Market to Market - September 29, 2023

Market to Market | Episode
Sep 29, 2023 | 27 min

Market to Market - September 29, 2023


Paul Yeager Coming up on Market to Market, who can own U.S. farmland goes under the Senate microscope. Vertical farming has grown while fending off challenges, making sense of the swings in fertilizer pricing and market analysis with Ted Seyfried next.

Announce 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 a Pioneer. Our name is our mission.

Announce 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 tomorrow.

Announce 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.

Announce This is the Friday, September 29th edition of Market to Market, The weekly Journal of Rural America.

Paul Yeager Hello, I'm Paul Yeager. One beacon of positive light in the housing market has been the sale of new construction. Not anymore. Higher interest rates may finally have cooled this sector as the August rate dropped 8.7%. Another long term purchase durable goods move 2/10 of a percent higher last month.

Paul Yeager Higher defense spending led the sector. The government's preferred gauge on inflation rose by 4/10 of a percent below expectations when the core p C is measured. The gain was only a 10th of a percent. The Senate passed a continuing resolution to keep the government open this week while the House approves some spending bills. But as of this taping Friday, no deal has been reached to keep the government open past Saturday night.

Paul Yeager The Senate Agriculture Committee did hold a hearing on the issue of U.S. farm land ownership. More than a dozen states have enacted some legislation on this very topic in 2023. But as the committee heard, the nationality of the biggest land owners is already in North America. Here's Peter Tubbs with this report.

The Senate Agriculture Committee met  Wednesday to discuss the rate of purchases of farmland by foreign entities and questioned witnesses over the security risks of American farmland being owned by the Chinese government.

While only 3 percent of the 1 billion acres of American farmland are owned by foreign interests, roughly the size of the state of Iowa, that percentage has increased 50 percent in the last 10 years. Most of the foreign owners reside in Canada and Europe.

Less than 1 percent of the foreign owned land is under Chinese control, with Smithfield Foods holding 80 percent of China’s share.

In accordance with the Agricultural Foreign Investment Disclosure Act of 1978, the Department of Agriculture collects data on land ownership, but the reporting process is voluntary.

Gloria Montano-Greene, USDA: “We've been working to address consolidation efforts and have a collaboration with attorney general throughout the country to be able to address that. With regards to AFIDA, AFIDA itself is a disclosure act, and that is the authority that we have. USDA does not have the authority to approve or decline purchases of land, domestic or foreign.” 

Experts testified that while China has significant investments in American agriculture, farmland has not been a target.

Dr. David Ortega, Michigan State University: “By and large, China's foreign investments in farmland have bypassed North America. They're really looking at acquiring agribusinesses like Smithfield. We saw ChemChina's takeover of Syngenta, and this is to exert more control over their import food supply chain. And I do foresee there being additional investments in this regard. But when it comes to actual American farmland, it's not something that I would consider as part of their current foreign investment strategy in agriculture.”

For Market to Market, I’m Peter Tubbs

Paul Yeager humorist Will Rogers was quoted as saying by land, They ain't making any more of this stuff when it comes to food production. A growing population and a limited supply of land has more than one entrepreneur looking for a foothold. David Miller has the story.

As the world’s population runs past the eight billion mark, there have been concerns about how to sustainably feed an ever-growing number of people. One of the answers may be vertical farming. 

The concept of growing food upwards inside a building instead of outwards across the ground has found more than one entrepreneur taking a chance on what they hope will be the future of farming.

Jacob Portillo, grower, Eden Green Technology:

“We are just trying to supplement something that we recognize is already an issue. So I think that moving forward that sustainability has to be a conversation regardless of where we’re growing our food.”

Vertical farming touts several advantages including reduced water use, optimal growing conditions and a consistent, reliable output - often in areas far from the farm, reducing the miles fresh food must travel to get from field to aisle. 

Several independent business owners with deep pockets have made the investment. California’s Plenty is breaking ground on a $300 million facility. Big supermarket chain Kroger has expanded their vertical farm offerings. However, several startups have encountered distribution or operating hurdles that forced them into bankruptcy. 

