Market to Market - January 10, 2025

Paul Yeager: Coming up on Market to Market - A dramatic week of snow and wildfires. Two major government reports give guidance for the new year. Double the market analysis with Ted Seifried and Matt Bennett next.

Announcer: What's next doesn't happen by chance. It happens when researchers and farmers work together to solve tomorrow's agronomic challenges. We're committed to creating what's next because at Pioneer our name is our mission.

Announcer: For over 45 years, Steiner Tractor Parts has shared your love of antique tractors. New parts for old tractors. Learn more at Steinertractor.com or at (877) 559-7887.

Announcer: Tomorrow. For over 100 years. We've worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today.

[Announcer] This is the Friday, January 10th edition of Market to Market, the weekly journal of Rural America. 

Hello, I'm Paul Yeager. The job picture continued to improve last month. Counter to the convention, where higher interest rates usually cut into expansion. Employers added 256,000 jobs in December and ending 2024 with the creation of 2.2 million jobs. The Labor Department did lower the figures for October and November by 8000 positions. The unemployment rate fell to 4.1%. Also this week, a major series of wildfires swept through the Los Angeles area with the help of intense Santa Ana winds and more than a foot of snow from Kansas to Illinois into Virginia started this week, which was followed by another system slowly moving from Texas to Virginia. Then there was the reason for our special programing this week. Two anticipated USDA reports. Ted Seifried is chief market strategist at Zaner Ag Hedge. Matthew Bennett is co-founder of AGmarket.net. Before we hear from them, let's set the stage. With this week's closes, smaller than expected yield and ending stocks sent the market higher in post report trading Friday for the week. The nearby wheat contract added $0.02, and the March corn contract improved $0.20. The soybean oil trade surged on the announcement of a clean fuel tax credit. The March soybean contract gained $0.34, while March meal cut $10.30 per ton. March cotton contracted $0.70 per hundredweight over the dairy parlor. February Class three milk futures declined $0.37. The livestock market was higher. February cattle added $4.73. March feeders put on $5.22, and the February lean hog contract increased $1.77.

In the currency markets, the U.S. dollar index added 69 ticks. February crude oil found $2.35 per barrel. Comex gold expanded $61 per ounce, and the Goldman Sachs Commodity Index moved more than 21 points higher to settle at 575.15. Let's get back now to Ted and Matt. Ted, this report, when you saw it, your first thought.

Ted Seifried: Yeah. Wow. I mean, it was a rather bullish report compared to what the trade expectations were. as soon as I saw the numbers, I figured that we would be sharply higher, and we were, And then the next thought that crosses my mind is, okay, are these all the things that we've been talking about, you know, sort of behind the scenes for the past four months or so? That is all now come to fruition. And this is now this, the realization of that. And there's this old adage in trading, which is buy the rumor, sell the fact. And I'm wondering, is this the fact? So I spent the rest of the day kind of wrestling with that idea, Paul. And, and also the idea of trade expectations come from analysts like us. And when we're asked by the news agencies, they're not asking us what we think the US national average yield is. They're asking us what we think the USDA is going to say on this report. And that's a big difference, because I think the market had been factoring in numbers, yield numbers, production numbers, carryover numbers, and that were lower than what the average trade guesses were. You have your computers, your, you know, funds, algorithms that trade versus expectations. But do you think about how the dust settles here over the next few weeks? And I think there's a lot of people that have been pushing long positions for quite some time, expecting to see eventually the numbers that we saw today. And now that we have them, it really makes you wonder, are they going to continue to buy this market? Is there a reason to be bullish longer term, or was this just the final realization of what we've been talking about since? Well, corn's low was in August. Beans was in the middle of December. You know. So I don't know. That's something that I'll be wrestling with for the next few days and going into next week.

Paul Yeager: Matt, did anybody pick up the phone and sell into this?

Matt Bennett: You know, there was a little bit for sure. I mean, whenever you look at farmers selling, you know, there was plenty of farmer selling today and a lot of that was stuff that was already put in in advance. And so there were offers that were hitting me. We were struggling to get up and above $4.60. You know, some farmers like, hey, you know what, if I could get to $4.70, I'd go ahead and sell some corn. Well guess what? You had your opportunity. But in a in a day like this, sometimes if you don't have your offer in, you're not going to get it hit. You know, and I saw this report today. I thought it was, pretty interesting. You go back to some of the things Ted was talking about that we, we've seen over the course of time, obviously excessively dry August. We know it rob some bushels. But the other thing is, is the moisture content coming out of the field. I mean, a lot of 11 and 12% corn coming out of the field, nine, eight, 7% beans, those things factored their way in eventually. But a 3.8 bushel yield drop for me in January is quite interesting that we're just now figuring out that it's a 3.8 bushel yield drop. Last month, you raised demand 200 million bushel. You took 75 of that back this month. So that's it's not altogether uncommon to see yield drop and then them drop demand. I mean it's something that they've done in the past. But to me I think that we knew that this yield was maybe a little bit lower, before this, but bottom line is today it was somewhat of a gift for the grower. I mean, quite frankly, I hope that the grower will look at it as a gift because a gift, not a gift unless you accept it. So I think we've got to at least take a look at this, you know, and what's base is going to do from this point forward. I mean, you've got to assume, you know, with an end user that has bought a lot of corn here in the last few weeks.

