Market to Market (January 25, 2019)

Jan 25, 2019  | 27 min  | Ep4423

Coming up on Market to Market -- A winter wallop complete with snow, ice and an Artic blast of cold. A century old farmer’s market in the middle of a food desert. Those stories and market analysis with Ted Seifried, 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. 

(music)

This is the Friday, January 25 edition of Market to Market, the Weekly Journal of Rural America.

(music)

Hello, I’m Delaney Howell.

President Trump said for weeks he would not end the government shutdown unless Congress put money towards a border wall with Mexico. On Friday, a deal to end the longest shutdown in U.S. history concluded without that demand being met. A number of questions remain on how the three-weeks of funding affects the nation’s farmers. ---

USDA was planning to help finish 2018 by handling MFP obligations and farm loan payments. It is unknown if they will expand the scope of services.

The trade war with China shows no sign of ending as farmers plan for the coming season. A team of Chinese trade negotiators are expected in Washington next week.

Will Congress make it a priority to take-up the USMCA trade agreement? Analysts at the International Trade Commission were on furlough making it impossible for any debate before Friday. Economists at Purdue University believe the treaty will increase agricultural trade by $450 million. ---

A “sick out” by TSA agents and air traffic controllers slowed commerce on the Eastern Seaboard but weather stopped even more people in their tracks.

John Torpy has the details.

Much of the country endured varying degrees of Old Man Winter’s wrath this week as a powerful mix of snow, freezing rain, and bitterly cold temperatures blanketed more than a dozen states.

On Tuesday, strong winds and blowing snow shuttered interstates in Colorado and Wyoming. Almost 200 miles of interstate 70 was closed in the eastern plains of the Centennial State, trapping motorists on the eastern edge of Denver.

Nat Sound Break

What started as freezing rain in central Kansas, turned to heavy snow in Iowa and Wisconsin. Snowfall totals reached up to 12 inches in some parts of the Midwest.

Nat Sound Break

Once the snow and rain had moved out, a blast of bitterly cold temperatures moved in with daytime highs in the teens accompanied by wind chills well below zero.

Nat Sound Break

Slightly warmer temperatures were the problem in Northern Ohio. Rain, and an ice jam on a river, caused flooding and evacuations in the town of Vermilion, which rests on the shores of Lake Erie.

According to The Weather Channel, Midwest and New England states could see the snow and cold repeat, as a hat trick of Alberta Clippers is expected throughout the weekend and into next week.

For Market to Market, I’m John Torpy.

According to USDA, food insecurity is defined as having limited access to a variety of quality, desirable foods. In the U.S., 1-in-12 share this condition.

SNAP dollars help solve the problem but sometimes the selection remains limited. Many communities have programs to bridge the gap but one group of farmers has found a way to provide a variety of foods that fill empty plates.

Peter Tubbs has more in our Cover Story.

The majority of the vendors and customers at this farmer’s market lack access to different things. Shoppers, mostly residents of central Milwaukee, lack access to fresh produce in general and crops from their home countries, specifically. Many of the vendors, who grow what they sell, struggle to find enough land to be profitable. The Fondy Food Center attempts to fill the gap for both farmer and customer.

Jennifer Casey, Executive Director, Fondy Food Center: “Our nonprofit was started because of the important role that this market plays in food security in the neighborhood. 53206 is an economically challenged neighborhood. There's a lot of food insecurity.”

Central Milwaukee has a population of 130,000 residents and some of the highest poverty rates in the United States. Even as nearby neighborhoods closer to downtown revitalize, jobs and retail are slow to move back into the minority neighborhoods nearby. The result is a community structure that relies on bodegas and food marts rather than full-service supermarkets. The smaller stores stock few perishable fruits and vegetables, and search for profit in shelf-stable calorie dense foods.

Sister MacCanon Brown, MacCanon Brown Homeless Sanctuary: “It's just so limited. No, hardly any produce. Often the prices are hiked way up and there's just not a lot of real food. A lot of it is chips.”

But this location on Fond Du Lac in Central Milwaukee has been home to a Farmer’s Market for over a century. Under management of the non-profit Fondy Food Center since 2000, the market is open four days per week in the summer and one day per month in the winter.

