Market Analysis with Ted Seifried

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Paul Yeager: Not only was Friday the end of the month and the quarter, two major government reports influenced much of the trade for the week. The nearby wheat contract lost $0.02 and the September corn contract fell $0.33. USDA reported more soybean acres, despite 12.8 million acres left to be planted. The August soybean contract shed $0.14, while August meal declined 270 per ton. December cotton expanded by $0.38 per hundredweight. Over in the dairy parlor, August class three milk futures weakened $0.56. The livestock market was higher. August cattle added. 2.28. August feeders put on $0.92, and the August lean hog contract found $0.17. In the currency markets, U.S. Dollar Index increased five ticks. August crude oil expanded $0.98 per barrel. Comex gold gained 540 per ounce, and the Goldman Sachs Commodity Index was down more than three points to settle at 577.65. Joining us now, regular market analyst Ted Seifried. Hi, Ted. Hey, Paul. So anything going on today?

Ted Seifried: You know, it's Friday, but yes, we had one of the biggest reports of the year today, Paul.

Paul Yeager: So we will hear about that. We'll call that a tease because the wheat market didn't really have. This wasn't really a report for the wheat market necessarily, but was it impacted?

Ted Seifried: You know, so the interesting thing about wheat is that this quarterly grain stocks number is what is effectively our ending stocks number for old crop. but as far as acreage is concerned no big surprise there. it came out pretty close to expectations. Pretty close to the intentions. Number. So yeah, we're very early in the new crop marketing year. So this is not as big of a report for wheat as it is for the row crops. So, it was still kind of a bit of a bearish report above a 700 billion bushel old crop carryover. New crop carrying is a bit of a bearish.

Paul Yeager: Report, but. And when you look at that chart that was just on the screen I mean we were down at one point I think 17 and 19 days this week. Do you see that a dead cat bounce right now?

Ted Seifried: Wow. yeah. Paul we had gotten to intraday. We had gone to 18% on a relative strength index. daily we had gotten down to 22, 22% on a relative strength index. I mean, it's just been an epic decline, like you said, down. What have we have like 12 days straight? and finally we had a bit of a bounce. Technically, we needed it. I don't know if there's much upside potential for wheat. We've had the Russian, you know, weather issues, but they've been revising their crops higher. Now. that's all been absorbed, like, I don't know. I think it really kind of depends on the. I think we will follow row crops if they go higher, but I'm not sure about that either.

Paul Yeager: Let's go to road crops for a minute. Corn. To me and two other analysts. Bearish surprise on acres. Is that the lead story for you in this report?

Ted Seifried: Yeah. You know Paul everybody wants to talk about acres because that's the number that we can all have right. Anybody can make a guess on acreage numbers quarterly grain stocks is a much more difficult number to come up with. You have to put a lot of math behind it. I mean, you're looking at three months of disappearance, three months of demand and trying to figure that out. So, yeah, acreage was a bearish number. I mean, we came out, for all intents and purposes, 1,000,003 higher than what the trade was expecting. it was a very contested number going into this report because on one hand, you had a sloppy planting season. You know, you had prevent plant in some areas. you know, so where are we going to lose some acres of corn versus. Okay, when we saw planting intentions, it was, you know, 6.2 million acres less than last year in principal acreage. And even the smaller crops were losing acreage. So there was a whole lot of acres that where'd they go? And we didn't put up that many strip malls and subdivisions in that amount of time. So we had a feeling that there were acres that could come back if we had a really nice planting window, but we didn't. So then it was really a question mark. End of the day, we gained acres. Okay, that doesn't really help the weather market ideas, right? I mean, we've had some weather issues that we've wanted to be bullish about. Market has not respond. And now we know why. Because we have that acreage cushion. And we have the quarterly grain stocks that came out 135 million bushels over expectations. That is very significant. Some of that will find its way onto the old crop balance sheet into the new crop, beginning stocks. So when you look at new crop, beginning stocks going higher and bigger acres, that leaves us a lot more room for error as far as the national average yields concerned.

Paul Yeager: And that becomes then a weight we have to bear for the foreseeable future.

Ted Seifried: Well, the biggest problem that I see in corn right now is that on farm storage is up 37% year over year, right? That means there's a lot of guys that are holding on to corn looking for the summer rally that we've had for the last three years in order to sell that corn, but that corn is going to have to move one way or another or at least a good portion of it's going to have to move before the new crop comes in. And if we don't get the summer rally to sell, you're going to see a whole lot of pressure in August on corn as guys are throwing in the towel. So that on farm storage number is the biggest concern that I have for corn. I think savvy traders have known that for a while. I think that's why we haven't really responded to a weather issue. The market generally draws out bushels with the stick rather than the carrot. I mean, lower prices, lower prices bring out more bushels than higher prices. It's just how it is. And it's unfortunate, but that's how that works.

Paul Yeager: So you're contributing to maybe the whole reason the funds were as short as they were. They knew something. Maybe.

Ted Seifried: I think they just trade charts and trade momentum. And there's just not been a good catalyst for corn to really go higher. I mean, I want to speak positively on corn demand. The corn is solid, but we have a big, big supply.

Paul Yeager: Let's do, let's try to get you positive. Jamie in Iowa wants to know. Ted, with all the crops being flooded in the Midwest and the Eastern Corn Belt, praying for rain, is there going to be a rally? And I'll amend this to say, any chance for a rally and what causes it?

