Market to Market (September 3, 2021)

Sep 3, 2021  | 27 min  | Ep4703

Coming up on Market to Market -- Ida leaves a trail of destruction from Louisiana to the Northeast. Flooding concerns loom as harvest nears. Exploring the efforts to repeal rabies. And market analysis with Jeff French, next.

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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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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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This is the Friday, September 3 edition of Market to Market, the Weekly Journal of Rural America.

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Hello, I’m Paul Yeager.

The job picture is a complicated one. Several states ended unemployment benefits but that has yet to translate to massive gains in people going back to work. ---

American employers added 235,000 jobs in August even as the Delta variant has slowed some economic activity.

The unemployment rates dropped two-tenths of a point to 5.2 percent. Hiring was lower in places that require face-to-face contact.

Supply chain bottlenecks remain a concern for those surveyed in the Business Conditions Index. The Creighton University snapshot reported a monthly decline, but held at 68.9, well-above growth neutral.   ---

There was a decade and a half between the August 29th landfall of Hurricanes Katrina and Ida. The damage to infrastructure was different this time, but the remnants of the storm drenched the Northeast. The National Weather Service office in New York City had never issued a Flash Flood Warning until this week.

John Torpy wraps up another wild week of weather.

Devastating environmental events hit the U.S. on multiple fronts this week as wildfires grew in the west, drought and flooding mixed in the Midwest, and Hurricane Ida idled shipping on the Mighty Mississippi.

Commissioner Mike Strain, Louisiana Department of Agriculture and Forestry: “We expect the river to open from nine mile point out into the Gulf in seven days./ And I think the main message to America is that we're going to get this river open as soon as possible, A-S-A-P. “

While hurricane Ida mostly spared Louisiana crops, it did not spare the nation's most efficient way to ship them. Ships and barges were scattered on the banks of the Mississippi River, causing a stoppage for river traffic just as grain farmers across the Midwest are preparing their combines for the 2021 harvest.

Commissioner Mike Strain, Louisiana Department of Agriculture and Forestry: We have a lot of ships in the river that are waiting to be loaded. We have a lot of barges in the river that we need to get to the North./ Because that is how we were going to be able to move the corn and the beans and the grain and the other products up and down the Mississippi river.”

Hurricane Ida, the fifth most powerful storm to strike Louisiana, made landfall 16 years to the day that Hurricane Katrina struck the Pelican state. 

The Category 4 storm knocked out power to one million people in Louisiana and authorities say it could be weeks before power is fully restored.

Early damage estimates from hurricane Ida currently hover around $16 billion and officials anticipate the final total could be as high as $50 billion. The fourth named storm of the season made landfall at Port Fourchon, severely damaging a facility that is essential to the production of oil and gas in the Gulf of Mexico. 

Heavy rainfall from the remnants of Ida washed out roads in Mississippi and flooded several rivers as far north as the New England states. The high water was responsible for dozens of deaths.

In the West, hot, dry weather continues to fuel wildfires in Northern California. The resort city of South Lake Tahoe lays squarely in the path of the Caldor fire and more than 20,000 residents have left the area due to mandatory evacuation orders. The fire has charred over 200,000 acres since August 14th. Only 25 percent of the fire is contained with nearly 4,500 fire personnel facing numerous obstacles to combating the blaze.

Keith Wade, Caldor Fire Incident Command spokesperson: “We've experienced very erratic winds, very high temperatures and very low humidities. And we're in areas that haven't burned on some records for decades or even 100 years./It's created a huge challenge for firefighters who are working to try to contain the incident." 

Ample rainfall in the upper Midwest reduced drought conditions in Iowa, Minnesota and the Dakotas. Flash flood warnings were issued in northern Iowa, where heavy rains pushed rivers and streams out of their banks. The U.S. drought monitor also revealed widespread improvements in conditions for the Gopher state and much of the High Plains.

For Market to Market, I’m John Torpy.

As a chemist, Louis Pasteur gets credit for discoveries involving pasteurization, microbial fermentation and vaccinations.

His work in understanding the causes of diseases has helped nearly eradicate rabies and anthrax.

Those viruses still exist and as Colleen Bradford Krantz explains in our Cover Story, the fight continues.

Betsy Haley is holding the line. Plotting where the enemy might next attempt to cross the mountains, she has just dispatched the fifth flight of the day.

The enemy she’s fighting?

Rabies.

A virus – fatal if left untreated - that has struck fear in humans for generations. In the United States, the rabies threat doesn’t look like it used to when it comes to the carrier animals.

It’s less this [growling dog] and more this [cute raccoon].

In the early part of the 1900s, dogs were the primary carriers in the U.S.. But, between public awareness campaigns and the enactment of dog vaccination mandates in most states, that has changed.

