Market to Market (October 30, 2020)

Oct 30, 2020  | 28 min  | Ep4611

Coming up on Market to Market -- A widely-used weed killer gets new guidance for the next crop season. 2020 leaves its mark with wildfires, hurricanes and a derecho. And market analysis with Angie Setzer, 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.  


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, October 30 edition of Market to Market, the Weekly Journal of Rural America.


Hello, I’m Paul Yeager.

The signs of 2020 say wear a mask, vote here or caution ahead -- in both the presidential election and the economy.

The third quarter GDP revealed unprecedented growth in the economy - rising 33.1 percent. The entire recovery is still in process, and remains below last year’s productivity.

New home sales cooled slightly, with a 3.5 percent drop in September, but were still well over last year’s pace.

Durable goods orders rose again last month. Big-ticket items meant to last longer than 3-years helped lead the 1.9 percent gain.

Consumer spending added an increase for the fifth-straight month in September. Two-thirds of the U.S. economy is reliant on consumer activity.

The EPA is long on the minds of rural Americans from regulations over water and air.

This week, the government put a tool back in the box for farmers.

Peter Tubbs has our story.

A popular agrochemical at the center of numerous herbicide damage complaints has been given the “go ahead” for use during the upcoming growing season but only if applied according to a new set of rules.

Three herbicides with the active ingredient dicamba, the powerful chemical that is prone to drift under certain conditions, have received certification from the Environmental Protection Agency through 2025. XtendiMax, Engenia, and Tavium can now be used on dicamba tolerant varieties of soybeans and cotton when it is combined with a volatility reduction agent in the mix tank. 

Buffer zone requirements also have been revised upwards, from 110 feet to 240 feet between the spray area and non-dicamba tolerant plants. The presence of endangered plant species raises the requirement to 310 feet.

Along with the new distance regulations, the herbicide will have a limited application window. Spraying must stop after June 30 on dicamba tolerant soybeans and is prohibited after July 30 on dicamba tolerant cotton.

According to the EPA, dicamba resistant soybeans made up nearly 40 percent of the 2018 crop, and almost 70 percent of the cotton acres in the same year. Officials with the federal agency estimate farmers using the weed control regimen save an average of $10 per acre when compared to other measures. 

Dicamba damage complaints have risen sharply in the past five years leading up to the implementation of the new rules this week.

For Market to Market, I’m Peter Tubbs.

Ideal seasonal weather allowed many farmers to plant and harvest corn and soybeans at a faster-than-average 5-year pace.

Between the two seasons though, the weather was anything but average in at least three regions.

The imprints of wildfires, a derecho and hurricanes will be long-lasting.

John Torpy reports in our Cover Story.

Rural America, already hobbled by a trade war and COVID-19, has been enduring a series of droughts, fires, and hurricanes.

Over the past three months, the state of Louisiana has found itself in the path of five hurricanes of which three have heavily pummeled Pelican state commodities.

Sec. Mike Strain, Louisiana Department of Agriculture: “I've got 757,000 acres of timber that's destroyed. 20 million tons of debris on the ground.

According to the Louisiana Department of Agriculture and Forestry, Hurricane Laura, one of the strongest hurricanes to strike the state in 150 years, caused close to half a billion dollars in damage to the timber crop.

Sec. Mike Strain, Louisiana Department of Agriculture: “Then you get Delta right on its heels, comes in and it comes back in the same track. And so those timber damages now are going to be probably, direct damage, one and a half billion overall damage, you know, to the timber industry, probably pushing $2 billion. And then you add to it, the additional ag damages probably around $750 million to a billion dollars. So we're probably now looking at $3 billion just for those two storms.”

The lumber industry injects approximately $3.6 billion in revenue into the state’s economy.

Hurricanes Laura and Delta hit at a vulnerable time in Louisiana’s cotton production when the bolls for this year’s crop were open.

Sec. Mike Strain, Louisiana Department of Agriculture: “We have the Laura numbers. We don't have Delta yet. We'll have that pretty soon. Uh, so, but it's probably going to end up affecting, you know, 70, 80,000 acres with a 12 to 15 percent yield loss.”

