Market to Market (February 19, 2021)

Feb 19, 2021  | 27 min  | Ep4627

Coming up on Market to Market -- Serious questions emerge over power generation following a major winter storm. USDA weighs in on 2021’s economic outlook for agriculture. The former Ambassador to China gives his firsthand account of life on the front lines of trade negotiations. And market analysis with Elaine Kub, 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, February 19 edition of Market to Market, the Weekly Journal of Rural America.


Hello, I’m Paul Yeager.

Many factors make up economic health. Each region of the country is dependent on different things, but one area that unites us is shopping.

January marked the largest increase in eight months for retail sales as $600 stimulus checks quickly fueled activity. A jump of 5.3 percent came in all sectors fueled by purchases of new furniture, clothing and appliances.

The rate of new home building slumped as several factors like higher lumber prices weighed on the pace. However, applications for building permits spiked signaling activity ahead.

The existing home sale market rose slightly in January as record low inventory pushed prices higher.

The Rural Mainstreet Index, again, climbed above growth neutral as sharply higher commodity prices and federal farm support boosted bottom lines.

North Dakota is one of the states surveyed by Creighton University and the town of Grand Forks was like many in the region that spent eleven days without breaking zero. 

The arctic blast of air was not exclusive as a winter storm hammered the state of Texas with a one two punch that’s going to leave the state staggering for days and months to come.

John Torpy reports.

A polar vortex blanketed the lower 48 states with record setting cold temperatures this week, leaving millions of people without power and sending natural gas prices skyrocketing.

The National Weather Service reported that by Wednesday, more than 100 million people nationwide were under some type of weather warning related to the record breaking arctic cold temperatures and multiple winter storms. While places north of Interstate 70 were able to weather the freezing temperatures with relative ease, the cold snap and icy winter conditions brought life in many southern states to a standstill.

In the Lone Star State, the record setting polar vortex froze natural gas supply lines that feed electric company generators just as people were turning up their thermostats. As of Thursday, the Electric Reliability Council of Texas announced a continuation of rolling blackouts across the state as crews worked to re-establish power for millions of residents.

Gov. Greg Abbott, (R) Texas: "Every source of power the state of Texas has has been compromised, whether it be renewable power, such as wind or solar, but also, as I mentioned today, access to coal generated power, access to gas generated power also have been compromised, whether it be with regard to systems freezing up or equipment failures."

Farmers growing winter produce also may have taken a big hit from the polar vortex. According to the Texas International Produce Association, of the forty different varieties of produce grown in Texas, all but three may have significant damage.

For Market to Market, I’m John Torpy.

USDA issued its early acreage guess this week at its annual Agricultural Outlook Forum providing signals of reports ahead. The government agency also reported on headwinds U.S. producers are facing from weather and trade.

Josh Buettner reports on the meeting.

This week, USDA kicked off their annual Agricultural Outlook Forum, virtually, as a sign of the times.

Dr. Seth Meyer/Chief Economist – USDA: “Now in its 97th year, the forum continues to serve as a unique platform for our stakeholders to connect, exchange ideas, and discuss some of the most important issues impacting the agricultural sector.”

The agency projects the largest 3 crop total for wheat, corn and soybeans since 2016 at 227 million acres.  Those figures are up nearly 9 million acres from 2020 - which was impacted by the coronavirus pandemic and extreme weather events like August’s derecho windstorm. 

Economists expect a turning point for ethanol producers as COVID-19 vaccinations give way to a rebound in driving.

Dr. Seth Meyer/Chief Economist – USDA: “On the other side of that, we’ve had really pretty good domestic demand for livestock.  And pretty good trade demand for things like pork.  So again, those folks will feel the pinch of higher feed prices, but so far, demand has been pretty robust as well for those meat products.”

A forecast for increased feed demand as herds recover from African swine fever is one of the many reasons China remains a beacon for U.S. farm products.  Analysts see the EU and Brazil as the nation’s biggest rivals.

