Market to Market (February 21, 2020)
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Market to Market (February 21, 2020)

February 29, 2020

Coming up on Market to
Market — Immediate Chinese buying fails
to materialize. The race to complete levee
repairs before flood season kicks
into high gear. Helping landowners return
some of their ground to native prairie. ♪♪ And commodity
market analysis with Shawn Hackett, next. ♪♪ Pioneer Hi-Bred
International is a proud sponsor of
Market to Market. 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. ♪♪ Tomorrow. For over 100 years we
have worked to help our customers be ready
for tomorrow. Trust in tomorrow. Information is available
from a Grinnell Mutual agent today. ♪♪ This is the
Friday, February 21 edition of Market to
Market, the Weekly Journal of Rural America. Hello, I’m Paul Yeager
The next steps of the cease-fire for the
18-month old trade war with China were
taken this week. The world’s number two
economy reduced tariffs on nearly 700 U.S. products including
soybeans, pork, corn and wheat. The reaction in farm
country remains cautiously optimistic. The Phase One trade deal
between the United States and China was signed in
January and official implementation
is underway. U.S. traders hoping for Chinese
buyers to purchase large amounts of U.S. commodities have yet to
see their hopes come to fruition. Grant Kimberly, Market
Development, Iowa Soybean Association: “I’m not
going to anticipate we’re going to see huge amounts
of soybean sales to China beyond just what normal
sales would be until we get into next fall. Because there’s a caveat
in the agreement that we had to be price
competitive. Well, South America has a
record crop that they’re starting to
harvest right now. It’ll probably be
difficult for us to be consistently price
competitive over the next six months.” The South
American crop is moving through the system and,
for now, remains the cheaper
alternative to U.S. soybeans. Commodity groups are
continuing to look for new markets that may initially
import only one or two million bushels
of product. Grant Kimberley: “You
know, we as a soybean industry continue to work
to diversify our markets beyond China,
unfortunately, China buys 60 percent of the world’s
soybeans, so there still the biggest market and
always will be for quite a while in the future here,
but we’re working in other markets to develop those
demand picture for soybean producers.” President
Trump signed an order this week giving California
farmers and ranchers greater access to
water resources. The move spawned a
lawsuit by the State of California. The action comes as
reduced snowpack in the Sierra Nevada’s indicates
a western drought is looming. Farther away from the
California sun — rain, snow and high water swept
from the Midwest to the eastern seaboard. Peter Tubbs kicks off
our weather coverage. The flood season of 2020
started early in the South. Heavy rain in Tennessee
turned fields into lakes. Transportation officials
closed roads as water moved up in the
flood-ravaged region. The heaviest rain extended
from Louisiana, through Mississippi to Georgia. Homes around Mississippi’s
capital of Jackson, were sent from their homes and
told not to return until given the all-clear. This neighborhood is near
the Pearl River and a reservoir held and allowed
for a slower release of upstream water coming
towards Jackson. Some residents had to
paddle into their homes to check on belongings and
conduct property checks. Winter spread to the
Southeast this week as snow fell in North
Carolina and Virginia – areas that rarely see
conditions like this. Here in Raleigh, the
capital was forecast for only an inch, but
other locations in the northeastern portion of
the state could be in line for six inches and
whiteout conditions. For Market to Market,
I’m Peter Tubbs. And this is John Torpy
in Hamburg, Iowa. Some refer to spring as
the season of renewal. For those living along the
Missouri river, the only thing being renewed is
fear over another year of flooding. In 2019, the southwest
Iowa city of Hamburg was inundated by flood
waters on three separate occasions. The Missouri River
destroyed countless homes and left farm
fields in ruins. Damage to buildings and
property was well over the billion dollar mark. While there are
predictions of flooding in states bordering the
Missouri River this year, officials with the
National Weather Service say it won’t be as
bad as last year. Dave Pearson, Service
Hydrologist, National Weather Service:”
Everything just looks like at least minor flooding is
a virtual certainty for parts of the Missouri
river.” As planting season approaches, farmers living
near Hamburg have the additional worry of
broken levee repair. Crop insurance agreements
hinge upon the completion of these projects that
protect flood prone communities and
farm fields. Construction crews must
complete their work by April 11 or producers
could see their flood insurance rates triple. Doug Aistrope, agent, Farm
Bureau Insurance:” There are just a lotta of