There are those who believe vertical farming is a detriment to the environment and the financial resources could be devoted to improving horizontal farming.

Tom Kimmerer is a plant physiologist who taught at the University of Kentucky.

Tom Kimmerer, plant physiologist: “We are missing out on enough investment money going to more traditional farming. There’s a huge opportunity to invest in traditional farming to increase productivity, reduce the carbon footprint of farming and increase the nutritional quality.”

Like any leading edge business, vertical farmers still face the same hard realities as their land-based counterparts, constantly looking for the right mix of capital and customers for their operation to succeed. 

For Market to Market, I’m David Miller.

[contact: David Miller,]

Paul Yeager Two major factors drove up the fertilizer market in the last two years. Now those waves have calmed, but the question remains are the worst of the high prices behind us and what could return quickly to change the market?

Paul Yeager We put these questions to Josh Linville, the vice president of Fertilizer for Stone. His comments are part of an upcoming MTM podcast and is this week's cover story.

[Josh Linville]  I would say the leading one was the Russian invasion of Ukraine, which a lot of people sit there and say, Oh, well, that must have really hurt Ukrainian fertilizer exports. And that's not the case, because Ukraine is not a major exporter of fertilizer. What happened, it was a secondary event, Russia, upset with Europe. But first on the Nord Stream pipeline situation, and of course, their support of Ukraine stopped shipping natural gas to Europe, European Dutch TTF value started to skyrocket, all of a sudden, then we had, you know, the price of the input was so high, they could not make nitrogen fertilizer in a disrupted global supplies. That to me is the single biggest event, just because it wasn't a direct fertilizer situation is one of the secondary events that had a major impact on the fertilizer markets.

[Paul Yeager]  So now, Josh, we sit here and look at the market and say, Okay, we still have Russia trying to invade Ukraine still there, that issue hasn't gone away. China's having whether it's an up or down economy, you pick what service you want to believe. And we've seen a relaxation in most of the fertilizer prices, why?

[Linville] We have normalized a lot of the situations. To your point, the Russian stoppage of natural gas flows to Europe. At first, that was a major event. Oh, my gosh, what are we going to do? We're going into winter, there's not enough supplies, we saw that Dutch TTF go from 4-5-6 dollars and MMBtu to 103. Today, 15-16 bucks. Are we back to absolute normal? Absolutely not because the world is still messed up. But we're not back at that high end. Because we figured out normal, we figured out imports and exports and things like that. And open and free market finds a way, eventually, there's always gonna be a little bit of a scary period there were always there was like, Oh my gosh, I don't know what's going to happen. And in fear generally drives prices higher. But as we start to figure it out, and that's what's happening around the world, we figured out oh my gosh, we thought we were losing Russia. We didn't lose Russia. Oh, my gosh, Europe will never turn their nitrogen production back on. About 75 to 85% of their production is now online. So all these events that we're scared of, we figured out.

[Yeager] But did we also use less product?

[Linville] To a certain extent? Yes. High prices cure high prices. Demand always ends up having a say in that sad, right. So yeah, there's a little bit of the scaling back. But ultimately, this seems as though it was more of a rationale of the New World, to me at least.

[Yeager]  So what's going to be the big driver now then, on the volatility?

[Linville] Well, right now, it depends on the market. When we look at nitrogen, a lot of it is centering around China again, the government continues to sit there and step into the export market, making dictations you can do this. You can't do this right now. The big fear of the world is the government came out and said we need to fill Chinese warehouses first we are going to stop exports. Well, then we started to find out it wasn't exports to the rest of the world. It was exports to India, they're really zeroing in and saying we're in slowdown going to India. So that's disrupting global supply as well, the trade on the phosphate, it is dodging two bullets, you know, that major hurricane that went up to the Gulf of Mexico, and when just north of Tampa, that thing missed a lot of phosphate production by a hair in in the earthquake in Morocco, right? That huge devastating effect on the population. Fortunately, the phosphate production kept on turning along. So it's miss two major bullets, but still dealing with very, very tight supplies here in the US countervailing duties are keeping three of the world's largest global exporters from exports in our country.

