Market to Market (June 15, 2018)

Jun 15, 2018  | 27 min  | Ep4343 | Transcript

Coming up on Market to Market -- The Senate Agriculture Committee greenlights its version of the Farm Bill. Fighting wildfires with fewer dollars and more ground to cover. And market analysis with Dan Hueber, next.

Wherever your operation takes you, or who you share it with, we'll be where we've been all along, with you from the word go. 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, June 15 edition of Market to Market, the Weekly Journal of Rural America.

Hello, I’m Delaney Howell.

On Friday, President Trump enacted his long threatened $50 billion Chinese tariff package. The effect of the rumor was already seen in a number of economic indexes. --

The Producer Price Index, rose 0.5 percent last month. When price swings from food and energy are taken out, Core PPI rose 0.1 percent.

Prices paid by consumers increased in May, rising 0.2 percent. Core CPI grew the same amount.

As expected, The Fed raised key interest rates for the second time this year, bumping up the amount charged to banks a quarter point. --

Since the 2014 Farm Bill was enacted, the drought-fueled farm income of the early teens has declined and a relatively low number of bankruptcies has risen. Along with unresolved trade negotiations, rural America is left searching for some sense of stability.

That safe harbor for farmers and ranchers may well be the Farm Bill. Work by the upper chamber on the measure was less contentious than in the House.

Paul Yeager has more. 

Sen. Pat Roberts: “Seeing a quorum, I call this meeting of the committee to order.”

The Senate Agriculture Committee spent part of the week marking up their version of the 2018 Farm Bill.

Members waded through 12 titles and 66 amendments for the industry that provides 16 million jobs in this country.

Sen. Pat Roberts, R - Kansas: “The absolute requirement for this committee is to provide farmer, ranchers, growers and everyone within the agriculture and food value chain certainty and predictability.”

Roberts says he heard producers tell him crop insurance was priority one in new legislation.

Sen. Sherrod Brown, D – Ohio: “Everyone on this committee and full Senate even, has heard me talk about the importance of the Great Lakes and the fragility of Lake Erie.”

Sen. John Thune, R – South Dakota: “ARC did not receive the changes needed to make this program an effective safety net in the next Farm Bill.”

Sen. Kristin Gillibrand, D – New York, “Any problem, whether it is a drought in California, whether it is nuclear fallout coming across from Japan, it literally changes whether we can produce wholesome food in that part of the country.”

Sen. Michael Bennet, D – Colorado: “With the uncertainty in trade, immigration in my state and with commodity prices where they are, our farmers and ranchers desperately need this farm bill.”  

Sen. Steve Daines, R – Montana: “Active management enhances public safety, by reducing the threat of wildfire.”

Individual Senators spoke about important topics in their home states and how the Farm Bill will improve life in rural America through improvements in the conservation, food and nutrition titles.

Sen. Pat Leahy, D - Vermont: “Rural communities across Vermont and every corner of America, represent every single state here, will directly benefit from this bill.”

Senate Majority Leader Mitch McConnell serves on the committee and touted the benefits of expanding assistance for hemp, a replacement crop for former tobacco farmers in his home state.

Sen. Mitch McConnell, R - Kentucky: “Younger farmers in my state are particularly interested in going this direction. All the people in rural Kentucky sort of grew up with tobacco are hoping, that this will really be something.”

The Senate committee has worked in a bipartisan manner on the measure.

Sen. John Hoeven, R – North Dakota: “Good farm policy benefits every single American, every single day, because we have the highest quality, lowest cost food supply in the world.”

House vote: “On this vote, the yays are 198, the nays are 213, the bill does not pass.”

The House failed to pass their version of the Farm Bill as no Democrat and even some Republicans cited concerns over immigration and food assistance aspects of the bill.

Nutrition assistance has been less thorny in the Senate’s version, but there was still some tension among committee members.

Sen. Joni Ernst, R - Iowa: However the bill is, it’s not perfect, we must do more to help SNAP recipients rise up out of poverty. The U.S. economy is booming right now. For the first time on record, the number of job openings exceeds the number of Americans looking for work. We must seize this opportunity to help folks be self-sufficient.”

