Market to Market (July 24, 2020)

Jul 24, 2020  | 27 min  | Ep4549

Coming up on Market to Market -- Congress returns to work on COVID relief for producers and consumers. Getting back in the tractor after losing both legs in the blink of an eye. And market analysis with Mark Gold, next.

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What's the most complex industry on Earth? It's not genetics, or meteorology, or logistics. It's a business that involves them all. It's farming. Thank you, farmers, from Pioneer.  

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.   

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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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This is the Friday, July 24 edition of Market to Market, the Weekly Journal of Rural America.

Hello, I’m Paul Yeager.

Before 2020, the statement “if the U.S. economy sneezes, the world catches a cold” was an Economics 101 metaphor.

Replace that with COVID-19 and the comparison hits close to home in both a public health and economic sense.

Initial jobless claims have rebounded since last Friday in the first week-over-week increase since March.

The housing market performed well in June.

Sales of existing homes jumped 20.7 percent last month. The National Association of Realtors cites low mortgage rates and pent-up demand as factors.   

New home sales were up sharply by 13.8 percent on many of the same reasons.

Americans are waiting to see exactly what Congress is going to provide in the next economic stimulus package. More than one urban dweller is hoping for status quo on money to make ends meet while many in rural America are hoping to make up for losses on the farm.

Here’s Josh Buettner with more.

Sec. Steve Mnuchin/U.S. Treasury Department: “The recovery act – CARES 4.0…The good news is, a lot of the $3 trillion we still have left to put in the economy and put back to work.  We’re focused on starting with another trillion dollars.  We think that will make a big impact.”

Early this week, the White House and U.S. Senate began negotiations on more coronavirus related economic assistance. Deficit hawks within the GOP are railing against the measure.

Sen. Rand Paul/R-Kentucky:  “Adding another trillion dollars is the most fiscally irresponsible thing I’ve ever heard of.  Everything they ever said about president Obama…everything they ever said about the Democrats…they are!”

The so-called “fundamental agreement” will tee-up discussions with Democrats, who passed an over $3 trillion bill in the U.S. House.

Rep. Nancy Pelosi/D-California/Speaker of the House: “We offered this legislation.  We thought they would counter with something that was at least reconcilable.”

Republicans are under pressure to move quickly on more aid as COVID-19 cases and deaths surge domestically.

Sen. Chuck Grassley/R-Iowa:  “We think it fills a big hole we didn’t anticipate in March when the first CARES package come out and we put 24 and a half billion dollars into the CCC program, of which 19 and a half billion dollars has been dispersed by now.”

Farm state Senators recently introduced bills to increase the number and type of ethanol feedstocks as well as working to clear red tape from USDA’s Commodity Credit Corporation. If adopted, the measures would unleash more emergency assistance for livestock producers, dairy operators, and meat processors.  Those efforts could find their way into the larger aid package.

Sen. Chuck Grassley/R-Iowa:  “Nobody anticipated the shutdown of slaughtering houses and all the stuff that we now know.”

The National Pork Producers Association is seeking further federal aid for its members dealing with COVID-related supply-chain disruptions resulting in on-farm euthanization of healthy hogs.  Local representation in the nation’s top pork-producing state says pandemic concerns are just the latest in a long string of challenges for the swine industry.

Mike Paustian/President – Iowa Pork Producers Association:  “In the two years leading up to this, we’d been facing a lot of headwinds due to the disruptions in trading that have been happening.  Pork producers were on the spear-tip of retaliation for some of the tariffs that were being put on against some of our products.  This was supposed to be a year where things kind of turned around a little bit…and now the projection is that collectively, pork producers are going to lose up to 5 billion dollars this year.”

For Market to Market, I’m Josh Buettner.

July 2020 marks 30 years of the Americans with Disabilities Act.

The ADA prohibits discrimination against individuals with disabilities in all areas of life.

Our originating station, Iowa PBS, is marking the anniversary in a variety of ways including our coverage.

The National Ag Safety Database cites almost 80 percent of farm accidents result for carelessness or failure to deal with hazards safely.

