Market to Market - August 11, 2023

Coming up on Market to Market - A pattern change brings rain to the Plains. Land owners hear details about an addition to a proposed pipeline. Plus, finding additional revenue on the dairy farm. And market analysis with Shawn Hackett, next.

What's next doesn't happen by chance. It happens when researchers and farmers work together to solve tomorrow's agronomic challenges. We're committed to creating what's next because at Pioneer, our name is our mission.

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This is the Friday, August 11 edition of Market to Market, the Weekly Journal of Rural America.

Hello. I’m Paul Yeager.

The government’s goal was to provide a soft landing on inflation. But that metaphor hit some turbulence this week.

The consumer price index for July increased 0.2 percent, matching the core reading as well when volatile fuel and food segments are removed.

The year-over-year reading did increase 3.2 percent, snapping a twelve-month streak of declines.

The core annual reading matched the smallest monthly rise in nearly two years. However, pressures for the next snapshot will have to endure the highest prices for WTI Crude Oil since November of 2022. Higher housing costs made up the majority of the inflation increase.

Late last week, the North Dakota Public Service Commission denied a permit application to build a section of the Midwest Carbon Express. Iowa-based Summit Carbon Solutions was told they had failed to “meet its burden of proof to show the project will produce minimal adverse effects on the environment and upon the welfare of the citizens of North Dakota.”

Summit said they will re-apply and kept appointments in Iowa to tell landowners about the multi-state effort. David Miller was at one of those events.

Hunter Fors, Iowa Utilities Board: “All right. Good afternoon, ladies and gentlemen. We're going to go ahead and get started. It is 12 o'clock, so out of respect for everyone's time, we're going to go ahead and get started.”

Officials with Summit Carbon Solutions have begun requesting voluntary land leases along a new segment of its controversial Midwest Carbon Express pipeline.

Jimmy Powell, COO Summit Carbon Solutions: “...if you know you agree to, to execute an easement with us, you agree to a price, then we pay that a hundred percent upfront.”

Ground along the new route is being sought under a second permit. The gathering of leases was allowed to begin immediately following informational meetings held earlier this week in the northeastern Iowa counties of Floyd and Mitchell. The 31-mile-long Absolute Energy Expansion will be added to the nearly 2,000 miles already covered in a previous permit request.

The main sticking point for landowners along the route is the potential use of eminent domain to get the project started.

Aaron Murphy, lawyer - Osage, Iowa: “...what if a particular landowner does not agree and eminent domain is used? What, what happens then? I mean, are you taking ownership of that strip of ground or are you still just taking an easement?”

Hunter Fors, Iowa Utilities Board: “...the board could rule on that and it'd be for an easement. So, um, in their other docket, they have some of those already. And it's an easement. It's not fee simple, it's not taking ownership.”

Kathy Carter, Rockford, Iowa: “Those voluntary easements that got mentioned, quite a few of those are not so voluntary because of this. We'll give you the money. You get to keep it no matter what happens if the pipeline doesn't happen, there's no null and void clause in those easements. Make sure you have legal team look over those easements if you're thinking about signing it, because there's a lot of things in there that are not something you like to end up with.”

Jake Ketzner, Summit Carbon Solutions: “...the stated goal from Summit Carbon Solutions for the last two years is to reach 100% voluntary easements. That's the goal.”

Unidentified participant: “You guys are all nice, the people that are out in the fields are kind a nasty.”

Jimmy Powell, COO Summit Carbon Solutions: Well, ma’am, they all funnel up through me. That’s the case? Let me know. We have replaced people on this project because we didn’t think they were representing us well.”

The other issue most prominent at the meeting was safety.

Unidentified man: What's the life of the pipeline?

Jimmy Powell, COO Summit Carbon Solutions: “That's a great question. So, um, we design for 25 years, because the commercial guys have to base their economics on something. But, um, if you design it, construct it, and install it and maintain it properly…we're designing for 25. I mean, we, we hope we're here long after I'm gone, which may not be too much longer, but long after I'm gone.”

If the permit for the expansion is approved, it will bring CO2 from the Absolute Energy ethanol plant in Mitchell County into the rest of the pipeline. The Midwest Carbon Express will transport liquified CO2 from 34 ethanol plants located across Nebraska, South Dakota, North Dakota, Minnesota and Iowa to Summit’s underground storage facility in North Dakota.