[Yeager] We're already looking ahead. I'm already getting questions about '24 acres, you're making a decision to plant corn or beans. Now, if you're applying anhydrous so you're anticipating more fall application henceforth, more corn acres, right or am I reading too far down into the book?

[Linville] We are forecasting right now in our demand models, we are using 92 million acres of corn and 88 million acres of beans next year. Now that is actually a little bit less corn acres than what we did this year. However, last year anhydrous a little bit overvalued and we didn't quite know there was gonna be 94 billion acres, right. We didn't lead into the season thinking there's gonna be that much. But as we look at it, we actually think that anhydrous is going to take more of the overall nitrogen demand, assuming mother nature allows us to get out there because it has been so well priced. Right now we're forecasting that boy anhydrous gonna be great. It's gonna be 2.15 million tons of light. What happens if it's November 1, and it's finally starts raining? That's great for the Mississippi River. That's terrible for anhydrous application and well floods in stat freeze, and we can't run toolbars anymore.

[Yeager]  I guess I'll ask one more weather question. When you see areas come out of drought that traditionally are in drought. I'm thinking of areas south of you and West of you that have emerged. And then the areas around me that are in drought and don't look anywhere close to emerging, does that have any influence on what you do?

[Linville] Absolutely. And it's, it's having the conversations with our clientele in those areas, it gets very difficult. Because pull yourself obviously a lot of folks are listening in from a farmer's perspective. It's hot, it's dry, what's your approach to it, I'm not putting anything on this ground, I'm not going to plan anything. If there's no moisture, it's stupid, I'm gonna spend the money. So your feedback to the retailer, I'm not going to buy I'm not going to buy I'm not going to buy what happens when the first rain comes through. Why need to buy retail center saying that you sat there and said, You're going to need anything. Every farmer in the area was saying I you are going to need anything, I wasn't going to take that price risk. So now all of a sudden, demand goes from zero to 100 mile an hour in a matter of a couple hours when a rainstorm comes through. So that's in all sudden you start trying to figure out those regions, you can have an overall market that's falling through the floor. But if that region is sitting there desperate for whatever can get its hands on, that number can actually start to rise and those little opportunities or the risks that we look for.

[Yeager]  The full discussion will be part of the M to M release on Tuesday.


Announce Next, the Market to Market report.

Paul Yeager Friday's quarterly stocks report failed to add any positive news to an already challenging week as the government raised piles of wheat and beans and also government crop surveyors started as the shutdown loomed for the week, the nearby wheat contract dropped $0.38 while December corn lost a penny.

The soybean trade looked at longer moving averages for guidance. The November contract fell $0.21 and December meals shed 460 per ton. December cotton expanded by $1.28 per 100 weight. Over in the dairy parlor October Class three milk futures decreased a quarter. The livestock market was lower. December cattle lost. 342 November feeders cut 863 and the December hog contract declined $0.40.

In the currency markets, the US dollar index added 53 ticks. November crude put on $0.47 per barrel. COMEX gold lost 7960 per ounce and the Goldman Sachs Commodity Index shed almost three points to settle at 608 70. Joining us now, regular market analyst Ted Seifried. Burning a hole out of your smile to get through this week, Ted.

Ted Seifried I know, right?

Paul Yeager I mean, this wheat market alone. Yeah. Let's see, K.C., hard read looking at old lows spring, looking at two year lows. Where's the silver lining there?

Ted Seifried Who for? I don't know. You know, and actually, the week. The week for wheat. It wasn't all that bad until Friday. Right. And you have a production report that comes in 80 million bushels higher than what expectations were and what last month's USDA numbers were. That really threw a wrench into the market and really did some tactical damage. So now you you hope those those lows hold, but they are going to be that target. That's that's the next hope that we have for for wheat.

