Market to Market (August 9, 2019)


Coming up on Market to
Market — China ups the ante in the trade war. A push to change your
diet to slow a change in climate. A farmers market that
cultivates customers on Capitol Hill. And market analysis
with John Roach, 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. ♪♪ S ukup
Manufacturing Company – providing equipment and
buildings to store and condition grain to help
farmers adjust to market swings. We build drying, moving
and storage equipment designed to preserve the
quality of their crops. Sukup Manufacturing,
store now, profit later. ♪♪ This is the
Friday, August 9 edition of Market to Market, the
Weekly Journal of Rural America. ♪♪ Hello, I’m
Delaney Howell. Many in rural America
remain optimistic about their future even as the
amount of trade with the now former top U.S. export market
remains in question. Last month, the
Purdue/CME Ag Barometer moved sharply higher
as 78 percent of those responding believe the
trade dispute with China will be resolved in
agriculture’s favor. The cost of doing business
for those supplying rural America rose 0.2 percent
in July as gasoline prices climbed higher. When the volatile food
and energy sectors are removed, Core PPI
fell 0.1 percent. President Trump’s
threat last week for another round of tariffs
on Chinese goods did not sit well with several
sectors of the U.S. economy. This week, the Chinese
responded to the salvo with U.S. farmers, ranchers and
consumers in the middle. Peter Tubbs has more. Both commodity and
financial markets roiled this week after President
Donald Trump proposed a new round of tariffs
on imports from China. The Chinese government
responded by halting all purchases of farm
commodities from the United States. China is the second
largest export destination for U.S. farmers. Dale Moore, Executive Vice
President, American Farm Bureau Federation: “Well,
their announcement that they are going to
basically stop importing all U.S. farm commodities products,
to quote our president Zippy Duvall, when he said
yesterday, it is a body blow. And I don’t know any
other way to describe it. It is a punch in the gut
that is just taking away one of the most important
and largest markets that we have spent decades
developing.” The new proposed tariffs, which
will take effect September 1st, will cover the $300
billion of goods imported from China not currently
subject to tariff. The new batch of tariffed
goods will cover more consumer products, raising
prices for both importers and American consumers. China also caused market
drama when it announced that the Yuan would be
allowed to drop to an 11-year low
against the dollar. It has already lost 5%
of its value this year. The President charged
that action constitutes currency manipulation. The Trump Administration
is currently doling out its second round of tariff
relief checks to commodity farmers, relief that could
total $26 billion dollars once completed. The President questioned
reports of producer unrest in rural America, and
believes farmers are happy with the financial
assistance. President Donald Trump:
“Well, you interviewed the wrong farmer, number one. Number two: Any amount
that China sucks out, we’re making up out of the
billions of dollars that we’re taking in. Remember this: Our country
is taking in billions and billions of
dollars from China. We never took in ten
cents from China. And out of that many
billions of dollars, we’re taking a part of it, and
we’re giving it to the farmers because they’ve
been targeted by China. The farmers – they
come out totally whole. So you interviewed the
wrong farmer, but that’s all right.” For Market to Market,
I’m Peter Tubbs. According to USDA, one
farmer feeds 155 people annually. Holding on to that number
could get more challenging as the population grows
and the climate changes. A recent study by The
Union of Concerned Scientists revealed the
number of days topping 100 degrees will increase
over the next 80 years. Those hot, humid days
could impact crop production. The United Nations piled
on to the news as the planet’s population ticks
towards 7.7 billion. John Torpy has the story. The agricultural industry
received an extra helping of bad news as a
newly released report put farming in a
negative light. Over 100 scientists from
52 countries signed-off on a United Nations
whitepaper at the end of this week. The Intergovernmental
Panel on Climate Change concluded human actions
on the land are increasing global carbon
dioxide levels. In turn, the report
reveals the higher CO2 levels are degrading the
quality of the food being grown. Released this week
in Geneva, the study concludes global
temperature will increase over 1.5 degrees
Fahrenheit in the next 50 years and could increase
food insecurity worldwide. However, authors of the
study say a change in human behavior may be the
best plan to combatting the problem. Jim Skea, Co-Chair,
Intergovernmental Panel on Climate Change:” Some
diets require more land and water and lead to
higher emissions than others. For example diets that are
high in grains, nuts and vegetables have a lower
carbon footprint than those that are high in
meat and they lead to better health outcomes.”
