Market to Market (June 11, 2021)

Jun 11, 2021  | 27 min  | Ep4643

Paul Yeager: Coming up on market to market. Following a two year absence, the pork industry gathers to focus on issues. I look at the impact of new policies on Western stakeholders. And market analysis with Sue Martin, Next

Announcer: 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

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Announcer: This is the Friday, June 11 edition of Market to Market the weekly journal of rural America.

Paul Yeager: Hello, I'm Paul Yeager, certain years of evoke memories, 1929 and the stock market crash 1941 and entering World War II, and 2020 with a global pandemic. When you bring up 2008, though, the comparisons are tied to the Great Recession. The consumer price index ticked up six tenths of a percent in May, but the headline was the 5% surge year over year. The highest leap in 13 years, consumers are hungry for goods and services, but a shortage of components is keeping the main course at bay. When the volatile core items like food and energy are stripped out, the CPI moved higher by seven tenths of a percent. The trade deficit narrowed last month by 8% as a recovering global economy increased the demand for American made goods. Now domestic grown pork headed for export helps that side of the ledger, but the amount of product ready for shipping is in doubt as slower line speeds could return following a judge's ruling to reverse a request for an increase in speed. The issue of line speeds along with trade were just two of the big topics discussed this week in a homecoming of sorts in Iowa, Peter Tubbs reports.

Peter Tubbs: The world pork expo returned to Des Moines, Iowa. After a two year hiatus but the list of challenges facing the pork industry remains long.

Jen Sorenson, President, NPPC: We have a high hog market. We have strong us domestic demand. We've got strong export markets. Now it's not all roses. We've got some higher grain costs that push up our feed costs and that's 70% of production. So we still have to mind our P's and Q's on our spend.

Peter Tubbs: While, China continues to be the largest export market for American pork consuming. 28% of the 7 billion pounds, the US exports each year. The industry is searching for increases in smaller markets to diversify the portfolio.

Jen Sorenson, President, NPPC: We have to go after those small wins in those small countries all the way from Jamaica to our Asian Pacific region.

Nick Giordano, NPPC: We'd like to go back to a more expansionist trade agenda in the United States that wasn't really the standard operating procedure of the last administration. It isn't certainly in the early part of this new administration, very important to us, but you know, you gotta take what you can get, right? Like we'd love trade promotion authority to be renewed. We would love the us back in CPTPP right. We'd love the punitive tariffs in China to come off, right? And we're making our views known to the administration, to members of Congress on those things. But you know, what's really attainable and where can we work collegially and positively with this administration

Peter Tubbs: While expanding export markets will continue to support prices. The American consumer has rediscovered the joy of cooking at home.

Neil Dierks, CEO NPPC: The only good thing about COVID is consumer stayed home and they had to buy meat at the store. I know the national pork board was just overwhelmed almost with requests for recipes, because guess what people had to learn how to cook again. And suddenly they found out that it really isn't that difficult and they can make products that are really tasty and nutritious for their families.

Peter Tubbs: As the economy of household is improving. Clouds are on the industry. Horizon producers are worried about new production standards that will have to be met in order to comply with California's proposition 12, which goes into effect in January, 2022. NPPC officials believe adhering to prop 12 will be detrimental to us pork producers.

Jen Sorenson, President, NPPC: I don't like it. I think I don't like production practices that aren't based on sound science, that aren't based on, you know, what farmers know about great animal care and great production and efficiency and sustainability and prop 12 takes us backwards in all of those areas.

Peter Tubbs: The specter of possible domestic disease outbreaks like African swine fever has the medical side of the national organization laying out its plans.

Liz Wagstrom, NPPC: You know, the biggest questions we get from farmers is if it hits, what are the rules going to be for my, my farm? Am I going to be able to have feed delivered? Am I going to be able to buy semen?

Peter Tubbs: Despite the challenges, the return of the expo has helped the industry reconnect.