Today, wildlife are more likely to carry rabies than the nation’s domestic animals. Foxes and bats have been a constant threat, but the bigger danger in recent decades came from skunks and raccoons.

Haley and others at USDA’s Wildlife Services have been working to help reduce the prevalence among raccoons and other wildlife.

Betsy Haley, National Rabies Management Program: “The focus is actually on raccoons and skunks because those are the animals that seem to encounter humans more. Especially raccoons. Raccoons seem to be that warm, fuzzy critter that everybody wants to get closer to or befriend.”

Since the 1990s, officials have been criss-crossing the countryside in planes and helicopters, dropping vaccine-filled bait packets covered with a sweet coating to attract the raccoons.

Betsy Haley, National Rabies Management Program: “Our work is to distribute oral rabies vaccine baits for raccoons, starting from Maine down to Alabama. …And helping to map the areas that we are going to distribute the baits in.”

When the raccoon-variant of rabies began moving north from Florida in the 1940s – and was accidentally accelerated by some trappers in the 1970s – federal officials took notice. And began a campaign to confine the disease.

Fortunately, the Appalachian Mountains offered a natural barrier that slowed the progression of the virus. An additional drag was placed on the migration of the disease by the development and distribution of rabies vaccines.

The battle isn’t over. Rabid raccoon attacks still happen today along the East Coast.

WCVB News Report: Laurie Rose said she spotted the raccoon when she heard her chicken, Alice, squawking Saturday evening. That’s when she came outside to put Alice in her pen. ‘It just charged me and I slipped and it grabbed ahold of my heel and it would not let go.”

The Boston-area woman, bitten earlier this summer, received the proper rabies treatment quickly, which is key to surviving exposure through a bite or scratch.

The command center for the raccoon rabies bait drop on this particular day in August was the airport near North Lima in eastern Ohio. Over four days, the team would distribute 700,000 bait packets.

Betsy Haley, National Rabies Management Program: This project itself is covering portions of eastern Ohio, western Pennsylvania and a little bit of northern West Virginia. … We chose this area because it is the western edge of the raccoon rabies front.”

In many states, although it can fluctuate, the number of rabies-infected wildlife appears to be declining over the past 15 years. That includes Ohio, where wildlife biologist Jeff Raines is based.

Jeff Raines, Wildlife Services, USDA: “At the height of the raccoon rabies positives in Ohio, we had over 20 positives in Ohio in a calendar year. And through the work of the Ohio rabies management program and the national rabies management program, there’s been a decline in the number of cases per year. In 2020, we only had one positive animal and so far in 2021, we only found one animal.”

The personnel on the flights drop the packets over woods and fields where raccoons are likely to live, avoiding a release over homes or populated areas.

Jeff Raines, Wildlife Services, USDA: “Through complex calculations, the national rabies management staff determine how many baits need to go out in a certain area … So for this flight, we’ll have roughly 12,000 baits, and that can fluctuate from 10- to 20,000 baits depending on the area we are working…. We’ll have a total of 15 flights today.”

Anyone who finds a bait packet should put on gloves before picking it up and moving it to a wooded area. And, no matter what, to always avoid going near raccoons, particularly if they are stumbling around or acting strangely.

Betsy Haley, USDA National Rabies Management Program: “If you do get bitten by an animal…the best thing to do is clean and wash that infected area and then contact your local health department immediately.”

The number of humans dying from rabies has dropped over time and it is now rare in the U.S. Just a few years ago, however, a Delaware woman died of the disease. State officials said she may have been exposed to rabies through a scratch from a feral cat or one of her own. She was the state’s first confirmed rabies death in 77 years.

While eliminating all variants of rabies from the U.S. may be impossible because of the difficulty in delivering vaccine to bats, the variant carried by raccoons could actually be eliminated.

Betsy Haley, National Rabies Management Program. “The ultimate goal is to eradicate rabies from the Eastern U.S.”

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

Next, the Market to Market report.

USDA announced a change in their September Crop Production report that could ultimately update planted and harvest acreage estimates. The market is moving ahead of next week’s report and also digesting ample rain and shipping problems in Louisiana. For the week, December wheat subtracted six cents while the nearby corn contract declined 30 cents. Timely rains has some saying it could help fill pods, but others contend it is too little too late. The November soybean contract shed 31 cents. December meal lost $11.40 per ton. December cotton fell 82 cents per hundredweight. Over in the dairy parlor, October Class III milk futures added 15 cents. A down week in the livestock sector. October cattle cut $4.33. October feeders shed $5.95. And the October lean hog contract dropped $1.15. In the currency markets, the U.S. Dollar index lost 65 ticks. October crude oil improved 44 cents per barrel. COMEX Gold expanded $12.60 per ounce. And the Goldman Sachs Commodity Index increased nearly 6 points to finish at 533.40.   