unknowns which makes it really hard for us, the
farmers, and everybody else to figure out
where do we go? Do we go 75% level? Do we bumped it up? The price is already going
up, can we afford a bump it up? There’s just a lot of
scenarios that we don’t know, and we gotta make
that so you my March 15.” Previous predictions
of spring flooding are already coming to pass
in the Cornhusker State. Residents of Fremont,
Nebraska are enduring rising floodwaters due to
an ice jam that formed just south of
town where U.S. Highway 77 crosses
the Platte River. As the ice melts, towns
downstream could see the river climb out
of its banks. The water will eventually
join snowmelt from the Dakotas that National
Weather Service officials are saying will bring
rising flood waters to Iowa, Missouri, and
Nebraska in the coming months. For Market to Market,
I’m John Torpy. At one time, most of the
Midwest was prairie. Now, the millions of acres
that are tilled help feed a hungry planet of
nearly 8 billion. But there is a movement to
put some of the land back into native
grasses and plants. Peter Tubbs has more
in our Cover Story. Workers slowly harvest
ripe seeds on a September morning. The rows of Anise Hysop
are part of the 365 acres of plants and grasses at
Prairie Moon Nursery near Winona, Minnesota. Surrounded by corn,
soybean and dairy operations, Prairie Moon
is notable for managing a diverse harvest. Bill Carter, President,
Prairie Moon Nursery: “Well, we have a lot more
crops, lots and lots of crops. We about 750
different species. Not all grown here but
the vast majority of them are.” The 750 varieties
are plants that covered the prairies of the upper
Midwest for millennia before the plow broke the
sod in the 19th Century. As landowners
have considered non-agricultural uses for
farmland over the last 50 years, returning areas to
the original plant base has gained popularity. Prairie Moon has found a
business niche supplying seeds for restoration
projects both public and private. While raising seed is an
agricultural process, the details are different
compared to neighboring farms. Bill Carter, President,
Prairie Moon Nursery: “and many of our plots were
whole harvest multiple times. You know, we’ll get the
earliest crop off of it, we’ll come back, hand
collect another. You can get a lot, a lot
of seed faster by growing as a monocrop. You just can’t do that
with every species.” Prairie Moon grows most
of its own inventory, focusing on species that
are rare or difficult to grow. Common varieties that
are simpler to grow and harvest are purchased
from growers in the upper Midwest and New England
to maximize the diversity within each cultivar. While seeding native
plants benefits the soil and reduces erosion, these
species also feed the insects that pollinate
agricultural crops and other plants. Kaitlyn O’Connor,
Education & Outreach, Prairie Moon 2:40 “They
produce that habitat that a lot of our species need. Um, and they also have
benefits to a soil and water quality, especially
as it relates to soil erosion and water
pollution and runoff.” Harvest stretches from
late May to early November. The winter months are
spent cleaning, packaging, and shipping orders. Some varieties are grown
out and shipped as live plants, but the majority
of the offerings in the company’s catalog
are seeds. Most of the varieties
offered for sale are grown in plots, which allows
for easier weeding and harvest. But some of the plants
only grow in a naturalized stand, as they would
in a native prairie environment. Prairie Moon advises
landowners looking to install native plants
on their property. The goals of the landowner
and the conditions on the ground shapes the kinds
of varieties that are planted. Kaitlyn O’Connor,
Education & Outreach, Prairie Moon “Every piece
of land has a historical context in terms
of habitat. … But I think what
more and more people are realizing is that we have
our own unique habitats here in North America,
like the Prairie that 99 percent of that habitat
has been plowed under or paved over since the 1830s
and so there is real work that we can do right here
at home.” Prairie projects run the gamut from
ornamentals in the yard of a homeowner to a
preservation site surrounded by full
mechanization farm fields. Kaitlyn O’Connor,
Education & Outreach, Prairie Moon “First
you want to have a conversation about the
homeowner’s goals. What exactly is it that
you want to achieve? Are you hoping to get a
government contract cost share through the
NRCS or the FSA? That’s going to be a
certain type of project. Are you an urban land
owner who just wants to attract birds so that you
can do some bird watching from the kitchen window? Well that’s going to be
another type of project that we can help
with.” Some prairie reconstructions look to
return a farm field to the plants it may have hosted
before agricultural cultivation. The State of Iowa has
planted hundreds of miles of highway right-of-way
in native plants to both provide habitat for
pollinators and birds as well as reducing mowing
costs each summer. Iowa is the only state
