Market to Market (August 30, 2019)

Aug 30, 2019  | 27 min  | Ep4502

Coming up on Market to Market -- Campaigning for trade policies both foreign and domestic. The mushroom capitol of the world makes an upgrade. And market analysis with Elaine Kub, next.


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This is the Friday, August 30 edition of Market to Market, the Weekly Journal of Rural America.


Hello, I’m Paul Yeager. Delaney Howell is away this week.

Despite a pick-up in the purchase of goods with long lives – airplanes, dishwashers and automobiles – fears of a recession continue to loom. --

Orders for durable goods rose 2.1 percent last month.

Without the volatile transportation sector, orders fell O.4 percent.

However, consumer spending grew 0.6 percent in July as U.S. shoppers largely ignored increased prices brought on by the trade war.

Those who opened their wallets helped push 2nd quarter GDP to an annual growth rate of 2.1 percent. ---

As of Sunday, if there is no resolution or delay, the U.S. will impose additional tariffs on a partial list of Chinese goods. By December, the duties could top $550 billion. The increase is expected to be countered by China with higher tariffs on U.S. imports.

In what could be considered a campaign to bolster spirits among farmers suffering trade war fatigue and the sting of small refinery waivers, a bipartisan crew came calling on the Midwest.

The push for USMCA passage came to an Iowa dairy production facility this week. Former USDA Secretary and current U.S. Dairy Export Council CEO Tom Vilsack, along with Iowa Senator Charles Grassley, toured the Anderson Erickson production facility in the capitol city of Des Moines. AE does not export their products, but says trade does helps the entire industry.

The message centered on jobs that could be created if the United States Mexico Canada deal is ratified by all three countries.

Tom Vilsack, CEO, U.S. Dairy Export Council: “Not only does it preserve and protect our number one market Mexico, which is incredibly important as being a tariff free market, but it also creates an opportunity for us to protect certain cheese names.”

The dairy industry has struggled in recent times and Vilsack says more than 2,000 dairy producers have gone out of business over the last two years reducing the number of operations to 39,000.

Sen. Charles Grassley, R - Iowa: “It's an opportunity to get more poultry products, particularly into Canada. And there's an opportunity to get higher quality wheat into Canada than we have under the NAFTA agreement. But also, NAFTA, needed to be modernized.” CUT But all together, this is important for agriculture, for manufacturing, and for the future and the predictability of it.”

Senator Grassley is optimistic the U.S. Congress will ratify USMCA by the end of 2019. House Democrats have concerns over labor, environment and overall enforcement of the entire pact.

Trade was the president’s mind when he made several appearances in front of reporters at the G7 conference.

President Donald Trump: We’re taking these horrible, one-sided, foolish, very dumb, stupid, if you’d like to use that word because it’s so descriptive. We’re taking these trade deals that are so bad and we’re making good, solid deals out of them.”

U.S. producers did get some positive trade news from the G-7 conference involving Japan.

President Donald Trump: “It's a very big transaction. And we've agreed in principle, it's billions and billions of dollars. Tremendous for the farmers. And one of the things that Prime Minister Abe is also great to is we have excess corn in various parts of our country, with our farmers, because China did not do what they said they were going to do.”

President Trump said Japan had agreed to purchase U.S. produced commodities like pork, dairy and ethanol to the world’s 3rd largest economy by GDP.

Robert Lighthizer, U.S. Trade Representative: “It will lead to substantial reductions in tariffs and non-tariff barriers across the board. And I'll just give you one example. Japan is by far our biggest beef market. We sell over $2 billion worth of beef to Japan and this will allow us to do so with lower tariffs and to compete more effectively with people across the board particularly the TPP and the countries and in Europe.”

And the president also indicated he’d spoken with China following last week’s escalation of tariffs between the two countries.

President Donald Trump: “China called last night, our top trade people and said, let's get back to the table. So we'll be getting back to the table. And I think they want to do something they've been hurt very badly. But they understand this is the right thing to do.”

Chinese officials denied making calls to the U.S. shortly after President Trump made his statement.