One Iowa farmer made a harvest decision a few years ago that changed his life forever but only in *how* he gets the job done on the farm today.

Producers David Miller and John Torpy tell his story.  

Rick Meister, farmer, Lake View, Iowa: I grew up here…The family farm is South of the Lake, and I went to school here and I just stayed here. And in 1990 I bought my own farm.”

Twenty-four years after starting work on his northwestern Iowa farm, Rick Meister began another day of harvest on his operation near Lake View.  

Rick Meister, farmer, Lake View, Iowa: “October 8th, 2014, the Saturday of Labor Day that we had some wind storms come through and we had some corn come down. So I said, ‘We’re gonna go out and open up the field so the chopper can come through.”

As day turned slowly to dusk, the downed corn began jamming in the combine head.

Rick Meister, farmer, Lake View, Iowa: “I was going through, the head plugged once, I shut everything off, got out, unplugged it, got back in the combine. The head filled up, again, with the downed corn. I shut it off, got back out, got it unplugged. Well, I was going along the next time. Well, it happened, again. Well, I don't know, frustration or whatever, just. I had the corn head down. I left, I left the combine run. It was my own fault. I left it run. Well. I was out there and I ‘bout, had all the corn stocks left and I reached and the second row gathering chain, grabbed my blue jeans. Well, the chain did its job; it gathered me in and I had to hold myself out otherwise I would have went through the corn head. It cut off my left leg, above the calf, about the calf area.

And it also had the right leg, but I fell to the ground before it cut the right leg all the way off.”

Jared, one of his three sons, was the first to arrive.

Rick Meister, farmer, Lake View, Iowa: “So he walked around the end of the combine. He seen me. He goes, ‘Dad, what do I got to do?’ I said, ‘We got to stop the bleeding.’”

Jared phoned his brother Jake to come to the scene of the accident and provide more help. Eventually, both boys used their belts as tourniquets on their father’s legs.

EMS arrived. An attempt to get a Life Flight helicopter failed and Meister was taken about 10 miles to the nearest hospital in Sac City. Meister’s wife, Jackie was brought to the emergency room.

Rick Meister, farmer, Lake View, Iowa: “And then they finally got a hold of Life Flight, but it was going to be 45 minutes. And by then the priest came and the boys got Jackie, who was home here working. They got her. And we said our goodbyes and that's the last I remember.”

He was airlifted to a hospital in Omaha, Nebraska for emergency surgery.

Rick Meister, farmer, Lake View, Iowa: And then I woke up in Omaha, like at 2:30 in the morning.

The doctor came into the room and spoke with the family.

Rick Meister, farmer, Lake View, Iowa: “And he says, ‘Boys, your dad's been through hell.’ And he goes, ‘I had to do the hardest thing a doctor does is ask for the saw in surgery.’… He said, ‘You know, but I can see your dad. He's going to move on. He's going to make it.’”

Meister spent eight days in the hospital and another 11 in a Lincoln, Nebraska rehabilitation center. Before leaving for home, he was told about a provision in the 1990 Americans with Disabilities Act called Agribility. The federal program helps producers with disabilities get started on the farm or return to farm life after a serious accident.

Rick Meister, farmer, Lake View, Iowa: She goes, ‘is there a program that helps farmers out in Iowa?’ ‘Boy, I don't know.’ You know? And she goes, ‘well, ‘every state has one,’ you know, but it's probably not the same program. Well, they did some searchin’ and they found out it was Easter Seals for me. So they have, they set it up. So then when I got home, I called Easter Seals.”

Tracy Keninger is the director of the program run by Easter Seals Iowa, located in the capitol city of Des Moines.

Tracy Keninger, Director, Rural Solutions, Easter Seals Iowa: “Easter Seals, Rural Solutions Program started in 1986, even prior to Agribility. We were one of the first programs in the entire country who arranged a program specifically for farming with a disability.”

“In any given year we'll support anywhere from 130 to 150 Iowa farm family members with disabilities.”

