Market to Market (March 16, 2019)


Coming up on Market to
Market — A whirlwind of weather hammers the
Plains and beyond. The little blue budget
books arrive on Capitol Hill with a thud
for rural America. A return to the farm comes
with a heavy dose of reality. And market analysis
with Don Roose, 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. ♪♪ Accu-Steel,
offering fabric covered buildings specifically
designed for the cattle industry since 2001. The next generation
of cattle buildings. Information at
accusteel.com. ♪♪ This is the Friday, March
15 edition of Market to Market, the Weekly
Journal of Rural America. ♪♪ Hello, I’m Delaney Howell. The March weather lion
blew over trucks in Texas, cut-off Midwest
interstates and jammed up rivers across 25 states –
or as we called it this week … Wednesday. The massive low pressure
system hammered Colorado with a springtime storm as
interstate travel became nearly impossible from
Colorado to South Dakota. I-90 was shuttered for
hundreds of miles as crews tried to make progress
on clearing the snow. Just a few miles separated
blizzard from heavy rains. Ice chunks jammed rivers
as spring melt happened quickly as warm
temperatures and heavy rain on still frozen
ground served up widespread flooding
in several states. A loud noise came from
Capitol Hill this week when the president’s
budget landed for lawmakers to dissect. Government agencies are
tasked with finding cuts as they look for ways
to make do with less, especially in agriculture. John Torpy reports. President
Trump’s budgetary wish list met with a tepid
response from Congress this week. The $4.7 trillion dollar
proposal looks favorably on military spending and
construction of a border wall. But domestic programs like
USDA would receive cuts if the administration’s
budget were to be adopted. The suggested cut for the
Department of Agriculture is $3.6 billion, or
fifteen percent of last year’s allotment. Crop insurance landed
squarely in the cross-hairs with a
reduction in premiums and a tightening of
subsidy programs. Funding for the
Supplemental Nutrition Assistance Program
is wrapped around strengthened work
requirements for able-bodied SNAP
recipients. Two years ago, President
Trump said he would like to see $1 trillion
earmarked for infrastructure
improvements. Since then, the figure has
been part of every budget including 2020’s, hovering
around $200 billion. Missing from the
line-items is money for Lock & Dam improvements. The American Soybean
Association protested the spending inaction, calling
it a reversal by President Trump on promised
infrastructure investment for inland waterways,
which the association sees as vital for shipping. Democratic lawmakers
objected to the President’s plan saying
the proposed cuts will only make matters worse
for farmers already hurting from the trade
dispute with China. Opposition is high enough
in both the House and Senate that the budget
proposal is not expected to be adopted by Congress. For Market to
Market, John Torpy. The E-P-A moved forward
this week with a formal proposal to sell
E-15 year-round. The combo of increased
demand and lower fuel stocks has driven prices
higher by a nickel in the last few days to
$2.52 per gallon. Retail sales rebounded in
January after a sluggish December. The Commerce Department
pegged the increase at 0.2 percent. Wholesale prices reversed
course after three consecutive months of
declines indicating little inflationary pressure
in the economy. New homes sales fell 6.9
percent in January and was likely a reflection of
the government shutdown cutting into buying. — One Iowa family got a
home that was new to them as they switched
residences in 2018. They made the move from
concrete streets to dirt roads in an effort to help
make a transition with the family farm. As John Torpy explains
in our Cover Story, the hand-off has had
challenging moments. In the Spring of 2018,
Joni Embree-Meinders returned to this place
which she called home nearly two decades ago. At the request of her
grandfather, John Young, Embree-Meinders brought
her family farm back to the Young Farm and got
right to work…hitting the ground running…with
a big smile on her face. Joni Embree-Meinders,
Young and Son Farms:”My heart is–this is home. And I’m surprised at how,
how hard that hit me. In mid-June of 2018, wheat
harvest was underway when Joni, Zach, Lucy and Colby
moved back to the small central Kansas
town of 874. Young Farms endured its
share of dealing with Murphy’s Law as things
that could go wrong…did. Mechanical problems
plagued the operation during harvest. A long summer drought
slowed the growth of their dryland crops. When rain finally arrived,
it fell until just days before the start
of harvest. The storms delivered
all of Burrton’s annual rainfall in just 30 days. Embree-Meinders took all
the problems in stride and embraced the steep
learning curve. Joni Embree-Meinders,
Young and Son Farms: “There’s so much to learn. I’ve kind of put myself
in his submersion program with everything. I read absolutely
everything I possibly can. Everything that Grandpa
tells me to look at or the guys that he listens to a
read their articles and things like that. I’ve tried to get–read
everything I can get my hands on. Some of it makes sense. Some of it doesn’t. But I figure if I just
submerge myself in information at some point,
I’ll have a conversation with somebody that’s going
to make it all click. You know?” Embree-Meinders continues