with this kind of program. A hillside that drains
into a creek in Whiteside County, IL was converted
to native prairie 20 years ago. Part of the projects seed
stock were produced by Prairie Moon. Since the restoration, the
erodible farm ground has stabilized, and the
creek now runs clear. The improvement in water
quality may be long term due to the work of the
Hardin family which owns the land. This corner of the farm
is rented ground, but has been placed under an
easement that limits the types and techniques of
agriculture the renter can utilize, and requires the
areas of prairie and trees remain undisturbed. Steve Hardin “And it’s
sort of a unique that it’s um, one, one of the few
agricultural easements, um, where it’s, it’s
for perpetual, either agriculture use or
preservation use.” The prairie and hardwood
plantings run for nearly a mile along Otter Creek,
which drains into the Mississippi River
8 miles downstream. The mix of grasses and
plants provides food and shelter for a variety of
birds and wildlife, and filters the water that
flows off the strip. The Hardin family
enjoys continuing the conservation work their
Grandfather began in the 1950’s with the first
terraces in the region. The original prairie
planting was done by their late Grandmother in 1998,
and has matured over the past 20 years. Steve Hardin 9:13 “Just
um, going there and walking it, it just has a
whole different feel than the rest of the farm and I
don’t know exactly how to explain it… it’s just quieter there
and something’s more serene about it when you
walk it.” Steve Hardin “We’ve started now with a
couple of people in the area. We, one other person had
some interests, so you never know. Maybe, maybe it’ll catch
on.” For Market to Market, I’m Peter Tubbs. Next, the Market
to Market report. The commodity markets
chopped around waiting for news from the Outlook
Forum and then a Friday morning tweet from the
President was added into the mix. For the week, May wheat
bumped up eleven cents and the nearby corn
contract lost a penny. The May soybean contract
fell 4 cents as Chinese buying failed to
materialize and South American prices continue
to be more attractive. May meal dropped
$1.80 per ton. May cotton rose 59 cents
per hundredweight. Over in the dairy parlor,
March Class III milk futures lost 38 cents. The livestock sector
finished mixed. April cattle shed $2.08,
April feeders added 72 cents and the April lean
hog contract put on $2.73. In the currency
markets, the U.S. Dollar index
rose 19 ticks. April crude gained
$1.12 per barrel. COMEX Gold skyrocketed
$59.80 per ounce. And the Goldman Sachs
Commodity Index added more than 3 points to
finish at 400.20. Joining us now to offer
insight on these and other trends is our one of our
regular market analysts Shawn Hackett. Shawn, welcome back. Hackett: It’s always
great to be here, Paul. Yeager: So we have this
tweet and it comes less than 24 hours after the
Secretary of Ag said, there won’t be another
round of MFP, then the President says this. The markets initially
bounced higher and then they turned red on Friday. What are we supposed
to take from these two conflicting stories
moving forward? Hackett: It has been the
continued trend of the Trump administration where
one hand is not talking to the other hand and it
seems that the President gets very impulsive with
what he wants versus what supposedly his Secretaries
are doing and so it just creates massive confusion
and markets just don’t know what to do. And you said, choppy
markets, chopping around up and down. What are you supposed to
make of a President says one thing and the
Secretary of Ag who is supposed to know exactly
what is going on is saying something else? It just puts uncertainty
at a time when we have plenty of uncertainty
to be dealing with. Yeager: Wheat was hit
particularly hard on Friday but this market has
been looking, as Chinese interest comes in, but the
90 day weather forecast is cool and wet. What is playing
into this market? Hackett: Well, the wheat
market had a big rally because Russia had two
bad crops in a row, their exports are way down,
export prices started to take off but then all of a
sudden we had this capital flight coming
into the U.S. dollar and because we are
such a global market when that dollar starts to take
off we start to become very quickly
uncompetitive. And if you look at the
dollar rise just in the last week, week and a
half, the wheat market has fallen pretty
precipitously in direct reverse correlation
to that. So we really think this is
a very highly correlated currency move than
anything else. Yeager: We’ll get into
currency in a moment. But the dollar up almost
two and three-quarter year highs. So you’re saying that
is weighing some of the hardest on wheat? Hackett: It is because
when you deal with corn or soybeans it’s us and South
America and it’s not as broad. But with wheat we have
Australia, we have Russia, we have the Ukraine, we
have the U.S., it’s such a broad base of production
that the dollar has a disproportionate
