Dockworker strikes in South America and official long-term weather guesses made for mixed results in the commodity markets. For the week, July wheat gained 20 cents and, after several volatile sessions, the nearby corn contract lost 4 cents. Bears trampled last week’s gains in the soy complex as the July contract clawed its way back to close 3 cents lower. July meal dropped $5 per ton. December cotton compressed $3.13 per hundred weight. Over in the dairy parlor, July Class III milk futures spilled 17 cents. The livestock sector felt the effects of profit taking as the August cattle contract plummeted $5.67 and nearby feeders shed $6.30. Lean hog prices ended a 2-month ride higher as the July contract declined 37 cents. In the currency markets, the U.S. Dollar index gave back 14 points. Crude oil dipped $1.10 per barrel. COMEX Gold shook off $14.90 per ounce. And the Goldman Sachs Commodity Index retreated 6 and a half basis points to finish the week at 364 even. 

Pearson: Here now to lend us his insight on these and other trends is one of our regular market analysts, Ted Seifried. Ted, welcome back.   

Seifried: Hey, thanks for having me.

Pearson: We're glad to have you. And, in case you want to go over things again, you can listen to our Market Analysis and Market Plus podcasts anytime online at

Pearson: Ted, I'm tripping over my tongue because I'm excited to talk about the wheat market. We finally got a story here. How much of this recent rally is predicated on the fear of lost wheat production in the Dakotas due to drought?

Seifried: So, for spring wheat it is almost all predicated on that. For Chicago wheat and Kansas City wheat it's not so much that as maybe we're going to see a little bit more demand from the blend, but also shortcovering from the funds, and that is really kind of what has driven that. So, you saw the last couple of days of the week where Chicago wheat kind of leading the way, that's sort of a contraction to that spread a little bit. And then also, again, you're seeing that fund shortcovering starting to happen there and that's exciting, you like what happened on a chart this week, it really does look pretty good.

Pearson: Given the fact that funds were, were they record short coming into this week in Chicago wheat or close to it?

Seifried: Very close, yeah.

Pearson: Given the fact that we've seen a lot of shortcovering, all the funds buying back positions in that market, what do you expect to see next week? The wheat crop in the Dakotas probably isn't going to get much better.

Seifried: Right, but it's also probably not going to drop another ten percentage points in the good to excellent category for the third week in a row, especially after getting the rains that they did. So, the improvement's not, I don't really think the improvement is there. The rains I think were too little too late. The guys that I'm talking to up there probably went from maybe not being harvestable to maybe five to ten bushel, some of it. Yeah, I think that spring wheat crop has a story, I think we'll see something close to $7 before this is all said and done. In the meantime, we could be due for a bit of a setback. When you get markets that are moving like this, Thursday morning or Wednesday night into Thursday morning we had a 20 cent break and then we ended up closing positive on the day. It was a huge range. You saw similar things happening in corn and soybeans. But wheat has really kind of been leading the way right here, whcih makes sense because if wheat prices are going higher that brings back a little bit of corn demand for feed. So, we've been saying for a long time that one of the keys to, or one of the sparks, potential sparks for a corn rally, might be stronger wheat. But yeah, it has been good to see what we're doing and you like to see what we've done with the chart.

Pearson: For wheat producers of the non-spring, our winter wheat producers, how aggressive do you want to be making sales here on a 20 cent rally on the week?

Seifried: Yeah, I would kind of wait for that. For the most part we have approached wheat the same way we have approached corn, so I own a lot of call spreads looking to kind of replace bushels that we're making sales on. We've got targets for sales that are within about 15 cents from where we're at. So if those sales, if those sales start getting triggered we do still have calls on the board that can allow for more upside potential. But, again, this is a spring wheat issue and to some extent it does spill over into Chicago and Kansas City, but that's more in a shortcovering sense and also keeping up with the spread. Are we going to see brand new buying coming into those two wheat contracts? That I don't know. So, you've got to make the sale but it's not bad to have that upside open in case we just go on a bigger run.