Jason Hafemeister/Secretary’s Trade Counsel/Trade and Foreign Agricultural Affairs/USDA: “Just a reminder – if we grow it in the United States, we are competitive.  So we look at exports as an opportunity and trade as a lifeline.  If we can’t sell it overseas, that will weigh down on the prices that our farmers receive.  That will have a negative economic effect in rural America.”

Even as the U.S. butted heads with its largest trading partner under the Trump Adminstration, and Phase One trade purchase agreements have fallen woefully short, pundits don’t expect big changes soon.

David Dollar, Senior Fellow - Foreign Policy/Global Economy and Development/Brookings Institution/John L. Thornton China Center: “Personally I think that the tariffs are not a particularly good instrument to use.  We’re basically shooting ourselves in the foot.  But President Biden is certainly not going to rush into removing the tariffs.  In general, the administration seems to be taking a pretty…wait and see attitude concerning its relations with China.”

While bitterly cold temperatures have sidelined much of the U.S. in recent weeks, increased snowpack could improve drought conditions.  But USDA number crunchers caution weather always gets the final say. 

For Market to Market, I’m Josh Buettner.

Terry Branstad is the longest serving governor of any state. During his time in Iowa, Branstad saw the rise of renewable fuels as a source of energy and the use of Hawkeye State farm products destined for foreign ports. He also had an early interaction with an international delegation that included Xi Jing Ping -- who eventually became the President of China.

Following the election of Donald Trump, Branstad was tapped to be the U.S. Ambassador to China. I had a chance to get the former Ambassador’s thoughts on what worked with Phase One and some advice for the new administration on how to deal with the world power.

Amb. Terry Branstad, Former U.S. Ambassador to China: “Well, first of all, we are the largest economy in the world. And we have done more to help China to join the World Trade Organization in invested in China. So we've done a lot to help China. And this administration said, and the Chinese love to have these dialogues, where you have these discussions, that doesn't lead to anything. And they say, Oh, yeah, we're going to reform and open up and then it gets delayed and delayed and delayed it and, and Ambassador Lighthizer. And initially, I wasn't so sure about him. But I became very impressed with him. He's very focused, very meticulous, not only did he get, and it took us two years, it was a long, hard battle. And we had to use tariffs to get their attention, but it worked, we did get their attention. And we got them to address long standing issues like protecting intellectual property rights, preventing the stealing of technology, like they have with corn seed here, and things like that. But also dramatically increasing a purchase of agriculture, energy and manufactured goods from the United States. The Chinese have now purchased record amounts of corn, soybeans, pork, even beef and chicken. And the result has been the price of ever since I think, September, soybeans have gone up from about $9 a bushel to $14, corn's gone up from $3 to five and a half. It's made a real difference for the price we're getting and the prices are even higher in China.”

Paul Yeager: “But it is short of what the projections are at least what the deal was. And there's.”

Amb. Terry Branstad, Former U.S. Ambassador to China: “It's a two year deal.”

Paul Yeager: “It's a two year deal. That's going to be a heck of amount of purchases that are going to have to be made in the second year. Are they going to be able to do it?”

Amb. Terry Branstad, Former U.S. Ambassador to China: “Well, I think they're able to do it. The question is, do they have the, the will to do it. And the administration, the Biden administration needs to insist that they abide by what they committed to. Now there's, I think there's valid reasons why it got off to a slow start, because of that what was happening with the virus. But now we they've caught up to a great degree in the fall, but and they've done more on agriculture than they've done on energy, or like aircraft from Boeing and things like that. So there's still a lot they need to do. But we need to not only do that, the other part that didn't get done, the phase one didn't include eliminating the subsidies of the state owned enterprises, which really distorts the market. And that's what the new administration needs to focus on. That's what the Trump administration was wanting to do it in a second term.”

Paul Yeager: “Well, and the Chinese own companies have long been a source of look to them for signs, because that's usually an indication of what the government wants to do when it comes to buying soybeans or corn.”

