Market to Market (August 7, 2020)

Aug 7, 2020  | 27 min  | Ep4551

Coming up on Market to Market -- A landmark environmental bill could create a maintenance bottleneck. The livestock sector studies pain management in food animals. And market analysis with Arlan Suderman, next.


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.   


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


This is the Friday, August 7 edition of Market to Market, the Weekly Journal of Rural America.


Hello, I’m Paul Yeager.

The U.S. House and Senate entered Friday without a coronavirus relief bill putting the financial survival of some Americans in a precarious position.

Finding common ground in Washington, D.C. is easier said than done, especially when an election is less than 90 days away.

The president did sign a bill this week focusing on protecting federal public lands and waters. As the measure becomes law, the critics contend this is more than upkeep at national parks.

Josh Buettner has more.

This week, President Trump signed landmark environmental legislation into law.  Under the Great American Outdoors Act, $3 billion annually will go toward conservation projects, outdoor recreation and maintenance of national parks and other public lands.

President Donald Trump: “President Theodore Roosevelt was right when he called these exquisite resources the most glorious heritage a people ever received.”

The measure overwhelmingly passed an otherwise log-jammed Congress and in-part requires $900 million in annual mandatory funding of the popular Land and Water Conservation Fund – in existence since the mid-1960s.  The endowment is generated through federally administered oil and gas leases – and gives some allowance for land acquisition.

Nearly $2 billion more will enable improvements to parks, forests, wildlife refuges and rangelands every year.

President Donald Trump:  “We want every American child to have access to pristine outdoor spaces. When young Americans experience the breathtaking beauty of the Grand Canyon, when their eyes widen in amazement as Old Faithful burst into the sky, when they gaze upon Yosemite, Yosemite's' towering sequoias, their love of country grows stronger.”

Supporters hailed the move as the most significant conservation legislation in nearly 50 years - one which will create 100,000 jobs.  Opponents counter the money isn’t even enough to cover the estimated $20 billion maintenance backlog on federally owned lands – a problem across multiple administrations of both parties.

Kaitlynn Glover/Executive Director of Natural Resources/National Cattlemen’s Beef Association:  “We love the great American outdoors.  We all want a sustainable and healthy future for these landscapes.  The problem is that this bill, as it was enacted, didn’t quite get us to the place we needed to be.”

For those whose livelihoods create taxable profits from the land - particularly in the American West, where the majority of the nation’s 640 million federally-owned acres are found – the National Cattlemen’s Beef Association is concerned the new law could allow the federal government to acquire more property at taxpayer expense over the long term – exacerbating challenges ranchers have wrestled nationwide for decades.

Kaitlynn Glover/Executive Director of Natural Resources/National Cattlemen’s Beef Association:  “It was a bailout, effectively of federal agencies and their deferred maintenance at any cost.  For my producers and the producers I represent, the big priority is going to be making sure that these funds don’t take private lands out of private hands – these funds are not used to create a voluntary separation of those private property rights to make sure we are not taking these lands out of a productive capacity.”

For Market to Market, I’m Josh Buettner.

The Coronavirus pandemic continues to wreak havoc on the U.S. economy.

- 1.8 million jobs were created in July, above expectations, but only 42 percent of the jobs lost since March have returned.

Unemployment dropped to 10.2, nearly a 1 point fall and third consecutive month of declines since April’s 14.7 percent peak.

The nine-state Mid-America Business Conditions Index, one indicator of rural America’s economic health, climbed to 57.4 -- those surveyed still see a long road to recovery.--

Consumers have taken a greater interest in how their food is grown and arrives on their table. The national discussion now joins the existing debate of pain management in animals being raised for food.

Colleen Bradford Krantz has more in our Cover Story.

This Kansas cat is about to be spayed. This Iowa piglet is about to be castrated. One will be given medicine for the pain. One will not.

While pain medications labeled for use in livestock are almost nonexistent, companion animals, like Annabelle in Atchison, go through most medical procedures with the help of short- and long-term painkillers.

Dr. Chris Hansen, Atchison Animal Clinic: “Within our small animal pharmacy, we essentially have two shelves full of different pain medications that we can use… In cattle, the only labeled product that is out there for pain or analgesia is Banamine Transdermal and the only label is for foot rot.”

In recent years, however, veterinarians, college professors, and livestock industry leaders have begun working to overcome barriers that have led to the lack of livestock pain medications.

Dr. Chris Hansen, Atchison Animal Clinic: “Growing up, farm pain management I don’t think was really anything anybody thought about. If something was suffering really bad, it just came down to maybe we need to end that animal’s suffering.”