Pearson: Alright. And while we're talking about, and you touched on this a little bit, we've got a question here from @Bankerfarm1 in Northeast North Dakota. We encourage all of you to send in your questions via Facebook and Twitter. He's asking, with the hard red spring rallying as much as it has and the hope of corn and soy following, should producers look to lock in harvest delivery basis and let the futures run? How do you handle that?

Seifried: Basis for wheat or basis for corn and soybeans?

Pearson: For corn and soy.

Seifried: Okay, you want to lock in basis when we're down near lows. So we're not as low as we have been. There has been maybe slightly better times to lock in basis, but we're still I think on the better side of that, especially if there were to be a weather issue here at some point and you get futures run, basis is going to have a hard time following because we do have a lot of corn and soybeans carryover, old crop carryover that is still sitting there. I like locking in basis. I would have liked to have done it back in say February. But I don't think it's too late. I certainly think that's a good idea to be looking at right now. And part of that depends on where you are too.

Pearson: Exactly. It's all local market dynamics, how are things shaped up in your neck of the woods, but it's definitely worth taking a look at.

Seifried: Yeah, overall I think it's a very good thing to look at. Again, I would have rather have looked at it earlier in the year or even very late last year, but it's definitely something that everybody should be looking at right now and weighing the options there and, again, a lot of it depends on the local market.

Pearson: And the big question I think that @Bankerfarm1 is asking, wheat has had really its foot on the neck of the corn market looking at these ample supplies of feed, now that that's starting to make a move to the upside, is this going to pull corn higher? Or at least is this going to create the condition that we could start to see a little more shortcovering in the corn market?

Seifried: I think you've got a number of things that could start to pull corn higher or allow corn for some higher trade. So, that is one of the keys, that is one of the things, again, we've been saying for a long time, if we can get wheat to rally that will really help corn. It might not be the only thing we need. If we have a perfect growing season and we end up with a 178 national average yield it's going to be tough to really get corn to rally and sustain a rally. But you look at the growing season that we've had so far. I'm going to argue that while it's not impossible to hit those numbers, I think at this point it's starting to get very unlikely. So that I think you've got to have at some point build a little bit more weather premium into the corn market. I think minimally we'll get a shot to $4.21 in December corn. I'm starting to wonder if it's going to be closer to $4.40. So we'll see. We'll see how the growing season goes. But, yeah, I can't say it enough, higher wheat would certainly be beneficial for corn.

Pearson: Alright. Well, let's talk about the soybean market because we've just had a lot of volatility, but at the end of the day not a lot of movement in actual pricing. Tell us a little bit about where you see this bean market headed next week.

Seifried: Well, that's the thing, we're not going anywhere in the bean market because we really don't know what to do with the bean market right now. For the issues that we had with planting and we went from being very, very wet to being hot and dry and blowtorch engage. But has that had really much of an effect on soybeans? Yeah, okay, we're not rated great on our first ratings, but beans have really all the time in the world to improve and we can still have a wonderful bean crop. So it's hard to get, from a fundamental standpoint when you're talking about production, it's hard to get too excited about any problems with the bean crop at this point whereas you can start to get a little excited about corn. So, I don't know, for next week, this week had a lot to do with what was happening on the demand side. I'll say this, old crop soybean exports stayed pretty good. Normally this is when we should be seeing negative numbers, we're still seeing positive numbers. That is pretty impressive considering the very large South American crops we've had. Nov crush beat expectations by a long shot.

Pearson: First time in a long time.

Seifried: Right, yeah, five, six, seven months maybe, maybe more, which really surprised me. I was right on the average trade guess there so yeah that coming in higher, but on top of that you had oil stocks coming in right on expectations, which would have been 6 million bushel smaller crush number, and not really building very much month over month. So we're crushing for oil? That's definitely not the case. But, we're using that soybean oil. So, demand for beans and oil seem to be good. Meal is the struggle. We can't really seem to get that meal demand going.

Pearson: That was my question, at this point are you an aggressive purchaser of meal if you're an end user? Or do you let it slide?

