Market Plus with Kristi Van Ahn-Kjeseth

Paul Yeager Welcome in. This is the Friday, July seven, 2023 installment of Market plus. Joining us, again, Kristi Van Ahn Kjeseth if I get it pronounced right. Yes. Yes. Good thing we had practice, right? We had you on an m Tom podcast a while ago. You told me the story of your of of you. Yep. Tell this audience.

Kristi Van Ahn-Kjeseth Yes. So really what it comes down to is my grandpa started the business. He had always worked in the elevator business. My dad ended up taking it over and now I run it with my brother in law, Jim. He's married to my older sister and we've been running it together for quite some time. My dad is fully retired.

He does still follow the market, so we get to have those chats all the time. And he's kind of our person that we like to send out on a little mini crop tours to kind of scope up everything and let us know how things are. But Jim and myself run together with our team.

Paul Yeager Does he give opinions still?

Kristi Van Ahn-Kjeseth He does.

Paul Yeager Does he get paid for those opinions or are they free?

Kristi Van Ahn-Kjeseth He gets paid in love from his grandchildren.

Paul Yeager There you go. There you go. You are based in the town of Alexandria, Minnesota, is that right? Yes. How well do you know Alexandria? I if I show you this, look to your right. There's going to be a monitor. Josh is going to roll this video. You are going to see something. What is that.

Kristi Van Ahn-Kjeseth Big Oly!

Paul Yeager What is big Oly’s story?

Kristi Van Ahn-Kjeseth Okay, so Big Oly, actually, when I grew up, he was in the middle of the main intersection in town. So you actually had to drive around him to get anywhere. So Alexandria, they say that it's the birthplace of America. They actually say that's where we saw settlement come from, Vikings. And so this is kind of the big statue to let people know. Sometimes people dress them up, People like to take pictures in front of them.

Paul Yeager Does everybody when they come to town, I have to get a picture there?

Kristi Van Ahn-Kjeseth I think so. Oh, yeah, it's it's kind of the thing to do. All right.

Paul Yeager Well, let's get back to what we had you do. You made the drive down. So you talked a little bit earlier in the show about what you saw. Well, we'll start with Bradley in Nebraska, who's had a wild couple of weeks there where he's at. He said, “Last summer it looked like the soybeans were building some carry into market prices. He says that’s no longer the case. What happened?”

Kristi Van Ahn-Kjeseth Yeah, I think this is a great question. So when we started building this, carry and the soybeans, you were really looking at a situation where the market felt comfortable that you were probably you're on a 300 million bushel carry and that is a comfortable carry out. Like you can feel okay about that. And I think you start to kind of build that carry in. Typically we end up seeing a limited carry when China starts to step in and buy and we have not seen China step in. And so I think that was also that justification for the carry in the market. And then we really took this market off and we started to talk about yield reductions. And right there you were like, okay, we're not at 300.  We might be below that. And then we got to June 30th and you come in here with this very, very low acre number. I mean, when I saw that acre number and corn acre number, I'm like, that's a typo. Where's the correction? Like I thought for sure. And so I think now you're coming in here and saying, this is going to be a tight situation. I'm not so sure you can justify having to carry in the market. And if we see China start to step in and start buying our product, I think you're even going to see that narrow up even more.

Paul Yeager And forgive me here is it is a Brazil that's holding on to their corn right now and not selling it on the market. I mean, would they do the same thing with their beans and not sell?

Kristi Van Ahn-Kjeseth I think you could maybe see that. But I also think that they had such a big crop that there's a lot to sell. Right. So you're talking about the last few years they've had this poor crop and they could justify holding some, but now they're coming in and having all those extra bushels that I think there's enough to sell to keep China away from the US for the time being.

Paul Yeager All right. Let's go to Gary in Wisconsin. He wants to talk corn. “Will we see an overly large corn yield drop by USDA because of drought in areas like Texas that had large acre increases?”

