Market to Market (September 20, 2019)


Coming up on Market to
Market — Calling on the past to push the
future of trade. Biofuel supporters want
less talk and more action. The wind industry hits
resistance in a key state. And market analysis
with Sue Martin, next. ♪♪ Pioneer Hi-Bred
International is a proud sponsor of
Market to Market. Tomorrow. For over 100 years we
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for tomorrow. Trust in tomorrow. Information is available
from a Grinnell Mutual agent today. ♪♪ This is the
Friday, September 20 edition of Market to
Market, the Weekly Journal of Rural America. ♪♪ Hello, I’m
Delaney Howell. Despite threats of an
economic slowdown and the potential for a
recession the U.S. economy is showing
signs of good health. Housing starts jumped
12.3 percent last month on a surge in apartment
construction. Existing home sales rose
1.3 percent – a 17-month high. The Fed cut interest rates
by a quarter point even with dissension among
the board of governors. Creighton’s 10-state Rural
Mainstreet Index climbed above growth neutral as
stalled Chinese trade talks reduced banker
confidence. There was another campaign this week
to get some trade momentum going. Speaker of the House Nancy
Pelosi says the bill could pass but House Democrats
remain concerned about the enforcement of labor
and environmental laws. Peter Tubbs has more. Sonny Perdue, U.S. Secretary of Agriculture:
“Agriculture in this place, in this city, is
the probably the least partisan issue that
anyone can talk about.” Thursday, four former
Secretaries of Agriculture spoke in support of
passage of the United States – Mexico – Canada
Agreement, or USMCA. The update of the North
American Free – Trade Agreement, known as NAFTA,
has been waiting for a vote in Congress
since late 2018. John Block, Dan Glickman
and Tom Vilsack joined current Secretary of
Agriculture Sonny Perdue to endorse the
new trade pact. Dan Glickman, U.S. Secretary of Agriculture,
Clinton Administration, 1995-2001: “That
uncertainty would be much worse if we didn’t get a
trade agreement with our partners, our neighbors,
Mexico and Canada. After all, if we can’t
work out with them, we can’t work out
with anybody. Then farmers face really
serious problems and anxieties.” Tom Vilsack, U.S. Secretary of Agriculture,
Obama Administration, 2009-2017: “Thirty percent
of what’s grown, raised, harvested this year and
every year from America’s farmers, ranchers and
producers ultimately ends up in an export market. Not only does it help
support farm income, a number of
good-paying jobs.” The elimination of
Canada’s Class 7 dairy classification was singled
out as a victory for American dairy producers. The U.S. had charged that the Class
7 classification had kept American dairy protein and
powdered milk solids out of the Canadian market,
depressing the global price for those products. Tom Vilsack, U.S. Secretary of Agriculture,
Obama Administration, 2009-2017: “So for U.S. dairy, we know from the
ITC report that this is about $300 million dollars
in additional business opportunity that can
be created through the ratification and
implementation of USMCA.” Eight former Secretaries
signed a letter in support of passage of the USMCA. Representing the
last six Presidential administrations, and
from both sides of the political aisle, the
Secretaries argued that the USMCA is an
improvement over NAFTA, and passage would give
momentum to negotiators working on other pending
trade agreements. John Block, U.S. Secretary of Agriculture,
Reagan Administration, 1981-1986: “The
secretaries of Agriculture, both parties,
are standing shoulder to shoulder, saying to the
Congress, go ahead and pass this legislation. Because that’s the first
step, that’s the first step, get that done.” For Market to Market,
I’m Peter Tubbs. Last week the
Environmental Protection Agency was cheered by
rural America for revoking the 2015 Obama-era
WOTUS rule. However, the EPA’s actions
on refinery exemptions have spoken volumes
to rural America. Paul Yeager has the story. The White House is again
at the center of the debate on biofuels. Late last week, farm-state
representatives made their case to reverse the
Environmental Protection Agency’s granting of 31
waivers for oil companies on blending requirements. Iowa Senator Charles
Grassley said what transpired in that session
is a win for all sides in this discussion, but still
wants a deal in writing. Senator Charles Grassley,
R – Iowa: “We left that meeting satisfied that if
it comes out on paper, because EPA writing it and