For Market to Market, I’m John Torpy. The National Farmers
Market Coalition has declared that August 4
through 10 is National Farmers Market Week. USDA figures show over
41,000 farms made more than $700 million

worth of direct sales to consumers in 2015. Recently, a special
farmers market was setup in the nation’s capital
where the outcome had less to do with making a
profit and more to do with cultivating relationships. Here’s more in
our cover story. According to the American
Farm Bureau Federation, the typical American
consumer is at least three generations removed
from the farm. To close the gap, farmers
and ranchers have found it all the more vital for
rural Americans to “share their story”. During the Farm Credit
Services annual fly-in event, held just a
few short weeks ago in Washington, D.C.,
producers who use the financial institutions
lending services were able to try their hand at
engaging folks from both sides of the aisle about
their farms and their retail products. Todd VanHoose, President
and CEO, Farm Credit Services: “Probably the
most important thing we’re going to try to do is
educate people about agriculture. Because if you look at
Congress today, very few of them have a direct
tie to agriculture. They don’t understand
the modern realities. A lot of them are
supportive of agriculture. They had this good feeling
about farmers, but they don’t know what the
reality of modern agriculture is in. So job one up there for
us is explain that.” The third annual event was
hosted in the Library of Congress. More than 80 farmers
and ranchers brought everything from pecans
to maple syrup to put on display in hopes of
spurring a little conversation. Todd Van Hoose, President
and CEO, Farm Credit Services: “One of the
things we try to stress is agriculture is not
the same everywhere. And some of its big and
some of it’s small and some of it’s commodities
and some of it’s really specialty products. And if you embrace all
of that, you’re going to start to understand
agriculture as it exists in the world today. And you get a much clearer
picture on what it takes to be successful
out there. And that’s the message
we’re trying to bring people.” Attendees, which ranged
from Capitol Hill Staffers to Lobbyists and
legislators, were given shopping bags upon their
arrival to browse the “marketplace.” They were encouraged to
visit with the various vendors about their
operations as well as take home a sample of the
products on display. Lotsee Spradling and
her husband Mike own the Flying G Ranch
in Oklahoma. They’ve been running
Polled Hereford Cattle since 1932. But In 1986, after Lotsee
and Mike got married, they began growing Pecans. Their ranch produced
nearly 1/10 of Oklahoma’s pecan crop last year. Lotsee says there are
just two things that consistently impact
their family’s operation. Lotsee Spradling, Flying
G Ranch Sandsprings, Oklahoma: “Mother
Nature’s the biggest. Um, probably politicians
are the next biggest. Um, you have to be careful
that you follow all the rules and regulations if
they shut down a market. For us, China’s been a
big market for us with the trade things going on. That market has definitely
gone from being booming to a trickle. (4:04) Part of the
objective for the marketplace event is to
connect those producers and “give them a face”
as VanHoose put it. Another goal is to give
the producers a voice by sharing their thoughts and
opinions with the folks who guide and create the
legislation that impacts them. Lotsee Spradling, Flying
G Ranch Sandsprings, Oklahoma: “First of all,
we appreciate the free market we have. We definitely want to
thank them for the country we live in, the
marketplace we have that’s prime on our list. But we also want to share
our concerns about, um, some of the tariffs, both
going both ways and also the group where with
Farm Credit, um, is instrumental in keeping
most of us a float because the local bank, whether
even if you’re in a rural town, the local banks do
not understand agriculture anymore. The people that are
renting and most of them are not born and bred
rural and so they don’t understand. So one of the things is we
want to keep farm credit viable and make understand
how essential it is to rural America for us
to feed the world. The 116th Congress, which
is currently on their August recess, is the most
racially and ethnically diverse group the United
States has ever seen. And, as the Urban sprawl
continues, many in rural America have said they
struggle to find the votes needed to elect leaders
who are educated on the policy impacting their
rural constituents. Mark Yeager and his
daughter Anna, have started making the
transition over the past couple of years to give
their business a face. They discovered more
consumers wanting to interact with the people
