Market to Market (April 19, 2019)


Coming up on Market to
Market — What is ‘water’ passes a milestone for
the administration. Taking to the air for
a view and to enhance America’s bounty. And market analysis
with Naomi Blohm, next. Pioneer Hi-Bred
International is a proud sponsor of
Market to Market. Tomorrow. For over 100 years we
have worked to help our customers be ready
for tomorrow. Trust in tomorrow. Information is available
from a Grinnell Mutual agent today. ♪♪ This is the
Friday, April 19 edition of Market to Market, the
Weekly Journal of Rural America. ♪♪ Hello, I’m
Delaney Howell. The storm clouds cleared
and sunnier weather emerged this week in
America’s weather pattern and China’s economy. — The world’s
second-largest economy grew in the first quarter
of 2019, reversing a slowdown — despite a
tariff war with the U.S. Fewer Chinese goods landed
on domestic shores as the trade deficit fell for the
second straight month on a surge of civilian
aircraft, cars and medicine. Some of those same
items helped push U.S. retail sales higher
in March indicating a healthier job market. The Federal Reserve’s
Beige Book painted a moderate expansion picture
even with trade tensions and severe flooding
in the Midwest. Several thousand Corn
Belt acres remain under water from
spring flooding. This week, several
senators journeyed to the heart of the damage and
delivered sharp criticism to the federal agency that
manages dams along the Missouri River. Some of the same elected
officials sent letters to the EPA over the
Waters of the U.S. before a comment
period ended. At the core of both
issues is water. Peter Tubbs reports. With its comment
period closed, the Environmental Protection
Agency is finishing work on revised definitions of
the Waters of the United States rule or WOTUS. The creation of new terms
were required by an executive order made in
the first weeks of the Trump Administration. The order seeks to replace
the 2015 version of the WOTUS rule with more
definitive and narrower language. The Waters of the U.S. rules build upon the 1972
Clean Water Act, which focused on pollution that
was then being discharged into the nation’s lakes
and rivers from single point polluters like
industrial sites. The water quality of many
rivers and lakes has improved in the
succeeding four decades. The EPA maintains that
the majority of water pollution originates from
“nonpoint source” origins: urban streets,
agricultural land and rural areas. The Obama administration
asked the EPA and U.S. Corps of Engineers to
craft language to clarify an earlier rule. The result was what some
have called language that could place many ditches,
storm water control basins and wetlands under
federal oversight. Under the 2015 rule, areas
that were generally within the 100-year flood plane
or high tide fell under federal control. These areas could include
infrequent or seasonal bodies of water as long
as they fed into a larger tributary. The newly proposed changes
would redefine “navigable waters” as bodies that
could be used to transport “interstate or foreign
commerce”, the continuous (contiguous? ) bodies of water that
flow into them, and waters that adjoin or connect. The U.S. Geological survey
estimates that 18 percent of streams and half of the
wetlands under federal control in the 2015 rules
would not be protected federally under
the new rule. Many rural streams and
areas of occasional water flow after rain or snow
melt would return to state oversight. Agricultural groups
generally support the narrower definition
of the rule. Zippy Duvall, American
Farm Bureau Federation: “The new rule would put
a stop to the federal agencies’ unpredictable
and inconsistent case-by-case approach for
determining jurisdiction. With past rules and
regulations, farmers have found themselves under a
cloud of uncertainty – or worse yet, subject to
bureaucrats controlling what happens on the land
where we make our living.” Environmental and water
quality advocates remain in support of the
Obama-era rule. David Hayes, State Energy
and Environmental Impact Center: “The Trump
administration continues to flout the rule of law
with its decision to abandon Justice Kennedy’s
‘significant nexus’ standard, even though this
standard has been upheld by the federal courts
countless times already,” The EPA is expected to
finalize the rule at the end of the year. For Market to Market,
I’m Peter Tubbs. Each summer aerial dare
devils fly the skies dusting crops
from dawn to dusk. Some of those pilots have
added more flights to provide a new way to
assist in feeding the world – even as drone
technology appears on the horizon. Josh Buettner has
our Cover Story. Jordan Omstead/Pilot –
Stardust Ag Aviation, Lamoni, Iowa: “Flying is
the ultimate freedom. You leave the ground and
all your problems, all your worries,
they’re behind you. It’s you and
the airplane.” For Agricultural Aviator
Jordan Omstead – Iowa is a flyover state –
in the best sense. After graduating from the
Air Force Academy in 2006, Omstead spent time in
Afghanistan and Iraq – in the military and as a
private contractor, before returning home to pursue
a childhood passion. Jordan Omstead/Pilot –
Stardust Ag Aviation, Lamoni, Iowa: “I like to
tell people I had to get out of the Air Force to
