Market Plus: Naomi Blohm, Ted Seifried, Matt Bennett

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Yeager: Welcome in everybody to the Friday, January 14, 2022 Market Plus. Back at the table, Naomi Blohm, Ted Seifried, Matthew Bennett. I have to read their names 'cause I can't remember them. If I look at them, uh, Ted post-game reaction, what'd you think of the show? What did you wanna say that you didn't get to say?

Seifried: Yeah. Good question Paul. I, you know, I think something that I wanted to kind of push a little bit more is that, Hey look, prices are really good right now. Right? How many times in my 18 year career have we been above these prices? Three or four times? How many times have we been at or above these prices in the month of January? And the only time I can think of would be January, 2013 as we were on our way down, right? These are really good prices. We need to be managing this risk right now. I think we talked about it briefly in the yes, and input cost is a thing, but to me, if you did book higher input costs, I think I still think you need to be making cash sales because you have more to risk at that point. But also it really opens up the idea of a reownership opportunity because if prices go sharply higher, you wanna participate in that. But I, I think that's a point that I wanted to stress a little bit more during the show, I'll stress it now, we need to be making cash sales. I'm asking guys to be 30, 40 percent sold on new crop already. I know it's January 14th, but we need to be fairly aggressive with these prices 'cause history tells us we don't stay up here very long.

Blohm: Oh, I'm sorry.

Bennett: Well, I, you know, okay. So people keep asking me about cash corn, you know, like what should I do with my old corn? Because, uh, obviously, uh, there's a lot of talk out there that we could go substantially higher, but I'll tell you a couple of facts. The fact is is that there's an inversion in the market, right? We have an inverted market. First of all, second of all, you're sitting here in the month of January running overs on basis. SIF values at the Gulf are a dollar over, FOB values substantially higher than that. And so you're sitting here as a producer and you're saying the facts of the matter is that there's an inverted market with really strong basis. That's a fact. And you can say that those facts lead me to the assumption that people are gonna want my corn later. Right? Right. Facts versus assumptions. And so if I'm a person who wants to base myself on something I know is a no brainer, $6 corn. I mean, what is wrong with $6 corn? You look at your input prices for the '21 crop and you're wildly profitable. And the other thing I want to say is, is let's get it out of our head that we're gonna make near as much money in '22 as '21, cuz it's highly unlikely. Agreed

Yeager: Naomi,

Blohm: I encouraged cash sales for new crop today. Also looking at 25% sales cuz it was $13 beans and I $5.50 corn. And that new crop corn has just been trading sideways for almost three months. It can't get out of the range. And my thought for the short term, as far as old crop prices, I agree with getting prices going. If you haven't made more sales because quite frankly, for the market to go substantially higher from here, you need the stars to align. And that means you need a lower dollar. You need more bad weather in south America. You need our export market to pick up and you need a potential weather issue with our crop here in the United States, this spring or this summer. So we might be stuck here. Like we were last year. Yeah. Three months of sideways prices. And then what happens, you know, if basis levels start to slip or things like that.

Seifried: And look at that '23 corn, like you talked about during the regular show, look at the '23 corn coming on with the big strength lately. Hey, that's a gift. Let's look at selling that too 10 to 20 percent of next, next year's crop. Why not? Right. Right. And to, to your point, what's the problem with $6 corn? Well $7 corn. Yeah, of course. But yeah you did again, we have these tools at our disposal, right? To be reinvested in. We can, we can re own that opportunity. So an inverted without having a whole lot of risk, right?

Bennett: Inverted market owns some July call spreads or July call. I mean there's nothing wrong. And so I've told people, you know, what, if you really wanna sell some corn, uh, make sure you really wanna sell it whenever you call your, your end user and you make an offer because I've had several guys lately tell me, they call the guy and they say, 'Hey, I've got corn.' especially if it's a home, obviously, because it's worth a little bit more money there, uh, 'you know what? I want $6 corn' and the guy says, 'sold' and then they've got remorse because they know that they should have shot for a higher number. Yeah. But what I've been telling 'em is if you're gonna get 10 cents, 15 cents better than what you thought you were gonna get in an inverted market, take your 15 cents, buy yourself a call, spread, stay in the market.