Kristi Van Ahn-Kjeseth Yeah, this is going to be the wild card for the July 12th report next week. And I think this is what the market wants to really, really zone in and focus on because we don't have a situation where we can come back and say, “Hey, this is kind of similar to these years.” So I did some digging to try and see if we could correlate to a yield on crop conditions, crop conditions are kind of you can take them for what they are, right? They don't always relate back to yield. But when you look at it, we really only have a few years that we had poorer conditions. One is 2012, but the other one is we had a couple of years where very poor, poor crop conditions were more. I don't know if you're really going to see us make the very, very large ones right off the bat. I think they're justified to come in and step down to like that 175 area. And then I think from there you're waiting a little bit more to see what kind of crop conditions do you have moving forward and then what can we physically start to see happen? And I think it's more of that August report that you could see them make the bold move versus the dry July report.

Paul Yeager We don't have a backyard itis question this week. But you know, they exist. Certain areas have caught rain. Others have not.

Kristi Van Ahn-Kjeseth Yep.

Paul Yeager The trade believes, correct me if I'm wrong, that everybody's received rain. Is that right?

Kristi Van Ahn-Kjeseth I think to a degree I mean you know that there's some pockets but you need to see like where those pockets are right in one of those pockets is unfortunately where I'm from. Right. So you take anywhere from North Dakota down through central Minnesota to southeastern Minnesota, over into parts of Wisconsin, we saw those drier areas in Illinois. We saw the drier areas around Omaha. Those places got rain. We haven't gotten in so much. So, I mean, when you look at kind of as a whole where you've gotten those rains, I think that they've been beneficial for some very, very large areas. So the market wants to feel that way. But more or less, I think that any time you have rain, even if you did this really dry pattern, it brings some bulls out of the situation.

Paul Yeager So what if you are in one of those areas that you mentioned? You know, I look at Nebraska and I just see a whole lot of dark red on the drought map. So if you're in that area and you don't have a crop, it looks like as we sit here tonight, what do you do?

Kristi Van Ahn-Kjeseth Yeah. So I think there's some tools that you can use. I mean, I first you you can look at it and say, Hey, I feel comfortable saying I'm at least going to have this percentage and you work with that on your calf side of things. And then from there you can supplement with futures options, anything like that. But you have to just know your defined risk and know where your break evens are. And I think crop insurance also has to play a big role into that. That's the difference from this year versus next year is that we have a decent crop insurance price penciled in that I think this is one of those years that if your crop is really, really rough, you've got to rely on that to a degree.

Paul Yeager Let's get to wheat and a little bit of corn again. Adam in North Dakota wants to know “What does the global wheat supply look like? Will dryness and Canada matter? Can wheat hold up if corn stays sub- $5?”

Kristi Van Ahn-Kjeseth Yeah. So I think when you look at kind of wheat and you look at those drier areas, you're exactly right. You're coming up and you're hitting parts of northern North Dakota and then into Canada. So you you have those pockets. We know carry out is tight. We know that it's going to fluctuate off of the corn price to a degree. But when everything shakes out, we need to have some form of demand start to show up for this market because if we just don't have it, it doesn't matter what our suppliers and we just haven't seen that happen yet. So if we could see that kind of pick up the pace, but as of now, we're just really overpriced when you look at the market.

Paul Yeager If nobody wants those terrible cardinal pitchers, nobody's going to buy them. That's exactly that is a supply demand story in sports, too. But that's for another Market Plus Plus. Aaron, in Iowa has a cattle question for you, Kristy. “Cattle have struggled to chew through resistance. Can we push to new highs or will exhaustion and seasonality pull us down to Q4?”

Kristi Van Ahn-Kjeseth This, like my worst nightmare is, is when people ask you the price movement, because I feel like then you get to sit back and you have to have people say, remember when you said that? But I do feel like in general.

Paul Yeager I told you, you can stick your neck out as far as you want.

Kristi Van Ahn-Kjeseth I feel like in general, cattle markets are very supportive. I think they are due for a technical pullback. I think this is justified and I like to say it. It's always really nice to shake the tree, Right. Get the people out that don't really want to be a part of it. But I've been riding the ride and let them come out, Let some new buyers come in, get some healthier length in the situation. But I do think that you can see these markets continue to be supported after a liquidation phase.

Paul Yeager And what would be an appearance of market to market without a. Phil in Ontario, Canada question. Welcome for your first Phil question. Phil, Thank you. “Dec corn has bounced up from its lowest closes and November soybeans met resistance at $14. What is the road ahead through July? Do the trading algorithms have the corn crop made? Does corn drag soybeans down in front of the dry, wet August rain storyline?”