effect on U.S. wheat prices when the
dollar gets going. Yeager: We’re making an
11 cent gain on the week. Are you making sales yet? Hackett: On soft red
winter wheat we want to be making some sales,
we really do. Our smart money algorithm
that measures capital flows is heavily bearish
and we’re starting to move up into the upper end of
the trading range that has been pretty hard to get
through and we don’t think it will get
through this time. Yeager: Corn has
been a major story. Coming out of the forum,
again more acres. We’re looking at 94
million acres and we keep looking at this, there
is too much corn. Is there? Hackett: Well, our corn
stocks are way down from last year. We did have a small
crop last year. But if we do plant 94 or
95 million acres of corn and we have the demand
base that we do, the USDA is projecting 2.5 billion,
maybe 3 billion bushels of corn, that’s a really
tough number to get through. And so we need something
to change that up, either acres don’t get planted
like last year or some kind of weather comes into
South America or the U.S., but right now so long as
that is the forecast corn is going to struggle here. Yeager: All right, so do
you sell now before it goes lower? Hackett: I think you have
to get some on the books now, Paul. Our forecast is a little
bit different than the one you mentioned earlier. We actually see an early
start to the planting season this year, early
spring, some really dry actually conditions in
the middle of the spring. What it means is record
early planting, record planting pace and we know
what that means, it could mean even more corn acres
than the 94, 95 million. So we’re really worried
that the corn market could kind of nose dive like it
did last year but for an entirely different reason. So we will get some
on the books here. Yeager: All right. So a lot of acres
going to corn. Is it coming
from soybeans? I’ll get your take
on that in a moment. But the other thing that
is playing in the soybean market right now, Shawn,
is this story with the Brazilian Real. And we got our first
question that we’re going to use, this one came
via Twitter, Bradley in Upland, Nebraska. He’s asking, how much
cheaper can the Brazil Real get? Hackett: We are at
all-time record lows. So the answer is we have
really no idea how far it could go because there’s
no other point on the chart that says
it will go here. Yeager: And so what
does that mean then for soybeans for us here in
the U.S.? Hackett: It just means we are going to
continue to struggle. We talked about the price
difference, South American being more competitive
than the U.S. price, the worse the Real
weakens the more it makes that price differential
more difficult to compete with. Yeager: All right. Are we making
sales short-term? Long-term? Hackett: We’re pretty
constructive on grains beyond the next couple of
months so we don’t think this is a time to sell it
all and be done with it for the year. We want to get some on the
books, get some done, I don’t think anyone wants
to endure what we think it going to be a pretty tough
spring, but we think there’s light at the end
of the tunnel as we get beyond that and we want to
save some powder dry for some late spring,
early summer sales. Yeager: Save an
opportunity if there is some type of blip whether
it’s a weather problem here? Is that what
you’re saying? Hackett: We think it’s
going to be a weather problem here. We think it’s going to be
more of a drought like conditions in the
mid-to-late spring that’s going to make early
planted grains compromised and have the market, who
would be trading early planting makes grain, say
wait a minute, now all these early planted acres
are not going to maybe be as good as we thought,
we have to recalibrate. And so we think we’re
going to get a similar V kind of a pattern when we
come out of that and that gives us our opportunity
to get a weather rally going like last year and
get a chance to sell. Yeager: All right. Acreage battle, cotton is
always figured into that. Cotton up this week but
it’s wet in the South right now. Hackett: Yeah, the South
is very, very wet. Already the USDA has
dialed down cotton acres. So if the weather remains
that wet and that unfavorable, the cotton
acres are going to be tough to bring in. We, however, just because
of what we just said with the grain markets, corn
probably getting hit, soybeans coming down, we
think that cotton could look a little better a
month from now than it looks today. Obviously it’s always
a moving target. But we’re not so sure that
we’re not going to put some acres in, especially
the state of Texas where we think the weather won’t
be quite as daunting as it is in the Deep South. Yeager: They’re growing
cattle in Texas as well. We know today the cattle
on feed report came out. Placement was 99% of
what was expected. That is below the
estimate there. But we also had another
number at 102.10. Hackett: Yeah, the cattle
on feed was pretty close to what everyone
was looking for. The placement was
certainly off. When you look at the whole
report I don’t think it’s going to take the cattle