“Senator Grassley: “No.”

Senator Charles Grassley cast the lone dissenting vote. The Iowa Republican wants stronger language putting a cap on the amount of money farmers can get from the farm program. Grassley is unsure how he’ll vote in the full Senate version, but has a strong recollection of the last go round when his amendment advanced both chambers, but didn’t make it through conference committee.

Sen. Charles Grassley, R – Iowa: “They obliterated it, in other words, I got screwed in conference and consequently, that’s why I voted against the 2014 Farm Bill.”

Sen. Roberts:  “The ayes are 21 and the nos are 1.”

For Market to Market, I’m Paul Yeager.

The Senate Farm Bill contains a Forestry title that pays for, among other things, reducing the fuel that threatens towns, local industry and lives.

Earlier this year, Congress approved the Wildfire Disaster Funding Act, which was designed to prevent the USDA’s Fire Service from having to raid non-fire programs to pay for firefighting.

Colleen Bradford Krantz has more in our Cover Story.

More than 8,500 firefighters from around the country worked in December of 2017 to battle southern California’s now-infamous Thomas Fire. The blaze devastated nearly 282,000 acres to become the state’s largest wildfire in modern history.

Talbot Hayes, a Forest Service district fire management officer from Alpine, California, traveled 200 miles north to join those battling the massive fire, which ultimately destroyed more than 1,000 homes and businesses as well as taking two lives. A month later, Hayes returned home and continued his forest-management work to simplify battling wildfires in his assigned district inside the Cleveland National Forest.

Talbot Hayes, U.S. Forest Service: “The time to fight tomorrow’s fires is in the winter through prescribed burning and prescribed management fuel strategies.”

The almost-automatic response to wildfires for decades had been to put them out immediately. Greater awareness of the positive and rejuvenating effects of natural fires in forest and prairie regions brought about a shift in strategy to allow fires in more remote areas of the country to burn longer. But, in heavily populated regions where lives and buildings are at risk, Hayes says there are few such opportunities to just let it burn.

Talbot Hayes, U.S. Forest Service: “Down here in southern California, that strategy has pretty much stayed the same: We try to suppress all fires, just about 100 percent of all the fires that start due to the values at risk, the amount of people that live down here, the infrastructure in the area….There are other regions, other forest units that have a lot more wilderness, areas farther away from communities and values at risk, and those areas can have slightly different strategies.”

The 2018 fire season is expected to be a tough one as many regions are already tinder dry. New Mexico and Colorado have already faced large catastrophic wildfires that broke out before the traditional start of the fire season.

Talbot Hayes, U.S. Forest Service: “We had fire engines sent to Colorado in March this year, which is very uncommon for Colorado to be having fires in March…We are in a dry spell and our local mountains aren’t getting as much snowpack so the vegetation is a lot dryer… All of this contributes to a busier, longer, more devastating fire season.”

According to Hayes, most wildfires in southern California are started by humans, rather than lightning. A spark from a dragging trailer chain or a mower hitting a rock may start a grass fire in the heat of summer.

Jay Eyre, Cleveland National Forest campground host at mile 26 on the Pacific Crest Trail, says hikers need to be aware of fire conditions and comply with fire-prevention rules along the route. Campfires are prohibited outside designated campgrounds, and permits are required to use certain types of camp stoves along the 2,659-mile trail that runs from Mexico to just over the Canadian border.

Jay Eyre, Pacific Crest Trail, trail host volunteer: “They need to stop if there is a forest fire in the area.”

Eyre, a retired school teacher from Montana, says his home state also had a rough fire season last year.

Jay Eyre, Pacific Crest Trail, trail host volunteer: “Last year, there was a big fire in western Montana. A lot of Montana is in high fire danger because of climate change and warmer temperatures and lower snow levels we are seeing. And a few years ago, a huge infest of bark beetles came through so we have a lot of dead and downed trees so there’s more fuel.”

It’s those kind of dead and downed trees, as well as forest undergrowth, that are particularly concerning for Hayes and his crews. Their answer is to cut and mow underbrush, create fire breaks, and use prescribed burns in certain high-risk areas.