And this week, Hurricane Zeta came ashore in southeastern Louisiana as a Category 2 hurricane further adding to agricultural losses.

Hurricane force winds also struck the Midwest on August 10th of this year, as a Derecho, or straight line wind storm, brought Category 1 hurricane conditions to seven Midwestern states. In Iowa alone, wind speeds of 106 mph flattened what was expected to be a record corn crop.

Iowa Agricultural Secretary Mike Naig spoke with Market to Market shortly after the August storm and this week, gave us an update on the state’s recovery.

Sec. Mike Naig, Iowa Department of Agriculture: “And so as we've gone through the fall months here, we've started to see that number of acres tick up, uh, acres that were not harvested. And, you know, that started around 500,000, uh, crept up to 800,000. I think we will absolutely be near a million acres that did not get harvested because it was zeroed out due to, uh, Derecho damage./When you go out and you see what's happening, you see what it takes to go drive one direction across the field at a mile and a half, uh, per hour. And, and, uh, you know, you've got a lot of work ahead of you and you're tearing up equipment along the way. That is a tough, tough thing to have to go through.”

The storm started in South Dakota, and sped across 770 miles of the entire Corn Belt damaging or destroying crops on 14 million acres. It left tens of thousands in metropolitan areas without power as they began to dig out in the wake of the storm.

The full impact of the rare storm on agriculture has yet to be revealed.

Sec. Mike Naig, Iowa Department of Agriculture: ”There will be agronomic issues that have to be dealt with because of that corn, volunteer corn. Um, you know, there's going to be a number of things that folks have to be thinking about in terms of seed selection and, and chemistry selection, and even some of their tillage choices, whether to use a cover crop or not. Those are all things that, uh, the farmers have needed to be dealing with and thinking about as they've harvested this crop.

The storm also destroyed nearly 60 million bushels of grain storage capacity that has added roughly $7.5 billion to damage totals.

Out West, wildfires have scorched millions of acres across Washington, Oregon and California.

Sec. Karen Ross, California Department of Food and Agriculture: “Now we've burned over 4 million acres of land, which is more than double our previous high. And pretty soon it feels like there's nothing left to burn, but unfortunately there is.”

In August, a heat wave brought high winds and lightning storms to northern California, sparking numerous wildfires in the Bay area. As many as 11,000 lightning strikes sparked more than 300 fires. In the following weeks, those blazes moved at unprecedented speeds across the region. According to the California Department of Forestry and Fire Protection, more than 8,600 fires have consumed more than 4 million acres state wide.

Significant damage has been done to one of the Golden State’s most lucrative commodities. Time may have run out for grape growers across wine country in Sonoma and Napa counties.

Sec. Karen Ross, California Department of Food and Agriculture: “I think the most urgent need right now, which we share with Oregon and Washington this year is, um, smoke taint issues have come up in fires two years ago before, but it was very isolated because those fires came at our normal time for fires, which is October, November. Our fires this year started in August. So we had grapes sitting in smoke and new smoke for an extended period of time, which is why you'll see, um, in Sonoma they estimate 30% of their grapes won't even be picked because of how long those grapes set in smoke and the smoke taint issues that are associated with that.”

According to Napa Valley Vintners, wine production contributes $34 billion to the nation’s economy in 2019.

Ryan Klobas, CEO of the Napa County Farm Bureau, says problems for grape growers have only compounded since the start of the 2020 fire season.

Ryan Klobas, CEO, Napa County Farm Bureau: “We've had, um, a number of members reach out to us, um, saying that they are unable to sell their grapes this year. Um, they don't know how they're going to proceed in terms of what they're going to do. And, you know, really it comes down to, um, do they have crop insurance? Do they not, you may be able to qualify for federal assistance, but only 60% of people in Napa have crop insurance.”

CalFire has spent more than $2 billion fighting fires across the state this year and insurance companies have already passed the $10 billion level in damage estimates.

Sec. Karen Ross, California Department of food and Agriculture: “I think that we've seen it over the last couple of years and then just the smoke this year to make people in areas that normally wouldn't have to think about this, whether you were in Santa Monica or Berkeley, is the renewed focus on doing, you know, prescribed burns and forest management and fuel reduction, that political equation that kind of has frozen us into inaction for almost two decades, as long as we're all responsible and how we go about this. I think we changed that.”