Getting the U.S. Food and Drug Administration to approve painkillers for livestock, however, has been more complex than with non-food animals because of rules designed to keep drug residue out of meat.

In the past, veterinarians who wanted to ease pain in hogs, cattle and other livestock, were left little choice but to use a drug in an extra-label or off-label manner. The responsibility landed on the veterinarian to ensure the drug didn’t end up in the food supply.

Dr. Chris Hansen, Atchison Animal Clinic: “…everyone wants to use it but we need to have the research done so that we use it correctly.”

Now that research is being done. The FDA has joined industry leaders in studying new options for livestock pain management, but approval any drugs used for livestock usually requires proof of pain and subsequent easing of pain with the medication’s use. Banamine Transdermal, the medication approved for foot rot, a painful condition in cattle, gained FDA approval in 2017, becoming the first officially approved painkiller in the U.S. for a food animal.

Kansas State University participated in the research that helped gain that approval. The team is trying to pinpoint how to prove when an animal is in pain.

Hans Coetzee, Kansas State University: “Obviously, it’s difficult to assess pain in animal cause they can’t talk and tell us how much pain they’re in. So we have to rely on biomarkers of either behavior or the physiology of the animal… It’s been difficult for us to try to assess behavioral changes objectively and to try to come up with a scoring system.”

Research teams look for indicators of stress in the blood, such as cortisol, but it can disappear too rapidly to consistently measure. A second indicator of pain is skin temperature. Pain prompts a fight-or-flight response, which means blood is pulled toward the body’s core. This Kansas State University thermal imaging video of a steer as it is being castrated illustrates the instant change in skin temperature.

Some early work is also being done with facial recognition in hogs and other species. A program looks for changes in expression that might hint at an animal’s suffering.

Another test that shows promise uses a pressure mat to measure changes in an animal’s stride length and weight placement.

 Hans Coetzee, Kansas State University: “So looking at the way the animals change the distribution of weight on feet has actually been something we can measure quite accurately.”

The National Pork Board is working with these university researchers and the FDA to pave the way for a pain medication for hogs, in particular. This may become particularly important considering a few other nations have banned practices such as piglet castration.

Sherrie Web, American Association of Swine Veterinarians: “Castration of pigs is a global conversation, not only here in the U.S. but there’s a lot of discussion in the E.U., Australia, and in New Zealand.”

Hogs are castrated because the meat, when cooked, emits an odor known as “boar taint,” which surveys show 80 percent of the population find offensive.

Sherrie Web, American Association of Swine Veterinarians: “We know that the procedure is a painful procedure for piglets. But what we focus on looking at is ways we can either replace the procedure, refine the procedure or reduce the pain.”

Piglet castration has been refined some over the years. The surgery now typically takes place when the piglet is 3- to 5-days old. This timing seems to allow the piglets to bounce back most rapidly, particularly if they are still with their mothers.

 Hans Coetzee, Kansas State University: “What’s urgently needed from a producer’s standpoint is a practical way to be able to implement these pain management strategies in a production system because typically we are dealing with large numbers of animals.”

Ideally, experts would like a medication that can be given to a sow, reaching her piglets via her milk a day later. The low dose in her milk should ease the piglets’ pain during common procedures such as castration or tail docking.

Todd Wiley, producer: “We would be all about utilizing a product if, in fact, it showed that it worked and was beneficial and useful. The cost component, while always to some degree a factor, if it is better for our pigs then we’d be inclined to use it.”

Some veterinary clinics, the Atchison Animal Clinic in Kansas among them, have begun implementing the use of off-label pain medication with the more routine procedures on livestock.

Dr. Chris Hansen, Atchison Animal Clinic: “whenever we’re castrating cattle or dehorning, we’re going to administer pain medication. It’s something we feel very strongly about. …. Initially, we offered it as an option. Now we’ve kind of moved on to where it’s just something we do…. The consumer can see the value of that and feel good about the way these practices are done.”

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

Next, the Market to Market report.

Expanding drought conditions wilted in the face of private estimates in the Corn Belt. For the week, September wheat tumbled 36 cents while the nearby corn contract lost 8 cents. Soybeans drifted downward to join in low prices by wheat and corn as the crop size estimates surged. The September soybean contract fell 24 cents. September soybean meal lost $9.20 per ton. December cotton gained 2 cents per hundredweight. Over in the dairy parlor, September Class III milk futures plummeted $2.47 or 13 percent. A mixed week in the livestock sector. October cattle shed 70 cents. September feeders climbed 33 cents. And the October lean hog contract increased $1.68. In the currency markets, the U.S. Dollar index added 7 ticks. September crude improved $1.61 per barrel. COMEX Gold jumped $60.90 per ounce. And the Goldman Sachs Commodity Index expanded 5.25 to finish at 343.95. Joining us now to give us some insight is one of our regular market analysts, Arlan Suderman. Hello, Arlan.