Many of the farmers caught in the crossfire of the trade war are preparing for the looming harvest of the commodities involved.

Iowa Corn Growers Association board member Mark Mueller was at the trade group’s meeting this week calling for the Trump Administration to uphold the integrity of the Renewable Fuel Standard.

The biofuel’s future isn’t the only elephant in the room impacting producers.

Mark Mueller, District Director, Iowa Corn: “Our president administration has done a lot of harm to agriculture, like the small refinery exemptions, corn demand is being decimated. With the granting of the small refinery exemptions, or trade deals. I I'm afraid that this administration is picking trading fights, starting trade wars, but doesn't have an endgame in mind doesn't have a plan on how to win these fights.”

More than one entrepreneur has launched a business that quickly outgrew the garage to become a major employer in the community. Corporate giants Microsoft and Apple are new to the game in comparison to one business with roots in the East.

Colleen Bradford Krantz has more in our Cover story.

Anyone in southeastern Pennsylvania worth their weight in Maitake knows the story of how the mushroom industry began here. It’s not about the area’s climate, terrain or soil.

Kathi Lafferty, owner, The Mushroom Cap: “The mushrooms all started back in the late 1800s.”

Jim Angelucci, Phillips Mushroom Farms: “It started when a carnation grower’s son saw wasted space under the carnation beds...”


…in a Kennett Square city market similar to this one in New York city…

Jim Angelucci, Phillips Mushroom Farms: “He was very fastidious and, wanting to make use of all the resources. He took a steam ship to Europe where they were growing mushrooms in Paris …”

Kathi Lafferty, owner, The Mushroom Cap: “and he brought in the mushroom spawn.”

Jim Angelucci, Phillips Mushroom Farms: “And in 1902, Swayne and a fellow named Harry Hicks built the first building specifically to grown mushrooms.. and the industry just started to spread.”

Today, Pennsylvania is the nation’s top producer of mushrooms, growing and picking 67 percent of the United States’ 827 million pounds of the most commonly cultivated mushrooms, including white button. California comes in a distant second, raising 11 percent.

Chester County and, specifically, the community of Kennett Square have labeled themselves the “mushroom capital of the world.” The city of 6,000 holds an annual Mushroom Festival, serves mushroom-focused dishes in nearly every restaurant, and even has a mushroom-themed gift shop.

Kathi Lafferty, owner, The Mushroom Cap: “It’s great for the economy here in Chester County and, you know, the industry employs probably 10,000 people. It’s just amazing.”

Yet, it’s not always an easy business. A new report from the National Agricultural Statistics Service shows the volume of all mushrooms slipping 10 percent over the past three years.

Jim Angelucci, general manager of Phillips Mushroom Farms, says the startup and overhead costs are significant for those trying to get into the business. But labor has perhaps been the biggest problem as some companies struggle to hire enough workers to pick their mushrooms. Like many dairy farmers, mushroom producers are not allowed to hire temporary international workers under the H-2A visa program because the work occurs year round.

Jim Angelucci, Phillips Mushroom Farms: “Since we grow mushrooms 24-7, 365, we are not considered seasonal. My comment is, you know, our crop is only 9 weeks long. We just elect to do it six and a half times a year…If we don’t do something, I consider it a national security issue. We’ve got to have labor…You know, we’re going to lose the salad bowl in California if we don’t get labor.”

Phillips Mushrooms has been around for 92 years, and is now the world’s largest grower of exotics mushrooms. Business is strong enough that the company is building a new state-of-the-art mushroom farm just across the state line in Warwick, Maryland.

Growers pick inside climate-controlled buildings with humidity and temperature set to the perfect range for mushrooms. However, that doesn’t isolate the company financially from consequences of extreme weather.

Jim Angelucci, Phillips Mushroom Farms: “We don’t have to deal with the elements directly. When it’s 105 degrees here in the summer and our electric meters are spinning off the walls because of the electricity we are using to cool the rooms, that’s still a direct effect of the weather… the cost of doing business continues to escalate, the cost of compliance with the government.”