Talbot Hayes, U.S. Forest Service: “Here on the Cleveland, we try to treat between 4,000 and 5,000 acres every winter through fuel management. Good fires prevent bad fires.”

Community defense breaks are typically 300-foot wide bands that create a barrier between the national forest and communities on its edge. It takes a crew of 20 several days to cut and gather the brush in these defense breaks. But Hayes says it increases the odds for successfully protecting a town if a wildfire reaches the area.

Talbot Hayes, U.S. Forest Service: “We try to cut out a lot of vegetation especially the dead and more flammable to reduce the intensity of the fire as it comes into the fuel break area to give us a better chance of actually stopping the fire.”

The locations for prescribed burns are selected based on how much wood and vegetation – aka fuel – is present, as well as how long the area has gone without a fire. The hope is that taking away a portion of the fuel will reduce the intensity of any wildfires that do occur.

Talbot Hayes, U.S. Forest Service: “This side of the handline we are standing on has never been treated. It’s never been prescribe burned or thinned in any way and you can see the heavy accumulation of ground fuels. And you can see how devastating a wildfire in the summer would be if it were to start in this area. In this area over here, this was thinned. It was broadcast burned. If there were to be a wildfire start in this area, the fire would be very low intensity. You would be able to get in here and keep the fire smaller.”

The federal government reported it spent a record $2.9 billion on suppressing fires in 2017. And the outlook for the current year is bleak as many regions are expected to become dangerously dry. Firefighters will continue their work to reduce the size of the fires that will inevitably happen this year.

Talbot Hayes, U.S. Forest Service: “It’s not if more fires will happen, but when.”

For Market to Market, I’m Colleen Bradford Krantz.

Next, the Market to Market report.

The trade was dominated by tariffs this week. The President’s move triggered a date certain of July 6th for the first round of Chinese counter-tariffs, many on agricultural products. For the week, July wheat dropped 21 cents, while the nearby corn contract plunged 17 cents. Chinese tariff retaliation overshadowed the soy complex sending the July soybean contract into a tail-spin nosediving 64 cents. July meal fell $18.90 per ton. In the softs, December cotton ended its rally shrinking $5.09 per hundred weight. Over in the dairy parlor, July Class III milk futures lost 62 cents. The livestock sector finished mixed as the August cattle contract shed a dollar. August feeders put on 70 cents. And the July lean hog contract moved up $1.12. In the currency markets, the U.S. Dollar index skyrocketed 132 ticks. Crude oil lost 68 cents per barrel.  COMEX Gold melted $24.20 per ounce. And the Goldman Sachs Commodity Index dropped more than 13 points to settle at 463.30. Joining us now to offer insight on these and other trends is one of our regular market analysts, Dan Hueber. Dan, welcome back.

Hueber: Thank you very much, always a pleasure.

Howell: Always a pleasure to have you, Dan. We're going to take a Facebook question off the top here. And of course, folks, you can send in your social media questions each week to get aired on the show. Dan, we've got a question here from Chad in Dunbar, Nebraska. Do the grain markets have a chance to regain what they've lost?

Hueber: Well, certainly we always have a chance but I think right now we have kind of beat things down a little bit artificially low and markets are trying to overanticipate worst case scenario if these trade tariffs really came into being. Even what was announced today, keep in perspective they are set to take effect on July 6th, so it does leave a little room for negotiation. And certainly I don't think China wants to get into any worse of a trade war so hopefully the cooler heads prevail over the next few days. But realistically it's going to take some time to develop demand once again, particularly in the beans. We've really seen a lack of demand, particularly from that Far East sector, China specifically and really would say we need a weather issue. Right now there doesn't seem to be any weather issues outside of what is happening in Texas and the Southern Plains.

Howell: Affecting some of those wheat acres.

Hueber: Wheat and the cotton people. But for the Corn and Soybean Belt right now we have a pretty favorable outlook. So until we can see something, get a little scare there, it's going to be tough to think we're going to get back to levels that we were here even three weeks ago.

Howell: Okay, and I wanted to touch on something really quick here as we talk about tariffs. In your newsletter this week, and I want to make sure I get the quote right, you said if it actually comes to fruition what is left to fret about? It's now fully factored into the price structure and you were referencing the tariffs there. How do you know that this has already been factored into the markets at this point?

