Market Plus: Ted Seifried

Feb 2, 2018  | 14 min  | Ep4324 | Podcast

Podcast

Yeager: This is the Friday, February 2, 2018 version of the Market Plus segment. Joining us now, Ted Seifried. Ted, how are you?

Seifried: Doing great, Paul.

Yeager: Happy Groundhog Day.

Seifried: That's correct.

Yeager: I mean, do you celebrate that? Did you see your shadow this morning?

Seifried: I knew immediately that I would see my shadow, and then I shaved.

Yeager: And then you shaved and it was all gone.

Seifried: It was all good.

Yeager: Is that a good movie? Do you like the movie?

Seifried: Of course, one of my favorites. I'm a huge Bill Murray fan.

Yeager: Well how can you not be living in Chicago?

Seifried: I mean, yeah, sure.

Yeager: He's a native guy. We have a couple of questions from our viewers themed with Groundhog Day. So we'll get to those right now. But before we get to that, Ted, I have to ask you about the cotton market. We saw the story about cotton in the program. We didn't get a chance to answer it. I believe December was the most bales since 2014 that were sold but yet the market hasn't really reflected that this week. It has been a great run for the last three weeks, four weeks.

Seifried: Yeah, so we have come off highs. We've basically seen a 15% retracement now at this point. But we followed that up with marketing year high exports here this week. So we're finding that those exports are really coming to life on a pull back off the highs. That is really good news. The lower dollar I think might be helping out there as well. And overall we've got a quality issue in cotton, our exports have been really good so demand is really quite good. There is a good side to the story. However, you're probably going to pick up a fair amount of cotton acres down in the South as well. So longer term you see production respond to higher prices and I think that kind of idea had kind of crept into the market and maybe why we pulled back a little bit. But I'm looking for a bounce here. I think the strong weekly export sales, again, suggesting that global end users are really liking the price here, if the sales can continue to be strong I think you get a bit of a bounce.

Yeager: Well, cotton is tied to our first question from Dan in Geneseo, Illinois. He says, if there is abandonment in wheat, insert the word cotton if you want too for this discussion, Ted, will that add to corn and soy acres?

Seifried: Well, I think you look at the corn and soybean ratio and it is really asking for more soybean acres. But we saw that again last year. I think there's a good chance we look at this corn and soybean ratio and might see some more soybeans here this year, but for the most part I think it means that we hold the higher soybean acres. Overall I think you do see a little bit more corn acres and a little bit more soybean acres. The reason why I think you see more corn acres is that while the guys up in the North are almost forced to move more toward soybeans your guys in the I states, you look at how well corn yielded last year, a new record yield, in a year where we had a fair amount of diversity. So we've just gotten so comfortable with the corn yields now at this point that I think corn acres really hold on. And honestly if you look at it we've really built up corn demand very well with lower prices over the last few years. We really do need 90, 91, 92 million acres of corn.

Yeager: There's people that argue with that.

Seifried: Oh I know.

Yeager: But do you see wheat acres or cotton acres then going away in favor of corn or soybeans to fill that void that you’re talking about?

Seifried: Wheat is the one that --

Yeager: You think wheat is the loser in that?

Seifried: It continues to be mainly because there is so much competition with everywhere else in the world.

Yeager: Kylo is asking another wheat question. This one is very specific and so Market Plus is a great place if you have a very specific question we'll try to get to it. He's asking, if it stays mostly dry and Kansas harvests a 30 to 35 bushel to the acre wheat crop, what is the top end for Kansas City wheat?

Seifried: 30 to 35, that's pretty aggressive.

Yeager: Especially when you have 44% poor to very poor, 47% of the crop is in drought status.

Seifried: Sure, but there's still time for some of that to come back around. The very poor category you look at that and figure there's damage done. But anything from poor and fair I think can have the chance to come back. That's a really aggressive cut to yield, it's not impossible, but we'll see. That being said, if that were, let's call it 35 national average yield, $5.50. I'm not sure we can hold above that though and if we get there I think that's a great sell.