A recent innovation has helped the finances of both customers and vendors at the market. Fondy Food Center staff help customers convert SNAP benefit dollars into tokens that vendors accept for purchases. Vendors exchange the tokens for cash at the end of the marketing day. In 2017, Fondy Food Center processed $72,000 dollars in SNAP benefits at the market. The average farmer’s market in Wisconsin that accepts SNAP benefits processes only $4600 in benefits annually.

The high volume of SNAP benefits belies the common perception that the poor are not interested in purchasing healthy food. The highest hurdle for SNAP households purchasing fresh produce at farmer’s markets is the knowledge that the option is even available.

Another benefit for vendors at the Fondy Farmer’s Market is being delivered from a location 12 miles to the north in the suburb of Mequon.

Chue Vanglor picks squash on the one acre plot he rents from Fondy Farms. The farm sits on a corner of the 444 acre Mequon Nature Preserve in southern Ozaukee County.

Vanglor emigrated from Laos in 1985, and has been farming since 1991, but access to land has always been the tallest barrier to increased production. The one acre he rents from Fondy Farms provides predictability to his season, as he can focus on his crops rather than finding another farm to rent next year.

The mostly immigrant customers at Fondy Market have encouraged farmers like Chue to plant crops from their homelands, sometimes with seeds carried to the U.S. by family.

Chue Vanglor, Farmer: “I grow here, I have here some hot pepper, and a bitterball, eggplant, and pumpkin, and some bean. Yeah.”

Jennifer Casey, Fondy Food Center: “Back in 2007, 2008, 2009, we had a number of farmers drop out of the market and that was a problem because we needed to ensure the supply of fresh produce to the neighborhood. When we began talking to the farmers about why they were dropping out of the market, we realized that very consistently, it wasn't because they wanted to stop farming and they're ready to retire. It's that they did not have access to land. They were relying on handshake leases, and it was quite expensive for them to continue their operations. We started with 20 acres, but we had farmers apply for more than 100. So the demand vastly outstrips the supply.”

Twenty-four farmers work plots that are 90 by 500 feet. The one acre canvas is planted in whatever crops they feel they can sell. Many of the crops drive high prices due to scarcity in the local food system. Bitterball - a form of eggplant popular in Caribbean cooking - sells for $5 per pound. Specific peppers can yield as much as $30 per bushel.   

Stephen Petro, Manager, Fondy Farms: “The farmers that we're working with are just really, I think like a lot of farmers around the world, they're, they're just being really responsive to the communities that they're serving. Um, and something that is really unique here is that, that, that is really diverse. You know, where are, we only have farmers out here are just growing, you know, tomatoes, eggplant and cucumbers, you know, they're growing 50, 60, 70 different types of crops.”

The Fondy Market gets some of its supply from more traditional operations. Robert Craig farms in Mukwanago, Wisconsin, 30 miles southwest of Milwaukee. Craig has sold vegetables at the Fondy Market for 15 years, slowly increasing the volume of vegetables he produces while decreasing the investment in his dairy business.

Robert Craig, Mukwanago, Wisconsin farmer:  “In this neighborhood there's a lot of SNAP benefits and uh, and WIC and um, with, with the SNAP and just have the availability that the market is made it easier for the farmers to accept it. It's really helping a lot. And people in neighborhood, they really depend on that and it's, it's, it's money, you know, going right to the farmer. A big, big portion of our income is through the snap program and with WIC program. So it helps us directly.

By catering to the needs of its customers, Fondy Farmer’s Market is able to improve the businesses of  the farmers that serve it.

For Market to Market, I’m Peter Tubbs.

Next, the Market to Market report.

Before the 3-week budget deal was made, the commodity markets traded on South American weather swings and Chinese trade news. For the holiday shortened week, March wheat gained 2 cents and the nearby corn contract lost 2 cents. Hot weather in Brazil, rain in Argentina and a planned visit by Chinese trade negotiators added 9 cents to the March soybean contract. March meal dropped $1.20 per ton. March cotton gained 24 cents per hundredweight. Over in the dairy parlor, February Class III milk futures fell 22 cents. The livestock market remained mixed. April cattle shed 53 cents. March feeders put on 80 cents. And the April lean hog contract cut $4.15. In the currency markets, the U.S. Dollar index plunged 57 ticks. February crude oil finished 35 cents per barrel lower. COMEX Gold added $15.50 per ounce. And the Goldman Sachs Commodity Index fell back more than 3 points to finish at 409.55. Joining us now to offer insight on these and other trends is one of our regular market analysts, Ted Seifried. Ted, welcome back.

