Yeager: Welcome into the February 24, 2023 installment of Market Plus.

Joining us now is Ted Seifried.

Ted, we had a lot to cover, like we always do, you get going on some things and I want to ask you a follow up but we have a whole lot of ground to cover.

So welcome to Plus where we can cover some more ground.

One of the questions I wanted to get in was submitted by Matt in Wisconsin, didn't quite get this during the show and appreciate everybody who asks.

So Matt, we're going to start with your question.

This is a hot one right now.

Relations with China are getting more, he calls it complicated, I think he's not the only one.

What are the chances we lose them as a customer all together?

What would that look like for prices on all commodities?

Seifried: Yeah, first of all, thanks for the question, Matt.

That's a good question.

Second of all, how much time do we have here?

Yeager: That could be the whole segment and that's why I couldn't ask it during the show because I knew the answer wasn't short.

Seifried: Right.

So, China very much wants to not do business with us.

They have shown signs of that time after time after time again.

They continue to proliferate relationships with other countries and other suppliers.

They continue to invest in them.

They're not really investing in us in the sense that they are helping us, they are investing in us in the sense that they are buying our companies and buying our farmland.

China at this point cannot fully go away from the United States.

Their demand is so strong that they could buy all of Brazil's crop and that would not satisfy them.

Then we talk about this thing called demand displacement, so even if they did buy 100% of the Brazilian exports that pushes other countries of the world back to us.

So there is that.

But it is very important that we understand that China is trying to move away from us and Brazil is continuing to grow fairly dramatically every year.

So at some point that may happen further on down the road.

I mean, way further down the road.

But I think more realistically what we have to prepare for is that we're going to lose market share to China year after year unless Brazil has issues.

So what can we do?

I've been a longtime proponent of continuing to add to the, value add, the crush.

Let's continue to build our crush capacity and let's compete on the global scale with, say, Argentina on the products rather than the raw soybeans themselves and keep that value add in this country.

And crush margins for the last few years have been really good and we've done that.

Some projections are that by 2029 we will have added 700 million bushels of crush capacity.

That's fantastic.

I think we need to do more.

But, we need to know who we are dealing with.

China is not a friendly party.

They're mostly adversarial and they would like to cut us out the mix as much as they possibly can, as soon as they possibly can.

Yeager: And I would have asked that question during the program.

We were discussing this BSE issue when it comes to meat between Brazil and China.

So even two countries that seem to trade aren't getting along.

And then you throw in this Russia part of the equation and Russia putting cheap wheat onto the market.

You've got a lot of large global players not necessarily playing nicely with each other.

Seifried: Yeah.

First of all, I don't think the BSE issue between Brazil and China is them not getting along.

I think that China really has a strong stance on certain things, GMOs and they choose to not do business with -- they don't want BSE coming into the country so that is something they had to do.

I think Brazil understands that that's not China being aggressive, that's just how China works.

China is the largest consumer of raw commodities in the world.

And if they don't like the product they're getting they will walk away.

I think everybody knows that.

And again, I don't think Brazil takes that poorly.

And I also don't think that relationship of not importing Brazilian beef is going to be a long-term thing.

That will probably, we've seen that happen before, it will be a shorter term thing.

But China is in a position where they can kind of pick and choose whatever they want to do because they're such, they are the world's largest buyer.

Yeager: All right, before I ask you this next question, Kenny needs to bring something in and set it down next to you.

This is the long anticipated delivery of something that you traveled with today -- Seifried: The brand new corn hat.

Yeager: The brand new corn hat.

Seifried: Look, it's two-tone.

Yeager: It is nice.

We're going to ask this question from Gary in Wisconsin.

He asked you on Twitter, where are all the corn and bean acres that are being projected going to come from?

Wheat already claimed some.

Solar and urban sprawl have eaten others.

So is cotton, hay and pasture losing that many?

Let's talk acres first and how corn fits into this acre discussion.

Seifried: Yeah, all right.

Good question.

So there's a couple of things.

One, we had a lot of prevent plant acres again last year.

So there's optimism that we will have a better planting season and some of those acres will get back into production, especially with the higher prices that we have right now.

So that's one.

Two, the higher wheat acres doesn't necessarily take away one for one of row crop acres because there's a lot of double crop beans that go in on wheat acres.

So that higher what acreage number and still a fairly robust soybean acres number is reasonable to think of.

Cotton, you know, I talked to a lot of my guys in Texas and they are very much leaning towards row crops if they can because prices are really good versus cotton, although cotton did have a good week this last week.

Yeah, but the question overall is go back three or four years and we would talk 182, 183 million row crop acres.

Now we're just kind of barely scratching 180.

Where did all those acres go?

Urban sprawl and things like that, but with prices trading at the higher end of the historic trading range you would think at some point we would find a whole lot of these fringe acres coming into production.

And I think the main thing that is keeping that from happening was the high input costs that we had back in the fall.

Yeager: Okay.