Suderman: Good to be here, Paul.

Yeager: Good to see you there. Let's start in your back yard, the wheat contract. Just when you thought it couldn't get any worse already the Kansas City hard red contract low set in and then Russia and Canada said, oh yeah by the way our crops are better. Are there more bears in this market?

Suderman: That's what they're trying to find out and the momentum traders are certainly driving it. And you're right, Canada is looking like a good crop right now, Russia has got a better crop than first thought. And Russia, the Black Sea really sets the price. And so with a bigger crop than expected in the Black Sea that means that they're expecting to see lower prices pushing our market down.

Yeager: Well, we've seen Chicago give back 80 cents in the rally since June and July, it's a heck of a give back. We had a nice bump there. Is there any chance that this thing can turn around?

Suderman: There certainly is a chance. And it's going to be tied to the corn market too. If we can put a bottom in the corn market, and I presume we'll probably be talking a little bit about that today, that would certainly help. But right now the market is focused on the supply side of the balance sheet across these commodities. At some point it will be comfortable with what that supply side is and it will start focusing on demand.

Yeager: You mentioned corn. There was this company that came out this week with one of those private estimates that pushed us way above trendline yields in the corn market. It is your employer, Arlan, so what is it that the company is seeing in your estimates? And is there more corn out there than even what is estimated?

Suderman: Yeah, I've seen some higher estimates even than what we printed. But what we do is a survey of our customers across the country and especially the Midwest, if you were to pick a yield today that you think would be the final yield, we're not predicting USDA and the next crop report, but we're predicting final yield as of the 1st of the month, what would you think it would be? And then we compile that all into state and national yields and it came to 182.4 bushel yield for corn and 54.2 for soybeans. That 182.4 sounds really high but it's only 2.2% above trend yield. So that's really not that much above trend and I think it's just a perspective thing. But in reality I've heard higher yields, we have had some dry pockets in some locations, we've got some uneven stands in Illinois and those are the factors that I think are -- and obviously the dryness in Iowa, we can't leave that out -- those are the factors keeping us I think this year from a 187 or a 188 is those unevenness factors. Right now it does look like a good crop and above trend.

Yeager: Well, the stats from the drought monitor yesterday said 18% of total corn producing areas are experiencing drought. That is west of us here in Johnston, Iowa. They have gone from the darker brown to the red and that area keeps expanding. How much larger does that circle need to get, Arlan, before the market kind of starts paying attention?

Suderman: Well, it's all going to come down to supply and demand and so what they're watching is the various yield models and what they say is believed to be the size of the crop. And obviously Iowa weighs heavier and Illinois weighs heavier than some lower producing states. So they're watching that. Last week we saw the crop ratings drop about 3 points in the good to excellent category. If they drop again 3 points this week that will lower production expectations and that will start to narrow the surplus. But right now with an anticipated surplus stocks of around 2.8 to 3 billion bushels the trade is really not too concerned about it until we get a much lower production estimate.

Yeager: We have a question from Brian in New Providence, Iowa that I want to get to. I think it's also one of those factors you talked about, demand. Brian is asking, Chinese corn reserve auctions have garnered quite a bit of attention by selling out and at higher prices each consecutive auction. Is their domestic demand extremely strong or supplies tight? What picture does this paint for continued demand from Chinese on U.S. corn?

Suderman: Well, the answer to that is yes, their demand is strong, even with African swine fever reducing feed consumption it is strong. Their supply is limited. Their production, production tends to go up year after year, we have trend yields that go up, etcetera, but in China it has really flattened out. Demand has continued to go higher as production has flattened out. And so right now they're consuming about 25 to 30 million metric tons per year more than what they are producing. They have been leaning on their reserve, they quit putting corn in their temporary reserve back in 2015, that was the last year. They have been auctioning off supplies to fill the deficit. And based on our contacts on the ground we believe they will have about a three week supply left in their temporary reserve. They still have a permanent reserve and that is a big state secret what size that is but we're not really too concerned about that because right now the sentiment of the Communist Party of China is to build that reserve, not let it go down. So their cash supplies are getting tight and that does raise the prospect of the possibility of significantly more imports.