Paul Yeager Hope is only one thing. So we're looking at almost 7% on the December contract. So quickly on wheat. I know you're going to have to you get asked this a lot on Twitter. Is this the bottom?

Ted Seifried Yeah, yeah, yeah. I do get asked that a lot. So unfortunately, I don't think so. Okay. And I think that really ties into what we're going to talk about in the road crops, too. We have macroeconomic things that are afoot and that I think is going to really impact seasonality. It's going to impact, you know, technicals and charts that we think, hey, these are levels that should hold. I think they skew fundamentals or a little bit or our perception of fundamentals a little bit. So unfortunately, I have to say no.

Paul Yeager CORN Not much better. Right. But only a not even a penny. So even on the week, it was quite a week started out with some incredible news that Mexico bought a whole bunch of grain and then it didn't get any better.

Ted Seifried Actually, you know, all the way up until Friday morning, Corn had was having a good week. We were up, I think, 11 and a half cents for the week or so. And then, yes, we gave it all back on Friday based on the report, based on the massive risk off situation that you had really commodity wide stocks as well. I you know, I'm going to say there are some things that I think are turning a little bit more positive for corn. That is, you know, that big export sales to Mexico the last couple of weeks of weekly export sales have been fairly solid. And we know next week's going to be really good because of the Mexico sale that we had on Monday. Ethanol's hanging in there pretty well. It would be great if we could get unleaded gasoline consumption to start moving higher. It's still languishing around end of pandemic levels. So that's the one drawback for for ethanol. But margins are good. So we're going to continue to push ethanol. So that's that's good. The problem, though, is we're still looking at a potential two plus billion bushel carryover, even with quarterly grain stocks. Numbers coming in a little bit below expectations in that quarterly grain stocks number. While that was lower than expectations and stock's year over year are down 1%, the on farm stocks are up 19%. So when we talk about looking for harvest lows, that means that most of the cash pressure, the cash sales that are going to happen leading up to and during harvest are behind us. You cannot comfortably say that right now. There's going to have to be a bunch of old crop that has to move in order to make room for new crop. And I've got a fair amount of guys that are coming back and telling me that they're finding more bushels out there than what they were expecting. So there's unaccounted for bushels that are now going to be on the sales sheet. So yeah, harvest low is in corn. It's we want it to seasonally be now that this should be now but just it doesn't I don't think the fundamentals are there for it and again the broader market picture I think is a big problem for for corn for for commodities as a whole. And I think it takes away some of the seasonality that we would expect for corn.

Paul Yeager We need those names, the numbers of each individual customer that says more and where they're at. Okay. Corn, One last quick thing on it then. If if the low is not there, if there is more grain out there and the report validated the thoughts of there's a whole lot of corn still on the farm. So my question to you is, do you take a loss as much as you can and sell off the combine right now?

Ted Seifried So, you know, the good thing is that we have crop insurance and the levels were set at decent levels. I mean, look, none of this is fun, right? This was the most expensive corn crop we've ever planted. And if you had not made sales throughout the year when you had chances to, this is a tough decision to make. And I understand how hard it was to make those sales when we had those two spikes during the growing season, because then you're sitting there thinking, well, it might not ever rain again, we might not have a corn crop, corn could be going to $8. So it was difficult to pull the trigger. And if you're sitting there now, I think what you have to do is make the sales take the crop insurance, but you almost have to protect the crop insurance at this point by, say, owning calls.

Paul Yeager And looking at technicals and soybeans, looking at that 100 and the 200 day moving average, is it telling you the low is in or it's time to make a sale before it turns lower?

Ted Seifried I hate the look of the soybean chart right now. It looks really toppy from a long term perspective. We broke out. We broke out below that that 1280 level in November beans on Friday. That is a really bad look that looks like the start of a new leg lower. I think the immediate target is 1257, but 1180 is kind of the projection at the moment. So I know I'm not the bearer of good news here, Paul, but Friday was a was a really not good day for for really everything from a chart perspective, a bad day.