Again, you may have to answer with this hat.

You put it on if you really think so strongly about this with the answer, corn.

Glen in Ohio -- I'm going to say hi to Glen and so is Ted -- Seifried: Hi, Glen.

Yeager: We're both going to say hi.

Glen asks you, if the USDA projections of acreage, yield and demand have already been factored into the market, will we need a black swan event to move them outside of the current narrow trading range?

Seifried: So I want to wear the corn hat, but after Thursday and Friday I'm not so sure that it's called for, right?

Yeager: That's the thing, it changes so quickly.

This is a long-term question.

Seifried: To Glen's question, one, I don't know how we can say that the USDA's numbers are now factored into the market because that was just the first glance that we had at the USDA's new crop balance sheet not even on a WASDE report.

In fact, a lot of years we don't really even pay attention to Ag Outlook Forum.

Those numbers will change dramatically.

We are going to be watching very closely to planting intentions and then planted acreage and what the USDA does with balance sheets.

We know those demand side, the demand side of the equation is going to be changing.

I can't say that has been factored in.

Where do we go from here?

First of all, Glen, I'm going to say this.

What's our beginning stocks going to be?

Are we going to get to -- is the USDA's current target of 1.3 billion bushels, is that accurate?

Or is it going to be closer to 1.6 because exports just aren't there?

If that's the case that takes that Ag Outlook number of just shy of 1.9 billion bushel carryover and pushes us over 2.

That's not factored into the market or maybe is in the process of that considering what we did Thursday and Friday.

I'm going to say this, I don't think we're quite ready for the big flush out to the downside, although I am worried that it will happen at some point.

I think Thursday and Friday were a bit of a foreshadowing of that.

But I think corn still needs to hold onto some strength with South American second season crop.

Until we know that's there and then also we need to get our crop planted and see what the first half of our growing season looks like.

But I could be wrong about that.

This could be -- look, we watched what happened to natural gas, we watched what happened in crude oil.

Things can fall apart very quickly even when people are still ringing that bull bell as hard as they possibly can.

Yeah, I don't know.

Yeager: But they returned in natural gas this week up 8%.

Seifried: Yeah, finally.

Yeager: But it took them a long time.

Seifried: Going from 10 and a quarter down to 1.98.

Yeager: But you just don't want to hit that if you don't have to.

All right, Manitoba, KB in Manitoba wants to ask you, how has the lack of commitment of traders report since January 24th impacted your perspective on interpreting managed money versus non-commercial behavior in corn, soy, record soymeal and the three wheat future?

Seifried: Yeah, it's a notable loss for the market.

One of the things that we look at to give us direction and to give us an idea of what the funds are doing, I mean, we always want to talk about them because they're such a big player in the market.

That being said, the big drop that we had in corn on Thursday, that was the highest volume day that we had seen since 2018.

So if you go back for the last six months we've had days like that where we've been surprisingly lower in corn but it has been on relatively low volume.

Well, we know that when volume is really strong like that, that the funds have to be some pretty big players on a day like that.

It's kind of impossible to get that sort of volume without that.

So, leading up to Thursday and Friday markets had been fairly sideways so I think you could kind of say that the fund positions were pretty similar and that all changed, I think started to change Thursday and Friday.

So yeah, we'd all really, really like to see that.

Sometimes we think we know what the funds are doing and then the commitment of traders comes out and gives us a completely different picture.

Yeager: Because you'd rather have accurate information than wrong information now?

Would that impact the market negatively if we were given numbers that weren't accurate?

Seifried: Yes, you'd rather have, you'd always rather have accurate information.

But you'd rather have no information than wrong information.

So, yeah okay, don't give us the wrong information and I don't think that the commitment of traders is in the business of doing that.

So that is why the delay.

But, yeah, it's hurtful to the market that we don't have it but it's better than getting inaccurate information I suppose.

Yeager: We're long on this Market Plus so I need to do one more thing.

One last question, real quick.

Scott in Wisconsin, can boxed beef go as high as pandemic prices?

Seifried: The setup is there, Scott.

Right?

The animals are lower.

We just don't have the number on feed.

And then weights coming down, if we see next week that weights come down another four or six pounds or so, I don't think that's going to happen, but yes, the setup is absolutely there.

I think we are looking at that sort of thing, yeah.

Yeager: And I know it's all tied together in one form or fashion, but if grains do keep falling all of a sudden the feeder might get a little excited and do some buying too and have some, they might want to put the corn hat on their head.

We're going to hold off for now, right?

Seifried: I'll do it for cattle.

Yeager: You'll do it for cattle?

All right, how about that?

Ted's putting it on for cattle.

Ted Seifried, everybody, appreciate the time here on Market Plus and thank you as well for watching.

Next week, we are going to look at how Native Americans have been given a little more say in what goes into their grocery carts and we'll have commodity market analysis with Elaine Kub.

Thank you so very much for watching.

Have a great week.

And Ted says, I like my hat.