Market to Market (December 28, 2018)

Coming up on Market to
Market — Wild weather makes a year-end rally
from Texas to Minnesota. One farmer is using some
of the richest soil on earth to combat
food insecurity. Those stories and market
analysis with Tomm Pfitzenmaier, 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. ♪♪ And by Sukup
Manufacturing Company. Offering a full line of
grain drying and storage equipment and steel
buildings, Sukup Manufacturing is on a
mission to protect and preserve your crop and the
tools that produce it. ♪♪ This is the
Friday, December 28 edition of Market to
Market, the Weekly Journal of Rural America. ♪♪ Hello, I’m
Delaney Howell. To call the week on Wall
Street a rollercoaster ride would be selling
the story short. The worst Christmas
Eve on the stock exchange was followed by the
best one-day Dow Jones performance. The market pinballed
nearly 900 points Thursday, the biggest
inter-day swing since 2011. November’s New Home Sales
report was caught up in the on-going government
shutdown and wasn’t released as scheduled. Portions of the Department
of Agriculture also are under shutdown, but M-F-P
payments are still being distributed, at least
through Friday. Another brutal week for
crude oil as projections of continued high supplies
pushed the commodity to its lowest level in
almost 18 months. AAA says the average price
per gallon of gasoline is $2.30. But in nine states, the
cost went below $2. — Mother Nature failed
to deliver a white Christmas for much
of the Corn Belt. Instead, blizzard
conditions and flood warnings arrived in the
lead up to the New Year. Paul Yeager has more. The Lone Star State was
inundated mid-week with thunderstorms. Heavy rain soaked the
Austin, Texas area. One woman was trapped by
the quick-rising storm waters and had to be
rescued from her vehicle. Julie Butler, Rescued from
rising floodwaters: “There was a little tiny tree in
the midst of all of that stuff and I thought, if
that car shifts one bit, I am going to like, wee! over to that tree
and grab ahold of it. So I kind of already had
a plan if I was going to completely go under.”
Blizzard conditions blasted folks from
Kansas to the Dakotas — shuttering roads
and airports. Police in several states
were forced to shut down interstates as winds
whipped the more than a foot of snow across
the paths of would-be travelers. Minnesota DOT officials
advised folks to wait out the storm for
roads to improve. Portions of places in
the land of 10,000 lakes received nearly
20 inches of snow. Crews in Duluth were
working overtime to clear the remnants of the storm
which was still falling early Friday. The amount of moisture
that fell in the last 72 hours across the U.S. is above average. This map from iWeatherNet
reveals heavy rain the South across Texas through
Louisiana, Mississippi and into Alabama. Farther north in Iowa,
mostly rain fell on empty farm fields. Only a light dusting of
snow arrived in central Iowa after close to 2
inches of rain were recorded over a
two-day period. Traffic was slowed on the
morning commute with the icy combination
on the roads. For Market to Market,
I’m Paul Yeager. Before the ink was dry on
the president’s signature of the 2018 Farm Bill,
USDA officials considered changes CUT from
the legislation. Work rules surrounding the
Supplemental Nutrition Assistance Program or
SNAP were part of the directives USDA
aimed to examine. Food insecurity impacts
millions of Americans and that includes those living
in areas where food production is abundant. Josh Buettner looks at one
operation doing their part to provide fresh produce
in the land of tall corn. His report is
our Cover Story. Iowa is a top producer of
commodities like corn and soybeans that find their
way to ports of call across the globe. But one Hawkeye State
grower is employing some of the richest soil on
earth to provide a variety of fresh food items for
those less fortunate a little closer to home. Tracy Blackmer/Gardening
For Good – Madrid, Iowa: “There’s no reason in a
place like Iowa, we can’t grow enough of certain
vegetables during times of the year like this to give
everybody the food they need.” A soil scientist by trade,
Tracy Blackmer converted a hog operation near Madrid
into Gardening For Good, a non-profit organization
that educates youth and corporate volunteers about
agriculture and community service. Tracy Blackmer/Gardening
For Good – Madrid, Iowa: “Anyone know what the
name of these are?” Student (OFFSCREEN):
“Dibbles?” Tracy Blackmer/Gardening
For Good – Madrid, Iowa: “Yep. Dibbles or dibblers… What are they used for
besides killing vampires?” Tracy Blackmer/Gardening
For Good – Madrid, Iowa: “More and more kids are
further removed from the farm than ever. And even though this is
rural Iowa, and there are farms all around, most
kids still couldn’t even tell you what a