The Warwick facility, where additional buildings are still being constructed, features stainless steel rather than the traditional wooden growing shelves. The complex was begun when the company decided to return to growing large volumes of white button mushrooms, which it had moved away from. The stainless steel shelves are easier to wash down when the compost – or substrate - is changed after a batch of mushrooms is harvested.

Jim Angelucci, Phillips Mushroom Farms: “Our Maryland facility is called the Dutch style growing…When we were going to venture back into growing whites, the Agaricus mushrooms, back in 2009 we decided that we would look at state of the art facilities, food safety being the most important factor. So we spent a few years going back and forth to Europe before we decided on the design.”

The mushroom, as they have always been, are grown in a special type of substrate. Stall bedding from a nearby horse track is used, as is old wheat straw and hay, preventing that material from being tossed into a landfill. Some of the area’s mushroom farmers own the composting facility as a shared cooperative, and the materials are blended and prepared for all.

Angelucci, even before working for the Phillips, knew mushroom farming, and how to work with the substrate.

Jim Angelucci, Phillips Mushroom Farms: “My father told me when I was nine years old to put something on the table besides my elbows. So he took me down to our friend, a mushroom farmer … and I was the little kid on top of the pile with the hose, making sure that it reacted properly.”

Angelucci feels good about where the company and industry are heading, particularly if the labor problem can be resolved. Recent studies point to a possible connection between eating white button mushrooms and inhibiting the development of breast cancer in older women.

The Mushroom Council is encouraging Americans who are considering becoming vegetarians to instead blend chopped mushrooms into their ground meats, becoming “blenditarians.”

Jim Angelucci, Phillips Mushroom Farms: “Research has shown… an incremental sales increase in beef because people feel better about eating it… A blenditarian is one who believes that the meaty, mighty mushroom makes meals more nutritious, delicious and sustainable.”

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

Next, the Market to Market report.

Cool weather and a presidential promise prevented some commodities from adding to last week’s losses. For the week, December wheat lost 15 cents while the nearby corn contract was 2 cents higher. The potential for renewed U.S.-China negotiations was combined with questions about the length of the growing season to give the November soybean contract a 13 cent bump. December meal lost a dime per ton. December cotton added 62 cents per hundredweight. Over in the dairy parlor, October Class III milk futures gained 22 cents. The livestock sector remained mixed as October cattle shed 47 cents. October feeders cut $1.73. And the October lean hog contract put on $4.23. In the currency markets, the U.S. Dollar index skyrocketed 131 ticks. October crude oil expanded 99 cents per barrel. COMEX Gold dropped $4.00 per ounce. And the Goldman Sachs Commodity Index gained more than 3 points to finish at 396.60. Joining us now to offer insight on these and other trends is one of our regular market analysts Elaine Kub. Elaine, welcome back.

Kub: Happy to be here.

Yeager: It's a shame we have nothing to talk about. Thanks for making the trip.

Kub: Nothing good.

Yeager: Well, it depends, it depends. We'll get to that in a minute. Let's start with wheat though. Bearish pressure continues on this crop. Is that something that's going to continue?

Kub: I think so. I can't foresee anything that could come in here to be bullish for wheat. We even had good export numbers this week for wheat, export year over year we're 24% higher than last year at this time but not even that kind of good news can do anything for this wheat market. When you have the dollar, as you mentioned, it went up about half a percentage point on Friday alone.

Yeager: Yeah and it's already at a four week high going into today.

Kub: So I think that is probably why you're seeing these double digit losses in nearby wheat futures, especially on that Chicago board. But even the KC wheat price wise itself is pretty grim, the futures are below $4, which means the cash price is much below $4 and that all kind of makes sense just domestically. This is true for spring wheat also where you've had pretty good conditions all summer. And this harvest is late, it's about 10 to 15 days late, but nobody cares about a late harvest if you're eventually going to get in all of these bushels.

Yeager: And get a harvest. So, do you cut your losses and make a sale now? Or do you hold?

Kub: No, and especially in the case of that spring wheat where I believe some folks are having, the protein isn't there, you need to know what protein you have in your bin, get tested for falling numbers and see where the market is going to shake out because I think right now there are lots of bushels but the quality or the protein levels is not what it would be in some other years. So I think it would pay to know what you've got in your bins and make a marketing decision months down the line.