According to the company, the $4.5 billion project is vital to the agricultural economy because it will provide carbon sequestration opportunities for the ethanol industry allowing it to reduce its carbon footprint. Summit plans to inject up to 18 million gallons of CO2 annually, or the equivalent of taking 4 million cars off the road every year.

An evidentiary hearing for the Iowa portion of the Midwest Express is scheduled for August 22.

For Market to Market, I’m David Miller.

Farmers and ranchers have long proven abilities to hit curveballs thrown at them attempting to disrupt their operations.

A New England producer faced new rules for disposing of waste from a family dairy farm.

How they handled the challenge is this week’s Cover Story.

Here’s John Torpy.

The fall foliage in Northwest Connecticut provides an idyllic backdrop for Freund’s Farms, a dairy operation where the management practices are designed to ensure the family farm’s future.

Matthew Freund, Owner and Operator, Freund Farms: “New England is a tough spot to milk cows. There's just, our costs are much higher than the rest of the nation.”

Matthew Freund is the second generation working on this operation rooted in the rolling hills of Canaan, Connecticut. Freund’s father, Eugene, started the operation with sustainability in mind. When Matthew and his brother Benjamin took over the dairy, they continued using the same sustainable mindset.

Matthew Freund, Owner and Operator, Freund Farms: “We've always been astute to the fact that there's other things that have to happen to make the dairy stay solvent.”

Facing new manure disposal regulations, the Freund brothers decided to turn a potential negative into a positive. They took the manure from their 300-head dairy and used it to generate additional revenue by building one of New England’s first anaerobic digesters.

The methane captured from the manure is burned to heat water, the barns and their family home. The pasteurized liquids are sprayed back on fields as fertilizer, reducing input costs for the farm. 

Matthew Freund, Owner and Operator, Freund Farms: “Okay, so what do you do with it? At the end of the digester, you really didn't change your nutrient load. You made some methane and you converted some of your nitrogen to a more readily available, uh, chemical. But you still haven't changed anything. You still have all that nutrient. So, at first, we started to try to sell it for compost and that didn't work out so well because my next-door neighbor, who milks four times as many cows as I do, was selling compost as well.”

The brothers continued to search for a use for the manure solids. Around 2001, while attending a local farm cooperative annual meeting, an official from the Connecticut Department of Agriculture suggested making flower pots out of the manure 

Matthew Freund, Owner and Operator, Freund Farms: “And I thought about that for a little bit and then came home and started doing some research and just spent an enormous amount of time looking to see how I could make a pot out of cow manure.”

With a little outside help, the Freunds finally came up with a working model and a plan for marketing what are now known as CowPots.

Amanda Freund, Sales and Marketing, CowPots: “You're

taking this pot as it is and you're setting the whole thing

in the ground.”

Amanda Freund is the third generation to work on the family dairy and currently holds the sales and marketing reins for CowPots.

Amanda Freund, Sales and Marketing, CowPots: “This is awesome for me, like just, to like, be able to be reminded and to have the firsthand experience in our own market garden here. That this is a parsley plant that went in the ground in June with the pot intact. We didn't score or crush it, we just put it in the ground as a full pot. And you can see there was absolutely nothing preventing the roots from growing right through that pot wall. And you can see, look at all these grubs I've got here. Hey, Mister, come here.”

 

She also helps out at Freund’s Farm Market and Bakery, a storefront business run by her mother. Amanda notes proper land stewardship and economic opportunities are working hand in hand on the farm.

Amanda Freund, Sales and Marketing, CowPots: “Being able to generate revenue from producing CowPots, which are these biodegradable pots from our cows’ manure that we then get to use in our farm market garden center. And so, the manure from the dairy is then formed in the cow pots at our cow pots factory and then used to grow plants for our farm market. So, it's a synergy of these three businesses all being able to work together.”

CowPots footprint has grown from supporting gardens in New England states, to supplying gardeners with compostable flower pots nationwide. Some of Freund’s products can be found in Des Moines, Iowa, at the city’s Downtown Farmers Market.

