Market to Market (April 16, 2021)

Apr 16, 2021  | 27 min  | Ep4635

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Coming up on Market to Market…

Ten waterways make their way onto an environmental watch list.

Farmers and legislators push for the right to repair.

Helping pollinators thrive in their fight for survival.

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. (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.

“This is the Friday, April 16 edition of Market to Market - the Weekly Journal of Rural America.”

Hello, I’m Paul Yeager.

The literal and figurative foot appears to be hammering down on the economy’s gas pedal.

Higher gas prices drove the Consumer Price Index up 0.6 percent - the biggest jump since 2012.

When energy is stripped out, the core CPI rose 0.3 percent.

March retail sales soared nearly 10 percent as the wave of vaccinated consumers were also armed with stimulus checks to buy new clothes and restaurant meals.

The Rural Mainstreet Index dipped slightly, but stayed above growth neutral for the fifth straight month. The survey of bank CEO’s in 10-states revealed a reading of 69 on higher farmland and equipment sales.  ---

The Missouri River runs through several states in the Creighton University survey.

As the waterway makes its way from Montana to Missouri it borders states trying to get a handle on nitrate levels.

An annual list released this week highlights rivers that have been involved in high-profile legal cases like the Raccoon in Iowa.

Josh Buettner looks at the list and the aftertaste of the report.

This week, several waterways were found in the crosshairs of the environmental advocacy non-profit American Rivers.  Since the mid-1980’s, the Washington D.C.- based group has compiled an annual list of the top ten most endangered rivers in the nation.

Tom Kiernan/President and CEO – American Rivers: “These have been a tough 12 months.  We’re dealing with a pandemic.  We’re dealing with an economic downturn.  We’re dealing with an important national conversation around inequity and injustice.  And I hope that through these challenging times, rivers near you, perhaps rivers you grew up on, have given you a sense of support.”

While the Pacific Northwest’s Snake River topped the list of impacted riparian communities, drinking water sources, and fish and wildlife habitat - the Lower Missouri River, which makes up the majority of Iowa’s western border, was the report’s second most endangered river.

American Rivers cited the ongoing risk of extreme flooding due to poor infrastructure management as the deciding factor.  Towns, farmers and landowners were plagued with $3 billion in flood damage along the corridor in 2019.

Sec. Mike Naig/Iowa Department of Agriculture and Land Stewardship:  “That so called report was a bit of propaganda, I think.”

The Lower Missouri River designation, as well the group’s first-ever placement of Iowa’s Raccoon River on the list, at 9th, due to runoff from livestock operations and farm fields, drew the ire of the Hawkeye State’s Secretary of Agriculture, Mike Naig, who says conservation efforts like cover crops, wetlands and bio-reactors have been accelerating.

Sec. Mike Naig/Iowa Department of Agriculture and Land Stewardship:  “The way that those types of reports come out, with no basis… They were nominated by an activist group here in Iowa.  It’s a fundraising plea for this organization.  Again, they can do that.  I’m not saying they can’t.  But if you want to talk facts, you have to ignore a lot of evidence that says we are moving in the right direction, that work is getting done every day on the ground.”

For Market to Market, I’m Josh Buettner.

Spring field work is in full swing this month as farmers look to prep the soil for planting. 

Inevitably some producers are going to run into breakdowns. 

What comes next is at the center of an on-going debate about who can do repairs to the equipment in use.

Peter Tubbs has our story.

Farmers throughout agriculture have grown frustrated with their inability to repair some of their farm equipment, simply because they are not allowed to diagnose error codes their tractors or combines generate. Manufacturers limit that information to trained service techs from dealerships.

Bills in Nebraska and eight other state legislatures are looking to allow farmers access to the data they need to fix their equipment themselves. Just as drivers can scan the error codes of their cars to diagnose problems, farmers would be able to triage problems in the field, rather than at the dealership.

Tom Brandt, R, Dist. 32, Nebraska Senate  13:00 “It's really interesting that dealerships by and large are, are sort of on the side of the farmers on this because a lot has changed for them the last 10 years too... This is not anti-dealer, this is not anti-OEM.This is just getting back to like, it was 20 years ago when you bought a piece of equipment, you own that piece of equipment.”

Problems with a tractor - be them mechanical, electronic or software related - might put the tractor in limp mode, rendering it unable to do most work until a repair is completed.