soybean plant is.” Active in his local church
and accustomed to lending a helping hand, the
genesis of Blackmer’s charity was geared toward
assisting a food pantry run by his mother. The initial harvest was so
abundant, it filled the shelves of three
additional pantries, and then some. Tracy Blackmer/Gardening
For Good – Madrid, Iowa: “…And she’s like, well,
you can bring it to the Food Bank, I bet. I bet you they’d take it. Uh…what’s a food bank? You know, I didn’t
know what that was. So I said sure.” In nearby Des Moines, the
Food Bank of Iowa acts as a go-between for over 500
smaller pantries and other partners who assist
food insecure Iowans. Michelle Book/CEO – Food
Bank of Iowa: “He expanded the program and started
bringing the produce to the Food Bank of Iowa
because we have many more distribution opportunities
than he would as an individual.” CEO Michelle Book says her
organization moves over one million pounds of food
monthly, more than half of which is donated, and
they’re always looking to supplement non-perishables
with lean protein and fresh produce. Michelle Book/CEO – Food
Bank of Iowa: “One of the things Tracy is most
brilliant about is, is considering what to plant. And we received from him
last year melons, peppers, squash…things that are
easily transportable and have a decent shelf life.” For frontline partners
like Catholic Charities, which act as a retailer of
sorts to the Food Bank’s wholesaler role, the
ability to offer fresh food options for
free is a big deal. And those dependent
on their services are grateful for
Blackmer’s efforts. Jacqline Stevenson/Des
Moines, Iowa: “I think it’s great that he can
take the time and do it for the ones that need
it and can use it. Saves me a lot of money,
lots of it, and the nutrition from it.” The Food Bank of Iowa says
they received over 125,000 pounds of produce from
Gardening For Good following the last growing
season – and that amount has been on the rise every
year over the past five years. Book adds that just like
on the farm, volunteers are their lifeblood. Michelle Book/CEO – Food
Bank of Iowa: “We can’t do anything without
volunteer assistance. And Tracy has been really,
really smart – he knows certainly how to engage
them around the work of helping those that are
food insecure.” Since 2014, the State of Iowa
has offered an annual Farm to Food Donation Tax
Credit of 15 percent, up to $5000, for eligible
farm operations donating self-produced food
commodities to food banks or other emergency
feeding organizations. Blackmer has utilized his
research trial expertise and the tax credit option
to help convince a handful of other producers
to pitch in. Tracy Blackmer/Gardening
For Good – Madrid, Iowa: “The model is scalable
for some things. There’s a lot of people
that have that patch of something that maybe is
the point rows that are hard to get at…or, for
whatever reason, there’s that nice little area
that’s separate. But it’s a really good
reinforcement for landowners and/or the
farmers to do that.” Though Blackmer classifies
his 20 acres as a hobby farm, he’s adapted it
to reap benefits from challenges large
neighboring operations face, and help clean up
the environment as well. Tracy Blackmer/Gardening
For Good – Madrid, Iowa: “There’s about 2,500 acres
that drain into this. And of course, a lot of
the tile drainage water, especially in the spring
and the early part of the season have a reasonable
amount of nitrates in it. So as we’re watering,
we’re actually catching some of that and
fertilizing with it, into there, so we’re actually
helping to pull out some of the nitrates in that.” Gardening For Good’s
plastic mulch, drip irrigation and row spacing
help improve yields and minimize labor on
tasks like weeding. Blackmer says another
benefit is the various groups coming through can
get into the field quickly after significant
weather events. Kassi Bailey/International
Program Manager – Iowa Sister States: “This is
the perfect match to show them a little bit about
Iowa, how we take care of our communities and show
them a little bit about our agriculture. So it really ties in well
with everything for us.” While Iowa’s commodities
go around the world, sometimes the world
comes to Iowa. Kassi Bailey, the
Iowa Sister States International Program
manager says Gardening For Good also is a perfect fit
for international students and faculty seeking an
American farm experience. Kassi Bailey/International
Program Manager – Iowa Sister States: “The kids
are learning a lot and it’s a lot of fun for
everyone I think.” For Blackmer, it’s all
part of the spirit of giving he tries
to nurture. And a novel approach to
things like disposal of subpar crops helps
cultivate good times amidst the backdrop
of hard work. Kassi Bailey/International
Program Manager – Iowa Sister States: “They’re
getting told that they can throw an item. That’s not typical in a
school setting, especially with your