“We travel directly to the farms and work one-on-one with farm family members with disabilities. And it's not really just working with the person with the disability, it's working with the entire unit and we're right by their side, every step along the way until they can fully rehabilitate and be engaged in the farming operation after the onset of their disability.”

Meister began working with the non-profit that has a 90-year history of helping anyone with a disability or special needs. There is no charge for the Rural Solutions service however there is a cost associated with some equipment. Meister paid a nominal fee for a motorized wheel chair and a specialized tricycle.

Meister experimented with some of his own solutions but he had mixed results.

Rick Meister, farmer, Lake View, Iowa: “Well, I said, ‘boys, let's weld a tractor seat on the end of that, fit on the skid loader. And I'd sit on this. And it worked to get me an attractor and stuff, but I had to wait to somebody who was there to get me out. Like if I got done, I'd have to wait. And the boys seen this, lift at, uh, at the Farm Progress show one time. And they said, ‘Dad, this is what you need.’“

Rural Solutions assisted in acquiring the specialized lift that makes it easier for him to get around the farm.

Rick Meister, farmer, Lake View, Iowa: “I can go three inches off the ground or 12 feet high. …It has got me into anything I want; combine tractor, skid loader, the older tractors, you know, it has got me so far. I haven't got stuck yet.”

Meister has often reflected on what happened that day nearly five years ago, but he has never let the outcome of the accident stop him from getting back to work.

Rick Meister, farmer, Lake View, Iowa: “Yeah, we made that decision in the hospital. I said, ‘Jackie, we're going to try.’ And my wife, she was a motivator. And, with the kids I wanted to, you know, we had too many plans at the farm that I wanted to see completed. And you know, we were in the process, but you know how that all takes time. And yeah, this was, I, I didn't want to sit. I wanted to kept going.”

For Market to Market, I’m David Miller.

Next, the Market to Market report.

The commodities were under pressure from weather and boosted by sales. For the week, September wheat gained a nickel while the nearby corn contract lost 7 cents. July has proven to be a big month of sales to China in the U.S. soy complex. The August soybean contract added 7 cents. August soybean meal improved $4.30 per ton. December cotton lost $1.70 per hundredweight. In the dairy parlor, August Class III milk futures decreased 70 cents. A mixed week in the livestock sector. August cattle dropped $1.95. August feeders shed 65 cents. And the August lean hog contract added $1.20. In the currency markets, the U.S. Dollar index dropped 153 ticks. September crude increased 33 cents per barrel. Metals were hot this week as COMEX Gold jumped $86 per ounce. And the Goldman Sachs Commodity Index improved nearly 3 points to finish at 341-even. Joining us now to give us some insight is one our regular market analysts, Mark Gold. Hello, Mark.

Gold: Hello, Paul. Good to see you again.

Yeager: Good to see you as well. I was telling you before we got going, this is the third time we've talked to you remotely. And I'd like to say some things have changed but plenty of things have not. One of the things that has changed more recently is the wheat market. The three different ones all kind of have their own mines right now, Kansas City, Minneapolis and Chicago. Why is that?

Gold: Well, the amazing thing is you look at Chicago wheat, 90 cents over Kansas City, we got out to $1.14 I think it was last September, we've never seen spreads like this with soft wheat so far over the protein. But it is, like you said, a different day, a new market and we've seen this strength and it doesn't look like it wants to back off any time soon.

Yeager: Are any of these following seasonal trends, any of these three?

Gold: Not really. We've come through the harvest on the Chicago wheat and the Kansas City wheat pretty well winding it down now and we should start to see some pick up after the harvest pressure. The dollar, as you mentioned earlier, has really taken a hit. It has gone through several of my support level and I've been saying it looks like the dollar is toppy, we can work this thing lower, and we've just continually made this thing really look pretty bad. To me the next real support in the dollar is 92 cents which would be almost a 12%, 13% drop off the highs. That should start attracting some attention and not only are we breaking but the European currencies are moving higher, which they have been the dog and we have been the dog with the least fleas, but now the Europeans are coming in and their currency looks better and ours is starting to take the hit. I think it's reflective of inflation, I think it's reflective of spending $3 to $6 trillion and printing up all that money not expecting that the value of the dollar won't get hit. So ultimately I think that we can see lower dollar prices which should be very helpful for the wheat market.