Kristi Van Ahn-Kjeseth Yeah. So let's peel that. There's multiple layers in that question. And I'll start with, you know, the yield case. So when you say do they have it made it, I think that people have started pencil in. They're really they're taking the really disastrous yield off the table. And who knows if that's still in line or not. We're not going to know for a little bit. But I feel like those people that really started to talk about huge yield declines have stopped talking about that as much. So I think you can pull it back and say they're penciling in yield declines, but they've backed off of it to a degree, saying that we have enough areas to try and support this. We also know that high acres makes it hard to get a high yield. And so you can play that factor into it that you're going to justify a yield decrease when you move and say soybeans hitting that $14 mark. That was a very stiff resistance at $13.90 to $14 has been that level that's really stopped the beans. I think you saw the sellers come in. I think you saw them want to be sellers as soon as you saw the charts the way they were, I thought maybe you'd see $13.40 hold to a degree. We broke that here at the end of the week. $13 is at next psychological level. And I think given the numbers we have so far, you really should see some support here. July 12th is going to be that really that huge number that's going to choose how we trade for the next few weeks. And that's going to be the biggest thing.

Paul Yeager But what if USDA does what they've done in so many reports and not given you anything to chew on on July 12th?

Kristi Van Ahn-Kjeseth Yeah, that's a big reality that they could come in here and and it would be absolutely disastrous for corn if they came in here and didn't change yield because we know they acre number we're going to use and we know how high that yield is and we feel the market feels in general that demand is overstated. So even if they just leave demand as is and keep with that trend line yields on the acre number, that is going to be such an ugly number to be looking at for a corn market. So we're hoping that they don't do that. Right. And I think if if you don't see that yield decline, that's where you could see those support levels of that for 85 not hold. And I think that's where you could see it. But for the time being, I think the market feels comfortable enough that we have some time that $4.85 as long as we start to see the yield declines should hold for the time being.

Paul Yeager All right. We're going to close with one last question, Robert in Iowa here. And this one is I have had this text discussion with a couple of people every year. “I missed some early sales for fall corn. Is this a store and ignore year until the government reduces yield due to dry weather?”

Kristi Van Ahn-Kjeseth Yeah. This is always such a tough question, right? Because I'm not a believer in store and ignore like I'm a believer in a plan and I'm a believer of sticking to it. And so it's really hard for me to say that. I think what you really do is you break down what do you need to go at harvest, right? Focus on that and have that be your your first really focus point is saying, okay, I feel like I need this amount of bushels going in that at harvest time. I need to make sure I do something with that before then and then I can work on the rest later. And so I feel like corn, as long as we can start to get that yield decline and it's shown some really good support to hold this $4.85 can get back up to anywhere from that $5.35 to $5.70 area. And around that area is where I would start to make those sales. And I've been pushed back on that because you have people say, hey, you're you're selling below crop insurance price. That's a very real reality. But I also don't want to have people selling much lower. And so I think you take that as an opportunity. If we keep going higher, you can work on the rest of the crop to sell.

Paul Yeager So I guess I'll ask, do you make any decisions before Wednesday on the 12th, if you're in that situation? If I haven't sold much.

Kristi Van Ahn-Kjeseth If we for some reason came out on Monday, started off strong and got to $5 like $5.50, I would definitely be looking at at least a point underneath that market to just say, Hey, I'm not putting all my eggs in one basket with USDA. I'm not going to completely put my crops faith in here. And so I'm going to put a floor underneath myself, get through that report, and then hopefully we can see some better trade.

Paul Yeager And we also got through Market Plus.

Kristi Van Ahn-Kjeseth We did. This is great. This is fantastic.

Paul Yeager Thank you.

Kristi Van Ahn-Kjeseth Yes. Thank you.

Paul Yeager All went well.

Kristi Van Ahn-Kjeseth Yes

Paul Yeager You did very good. Kristi, thank you so much. Kristi Van Ahn Kjeseth. And thank you so much. Next week, we look at one stop shopping for the overall health of your operation and we'll have the commodity market analysis of Sue Martin. Thanks for joining us and have a great week.