Yeah, basis is going to have to widen out here whenever you take this kind of a jump up in the market.

Paul Yeager: You like though, the basis is going to change. You like that idea?

Ted Seifried: Yeah I think so. Right. Especially after today. I mean there's a lot of resting orders that were in there, you know, because you go back to this past growing season, during the summer, we had a lot of guys had resting orders in there well above the market, which the year before when we had those three rallies that got hit in the market came back down and it was like, oh, I'm glad I had those in there did that again this year. Market never rallied, never had that spike to get those resting orders. So now going into this you had resting orders, but they weren't high in the sky. Super high resting orders. They were fairly close to the market. So a day like this filled a lot of those orders. A whole lot of cash movement happened today and even leading up to today.

Ted Seifried: and so I do think your end users probably pretty satisfied for the time being. And I'd say that for, for both corn and soybeans at this point.

Paul Yeager: So I guess we always talk about the farmer opening up the barn door. It sounds like those who collect the end user is going to shut and not accept anything more. Do you concur?

Matt Bennett: Yeah. I don't know if they're going to shut down, accept anything more of it. The bottom line is, you know, whenever they start getting a whole lot of corn in and they've already got a fair amount of coverage out to the next 90 days, which I think is fairly common. basis will have to widen because they're going to say pump the brakes.

Ted Seifried: It'll be less so, you.

Matt Bennett: Know, and if you.

Paul Yeager: Want less aggressive is what you.

Matt Bennett: Still want to bring the corn. We're going to have to back this off just a shade. And so you pick up $0.15 on the board. Ultimately if you continue the rally next week, you know, I think in some places you might lose half of the board rally in basis alone. And so, you know, you got to be respectful of that. And understand how that works. But you.

Ted Seifried: Say bigger deal for corn of soybeans.

Matt Bennett: As far as basis is concerned. Yeah, I would say for corn I mean, just based upon what we heard about the farmer selling today, you know, or on Friday, I mean, when that report came out, massive amounts of orders just on our platform hit. And so I know that was the case for Ted. I know that was the case for everyone that comes on here. And so obviously there was a lot of corn that changed hands today.

Ted Seifried: Yeah, worry about soybeans too, though, because.

Matt Bennett: I knew.

Ted Seifried: You get the feeling. You look at the South from here. You look at the Brazilian crop. Yep. And you say, well, our window, our export window's coming to a close here fairly soon, you know, and you've you saw a lower production number, but they didn't lower anything on the demand side of things. Right. And I think that was a direct function of not raising Brazil yet.

Matt Bennett: All right.

Ted Seifried: If they raised Brazil and cut our exports, you probably just saw the tightest or the smallest soybean carryover domestically that we're going to see. Yeah. And I don't know I don't feel like the end user is worried or panicking that the beans aren't going to be there. Right. And so I don't know, I worry about being based I think we say both. Yeah. But yeah I worry about being basis. And you look at the global carryover number, it really didn't come down much. I mean it's a 128 and change. Look at two years ago we were at a 101. You still have 28% increase in two years of the global ending. Stocks and soybeans. That's not a bullish picture. Even at a 380 million bushel domestic carryover.

Ted Seifried: Right. It's less bearish than it was.

Matt Bennett: Yeah absolutely.

Ted Seifried: But it's not oh my gosh we're going sharply higher. Yeah. In my opinion what.

