Market Analysis with Ted Seifried

Paul Yeager:  Drier conditions in Argentina and colder U.S. weather impacted the trade. For the week, the nearby wheat contract at a $0.19 while the March corn contract, it improved $0.09. China's emergence from COVID restrictions provided a volatility jolt to the soy complex as the January soybean contract lost $0.04, while January meal dropped by $8.60. March cotton expanded by 97 cents per 100 weight.

Paul Yeager:  Over in the dairy parlor January Class three milk futures added a penny. The livestock market was mixed as February cattle added $0.23. January feeders cut $0.15 and the February lean hog contract, a busy Friday, ended on a gain of a $1.78 for the week. In the currency markets, the US dollar index added 22 ticks. January crude oil improved to 62 per barrel.

Paul Yeager:  COMEX Gold shed $10.60 per ounce and the Goldman Sachs Commodity Index was higher by nearly 19 points to finish at 588.85. Joining us now is regular market analyst Ted Sefried. Hello, Ted.

Ted Seifried:  Hey, Paul.

Paul Yeager:  I want to look at headlines. I want to make sure I get something right here, because this is the week of early in the week. We're asking, is this a dead cat bounce? Kansas City shows some promise. Then we had no fresh news. Then all of a sudden, it got cold. Yeah. What's the biggest mover in wheat this week, in your opinion?

Ted Seifried:  Well, I mean, look, that cold is an issue. There's a lot of weather as a whole. I mean, when you look at snow and things like that, which is I mean, there's snow is good to a point. You throw 22 to 24 inches two feet of snow on something that's maybe getting past that point of good. But for the areas that didn't get snow, I mean, there's some really, really cold temperatures coming in here.

Ted Seifried:  That's kind of what we're looking at. We're worried about, you know, winter kill, it's wheat. You know, we can kill wheat how many times and it still can manage to yield. But with conditions being as poor as they were even before that, with all the drought conditions, I don't know if we'll have such a resilient crop this year.

Ted Seifried:  And you look at the drought conditions and the correlations, there's been a lot of studies done. We are not set up for a very good wheat crop this year.

Paul Yeager:  What are we set up range wise then, given what you're saying?

Ted Seifried:  Well, there's the other side of that equation, though, Paul, is demand. And the demand for wheat has been really lackluster as well. And, you know, you look at wheat, we are well off the highs that we had from the initial, you know, short squeeze that happened when Russia and ready to invade Ukraine. But we're still with kind of relatively high prices for wheat.

Ted Seifried:  So, you know, given all the fundamental inputs, the supply issues, but also the demand issues, you know, you can really make a you can make a bullish case on the supply side. That bullish case gets diluted by the demand side of the equation. And then again, you look at where the prices are. You know, if we were trading $5.80 wheat, you'd have to say the supply issues are enough to give us a rally.

Ted Seifried:  But based on the fact that we're not trading, we're well higher than that. You're really kind of left in limbo and you're left with a market that's just really searching to try to find a bottom. And maybe we have I don't know, you didn't have very convincing price action this week. But, you know, sometimes it takes a long time to carve out a longer term bottom.

Paul Yeager:  We didn't have enough action to form the bottom. Is that what you're saying?

Ted Seifried:  You can have a convincing price action. Okay. That's the lows in now.

Paul Yeager:  All right. So but we did pull corn along for a little bit for all of week, but corn also had some export news that was encouraging. No?

Ted Seifried:  Better than it has been, but we're still 48% behind where we were this time last year.

Paul Yeager:  So given the news of the week ...

Ted Seifried:  Yeah.

Paul Yeager:  Have we set either a bottom or a top in the near term for corn?

Ted Seifried:  That's a good question. I mean, we're heading into some very well potentially very light holiday trade, choppy holiday trade. And generally speaking, the seasonality is positive for the time frame between the December report and the end of the calendar year. And that's usually because we don't end up making a whole lot of cash sales in that time frame.