Paul Yeager So do you I guess same question as it was in corn. Do you think this will force some people to sell before it gets worse?

Ted Seifried I think for soybeans, you really have to do that. You know, look, corn has been just hovering right above and consolidating sideways, right above the lows for the month and a half. Right. So the soybeans are well off the lows. You know, we had 1120 before we got the acreage report back in May. So we're 13 while we just got below 1280.  Right. So, I mean, we were at 13 for a while. We're not far off. 13. If you go further out in time, you are still seeing some contracts at 13. These are still relatively decent prices in soybeans. I think you really do have to take advantage of that.

Paul Yeager Okay. We're showing that March contract and that's exactly what you're talking about. 1310. I need to get to livestock because that, too, was not real pretty. You mentioned the macro markets, outside markets on cattle. Economically, those are always tied together. Do you see that that is more independent, the cattle market's topped, or is that influenced by outside markets right now?

Ted Seifried So you have a lot of speculators that have been trading in the cattle market. And when you have a massive risk off events, they're going to run for the doors. In the meantime, it does chart damage that gives them more reason to sell. And you've got a lot of fear and concern about what's going to happen with government shutdown, but also the economy going into fall and winter. Some are suggesting this could be a really this could be the recession that we've been talking about for years that hasn't actually happened. So there's a lot of fear surrounding the cattle market, in particular. I don't know. The supply side fundamentals are still relatively are pretty bullish. I think it's just a matter of if we do go into this economic slowdown, we're not going to be able to support paying for high priced beef.

Paul Yeager Right. And so then the feeder volatility, Yeah. Is there to given it's shown some volatility. However, can you find some hope that we're since we're short animals that that might stave off some losses.

Ted Seifried The biggest hope in the feeder cattle or cattle is that we've we've done enough of the work already. Right. And you have the potential for lower corn prices coming. So those two things I think could be fairly supportive. Now that we've broken 15 bucks off the highs or so. The problem is, is that when you're looking at feeder cattle, you're looking at further on down the line in our recessionary fears are further down the line. So that's why it hit feeder cattle first and the hardest. But at this point, yes, we've gotten very oversold. You'd hope that we're close to finding a bottom, at least trying to consolidate and maybe bounce back a little bit.

Paul Yeager Pigs, hogs and pigs report on Thursday and the wildness continues.

Ted Seifried Yeah, yeah, yeah. The California deal is just lingering and that's just a bad deal. The thing the good thing about hogs, though, is that if we are slipping into this recession that we were so worried about and have been for last quarter, look how bad the stock market has taken a hit just since the beginning of August. I it's not good. And the dollar is just flying high. The winner here might be the hogs, because if we are going to the grocer and saying, you know, hey, we really need to cut back a little bit, let's not spend on the T-Bone, let's get some pork chops instead as a substitute substitute protein, pork could be the winner here. So I'm I think a lot of the negative news for hogs with California, everything like that has been factored in. I want to be friendly hogs, especially if we are going to be so negative on everything else. I just don't like the strength in the back months because I want to I want to own further out in time, but I'm owning it higher prices and that makes me nervous compared to what what we're trading on the front month. So, yeah, again, I want to be optimistic for hogs in a recession, if that's where we're headed.

Paul Yeager We tried to smile as best we could, but I know, I know we're going to answer some more questions here at Marketplace and maybe we'll find something positive there. All right. Thanks, Ted.

Ted Seifried Yep. Thanks, Paul.

Paul Yeager Hold on there. We are going to pause this analysis, continue our discussion about these markets at our Market Plus segment. You can find both analysis and plus on our website of market to market. Org Our portability keeps you in the loop and us in your cab truck or ears this harvest season. Follow our YouTube page for full shows Marketplace and the MTO and podcast hits. Subscribe at Slash Market to Market Next week. We look at farm safety when entering the bin. Thank you so much for watching. Have a great week.

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

Announce 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 a pioneer. Our name is our mission.

Announce 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 Dot com.

Announce 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.

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.