Yeager: Now here to provide insight is market analyst, Jeff French. Hello, Jeff.

French: Paul, great to be here.

Yeager: Good to have you here. You didn't have to bring your rain coat. We had that last week. Did this rain have a major impact on wheat as it did on maybe corn and soybeans?

French: Somewhat.

Yeager: I need it from a planting perspective moving forward.

French: Well, they're waiting on the rains. If you look at Kansas, they want to get some moisture to plant the crop. But I look at the price action in the wheat, we had Canada come out here earlier in the week, friendly report. Canada's crop is down 35%. It is well telegraphed. They have had a major drought up there. But the market didn't really react too positive. It had some outside reactions to what is going down in the South. But this wheat is high-priced, you've got $7 new crop wheat and I anticipate that you're going to see more acres go in the ground next year.

Yeager: Well, and that's partially my weather question but also partially the other question, when you're over $7 the wheat, the acreage battle? So do you think wheat is the biggest winner in 2022 for acres?

French: Right now I think if Kansas can get the moisture, I anticipate wheat will see probably upwards of 2 to 3 million additional acres. I have clients in Kansas right now that are looking into putting wheat underneath their pivots and that is simply because of the inputs on the corn. They're so expensive, with new crop wheat at $7 you can lock that in right now, have it protected here for all of growing season, $7 wheat is a money maker.

Yeager: Quickly, are you getting rid of any wheat right now?

French: I have no problem -- we're sold out of old crop. New crop we're upwards of 20% sold. But again, $7 wheat, it makes money, get some booked here, but also protect the downside in case there is, there could be some more upside here. That crop up in the hard red spring wheat could continue to get smaller. That could attract some buying. But these are really good prices. You need to be defensive here.

Yeager: Are these good prices in corn?

French: They're moneymaking prices. This crop went in when it was $3 inputs, so we've had a big rally here in the last year. Now here short-term we're kind of on a downslope. We held support at $5.20. We need to continue to hold that because if we take out $5.20 in December, $5.01 is the 200-day moving average, this week we closed below the 20, 50 and 100 day moving average in corn. We have not done that in a year. So you have these funds that control a lot of bushels. And when we start taking out those moving averages like that they don't want to be holding onto those long contracts and right now they're long about 200,000 contracts of corn. If we start taking out that $5.01 they're going to quickly sell the remaining.

Yeager: We have a question about round numbers in corn we'll get to in Market Plus. So I'll ask you though now, do those moving average closures underneath them prompt you if I'm a grower sitting with a decent crop in my fields, am I booking some more sales right now in the say December?

French: Well, again, corn right now is making money at $5.20 or $5.25, a lot of places still have positive basis. If you are selling into this downslide that we've seen here just get it reowned. Buy a March call out there for, you can buy a $5.70 March call for under 20 cents a bushel, you can reown those bushels for the next six months. Right now I'm not making sales. Now, if we start closing below $5.20 I might get a little more aggressive there.

Yeager: September 10 is a new USDA report and it's going to be possibly different, the news of relooking at acres. Is that a big impact on corn?

French: Well, I think it surprised the market a little bit and that also added to the selling pressure this week. When that was announced we immediately moved lower. The trade has kind of digested it and the trade kind of anticipates that the acres are going to go upwards of anywhere from 800,000 upwards of 1.2 million more acres of corn. So we'll just have to see what the government says. But for them to come out in September that raises questions.

Yeager: Does that translate to anything different in the soybean market, that same USDA change?

French: I think the market is pretty comfortable with that 89 million. We've had some good rains here, it's late August, early September here. Will they help? That's the question. I don't think they're going to hurt by all means. But most people anticipate that yield in beans are inches upwards. The market right now is pretty comfortable with supply.

Yeager: Okay, well we have a question about basis, a little bit how it relates to supply and it came from Jared in Illinois via Twitter. And he's asking us, if ending stocks are as tight as they seem for soybeans, why is there a 10 cent under local basis going into harvest?

French: Well, I've traveled a lot here this summer and I've been talking to producers all over the Midwest and I'm shocked at how many producers I talk to that are zero percent sold. And this is within the last month of being out on the road. So I think the market kind of anticipates that the American farmer has not sold a lot of new crop. Last year they still have the sour taste of selling new crop beans at $10 and then watching it go up to $14 by the end of the year. Well, we have $13 beans right now. These are very good high prices. These prices are typically associated with a crop disaster and I just don't see a disaster out there.

Yeager: Right before we started, Executive Producer Dave Miller showed me, he quizzed me on a close sheet. When is this from? And it was right about $13, it was from 2012. That was a catastrophic crop year. Are we in a catastrophic crop year with these prices?

French: No.

Yeager: So does that mean book some sales?