teachers around.” Tracy Blackmer/Gardening
For Good – Madrid, Iowa: “So that was fun?” For Market to Market,
I’m Josh Buettner. Next, the Market
to Market report. Technical signals mostly
moved the trade as stalled government shutdown slowed
news on export sales. For the week, March wheat
fell 3 cents and the nearby corn contract
also dropped 3 cents. A lack of demand and mixed
South American weather reports muted moves in the
soy complex as the March soybean contract moved
lower by 2 cents. The March meal contract
gained $2.90 per ton. March cotton trended lower
again this week by 99 cents per hundredweight. Over in the dairy parlor,
January Class III milk futures improved 14 cents. The livestock
market was mixed. February cattle
added $1.48. January feeders
gained $1.73. And the February lean hog
contract fell 48 cents. In the currency
markets, the U.S. Dollar index
lost 49 ticks. February crude oil shed
26 cents per barrel. COMEX Gold added
$24.90 per ounce. And the Goldman Sachs
Commodity Index declined nearly 5 points to
finish at 375.60. Joining us now to offer
insight on these and other trends is one of our
regular market analysts, Tomm Pfitzenmaier. Tomm, welcome back. Pfitzenmaier:
Thanks, Delaney. Howell: Tomm, we’ve got
a lot to talk about. I want to focus on some
bigger picture things here. We’re at the end of the
calendar year, trade has been pretty low,
volume has been low. Let’s start out here, walk
us through what is going on with the government
shutdown and how that is impacting the
commodity markets. Pfitzenmaier: Well,
generally speaking a lack of knowledge is not good. The markets operate best
when everybody has full knowledge. And I think probably the
commercials probably have a little better handle
on what’s going on than anybody else does so maybe
it’s a bit of an advantage for them. I guess I think it’s going
to tend to be not so friendly to most markets. When you don’t know
exactly what’s going on you tend to push prices
down a little bit. Howell: And when you say
not knowing what’s going on, we’re not having
weekly export sales, WASDE, is that a concern
for the January 11th report? Pfitzenmaier:
I think it is. A lot of people are
talking about whether if something doesn’t get
resolved or doesn’t get resolved next week then I
would expect that report is going to be in peril,
which that’s important, but it also includes the
final production number, which is what the final
yield was in corn is kind of a number people have
really been talking a lot about the last
month or so. So yeah, it’s going to
be a problem if it’s not released. I mean, eventually the
information is going to come out I suppose, but
it’s not going to come out on the 11th possibly. Howell: Right. So how would
that work then? If the information doesn’t
come out on the 11th is it just rumors of what the
trade is expecting? Pfitzenmaier: I think it
will go on just like it’s been going on where
privates come out with their ideas and the market
reacts and there are those that believe that’s good,
it would be better off to not have the government
putting out numbers. But they tend to be fairly
accurate when all is said and done so I think it’s
important to know really where we’re at, to
have those numbers. Howell: And if we don’t
get those numbers come out, you said specifically
the corn market is one that could be
impacted by that. Was the corn market
anticipating some bullish news on this
January 11th report? Pfitzenmaier: Yeah, I
think a lot of the people that are friendly to the
corn market believe yield is overstated by half to
two bushel per acre, which drags that carryout down
into levels that are just a little bit tighter. Now, there’s probably a
chance we’re going to offset that because
ethanol usage hasn’t been what we were expecting,
export sales haven’t been meeting the needed
category every week, so there’s some adjustments
that could offset that. But overall I think the
perception is that it’s going to be supportive. Howell: I want to go back
to the ethanol thing. We’ve got a good question
here I think that sets the stage for just the grain
markets in general. We’ve got Tim in
Crookston, Minnesota. He said, New Year
projection, Tomm. What crop has the most
upside from here? Corn, soybeans or wheat? Pfitzenmaier: I think
wheat probably does. Wheat has got problems
around the world that I think are going to
tend to be supportive. Probably second
would be corn. The corn market has got
potential things sitting out there. If there’s a problem with
South America, if China does come in and buy corn,
if the yield is lower then corn maybe has
some bounce in it. But I’d guess
overall wheat. South America has had
problems, Australia has had problems, there’s a
lot of spots around the world that have kind
of had wheat troubles. Howell: What about when
you factor in what’s going on in Russia right