you know, I think a big oil has too much
influence in EPA. But if it comes out on
paper, the way that we orally had a discussion
with the president and everybody seemed
to be satisfied.” Currently, the Renewable
Fuel Standard sets the blending level at 15
billion gallons of corn or starch-based ethanol. However, that mark was
missed in 2018 and has been short of the mandated
goal since 2014 according to a report from the
Congressional Research Service. What started at 4 billion
in 2006 aims to hit 36 billion gallons of all
renewable fuels by 2022. The president has outlined
support for renewable fuels such as ethanol. But as Senator Grassley
said last week, not everyone in the Trump
administration carries the same opinion as
the president. This week, oil state
senators were going to get their turn at the White
House to make their closing argument
on the issue. Senator Charles Grassley,
R – Iowa: “I shouldn’t have to go back to the
president and say anymore. If the President and the
people advising him say we have a deal,
we have a deal. And what better deal could
you get and then the small refiners can get their
waivers and we’re going to get the use of ethanol
what we were promised under the law.” For Market to Market,
I’m Paul Yeager. In the 1970s, renewable
energy was touted as a way to save the planet. Power companies resisted
saying fossil fuels were the most reliable, cost
effective method of producing energy. Today, power producers
like Mid-American Energy, have changed their tune. But, as producer John
Torpy discovered, there are detractors to the
energy giant’s work to employ renewables. It should be noted that
Mid-American Energy helps fund Iowa Public
Television, where Market to Market is produced. In recent decades, the
number of whirling blades scraping Midwestern skies
has grown steadily across the nation’s midsection. That growth may soon have
to contend with the loss of a primary building
block – the Energy Production Tax Credit. Nat Sound Break In
the early 1990’s, the tax-deferred program
passed through Congress, helping stabilize and
expand the use of renewable energy. The credits helped
companies like Iowa-based MidAmerican Energy invest
heavily in wind energy production. In 2016, nearly half of
the power provided to customers was produced
by wind turbines. The company plans on
making 100 percent of its power portfolio
renewable by 2021. The tax credits also
spurred growth in the industry and helped wind
power producers update aging infrastructure. MidAmerican officials
say the credits made it possible to pay for the
upgrades without passing the cost along
to customers. Spencer Moore, VP of
Generation, MidAmerican Energy: “… as we look at the project,
the real benefit for our customers is that we’re
going to get a million, about a million
megawatt-hours a year of additional energy out of
these existing projects.” MidAmerican, like other
wind energy providers, is working on a
tight timetable. With passage of the
Bipartisan Budget Act of 2018, wind energy
businesses may be witness to the curtain call for
Energy Production Tax Credits. Wind energy projects
starting construction by December 2019 are eligible
for the full credit. Projects starting after
2019 will see the credit shrink by 20 percent per
year until the program expires in 2022. NAT Sound Break Those
companies working to expand their production
capacity also face hurdles in communities where the
towers are being erected. Some landowners charge
that sight and noise pollution hurts property
values as well as creating a potential health risk. Environmental groups
contend the turbines are a threat to bats and birds. However, according to U.S. Fish and Wildlife data,
the number of birds killed by buildings is 1,500
times greater than the number of birds killed
by wind turbines. Further, a 2014 National
Institutes of Health study revealed noise and visual
complaints had more to do with who was receiving
economic benefit from nearby wind farms. And three university
studies showed wind farms had no impact on
housing prices. In the town of Winterset,
Iowa, residents on both sides of the wind energy
discussion packed a Madison County board of
supervisor’s meeting to capacity. At issue is a proposed
one-year moratorium on new renewable energy projects. The complaint centers
around MidAmerican’s recently secured
permission to build 52 new wind turbines in the
southwestern Iowa county. These structures will rise
almost 500 feet above the landscape, be 1,500 feet
from the nearest home, and cost nearly $3
million dollars each. A large percentage of