Yeager: Absolutely considering what we've seen. Flinton in Zumbrota, Minnesota, there by Rochester, is asking again about weather. La Nina this year, does that mean lower than trend corn yield? And the he asks a follow up, how high can corn go? I kind of pinned you down on the program a little bit. La Nina, do you think that has really taken effect?

Seifried: Well, the current forecast models are for a warmer, drier growing season. But in a lot of places we saw that already last year and still end up with a national average yield. I think the big question for corn nowadays is how do we look going into the growing season? If we have good subsoil moisture, like we did last year, and we have a good August, like we did last year, we're going to have record national average yields. So the next couple of months as we get into planting how are we going to look, what does the soil profile look like going into that? That is the bigger question I think. So yeah, some of the models are suggesting we could have a warmer, drier summer. It could be very similar to what we saw last year. But we had national average yield records last year. So again, subsoil moisture going in.

Yeager: But we're still in early February so there's still a lot of ways to go. William in Hiawatha, Kansas. He's @wtmcc on Twitter and you're @thetedspread on Twitter, by the way. Can we get $3.75 for corn and $10 cash beans for new crop? We're pushing $10 already on new crop beans, we're close.

Seifried: So he's asking cash, right?

Yeager: He's asking cash. Sorry. I left out that word.

Seifried: Where did you say he was again?

Yeager: In Kansas, Hiawatha.

Seifried: Not exactly sure what basis is doing right there. But let's say this, we're not far off those numbers unless your basis is really terrible. I think there's a good chance that we see some of those things just in a normal summer rally, June rally, if there's any sort of problems there. The problem I have is soybeans, again, I'm worried we're going to have a really hard time moving this year's crop because of the quality concerns and if we've got a lot of soybeans left over from this year and we're planting extra acres next year it's going to take a lot of, a major weather problem to really get us to where we need to go to get to the better prices you want to see.

Yeager: And Drew in a question he was asking the significant selloff, you did kind of cover that in the program. You are concerned a little bit long-term here on beans.

Seifried: Yeah, like I said, everything is kind of pointing the soybean crop that we have is of lesser quality than what we've seen in years past and global end users have really made it somewhat apparent, China in particular, that because of poor crush margins they really want to seek out the more premium and the better product soybeans, South American, Brazilian in particular, soybeans. They're willing to pay more for it because they're getting better margins off of it. So yeah, that is a major concern for me. And if we have a hard time moving the soy crop we either need to see much lower prices in order to incentivize making the sales or we're going to have a lot of bushels hanging around.

Yeager: Alright, we talked about Groundhog Day references. Phil in Dresden, Ontario, Canada, he's @agridome on Twitter.

Seifried: Hey, Phil.

Yeager: Hey, Phil. He's asking, December corn is approaching resistance. The last two years we've had lower highs in December corn, June 2016, July 2017. Is it 6:00 a.m. again in 2018? You know, deja vu?

Seifried: Yes, well, Phil, the last two years, we're in an overall downward trending channel on a weekly and monthly chart, not just the daily chart. And yes, so we spent a lot of time in the month of December coming up with what our target prices are under normal conditions for the year. The last two years in December corn it was $4.44, which by the way the market got through it by 4 and three quarters of a cent. Last year it was $4.21, the market missed it by 2 and three quarters of a cent. This year it's $4.14. So that number continues, it's flattening out a bit, but that number continues to go lower under normal market conditions. We can do a lot better than that if we have a major weather issue, something of that nature, or something happens on the demand side that we're not currently seeing. But if all goes normally, if we have just a normal growing season, then yes it very much is 6:00 a.m. again.

Yeager: Alright, well let's keep asking questions about Groundhog Day. And this one is from Glen in Bryan, Ohio @glen_newcomer. In the movie we talk about that anything different is good. Can you apply this to the grain markets at this time?