Yeager: So before we go on, this is a question that's legit. I think for many Gary in Franksville, Wisconsin, Naomi's asking after a blah report, better weather forecast for South America and decent prices, what would make someone want to keep grain in storage?

Blohm: I would move it if it was mine.

Seifried: We just answered that.

Yeager: Well, I know you answered that, but I wanted to interrupt you all three and say, we've had this question several times.

Blohm: Well, it's a conversation I have with clients every day on the phone, you know, I'm asking, okay, where are you at for your sales? You know, what are your target prices? And, and there's not necessarily a strategic plan. And so it's, it's um, the conversation of exactly what we were talking about. Okay, well let's, let's do the math. If you make the cash sale. Now, if you reinvest 15 cents, this is what the upside looks like. If the market does go higher, this is how it can, you know, rewon on paper. But what if we come back from a three day weekend and it's been beneficial rain in South America and the temperature's cool or, um, you know, China's gonna be out of the market for a whole month in February because of their lunar holiday followed by the Olympics. So we don't know if they're gonna be around and if we don't get that strong export number, well prices might slip. So don't forget what's in front of you and the value that's there.

Bennett: Another, another, yes, absolutely. Uh, one thing that I think makes you wanna hold onto it, Paul, like a producer that I work with in, in uh, a very cattle rich area of Kansas this past week told me that he was offered a dollar over for corn.

Blohm: Really?

Bennett: Yes. And so that makes you, as a producer say, well, someone might really, really want my corn later on and so, you know, I wanna hold on to a portion of it. One thing for sure cash ownership is, is where it's at whenever people want the corn. But again, like Naomi said, uh, the thing that we've gotta remember, there are a lot of chips on the table with $6 corn and the kind of yields that we saw last year, we just confirmed a national record yield. And so that means everyone, uh, for the most part, not every single producer, but most people had really, really good corn. You take really, really good corn times, six bucks, right? That's big money. And so lock it in and then put yourself in a position to participate at least in a portion if it goes on up.

Seifried: Yeah. Well, okay. So you gotta manage your risk and you gotta manage your opportunity, right? Yes. Use cash sales to manage your risk. Don't use your bins to manage opportunity. Use the board to manage opportunity bins in a lot of years are great, but this is not the type of market where that's the case. Right? I guess in my mind, the only reason why I would want to really hold on is because if I thought basis was going higher, but then you can HTA that, that grain too. So use cash sales to manage your risk, use the board and in particular call options or call spreads to manage that opportunity because there's a lot less risk on a 12 cent, 15 cent, 16, 18 cent call spread that goes to zero, no harm, no foul. You've made your cash sales, you've managed your risk.

Yeager: All right. So Chris in Wallen, Illinois, Dan in Gaston, Oregon, , I think they've all kind of answered your questions. So I'm not gonna ask Ted just, I was about to ask him about the risk, but he just kind of answered it. So instead we'll go to Phil in Dresden, Ontario, wouldn't be an official Market to Market show without a Phil question. The January USDA report Ted's, uh, confirmed a record corn crop last year. Usually this would mean a big swoon in corn prices. How did we avoid that this time around and will it be downhill from here on in?

Seifried: Uh, weather is downhill. I think Phil, really depends on south American weather from here on out, not only South American weather, but participate, participation in planting that second season's safrina corn crop. Uh, but how did we manage to not break prices? Well, Phil look at the environment, the, that we're in, we have very strong demand really from everywhere. I mean, who was expecting China to buy 10 million metric tons of corn, uh, last year, uh, from us, um, we've had a lot of demand. We had, uh, we had declining stocks kind of coming into that year. Uh, but it was a great year. We didn't have an amazing amount of acreage that was part of it too. Uh, but as we've been talking about through this whole Plus segment, there are a lot of things that can happen to make corn prices go down or maybe even sharply lower. There are some things that can make it go higher at the moment I'm leaning towards higher, but I'm also sitting here stressing the need to make cash sales at these certain prices, because there are other ways of taking part in these markets and taking part in upside opportunity without taking so much risk into the future.