those living in the construction area signed
a petition to delay the project. Following a recommendation
by the County Board of Health, county supervisors
met to weigh the merits of the idea. Alan Lange, Winterset,
Iowa: “I do think that it’s time to take a step
back and consider the concerns that the
community, that the community has
brought forth.” Some attendees showed
their support for the wind industry. Bonnie Halgen, Winterset,
Iowa:” I just want to be the personal face of the
10,000 rural Americans who are working in wind and
a time when more young Iowans are leaving our
state, looking for good paying jobs. I think it’s important the
decisions that we make to help keep our young
people at home.” Other residents felt
energy companies are pushing new construction
through without giving local residents any
time to ask questions. Mary Jobst, Earlham, Iowa:
“MidAmerican Energy claims they are a moral and
ethical company that is obsessively, relentlessly
at our service. A moral and ethical
company, who is a good neighbor, does not force
wind turbines on people who do not want them.” Officials with MidAmerican
Energy point out wind energy has a proven
economic benefit for rural communities. Adam Jablonski, Director
of Renewable Energy, MidAmerican Energy:”
We’ve got land owner participation. We’ve got, you know, over
2,600 operating turbines across state. There’s more than 4,800
turbines currently operating across
the state. Some more than two decades
in a, we, we, we didn’t know why there was
an issue with this particular, you know,
handful of turbines here. Um, so let’s, we’re coming
just to make sure people get the facts when they’re
making their decisions.” Some of those sitting on
the board of supervisors worry the bigger
structures will have an unfavorable impact and
question the motivation of those who approved
the project. Diane Fitch, Madison
County Supervisor: “I think this is, weak kneed
pandering politicians that buy into big corporate
America and they have huge lobbyists and they’re
giving our money. It’s our money. It’s not their money. It’s our money that
they’re taking and putting these up. I don’t think it’s fair.” After all the voices were
heard, the three member board of supervisors voted
2-1 in favor of a one-year new construction
moratorium. The ruling must survive
two more votes before it takes effect. For Market to Market,
I’m John Torpy. Next, the Market
to Market report. The commodity markets were
mostly steady as demand bears pushed back
against supply bulls. For the week, December
wheat was flat while the nearby corn contract
gained 2 cents. As the threat of a
September freeze fades and Chinese trade negotiators
backed out of a U.S. farm tour the November
soybean contract fell back 16 cents. December meal lost
$6.50 per ton. December cotton dropped
$1.76 per hundredweight. Over in the dairy parlor,
October Class III milk futures lost 50 cents. The livestock sector ended
mixed as October cattle added $1.27. October feeders
put on $4.62. And the October lean hog
contract shed $6.13. In the currency
markets, the U.S. Dollar index
gained 32 ticks. October crude oil rose
$3.25 per barrel. COMEX Gold rebounded
$24.70 per ounce. And the Goldman Sachs
Commodity Index jumped more than 16 points
to finish at 419.85. Joining us now to offer
insight on these and other trends is one of our
regular market analysts, Sue Martin. Sue, welcome back. Martin: Thank
you, Delaney. It’s nice to be here. Howell: Sue, I’m glad
to have you on the show today. There’s certainly
a lot to discuss. We’re going to kick off
our discussion with a social media question
coming to us here from Tim in Crookston, Minnesota. He said, will the spring
wheat crop become feed wheat? Martin: Well, with all the
rain that they’ve had one would think yes. But the crop is about
80%, 85% harvested. So I would have to say
that there’s a fair amount of good quality
wheat still there. Reading various websites
in the area it sounds like the wheat is in better
condition or quality than what was originally
thought. So I think that we’ll have
a good supply of quality wheat, milling wheat. But still it’s too wet
at the time to finish up harvest but they’re
on the downhill slide. Howell: Well Sue, speaking
of harvest, here within the next week or two we’re
going to start seeing a lot of combines rolling
across the Corn Belt. When you look at the corn
acres in particular how long until we have
a yield estimate? And I also want to add in
there, how long until the market starts to factor
in those numbers that the combines are rolling with? Martin: Well, it’s going
