Market Analysis with Ted Seifried

Paul Yeager: Wheat is still looking for a compelling story, posting four consecutive days of losses before rallying. And the rest of the trade was in a choppy trade pattern for the week. The nearby wheat contract lost $0.17 and the July corn contract fell a nickel. A surge in soy oil gave a jolt to the soy complex. The July soybean contract added $0.12, while July meal shed for 60 per ton. July cotton expanded $1.67 per 100 weight over in the dairy parlor. June class or milk futures sold off a $1.18. The livestock market was higher. June cattle improved $4.17. August feeders put on $3.42, and the June lean hog contract increased $3.12. In the currency markets, U.S. dollar index expanded by 15 ticks. June crude oil fell by $0.77 per barrel. Comex gold weakened by $25.80 per ounce, and the Goldman Sachs Commodity Index dropped by more than two points to settle at $536.25. Joining us now, regular market analyst Ted Seifried. Hi, Ted.

Ted Seifried: Hey, Paul.

Paul Yeager: Where's the story in wheat? What's it going to be? I mean, of course, if you knew what it was, you could, you know, you would not be here.

Ted Seifried: Yeah

Paul Yeager: But what does it need? What type of a story to get it going?

Ted Seifried: You know, I don't know, Paul. you know, go back to the end of last week and kind of felt like, hey, maybe we found a near term bottom. Maybe we can build off of this. And then we have this week and we fall flat on our face. didn't make new contract lows, so. That's nice, but didn't come far from doing it. So I, I don't know. You think, we might need some help from corn? and what, what would, what would a resolution to Russia - Ukraine war do for wheat? And unfortunately, I think in the short term that's actually maybe negative. I think Russia might end up pulling back on some of the wheat sales. I do feel like Russia has been aggressive on their sales, keeping prices low in order to bring that cash in. If the war gets resolved or if there is some sort of resolution and ends. Do they slow down wheat sales? Could that be friendly? or does the prospect of much bigger Ukrainian production and exports weigh on the market? I mean, we trade futures, not today's. So, unfortunately, I don't know if we'd be able to see the bright side of that and it does seem like we are working towards some sort of resolution, but I don't know, you know, what is going to spark the wheat? I mean, you look at the crop conditions for wheat, they're really not good for winter wheat. You know, that should have maybe given us some strength. We really haven't been able to do that. We know that wheat does have nine lives and can end up, you know, being a very good crop, but I think we just had a lot of reason to try to move higher. Just it's, just not been able to sustain.

Paul Yeager: So at that point or with that being said, what does one do?

Ted Seifried: Yeah. I think you have to be making cash sales, even if you really don't want to. But I do think re ownerships re ownership strategies make a lot of sense. because wheat, in my opinion, has a fair amount of upside. If that spark happens. but who knows if that spark happens or not? I mean, that's we've been waiting for it, hoping for it, thinking it could happen for a while, and it just hasn’t.

Paul Yeager: Let's talk. Sparks. We have that in a question that came in. Mike in Iowa wants to know from you, Ted, what are your thoughts on $5 Dec corn with good weather? Are you bullish enough to wear the corn hat?

Ted Seifried: Well, let's, let's answer your question. All right. So this comes with an asterisk, but I do think $5 corn is possible. Now, we got very close to $5 corn in the July contract. But I think the question is about December. There is a path. Right. And that path involves, well, clearing up some trade issues that we have currently. If a trade deal were to include corn sales to China, all of a sudden we have a ball game. The rest of the world's demand has been pretty good. There was talk on Friday that Japan might buy even more corn, even though they're sharply higher over the last few years, they've been buying. But maybe they could buy even more. So I think there's a lot of things that could happen to really push corn higher, outside of whether. But whether it's going to be the biggest one. Right.

Paul Yeager: I'll take it. Going to keep going.

Ted Seifried: Yeah. Weather is going to be the biggest one right? There's been a lot of forecasts that are concerned about hot and dry for the western half of the growing area. during the growing season. And if that happens. Well, that certainly can give us some reason to go higher. The extra acreage that we've got this year compared to last year does give us a bit of a cushion.

But if we get a big weather problem, then yeah, there's upside.

Paul Yeager: Well, so that's the thing. The weather story. It's not even the first day of May. Right. Which means we can't quite move into a weather story yet on corn.

Ted Seifried: Yeah. It's tough right? Right. Right now we're focused on planting. We actually would like to see it dry out in a couple of areas so that we can get more planted, but then we'll worry about is it going to turn hot and dry. So yeah, it's very hard with a climate of improving South American expectations to get terribly worried about a longer term weather issue. That's months and months out. I say it often, you trust long term forecasts about as far as you can throw them. until we get closer to it. We can't get worried about it, especially in the climate of, you know, trade wars and things like that. I mean, what is the global economy going to look like? What is global demand going to look like? There's too much uncertainty to get terribly excited about long term weather forecasts at this point.

Paul Yeager: So with that being said, do we already think that summer high in corn is going to come still in spring and not wait until summer to at least put some certainty in the books?

Ted Seifried: I mean, it's a really tough call, right? if you take out the, what I'm going to say, macro fundamentals, the non corn specific fundamentals, if you do away with that then I think there is still that upside potential to make new highs. But if we continue down the path of a deepening trade war with China, into a global recession, domestic recession, we start worrying about what corn demand might be for fuel and for feed. You can kind of throw seasonals out the window. Is this that year or not? Again, that look in markets and I guess in life, you know, we go from a series of unpredictable events to another series of predictable events. Some years we have more predictability than others. Sometimes it's just the weather. This year we have the weather, but we have everything else going on. So it's a very difficult year to manage marketing, to manage expectations and to predict weather. Seasonality is going to work or not.