Neil Dierks, CEO NPPC: I have had so many people saying, thanks for having this. We needed to see each other. I would in one word, describe it as joy

Peter Tubbs: For Market to Market. I'm Peter Tubbs,

Paul Yeager: TC energy, formerly known as TransCanada, pulled the plug on the Keystone pipeline. After Canadian officials failed to persuade president Biden to reverse this cancellation of the permit. The long delayed project was to transport crude from the oil fields of Canada to Nebraska. Now Biden cited environmental concerns as a reason for stopping the project on his first day in office. The last three presidents have been involved in Keystone along with another debate and almost the same region. President Obama made the first move in a debate that has a generations long cultural past in the west. Josh Buettner reports in our cover story.

Josh Buettner: On his way out of office president Barack Obama proclaimed 1.35 million acres in Southeastern Utah, a national monument bears ears named for distinctive twin Buttes towering over San Juan County's diverse high desert landscape was the first monument created in collaboration with a coalition of various native American governments, archeologists and conservationists, hailed the move for protecting the regions, married cultural and natural sites. But president Trump shrink Bears Ears by 85%. One year later splitting the monument into two non-contiguous sites. Critics warned former protected lands could be opened up for fossil fuel and mineral development

President Trump: Modifying the Bears Ears, National Monument

Josh Buettner: Trump's action drew the ire of local tribal constituents who consider the area sacred a handful of various stakeholder lawsuits alleging presidential overreach spun up and were consolidated into one case by a federal judge, but judicial backlog and Coronavirus have kept the case in limbo.

President Biden: So help me God.

Chief Justice John Roberts: Congratulations, Mr. President

Josh Buettner: Taking office president Biden promptly issued a review of Trump's changes and the district court granted the stay.

Secretary of the Interior, Deb Haaland: The constitution of the United States constitution of the United,

Josh Buettner: A recommendation from Interior Secretary, Deb Haaland on Bears Ears boundaries is forthcoming, but the issue remains divisive in Utah.

Josh Ewing: Yeah. This ping pong back and forth between maybe a conservative president and a liberal president and going back and forth. That's not good for the land. You know, the land should not be political football. Josh

Josh Buettner: Ewing is executive director of friends of Cedar Mesa. A grassroots organization founded in 2010 to support regional public land use based in bluff Utah, the group's bears ears education center helps enlighten tourists drawn to a massive county larger than a handful of new England states combined. Ewing also describes San Juan as the most archeologically rich county in the U S

Josh Ewing: People aren't used to just walking up to a cliff dwelling, walking up to a 2000 year old pictograph. They need to know how to behave in those sensitive areas. Archeological sites are easily damaged and once they're, they can't be recreated.

Tyler Ivins: So this is the edge of our permit. We run all the way up. This canyon, everything inside of these rims is his part of the monument

Josh Buettner: The vastness of San Juan County is one reason ranchers Tyler and Shawn Ivan's breathe a sigh of relief upon Trump's role back. The brothers run 300 head of cattle on mountain and desert allotments within Obama's previous proclamation area.

Tyler Ivins: So these are Anasazi ruins and these are all over San Juan County. There, there are thousands of them to put it in a perspective. One acre is 210 feet by 210 feet square, which would more than protect that area or that site. And if there were a hundred thousand of them, that would be 100,000 acres and they wanted to take 13 times that, which is 1.3 million acres. In our opinion, that's overkill. You know, it takes in a lot of area that doesn't have a lot of bearing on it

Josh Buettner: Over half of Utah's iconic landscapes already fall under federal oversight. And the Ivan say adding to the management backlog is unsustainable.

Jared Berrett: I think the fear of a lot of the local people is that it will change the way it is.

Josh Buettner: So some locals have gotten to work developing the area to capture increased tourist dollars. Jared Barrett built a resort and spa in bluff. He's all for protecting the area, but echoes local sentiments, weary of overexposure. So the expedition wing of his business focuses on small group excursions.