market away from what it is really focused on
right now which is the coronavirus and demand
issues, especially from Japan. We’ve seen some pictures
that Japan, some cities, some areas that are
supposed to be bustling are really, really quiet
because people are worried and just staying inside
even though the virus isn’t proliferating there
as it did in China, but the cattle market is
worried about that because without Japanese demand
that’s a big hit. Yeager: Then there was a
story this week that said maybe the Chinese are
starting to kick the tires on beef, U.S. beef, or pork. Which one is going
to win out here? Hackett: Well, we think
pork will win out. We think at the end of the
day they have always eaten pork, that is their
lifeline, that is their cultural meat to eat and
when we look at pork prices in China making new
record highs this week because of the supply
shortages getting worse because nobody can feed
any animals, nobody can get product anywhere, we
have to believe they’re going to find a way
at least to get U.S. pork into their country. Yeager: But there was a
story this week that the sow herd monthly increased
again for the fourth consecutive month. So there is some
rebuilding. Hackett: Well, and
remember we supposedly got a story that African swine
fever vaccine has been found. It has to be a little more
verified, we have to get more ducks in a row, but
it does appear it could be available near the end
of the year and I would imagine some Chinese
producers are starting to get more confident
that they can get some investment going, get some
herd growth going, because they’re going to have a
vaccine that is going to save the day for them. Yeager: So is that the
reason to make a sale in hogs right now? Hackett: We don’t think
it’s the right time to make sales in
hogs right now. We think that there’s
more upside to go. We don’t feel there’s
going to be a supply response until 2021. We think this year still
going to be a big shortage and the U.S., if the
trade deal is any value whatsoever, the U.S. is going to have their day
to get a price move here. So we would be patient on
hogs and we wouldn’t jump the gun just quite yet. Yeager: And I did kind
of skip over feeders. That number that I gave
you, 102.10, was on feed. So we are still seeing
more animals go into the lot. Hackett: We are and beef
production in the second quarter is going to be
up significantly, beef production in the U.S. from the first quarter. The other thing we do want
to kind of let everybody know that the drought
has broken in Australia, flooding rains there, and
the cattle price has gone parabolic. And so the imports that
we usually bring in from Australian beef in the
second quarter we feel is going to
completely dry up. So that is going to help
counterbalance some of this extra supply. So it’s a mixed bag but we
don’t think it’s doom and gloom at this point. Yeager: Well, the
Australian story though, there was some improvement
after the wildfires. They all of a sudden
had a whole lot of rain. But then that also
impacts the wheat market. So but you’re saying the
beef market is going to be a little more
impacted there. Hackett: Absolutely, how
much Australian beef we import into this country,
without that beef coming in it’s going to severely
tighten up the lower end of the market, which on
the margin is going to be pretty positive as we move
into grilling season. If we’re correct that the
spring season is going to start early that means
we’re going to get some extra demand this year
that we didn’t get last year when it was cold and
wet all the way into late June. Yeager: So the early
spring that you’re referring to, that means
I’m going to be grilling sooner? Hackett: Absolutely. Yeager: And have an
opportunity to eat through some of that supply. Hackett: Yeah, and
that’s positive. On the margin that will
really help sop up some of the supply that
is out there. Yeager: All right. We’re going to talk $7
corn with Shawn Hackett in Market Plus in
just a moment. Thank you, Shawn. Hackett: Thank
you so much, Paul. Yeager: That will do it
for this edition of Market to Market. But as I mentioned we will
keep that conversation, talk to Shawn about Market
Plus, and we’ll answer more of your questions. You can find it
on our website at That’s where we post a
whole lot of things, also links to our Twitter and
that allows us to stay in the loop with just a few
characters, the Twitter bird that is. We share news, pictures
and behind-the-scenes information on our feed
of @MarketToMarket. Join us again next week
when we’ll explore how a diverse set of western
stakeholders are seeking common ground
on public lands. So until then, thanks for
watching and have a great week. ♪♪ ♪♪ ♪♪ ♪♪ Market to Market is a production of
Iowa PBS who is solely responsible for
its content. Pioneer Hi-Bred
International is a proud sponsor of
Market to Market. 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. ♪♪ 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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