now with wheat? The Russian Federal
Statistics Service just estimated 72.1 million
acres for their 2018 wheat harvest. That’s a lot higher than
a lot of other estimating services were guessing. How does that impact
our world outlook? Pfitzenmaier: The whole
Black Sea region, the Ukraine crop in wheat was
quite a bit better than we expected too. So that is why I’m a
little cautious about getting too carried away
with wheat because always somebody around the world
every month is harvesting wheat some place and
there’s quite a bit of it around. So when I say I think it’s
got more potential, maybe 30 to 40 cents, versus
corn has maybe got 15 to 20, so the margin of
better than is not all that great in my mind. Howell: So they’re looking
for another maybe 30 to 40 cents in the
wheat markets? Pfitzenmaier:
Correct, yeah. March wheat up around
$4.40, I mean $5.40 to $5.50 certainly is a
possibility but that would be the upper limits
I would think. Howell: Okay. You mentioned earlier
ethanol and I want to make sure we talk about that
because going into the New Year here, you even
mentioned it in your newsletter this week,
we’re seeing ethanol producers and ethanol
processors being in negative margins,
they’re pulling back on production, they are maybe
shutting down plants in some instances. When we look at the 2019
picture, what does that reduction in ethanol do
for the corn situation? Pfitzenmaier: Well, that’s
what I was saying earlier, to some extent if there is
a drop in yield it’s going to offset, if there’s not
a drop in yield then it’s going to contribute to
stocks being bigger than we thought they
were going to be. It certainly isn’t a great
thing for farmer producers that have grown accustomed
to selling ethanol plants because one of the ways
they can adjust that is that they’re going to have
to lower their basis and not pay farmers so much
for corn to try and get their margins back. So we’ve really developed
a big dependency on that ethanol industry and if it
starts to back off on us a little bit it’s going to
be kind of a problem at the farm gate. Howell: Have we seen basis
start to decline yet from that ethanol reduction? Pfitzenmaier: No because
up to this point it has been offset by lack of
farmer selling, the farmer has been in such a tight
hold or they’ve kind of had to bid up to get
the corn to process. I don’t know if that’s
going to change after the first of the year because
at some point corn is going to have to move. Howell: Absolutely. So did we set ourselves up
this week for testing our November lows? Pfitzenmaier: Probably. We broke down through some
pretty important support points. I guess I think that March
contract could move back down into that $3.73,
$3.67 area, somewhere down in there. I guess I’d lose my
enthusiasm for being bearish corn and probably
be accumulating long positions at that point. Howell: Okay, the other
big news we had this week, just actually on Friday,
was this announcement that China purchased U.S. rice. That doesn’t really fit
into our mold of typical patterns here but let’s
unpack that a little bit. Tomm, why would China
buy rice from the U.S.? Pfitzenmaier: Apparently
they have less rice than we thought they did,
that’s the only thing I can figure out. I don’t know, politics
gets in the middle of this to some extent too. So I don’t know whether
they did that to satisfy some requirement or some
agreement that was made between the U.S. and China and
trade negotiators. I don’t know. Howell: The question that
came to my mind too is why not buy, if it’s a
political move or some sort of olive branch,
why not buy soybeans? Why are we buying rice? Pfitzenmaier: Yeah,
good question. And maybe we’re the
only ones that have it. I’m not big on the rice
market but I’m not sure you can go to Brazil or
Argentina and buy much rice. So if you need that and
we’ve got it maybe we’re sort of in the driver’s
seat on that because in two or three weeks they’re
going to be able to buy new crop beans
out of Brazil. Howell: So speaking of
Brazil, what are you hearing, Tomm? Are we still ahead of pace
in Brazil and Argentina for their harvest? Pfitzenmaier: Well, yeah,
because particularly in Brazil their crop got
planted pretty early so as a result some of that is
going to be harvested early. All reports I’ve had that
by mid-January they’re going to be starting to
harvest new crop beans. One of the things that has
popped up and we saw a nice little rally on
Friday on beans because there is some wet
conditions in Argentina and that had the market
a little nervous. Now we really had light
volume and not many people participating so it didn’t
take a whole lot of effort to get a 15 cent rally in
beans and that may very well soften back up next
week when people start coming back to trade. But there is some
sensitivity to South American weather for sure. Howell: Absolutely. And the other big question