Amb. Terry Branstad, Former U.S. Ambassador to China: “That's right. In fact, one of the last groups that I met with before I left China was COFCO. They are the biggest Chinese purchaser of agricultural products. So I, and I made the point that they had made progress on a lot of things, but they hadn't purchased ethanol. And now they've made a commitment. They're going to make a record purchase of ethanol in 2021. We need to see that they do that they need to do that, to help reduce pollution. They're still using MTBE, which is poisoning the groundwater. So we've made some progress and the embassy actually started monitoring air quality years ago. And that has helped convince the Chinese they need to get serious about air pollution. But they have a huge problem with both our groundwater and soil pollution. And we can help them and certainly ethanol and biodiesel. And for that matter, DDGs are great livestock feed. So I'm very hopeful we're going to see that and that's one of the last things I did with both COFCO and with their chief negotiator Liu He. Before leaving China.”

Paul Yeager: “As we sit here tonight is a phrase that we've said many times on Market to Market, as we sit here today and have this discussion. Ambassador has Phase One been a success?”

Amb. Terry Branstad, Former U.S. Ambassador to China: “Oh, it's been a great success. Just ask the farmer who's seen their price of corn go up from $3 to right, five and a half. There's no question about that. It's not perfect, but it's a good first step. And we need to continue to move forward on that. China is a huge country with a huge population. And with a growing middle class, there's more and more demand for protein and pork is there. And of course, they've been hit by the Asian, by the African Swine Fever, which their dream, they're really rebuilding their pork herd. And that's one of the reasons why they need the corn and soybeans.”

Paul Yeager: “Which is a concern if you're looking at the market from the outside perspective. Not your inside perspective of what was going on over there to say, China needs to feed their people, right. That's why they're buying. It just so happens that can fall under the umbrella of Phase One.”

Amb. Terry Branstad, Former U.S. Ambassador to China: “Well, that's true.”

Paul Yeager: “Is that an accurate statement?”

Amb. Terry Branstad, Former U.S. Ambassador to China: “Well, yeah, I think that's true. But the Chinese people love the quality and the reliability of American food. Hormel, Kentucky Fried Chicken, you know, Quaker Oats, all of those things are very popular with the Chinese consumer. And so I think we need to continue to press them to fulfill the commitments they've made. And it's in their interest as well. Because, frankly, what they're importing from us, costs a lot less than their local prices in China.”

Paul Yeager: “Ambassador Terry Branstad, thank you so much for your time. I appreciate it.”

Amb. Terry Branstad, Former U.S. Ambassador to China: “Great to be with you. Thank you.”

This is only part of the conversation. The full interview will be released Tuesday as part of the MtoM podcast which can be found via our YouTube channel of Market to Market or wherever you get your podcasts.]

Next, the Market to Market report.

Weather caused different problems domestically and globally this week impacting the trade. March wheat improved 14 cents while the nearby corn contract added four cents. The Chinese returned from holiday, but the full buying spree did not. Nearby soybeans gained a nickel.  March soybean meal dropped $2.90 per ton. May cotton expanded by $1.82 per hundredweight. Over in the dairy parlor, March Class III milk futures declined 19 cents. Red in the livestock sector, April cattle shed $1.50. March feeders fell $1.72. And the April lean hog contract lost 70 cents. In the currency markets, the U.S. Dollar index dropped by 8 ticks. April crude oil decreased 45 cents per barrel. COMEX Gold fell $40.70 per ounce. And the Goldman Sachs Commodity Index added more than 10 points to finish at 468.55.

Yeager: Now here to provide insight is one of our regular market analysts, Elaine Kub. Hello, Elaine.

Kub: Hello, Paul.

Yeager: I'm so used to seeing you on the screen. To see you in person is, just give me a moment okay?

Kub: I am not a cat.

Yeager: Is your dog around that might come in like it did the one time?

Kub: No, not today.

Yeager: Not today, all right. But you were one of the more memorable guests we had. That was great. How is it when you make the trip south, you have made this trip to see us for years, how often is it that you in the middle of winter had to go south because Mother Nature didn't leave any snow for you in South Dakota but there's a whole bunch of it here in Iowa?

Kub: That’s right. The difference between the snow in the west and the north versus the center of the Corn Belt is actually a market story. I heard that there is more snow cover in Austin, Texas right now than there is in Aberdeen, South Dakota. So that is influential to the markets, especially when you think sort of longer term or the outlook for the weather as we get into planting season.