to be interesting because that is what is going to
help drive this market if the yields are down as
much as what some of the public thinks. The USDA, the WASDE was
very quick to drop back in June and then they raised
it a little bit and then dropped back here
in September. But the bottom line is I
think that we’re going to see NASS, they’re going to
have a better handle on it as they get more
into October. This heat that we’re
seeing is very abnormal for this time of the year
and it is probably sort of a double-edged sword in
Illinois and Indiana and Ohio, Wisconsin, Michigan. But it is bringing the
crop along better. And your nighttime
temperatures are staying over 70 degrees so that’s
transferring sugar into starch and that’s putting
weight into that kernel. So the fear of a
frost/freeze, which would have killed the crop and
stopped it right where it was at, is kind of passed
for now and so the trade is looking at it that gee,
we keep pushing this out a week and a week and a week
that this crop just may make it home. Our weather sources
believe that we will see, especially the eastern
half of the U.S., enjoying a prolonged Indian summer
and that is just about the way it seems like
it’s coming off. So for now the market is
not getting fed any more positive news to push it. But if we fall back and
then all of a sudden we start hearing the yields
that is going to certainly turn this market around
and give us another step higher. But for now $3.75
seems to be static. Howell: Sue, for a while
there we were talking about maybe the
potential for $5 corn. Is that out of
the question now? Martin: I think
for now it is. We need to see this
market, first off do we take out last year’s lows? No, I don’t think so. That would be
$3.42 and a half. But I will say underneath
that there’s a gap down to $3.38. I don’t see that on corn
where we’ve had wheat that did not make higher highs
for the year came down and took out all the way back
to 2015 the lows of the years in between so that
weighed on corn and it’s struggling because there’s
just so much wheat in the world and we’ve got Russia
underpricing us, although they’re going to be
dealing with some pretty cold temperatures here in
grain country, especially north of Ukraine, and then
we’ve got France’s wheat crop looking awfully good. So we have competition. And there isn’t a lot of
talk about Australia. But I think the market
more than anything is just lacking news. And in the path of least
resistance in that kind of environment it’s
going to be softer. So I think that when we
look at the corn market I think we’re seeing a
subtle shift towards maybe the smart money kind of,
as Shawn Hackett would say, start to maybe look
at the long side but they certainly aren’t
full bore yet either. And the bean market is
kind of the same way and we made higher highs this
week — Howell: In the bean markets. Martin: Yes. And then closed the week,
well we did I think in corn too, and then
closed the week lower. So that is certainly going
to portend to us that we’ll probably see lower
lows next week to start with. Howell: Sue, there was
definitely no shortage of news for the soybean
markets on Friday with the announcement of the
Chinese canceling their U.S. farm tour. Monday do we rebound from
our poor closes on Friday? Martin: Well, if we do I
don’t think they’ll hold because I do think that
this week’s lows are going to be tested and come out. We thought, you’ve got
such a huge key reversal month going in beans and
so we kind of expect that maybe we’ll hang onto a
decent monthly close at the end of the month
because we’re going into October and we
have anticipation. I feel like we’re just
doing a dance with the Chinese. They must have needed to
buy more beans and needed them cheaper so they just
pulled back away and President Trump was saying
we want a deal not just on agricultural buying, we
want it across the board. And so they kind of turned
around and said, well we’re not going to
go visit your farms. Well, that was behooving
them more than it was us anyway. So I’m not sure. The trade looked at it as
oh, things are going bad again. But to be honest I just
think it was a dance and a ploy and there’s rumors
that they have bought two to three cargos of beans
today out of the Pacific Northwest. But the other thing
is that they’re also inquiring about offers
out of Brazil and so for another two to
three cargos there. So we’ll see what happens. But it’s just, I just
call it a dance, it’s manipulation. Howell: It is. Sue, when you look at the
soybean situation, China out of the picture, based