Hueber: Well, one it's not like it was necessarily a surprise this week. We've really been talking about this since March and we've had several waves of kind of selling, washing people out of there. Certainly we can't guarantee that this is the last of it, this is the last of the story we're going to hear about it, but in the same token you can only beat a story for so long, you can only take demand down so far. It's still, on a worldwide basis people still have to have product. So I guess I think psychologically the market has probably pushed a little bit too far just in kind of a panic mode. And as I commented this morning, I think we have a new phrase to use in the commodity market, which is tariff trade terror. So it's just kind of a terrorized situation but maybe we've moved beyond the worst of it here at this point.

Howell: Well, certainly I think producers sitting at home are hoping for that. Let's talk about wheat. Are there any price indicators that you're watching to signal the market to go back or lower into July wheat?

Hueber: Certainly the wheat market is kind of the exception to the rule when it comes to the grain soy complex at this point. Now the reaction lower this week, it didn't really necessarily turn the trend down. But that said, it's kind of pushing us on the border, you've got July wheat back towards the $5 area. It wouldn't take much of a push below $5 and I think you'll start to panic longs a little bit. This market we know there's significant damage done to the U.S. wheat crop and we're certainly not going to have a robust crop here by any stretch of the imagination. You've been actually worldwide been hearing a lot of the Soviets, the Ukraine, Europe, everybody has been ratcheting down their production estimates just little by little. So if anything we're seeing the world wheat numbers start to contract. That generally means higher, steady to higher prices. So certainly wheat could go through a correction over the short-term. I don't think it's going to be the kind of wipeout that we've witnessed over in the soybean market and to a lesser extent in the corn market.

Howell: Okay. Well I want to get to more wheat discussion which you can find in our Market Plus section at But that's all the time we have right now for it. Let's talk about corn. New crop corn, that is of course on a lot of producer's minds. With the current high in for December at $4.29 and a half is that going to be the high for the year?

Hueber: I think at this point probably a pretty good probability. The only thing that would really change that would be a very, very serious weather issue, not that that couldn't materialize, but we're getting a little bit late in the game to really get something that serious there. That said, I don't know if we have a lot of downside potential yet either. We really returned, we've actually taken back about 50% of the rally we've seen over the last year, maybe just a little bit more than that, but we've really returned to levels that used to be resistance. If we went back to the fourth quarter of last year this was a price range that we were having a difficult time moving above. I think it should turn around and find support there. And the reality of the corn market is at 88 million acres we just aren't going to produce an excess amount of crop. We already are looking at a reduction in domestic ending stocks and in the world ending stocks an even greater percentage wise reduction so I think that really kind of limits the amount of downside pressure there. But boy, to get us moving back in the other direction we need a little weather stimulus to come around to help us out there.

Howell: And then you look at weather issues. Is it the same story in the soybean market? I think we put in a low in June last year, June 23rd. Do you expect us to follow that same pattern unless we have a weather issue?

Hueber: I wouldn't be surprised. Again, I guess the question then is how much can you really rebound? If it's going to come it's probably going to be via the help of soybean meal and demand in the meal. Interestingly enough I was looking at the bean market this morning, returning to the $9 level which is exactly where we were a year ago at this point in time, but if you look over the last three and a half, almost four years, 169 weeks we have only spent a total of 29 weeks below $9, very limited amount of time here. So it does seem to be a value area on the soybean market. So yes I'd like to think we're going to stem the decline but here again we need a stimulus to bring us back out. We could easily see yes, technical rebounds, but unless we see a real resurgence in the demand on the meal side or of course a weather issue maybe later in July or August the upside is going to be limited for now.

Howell: If I'm sitting on some old crop beans should I be looking to sell them now? Or do you think that they'll get a corrective bounce back up?

Hueber: Tough, if you've sat on them this long it's going to be a little bit taxing to try to wait for that bounce. But if I was in that situation yes, I'd probably sit tight and see if we couldn't get a rebound before I'd price them.