Seifried: Hey, thanks for having me.

Howell: Ted, we still don't know what's going on with the government shutdown. We saw President Trump announce potentially we're going to see the government reopened here for three weeks. But one thing we do know is that Informa released their acreage estimates this week for corn, wheat and soybeans specifically. Ted, what are your thoughts on those estimates that they released?

Seifried: Well, first of all I'd like to say that I don't think this is an end to the government shutdown, it is just a sort of temporary relief, a window of opportunity to come together and get it solved. So I don't see this as a capitulation by Trump, this is just something that we're doing in order to help a lot of Americans that have been dealing with this government shutdown. Now, as far as Informa's numbers, Informa has numbers, we have numbers, lots of people have numbers. I like Informa's numbers though, that being said. They're fairly close to what I'm looking for, 91.5 million acres in corn. I think they're maybe a little bit low on their soybean acreage because I don't see all that other acreage going to cotton and other things. But yeah, it's right in the wheelhouse. I think somewhere in the low 91's is probably where we'll land on corn. And as far as soybeans are concerned I think somewhere between 86 and 88. A lot of that is going to depend on what happens next week and what sort of language we hear out of these trade talks. A lot of acres have been decided on but there are still some swing acres and that could still be another 3 or 4 million acres out there, maybe 5 or 6 million. So I don't think we're quite there yet as far as a final decision. But yeah, for right now I'm feeling pretty comfortable with the numbers that Informa gave us.

Howell: Ted, let's talk about wheat. Those numbers that Informa gave us for winter wheat in particular, are we going to see those numbers change with the winter weather that we're having? Are we going to see any acres die off or freeze?

Seifried: Well, that's a great question. We would have seen this number if the government had been open and we saw the winter wheat seedings report back in mid-January, the 12th I believe. Man, that's one of the big numbers that we've really been missing from the USDA because we've got a lot of people with a lot of opinions on what happened with that winter wheat planting. I think the general consensus is that we fell short of what we were trying to get in because of weather. The question is how far short? And all of us have sort of different numbers on that. Hopefully with this three week redemption or the government coming back online I'm wondering if we're going to see these numbers February 8th when we're scheduled to have our next WASDE report. That might be a very large sort of dump of data out of the markets and that would be one of the numbers that would be keen to be on there. That could be something that could be a big market mover at that point. Either way I think we have shorter acres. I think the acres for wheat are coming down. But I think the market has factored that in to some extent already.

Howell: Let's talk a little bit about that data dump, as you called it. We've seen soybeans, wheat and corn trading in tight ranges, I think the tightest ranges in January percentage wise. If we do see a data dump, is that what it's going to take to see us break out of some of these ranges?

Seifried: Well, lack of USDA I think is one reason why we've had historically kind of tight ranges here throughout the month of January so far. The other thing about that is that we're all kind of waiting to find out what happens with China. This is such a big deal and has such a large impact on the market that we're all very reluctant to do one thing or another until we find out more facts or more details of what is going to happen there. If you're a producer we're really wanting to hold on and not sell and look for that spike. Everybody I talk to is looking for that spike after a deal gets done and they want to sell within the first day or two of a deal getting done. And as far as end users are concerned they don't like the prices here because they look at the soybean carryover and it doesn't match up with the prices, the prices are way too high so they're waiting for the lower prices. So there's a lot of just, again, waiting. We want to see this. So there's a lot of reasons why we have tight ranges, the lack of USDA is part of that, but even if the USDA comes back we're still waiting on the deal with China, that's the one that is really going to move the markets.

Howell: Let's get back to the China deal here but I want to talk corn and we've got a good question here from Lexi in Iowa. She said, new crop corn stocks seem to be looking bullish for both the U.S. and around the world. Is there any upside potential left in the market? And if so, how much?