Many technicians in Nebraska are an hour or more away from area farms. The cost of a service call, which includes drive time, can run several hundred dollars even if it’s just to scan a tractor's operating system.

Jeremey Davis runs a repair shop in Palmer, Nebraska. The percentage of repairs he is unable to complete without access to diagnostic equipment has risen to a third of his potential work.

Jeremey Davis, Firehouse Repair: “No matter what color of the piece of equipment is, they've all got all got electronic equipment that needs to be calibrated and looked at to figure out what's happening.”

The proposed measures would not allow for the bypassing of safety or environmental controls, nor would they reveal intellectual property.

Jeremey Davis, Firehouse Repair: “We're not trying to cut dealers out. You know, there's enough work out there for everybody. You know, we just need a little help from the manufacturer to be able to fix things, be able to take care of the customers that they created in the first place.”

John Deere, Case IH and Kubota maintain that limiting access to the software systems and failure codes protects operator safety and ensures that equipment operates within its engineering parameters.

For Market to Market, I’m Peter Tubbs

Thousands of farmers are joined in the field by millions of bees. Each face obstacles in getting their assignments done that are critical in the link of agricultural production.

For the honey bees, they are facing a major obstacle via Colony Collapse Disorder.

If the fight against CCD is lost, $15 billion in agricultural production is in jeopardy.

Josh Buettner has more in our Cover Story.

Tim Hiatt/Hiatt Honey – Ephrata, Washington: “A good queen, yeah.  She’s laying good eggs and she is keeping the hive population up.”

USDA values national honey production well over $300 million annually, but in beekeeper brothers Tim and Steve Hiatt’s home state of Washington, honey bee pollination directly impacts the $2.5 billion apple industry there – an area which accounts for the lion’s share of the fruit’s domestic production.

Steve Hiatt/Hiatt Honey/Ephrata, Washington:  "We’re just one link in the chain of providing food.”

For more than a decade, colony collapse disorder has captured headlines. The syndrome causes adult worker bees to abandon the hive - leaving the queen and her immature brood to fend for themselves.

Tim Hiatt/Hiatt Honey – Ephrata, Washington: "It is a concern.  Every year there’s stories of beekeepers who lose 50, 70, 80 percent of their hives.  And it’s hit us in the past.  We’re doing our best to prevent that from happening.  All they can say for sure is that it’s a multi-faceted problem.”

While the brothers say sporadic losses have plagued apiarists for centuries, the U.S. Environmental Protection Agency has noted a substantial decline in new CCD cases in recent years. But those closer to the hive parse those reports with an array of more than 60 underlying stressors like pesticides, disease pathogens and environmental factors.

Dr. Jennifer Han/Research Associate/Washington State University: “The varroa mite has been described by many people as probably the number one threat to honeybees.  It has like these almost like hook like mouth seam-ripper type appendages.  And what they use that to do is basically rip a hole in the exoskeleton of the honeybee.”

Dr. Jennifer Han is a post-doctoral pathology research associate with Washington State University. She says invasive symbiotes, like the varroa mite, attract several other diseases and eventually conquer bees immune systems also compromised by exposure to nicotine-based insecticides.

Dr. Jennifer Han/Research Associate/Washington State University: “Imagine having a parasite living on you that’s about the size of a dinner plate feeding on you at all times.”

Decreased flying time and the inability to pollinate are among the negative results from this relationship.

Dr. Nick Naeger/Entomologist/Washington State University:  “Bees, just like other animals, can get viruses. And we do not have any good treatments, much like we do not have a good treatment for the common cold.”

Employing a multi-pronged approach to boost pollinator populations, Dr. Nick Naeger is an entomologist specializing in honey bee analysis whose work grew out of a Department of Defense initiative involving fungi.

Paul Stamets/Owner – Fungi Perfecti/Olympia, Washington:  “Woo!  Harvest time is the best.”

Mycologist Paul Stamets is a purveyor and promoter of what he calls high-quality gourmet and immune-supportive mushrooms. Post 9/11, the federal government sought extract samples from Stamets’ company Fungi Perfecti as research into safeguards against a possible chemical weapons attack.

USDA, Washington State and Stamets put their heads together and a partnership with higher education blossomed.

Dr. Nick Naeger/Entomologist/Washington State University:  “Over ten years ago Paul Stamets was growing mushrooms and noticed that honeybees would forage in his mushroom beds. Bees normally live in hollowed out logs where they would encounter fungi on a daily basis. Now they live in these very nice sawn wood hives that have less fungus in them. We think that by allowing bees to eat fungal and fungal products again, that this could restore some of their health.”