Ted Seifried: Well, hi, Jamie in Iowa. I have this report today. I think it could have the potential to spark a weather rally if we were to come in at 88 million acres for corn. That's a lot less window. That's a lot less cushion for any sort of problems with our national average yield. I was really kind of hoping we'd see that, to be honest. Paul. but that was not the case. Now that we have more acres than expected and go back to last year where we had some really tough conditions. I mean, in a lot of places it was as bad as or, you know, like in 2012 and we still ended up with a 170 7.3 national average yield. it's going to be tough. It's going to be really tough at this point, Paul, to get excited about weather and corn. Now, I do think corn demand is fairly solid. so, you know, maybe that keeps a bit of a floor underneath us. Corn is now very oversold, just like wheat was, So I wouldn't be surprised if we have just put in our sort of seasonal low for corn. I would like to see a bit of a recovery from here, but, I don't know, I just don't have anything I can't do. Jumping jacks, about $6 corn. Paul, I just can't.

Paul Yeager: Can you do jumping jacks on 1133 on August beans?

Ted Seifried: There's been a very strange thing happening with soybean spreads, old crop, new crop, either July versus November or August versus November. We've had a very large inverse, which is not typical in a bear market, which is not typical in a you projected 350 million bushel carryover. so it's been kind of tough to explain that. And quarterly grain stocks for soybeans, I, I thought that was going to be the most interesting number on this report, because it would have gone a long way to explaining the relative strength that we have in old crop beans. If that quarterly grain stocks number came in well below expectations. But it didn't, it actually came in above expectations. Just like we talked about on farm storage for corn on farm storage for beans is up 44% from last year. We've got a whole lot of bushels of beans sitting on farm right now. So the tightness that we have in the cash market is, are, is artificial. It's guys waiting to sell. They want to see $13 beans to sell. It's happened in, recent years we've had that mid-summer rally to sell. They're waiting. They're hoping for that. If it doesn't happen though, even worse than corn, you're going to have a whole lot of beans coming to town, right before harvest. Just because we have to make room for the incoming harvest. You've got a potential train wreck waiting to happen for beans towards the end of the year. If we don't get a weather issue later on. The bigger problem too, is that we just don't have the demand that we would be normally used to seeing at this time of year. We have virtually nothing on the books for China for new crop. We've got some unknown destination sales, but new crop soybean sales as a whole are down. I mean, it's the lowest level in like ten years. It's really concerning that there is just no interest in soybeans at this level. And you really fear that new crop beans are going to have to take $0.20 off to try to find that buying interest. If that doesn't happen, there just 20, $0.20, $0.20, $0.20, 20 until we get that export business. Because right now, the new crop, soybean demand from an export perspective looks really concerning.

Paul Yeager: You're talking we'll get into it and plus but I mean you're talking well below 11. I almost hear you say well below ten. 

Ted Seifried: My current target is 1080.

Paul Yeager: Okay. All right. We'll get to that in a minute. In livestock, was this a better day for livestock?

Ted Seifried: You know, I mean, any time that you have the potential for more corn bushels, whether it's. We found an extra 135 million bushels in quarterly grain stocks, and we ended up with, over a million acres more than what we were expecting. Well, that is, really nice news for, you know, guys feeding corn. So, Yeah. No, I think the big winner from these reports, were, were cattle, you know, the cattle guys. so, yeah. No, that's good news. not only that, I mean, we're headed into sort of, Well, not sort of. We are headed into our peak demand weekend of the year in the form of 4th of July. The question that I have, though, is, are packers going to continue to be aggressive? once we get past that and, you know, what's our what's our domestic demand? Look like in the summer doldrums? you know, beyond 4th of July until we get to Labor Day, I think we could potentially see a bit of a pullback. But in the meantime, August live cattle posted the highest trade we've seen since October 12th. so we are back to some really good levels again. And we do have an old story, Paul. We've been talking about it for a long time, but we do have a bit of a tightness as far as animals are concerned with supply. So there's reasons to have cattle trading at these higher levels. I don't see a big break, but I do think that we could see a summer doldrums pullback.

Paul Yeager: Looks like the hog industry has already kind of had their pullback. Yeah. Or is there more opportunity to fall here.

Ted Seifried: Man. You put a hog chart next to a chart and you say wow there's a lot of similarities there. And a lot of that's because of fund liquidation, right? And they had gotten very long. And now well they pretty much bailed on their entire long position. I'd like to say there's upside potential in hogs. I'd at least like to say that I don't think there's a whole lot of downside potential from here. The sort of volatility that we've seen in the last week or so in hogs, I think, is indicative of a bottoming sort of activity. I think there is a chance for a recovery. Do we need to go back and make new contract highs? I don't see that. We have a lot of weight up front, which means there's a lot of up front product. But again, I think we've come down a little bit further than what I would call fair value.

Paul Yeager: What we have this week, hog inventory up a percent lower. Farrowing is projected. Herd grew over the last year, but further expansion is a question mark. Do you agree with that sentiment?

Ted Seifried: I mean, when you have, a chart that looks like a falling knife. Yeah. Expansion is a question mark. but okay, so that was a bit of a bearish report, but it was expected to be bearish. I think that now that we've gotten that out of the way, we can start looking towards the future. and the concerns about the replacements I think could give us a little bit of support. Right. I do think that we have to chew through, pun intended, the upfront supply that we have. All right. But further down the line, I see I see potential for higher prices.

Paul Yeager: All right. Thank you, I appreciate it. We're going to pause this analysis, continue our discussion about these markets. In our Market Plus segment. You can find both analysis and plus on our website of Market to market.org. Since you watch this program we have a recommendation for you are MTM podcast season nine debuted last week as we continue our conversations with those in and around agriculture, weather, and energy. Sound familiar? Subscribe today wherever you get your podcasts. Next week as an, we'll have an in-depth discussion on the economy on and off the farm. Thanks for watching. Have a great week!

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