Ted Seifried:  Generally speaking, we're all we don't want to mess with our taxes any worse, any more than we have. It's time we spend families. So we're not really busy hauling in things like that. And generally speaking, we are a little bit concerned about South American weather. So usually that's a it's a good time of year to see a little bit of a bump.

Ted Seifried:  It's also a really good time to get some of the new crop marketed. Whether this year's the same or not. I'm not 100% sure. We're already kind of at some elevated levels. We've already factored in some South American weather in the form of Argentina dryness. If that Argentina forecast changes dramatically over the next couple of weeks, I think we could see a counter seasonal move.

Ted Seifried:  But that's a big if if it doesn't change. Yeah, I think there there's a chance that we have a halfway decent recovery in corn after the break that we saw earlier in the month.

Paul Yeager:  But the line is so small between Argentina and Brazil. Brazil gets rain. Can they get enough and create enough to counter your counter seasonal rally that you're talking about?

Ted Seifried:  Brazil looks pretty good. There are some problem areas in Brazil and that's for sure. So the question is, going forward, do does the issues in Argentina spread northward to Brazil? And are we talking about a wider a bigger, bigger drought impacting a bigger area, but also maybe in a more important area in Brazil? Or are we looking at the Argentinean issues maybe starting to dissipate and go away?

Ted Seifried:  Like so many times in our growing season in the US, we'll start with some dryness, but by the time you get to June or July, the weather pattern changes and all of a sudden we're talking about a normal or maybe even better than normal crop. There's still a chance for that to happen in Argentina. Argentina is 53%, 55% planted at this point.

Ted Seifried:  They're still planting this crop. So it's not like it's July in Argentina right now. There's still a lot of time for that to turn around. It doesn't look great at the moment. The extended forecasts don't look great. It's a lot of heat, but weather patterns can change.

Paul Yeager:  Soybeans also had some export story to tell. Yeah. Did you like the export story better in soybeans?

Ted Seifried:  Well, the export story for soybeans has been better for quite some time. I mean, we are on pace to hit the USDA target and maybe even beat it if we are going to continue to see these sales elevated the way they have been. It was, I think, the second best week for soybean sales in this marketing year so far.

Ted Seifried:  Yeah, the soybean sales are good. You almost wonder with the fact that exporters are continuing to sell as aggressively as they are they must not be too terribly worried about running out of soybeans further on down the line. So you wonder what that means for that January report, you know, so pretty soon we'll start talking about what our expectations are for that January report.

Ted Seifried:  That's a big, big deal. You know, that's the final production number, a quote unquote final, which is the final numbers have a tendency to get revised as well. But there'll be big changes on that January report. The question is in which direction?

Paul Yeager:  All right. Let's do a little range game then with soybeans. Between now and that report that you're mentioning on the 13th of January, what do you see for a top in the November contract for soybeans?

Ted Seifried:  The way the way it was acting on Friday, the way the price action has been acting this past week, it seems like soy, soybeans want to probe higher. But every time we see that, we run into the $15 level and we kind of fail, I think there's a pretty decent chance that we're going to take a shot at like $15.12, somewhere in that neighborhood.

Ted Seifried:  But then again, it's a weather market right? If that weather changes or the news changes, I mean, there's so many different factors that can come out of the blue. I mean, if we've learned anything in the last five years, Paul, it's that we should expect something to be coming out of the blue at any moment. So look left to our own devices, really no change in weather, no change in outside factors.

Ted Seifried:  Yeah, I think we can check out that that $15.12 area or so, but who knows?

Paul Yeager:  What you said gave me a question. I'm going to ask you in Market Plus so I’ll tease that you have to come into Market Plus to see us talk about that. Let's get Glenn in Ohio's question to Ted here now, because Glenn's a little bit looking ahead there. He says planting in Brazil and Argentina nearly complete. Will the dry weather in that region dominate the supply demand conversation, or will other fundamental events in the U.S. be the primary market mover now until spring?