start my flying career. My dad was a pilot. I grew up on a farm, so
this is the combination of agriculture and aviation,
so I get to be a part of all the attributes
that I really love.” USDA figures reveal the
Hawkeye State, a national leader in corn and soybean
production, planted about 23 million acres of both
crops, combined, in 2018 – and valued north
of $13 billion. But pest, disease and
fertility pressures can send farm revenues
into a nosedive if left unchecked. And that’s when
barnstormers like Omstead take flight. Jordan Omstead/Pilot –
Stardust Ag Aviation, Lamoni, Iowa: “The vast
majority of what we do is insecticide and
fungicide.” Aerial application, or
crop dusting, began nearly a century ago in the U.S.,
and – like other wings of agriculture – has
reaped the benefits of technological advancement. According to the National
Agricultural Aviation Association, a Washington,
D.C. based industry advocate, over 70 million
acres of cropland across the nation are treated
from above every year, in addition to millions of
acres of pasture and rangeland. In Iowa, that amounts to
a more than $214 million annual industry with the
mix applied to around 5 million acres – according
to previous estimates by the Iowa Agricultural
Aviation Association. Cliff Crowl/Owner –
Stardust Ag Aviation, Altoona, Iowa: “We
actually put it on better than a ground rig. Because a ground rig,
they’ll go out there in winds that we
don’t work in.” Cliff Crowl owns
Stardust Ag Aviation. He taught Omstead the
trade before hiring him as a subcontractor, and will
one day hand the business off to him. Crowl, a Navy veteran,
launched his career in crop dusting over 20 years
ago – landing in Iowa by chance. Cliff Crowl/Owner –
Stardust Ag Aviation, Altoona, Iowa: “When I got
out of the military I had a buddy who lived here. So I flipped a coin and
said Des Moines, Iowa or Little Rock…we went
heads so we went with Des Moines.” Though ground applicators
might have a different take on best methods,
Crowl says diligence is paramount to ironing
out any shortcomings. Cliff Crowl/Owner –
Stardust Ag Aviation, Altoona, Iowa: “We do have
some drift problems, but we are working with those
and dealing with those constantly as far as the
safety aspect of it. I think the airplane does
a better job and is a safer way of applying it.” Critics charge all manner
of spray applications are susceptible to
contamination and runoff which can threaten the
environment and human health But aerial
proponents point out all of their liquid pesticides
are approved by the Environmental Protection
Agency, and say they employ precision
techniques. Jordan Omstead/Pilot –
Stardust Ag Aviation, Lamoni, Iowa: “Without
getting into a lot of aerodynamics, just the
forces coming off this wing are pushing the air
behind the airplane down into the crops. And the way we’ve got the
booms positioned, they’re releasing that chemical
into that air. So it forces it
down with it. That said, the closer we
are to the crops, the less fall time there is
for that chemical to evaporate. So we get as close
as we can, safely.” Omstead references the
myriad safety precautions emphasized by the industry
and his mentor, like preflight analysis, annual
inspections, and scouting fields for people,
obstacles, and other hazards. Mark Hanna/Iowa State
Extension Agricultural Engineer – Retired:
“Safety is always an issue, just like with
ground based application – that type of thing. We want to make sure we
are doing it correctly and well.” Retired Iowa State
Extension Agricultural Engineer Mark Hanna
emphasizes the land grant university’s outreach
efforts to local flight crews, while national
training to calibrate equipment also takes place
ahead of flight season. Mark Hanna/Iowa State
Extension Agricultural Engineer – Retired: “We
spend a fair bit of time every year working with
aerial applicators, doing a good patternation check
off their aircraft – making sure that we’ve
got some good uniform application. Make sure we don’t have
some of the things that might cause some
off-target movement or drift on that aircraft.” Over the past several
years, Stardust Ag Aviation has seen a steady
rise in customers seeking aerial cover crop seeding. Released at a higher
altitude than spray liquids, the boom
accounted for up to 35 percent of the company’s
business last year – up from 10 percent in 2017. And for farmland like
Iowa’s, which is highly susceptible to runoff,
such a spread could create a pattern of benefits. Mark Hanna/Iowa State
Extension Agricultural Engineer – Retired: “Cover
crop has some distinct advantages, particularly
for water quality. It helps keep the soil in
place, but another thing it does is it uses
nutrients down in the soil, and particularly
nitrates.” Some see growth areas for
conservation and precision agriculture as food
production increases to serve a growing
global population. Going forward, Hanna says
it’s possible the industry could see benefits in
overlapping technologies like drones working
in tandem with manned aircraft. But for Omstead, it’s easy
enough today to map routes to customer fields and
mix things up with his favorite playlists all
from his cell phone. Jordan Omstead/Pilot –
Stardust Ag Aviation, Lamoni, Iowa: “It depends