Naeger says research shows when bees consume liquids extracted from certain varieties of Stamets’ mushrooms, it cuts viral levels a thousand fold. 

Dr. Nick Naeger/Entomologist/Washington State University:  "Those fungi tend to produce a whole range of antimicrobial compounds.”

The natural pesticide is good news for Aaron Riggs, who manages a 69 acre apple orchard in the Evergreen State.

Aaron Riggs/Manager – Cache Orchard/Ephrata, Washington:  "You couldn’t set enough fruit if you didn’t have the bees.  You would get some pollination through other insects or things like that, but you wouldn’t get near the crop to make it profitable if you didn’t have the bees.”

While the coronavirus pandemic created some hurdles in supply chains and cleaning procedures, the Hiatts say traffic on the roads to market have cleared substantially.  Hundreds of their hives criss-cross the U.S. on truck beds every year to pollinate tree fruit and nuts before rounding out the summer in honey production.

Steve Hiatt/Hiatt Honey/Ephrata, Washington:  "We have to wait for the sun to go down because the bees will be flying all around the orchard.  And then when it’s dark like this, the bees will all be home.  We’ll gather them up and take them to a different location.”

With nutritional testing underway, researchers at Washington State University hope to eventually petition the Food and Drug Administration for approval of fungal extracts as a livestock feed additive for bees.  The designation could help ease the burden on beekeepers battling colony collapse and its root causes. 

Tim Hiatt/Hiatt Honey – Ephrata, Washington: “They’re doing a lot of work to try to improve bee health and we’re really appreciative of their efforts. 

For Market to Market, I’m Josh Buettner.

Announcer: Next, the Market to Market Report

Paul Yeager: Corn traded above $6 for part of the week. As a combination of continued pressure by China, for some of the old crop and weather conditions affecting planting of the new crop buoyed prices for the week, may wheat gained 14 cents, while the nearby corn contract added 8 cents. A run on soy oil kept the bulls in the soy complex. May soybeans improved 30 cents. May meal increased a dollar. May cotton expanded by a $1.31 per hundred weight. Over in the dairy parlor, May Class III milk futures fell 46 cents. A down week though in the livestock sector, June cattle dropped $3.40. May Feeders declined $5.90 and the June lean hog contract plummeted $7.25 or nearly 7%. In the currency markets U.S Dollar index lost 63 ticks. May crude oil added $3.74 per barrel. COMEX gold improved $35.80 per ounce. And the Goldman Sachs commodity index jumped almost 18 points to finish at $489.45. Now here to provide insight is regular market analyst, Elaine Kub, Hey Elaine.

Kub: Hello Paul.

Paul Yeager: So wheat is an easy story to start with this week because it rallied like the corn and soybeans did. But the question though, is wheat a follower or is wheat going to be a leader in the grains?

Elaine Kub: Yeah, I don't know. It is such an easy story because that has been a mystery, uh, in the past couple of months. Why hasn't it followed corn and soybean more particularly. And I took a look at this because when you think about drought in the United States, now you think the wheat country it's the high Plains, Colorado is a big wheat producer. So North Dakota is the number one wheat producer, and it has large pockets of extreme drought. So actually I kind of was feeling that wheat should be following along more or like you say, take the leadership role, but it is such a haves and have not story. When you look at Kansas, actually the crop is pretty luscious. It's 55% good to excellent rated. So it's not, you know, outstanding and there's portions of Kansas, basically anything anywhere West of highway 385, all through the high Plains is going to still be dry. But nevertheless, um, there is enough wheat there and certainly from a stocks to use perspective here in the United States and internationally, you know, we're not in the position of running out of wheat to the same degree we're running out of corn. And we did see that in export sales this week too, that was a very disappointing report for wheat. It was actually net reductions. So wheat, this wasn't the week for wheat to be taking the lead.

Paul Yeager: Is this a wave right now in the sense of, do I need to be making some sales right now because this wave is almost done. Is there more to it in the next two weeks?

Elaine Kub: I dunno. See, I am of the opinion that all of these grain markets sort of should in a rational market sort of move together. And we're going to talk about I'm sure all of the reasons to be bullish about corn and soybeans and feed grains as the season goes on. So to the extent that we can follow along with that, we do have motivating prices. If you're in a position to be planting spring wheat, uh, and looking at a $6.75 price this September. Yeah, that's motivating. But if it's going to keep following along with other bullish grains, you know, let it,

Paul Yeager: Where do you want to start in corn? Because you could talk about the weather. You could talk about the drain on old crop. You could talk about the weather not being dry, but the weather being cold and planting the new crop. What's the biggest story in corn this week?