Yeager: I'm not making light of the weather but we do know Punxsutawney Phil and we see six more weeks of winter if we see him. If we see this new creation called Frosty Frank, are we going to get that frost in the next six weeks? If Frosty Frank sees his shadow the market looks like it's going to be headed up. We're really watching a frost but it's already cool, continued cool forecast. Is that going to save the corn market?

Kub: I'm actually, I think the soybeans will be more sensitive to that weather concern than the corn, but both of them will. Certainly if you have a frost scare in the near future both of them would have a response. And there isn't at this point, I've checked the 10 day forecast even up in North Dakota where they have a good corn crop this year, so far so good. But we are absolutely in a weather market and it could be the case that six weeks from now nothing has happened and so there is no response in the market. I'm not necessarily bullish from this alone. I'm just saying that every day we wake up and watch the markets and watch the weather forecasts and we are absolutely in a weather market on that frost potential.

Yeager: We've been in a weather market but we've also been in a market where people don't believe things. And e got a question via Facebook. This one came from Dan in Geneseo, Illinois. Elaine, he was asking us, why is corn basis so firm if there are high stocks from last year and 169 bushels per acre in the field this year? Do end users not believe USDA? Or are farmers holding?

Kub: That is an excellent, excellent point that he's making there. And it really sort of depends locally. The really high basis levels are in the Eastern Corn Belt, in Ohio specifically. They were as high as 65 over, now they're about 30 over, maybe as high as 40 over, which means $4 cash corn bids are still out there for folks in the Eastern Corn Belt and it is exactly because the end users there can drive around and they can do a crop tour like anybody else and they can see that the acres aren't there and the bushels aren't there. If I was going to quibble with any of the USDA numbers right now certainly I don't believe this 169 number and I think satellite data backs that up and just general observations really put doubt on that. So yes there was large carryout. But remember a lot of that, more of that carryout than usual was left in farmer bins as opposed to commercial bins. So the farmers did have an ability to keep that basis strong and they responded and we've seen that Eastern Corn Belt basis, like I mentioned, go from 65 over to 30 over, so it's not what it once was, but it is still a reflection of reality. I think if you want a reflection of real concern from the end users who don't believe that the new crop is there and are trying to bid up that old crop, this basis is exactly where you see that reality.

Yeager: So watch the basis. And I'm going to get your conspiracy theory in Market Plus on something related to that. But before I let you go real fast in corn, if you maybe you're in the Western Corn Belt, Middle Corn Belt and you've got to empty those bins do you do it?

Kub: Yeah sure. The basis is very good for this time of year. You've got an equivalent of 10 over the December, ADM in Cedar Rapids, Iowa is sort of a benchmark. But sort of processor level bids all across the Midwest are about zero. So really for this time of year this is a good basis opportunity and maybe the price isn't what we wanted it to be but we did have a large crop in this old crop.

Yeager: We posted a picture on Twitter and Facebook, I think it was more of a tweet, last week or early this week, of pictures of soybean fields. And someone said, I zoomed in and looked and all I saw were blossoms, I didn't see pods. The video we showed you earlier, or we're going to show you here in a minute, will show you pods. That was from Northeast Iowa. How good is that crop out there right now?

Kub: Yeah, it looks nice.

Yeager: It looks nice from the road, right?

Kub: Yeah, from the road. But, like I said, I'm much more worried about soybeans than corn when you talk about the frost concerns. Any sort of frost before let's say Halloween there will be areas --

Yeager: That's pretty late, Halloween.

Kub: I know, but a lot of that was planted really late. And here I'm not thinking about the northern tier of the Corn Belt, but Southern Iowa, Southern Illinois where some of that was planted very late, then yeah you've got to get into October to get those pods fills. So I'm very worried about the soybean yield scenario by the time this is all said and done.

Yeager: 3 month low, pushing near a 20 day average, the weather, it has been cooler, we've got tariff talks, we've got China buying maybe. There's a lot of question marks facing soybeans right now.