Jared Berrett: You've got truly world-class scenery. I've been to Egypt. I've been to some pretty incredible historic sites. I mean, it's hard to look at the pyramids and not be freaking amazed, but I stand at some of the places that we have here. And I'm equally amazed if the flood gates did open and you got, you know, like Wal-Mart lines heading out to some of these ruins, the sanctity of it and the sacredness of it. I think you would Lose it.

Josh Buettner: While bears ears might be a double edged sword to some tourism. Advocates are encouraged that president Biden's first budget adheres closely to the $3 billion annual allocation under 2020s, great American outdoors act for conservation and maintenance funds nationwide.

Gary Torres: We have counters out there trail counters, and we've seen an uptick in visitation

Josh Buettner: Over 1 million acres of Utah's public lands fall under the purview of the U S bureau of land management, which helps coordinate land use among various stakeholders overseeing anything from motorized activities to hunting, hiking, or administering grazing permits.

Gary Torres: I'm a big advocate of multiple use. I think it's a great principle for the American public. It allows us to, to all play in the same sandbox. Essentially

Josh Buettner: Gary Torres is field manager for the BLM based out of the agency's local Monticello office. He says, no matter what presidents decide, BLM has a knack for planning and working with a diverse range of collaborators. We

Gary Torres: Need to be respectful of each other's activities, and we need to manage those resources so that they're here for my grandchildren and my great-grandchildren. And I think that that's the beauty of multiple use and sustained yield is, is that we're trying to do things that make sense now. And for the future

Josh Buettner: For Market to Market, I'm Josh Buettner.

Announcer: Next, the Market to Market report

Paul Yeager: A rain can be a welcome relief to push a crop along, but it can also wash the market of gains following government reports. For the week, July wheat lost, 7 cents. While the nearby corn contract added two pennies. The bean bulls look like they're hitting the exits in the nearby contract, but hanging around in November as the weather situation worsens. The July contract dropped 75 cents. July meal shed $12.90 per ton. December cotton rose by $2.04 per hundred weight. In the Dairy Parlor, July Class Three Milk weakened by $.40. A mixed week in the livestock sector, August cattle improved a $1.95, August feeders expanded a $1.25, and the July lean hog contract declined $.62. In the currency markets. The U S dollar index added 46 ticks. July crude oil added $1.24 Per barrel. Comex gold decreased $15.30 per ounce. And the Goldman Sachs commodity index increased by more than 10 points to finish at 530.45. Now here to provide insight is market analyst, Sue Martin. Hello, Sue.

Sue Martin: Hello there, Paul.

Paul Yeager: So we could talk weather, we could talk government reports. We could talk China, just like always, but the weather market in wheat has really kind of split these contracts. The Minneapolis wheat contract had a good week and then it was pretty weak. I mean, the rains are coming in certain spots that we hadn't expected. It had been dry. Why is weather so much a factor right now in this wheat market?

Sue Martin: Well, for one thing a lot of times when you're so moist in Kansas, Oklahoma in the hard red winter wheat, this time of the year, you'll be dry in the Northern Plains, but the Canadian prairies had been very dry. They'd been in almost a four year drought. And so they were so dry and the Northern Plains were extremely dry. It was thought that we'd lose some, a hard red spring, a hard red spring, but yeah, hard red spring wheat and at the expense it would move over to soybeans. And then we started to see some rains come across the Northern portion of Canadian prairies. Then we caught a second shift of that here this week. And again, even, you know, coming into Friday saw rains move across the Dakotas into the even made it in almost a Minnesota. So consequently that really worked over the Minneapolis wheat because remember it was setting new contract highs for the year on going into the government report. Now, the government report didn't really give us Minneapolis wheat, yes, it was friendly maybe towards that, but the report to this week, the supply demand report didn't really give us anything, all that much to write home about especially globally. And then you have Russia talking about their hard red spring wheat areas might be still a little on the dry side, but they, upped the amount of production that they thought they were going to have.