Elaine Kub: I'm going to, I'm going to split the difference. Paul, you talked about old crop and you talked about new crop, but what about the stuff right in the middle of this Brazilian crop, the second crop and third crop from Brazil, which was expected to be record large in 2021, you're talking like 4.3 billion bushels. So even if it was just a little bit of a, of a yield adjustment, because of the weather going on there, that would still be a story, but because we are so short or expected to be so short on corn supplies here in this country, over the summer, uh, we were really, or the globe was really relying on that Brazilian crop coming in and leaving some of that, that shortage. So that I think was the weather story this past week. Um, and going forward as well,

Paul Yeager: The, the weather story in Brazil in South America, you're saying, but what about the story here? Uh, there were pictures, uh, in the corn belt. I mean, in Iowa, we've seen fifties for a week and there's fifties for another week. There's a lot of people, some put some corn in a little early, maybe put some beans in early. At what point do we start getting concerned that the corn is not going into the ground soon enough?

Elaine Kub: Yeah. Yeah. And I was in the camp that absolutely you should be. You should be pushing that, that starting line as fast as you can. This year with the intention of trying to hit the September market, September futures alone are worth 17 cents more than December futures. So if you could get your corn out of the harvesting faster and get it to the market faster, there was an incentive to do that. But actually when you look at the cash market, there's actually a dollar inverse between old crop prices now and new crop prices now, but those new crop prices start already September 1st, if you're looking at cash bids in Southern Illinois, for instance, so Southern Illinois has been able to get started there about 5% planted statewide. There is this incentive to do that, but like you say, if the ground's not fit, if the ground's not warm enough and our 7 to 10 day forecast does not seem to support that, you know, you're not going to get, you're not going to get this stuff out of the ground by August, right? You're not going to hit that market. I think we just have to make peace with the fact that we're looking at an inverted market and not as great of opportunities once, September and October roll around.

Paul Yeager: I want to touch on this just very quickly, the basis for corn right now, what does that mean? And why should I be paying attention to it?

Elaine Kub: It's very hot. And, um, you know, it's hot in a, in a local basis, a, in a, in a nationwide basis, I'll tell you even my local elevator here is options zero basis, which virtually never happens in North central, South Dakota in April or any other time. So I went back and looked, has this ever happened before? Not since July of 2013. And that's kind of the timeframe that I think folks are going to have in the back of their mind as we head towards summer, when we have futures markets, this inverted, you know, it's, it's a bullish signal that the market is, is short on grain, and they want it coming to the market. That means wild things can happen. It could become wildly more inverted than the 75 cents. It is now. And it could be the case that basis starts going absolutely nuts this summer. If people, if processors and feedlots and people who need the grain, can't get their hands on it and we start importing. But whatever crazy thing happens, the point I'm trying to make is that basis is likely to continue to be volatile all through the summer.

Paul Yeager: It almost sounds like you're quoting a, an old Carpenter's song- "We've only just begun" when it comes to basis and corn. But what about in soybeans, Elaine? Uh, that has been, it was a breakout star at the end of '20, but it's kind of, it's playing more of a supporting role. Does it have star power?

Elaine Kub: I think it will continue. These are not bad prices. Nobody complains about $14 something, dollar old crop beans, new crop beans are not in the teens, but they may or may not get there depending what the weather does. But I think you're right to point out that it feels like there's a lid on this market. And part of the reason for that, I think is the, um, the ocean shipping rates. Actually, those have gone up quite a bit. You're looking at, at sending soybeans from the PMW to Japan, which I know nobody's doing right now, but if that's what we're basing, all of our prices on that's 92 cents a bushel, that's up more than it was obviously more than last year at this time. COVID obviously, but it's up compared to four year averages and everything.

Paul Yeager: All right. Are you in the camp yet to make any sale? If I had some of that old crap left, do I sell that or am I holding out? Let it ride.

Elaine Kub: Yeah. If you've got old crop anything, um, I would be inclined to just wait and see what happens this summer. If it's not hedged, right.

Paul Yeager: What about the new crop? Are you making any sales there?