Kub: Right, so it's a weather market ad we could get a rally, we could get a response from a frost. But that response will be going from a very low point. So cash prices in Iowa and anywhere west of Iowa or north of Iowa for soybeans is 90 under the November. That's like $7.80 per bushel for soybeans. That's yuck. So sure we could get a bounce up from that if there is weather, which itself is a big if, and that bounce is still not going to take you to a price that you're going to like.

Yeager: No. Is there any chance there is a price I'm going to like after November?

Kub: If it frosted in the next 10 days and took out the entire U.S. crop then maybe, maybe.

Yeager: That's a pretty big scenario right there.

Kub: Nobody is expecting that either. And you'd still feel bearish months down the line because there's the expectations for very large South American crops given what the Brazilian currency has been doing, given just their scenario down there and their acreage expectations. So it's really hard to feel any sort of bullishness for soybeans, beyond a little weather boost, any bullishness until a trade war gets solved.

Yeager: All right. We'll talk about cotton and the weather impact on Market Plus. Let's talk about the cattle market. We have a fire in Kansas still being talked about because now members of Congress are wanting an investigation and also trade groups are wanting an investigation of what happened. Is that still having any impact on the cattle market?

Kub: It's definitely having a profound impact on the market. The packers because they are now the bottleneck, they are the scarcity point in this industry, they are in the cat bird seat and they have $500 a head packer margins or more, which is record large. So the consumer is still willing to pay for the beef, the wholesale beef prices themselves are holding up, it's just the packers don't have the capacity, the capacity fell let's say 6% with some of the estimates, although when you actually look at the weekly slaughter numbers this past week they're only down about 3% from a year ago levels, so we probably haven't lost or we're not really behaving as if we've lost 6% of the capacity. But the packers are making money and they're pushing back against all of the fat cattle that otherwise would have been able to come to market.

Yeager: And we have those in the lot now, that feeder market. We've heard about expanding the weights, holding out, waiting for something, the bottleneck. Any good news there with feeders?

Kub: For the live cattle I would expect a jump up from this or a recovery in the futures market because that drop that happened right after the fire was almost certainly an overreaction. We've dropped $20 from the level it was on August 1st. So to me that suggests that a bottom has been found and a recovery could be seen. But with the feeders I don't think they would necessarily have that same overreaction, they don't have the same potential for a recovery. 

Yeager: All right. Costco opened up operations in China. That is seen as a possibility of putting more consumers over there in with U.S. pork. The hog market up a good chunk this week, 7%, $4. Is it going higher?

Kub: Yeah, it could recover, certainly seasonally and as you look out on the board it would recover. But even this bullishness that we had this week I think that is related to trade, maybe not so much China, although the Costco story was good. Folks were lined up out the door. But I think perhaps the timing of the discussion with Japan might have been enough of an influence to send hog traders moving upwards. And in fact that is one of the rare commodity markets where the funds are currently net long in futures. So I believe there is potential for them to continue building that hog position.

Yeager: One of those signs that we should be watching is what you're saying.

Kub: Sure.

Yeager: Just keep looking at things like that.

Kub: Absolutely.

Yeager: You’ve got 10 seconds, you get to finish your thought.

Kub: I was just going to say that the hogs are the only one you can say that for, the funds generally otherwise you look at the commodity markets most of the grains, cotton too, is a pretty bearish scenario.

Yeager: All right, Elaine Kub. Thank you so much.

Kub: Thanks, Paul.

Yeager: That is going to wrap up the broadcast portion of Market to Market. But we will keep this conversation going on Market Plus, conspiracy theory remember, where we’ll answer more of your questions. You can find it on our website at Our Facebook page is filled with links and photos. The more you like the more you’ll see @Iowa PBSMarket.  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 Paul Yeager. Have a great week!



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Pioneer Hi-Bred International is a proud sponsor of Market to Market. 

Tomorrow. For over 100 years we have worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today. 


Accu-Steel, offering fabric covered buildings specifically designed for the cattle industry since 2001. The next generation of cattle buildings. Information     


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.   


Grinnell Mutual Insurance