For Market to Market, I’m John Torpy 

Next, the Market to Market report.

Profit taking, month-end and pre-election positioning combined to push the market lower.  For the week, December wheat dropped 34 cents while the nearby corn contract fell 21 cents. The bean bulls got wet under some South American rain. The January soybean contract decreased 25 cents. December soybean meal weakened $7.80 per ton. December cotton shrank $2.37 per hundredweight. In the dairy parlor, November Class III milk futures added $1.67. A mixed week in the livestock sector. December cattle gained $4.72. January feeders jumped $8.58. And the December lean hog contract sold off $1.45. In the currency markets, the U.S. Dollar index soared 128 ticks higher. December crude oil fell $4.19 per barrel. COMEX Gold lost $24.40 per ounce. And the Goldman Sachs Commodity Index plummeted 21 points to finish at 342.50.

Yeager: Joining us now to give us some insight is regular market analyst, Angie Setzer. Hello, Angie.

Setzer: Hey, thanks for having me.

Yeager: Good to have you back. It's a slow time at the co-op. Glad you could take a moment for us.

Setzer: Yeah, I've got nothing going on.

Yeager: Nobody's running across the scale. We'll talk about harvest progress in a minute. I want to start with wheat and know that's always the boring thing to start with, but this week off 5%, almost 5.5%. It rained in the Plains. What else is at play here? Russia? Something?

Setzer: Yeah, we've seen some pretty rapid pace. It does look as though the Ukraine wrapped up this week at 91% planted of what they had expected because of those drier conditions, so you could say that that is somewhat of a bullish factor. And that's what we've been watching. The Black Sea region has been exceptionally dry and so has the Southern Plains. So your hard red wheat belt in the U.S. has been really dry for the last several months and then your Black Sea region has also been exceptionally dry for the last several months. So that has been a big concern. One thing that kind of came out of the start of the week that I think caught some folks off guard just because the last two years have been really rough when it comes to Australia production is that Australia is anticipating close to a record crop. So one of the things that you saw, the '07, '08 everyone likes to talk about wheat rallying to $20 on Minneapolis and Chicago wheat to $13, but a lot of that really was started because of the Australian crop shortage that year and it really kind of incentivized this huge expansion in the Black Sea region. And so the Black Sea region has kind of stepped in and allowed us to really absorb a couple of crop failures out of Australia the last couple of years for sure. And so this year we have been concerned really about what we're looking at when it comes to Russian exports, potential Russian export ban, and kind of two things came into play there. First being that Russia's offers when it came to Egypt's tender and other global tenders have been really competitive even with the futures move much higher, not necessarily indicating that they're kind of scraping the bottom of the supply there. And then you saw this Australia crop coming in to kind of step up and be able to kind of absorb some shortages of Russia were to cut those exports.

Yeager: So given those factors, are you in a selling position right now either in the near-term or in the futures?

Setzer: Yeah. I know it's a little bit harder in Kansas City wheat with as dry, there's a lot of folks that are still exceptionally dry, and Kansas City hasn't really rallied the way that we thought it would versus Chicago. Chicago has spent a lot of time above $6. If you look at the 10 year chart even it's not often that we sit above $6 for an exceptional period of time. So I think Chicago is still exceptionally overpriced. I'm not so sure about Kansas City at this point in time. I'd be a little bit nervous about production potential there and at the very least would be a little hesitant to book cash sales deferred if you're wondering what your production would look like. I think Kansas City may stay supported, that Chicago really should come down to where they're trading parity to even Chicago a touch lower than where Kansas City is at. I still expect that, it just doesn't seem to be what is happening since Chicago wheat has the depth to it and if a speculator who is an outside investor wants to come in, the Chicago wheat seems to be the vehicle to do that, and I think there's a lot of speculative money sitting in Chicago that eventually should work out if they pay attention to overall fundamentals. But that's a big if.