Matt Bennett: It boils down to is is if we're in a domestic situation and that's a lot tighter than what it was before. I agree with Ted. This is probably the biggest stocks number we're going to see or lowest stocks number we're going to see I think it grows from here. You know I think you've got to worry about some cancellations once you get Brazil come online. I mean clearly the real versus the dollar is like a 22 year low. And so I mean that is going to factor in once they have available supplies. And so, you know, I look at this whole thing and you got to ask yourself moving forward, you know, what is it that is going to rally the market sharply higher. And so if we look at this, like Ted was saying from a global standpoint, I think that corn has a little more of a story. I mean, you've got restricted, global stocks. I mean, it didn't go down as much as you'd think, like three and change. but the problem is you've got a been situation that the global supply, in my opinion, is going to be an anchor. So even if you have Argentine weather, even if Argentina's weather continues on a kind of a deal and then they finish poorly, let's say we take 20% out of the crop. That gets them down to what, 42, 40 to 42? And if they're 40 to 42, we're still looking at 120 plus. As far as global soybean supplies go, considering Brazil looks like they're going to raise one heck of a big bean crop. So I'm afraid this bean thing is going to be a bit of an anchor. Yeah.

Ted Seifried: So the ending the global ending stocks for corn minus China is one of the tightest we've seen in quite a while. That's friendly. And corn still has the weather risk of Argentina. But then the second season Brazil crop right. So you can't say oh that crops already there like you can and soy.

Matt Bennett: But you can of beans.

Ted Seifried: So there's that I sorry I'm going to take another question here.

Paul Yeager: Well I was going to give you a question but go ahead and do yours first.

Ted Seifried: Yeah. Thank you. so you talked about how corn was coming in with such low moisture content. Yeah. Same thing for beans. Yeah. What does that mean for you further on down the line.

Matt Bennett: Further on down the line in you. Who are you quantifying is you though.

Paul Yeager: Is he the farmer or for the markets?

Ted Seifried: Okay. Let me just that means high oil content and high protein content. Right. So you're not having to use as much of that soy, as much raw bushels of soybeans to get that higher oil content and to get that high protein content. So if you, if you kind of and this is maybe a little bit in the woods, but if you kind of project that out a few months from our domestic demand, it wouldn't be shocking to me if our meal demand ended up being a bit less, because you're getting that higher protein content and soybean oil production might end up being higher than, you know, versus like last year or the year before when oil content was a bit lower. So, I mean, to me, that's just another sort of negative connotation on demand longer term. just because you have that higher protein in oil kind of. 

Paul Yeager: All right. I need to ask you about beans specifically here, man in Wisconsin, this question, if it's an extension. It's part B of what Ted's asking here. Soybeans seem to be the commodity heat at the moment. Do you think that this has been overplayed. And they will end up rebounding from too many acres going to corn? We haven't discussed acres yet in this discussion.

Ted Seifried: You know, and that's a good question, Paul. I think we kind of hit on a couple of those things. For one, you know, if you look at the global balance sheets, the global corn carryover minus China, it's really rather tight. You know, global corn demand has been strong. And then we've seen about a billion bushel come off of our, our domestic carryover. Since we saw the outlook for some numbers back in February. the corn story has gotten quite a bit more friendly. The beans story has only gotten slightly more friendly. I mean, we were talking about 135 million bushel global carryover, and now we're at a 128. It's still a big jump. Over the course of the last few years. Beans are not in a position to really want to fight for acreage, so I don't really think that story has changed. There are things that could happen, right? There are things that, you know, if we have this brand new, you know, 45 Z, B that could be coming in in a few weeks. I mean, on top of the newer the announcements, from today, what might happen over the weekend, maybe that changes things, but I think for right now, no corn is the darling corn is the one that has the story, and the beans are just going to be a follower.

Paul Yeager: So, Matt, you, I'm going to ask you about acres for a minute on corn. What are you hearing, guys in your area south of I-80, north of I-80, are they going to feed this narrative of more corn to come in 2025?

Matt Bennett: Right. So I was asked a question this week, you know, that, where are you coming up with all these corn acres? Whenever this particular person was in central Illinois, they were a seed dealer, and they said, hey, I'm seeing beans to corn. Corn to beans this year. I'm. Yeah, you are. For a guy that can grow 85 bushel beans, right? It might be, 55, 60. That doesn't work at $10, but I can raise 230 bushel corn, 220 bushel corn. And so I do think the farther north you get above I-80, you're going to see a lot. And I mean a lot of buying acres, evaporate this year. And so whenever we start talking acreage, I've got to think when you just go back two years. So in 2023, you were like 94.6. And so the natural transgression would be you dipped a little bit in 2024. You're probably going back up for a lot of folks in 2025. First of all, second of all, just yeah, just by rotation. Second of all, purely the economics of this makes it extremely tough at $10 beans. And even with a bit of a rally. Paul, you look at some of these break evens, you would have to rally substantially to get some of your folks that I would say can't raise, really, really good beans. it's going to be tough for them to be able to make this thing work. So I feel strongly, in, in, in some of your fringe areas and especially the farther north that you get that you're going to see a pretty big, just absolute dearth of soybean acres compared to corn.