Howell: Okay. Let's move onto the livestock markets. With futures at a $10 approximately cash discount to cash, or at a discount to cash, is this market signaling further strength or further lower cash prices?

Hueber: I really think the hog market in particular right now really looks to be turning the corner. Now, two days ago we really had pushed through some resistance that has held us back here for the last 30 to 45 days. You're starting to see some of the cash, the spreads between the various cash markets narrow up in that hog market, which I think is indicative that I don't think it has ever truly been reflected some of the health issues that we witnessed over the winter months. Now that is finally showing up here in the slaughter levels and I think that is really what is kind of lifting that hog market out of there. Psychologically absolutely we were beat down thinking that these tariffs are really going to make a big difference in the trade, not that they couldn't be harming but I think it has been more psychological than anything at this point. We're still looking at a 9% increase in exports on hogs this year, we're up about 12% in cattle. So the demand has been there so we just need to kind of move beyond this concern that we're not going to be able to get our product out of this country and maybe start focusing more on the numbers.

Howell: Are you concerned about boxed beef values? I think they have fallen to the lowest levels here in quite a while.

Hueber: Yeah I was going to say, I should have moved right into cattle, cattle a little bit different situation. Yes we have, plenty of cattle on feed, certainly the demand is not quite there, the numbers don't seem to have any issues tightening as we move ahead so it may be a little bit tougher road to move the cattle out of these levels without seeing a great stimulus and moving beef somewhere out of this country. And of course you have the other caveat there is with the dollar now pushing into new highs for the year it certainly doesn't help out that cause either. So a lot of headwinds in the cattle market especially.

Howell: With that said about the dollar do you expect that to effect just exports in general?

Hueber: And granted it's difficult to look at a one-to-one relationship. Just because the dollar went higher that doesn't mean corn exports are going to suffer or necessarily even cattle or hogs. That said, it does psychologically impact commodities as a whole. And if you look at them over a very long-term perspective they seem to have an inverse relationship. So yes, if there is demand for any specific commodity sure that's going to remain there. But they might be hunting around just a little bit more to where is the best price going to be. There's probably one of the good things in the soybeans right now is we have beat it down to where we're absolutely competitive versus South America again so that could help us stimulate a little more demand in that market. Of course in the livestock trade not a lot of other avenues to go to, particularly for the hogs. So again that's where I'm a little more optimistic on seeing some extra business in the hogs right now.

Howell: Absolutely. And speaking of hogs, July hogs closed at their highest level on Wednesday since February 27th. What happened there?

Hueber: Again, just what I touched on a little bit earlier, I think we are finally starting to see a few less numbers coming in, in certain select markets, than was anticipated. Probably just was never really reflected, like I say some of the issues were with health over the winter months and the death loss that was out there. So between that and nice summer demand as we move further into the barbeque season I think has kind of lifted them up. So, again, from a technical side about a week, week and a half ago the hog market just really started to act like certainly we had a change at foot and it looks like that kind of came to fruition this week.

Howell: Absolutely. I think to tie this all together here, if I'm a livestock producer, an end user, should I be looking to lock in my feed needs now? And if so, how long out are you looking to lock them in?

Hueber: Certainly of course we are in the feed and livestock industry so it's something we've discussed pretty intently here this week and yes we did, with the breakdown we saw yesterday and today we did start looking at locking in both corn needs and soybean meal needs as we move out between here and the fall. So certainly you don't go in with both feet necessarily but we think of it as time to kind of start dipping into the water and start taking a little protection in there.

Howell: All right, definitely looking to take some protection. Dan Hueber, thank you so much for your time today.

Hueber: Certainly, my pleasure.

Howell: All right, well that wraps up the broadcast portion of Market to Market, but we will keep the conversation going on Market Plus where we'll answer more of your questions. You can find it on our website at Check out our YouTube channel as well. Tell everyone you have clicked subscribe at Join us again next week when we explore how one creamery is cashing in on its high quality dairy fat. So until then, thanks for watching. I'm Delaney Howell. Have a great week.


Market to Market is a production of Iowa PBS which is solely responsible for its content.

Wherever your operation takes you, or who you share it with, we'll be where we've been all along, with you from the word go. 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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