Yeager: And that is something a lot of people have asked. We have a lot of weather questions. But the reason I bring up the weather first is because of wheat. You can kill wheat six times in an off season. But when it's cold with no snow cover that has got to make a difference. What are they talking about in some of those high plains areas where there's no snow cover?

Kub: Yes, the western high plains. The hard red winter wheat market is in sort of a liminal space right now because you mentioned the price changes, kind of nothing really happened this week for wheat price wise. But as far as the fundamental scenario of the weather, actually it did make a difference. That extended period of cold across the western high plains did make a difference. Yes, soil can be an insulator, snow can be an insulator. But Central Kansas didn't have the snow to be an insulator. Eastern Colorado where they have severe drought of course doesn't have snow as an insulator. Northwestern Kansas had those extended low temperatures. So yes, the soil is freezing and it is certain there will be some winter kill to the hard red winter wheat crop. But that liminality as I mentioned is because we won't know exactly how much for a while. It could be months. Obviously it will be months before you really have an assessment of how much winter kill there was. The good news is Kansas farmers or anyone in that geography will be able to plant milo in the spring to replace it and see very favorable prices.

Yeager: Oh, milo. See I had a question about sorghum later that we'll talk about.

Kub: Same difference.

Yeager: Same thing, yes. So given what we know about winter kill might or long range problems with drought, we haven't really even gotten into the drought conditions in some of those same areas, does this wheat market have any more rally to it or are we just beginning a rally?

Kub: Yeah, price wise I don't know that we're going to see wheat prices take off immediately because we can't observe, we cannot observe these facts yet, it will take until the spring. However, you did notice a response from the commercial side of the market to the Kansas City wheat futures, their structure. They are still in a carry spread structure but that July to September carry spread got trimmed down to about 2 cents this week. So the market did respond to the concerns that there will be less of it. But there's still, let's say, enough. The long-term expectation for the 2021 marketing year is for still to have 30% stocks to use ratio. So this is not like a corn or a soybean story where you're talking about hugely bullish prices.

Yeager: To a point, until this week in corn, moderate gains, 4 cents. We've seen at least this week when you look at a week-over-week factor, are the high, wild times behind us?

Kub: No. And actually I'm glad you mentioned volatility because the volatility is really interesting this next week. For the next 5 days the volatility will make a difference to the crop insurance premiums. Obviously during February we know that the crop insurance reference prices will be set for the new crop. But not just the reference prices, the premium prices too are dependent on the volatility of the prices. So having more volatility we haven't seen in recent years is going to be a big deal when we get to the end of the month.

Yeager: I was trying not to say the V word this week but you know it's coming, it's out there. So I guess if you're sitting with corn right now, if I'm one of those few that still have old crop am I selling right now?

Kub: It might not be so few. I think farmers are bullish and optimistic. But weather wise, yes, the basis market has been strong, has continued to strengthen because of the weather. We're trying to motivate these bushels to come into town. Yeah, I don't think it's a bad idea to be selling. These are obviously very favorable prices to be selling and at some point you've got South America coming in and relieving the global market to feed grains to some extent. So right now in the past we've had the China buying story. Obviously the export sales this week came down. Lunar New Year sort of timeframe, that's not totally unexpected. But that big buying spree in feed grains might be behind us, China might now be comfortable with their strategy of stockpiling some of those feed grains. So most of that bullishness may be behind us and we may have to worry about bearishness in the future.

Yeager: What about in soybeans? Are the Chinese coming back to that market? Or is that in the rearview?

Kub: I don't want to say that it's -- I guess let's say neutral. I'm net neutral for price wise because there is still tightness obviously in the supply and demand scenario. The outlook that the USDA economists have mentioned this week at their outlook meeting, it's very strong for soybeans because of the past usage from China and others for feed grains, soybean meal but also for the oil. You look at any sort of oil seeds, the Malaysian palm oil futures are also churning higher, canola prices $25. There's just bullishness everywhere for soybeans and I don't want to say that the party is over.