Seifried: Something is different, good or bad? Yes, hi Glen. I think a lot of us will say that yes, anything different is good because we had gotten so lulled into very tight ranges in grains that nothing was going anywhere and obviously when we see volatility from a producer angle we would like to see it to the upside and especially when we're down at low prices we like to see volatility to the upside. But no I think we wanted to see some movement. So something different in this case very much is good.

Yeager: Well was this one of the more volatile weeks we've had in quite some time for the majority of the markets?

Seifried: We had 10 minute periods where soybeans would trade a 10 cent range. That hasn't happened for a while. For corn to have more than a 4 or 5 cent move, or more than a 2 or 3 cent move in a week is pretty impressive, especially since we did it to the upside. So yeah, I'd say there is some volatility coming back into the markets.

Yeager: Alright, well this one is really in the weeds. But Hair Farmer in Groton, South Dakota. That's his name this week on Twitter, @schuelkecorn. For an already well hedged 2018 soybean producer who wants to protect up to and past APH what option strategies do you like? He wants to say he's throwing you a softball.

Seifried: Yes, well, because he knows buy puts. No, right, so in soybeans you never want to oversell because it is always an explosive market, something could happen and we could see soybeans rally $3 just out of the blue. Brazil rains continue to linger and the quality of that crop deteriorates quickly. So yeah, I think you've got to look at puts and put spreads. Now is he talking about old crop or new crop?

Yeager: He didn't say, well hedged 2018 soybean producer, so new.

Seifried: So if you're already well hedged and you want to get shorter I'd be hesitant to do it with futures, although by all means use a stop and just keep it tight. But if you don't want to put that much work watching it like a hawk owning puts is not a bad thing to do.

Yeager: We try not to get too political on the show but the issue, Jennie in Marion, Iowa is asking if there is anything that grain marketers should do now to actively, proactively plan for changes to NAFTA? This is one where I've had the analysts sit in the chair and I've asked them what way do they see? Some see no difference. But is there something a producer can do to look ahead if something were to change?

Seifried: Well obviously if we're concerned about changes to NAFTA we're concerned about changes that aren't in our favor as far as grain exports are concerned or cattle and hog exports. So always looking at, keeping an eye on the downside and having maybe a little bit more protected or hedged than maybe you would knowing that you have this other conflicting or other potential big negative factor out there. That being said, I don't think we're going to see any movement in the markets until after something actually happens and if something actually happens I'd almost rather be more reactionary to it because I do kind of feel like there is a good chance that we're going to see NAFTA not only hang around but end up being really a pretty decent deal for us. So it's not something that is at the forefront of my mind. I could be terribly wrong and we'll see. But I'm not putting on NAFTA hedges here at this point.

Yeager: Okay. We are really long on time so I have to be really, really quick with this. Baloo wants to know if Ted had to pick his top five bands and their best hits from the '90s, because Ted and I have discussed music and his music career on the MtoM podcast if you want to find this conversation and why this gets asked. So real quickly, five bands.

Seifried: Gosh, five bands and their best hits?

Yeager: Let's just stick with bands --

Seifried: You referenced Presidents of the United States of America, which was one of my favorite bands in the '90s, although as much as I like Peaches I think Kitty is a very good song too. Wow, I was really obviously into Pearl Jam, Alice in Chains. We can run down the list.

Yeager: Foo Fighters is what we were discussing before --

Seifried: You were talking about Foo Fighters, Nirvana, Dave Grohl, the whole grunge, alt, yeah I was big into that I suppose.

Yeager: Spin Doctors.

Seifried: Yeah, we talked about that a little bit on Twitter last night too. I'm trying to think of some off the wall, but Presidents of the United States of America was one of my favorite bands.

Yeager: If you want to see more and interact with Ted when it comes to Twitter or his bands, hit him up on Twitter. Ted, thank you so much for joining us, appreciate you coming.

Seifried: Thanks, Paul, thanks for having me.

Yeager: That will do it for Market Plus. Join us again next week when we'll explore how urban consumers are getting fresh produce from a different kind of container and John Roach will sit across from me here at the Market to Market table. So until then thanks for watching, listening or reading. I'm Paul Yeager. Have a great week. 

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