Paul Yeager: Does that answer hold for what's going on in soybeans too?

Ted Seifried: You know, soybeans? Look, if you two, three weeks ago said, hey, we're going to be three weeks from now, we're going to be deeply entrenched in a trade war with China, with only glimmers of hope, of some sort of negotiation happening, in two sides arguing about whether that negotiations even happening or not yet. Soybeans are going to be $0.80 higher.

I just say that's kind of crazy. But what's happened is we've seen a lot of pressure have, come on top of the US dollar, that lower currency and that currency advantage is making us a little bit more attractive to countries outside of China, not China. And so the idea is that maybe we're going to get, some more exports there, maybe that extends our export window. But the problem is we haven't seen that yet. Paul, last week's export sales number, was more indicative of a closing of that export window. And we haven't seen any daily flash sales, really. So, I worry that that soybeans are being way too optimistic for their own good. The question is, again, how long is this trade war going to happen? Is this going to be like the first time around where China comes to the table and purchases a whole lot of American agriculture in order to, make, make things look good? Or is this something where, we're going to fight an extended battle for a reason that hasn't been explicitly said, which would be taking the wind out of the sails of China's aspirations to become the number one superpower in the world, i.e.Their motto, China 2025, which they've been talking about for 15 years. And I think that is the bigger deal. I think that is the real goal. And if that is the case, well, we're not going to have an interest to really make any major deals with China for a long period of time. That's going to be a real tough, uphill battle for soybean demand.

Paul Yeager: Let me see if I can boil this down then. It sounds like a selling opportunity maybe needs to happen pretty much right now.

Ted Seifried: Yeah. You know, and it's tough to do because, you know, you look at soybean prices and you don't really feel that optimistic. And then you look at those long term weather forecasts and you say, well, you know, even if we do lose some demand, some export demand, there is upside potential because of the lower acreage number. So it's a really slippery slope. But I do think that there needs to be some sales made. I'd like to see 25 to 30, 25 to 35% sold on new crop. But I do think re ownership strategies are a great idea because there is a lot of upside potential from whether from trade deals. Hopefully I'm wrong in that we are really looking to make a deal with China and get all of this wonderful business. And if that's the case, I mean, there is a lot of upside potential, but I don't know. I'm very skeptical of that.

Paul Yeager: What about in live cattle? Because that has been every time someone comes on, can't go any higher, can't it?

Ted Seifried: Yeah. So the wonderful thing about live cattle is that our export business for beef is not the, that's not a huge deal right. So directly tariffs, especially with China, aren't a huge impact on consumption of beef. And the thing has been is we saw cold storage numbers come down yet production was higher. So people are still aggressively buying beef at the butcher's counter. The big risk that we have there is that you have an extended downturn in the economy and people start spending less, start getting more worried about spending on high priced beef. That hasn't happened yet. Until that happens, you have a good looking chart. There's still upside potential. We still have bullish fundamental fundamentals in place for the cattle complex.

Paul Yeager: So are you buying in the feeder market then.

Ted Seifried: You have a potential triple top in that August feeder contract. I'm a little bit nervous up here. And as you know, I am rather nervous about the economy in that, you know, the stock market, the enthusiasm that we saw midweek and really kind of into the end of the week is just optimism that is unfounded. And over time that might fade and it could get really, really ugly. So I do think it's a really good time to be owning puts, things like that. I do think protecting the downside is paramount for your account guys.

Paul Yeager: A couple of weeks in a row here in the hog market. Look out.

Ted Seifried: Yeah, hogs. Same thing. Right? Cold storage or supply down even though production was higher. We are buying proteins like gangbusters right now, Paul. And so that's really encouraging the market. The problem there is that pork is an export market. China is, a consumer of U.S. pork. Our weekly export sales were the marketing year low. They were down 82% from the four week average in. The main reason for that is that China canceled 12,000 metric tons. And so if we lose China, that export business can continue to suffer. it might change the look at some of those numbers. So, yeah, I do think there is, downside risk there in hogs. However, if you do have an extended break in the economy, you might see domestic consumers actually buying more pork. So I'm not as worried about the downside as I am in, in hogs, due to a economic downturn. But I think there's just risk. There's downside risk really everywhere. I think you really need to be protecting that. You need to understand the climate that we're in is a tremendous amount of risk, more than we've seen in recent years, really since the pandemic.

Paul Yeager: And we'll talk about that more in a minute. Thanks, Ted. Good to see you.

Ted Seifried: Always a pleasure, Paul. Thanks for having me.

Paul Yeager: That's Ted Seifried everyone. And as I said, we're going to pause. We have to continue. And we're going to talk about everything here in our Market Plus segment. You can find both analysis and plus on our website of markettomarket.org. We want to make sure that you never miss any of our content when you subscribe to our YouTube channel. At Market to Market, there are benefits of being there. When you turn on notifications, you'll be at the front of the line for our Stories Market Plus and the MTM podcast next week. A look at a mined product impacting the Corn Belt and the Rose Bowl. Thank you so much for watching. Have a great week.

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