Seifried: That's a good question, Lexi. I'd like to say this, the corn story is still friendly but it's not quite as friendly as it was maybe a couple of months ago and the reason I'm going to say that is ethanol. Profit margin and ethanol have dropped dramatically here in the last few weeks, month and a half let's call it, and that is a bad sign. Ethanol for the longest time has been this shining bright spot on a corn balance sheet. And the fact that we're kind of losing that a little bit is not good news. Exports have been somewhat soft because Brazil crops look good. They're always our number one or number two importer of ethanol. Obviously we're not doing any business with China so that softer export market is not helping. The sharply lower RIN values are a problem, okay. So the smaller waivers are causing a big effect on the ethanol market. So we need to fix that. If we can fix the ethanol market I think corn has a fairly good outlook as long as we don't gain too many acres. But without that, that is a problem. So I'm friendly corn. How much upside potential? I have $4.44 as a target for my summer high or for my yearly high for corn, for new crop corn this year. I'd like to see that. This is a year where I'm a little concerned that maybe we don't get that and a lot of that is going to depend on what happens with soybeans going forward.

Howell: Yeah, so let's talk about soybeans. As you mentioned just a little bit ago producers like to trade on that one day news. Let's talk through some scenarios here. Give us the best what-if scenario. And what should producers be doing ahead of these trade negotiations or in reaction to these meetings?

Seifried: Wow, that's a great question, Delaney. Okay, so best case scenario -- and by the way I think this is a scenario that actually plays well for China because if we end up doing this again two years down the line this puts us in a much better position -- but let's say China wants to extend the olive branch and they really do want to throw money at this problem, at some point we're just going to have to I think take their work on IP and IT because they don't really have any way of proving that they're going to be able to police that. So they're going to throw a bunch of money at it. Why not buy 20 million metric tons of soybeans for delivery right now in order to build their state stockpiles and then continue doing business as usual? Now if that happens that significantly changes the soybean balance sheet and then we have a sustainable rally possibly. Now, we're still limited by Brazilian production and in the world we seem to be getting into an overproduction of soybean mantra. But that would be a game changer. Now, if we just go back to business as usual and quickly losing our window of export opportunity and they start buying more from Brazil just because that's what they would normally do and we're stuck with a 960 million bushel carryover or I think closer to a billion bushel carryover well then I don't think this trade deal is going to have a lasting upside effect on soybean prices in that case. I think we have to come back down from there. So there's a number of different outcomes. The devil is going to be in the details. I hate clichés but that's a good one for this scenario. It all depends on how much they're going to buy and when.

Howell: And that's what you mean when you say throwing money at it is just how much they're going to buy from the U.S. or if they do buy anything from the U.S. as an olive branch?

Seifried: Yeah, they've talked about a trillion dollars over the course of six years. Well, what are you going to buy for a trillion dollars? There's a lot of agriculture and energy commodities that are going to be included with that and you would think soybeans are certainly on that list, hogs are certainly on that list, maybe wheat, maybe corn, probably ethanol, maybe rice, most likely cotton. There's a number of markets that could be very positively affected by a favorable trade deal and I think any trade deal that we get right now is probably going to include a large monetary package of hey we're going to buy this stuff. It's just a question of when it's going to happen because if it doesn't happen for this marketing year we're still looking at a very large carryover for soybeans.

Howell: So, Ted, to tie a bow on this Chinese discussion, what should producers be planning? What should their strategy be with this meeting in mind?

Seifried: Yeah, I think we saw it here on a Friday and then I think we'll see it early in the week going into the talks, you're going to see prices probably run up into the meeting just on optimism. This might be a good time to make some sales in case we don't get something done. But there are some short-term, March calls for example are fairly cheap, they don't have a ton of time on them, but they might be a good way to get some exposure if this deal gets done and we do go sharply higher. But I want guys, normally I should be saying hey we need to be sold out of old crop corn and beans, especially in a bearish climate like we have, but man, you want to have something to be able to sell if we get a spike and certainly you're going to do that new crop, it would be nice to have something in old crop too whether it's bushels in the bin or you owning calls or something like that.

Howell: Ted, let's talk about the meat markets. We've seen the highest level since November 7th in the live cattle contracts. Why the continued strength in beef demand?