I think on a lot of producers’ brains, it has
been for a while now, is acreage. Tomm, we’ve got to talk
about acreage estimates for 2019. It seems silly, but would
we see any acres convert to rice maybe in
the South areas? Pfitzenmaier:
Maybe, I don’t know. To be honest with you
I have no idea on the dynamics of rice
profitability and even cotton prices have been
depressed as you indicated earlier and that certainly
would be down in that area where they’d
grow rice too. So I don’t know. The acreage thing is
going to be interesting. A couple of times ago when
I was on this show I was concerned that you were
going to see big acreage shifting from
beans to corn. I guess I’ve moderated
that a little bit simply because the more you talk
to people the more you find that production costs
on corn are going to be up pretty substantially next
spring, which makes it a little tougher to
make that transition. If you take new crop corn
versus new crop bean prices that spread isn’t
that far off historical relationships. The one area that would
tend to make you think so is up in the North Dakota,
South Dakota area where they grow 12% to
14% of our beans. They’ve gotten to be
significant bean growers and they have really taken
a hit because of this lack of soybean demand out of
China because a lot of their beans went up into
the Pacific Northwest and there’s nothing
moving up that way. And so their basis
is really bad. So if you take a cash
beans versus cash corn price it really favors
corn in some of those areas. So I don’t think there’s
any doubt there’s going to be switching. I originally thought 5
million, maybe more like 3 now. Howell: Okay. Tomm, let’s talk about
the meat markets. We mentioned earlier in
the program we’ve seen blizzard conditions
all across the U.S. How is that impacting the
live cattle market at this point? Pfitzenmaier: It has
impacted it a lot. It has been, the cattle
market has been overbought for a couple of weeks now
really and it continues to march higher strictly
because of weather. And this is the time of
year when you’ve got to be really cautious selling
cattle because almost invariably in this late
December through end of February period you can
have these storms that give you these
kind of pops. Now, generally speaking
they’re not sustainable, they tend to have a nice
jump up and then tend to fall apart and as
overbought as we are in the cattle I suspect
that’s what is going to happen. Everybody was expecting
the cash market to be a little firmer than it was
this week so there might be some disappointment
next week if there isn’t any follow
through on that. I guess if the weather
moderates at all I’d probably use whatever
rally we got at the end of the week or maybe into
Monday to make some sales. December contract on
cattle goes off the board on Monday. There’s a lot of open
positions in there and with the rally we’ve had
versus the cash market I wouldn’t be surprised to
see some deliveries on the December contract and that
could sort of throw a little cold water
on that market too. Howell: What about when
we look at feeders? We’ve closed above the
9 day moving average. Does that signal that the
short-term trend remains positive? Pfitzenmaier:
Yeah, I think so. Well, you’ve had a drop
in corn prices, which is always a positive. Wheat prices have pulled
back really this last week some. The fat prices, we broke
up into new high ground on the February and I think
on the April contract, so that always is encouraging
for the feeder market. So all the stars have
aligned a little bit to some extent for feeders. Now, I wouldn’t get too
carried away with that and at some point breaking out
into new highs is very rarely a bad thing so you
don’t want to get in a big hurry. But I’d start
watching that. If it starts getting
a little toppy and overbought you might want
to step in on making sales there. Howell: Absolutely. Tomm, five seconds. Are the hog markets
continuing to head lower or are they going
to hold here? Pfitzenmaier: I think
they’re going to hold here. We’ve got good Chinese
demand, markets oversold, I guess I’m looking for
a little pop in the hog market. Howell: A little pop
in the hog market. We’re going to save hogs
and oil and cotton for Market Plus. Tomm Pfitzenmaier,
thank you so much. 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 If you make a resolution
to write more in 2019, send us your
thoughts via email to [email protected] Join us again next week
when we’ll look back at the big stories of 2018
impacting rural America. 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. ♪♪ And by Sukup
Manufacturing Company. Offering a full line of
grain drying and storage equipment and steel
buildings, Sukup Manufacturing is on a
mission to protect and preserve your crop and the
tools that produce it.

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