to tap her grandfather’s knowledgebase. She relies on his years
of experience to help navigate issues both
on and off the farm. John Young, Young and Son
Farms: ” I didn’t know we were going to become
involved in a trade War, which is making
it more difficult. There’s going to be
problems you know in any business. I think that I’m continuing to
try to transfer anything that I might have learned in my
entire life to her and she’s very receptive. She’s
just very enthused about the entire thing, which I’m happy
about. And this is–I’ve got a
lot of personal drive and my “whys” are huge
for this operation. And so it makes it
makes it fun and easy. I’m interested I want
I want to learn more.” Joni and Zach Meinders
drive to move back to the farm was fueled by a
longing for their children to have the same chances
they had growing up on the farm. Lucy and Colby have
settled into the Burrton Unified School District
which has a smaller student body than the one
they were used to in Des Moines, Iowa. But what the school
in Burrton lacks in population, it makes
up for in countless opportunities. Lucy Embree, Burrton,
Kansas: “I’ve learned that If someone comes in
everyone’s accepted here because I mean it’s just
such a small school that everyone knows everyone. Colby Embree, Burrton,
Kansas:”I think that when somebody comes then
they’re like hey! And they just welcome.” Joan Simoneau,
Superintendent, Burrton Unified School District:
“Kids here, first of all are not going to fall
through the cracks. We’re gonna know all, you
know we’re going to know all about them
very quickly. And, kids in Burrton, if
you’re standing upright and can take a good
breath, can play basketball, football,
volley ball, run cross-country. Be the president of their
class, be part of the K club, Shake Hands
Association for Youth, and do FCCLA, 4H, you name
it./A lot of opportunity for kids here.” Dwindling populations are
a common thread throughout rural America. According to the U.S. Census Bureau, Burrton,
Kansas has lost of six percent of its population
since 2000, making Joni’s journey back to the family
farm a unique move in rural America. Joni Embree-Meinders,
Young Farms: “You know it’s been really it’s been
nice because I don’t get welcome home or welcome to
Kansas or anything like that. What I get is…”we are so
glad you’re here.” And I get a lot of–it’s far
more appreciative then just a welcome back. The fact that we’re coming
back to continue something that’s been set for a
long time it is I think appreciated in
a community. For Embree-Meinders,
every day is a good one. Despite any hurdles the
day may bring, she notes that with every sunset,
she has no regrets about her family’s move
to rural America. Joni Embree-Meinders,
Young and Sons Farms: ” There’s going to be
hurdles, there’s going to be stumbling blocks,
there’s going to be people that let you down there’s
going to be all of that and it’s all
going to be okay. At the end of the day,
when I get ready for bed, I am so content. My heart is so
happy here.” Joni Embree-Meinders: “I’m
closer to my grandpa now than I have been my whole
life and he’s an amazing man. And I’m really honored to
get to learn from him in this setting.” For Market to Market,
I’m John Torpy. Next, the Market
to Market report. The bears appear to
have left the market. The question is
for how long. The big three commodities
had their best performance in seven weeks as spring
weather challenges appeared on the horizon. For the week, May wheat
bounced higher by 23 cents while the nearby corn
contract gained 9 cents. The saga of U.S. and Chinese trade talks
took another turn this week as the president said
he’s willing to walk away without a deal. The May soybean contract
increased 14 cents. May meal jumped
$7.10 per ton. May cotton improved
$2.01 per hundredweight. Over in the dairy parlor,
April Class III milk futures added 11 cents. The livestock
market was mixed. April cattle
shed 58 cents. April feeders
fell 77 cents. And the April lean hog
contract rocketed $8.25, a nearly 14 percent jump. In the currency
markets, the U.S. Dollar index
stepped-back 69 ticks. April crude oil soared
again, this time by $2.35 cents per barrel. COMEX Gold gained
$2.20 per ounce. And the Goldman Sachs
Commodity Index improved nearly 14 points to
finish at 431.70. Joining us now to offer
insight on these and other trends is one of our
regular market analysts, Don Roose. Don, welcome back. Roose: Thank you, Delaney. Great to be back. Howell: Don, we had an
exciting week this week and put in a reversal here
earlier in the week in the wheat markets. Is the bottom in? Roose: Well, we think so. We think a lot of these
grain markets have scored a bottom and certainly it
was a positive week for agriculture and wheat was
the number one leader on the grain market. We had basically on the
wheat market if you look at it we dropped off the
top $5 a bushel a few weeks back. We torpedoed all the
way down to $4.27. We ha a double bottom on
wheat, which means we scored a technical bottom
here short-term and really it was led by the world
just finding good support. Russia flour, Russia
interior prices moved up and that really gave us
support in the market. So the wheat market we
think found a short-term bottom. Howell: Did we see exports
improve the situation at all for the wheat market? Roose: Well, remember
not yet, but that’s the opportunity down the road. As we look at other
countries to see if they’re going to have some