behind their products. Mark Yeager, Red Land
Farms, Moulton, Alabama: “We’re telling a story
of our cotton that we’re growing. ginning, picking the best
we got out of what we make and turning it into a, a
textile that you can’t buy anywhere in America, not
where, you know, where the field it was grown in.” The Yeagers have been
farming cotton since the early 80s. It wasn’t until 2015 when
Anna moved home full-time, after a stint in the Big
Apple, they decided to cut out the middle-man and
market their cotton directly to consumers. Anna Brakefield, Red Land
Farm, Alabama: “I fought like crazy to not come
back to the family farm. Um, but my dad approached
me in 2015 with this idea of taking the cotton that
we’re growing and making it into a consumable good
that we could sell direct to consumer.” And I thought that that
had such huge potential, um, in the day and time
that we’re living in right now. Red Land Cotton, the
business under which products from their Red
Land Farms are sold, focuses primarily on
textiles such as bedding and towels. Customer assessment of
the product line, which includes a “Made in
America” logo, have found the Yeagers selling their
100% cotton-based products at a premium. Over the past three plus
years, Anna has focused on sharing those values that
Red Land Farms brings into their textiles. She hopes that her fellow
agriculturalists will someday be able to join
forces to educate a wider swath of the public. Anna Brakefield, Red
Land Farm, Alabama: “I’m personally hoping to go
around and meet a bunch of other farmers that are
creating products and, and seeing how we might, could
work together even, um, and collaborate
like that.” (3:11) Lotsee Spradling
would agree that making the connection starts
with one conversation at a time. Lotsee Spradling, Flying
G Ranch, Sandsprings, Oklahoma: “We’re face to
face with another human being. And I have to eat, we
have to make a living. It really is a
nice connection”. Next, the Market
to Market report. Dry weather, a planned
trade meeting and anticipation of Monday’s
report helped the commodity markets
with a strong finish. For the week, September
wheat gained 9 cents while the nearby corn
contract rose 11 cents. Prospects for a meeting
between President’s Trump and Xi and short-covering
before Monday’s WASDE pushed the September
soybean contract 23 cents higher. September meal
climbed $4 per ton. December cotton
declined 52 cents per hundredweight. Over in the dairy parlor,
September Class III milk futures added a dime. The livestock
sector was mixed. October cattle cut $1.08. September feeders
put on 22 cents. And the October lean hog
contract rebounded $1.25. In the currency
markets, the U.S. Dollar index
declined 55 ticks. September crude oil lost
97 cents per barrel. COMEX Gold gained
$55.10 per ounce. And the Goldman Sachs
Commodity Index fell nearly 7 points to
finish at 400.35. Joining us now to offer
insight on these and other trends is our senior
market analyst John Roach. John, welcome back. Roach: Thanks, Delaney. Thanks for having me. Howell: John, I want
to get just your quick headline caption here
of what to expect for Monday’s report. Roach: Some price action
following the numbers. We have such wide variety,
a wide range of estimates on planted acres
and on yield. But on planted acres
alone there’s a 6 million, little over 6 million acre
range for soybeans and in corn it’s a little over
a 5 million acre range of guesstimates from
the high to the low. And those are really wide
numbers, a wide range of estimates and then we have
similar kind of a yield estimate range. So we’re all waiting to
see what the USDA will tell us from a prevent
plant standpoint and what actually got planted and
what farmers intentions are. Howell: So John, let me
ask you this before we move onto our
wheat discussion. Does Monday’s
report matter? Roach: I think it matters
a lot because so far the numbers that we’ve been
looking at from the USDA, we knew the day they came
out that they didn’t have enough data to really be
able to tell us because farmers planned on
planting but then weren’t able to and we don’t know
who did and who didn’t. Now we’re going to know
that and so we’re really going to have a pretty
good acreage number. But we’re not going to
know about yields yet, particularly with the kind
of weather pattern that we have right now. There’s a pretty
widespread area that is really missing out on
rains and it’s starting to make a difference
out in the field. So the yield situation is
still maybe not wide open but almost wide open. There’s a lot of crop that
is going to take a longer than normal kind of
a growing season. And so we still have a
couple more cards to play in this poker game before
we know what we have. Howell: Okay,
wait and see game. Roach: It’s a wait and see