French: Again, when you are a grain producer and you can make money off of the crop that you put in the ground and six months later harvest it and you can make money I'm not going to tell you to never sell that because that's what we're going to do. We're not into being right. It's about making money. And these prices make money, get some sold. But again, defend it with some call options out into March.

Yeager: All right, I asked you about cotton if we could talk about it and you said yes. There's a reason why. What is the big flat line against that cotton market?

French: A brick wall at 95 cents. We've tested it here for about 3 weeks. We traded above it for about an hour during the trading session. So get some cotton sold. If we can close above 95 cents for 2 days consecutively, buy everything back that you sold because we are going to go higher. But again, these are good prices, get some sold up here.

Yeager: Back to round numbers again. All right, let's get into livestock. This is something, two consecutive weeks where everything had been on the rise. Why the fall this week? Let's start with live cattle.

French: Well, I think you saw -- live cattle went up there and made multiyear highs after the cattle on feed didn't give us the bearish surprise. We hit $138 in December. Historically December cattle at $138 are very expensive. You can count on one hand how many times we've hit $138. So you saw, number one, longs take some profits, but also you saw producers saying hey, these are good prices, let's get some protection. So you've seen a lot of hedge pressure come into this market.

Yeager: Somebody was maybe listening to someone saying, these are good prices, multiyear, take advantage. So, feeder wise, there is a theory that maybe we need a leg lower to go back higher. Is this a technical move ahead for feeders or a fundamental story?

French: I think it's technical. There are some gaps on the charts that we put on in July that now we're within a dollar, dollar and a half of filling those gaps. And gaps typically in the livestock market, they get filled. We also had the August 22 feeder cattle contract come on the board last week. It opened at $174. That is a very good price long-term. So again, producers are looking at this price and saying hey, we need to protect it and that is absolutely what they should be doing.

Yeager: That is a 3.5% drop this week, $5.95. So if I'm looking to expand my herd right now am I in a good position?

French: Yeah, I think you wait and see, we've got a long weekend here. We open lower Tuesday, come back and close higher I think that would be a good sign. But right now the cattle market is trending. We've had 9 days in a row where it's lower lows and lower highs, that is not a friendly chart pattern. So let's see if we can stabilize and start moving higher and then we're going to get back on the long side.

Yeager: So maybe sit out for just a little bit longer?

French: I'd be a little patient here right now.

Yeager: Okay. Hog market, what do you think of Asia is having an issue with a lot of virus issue? Is that impacting what they're willing to take in imports?

French: Well, I want to be bullish hogs. You just said it, China is continuing to have problems, Germany is having problems. Exports this week were large. Now, China had a small cancellation or reduction. But I look at the hog market, we're at 90, 85 cents, 90 cents here upfront in the October, historically very good prices and then you have the ASF that is in the Western Hemisphere down in the Dominican Republic, that's 90 miles from Puerto Rico. Puerto Rico is considered a state. So I would be very cautious here. We do not want to see ASF in the States here.

Yeager: I want to spend the last minute discussing this hurricane this week. What is going to be the long-term effect Ida caused in say New Orleans, maybe long-term, this harvest season as we finish up '21?

French: From what my sources are saying we've got 10 days that we're going to be down here, maybe 2 weeks. But we actually dodged a bullet from an industry standpoint because September is our slowest month for exports. So from that side of it for it to hit any time it's probably a good time. If this would have hit late September or October when harvest was going at full speed here in the Midwest I think you would see a much more dramatic move lower because it is a very important port, 60% of our ag products flow through New Orleans. But we've been through this before, they're going to get it up and running as quickly as possible. It's negative near-term but I think we overdid it a little bit.

Yeager: The market overdid it because there was a discussion of was it all shipping and then the rise yesterday, tiny bit of a rise Friday, if that was a dead cat bounce? But maybe that's what you're indicating that maybe it's not as bad as we thought and that is why the market moved higher.

French: Yeah, markets tend to overdo it real quick. And again, I think the market kind of took a couple day breather, we've been through this before, there's not too much structural damage, a couple are, mainly it's just getting the power up and from right now I'm hearing 10 to 14 days.

Yeager: And there wasn't much old crop to ship anyway.

French: There shouldn't be. You've got a great positive basis right now. By the end of the month the basis is going to evaporate. So sell the old crop here, absolutely.

Yeager: And maybe the new crop too. All right, Jeff French, thank you so much, appreciate the time.

French: Thanks, Paul.

Yeager: That will 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. Learning happens, even on a holiday weekend. The Classroom section of our website provides constant updates to our entrepreneurship, innovation and commodity market sections. Visit markettomarket.org/classroom for more. Next week we look at the logistics post-Ida of shipping grain along the Mississippi River. Thank you so very much for watching and have a great week.

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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.  

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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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