Elaine Kub: I mean, you want to be right? These are, these are very good prices and that's the responsible thing to do from a risk management standpoint, if I'm in the Western corn belt or even if I'm in the Eastern corn belt. And I just want to, you know, gamble on the misfortunes of those of us in the Western corn belt, uh, it's tempting to just kind of hold off and see how things go.

Paul Yeager: All right. Um, this livestock market though, is you talk about inverse. Uh, the easy headline story might be that it's a, that's a feed issue. It's an input issue, but there's this consumer story out there. Uh, and I'm going to start with Aaron and Ocheyedan, Iowa to start our discussion. Elaine. He says, if cattle topped for now couldn't corn, keep chugging higher into summer, right? As cattle seasonally decline for more margin fun. So there's a couple of points in that question. Unpack, go for it.

Elaine Kub: Well, I like Aaron's sarcasm. That's that's right in line, but I mean, I think he's absolutely right to be thinking about feed costs. If folks do not have summer feed costs already locked in, well, five months ago would have been the right time to do it, but now it'd be the next best time to do that. I don't know that necessarily beef prices is topped out forever. We've still got chances here in the next three, four weeks for seasonally higher movement, but then things get a little bit more grim, but absolutely the margins are tightening up for feed, feed, lot operations. Um, I mean, what more do you want me to say about that?

Paul Yeager: Well, yes. I don't know what more you do say about that. And, but let's go into the consumer part of this thing. Let's talk about box beef that has become a topic. Uh, the consumer is buying, but is the consumer buying everything we'll get to hogs in a moment? Is this the beginning of higher prices curing higher prices in, in the live cattle market?

Elaine Kub: So, okay. So from a beef retail consumer standpoint box beef price is $276, and they're going up $3 every day, not every day, but day by day, they have a tendency to do that. I mean, they're very hot and the Packers are making just tons of money off of this, right? They're making $500 a head you could estimate. So I think there is potential for the beef prices themselves to go higher. If you start looking at, and you mentioned in the show earlier, people have money in their pockets. They're going to go out grilling and spending money, even at restaurants, from a retail perspective, for both beef and pork and chicken and everything else. So I don't necessarily think that beef prices have topped out. It's the question of how much are the packers, um, paying back to the feed, lots, how much are they contributing down the economic chain?

Elaine Kub: And that has been the real challenge for the industry. To some extent, the feed lots have been successful week by week, holding back their sales till late in the week, being, you know, holding firm on their, on their offers. And it worked this week to some degree, maybe a dollar, we went up to $120 a head for live cattle traded in the South. That's a dollar improvement. Its $10 improvements. Since January, we've gone from $110 to $120, but considering the Packers are making $500 a head. It's not enough. You know, we just, with the feedlots just don't have enough power to take back enough up to claw back enough of that market share.

Paul Yeager: We'll continue this discussion in Market Plus. I need to discuss the, the hog market. And I don't know what you say. Uh, we're still above a hundred, however, it was a pretty tough week. Why?

Elaine Kub: Let's see. It's a confluence of factors and this was true for live cattle and feeder cattle too. The whole livestock futures trade collapsed in a, in a big sense. And the hog market you saw, you know, the April contract was expiring. You had daily trading limits go off. Um, there was a fairly disappointing weekly export sales. I mean, it's just like a confluence of factors, speculators, net long. And so to see some moment of liquidation like this happen, not terribly surprising, it's a big wobble, but I don't necessarily think it's more than a wobble. All of the necessary fundamental factors that have supporting been supporting hogs remain. Actually the, the pork cutout stayed high this week. It's still above $112. You've got China's GDP still growing something like 13% year over year, but even quarterly, uh, it's still growing. So, so all of the fundamental forms are still there. I wouldn't worry too much about the futures losses. I worry about some of the fundamental factors in the beef market that we talked about, but the hog market, I think the wobble will correct itself

Paul Yeager: The wobble will stabilize Alrighty. Lane cup. Thank you so much. Appreciate it.

Elaine Kub: Absolutely.

Paul Yeager: All right, that'll do it for this installment of Market to Market. We will talk more in Market Plus. So join us there. Find that on our website of markettomarket.org. It is Spring field work season and all that time in the cab means you can focus on our three podcast offerings of Market Analysis, Market Plus, and the MTOM show subscribe today where you get your podcasts. Next week, we look at the study of easing animal pain. Thank you so very much for watching. Please have a great week.

Market to Market is a production of Iowa Public Television 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. (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.

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