Pro Farmer people. Um, and, and so, you know, Pro Farmer, it's a big tour. It's the biggest tour out there. It covers a lot of ground, but it doesn't cover everything. And yeah, I do think that maybe crops are going to offset the lower yield. I, like I said earlier, I'm, I'm more around 172. I, I'm not all the way down to 68 yet

Paul Yeager: Final 30 seconds on what Ted wants to talk about, about what you've seen this week. What do you have?

Ted Seifried: Whew. Uh, I saw some deer. I saw some, I saw some really tiny baby deer that kind of surprised me. And, uh, as I was walking into a cornfield and they kind of hopped along, that was pretty cool. You always see some really kind of interesting things that you don't expect to see, and it's, it's a lot of fun. You're with a lot of people you get to make a lot of friends. Um, uh, it's, it's a very stressful week for me because I'm trying to do the media stuff too, and, and full jobs, uh, as a crop scout, full job as my normal job. Um, but it's, it's, it's a very worthwhile thing.

Paul Yeager: And having to weigh in on which breakfast pizza might be the best.

Ted Seifried: And, you know, we gotta have some fun while we're in while, while I'm riding around in the backseat of a truck. <laugh>

Paul Yeager: I appreciate all the work that you've done. I mean, this is a good data point that Pro Farmer has done. Yeah, I know we have nothing to do with it, but it's something for us to talk about just like a USDA report is so thank you to everybody there, uh, that did the work there. And thank you, Ted for making time for us busy week for you. You're done

Ted Seifried: <laugh>. Thank you. My pleasure.

Paul Yeager: That's Ted Seifer. Next week, we're gonna look at the push to move data from analog to digital, to discover new opportunities. And Jeff French will be here to analyze the markets. I'm Paul Jager. Thank you so very much for watching. Have a great week.