game and I really think that for most we’re going
to need to see a combine monitor tell us
what’s in the field. And at that time we’re
going to have huge variability across one
field and we’re going to have huge variability
from field to field and certainly from
county to county. Howell: Okay. John, when we look at the
wheat market, let’s put Monday’s reports aside. Can September Chicago
wheat break through its 200 day moving
average here? Roach: It’s trying. We think so. We think that we had solid
buy signals on wheat in the low trade here a week
or so ago and we’ve come up out of that and we have
attacked the 20 day moving average. We think that the spec
funds will come back in and reown some of the
wheat that they have sold out lately. But we’ve got to push that
trend a little bit higher and we think that there’s
a good chance that we could do that. Howell: And obviously
the wheat market has been working very closely here
in tandem with the corn market. Tell me, did we put in a
reversal earlier this week in the corn market? Roach: Well, that’s
what I would call it. The market came down and
it was not able to move down any further and we
reversed and came right up and we did it right in
the midst of a buy signal. So the market is actually
performing very well in here although all the news
is about as negative as it can possibly be right now. That’s wrong, not all, but
certainly the demand side and the concern with the
trade wars and so forth. We just had a lot of
negative news come into the marketplace and the
market quit going down. Howell: John, walk me
through the two scenarios here if we have a bullish
report versus a bearish report on Monday for
the corn markets. What could and
might happen? Roach: Well, if we were to
have a bullish report we would likely jump up above
what we call our green line 20 day
moving average. We think that would
trigger spec fund buying. Spec funds have been very
strong sellers in the last three trading weeks and
we think that they could replace those longs
and carry the market on higher. On the flip side, if
it turned out that the numbers were a negative
number we’ll be very quickly down attacking the
lows that we’ve made here in the last week or so and
may well dig further down into support. But I do think that the
corn market has such uncertainty out here
as far as yields are concerned and the bean
market as well that it’s very difficult to think we
can take prices down very far below these
recent lows. I think the users will
accumulate corn as the market slides and I think
farmers will shut their sales off completely and
so I think the market will find support
relatively quickly. I don’t see a big washout,
that’s I guess what I’m saying. Howell: Okay. John, when you look
long-term then we’ve got a really great question, I
think a lot of producers this has been on their
mind, from Lexi in Iowa here. She said, how aggressive
would you be in marketing the 2020 and 2021 crop? The markets are telling us
not to grow beans in need of adding positive
equity to every contract. Roach: Well, the trouble
I have with doing that is that first of all I’m
in the wrong time of the year. The market peak was 50
cents or more ago and I’m just coming off
of buy signals. And so talking about
selling it’s sort of like violating every
rule I know. And when I look out and
talk about selling next year’s crop at price
levels that really don’t have much of any profit in
them where we still have to go through a growing
season in this country in the next month, we have
another growing season in South America and then
another growing season for the U.S. before we have to sell
some of that 2020 crop. So the whole idea that
we’re rushing out to sell things because we’re
scared to death, in my years of doing this
business that is the biggest mistake
you can make. You make sales because it
makes sense to make sales and your signals and your
indicators are telling you to do that. And right now we
don’t have that. What we do have is fear
and the fear is what is driving people to make
what I think are very — Howell: Rash decisions? Roach: Rash, that’s a
good for it, rash, rash. I think it’s a rash
decision to be selling out of fear for
this next year. Howell: John, was it fear
or something else that enticed some strong closes
on Thursday and Friday in the soybean markets? Roach: I think it’s the
realization that the spec funds are already heavy
shorts and I think as the market started to gain
some momentum they had to come in and cover up
some of those shorts. And I think that we really
have very few people who want to sell any soybeans
right now, there’s too much uncertainty. So when the buyers come
to the marketplace and there’s really not sellers
on the other side prices have to rally, they have
to go up and find the seller. Howell: Right. And were there any weather