Yeager: Well, you open up the door on the speculators and there's, we said at the beginning of the markets, folks leaving the market. Is that the speculative money that is leaving corn and why we lost what we did, almost 21 cents?

Setzer: I think there is some of that. We came into this week really heavy on risk and it's a very risk off sort of week with the election next week, with COVID spreading in Europe and in other places. So there's just a big feeling of being just way overbought, way too heavy. The CFTC indicated that the biggest bullish stance that we've seen almost nearly ever on all commodities. And so I think there was a little bit of that. I also think there was cash market incentive. I think you saw some physical handlers of grain have been chasing the market higher, they have been utilizing paper to kind of offset some of the physical shorts that they had while they were waiting for supplies to make their way to the export market structure. And I think that you could tell based on sift values, which is your values paid by exports and based on barge freight this week which exploded higher that someone who is out there really kind of chasing this market trying to incentivize selling and trying to get ownership to cover their physical short was able to do that at least in the short-term and I think we saw that really kind of indicated like I said in those sift values, basis values across the river market and what  is taking place when it comes to freight values.

Yeager: I already mentioned it, you're at the co-op, right out the window there you see the grain coming in and out every day, mostly busy this time of year. We have a question from Ben in Jesup, Iowa, in Buchanan County, actually technically Ben lives in Blackhawk County, a little disclosure there. Harvest is wrapping up in Iowa. Harvest moisture is low enough to shut off the corn dryers and basis is an option. You've kind of talked about some of these things already. And buyers can't keep farmers from putting corn in the bins. So what is it going to take to get farmers to give up physical ownership, Angie, and roll those grain bins or cars and wagons and trucks across your scales again?

Setzer: Time. Time is the only thing that gets the farmer to let bushels go. Basis is going to have to incentivize the commercials to ship state lines. If you look at stocks numbers and kind of get an idea of where the grain is sitting it's sitting in places that can get to where it's needed but it's not necessarily, option doesn't incentivize someone to travel very far. So I think you'll have to see some basis continue to get stronger. Iowa is not used to having a crop shortage. We've seen farmers building bin space, we've seen co-ops adding bin space, we've got co-ops increasing processing capacities in the state. Obviously hogs are incentivized to continue to produce, you've got a lot of mouths to feed. So the reality is you're just going to have to see kind of an increased basis that doesn't necessarily mean that farmers will let it go, especially this time of year, and if they have put it away. The more you firm up price the less likely the farmer is to sell if he or she doesn’t have to. And so at this point you're really just, as an end user in the state you're really going to start to see these basis levels get high enough to where commercials elsewhere with available supply are going to be puking put those bushels. And the reality is with what is going on in the river market, what is taking place with rail freight to the PNW it's going to get close. You will probably see it in the next couple, three weeks where basis levels will continue to scream higher in Iowa. It's going to be a great opportunity for the farmer. And it's going to be one of those things from a farmer standpoint where you're going to have to keep in mind what you're trying to accomplish from a cash pricing standpoint or if you have HTA's and be aware of the fact that the market is not necessarily going to want to be paying you later on when that time on the calendar hits because farmers do tend to have dates that are drop dead dates, John Deere payments, land rent payments and taxes and I've been doing this for 15 years and I can always tell when one of those three things are due based on how much my phone rings no matter what the market structure looks like. So don't be afraid to jump in and make some sales if the value gets really, really good, especially from a cash standpoint and you can't guarantee that that value is going to be available later on. That's what those inversions are trying to do is get you to sell.

Yeager: I hear hold a little bit. Let's go to soybeans quickly here, Angie, because I know everything is moving. Volatility has been something that has returned to the marketplace. Is that helping us in soybeans, volatility, hurting us?