Jana Erickson, Owner, Wit’s End Gardens: “I wanted something that disappeared…”

Jana Erickson is owner of Wits End Gardens. Her business specializes in growing perennials for pollinators. When she started selling flowers at the Farmer’s Market in 2015, she was having a difficult time deciding how to pot her flowers.

Jana Erickson, Owner, Wit’s End Gardens: “I'm not even sure how I found cow pots, it's cow  poop, which is like the best thing in the world for our plants. It is beyond sustainable. Um, cuz when I tell people, you know, I'm like, you know, their day job is making ice cream and cottage cheese, but their side work is, you know, pooping and, and you're never going to run out of cow poop.”

Erickson believes the biodegradable flower pots have improved her plants, her sales, and her mission.

Jana Erickson, Owner, Wit’s End Gardens: “I'm not, I am not selling a plant just so I can sell the plant, make money. I'm selling the plant so you have a beautiful plant in your garden and the pollinators are going to come, so therefore it has to live and grow. Right? And I, to me, that's a point of pride.”

To carry on the tradition of maximizing potential while remaining sustainable, the Freund’s decided to sell their herd in September to a young producer looking to get started in the dairy business. Their focus is now on their storefront and CowPots production.

Benjamin Freund, Owner, CowPots: “You know, we have a lot of farms with very mature leaders on those farms and that farm needs to get to the next, next generation in order to keep a actually a vibrant vision on that farm. Because if you're trying to stick with people my age, you're kind of getting’ stuck, I want to I don't say in a rut or that all people my age don't have any place to go, but the vision of someone in their 60s versus someone in their 20s is vastly different. So, we’ve been searching for the right individual to kind of come in and take over the cows and we were finally successful at just the beginning of last month. And it was a very long process and I think a very good process and I think the prospects for making milk in Connecticut are brighter with these young people coming up and through.”   

For Market to Market, I’m John Torpy.

Next, the Market to Market report.

These are the markets as of Thursday’s close as we had an earlier than usual production schedule this week. For that shortened week, the nearby wheat contract added a nickel, while September corn lost a penny. The soybean complex acted like much of the commodities and moved sideways ahead of Friday’s USDA report. The September contract closed down 35 cents and September meal shed $7.60 per ton. December cotton expanded by $1.94 per hundredweight. Over in the dairy parlor, September Class Three milk futures improved 13 cents. The livestock market was lower. October cattle cut 37 cents. September feeders dropped $1.87. And the October lean hog contract declined $2.75. In the currency markets, the US dollar index rose 58 ticks. September crude oil improved 40 cents per barrel. COMEX gold lost $28.90 per ounce. And the Goldman Sachs Commodity Index declined more than 3 points to settle at 590-even.

Yeager: Joining us now is regular Market Analyst Shawn Hackett. Hi, Shawn.

Hackett: Hi, Paul. How are you? Always good to be back. And I have my family here today.

Yeager: And we're going to give them a quick tour of everything commodities. Let's start with wheat. Dry for so long, the rain happens, then storm chances are happening. That's the domestic story. Then we have the Black Sea issue. What's the biggest weight on wheat in your eyes right now?

Hackett: The biggest weight continues to be the ability for Russia to sell wheat and low bid the market, low offer the market. Until they back away we continue to struggle to get ourselves a rally that can last and we go up and we come back down. Having said that, I really feel this time reminds me of the trade war we had back with China where we got so exhausted that we gave up that anything good was going to happen. Then when something good did happen the market took off and no one was prepared. The geopolitical instability is starting to escalate and I believe we're moving towards a point where we're going to see that override that bearish Russian factor. And everyone has given up that it's ever going to happen again because they're exhausted from it. I really feel we're moving away from U.S. weather to an escalation of geopolitics for wheat, which drives the whole grain sector into the fall.

Yeager: Wheat, though, last week hugely impacted by the losses in corn and soybeans. Did wheat make some independence this week?

Hackett: If you look at the charts, the wheat market has been breaking away from corn and soybean charts, meaning it has been basing all summer long whereas the soybean and corn market have been working itself back to lows. And I think that that is going to continue to show itself as the wheat market leading the charge back out once we make harvest lows.

Yeager: So, if I'm a producer of wheat and I'm listening to what you're saying about geopolitical, A, what am I looking for, for a signal? And B, how do I protect myself?