Yeager: Okay, we're going to talk a little bit more, there's another follow up to that that I want to get to in Market Plus but we'll wait. That's what we call a tease. Arlan, in soybeans the Chinese are still buying that product from us as well. However, whatever support was in this market has really started to erode in the last five, ten days. Is there further erosion going to happen? And how much lower?

Suderman: It certainly could because we know about the robust buying they did in July and have continued in August. On Friday we got the announcement of 16.5 million bushels, the largest purchase since June 11th. They're continuing to really pile on the purchases. But the supply is getting bigger at a faster pace. The average trade guess is that USDA is going to increase its stocks estimate knowing about that demand over 5 billion bushels. That is a quite adequate supply and I think it will be even larger because our production estimate is larger and we believe we're looking at at least a 10 million metric ton increase in Brazilian production this next year if weather doesn't interfere. So the western hemisphere is producing too much. So, again, the market is focused on supply, the price will erode lower until it feels like it has priced in whatever the size that supply is and yes, that can be below $8 and then it will start focusing on demand and I think demand will be robust this fall.

Yeager: And that was kind of the fear this spring but we kind of held off on this large crop sentiment. Right now you mentioned about Brazil, are they truly out of soybeans in Brazil?

Suderman: Well, they're not out of soybeans but their domestic market needs most of what they have left so their basis is really strong right now trying to price what is left of their supplies out of the export market so they have enough to make it to their harvest for their domestic needs.

Yeager: In the livestock market, there were signals flashing Wednesday into Thursday that maybe live cattle had seen the top and it appeared that those technical signals were right. Question is, how much further does this thing fall in live cattle? 

Suderman: Yeah, the question is do we go back and retest the lows and create a sideways trading range? I think that will be the real test to where we're coming out of recovery. Certainly you mentioned the idea of a pop in the market. We're watching the product market closely. We found some good demand when choice cuts hit $200 which started to bounce off that. We saw the big surge in exports but now those exports have kind of slowed once again. That is a real concern going forward. Restaurants being closed because of coronavirus and all the restrictions, California you can't eat on a restaurant premise, that's 13% of the nation's restaurants right there. Without that restaurant and food service and with a number of schools not being in session, going remote again this fall, that is really hurting demand and beef does not have the export demand that pork does.

Yeager: And there has been a low interest in that. What is the reason for that on the cattle market?

Suderman: Well, the world is well supplied right now and so we're really backed up on the supplies from when processing plants were closed in the spring. We have cut the excess weights about in half from where we were back in May so we are making progress. But it's going to take much of the rest of the year really to get current in the cattle market.

Yeager: And the low interest is still falling in the feeder market as well, right? Is it the same scenario that you're talking about in live cattle?

Suderman: Yeah, we've seen a little better interest in feeder cattle, although I think that may start to wane now with the fats looking like they may top out. But it has really been helping with the cheap corn prices helping to offset that somewhat and so we have seen better than expected interest in some of the calf sales.

Yeager: All right, that's a pretty good chart right there headed up higher. Is there more room to go up or are we kind of at that top?

Suderman: Yeah, on the feeder cattle it's really, again, going to be a factor of the fat price and how much do we correct lower and how low do corn prices go? Keep in mind that the cattle feeder tends to be the eternal optimist so if he sees cheap corn he's always going to believe those fats are going to go higher.

Yeager: Oh so that's who is the most optimistic. It's always the cattle feeder, isn't it? All right, in hogs again, it's a low interest story. But we were looking at a contract low play somewhere in the $47 range but then that thing kind of reversed late week. What's happening there?

Suderman: Well, we got a big jump in the product price on Thursday I believe it was up $3.76 per hundred weight for the composite pork index and that really helps the formula prices as well, the board responds to that, that ties directly to what we're going to settle the August contract against. We've got some support. I'm feeling like maybe we've hit a bottom. The board was nearing that bottom where we had previously set so we did see some fund money come in. But I think even though we have robust export demand accounting for about a third of our pork production we've still got a big supply problem there. We've still been producing about 11% to 12% more pork year on year and the demand has not been matching that so we can't get away from ourselves and price it too higher because we're starting to back up pork at the ports in China with all --

Yeager: All right, Arlan, I appreciate your time. Good to see you. We'll talk to you in Market Plus in just a moment. As we said, that will do it for this installment of the TV show Market to Market. We will talk more in that program I just called Market Plus so you can join us there. Find it on our website at Now, if you want to get a rewind of this week’s market analysis or track what our analysts have been saying for the past few weeks, you can do that in podcast form, all of them are available on our website. Next week, we’ll look at how the Federal Reserve tracks happenings in the Grain Belt. Until then, thanks for watching and have a great week.



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.   


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