Paul Yeager: So If you're in a position as a producer in either one of these spots that you're talking about, what are you doing? I mean, are you doing the same thing or is it a different strategy in each area?

Sue Martin: Well, I think in the wheat in the hard red winter wheat areas and soft red I would be prone, you know, we're going into harvest time and, you know, the harvest because of the moisture, the hard red winter wheat matured, a little slower. And so it's making like an areas of custom cutters. They're going to be a little delayed making it north when they normally should be. And so I think that that will start to pick up a little bit of support under the market. I have been a proponent of this being a counter seasonal year rally. Maybe that doesn't happen, but I, I think the jury is still out on that one. Would I tell producers to be selling? I'm not going to say don't sell, but I don't think your highs are in yet. But you know, the one thing I look at when you look at in the U S we had on this report, ending stocks, domestically drop in corn, they dropped in wheat all week, basically for 20 20, 20, 21. And then they also dropped in rice and in feed grains, when you get all four of those on the same path or the same ledger, whatever you want to call it, you're in a bull market. The one thing is you'll play tag, which we're seem to be doing, but then you look at the global scale and the only one out of all of those, well, I guess two feed grains and corn managed to see stocks drop, but in the other two wheat and rice, they went up, especially in the 21, 22 uh, timeframe. So I think that we still have work to do on that level, but I think we're in evolving markets. You, at the early part of this year, I had, I think I was on the show and I might've even made the comment that I thought, you know, we'd move up into summer, June, July, and we'd go down into November. And our lows for the year would be in November. I still believe that. And so that's adding a little caution to the listeners and viewers, because we are going to get some opportunities here. Is the crop this year in corn and beans is going to be a disaster? I don't think so, but I don't think it's the, the wherewithal either.

Paul Yeager: Well, the WASDE report, you kind of danced a little bit. It was bullish for corn, but we were up until the last day of trading this week. And then Friday just kind of fell off the table. Why?

Sue Martin: Well, when you look at corn, it's fighten, and soybeans, which the report was not bullish on. There wasn't any facet of it bullish. And then you look at wheat and it wasn't real special there. Then you had rains coming across the Dakotas. So all of that, even though there was heat in the forecast for the weekend and next week, in fact, for the eight to 14 day forecast heat. And yet the market chose to ignore that. I think with these rains coming through overnight, kind of took them by surprise, yanked and got an inch bless their heart, but they're going to have heat coming back, triple digit possibility. That'll evaporate a lot of that. So I think the market said, you know, we came up, we got fairly close, I think 28 and a quarter was the high on December corn, the high before that is 38, 8 and a quarter. So you've got fairly close. I think the market decided to take in some profit taking for the weekend and they stepped aside.

Paul Yeager: All right. So in soybeans though you mentioned the report not friendly to the soybean market, right? But there is a huge discrepancy between July and November. Why is that?

Sue Martin: Well, because we had such old, tight, old crop supplies, you know, we started off at 120 million bushels carry out for several months here. And we felt that might be pipeline supplies, even ADM, this research was saying that, and they should, they've got a whale of a research department. So we had to believe if that is pipeline supplies. What does that saying? That's saying that each report, you get that 120 is not going any lower and if anything, it's going to go higher. So it's diffusing some of that bullish attitude, even though it's also saying we don't have any, any more beans.

Paul Yeager: It sound like we've already rationed on our own. When that number doesn't go up. I mean, that's, that's a swear word. I get it.

Sue Martin: Well, you could say we've rationed. The crush dropped, but also where are we in our crop year? Because Brazil was delayed in their harvest because they were, they were delayed in the planting and then delayed in the harvest that shoved that crop in our face later than normal. So therefore we're dealing with that, but they're also dealing with not getting it out the door as fast as they'd like either. So I think, I think our demand has slowed a little bit. And if you don't have the beans, you can't crush them. So they got to drop the crush. What does that do? It ups the numbers.