concerns built in there as well or is the weather
concerns more pertaining to the corn markets? Roach: I think it’s very
much pertaining to the bean market. I met with a group of
people west of Oskaloosa, Iowa, southeastern Iowa,
which is kind of a garden spot, but they haven’t had
rain now for several weeks and their crops are
starting to deteriorate a little bit in the areas
where the lighter soil is and beans really need
good solid August rains in order to bear big yields
or good yields and we’re just not getting it. Howell: John, I’ve got one
more really good social media question I want to
just squeeze in there so we can talk about a little
bit of the South American competition
that’s going on. We’ve got Phil in Dresden,
Ontario @agridome on Twitter said, he’s reading
reports that higher prices and premiums for Brazil
soybeans since the recent increase in U.S. tariffs have momentarily
stopped Chinese buying of Brazilian soybeans. At the end of the day
with global soybeans is it about the lowest price? Roach: It usually is
about the lowest price. The buyers around the
world go to who has the cheapest offer. However, political
decisions come in there as well, particularly in a
centrally run economy such as China. And when the boss at the
top says no, don’t buy any, then price is not
what’s most important. However, the other people
in the world will come to U.S. soybeans rather than
pay the premium to take Brazilian soybeans. So there’s a certain
amount of that shifting that occurs. But one of the things that
people need to notice, soybean oil has just
pushed up to the highest level in two
years in China. Their crushing process
has slowed down. Their meal has stockpiled
a little bit and so they’re running short on
oil and we’re seeing a pretty strong move
in palm oil as well. So the oil market can
help carry the soybeans a little bit and that may be
the thing that people are missing this week is it’s
oil that has led this market up. Howell: John, when
you look at then the relationship between the
soybean markets and the hog markets obviously
direct correlation there and in China
in particular. Are we going to see China
follow through on U.S. purchases of pork? We saw the U.S. pork cutout values at
their highest levels in two years. Roach: Well, this week we
saw business to China and business to of all places
Australia where apparently they have sold out their
pork supplies that they’re having to reimport
from the United States. We’re also seeing meal
demand to go into poultry all around the world that
is helping to fill that protein gap left by the
pork shortage because of the African swine fever. So it’s interesting
how the movement of commodities goes on around
the world and we’re seeing that export demand
showing up for pork. Howell: And when you look
at the export demand for pork in particular,
Australia sells to China or whoever sells to China
and then turns to the U.S. as a customer. Is there much price action
or price opportunity missed out if we’re
exporting it to other countries besides China? Roach: That’s a
good question. Whenever you have a
market that is restricted, particularly when it’s a
large buyer that has done the restricting, it
definitely changes the economics and it’s not as
an efficient market if you will. So that means that
somebody is paying too much and it just, that’s
just how trade is when you get into inefficient
situations and particularly when you’re
running into some short supplies. Howell: So your next
fourth quarter here estimates for the hog
market and let’s throw in live cattle too since we
didn’t get to touch on that much. What are your outlooks
for those two markets? Roach: We think we have
bigger supplies coming ahead. We think the market can
bounce up but we think that we’ll put more
tonnage, particularly on cattle, as we move
into the fall. And so we think we’re
going to have some tough sledding here as we move
through the October, November, December
timeframe. Howell: Okay. John, I’ll save feeder
cattle for Market Plus. Thank you so much
for joining me. Roach: Thank you. 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. Using Twitter allows you
to stay in the loop with just a few characters. We share news, pictures
and behind-the-scenes information on our feed
of @MarkettoMarket. Join us again next week
when we explore how the U.S. leather industry is
searching for new markets. 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. ♪♪ Sukup
Manufacturing Company – providing equipment and
buildings to store and condition grain to help
farmers adjust to market swings. We build drying, moving
and storage equipment designed to preserve the
quality of their crops. Sukup Manufacturing,
store now, profit later.

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