weather problems as we move forward, that’s
really probably the thing that we have
to look at now. April, June is going to
be the key for the wheat direction. But funds are caught, like
they are in a lot of these grain markets, they’re
record short caught in the wheat short and in the
regular wheat, soft red wheat also short. So that is the
opportunity. It’s the wrong time of
year to be caught short going into the spring. Howell: Don, you
mentioned weather issues. We’re also seeing weather
issues in the United States. We had a social media
question about that to some extent this week. We’ve got Bradley in
Upland, Nebraska. He said, many acres of
winter wheat didn’t get planted in the Plains due
to abnormally wet weather last fall. How will that affect corn
and soybean acres this spring? Roose: Well, that’s
a good question. I think when you look at
it that is going to be the debate and we’re going to
start to look at that when we see the March 29th
acres and stocks in all positions report
not that far away. Remember, we’re already at
record low 110 year acre lows on wheat so we think
that is going to be some shuffling around on wheat. But the acres are pretty
low already and that’s the one issue. Howell: Don, you mentioned
that wheat was the leader this week. Did we see any reaction
in the corn markets specifically from the
rumored announcement about China potentially
buying U.S. corn? Did that breathe any life
into the corn markets? Roose: Well, I
think it really did. I think, remember, the
wheat market is the thing that really poured the
corn market down to just some, actually we went
down to harvest lows on corn and then we
found some support. And you could see when the
wheat market started to rally the corn market
started to rally. So we think that probably
the corn market scored some kind of a low, much
like the wheat did also. So we think there’s
some upside potential. Howell: Net short
positions are record levels for the corn market
as well for this time of year. What does that mean for
the corn market going forward? Roose: Well, you’re
exactly right. We had a key reversal on
Tuesday on the corn and at that time we were just off
the record short position, 238,000 contracts record
on the corn short and they got up to about
218,000 so a big short. And I think what it really
means, the same thing as the wheat, it’s the wrong
time of the year for the funds to be
caught too short. We need some kind of a
catalyst to push to the upside and I think on
Friday when we saw the Chinese Parliament vote to
protect the foreign IP and IT, I think that really
was a green light and it really shot a lot of the
commodities up as there’s big opportunity in the
hopes that we’re going to see a lot of
agriculture purchases. So we’ll see. Howell: Was that the
reason we saw soybeans also have a pretty strong
close here on Friday? Roose: Well, you’re right. The soybean market also
technically on our systems turned up on Friday. It was wheat first, then
it was corn and then the soybeans last. And I think that is
part of the reason. When you look at it, the
soybean market, a lot of these markets have been
caught in a range but particularly the soybean
market has been caught in a range. So we went down to the
bottom end of the range, now we’re trying to move
back into the middle of the range, and it’s
all on how much buying opportunity is ahead and
then what is the U.S. weather going to be. Howell: I want to
talk about weather. But first, I have this
question for you, Don. When you look at the
rumored sales or even some of the sales that have
been confirmed by China, especially on U.S. soybeans, it seems like
we’re not reacting in the soybean markets anymore. How much of a purchase or
agreement are we going to have to see to spark some
life back into the soybean markets? Roose: Well, a lot of
those purchases have been telegraphed and that’s
part of the problem, we’ve had these agreements,
and then some of these purchases have been
for even next year on soybeans. So they’re
distributed out. And I think if you look
at it from a Chinese standpoint we’ve already
passed our biggest opportunity for exports. And so now we’re really,
it’s South America’s time that they’re up to bat. So I think that’s part of
the problem but it doesn’t mean that we don’t have
some spring concerns. Howell: South America, you
opened the gate there on that as well, Brazil is
nearing the end of their harvest. Are we seeing them taking
up the lion’s share of exports to China
at this point? Roose: Yeah, and that’s
the real problem, our export market is really
in the fall and theirs is just really right now. And I think the other
thing that has happened is Brazil’s crop it was
shrinking, shrinking, shrinking, now it has
stabilized and, as you know, they’re about 65%
harvested so they’re moving along pretty
aggressively along with Argentina. So the soybean situation
is behind us from Brazil. And we’re really turning
from South America to North America on
soybeans right now. And then corn will look
at Brazil and the U.S. as we hit the
spring and summer. Howell: Well we’re hitting
the spring now, we finally got some warm weather. We’re seeing temperatures
rise, but we’re seeing so much flooding across the
Midwest, the Plains. Don, are we going to see
acreage shift here because of delayed planting? Roose: Well, that’s going
to be the big debate because it starts with the
fact that we didn’t get the proper fall tillage