off of last week’s report has the soybean picture
changed for you with the change in the carryover
or ending stocks? Martin: I think that the
bean yields aren’t going to be what
everybody expects. I think this heat is
bringing them on too quickly. It’s helpful if you’re
catching rain along with the heat, that might help. But I think the crops are
being pushed and I don’t think that’s a
good thing overall. I think demand is very
good for soybeans besides China. If there’s one good thing
at the end of the day about this it’s that we
have looked elsewhere for other buyers around the
world and solidified ourselves being
more diversified. In the meantime China was
already staring to do that before these trade tariffs
ever went into effect. So it’s all a lot
of psychology. We’d love to have Chinese
buying back and in full force. It may be something that
we have to earn back. They’re going to use it
to their best advantage. Howell: Yes they will. And we’ve seen that
continued on with the trade talk disputes. Sue, let’s talk about
what’s going on in the livestock markets. In particular, give us the
update from today’s cattle on feed report. Anything to note there? Martin: Well the
placements number was the positive number. It was down at 91% as of
September 1st and that was a lot lower than
the average guess. The average guess was
I believe around 94. And that is down I want to
say about 8% from a year ago, something like that. So that is a positive
towards February cattle. In the meantime, the
marketings number was right in line with the
lower edge of the guess, which was only 98%
to 99%, so 98%. And then the on feed
number was at 99, just right under 99. So I would call the report
pretty friendly actually. But the one thing I will
say is as we move forward in cattle going into the
first quarter of next year it would be nice to be
bullish because of the fact that we’ve got very
good economy, demand for proteins is very good and
we’re seeing that in cow slaughter. Cow slaughter is up
dramatically from a year ago so that’s a plus. But in the meantime I
think that we have to keep one thing in mind that’s
different this year possibly, we won’t know
yet until we get there, but a year ago remember
our winter was horribly awful with vortexes and
snows and that type of thing and bitterly cold. If we’re not quite like
that this year coming up then that is going to mean
that cattle will gain weight better and be
moving more aggressively as opposed to getting
backed up or whatever. Howell: Okay. Sue, we’ve got to of
course talk about the lean hog markets. It seemed like last week
they had some wind in their sails. This week they
pulled back 9%. Is a turnaround not in the
cards for the lean hog markets? Martin: I think the hog
market first off, when we look domestically the hog
producer is basically expanding or
planning to expand. In the meantime so is the
Canadian hog producer because they’re looking at
exports being better this next year and they too
because of Chinese ban on their pork they are making
inroads in other markets. The U.S. is still their largest
importer or buyer of their pork and beef. But in the meantime the
producer because of probably optimism with the
thought of getting some more business down the
road from China they are expanding. And so sow slaughter is
down pretty decently from a year ago. I think in August we were
down about 4.7% and we dropped dramatically
in July and in June. So I think that that’s a
little concern because we’re certainly going to
see more pork production and also more
numbers coming. In the flip side though,
the demand for pork I think is going to still
hold good and our export markets if we could get
something going, after all the U.S. has a beautiful product,
virus free, I would have to think that should at
some point China will need it and they’ve got their
lunar new year coming around so they’re going
to be buying pork. They wouldn’t have
included pork in this rollback of tariffs if
they hadn’t have planned on it. Howell: Absolutely, Sue
Martin I’m going to cut you off there. We’re going to keep the
rest of this discussion for Market Plus. Martin: Okay. 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. Harvest season provides
some great opportunities for photos. Search IPTVMarket on
Instagram and keep track of what we capture
in the field. Join us again next week
when we’ll look at the flipside of spring’s bomb
cyclone in one region of the country. 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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