Yeager: So if the party is not over what is the target for getting into the next round of the party? Let's go on the November contract.

Kub: The 2021 contract, that is at $11.70. So in a new crop scenario that soybean price to corn ratio is about 2.6 to 1. In that sense soybeans are overpriced actually. I wouldn't necessarily expect to see that 2021 market be churning higher above $12, $13 that we've seen in the old crop market.

Yeager: In livestock, again, back to the weather. That has been a major thing. Cattle on feed came out today. It's in one of my many stacks of papers here, Elaine. On feed $101, placed $103, marketed $94. These numbers compiled prior to this week. But what did the weather do to this cattle market?

Kub: Yeah, I wouldn't make too much of the cattle on feed report because, yeah, it is within expectations. That marketing number was lower but weights have been higher. There's a lot of nuance. I wouldn't worry about that. But the weather you're right to point out. We could say that this past week is maybe like a mini Holcomb in the sense that there were plants that were shut down, there were shifts that were canceled because of the weather. You couldn't get people into plants in Texas and Mississippi. So you've got a scenario where the boxed beef prices are still very strong, the profitability of making beef is still very strong -- 238 for choice I think in the boxed beef -- but meanwhile packers are not going to be paying up for the live cattle. The live cattle traded at about $114 this week in Texas. There will be that advantage to the packers again because of that shutdown and that makes that structure unfavorable to the feedlots, but hopefully just in the short-term scenario this time.

Yeager: I was also trying not to say advantage packer on the show this week too but there we go with that, it seems to be a common theme. In the feeder cattle market they have been hanged with higher feed costs but it's also hard to, you have to feed extra now because of those cold conditions.

Kub: Well, again, that's sort of behind us. But feeder cattle, the demand for that market is very strong in terms of the quantity that people want to buy. People are still, even at these feed prices the feedlots are still eager to be out there buying, they just only at a price, there's only so much that they can do price wise. And you see that on the futures chart specifically. There's resistance and you don't really want to expect to see that recover much more above $145.

Yeager: In the hog market, again, hanging on several things as well. What is the biggest driver do you think?

Kub: I think this past week, we haven't really had a lot of new highs this past week, it sort of pulled back a little bit. I honestly think it is related to the fact that the daily and futures weren't trading. You had those five days where they were shut down for the Lunar New Year holiday. So if you don't have that arbitrage and new information each day about how expensive pork is in China because their herd recovery has not been as extensive as maybe they planned or they wanted it to be, pork production is expected to be up 14% in 2021, but that's not a huge enough recovery. So pork prices are still very strong in China but we just didn't have that news this week and I think that is why prices had one less thing to drive them higher.

Yeager: All right, in the last 60 seconds I have a question from Zach in Lawrence, Nebraska. And this is about strategy for everything. He says, the marketing plan for the last 5 years has been 25% before southern harvest, 25% around planting, 25% before July 15th and then hold 25% for after harvest. Is that still a good plan as we move into '21?

Kub: It's okay but there's a lot of nuance there, especially because he's from Nebraska. Is he in irrigated Nebraska or is he in dry land Nebraska? Because if you're a dry land farmer in the Western Corn belt this spring yes there is an expectation that La Nina might let up the May, June, July timeframe, that we might very well make USDA's expectations for 175 bushels per acre. It's possible. But I wouldn't be as eager to sell early if you're in the Western Corn Belt where it is so dry.

Yeager: Okay, we'll flush that question a little more on Plus because I know that's a big curveball to throw in the final 60 seconds but I wanted to hear it. Thanks, Elaine Kub. Good to see you.

Kub: Good to see you.

Yeager: That will do it for this installment of Market to Market the TV show. We will talk more in Market Plus so you can join us there. Find that on our website of And here's the thing, algorithms are nearly impossible to figure out but we know one way that you won't miss what we post on Facebook. Just dial us up on our page directly at Like the page if you haven't and check out our content. The more you like, the more of us you'll see. Next week we'll look at the energy debates sparked by the Texas storms. Thank you so very much 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.  

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