Yeager: Are you making any sales either near-term or on the deferred contract right now?

Gold: We made some sales at around $5.40, $5.48 I think it was on some September wheat about a week and a half, two weeks ago. We're looking for another level a little bit higher. We get close again today on the rally but I think if we can continue to move higher we've got problems in Russia, we've got problems in Europe and I think this market is certainly poised to move higher. So we're just kind of moving into it slowly. We haven't done much yet, we've been patient and now we're paying off this wait here and hopefully we can see even higher prices yet.

Yeager: There was some guy out of Chicago this week who wrote, if we grow it they will come, it's just a matter of when. You're referring to the corn market, I'm sorry I gave it away, you were referring to the corn market. What did you mean there?

Gold: Yeah, who wrote that? To me there has been a lot of discussion with the U.S./Chinese tensions, the Chinese basically shutting down their Embassy at Houston. There's a lot f talk out there but we haven't seen it affect exports really one iota. You look at the weekly sales figures this week, 2.2, 2.3 million metric tons out the door in corn and beans. They're not stopping buying and I just don't think that with the way the Chinese system is right now they've got corn prices through the roof, they want to expand their hog production, so I think we're the game in town and if we grow it I think they're going to come. I think the big question is do they front load it before the election or do they wait until after the election? I think we’ll see some as we have seen before the election. I still think there's a lot of big buying out there that may come after the election. I think they want to put some heat on Trump not to get too high out here so I think they could wait until after the election.

Yeager: During your comments there we were showing video of some crop that was stressed. We still have west of us where we tape here in Central Iowa it's still pretty dry, there's other areas that are really dry. Why haven't we necessarily seen, are we too far down the road in corn when it comes to a lot of this crop is made now? Is that why the weather hasn't impacted corn as much?

Gold: Well, I think because we've had rains in Chicago, that's the old saying, it doesn't mean much but these prices have gone down. We had some good rains in Eastern Iowa, it looked like they were pretty scattered here and there. When you look at the current drought maps for Iowa there's a lot of drought area there. And I had one of my clients call me and say, hey Mark, you're talking about rains in Iowa, we wish we had them here in Western Iowa because we're not getting them. So is the yield 180? Is the yield 175? 182? Nobody really knows but I don't think it has been quite the growing season people think it is. We've had warm nights, hot and humid days. Yeah, where they've got rains we'll have a pretty good crop. But I'm not sure that yield is going to be the biggest factor. I really think demand is going to be a much more important role as we move forward.

Yeager: Real quickly, are you making any sales or are you holding right now?

Gold: We're holding off right now but we're looking for a good spot hopefully in the month of August. The weather still looks hot and dry to me in August. If we can get one more spurt, hopefully take out the triple top, the double top in the corn at $3.63, get to $3.90, $4, we'll certainly get more aggressive there. We're not running out of corn but the Chinese can make this a whole big different game.

Yeager: Well let's move to soybeans and a question that we got, this one came via Twitter and Brock sent this to us. He's asking, how much will China have to buy to get the market's attention? It seems we have yawned about every purchase thus far? That was the big story last week in corn. Beans we did rally but do you agree with the sentiment in that question?

Gold: Well, it's certainly a little disheartening when you saw the export sales yesterday, we really couldn't rally corn. But I think we've always had this kind of syndrome good exports, lousy closes and I think that's what we've seen here. If we start building up 6, 7, 8, 9 million metric tons of sales to China then I think the market is going to get very interesting. We don't see it on the flash sales during the week on the daily announcements. 200,000, 300,000, 500,000 isn't going to be enough. We're going to need to see flash sales of 2 million, 3 million metric tons and then I don't think the market can sit back and yawn, particularly when the funds are still short 180,000 contracts.

Yeager: You were saying coming into today we needed to finish above $9. We did finish at $9.05. How much higher does this go now in a technical sense because of that closure?