on…kind of the day and my mood. Sometimes there’s some
classic rock in there, sometimes there’s some
Beethoven…just a little bit of everything.” For Market to Market,
I’m Josh Buettner. Next, the Market
to Market report. The markets deflated as
trade news diminished and drier weather
patterns returned. For the holiday-shortened
week, July wheat plummeted 20 cents while the nearby
corn contract dropped 2 cents. The South American crop
got larger and the amount of news from the U.S. and China negotiating
table got smaller. The July soybean
contract fell 15 cents. July meal lost
$4.80 per ton. July cotton declined 59
cents per hundredweight. Over in the dairy parlor,
May Class III milk futures weakened seven cents. The livestock
market ended mixed. June cattle added $1.23. August feeders
put on $1.98. And the June lean hog
contract shed $1.75. In the currency
markets, the U.S. Dollar index
gained 55 ticks. June crude oil lost
a penny per barrel. COMEX Gold dropped
$19.10 per ounce. And the Goldman Sachs
Commodity Index fell three points to finish
at 449.15. Joining us now to offer
insight on these and other trends is one of our
regular analysts, Naomi Blohm. Naomi, welcome back. Blohm: Thanks, Delaney. Howell: Naomi, we’ve got
a holiday-shortened week this week, Easter
celebrating for some of the folks. Do we have anything to be
positive about after the week that we had in the
grain market especially? Blohm: It was a tough week
to get fresh news mostly because of the shortened
holiday week for sure. Starting with the wheat
market, the bigger pieces of news this week that
pushed that marketplace so much lower, we
had our U.S. crop ratings come in at
60% good to excellent for the wheat that
we have here. That’s a pretty good start
for the year so that pressured prices lower and
then we came to find out that the Russian crop,
again, is getting larger. And so of course they are
a big global competitor and a big supplier to the
world for wheat and just the more fact that more
wheat is out there in the world just is pressuring
prices lower. We’re at the point where
we’re probably going to see the Kansas wheat
futures and the July Chicago wheat futures
retest the lows from a couple of months ago. But then I think we find
some sure footing at those price points. We’ll be very competitive
against the world prices at that time and I think
we’ll find some support there. Howell: Okay. Naomi, as you mentioned we
had the progress plantings or the planting conditions
report come out this week. With spring wheat delayed,
planting was pretty significantly delayed, are
we going to be able to catch up? Or do you see some of
those acres switching? Blohm: That is what we’re
all trying to really keep an eye on and watch. The thought is that there
will be some that maybe goes to prevent plant
acres because the snow is still up there
in North Dakota. So whether it gets planted
for soybeans or the spring wheat we have
yet to be seen. The other thing
threatening the wheat market is with China now
cancelling their canola needs from Canada, will
China then switch those acres to spring wheat? Something that is kind of
in the back of my mind though regarding China and
their wheat, they grow about 120 million metric
tons of wheat and everything that
they grow they use. There is no room for
any error in crop. And actually what I didn’t
realize is that for the past eight years China
actually imports small amounts of wheat
every year. So now I’m wondering if
China is going to be having more acres going to
soybeans, it’s supposed to be 16% more acres going to
soybeans, and think of all the acres that they plant
there, that’s less wheat acres then in China to be
planted, that’s less corn acres in China
to be planted. So maybe they are trying
to get other parts of the world to plant more wheat
because they want to have something in their back
pocket so they don’t have to go to Russia to
negotiate any wheat purchases in case they
have a weather issue this summer. So that’s something that
was just in the back of my mind and I’ll be watching
that as we go forward. Howell: Okay. And as we go forward it
seems that wheat has been pulling down corn and
soybean prices with it. Is that the case? Blohm: Absolutely
the case. It’s the wheat prices
pulling things lower, it’s the funds just being
relentless about selling. And why not when there is
a theme of global surplus for grains? So path of least
resistance continues to be lower. And we’re going to,
unfortunately, probably see that continue until
the trade deal gets done, which now there’s new
hope that there will be a resolution the last part
of April into the first week of May. Howell: Let’s talk about
the funds there for a little bit because on the
last roundtable discussion I made this note. You said, technical
objective met to the downside or until we
can get some friendly fundamental news. That is maybe when the
time would change for those funds to get out of
their short positions. Has the funds story
changed then? Blohm: No, and so since I
was on the show last the funds became bigger
sellers again. They are record short
almost in these commodities. The piece of news that is
going to make them want to exit the positions I think