Setzer: I think it's helping. I think it has made soybean trading great again, it's at least fun. I can tell you last year at this time on our inbound inventory I owned a small percentage of it, about 50% of it was unsold on this date a year ago. Right now about 10% of my inventory is unsold. So I am an owner of beans. I don't have anyone really complaining too awful much about selling $10 beans across the scale. I think that's pretty common across most of the commercials out there at this point in time. I've seen a couple of different stories indicate 75% to 80% of ownership is out there and I would agree with that. And so I think the volatility has helped the farmer and that has also really kind of incentivized that holding corn out of the pipeline which is going to make that market structure so much more interesting here over the next couple of few weeks. So soybeans have been fun. It's going to be really interesting to see how frontloaded our export program is, going to be watching what takes place with South American weather. They have gotten some much needed rains. Obviously no it hasn't wiped out the drought, not even close, but is it enough to produce a decent crop? Probably. Price has been good enough to incentivize planting even if it's not ideal. And so we're just going to be watching South American weather, watching to see if we get a continuation of export sales beyond this very heavily frontloaded program. And I don't think soybeans want to go gently into the good night at this point in time yet either. So we'll definitely be watching and seeing what happens there.

Yeager: So I guess real quick, are you holding then right now on beans? Is that what I think I'm hearing?

Setzer: We've been active sellers at this level. I've got some that we're holding back on. I can't tell you to liquidate and everyone is going to laugh and I'll probably get to hear about it on Twitter on Monday. But honestly at this point in time it has just been a conversation of how much do you have unsold? Let's do half.

Yeager: Well played. I need to move to livestock. Last week the livestock producer, both live cattle and feeders, pretty drowned in their beer. This week they're buying shots for everybody at the bar. Is this a trend? We’re not quite back to where we were in live cattle. What is it going to take to get us back there?

Setzer: I think we've got to see a continuation of good export sales and the idea that we'll see a continuation of decent demand. I think beef kind of got caught up in the, well it hasn't done anything and everything else has done a lot sort of mentality and that helped pushed it up. I think last week everyone was expecting this bearish cattle on feed report and we got it. Obviously drought in the South tends to push cattle into lots and so that shouldn't have been a surprise to anyone. We saw China show up in the export sale report which got a lot of people excited and cash prices seem to be remaining pretty decent. So I think cattle will stay supported. I don't know, it will probably have to work to try to trade much higher, especially if COVID concerns kind of continue. Most anyone I know that is an expert in that business is saying that they don't know what the election is going to mean for prices and to really just try to keep it close to the vest when it comes to making some of these decisions, don't get too hopped up on hopium at this point in time whether it's hogs or cattle just simply because we don't know what the world is going to look like in another four, five, six weeks. 

Yeager: If we know then. 30 seconds on feeders. Is that a spike because the price of feed went down? Or is that something else?

Setzer: I think it's something else. Again, I think it's just a spike because it hasn't been doing much. I know that the physical sales have been stronger. People want to put cattle, they want to feed cattle. I've got a lot of friends that are talking about how excited they are for what next year looks like, the idea that China is going to continue to come in and buy hand over fist when it comes -- there's a world protein shortage if you ask some folks out there and I think that the ownership helps you kind of take possession and work your way into that if that is truly the case. I don't know yet. I still am in wait and see mode. But a lot of people are super excited about what has been taking place with the market structure there and buying interest and I think that helps.

Yeager: The open interest was a little bit of a story there in live cattle. But in hogs, a reason to celebrate or not? It was a down week.

Setzer: It was a down week. Yeah, we're still at higher levels -- flip a coin. You talk to a lot of folks right now and they say we need to go higher. You talk to others and they say we need to go lower. Germany is still battling ASF. China flew 15,000 hogs in first class, that's a record amount, so it makes you wonder what that means for the buying interest as we go forward. Exports were a little bit weaker this week I think. And so there's been some concern as to what that will look like. I think we find a range and we trade it. I think there is a lot of uncertainty in the market structure. We're really trying to figure out where those ranges are and when it comes to livestock we just have to establish what that new range is and we'll trade that.

Yeager: We'll go from there in Market Plus. Thank you, Angie.

Setzer: Thank you.

Yeager: That's Angie Setzer and that will do it for this installment of Market to Market. We will talk more in Market Plus so you can join us. Find it on our website of This week producer John Torpy set up his disaster recovery story in the MtoM podcast and we talked to a vineyard manager in the middle of Napa Valley about the challenges of 2020. Subscribe today where you get podcasts to stay in the know. Next week, we'll look at how the results of the election might shape the future of rural America. Thanks for watching. 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.  


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