Seifried: I think you really have to be looking at setting ceilings and saying, okay I'm looking at my profit margins here, they're pretty good, meal prices are great, I'm really not going to -- it hasn't been, that is a market that hasn't really shown me any reason to say I've got to cover it now. But own some calls on it, own some protection saying, hey here's where meal prices start to price me out of profitability, this is the line in the sand that I'm going to draw, and then spend a little bit on some calls to keep that from happening.

Pearson: Now, Ted, before we let you go we've got to turn to the livestock market. We saw a huge reversal in cash trade, in the futures trade on live cattle this week. Is it over?

Seifried: Is the reversal over?

Pearson: Is the reversal over?

Seifried: Well, we did try to find some footing on Friday. So yeah, okay.

Pearson: Mixed trade on Friday, trade both directions?

Seifried: I don't like that we gained weight last week in a week that we had some very warm temperatures. I don't like that cash is suffering like it is. And what's going on in the Dakotas and Montana with all the dryness they're having, very hard to find hay, very hard to find pasture, so you're seeing that dispersion. So that push to market is happening maybe sooner than we want it to up there. That's putting a little bit of pressure on cash. The optimism about the China deal kind of simmered down this week because of the lineage factor. The first stipulation that they have is non --

Pearson: Non-hormone, non-growth promoting.

Seifried: Yes, right, which isn't the majority of our product but we have the product for that and that’s okay. But we don't have very much product, the very little amount of our product that we have that we can trace back from day one.

Pearson: Right. And part of China's conditions was in order to ship beef into it you have to be able to trace that beef by an independent number to the farm of origin, which is very complicated.

Seifried: It's very complicated, we're not set up for that, at least for the most part. And the question is, how long are we going to do it? And is it really worth it? So we lost some optimism on that. We have broken some key technical support in both cattle and feeder cattle. I worry that we're rolling over to the downside. I look at the number of cattle that we have on feed, the placements that we've had, if we start gaining weight like we did last week you're looking at a potential wall of cattle. So we'll see. If we're quick, if we get back to the big push to marketing, we're pushing at lower weights, that lowers the supply and that keeps cash strong. If that resumes next week then things are good to maybe come back up to the highs again. But producers, I've been saying it for a couple of weeks now, really need to be looking at the potential for the downside and covering their risk.

Pearson: And as we watch live cattle futures fall and corn stay relatively stable, do you expect to see feeders just follow right along with them?

Seifried: I think feeders have a little bit, I like the feeder story better than the live cattle story. But you're right, cattle start falling, if corn gains some strength like I think it could, that's going to make things very difficult there too. So you've got to look at the downside also.

Pearson: Gotcha. Now, we've got another question here from a follower, this one is from Ben, he's on Twitter @bj_ama42. Looking at the hog market, does the hog cutout move much higher than $95 for the summer months? And will this dampen current movement in cash? And his follow up question is, do you like the October-December bear spread in lean hogs?

Seifried: Great questions, Ben. Hi, Ben. Okay, there's three questions there, let's start with the first one. We've been flirting with that $95 number for some time. We took a step towards it this week but then late week we kind of took a bit of a step back. I do just like the $250 market in box beef, it's a very significant number, maybe not as significant as $100 but it's a very significant number. I don't know if we're going to get much higher than that, especially if beef prices start coming down because you lose that competitive value. So we'll see. You look longer term in hogs, we're looking at the potential for the largest production increase in Q2 since 2009. We talked about the potential for being a wall of cattle where there is a wall of hogs out there. So I don't know. I'm starting to get less bullish on hogs. I like the bear spread out in the deferred contracts. We had really poor export sales this week. If that keeps up I really start  to get worried about hogs because then you're looking at a situation where we don't have domestic demand competing against export demand, we've got big supply and, you know.

Pearson: Alright. Well, Ted, we'll pick up this discussion and talk more in the Market Plus. That wraps our broadcast of Market to Market. As I mentioned, we will keep the conversation going, we will answer more of your questions during Market Plus, which you can find in podcast and in video form on our website. Now, we've also launched our own YouTube channel. You can check us out at and subscribe today. You'll get notified when Market Plus and other feature stories are posted. And join us next week when we explore how new shipping concepts are colliding with aging infrastructure. So until then, thanks for watching. I'm Mike Pearson. Have a great week.


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