Hackett: Well, if you're coming into this situation aggressively sold we think the current environment really argue for protecting upside price risks right now. We think the upside price risks are tremendous right now and we would want to make sure you could add some cents to your bushels that you've already sold if we get another wild ride higher, which we think is escalating at this point.

Yeager: Rain makes grain, but it doesn't make a good market. What do you do in corn?

Hackett: Right now, under $5 we're not excited about selling the market here. We do think weather is kind of off the table. We're having some good cooler wetter weather into mid-August, we're getting some good grain fill. I just don't see the reason why weather is going to drive the corn market higher. Having said that, having said that, China flooding is a problem. They've had a big, big typhoon. The corn price futures in China have spiked considerably in the last week and they're getting ready for harvest. I think there's something going on with China's flood of a corn crop that they might come up short. That's something to watch in terms of them starting to aggressively buy corn either from us or from Brazil more aggressively going forward.

Yeager: But, get back to geopolitical, the Biden administration this week, another tough act, at least in their eyes, when it comes to China. China might not be interested in buying our grain, but are you telling me they might be forced to if there is this flood?

Hackett: There's what the politicians say and then there's what they're actually going to do. China will buy corn when they need to from who they need to at the price they feel is in their best interest and politics will not drive their decisions to buy or not buy U.S. corn despite the ongoing conflict that we have.

Yeager: All right, in December corn we have this rain that falls. If you are in an area that has rain and maybe you're going to get better fill what do you do? But what if you're in the dry area that it's not going to fill like you want and you're caught a little short?

Hackett: Well, if you're going to have a short corn crop you have to look at how much you've already sold. You've probably maybe sold more than you thought as a percentage of your crop production. Under $5 with the geopolitical risks that we just discussed and with this possible issue with corn crop in China, I think I'm sitting here wanting to protect some upside price risks as we go into what is going to be likely an early harvest low. I think if you're short you need extra cents on those bushels to make up for the lost production. You can't miss a dollar move higher in corn if it's going to occur.

Yeager: You slipped a phrase in there, mister, early harvest low. How early?

Hackett: Late August, early September is what our belief is that we're going to make early harvest lows, whatever those lows will be in corn and soybeans, we think it's early because we think the Chinese weather and the geopolitics are going to get the market going a lot sooner than typically late September early October when we would normally expect those harvest lows to occur.

Yeager: Same story in soybeans?

Hackett: Yes, same story in soybeans.

Yeager: Any change to soybeans that can break them in a different direction or different from these other two?

Hackett: Well, the geopolitics affects soybeans the least because we're not dealing with selling soybeans out of Ukraine or selling soybeans out of Russia. But the flooding in China, even though they don't grow as much soybeans as they do corn, is a factor. The other thing is we're looking at post-ASF pork shortage later in the year. Dry weight prices taking off. Bean meal prices in China taking off. The hog price in China taking off. It's suggesting the herd liquidation is over and where they need to feed piglets, dry whey and meal sounds to me like they might come in for more soybeans sooner rather than later.

Yeager: What do I do if I'm a producer right now given what you just said?

Hackett: I think it's the same strategy in soybeans. I'm not that excited in selling soybeans let's say under $13 a bushel. I just don't think that that's going to be a good move with what we're seeing going forward with all these different factors coming to play.

Yeager: Dairy market, cheese, that's the big story, right?

Hackett: Big, big story. We got down to $13.50 hundred weight in July, the worst margins in the history of the U.S. dairy industry and now we're sitting here at $17, $18 a hundred weight, massive, massive reversal higher. We got a cow cull rate in dairy in the U.S. the lowest since 1986. And, by the way, that culling is going on everywhere in the world, in Europe, in New Zealand, and so we're looking at a synchronous decline in the dairy herd globally that is going to start to show a significant contraction in production later this year just as the Chinese are going to be looking for cheap pork, cheap chicken, and milk powder, which is another big protein source for them. So, I really think this reversal off the July low is an important mark, low mark that is going to trigger a much more prosperous period ahead for dairy.

Yeager: Culling of the herd also has been a story, live cattle and feeders, hold backs. What's the biggest story for live cattle right now?