Yeager: Okay. You said you studied or you, you look back at 2013, have you gone back and looked at some of the other scenario and setups to see, is there a carbon copy from 2013 that we're seeing here in 2022?

Seifried: All right. So, and that's a good question, Paul. I, I think I, throughout 12 and 13, because as a major drought year, you know, that's a, that's a significant, uh, production event that we, or may not see again in the next 10, 15 years. I mean, that's a, that's a one off the better one to look at, I think is what happened in 2008 and 2009, because that was an inflationary driven thing with some tightness in our, in our balance sheets. But then what happened in 2000, I mean, when things really fell apart. So, I mean, if we were to see an economy collapse which who knows, right? I mean, we're dealing with, if, if we've learned anything in the last three or four, five years, it's that things bad things can and will happen. And apparently at a regular ra, regular rate of speed, uh, something bad can happen to crash our economy to, to tank. I mean, talk, forget inflation, talk about deflation and, and you know, that's a bad setup. In 2008, I think is a better, I'm not saying we're gonna have that happen, but that is a possibility. So another reason to manage risk.

Bennett: People are already talking about, you know, four, four rate hikes. And then someone comes out today and says six to seven rate hikes, something like that would be damaging for just about everything, everything, you know, one thing I'd, I'd like to point out for Phil as well, is that, you know, from the 2019 crop to the 2020 and 21 crop we've raised about a billion and a half bushels more so the 20. I mean, the difference from 19 to 20 was about a half a billion and then from 20 to 21 was pushing a billion as far as total productions concerned. And what have we done since that time? We've doubled the price of corn. And so a lot of things have changed. I mean, a year ago today, crude oil was $30 lower than what it is today. I mean, that's incredible. Yeah. And so we've had a bit of an inflationary situation. There's no question about it. Uh, you know, but bottom line is I'm like Ted, uh, I'm still leaning towards corn being a pretty good value. But as a producer, you you're sitting here, it's like playing poker. If you've got all these chips on the table, you know, and you're up big time, it, it would be asinine to leave all of them out there and keep drinking, whatever you're drinking and act a fool. Right? Bring some of the chips off the table, put the money in your boot and play on the rest of them. And that's what I think, what, what we're trying to get at with the risk management side, latch on to at least some of this good fortune, because we don't know what's gonna happen tomorrow. Right.

Yeager: Think that was his line that he was practicing?

Blohm: I've been waiting for the line.

Yeager: I know. I think Maybe that was it. That's was it.

Blohm: Yes. Yes. And let me add that. What is also different about this year than those prior years of like 2008 and 2009 is that in those years there were not the nine commodities that have tight ending stocks, um, in the United States and in the Northern hemisphere. And so that is a different scenario where we need the production. The demand has been strong, but we need to have perfect production here. And on, in those years, we didn't have a trending lower global carryout happening for corn and soybeans and some of these other global commodities as well. So between inflation between truly, truly smaller crops here in the U.S. And globally, um, things could get very exciting down the road. I agree with them though, sell the value that's in front of you. You just, okay. Why, you know, you have who, how can you make sure that these stars align? Why would you wanna wait around to see if you can get $7 corn hoping that the dollar drops, hoping that south America has bad weather, whether you know, hoping that we have bad weather here. Sell what you have, 'cause it is.

Bennett: Everywhere, but my farm.

Bennett: Right profitable.

Yeager: All right. any, last thoughts before we go. You you've been great as always.

Seifried: Nah, I mean, we, we you've handled a lot. I, we had we all three, I think had a point to drive home. I think we've spent the entire time doing that.

Yeager: So that's Ted Seifried. Appreciate it. Matthew Bennett. Thank you as always. And Naomi Blohm, always, uh, love to just sit and listen and I get a front row seat. Thank you so much for imparting your wisdom. And next week we will look at the state of the economy in rural America yet again, and we'll also pair a couple of analysts, Angie Setzer and Chris Swift will analyze these markets for us. Thank you so very much for watching. Have a great week.