work done so it starts there and then I think
we’re just going to see how the spring goes
because it’s one of those that you’re running into
people in the Delta that are actually with the low
prices that we have on corn it’s wet down there,
it’s wet in the South, they’re actually hoping
maybe they could get some prevent plant acres. So there’s a lot
of strange things. But yeah, we’re coming
up to an important time period and typically we
tried to add risk premium because we don’t know
what’s going to happen in the weather and a lot
of these other issues. And I think this last week
was a good week for the grain market
to the upside. Howell: It was. We’re going to continue
discussing the grain markets in Market Plus. But Don, we’ve got to talk
about the meat markets. They have also had some
fascinating couple of weeks here. The live cattle market is
interesting to me because packers are buying so far
out in advance for April and May. Is that normal for
this time of year? Roose: Well, if you look
back on the cattle market what we had is just a
tough winter, one of the toughest winters we’ve
had for a long time. Our production was
supposed to be up one to two percent in the first
quarter because of the conditions, the weights
down, actually down one percent. But the issue that you
have going forward is we’re going to have the
supplies jump to a 12 year high from the first to
the second quarter. So we’ve got a lot of
supplies coming at us and it’s really going to
be up to the demand. But also on Friday a lot
of optimism that maybe pork buying and also
beef buying by China. So it really was all about
China and the funds are sitting near record long
in the cattle market. We were talking they were
record short in the corn market. So there’s some
fireworks there. But seasonally we usually
put a top in right during this timeframe, Delaney,
and typically we drop $27 a hundredweight from the
winter high to the summer low, that puts you at $102
for a low if we do the average, so you’ve
got to be careful. Howell: Do you think we’re
going to follow that normal seasonal pattern? Roose: I think we’ll
follow a seasonal pattern. We’ve got a $13 a
hundredweight built in now but I think it’s going to
be something less than that. You would think more like
a $109 low would probably be more realistic just
because the hog prices are just on fire. Howell: Okay, let’s talk
about hog prices because they had so much
excitement this week. Over the last two weeks
they have put on $12 in the lean hog markets. Is it all spurred because
of Chinese buying? Roose: It’s all
about China. And I tell you, the hog
market really was the darling of agriculture
this last week. And I tell you, when you
look at it, it’s just a series of events. We had hog prices went
way too low just recently because China was
liquidating their herd and putting those supplies
into the pipeline, then it just did a 180. A week ago pig prices
jumped $10, 10% over in China. That really was
the start of it. And then we did have on
our export sales China bought 50% of our exports
and their breeding herd looks like it’s down
somewhere around 19%, their overall
supply is down 16%. So does that equate to big
buying in the U.S.? The market voted that it
does, but we’ll see. Howell: Don, let’s assume
China is going to continue buying. How much higher are we
going to head here in the lean hog markets? Roose: Well, and that’s
it, that is the question because we had the PED
virus of 2014 and we shot up into the mid-$130s
pretty fast. So do we have that
type of market? Usually in markets like
this we have July hogs around $89, you usually
try to hit these big round numbers, that’s $100. We’ll see. But it’s a market that is
very overbought right now and very dependent on what
the Chinese do from a buying standpoint because
I can tell you, the government put out their
outlook, they’re looking for, just for example the
fourth quarter, 50 to 56, they’re looking for
supplies to be up 3.5% in the fourth quarter,
third quarter up 4%. So there is a big
disconnect between what the government is saying
and what the market is voting on the
Chinese to be. Howell: Don, your
quick thoughts here. Crude oil continues
to chug higher. We hit the highest
levels since November. Ten second thoughts on are
we staying here or going higher? Roose: Well, I think we’re
rangebound so I would expect we’re going into
the season where we usually push
up on energies. I imagine we follow a
seasonal pattern but I think it’s limited
to the upside. Howell: All right, Don,
we’re going to continue talking about some of
these things, feeders, cotton, we didn’t get to
those, but we’re going to hit them in Market Plus. Thank you so much. Roose: 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 MarketToMarket.org. A reminder, many PBS
stations are in their fundraising mode and this
program may be shifted to different time slots. Please show your support
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Market and invest in accurate information and
timely market analysis. Join us again next week
when we look at the challenges of moving back
to the farm as many others have left rural areas. 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. ♪♪ Accu-Steel,
offering fabric covered buildings specifically
designed for the cattle industry since 2001. The next generation
of cattle buildings. Information at
accusteel.com. ♪♪

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