Hackett: Well, live cattle the way I see it is because all of these dairy cows are being culled we're getting this extra supply coming into the low end of the market. Australia dealing with El Nino related drought, their cattle prices have been crashing. They're going to be selling a lot more beef to us. The cold storage beef supplies in Asia, they're at record levels to the brim, meaning they're probably going to have to push back in importing beef for a little while to work those levels down. Everything says we might be entering a period of indigestion here. If I draw a line from the 1970s on the live cattle price looking at October and you go all the way to now, there's a line that every time we get to that line we have tended to make an important top around the end of the third quarter to the end of the fourth quarter. I'd be a little worried here that maybe we get a little more upside, but I'd be a little worried that we might need some backing and filling and indigestion to kind of work this high price off that has been with us for quite some time.

Yeager: Do you think the industry can handle another volatile turn like that?

Hackett: I think it can handle it if it's not too long in duration and I don't think it's going to be long in duration. I think it's more of a move from here to the fourth quarter. When we look at next year if we actually start rebuilding the cattle herd in the U.S. supplies are going to get even tighter and if we have any kind of demand for beef at all, which we suspect will continue to be there, I think next year looks fine.

Yeager: But, I look at feeders, the chart is on the screen now. Through July and into August we have been up at that $250, $255 range. Same story there like in live cattle? Are we getting to that we're going to stall out here soon?

Hackett: The chart is almost identical. We draw this line from the '70s, it's almost a similar chart of when it tops, there's an overhead resistance line. What's interesting is cattle prices have really been going sideways for the most part for the last couple of months kind of developing some kind of a distribution pattern it looks to us. We might see one final spike on maybe some holiday, early demand for holiday demand, but I'm just worried that the cattle market might be ready for some give back here.

Yeager: Do you want to talk hogs? Hogs on the brain, Mr. Hackett? What do you know in the hogs?

Hackett: Wow, whipsaw from the Supreme Court decision, oh they're going to delay it so we had panic buying in the market to get some of those supplies and then now we're coming off of that, there's herd liquidation in the market because the margins have been so bad like dairy. Having said that, what does herd liquidation mean if you're not replacing it? It means we're going to have much lower supplies later in the year just as China is going to be looking for significant supply to bring into their country to handle the pork shortage. So, short-term the next 30 days could be a little ugly as we deal with this herd liquidation post panic buying from the Supreme Court decision. After that I'm very constructive hogs from the fourth quarter on where I think we could see some much, much better margins in '24.

Yeager: Let's finish with cotton, shall we?

Hackett: Yes.

Yeager: What is happening there? I see an uptrend. That's a surprise, right?

Hackett: Everyone is bearish, everyone has been bearish and the market is in an uptrend, surprise, surprise. Demand is terrible. Exports are missing the USDA mark by about 500,000 bales. But, Texas weather horrible. Gujarat in India, weather terrible. The weather in China, terrible. In our estimation the losses in production in those three key countries for cotton production are so severe it's going to override the loss of demand that has been keeping the market bearish. We think prices are going to work higher. We're very constructive the market right now based on supply, not based upon demand.

Yeager: And based on everything you've said, we're out of time. Thank you, Shawn.

Hackett: Thanks, Paul, always glad to be here.

Yeager: Shawn Hackett, everyone. We're going to pause this analysis and discussion and continue to talk about the markets in our Market Plus segment. We're going to have a bunch of your questions to ask, by the way, and you can find both Analysis and Plus on our website of MarketToMarket.org. All of these resources are free. We have been watching corn harvest in Texas and hay cuttings in the Midwest this and last week on our Instagram. We love sharing your images in our stories section. Follow our feed @MarketToMarketShow. Next week, we look at getting help to process meat in shifting markets. Thank you so much for watching. Have a great week.

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

What's next doesn't happen by chance. It happens when researchers and farmers work together to solve tomorrow's agronomic challenges. We're committed to creating what's next because at Pioneer, our name is our mission.

(music)

Sukup Manufacturing. Celebrating 60 years of innovation as a family owned and operated manufacturer of grain storage, drying and handling equipment out of Sheffield, Iowa. Learn more at Sukup.com.

(music)

Tomorrow. For over 100 years, we've worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today.

(music)