Ted Seifried: Well, I think today bought a lot of corn.

Matt Bennett: Oh, for sure. 

Ted Seifried: I mean.

Paul Yeager: Even more than what was going to be there before.

Ted Seifried: Well, okay. So I think today for any last minute decisions that are being made, I think today pushed us more towards corn because there is more optimism in that market. We saw the potential for what corn can do. But not only that, and I think maybe more importantly, in the short term, the Brazilians are going to max out that second season corn crop as much as they possibly can. They're going to be adding as many inputs, with their currency being what it was with their success in their export campaign that they had last year with China. I mean, the soybeans, that's a frenic corn crop in Brazil. oh, no. Like, this came in a really interesting time because now as they're getting ready to plant that crop, they are going to absolutely maximize it.

Paul Yeager: All right. So that's Brazil I need I still have a bunch of stuff I have to cover. I can't believe I've lost my time. did it did any weed? Acres get lost in this today.

Ted Seifried: We here's came in higher than expected. I, they they've been doing that for the last few years. no, I don't think. I don't think we're. We significantly losing weed acres. I think there when we the last couple of years when we were talking about acres, we look at it and we say, well, where are these acres going? Strip malls and things like that. No, I think there's just we haven't had the urgency to plant everything we possibly can. I think now after today, that urgency starts to come back a little. That optimism starts to come back a little bit possibly.

Matt Bennett: But I would say whenever you look at wheat, for instance, the one thing I pulled out of today is, you know, you made a new contract, low and front month wheat futures at the same time that corn and beans are just racing. And so, you know, that, Russian crop went into dormancy in pretty poor shape according to most people. I do think later on down the road, maybe wheat will have some sort of a story. I mean, right now it looks awfully rough, but I think whenever it gets right down to it with acres, even at 450 and we can't lose sight of the fact that front month futures rallied substantially, whereas December corn could barely, barely stay positive. You know, but at the same time, there's enthusiasm for corn, I'll give you that. but once again, if I look at what does it take to be able to make money in 2025, most growers are going to tell you at today's prices it's as thin as can possibly be. It just doesn't look as bad as what soybeans look.

Paul Yeager: All right, let's speak of making money. And in 2025, it sounds like it's going to be a lot like 2024 in the livestock market. Let's start with Ethan in Kansas, where they've been busy moving a lot of snow. He says, I have cows cavity now. That's when the snow happens, right? When you're calving. what's the best way to protect the price of those calves weighing 600 pounds this fall? Matt puts the expense of that far out, and LRP doesn't give much protection on lighter weight calves.

Matt Bennett: You agree on the LRP with lighter weight calves? I totally agree with that. Whenever you start looking at though, puts are expensive. I totally get it. But how much of feeders rallied here? You know? I mean, you look and see what we've done just in the past couple three weeks. I mean, you look at feeders, you look at fats and start thinking about, okay, whenever you get into this fat cattle market, the cash market is on fire and you've seen over. So you don't see the convergence there. You know, be careful to assume that's going to happen forever, first of all. But you can stay bullish. There's nothing wrong with staying bullish. But don't do it without some sort of protection under yourself. If you think puts are too expensive, get a little more creative. Maybe buy yourself a put and sell something up above the market. Because if the market rallies and you get capped out now, you're selling feeders even higher yet.

Ted Seifried: Yeah, I've actually been doing that a bit the last couple days. Is creating the window right. So we're sure, I was buying what, and this is all the way out in October. Buy in to 268 puts and sell them 280 calls. Yeah. The worst case scenario is that the market keeps rallying. And I'm short at 280, which could create some margin issues. That's why I say worst. The other worst case scenario is that the market goes straight down. And I've got short futures at 268. Right. I'm pretty happy with either one of those theory. Oh it's just a matter of that is for specific people that are able to understand the risks of being short that call and the margin possibilities and things like that. If you understand those sorts of things and you can tolerate them, I think that's a great way to approach the market right now.

Matt Bennett: Absolutely. The best thing that could possibly happen in that scenario is to pay margin calls. And some people don't. I mean, nobody likes them, but if you understand it, then you know that your cattle are worth more money because you're buying margin calls. So bottom line is stay protected and stay bullish if you want to.

Paul Yeager: And that's you're talking feeders and in cattle both I mean kind of some of those same philosophies are in hold on the technical question.