primarily hinges on the trade deal, but then also
around planted acres. And it’s of course a
little too soon to be talking planted delay,
that’s not until Mother’s Day, that’s when the
market would kind of get a little bit more
excited about that. But we’re also heading
into month end and for them to show profits on
books they need to exit some of those short
positions, buy them back so they can actually have
the profit on the books. Howell: Okay. Naomi, when we look at the
corn market they didn’t have quite as bad of a
week as the other grains but they did put in a
contract low in the July month at $3.64. Have we set a new
trading range for corn? Blohm: Sideways
trading range. Unfortunately, technically
speaking we’re on some bigger support lines
on the daily charts. If those fail, the May and
the July contracts could point to about another
15 cents lower. It would be the final
stretch to the downside. And the December contract
has big support at $3.83. If that price support
fails, then technically speaking the downside is
closer to about $3.60. So it’s something to be
watching this week because if we can’t get any fast
news, any good news, anything good for price
movement to the upside, still the path of least
resistance could be lower. But it would be a
short-term move because just remember these funds
are short almost 300,000 contracts of corn and when
they’re this short they don’t stay this
short for too long. We just need
that catalyst. So if you’re an end user
and you need to buy corn or if you’re a farmer who
is looking to reown corn make sure you have your
order sitting at those technical targets to the
downside so that way they can get hit because we’ll
probably be down at those price points for maybe one
minute of one day and if your order isn’t there for
reownership or for an end user to be a buyer you’re
going to miss it and that’s going to
be cheap corn. Howell: Do we still need a
catalyst even with, when you account for
seasonality? Usually we get some
seasonal rallies in April and May in the
corn markets. Are we going to follow
those normal patterns with everything else going on? Blohm: I do think
that we will. Something else for corn
that is a little bit more supportive, it will be a
bit of a segway tie into the hogs as far as feed
demand there from the U.S. market and from the
Brazilian market and from Europe. They are going to be,
we’re all going to be in a competition to see who can
get pork over to China the fastest. And there’s already talk
that in Brazil they’re wanting to increase their
hog production, they’re wanting to increase their
poultry production. And where the hog and the
poultry production is at is located in
Southern Brazil. And where the second crop
corn is in Brazil is up in the northern part of
Brazil and logistically it’s a challenge to get
it from the northern part down to the southern part. And so we’ve heard that
they’re going to actually, it’s easier to import
like a boating vessel. And so maybe that would be
a demand for our corn to go there. So there’s little things
that could kind of trickle in and like I said, with
China planting less corn acres this year they don’t
have room for error if there’s a weather issue
down the road, nor do we, and I really don’t think
that they’re finding all that corn from ten years
ago is true either. So I think there’s
more to the story. Howell: Okay. Let’s talk soybean
markets here. We’ve got a good question
to kick it off with Jeff in Lincoln, Nebraska. He said, what do we do
with the soybeans that we haven’t sold yet, old
crop and new crop? Do we wait for the
Chinese trade deal to get completed before
we sell additional? Blohm: I would say if you
have old crop at home, again the path of least
resistance is going to be lower, so if you’re
thinking about selling maybe do it now if you’re
in the situation where you need cash flow. If you can hold off for
summer or hold off for a trade deal it might pay
off from that standpoint. But I would say the
technical downside on beans or the risk because
of the less that we’re going to be feeding for
hogs globally puts more pressure to the downside. And, again, with China
planting 16% more acres they’re trying to keep
the theme of plentiful soybeans around the world. So the hog situation in
China really has taken any bullish tone out of that
soybean market because there’s less soybeans that
are going to be needed for feed. But one thing that is
interesting about China is that even though their
first quarter imports of soybean product themselves
have been down, their edible oils, so that could
be like palm oil, it could be canola oil, it could be
soybean oil, those edible oils are up 48% in
the first quarter. So they still need the oil
and they’re betting on Indonesia and Southeast
Asia to not have any issues with palm oil
production going forward. So I thought it was a
little interesting that they were so ready and
quick to pick on Canada with the whole canola
thing when they’re betting on good weather for the
palm oil production. Howell: So the 16% in
acreage shifting that China is claiming to do,
do you believe that they will actually do it? Or do you think it’s them
trying to manipulate the market as is the case
maybe with finding corn in the reserves? Blohm: That’s a good