Gold: I believe higher. I've always said a lot of times it's what a market can't do that is as important as what a market can do. And the market couldn't close at $9 today in the August contract to get both the puts and the calls to expire worthless. The calls had 4 or 5 cents of value on them as they went off the board and I think that's indicative that there's some pressure on the shorts here. So when we see this kind of action it makes me a little bit friendly particularly for next week. I'm hopeful barring some unforeseen news for the Chinese that we can open this thing higher, maybe get some of the funds to start chasing in some of their shorts and I thought it was a very positive close particularly in the August gains. I like the close and I think certainly the bean market could go higher.

Yeager: Let's move to live cattle. Are we still heavy in the lots? I know we're going to talk about cattle on feed in a moment. But we still have that big heavy that we're working through?

Gold: 900,000 head of extra cattle and the cattle that they are slaughtering at a good rate, slaughtering them with 20, 30, 40 pounds more per animal. So we keep adding meat into the system. We're through the majority of the growing season out here and we've had a $21 rally in the fats, we're urging clients certainly look at spending some money on puts on this rally. I don't know that we have felt the full effects of COVID, restaurants are shutting down again, numbers of cases are going through the roof, Arizona, California, Florida all curbing their outside and restaurant activities. That's not good. On this kind of a rally I think you absolutely have to invest $3 or $4 puts and protect the downside.

Yeager: What else on that cattle on feed report did you see that you want to mention?

Gold: Well, the on feed was down a little bit, they were looking for 104. Excuse me, the placements were 104, they came out with 102, so maybe not as many placed but the marketings are right on the market 101, on feed right on the market 100. So I didn't really see anything that big one way or the other. We've been trying to close the cattle over the 200 day moving average, haven't been able to do that and to me with this rally and these prices and what's going on with COVID I think that the cattle need to be protected. I hope I'm dead wrong and cattle go to $130, $140 and you lose the $3 or $4 on the puts but we can't watch this cattle market go down back down to $85.

Yeager: Protect yourself as we always like to say. We have been above $50 on lean hogs now the last two weeks. $54 even today. What does that signal to you?

Gold: It tells me that the Chinese have been buying some pork products out here. We know that they've been looking, we know that they've been buying and I think it's just a matter of until they can rebuild their herds we're a viable alternative. The dollar is cheaper so why wouldn't they come to us for some good pork? Hopefully we're going to see more of that and we can move these prices higher. We want, to hold these lows that we've made last month. If we start taking those out the back months could certainly try $40. I hope we don't have to see that because of the Chinese buying and the lower dollar.

Yeager: About 30 seconds, Mark. The floods of China, does that impact the hog market at all or is it more of a grain situation?

Gold: I think it could be both. Are they flooding out hogs? Are pigs drowning out in China? I haven't heard reports on that. It seems mainly to be affecting grain markets. But the fact of the matter is if they keep losing the grain they want to build this herd that's going to be friendly not only for the pork market but for the grain market as well.

Yeager: And there is a concern though that some of the rain is allowing the virus to spread that was the impact last year. Are you hearing that?

Gold: I haven't heard that. I have my doubts on that. I think it's more of a person-to-person. Let's put on our masks and protect each other out there kind of thing.

Yeager: Good to see you, Mark. We'll talk to you in Market Plus in just a moment. Thank you, sir.

Gold: Thank you, Paul.

Yeager: That will do it for this installment of Market to Market. We will talk more in Market Plus, so join us there. You can find it on our website atMarketToMarket.org. We have three take-on-the-go offerings associated with the program in podcast form. Market Plus and Market Analysis are available on Friday’s while the M-to-M comes your way every Tuesday with a behind-the-scenes look at this program and our stories in the works. Next week, pairing existing businesses with new owners in rural areas. Until then, thanks for watching and have a great week.

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Trading in futures and options involves substantial risk. No warranty is given or implied by Iowa PBS or the analysts who appear on Market to Market. Past performance is not necessarily indicative of future results.

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

What's the most complex industry on Earth? It's not genetics, or meteorology, or logistics. It's a business that involves them all. It's farming. Thank you, farmers, from Pioneer.  

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.   

(music)  

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
Pioneer