Seifried: We like beef, Delaney. You're a steak a day girl. You tell me. I eat a lot of beef, I eat a lot of protein in general.

Howell: Are there indicators to show that we're going to continue this pattern?

Seifried: Well, a lot of that is tied into the economy and while we've had some volatility in the stock market I think the general belief is that we're standing on solid ground even with the trade dispute with China. And our tastes are just such that we eat beef. So I think that continues. I'm bullish domestic demand. I continue to say that. And as far as the live cattle market is concerned we've been holding this really organized uptrend channel and earlier in the week we got down and tested the channel, we reversed off of it and then we kind of bounced back. We were bull spreading here on Friday. I think we're going to at the very least go and test the highs. But you look at April live cattle and I think there is a very clear target up at $130. That is a number that has often times for many years been a really tough line to cross. So I think we'll go and try that. Whether we get over it or not I'm not sure. I'm optimistic that we could. But we're so close now at this point. So I think we make new highs. I think we go and try that $130 level in fat cattle.

Howell: What about in feeder cattle? March feeders closed below their 9 day moving average. Do we hold here? Do we head lower?

Seifried: Well, we fought a good portion of the week to get back above some of these key moving averages and then a little bit of a pullback on Friday. We ran into some very, we had a cluster of moving averages that we ran into and we pulled back. But leading up to Friday, Wednesday and Thursday were good days for the feeder cattle market and that chart seems to be coming around. You'd always like to see a live cattle rally led by feeder cattle. That has not been the case. You wonder if feeder cattle kind of come around here sometime relatively soon and that may add strength to the live cattle market. But to me I look at a feeder cattle chart and it looks like a longer term sort of bottoming formation as long as we can hold those lows, which to this point I think it looks pretty good right now.

Howell: Have we seen kind of this reversal this week because of weather? Or what impacted feeders this week?

Seifried: Well, yeah, that's a good question. But we've been testing these lows numbers of times over the past few months and it just seems to be an area where we've found value. Yes, weather is, look, it is cold and that's not ideal. So that is a bit of, it's certainly a factor in these markets right now. But overall, again, I think just fair value is sort of where we're at. And look at the live cattle prices down the board too. That's helpful also.

Howell: Absolutely. Ted, let's finish up discussion here with the lean hog market. Slaughter so far since the beginning of the year has been up 5 plus percent. What is causing this increase in hog slaughter? Again, demand?

Seifried: Yeah. Look, domestic demand is solid but we have a lot of supply. Domestic demand is solid, all right? Export demand, question mark. I would really like to see those numbers. And by the way I think there has been a fair amount of speculative liquidation in the hogs the last few weeks because we can't see these numbers and traders don't like to trade things that they don't get, they're not getting data on and that's a problem. But leading up to the government shutdown we were rocking and rolling on our exports and a lot of that was to China, even with the 62% tariff. So look at ASF, look at China and look at the potential for how much they could be importing. It's hard not to be bullish pork demand overall, I mean, domestically and also globally. So yeah, and by the way, I think the problem in China is bigger than what they're letting on. Look at what their meal, crush margins are under a lot of pressure, meal prices are under a lot of pressure, that's suggesting that one, maybe they don't have enough beans, but the meal prices being down, oof, that sounds like a feed demand problem. And well what do they feed mostly? That's pork. So yeah, I don't know, I'm worried that ASF is a bigger deal and I think a lot of that pork might have to come from the United States.

Howell: African swine fever is a bigger deal. Why?

Seifried: I think it's a bigger deal than what they're saying because the numbers that we're hearing, while they're big numbers they're not a big percentage of their overall hog herd. I wonder if it's a much bigger problem than they say.

Howell: Ted, I'm going to hold that thought and continue this discussion in Market Plus. Thank you so much.

Seifried: Oh, pleasure's mind, Delaney.

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. We've subscribed to the modern teletype machine with our short bursts of information via Twitter. Check out our 280 character dispatch @MarketToMarket. You can leave us a question for the analyst of the week. Join us again next week when we'll look at how demand for a southwest specialty crop is heating up. So until then, thanks for watching. I'm Delaney Howell. Have a great week.

(music)

Market to Market is a production of Iowa PBS 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. 

Grinnell Mutual Insurance
Sukup
Accu-Steel
ICN