point, I hadn’t thought of it. It did come from a source
within China, one of their actual legitimate sources,
but I hadn’t thought about that. That would be interesting
to see going forward. Howell: Yeah, it
will be for sure. Naomi, let’s talk just
quickly here since you are kind of our dairy expert,
anything changing there or anything new to report
for our dairy friends? Blohm: Yeah, so actually
the cattle market as far as dairy goes, we have
seen the milk prices on an uptrend and that has
lasted actually for a good month. And we have milk prices
now in the low 16’s to mid-16’s for most
summer contracts. And so that also has been
because production is down overall. The last milk production
report showed . 2% increase and that is
the smallest increase we’ve had in a long time. They are definitely having
larger slaughter numbers so we’re seeing animals,
just less animals overall, and milk prices are firm
and the global dairy trade auction prices have
increased eight out of the last ten weeks and so that
is saying that demand for dairy and dairy
products is strong. And I’m kind of wondering
if China is going to be in need of protein because
they’re not going to have it from the hogs, maybe
we can send powder over there, maybe we can send
other dairy products to help fill the void that
they’re going to have for a need of protein. So hopefully that will be
more affirmative for our dairy prices. There is also a drought
in New Zealand so their production is going to
be a little bit lower. And some economists
actually from UW-Madison were talking that they
maybe were thinking that they could see $17 milk
for later on this summer. So for most people though
it’s breakeven and they’re finally getting back to
a breakeven or a small profit and we have to make
sure that we don’t see overproduction again. That’s the most
important thing. Howell: That’s
the key there. Naomi, cattle on feed
report dropped on Thursday afternoon. We’re taping a little
early because of Easter. Is there anything
to report there? And how are the markets
going to open after that report came out
today on Monday? Blohm: The on feed number
came in at 102 so that was just a little bit
higher than expected. The placement number came
in at 105, must a little higher than expected and
then the marketed number was at 97. So everything as expected,
no big surprises. If anything the market may
have just a simple setback or a correction but the
cattle demand right now is so strong. Boxed beef values were the
highest they’ve been since like 2017. So the demand is there. And we still have the
question of how many head of cattle were actually
lost in Nebraska in the flooding and in the
blizzards and we don’t totally know that yet. But the cattle market
overall I think will be able to continue to
defend its uptrend. We might have a little
bit of a setback or a correction but that’s a
strong market, that’s a friendly story because
that demand is strong and our exports have really
been nice for the cattle market as well. Howell: All right, Naomi,
we’re going to save our social media question
related to the cattle industry for our
Market Plus edition. Your quick thoughts here,
was this week’s closes for the hog markets a
correction or a sign that maybe we’ve priced in all
of the African swine fever disease for now? Blohm: I think that for
the moment we’ve priced in the swine fever. Now we’re at the point
where we have to see week by week, we need to
see China buying. If we can keep seeing
China buying it keeps the market supported. But there’s going to be a
lot of volatility along the way as we try to get
our hands wrapped around this even more. Howell: How did you feel
about this week’s export sales number? Blohm: It was a little bit
lower than last week but it was still, we’re still
exporting to China and I think too, holiday week,
we’re wrapping up Easter and things like that, so
it didn’t really phase me too much. It was maybe a point of
contention for the market to have a reason to have
a setback or some profit taking. But overall the theme is
there that China is buying from us in spite of
tariffs and I think that continues and I think it’s
going to be a big part of our tariff and
trade deals. Howell: All right, Naomi
Blohm, thank you so much. Blohm: Thank you, Delaney. Howell: That wraps up
the broadcast portion of Market to Market. But we will keep this
conversation going on Market Plus where we’ll
answer more of your questions. You can find it
on our website at Market-to-Market.org. ‘Tis the season to post
great images of spring planting. We’ve already posted a few
of our own on Instagram. Take a look at IPTVMarket. Join us, again, next week
when we look at how the fishing industry is trying
to balance economic and environmental concerns. So until then,
thanks for watching. I’m Delaney Howell. Have a great week! ♪♪ ♪♪ ♪♪ Market to Market is a production of Iowa Public
Television which is solely responsible for
its content. Pioneer Hi-Bred
International is a proud sponsor of
Market to Market. Tomorrow. For over 100 years we
have worked to help our customers be ready
for tomorrow. Trust in tomorrow. Information is available
from a Grinnell Mutual agent today.

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