Paul Yeager:  He's extending the past the report have kind of danced around both. Now we're going to make Glenn put you on the hot seat.

Ted Seifried:  Yeah. And I kind of usurped Glenn a little bit here because, again, Argentina is you know, they're not quite 60% planted. So when we say almost complete, I don't know. I don't know if that's a fair statement. Also, look, Brazil has multiple crops and it is a very, very big area. So they are planting and harvesting at the same time in a lot of a lot of times.

Ted Seifried:  So the South American weather story is really just getting started. That's something that we'll be watching very closely into June, for that matter. So when you talk about the second season corn crop and harvest and everything like that.

Ted Seifried:  So yeah, I think the best way to answer this question, Glenn, is that lack of any other strong outside market influences, right? We are going to focus on grain fundamentals. And what those grain fundamentals are for the moment is really based on South American weather and what's happening from an export standpoint. Those two things are very much related, by the way, but as we talked about, at any given time, we can get something to come into the market and completely shock it and make the outside fundamentals more important than the actual grain fundamentals.

Ted Seifried:  We're not in that time frame right now. Not saying that can't happen, though, at any given point.

Paul Yeager:  All right. We need to move to livestock real quick. Cattle equity pressure or do you buy this as a technical move? And then we gapped lower on Thursday. Still in an uptrend with cattle.

Ted Seifried:  You've got a nice little bull flagging kind of situation happening on the near-term cattle chart where the expectations are for just for supply to drop very dramatically in the first, second and third quarter of next year. If that happens, that's going to keep a pretty solid floor under cattle. You do have to worry about that equity market really kind of coming off.

Ted Seifried:  You know, our is the domestic demand going to be a problem but short of a big, big problem in the stock market or overall economy as a whole I think the cattle market's got some pretty firm footing underneath it. I think we'll try to go higher at some point. Break out of this. Again, bull flag scenario is a good, good thing to look at on a chart.

Ted Seifried:  And the way it traded on a Friday to me acted like it wants to stay in this range for now with the potential breaking out further on down the line.

Paul Yeager:  Same theory in feeders.

Ted Seifried:  Same theory in feeders. Feeders are going to be, you know, more tied into corn activity. And it was a positive week for corn. Corn had that that strong day right off the bat in the beginning of the week and then really held it throughout the week. I think that weighed on feeders a little bit, but yes, I'm optimistic there's upside potential for feeders as well.

Paul Yeager:  I looked at grains at midday and forgot to check the livestock market. The hogs kind of took off. What happened?

Ted Seifried:  Yeah, hogs really did kind of take off. So, you know, hogs have been trading this very wild range for quite some time and the moves have been pretty significant. We had gotten very oversold in the short term. Surprisingly cut outs came out quite a bit better. I think that is kind of what sparked it. But being oversold and being in this choppy range, I think that just, you know, kind of lit a match for a technical fire and you had a really nice recovery day there in hogs.

Ted Seifried:  Now whether we're able to follow that up early next week or not is the true test. You know, is that going to legitimize what happened on Friday or not? I really don't know.

Paul Yeager:  In our few seconds remaining is the China story about they're just opening wide up after COVID. Is that impacting which market the most, the hog market, the soybean market or something else?

Ted Seifried:  Do I think soybeans the most? I mean, look, soybean meal for a number of reasons, maybe some of them unknown right now has been on fire. And that's what's really helping the soybeans. And I think China has something to do with that. But then also South America. And as far as the hogs are concerned, you know, the Chinese story would be extremely helpful for hogs if we were to start seeing that reflected on an export sales sheet.

Ted Seifried:  To this point, we've not seen that. So we have to wait and see over time if that those are not.

Paul Yeager:  Great questions to come in Market Plus. We're going to get into ethanol and oil, plus questions out of Canada, Nebraska, Wisconsin and Iowa. So the gamut come in for you, Ted. All right. Thank you very much. That's going to do that for the show. We're going to put a pause on this analysis, continue our discussion about these markets and our Market Plus segment.

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