Matt Bennett: Up on all time highs again. Yeah. Well I mean, I know I never got my $200 back in 2023, but it sure looks like it sure looks like, we could push up in above here. Everything is on fire. We know that. But you got to be cautious here because the funds, at some point, we'll get tired of this long. It might be when the fundamentals are all together as bullish as they are today. But if they do get tired of this long at some point and you have no protection under yourself, you're going to say, whenever we had $198 cattle, I didn't protect myself. What was I thinking about? So you have to have some level of protection when.

Ted Seifried: You wonder about the economy. As we get into the new administration, I do, I really do get the feeling that, you know, four years from now, things will be better than they are right now and a lot of different fronts, but getting better or change and improvement, it's not usually comfortable, right? I mean, think about it. If you want to lose 20 pounds at the end of that, once you do, you feel great. Everything's better. But getting to that, you've got to go through some lean times. You got to it. It can be painful. It can be uncomfortable. Right. And do wonder if we're looking at that sort of scenario for the economy as a whole and therefore demand for things that are expensive, like high price beef, for example.

Paul Yeager: What about high priced pork?

Ted Seifried: You know, from a, from a, substitute standpoint, right. If you're if you've got beef prices that are astronomical and port prices that are relatively high historically, but not compared to where beef is, right? I think you look at pork as being sort of that recessionary trait. I think. I think a lot of the funds in the Wall Street guys have in the past, and when they start to get worried about the economy, they look at owning, hogs because they feel like at some point, beef demand could start to collapse a little bit, and then it might go to the cheaper alternative, which is hogs and chicken. But we don't have poultry markets.

Paul Yeager: Well, but poultry markets, I mean eggs I mean that's the that's the main street story right now on the headlines of the main organizations of dozen eggs over $6, the poultry, you know, that is where does that fit into this discussion with those who have livestock, cattle, hogs and poultry? What are they doing right now? Matt?

Matt Bennett: That's a tough question. I mean, ultimately, everything is high priced. We know this. I mean, to go back to what Ted said, I mean, there's no doubt it seems to me like, hogs, in my opinion, wouldn't be quite as strong as they are right now if we didn't have cattle prices where they're at today. And so I, I think if anything, for one of these guys thinking I want to own pork in some sort of recessionary deal, I'd be looking at maybe owning pork and maybe selling cattle and looking at some sort of a spread trade. But bottom line, everything's expensive. That's all there is to it. And so every facet, in my opinion, should have some sort of level of protection, because if Ted's correct and I feel like I feel the same way as he does, you could be looking at a lot of things, kind of deflated at some point because we're over inflated right now.

Paul Yeager: Speaking of, in the last 30s deflate, a dollar at the beginning of the week. Rallied at the end of the week, the dollar lowered because the incoming president said none of those tariffs are going to be a little more specific. Is that going to be the biggest mover of the dollar here in the next six weeks?

Ted Seifried: well, what are we going to do with interest rates, too? I mean, that's always that's usually the biggest mover of the dollar. Are we just going to pause on interest rates? Are we going to see things come down, or do we get more concerned about inflation again. And do we start to see interest rates go back up, which is kind of where I think we should be headed?

Ted Seifried: I don't know. I'm really curious to see how the dollar trades going through the next few months, but I would think that, I would lean towards more strength in the dollar coming.

Paul Yeager: Okay. Good to see you. Ten. Thank you so much for your time. It's a pleasure, Paul. Always fast, doesn't it?

Ted Seifried: It does go so fast.

Paul Yeager: That's Ted cipher, that's Matt Bennett. Matt, I appreciate your time as well. Thank you. Absolutely. All right. We are going to continue because we have to pause right now this analysis. But we will, as I say, continue our discussion about these markets. In our Market Plus segment, you can find both analysis and plus on our website at markettomarket.org. We have a way you can get our content to your pocket. Subscribe to our YouTube channel and be sure to click notifications and you will be fed our full program stories and podcasts, especially if you've missed the airing of our program on your local public TV station. Watch early and often when you head to YouTube.com/markettomarket. Next week, a professor hunts for unintended changes from genetic editing.

Paul Yeager: Thank you so much for watching. Have a great week.

Thank you so much for watching. Have a great week.

Announcer: Market to Market is a production of Iowa PBS, which is solely responsible for its content.

Announcer: What's next doesn't happen by chance. It happens when researchers and farmers work together to solve tomorrow's agronomic challenges. We're committed to creating what's next because at Pioneer our name is our mission.

Announcer: For over 45 years, Steiner Tractor Parts has shared your love of antique tractors. New parts for old tractors. Learn more at Steinertractor.com or at (877) 559-7887.

Announcer: Tomorrow. For over 100 years. We've worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today.

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