Paul Yeager: All right. Real quick. Gary and Franksville, Wisconsin wrote us on Twitter and we, we've kind of talked about the weather a lot, and he's just asking, give us, give us a little quick thing. What is a good way to protect prices? If you are in a dry area, he says, I hate to sell and not have a crop to back it up with.

Sue Martin: I would recommend buying puts and I wouldn't buy puts on any more than what your crop insurance does. I would also recommend because volatility is key in this market, and I think you're going to see volatility all summer long, even into early fall. So I think what I would do is even entertain, put spreads, buying a, put, selling a put, and that'll cheapen up your costs, but you have to manage it and then walk the market down. If it goes down, if it goes up, you won't have spent as much for that insurance. And, you know, I remember when options came out, that's how they sold it to us was ‘it's insurance’. And that's about what it was if you weren't the speculator.

Paul Yeager: All right. This week, the World Pork Expo, we talk about it. And the producers who were in my ear wanting to know more about this market, a big discussion is about the exports and how they have continued to help this market. But they're also facing headwinds of feed issues. Why isn't hogs being impacted like the cattle industry has when it comes to feed.

Sue Martin: Well, for one thing, you know, we have to go back to last year. And last year we've seen because of the, not able to get hogs to the packing house and get them in. You've seen a huge liquidation that was under estimated, or it just was under, over underrated. And then you also through the winter saw PRRS and, and PED virus, so that tightened us up. And so we're tight supplied on hog numbers coming in, whereas opposed to the cattle market, because of packers not being able to kill as many as they'd like to can't find labor. Well, unfortunately, therefore they are oversupplied for what the killing capacity is right now. The other thing with the hog market is, is the sow's you've seen you were seeing huge liquidation of sow's and prices got to $80 back in April. I think it was. And the last time I think that happened, might've been 2014. So, you know, they got really high. Now they have dropped back off. They might be hanging in the $50 range or whatever, but the price of corn has come up. So now the, the producers got to decide, okay, you know, corn is this soy meal, which hasn't been the runner in the bean complex. So it's still tolerable. And we're, we're producers get yourself protected because we think long-term that soy meal market's going to bike.

Paul Yeager: Are you protecting in, in live cattle too? I mean, there just seems to be an, a ridiculous amount of optimism, not right now, but for down the line. Is there a reason for that?

Sue Martin: Well, I think your cattle numbers as we get into August and the third quarter should be a little tighter, but and we need to keep seeing some of these cattle moving. The problem you're encountering is what's holding corn up right now in the U S is our weather market. You know, when we started this corn market, we started last August, how the USDA started to admit that maybe they had overstated the crop for the previous two years. And then they started showing more demand and demand came at us full force. And so we moved into a demand market that we hadn't seen in a long time. And the market was relentless and very trendy. Then we got into March, April, and we started trading, not only demand, but we started trading safrinha corn weather, and that added the market. And when did we peak when the safrinha corn pollinated.

Paul Yeager: Okay. All right.

Sue Martin: So that, can I…

Paul Yeager: 10 seconds.

Sue Martin: All right. 10 seconds. I'll, I'll hurry. But that has created the corn price to be high. So the producer in the feeders is saying, wow, you know, you look at the different cattle prices. They're not paying very well to be buying those feeders, but you've got this cow calf herd that's moving out of the Southwest and the Northern Plains.

Paul Yeager: We will continue that in just a moment. Thanks. So appreciate it. That's it for this program, we will continue to discuss in market plus. So thank you, Sue Martin. Thank you very much for watching I'm. Paul Yeager have a great week.

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

Announcer: It'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

Announcer: Tomorrow for over 100 years, we've worked to help our customers be ready for tomorrow trust and tomorrow information is available from a Grinnell mutual agent today.

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.

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