Market to Market - November 3, 2023

Paul Yeager:  Coming up on Market to Market, the Biden administration fans out across rural America breaking down the numbers of rising disaster payments. New regulations shorten the path for genetically edited seeds and commodity market analysis with Matthew Bennett next.

Announcer:  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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Announcer:  This is the Friday, November 3rd edition of Market to Market, the weekly Journal of Rural America.

Paul Yeager:  Hello. I'm Paul Yeager. The job market added positions in October, indicating signs of resilience in the US economy. Employers added 150,000 jobs last month, down from the September surprise, but still enough to fuel sturdy comments from observers about the health of the economy. The unemployment rate moved up to 3.9%, continuing a 20 month streak of being below 4%, the longest stretch in 50 years.

The Federal Reserve is trying to calibrate their key rate while cooling inflation and supporting job growth in an attempt to ward off a recession. The Board of Governors of the Fed kept the benchmark rate at 5.4%. Three Cabinet members of the Biden administration fanned out across several states this week, touting programs aimed at helping rural America. The president himself went to the land of 10,000 lakes for a fundraiser and a visit to a Northfield farm with the same plan.

David Miller has more on the trip to Minnesota.

David Miller :

The Biden administration fanned out across rural America this week, aiming to beef up credentials on issues aimed at governing with an eye towards reelection. This stop at a Minnesota family farm served as the backdrop for Biden's message. Bidennomics is just another way of saying the American dream. 40 years ago, trickle down economics limited the dream to those at the top.

President Joe Biden: “Folks, Bidenomics is just another way of saying the American dream. Forty years ago, trickle-down economics limited the dream to those at the top. But I believe every American willing to work hard should be able to get a job, no matter where they live in the heartland in small towns, raise their kids on a good paycheck and keep the roots when I grew up.”

David Miller:  The president announced $5 billion in spending on better adapting agriculture to climate change, expanding rural, high speed Internet and making improvements to infrastructure.

President Joe Biden: “All that means good jobs, good jobs in rural America. The bottom line is this. Instead of exporting jobs overseas for cheaper labor, now we're creating jobs here and expanding American products and selling them overseas.”

David Miller: 

Biden also says he's making the biggest investment in rural electrification, providing grants and loans to rural electric cooperatives. For market to market. I'm David Miller.

Paul Yeager:  Insurance is based on spreading risk among many parties. When claims come in, the payouts to those with damage from fire or flood get settled. However, Allstate and State Farm have paused selling new policies to California homeowners due to wildfire risk, and some other smaller companies have done the same. Floridians have fewer options as well as disaster payouts are prompting companies to stop selling new policies.

Peter Tubbs looks at a new report on just how many disasters have hit agriculture in the last two decades and the price tag attached.

Peter Tubbs: 

Subsidies for crop insurance may be increasing the cost of weather loss, according to an environmental advocacy group.

Analysis of U.S. Department of Agriculture data by the Environmental Working Group shows the total crop insurance indemnities doubled between 2001 and 2022, and totaled over $118 billion dollars. Their examination of the data shows the cost of those payouts is increasing faster than the rate of inflation. 

Work done by the non-profit environmental research group revealed the largest category of insurance claims were due to drought. Claims grew 690 percent during the 22 year period studied with the federal government paying $7.6 billion dollars last year alone. Flooding was seen as the second largest cause of loss with $2.2 billion dollars paid in 2022.

The insurance loss category with the largest percentage increase came in losses due to heat, which grew over 1000 percent over the two decades reviewed, Farmers were paid on $1.6 billion in claims for the final year examined. 

Based on their analysis, the ERG suggests the Federal subsidy farmers receive for buying crop insurance, which generally covers two-thirds of the purchase price, distorts the perceived risk farmers face due to climate change. The group also argues that those subsidies encourage farmers to plant crops in areas that are at a high risk of loss due to heat, drought or excess moisture.

County level data from the USDA also suggests the rate and cost of insurance claims will probably continue to increase in the future. The result could be an increase both in the subsidized cost of insurance to farmers and the cost of those subsidies to taxpayers. 

For Market to Market, I’m Peter Tubbs.

Paul Yeager:  Red tape is believed to have originated in 16th century Spain with King Charles the fifth. He was looking for ways to separate priorities from routine items for his staff. Decrying red tape as a political staple now on the campaign trail as a call to cut burdensome rules and regulations preventing actual work from being done. Ideas from research to approval often take time and data to back up the work, or, in the eyes of some, a bounty of red tape.

Colleen Bradford Krantz looks at improvements that have sped up the process in the area of seeds. Her report is our cover story.

Colleen Bradford Krantz: Many Americans likely missed hearing about the regulatory shift a few years ago inside USDA allowing exemptions or speedier approvals of certain genetically altered plants.

Inside the Donald Danforth Plant Science Center in St. Louis, however, plant researchers absolutely had the new SECURE rule – which means: Sustainable, Ecological, Consistent, Uniform, Responsible, Efficient – on their radar.

Donald MacKenzie, Institute for International Crop Improvement, Donald Danforth Plant Science Center – St. Louis: “Within the SECURE rule, it identified specific exemptions for genome-edited products and, as well, it made life a little easier even for genetically engineered products because, if you were working on a product that had a similar mode of action to another genetically engineered crop that had already received approval from USDA, then the work stream was a lot easier and less complicated.”

Colleen Bradford Krantz:  Some have objected to the rule from the outset, including the food safety and nutrition advocacy group Center for Science in the Public Interest, which believes food made from currently approved GMO seeds are safe to eat and benefit farmers and the environment. However, the 50-year-old group is concerned that many plant breeders have too great a financial incentive to self-proclaim eligibility for bypassing regulatory steps.

According to a 2023 Congressional Research Service report, the 2021 law “helped expedite” the time period for approval of biotech plants to about 41 days. However, after repeated inquiries by Market to Market, federal officials would not or could not provide the number of days previously required for processing.

The approval process has become less costly for some projects, and the report says it is primarily mid-sized and smaller entities that have applied.

For the nonprofit Donald Danforth Plant Science Center, which does research on food-security crops and on plants that boost agricultural sustainability, the changes mean getting improved seed into the hands of farmers more quickly. One of the group’s current projects focuses on teff, a small grain popular in the eastern African countries of Ethiopia and Eritrea. Teff, a staple for about 80 million people, is turned into flour and used in injera, a spongy flatbread.

Donald MacKenzie, Institute for International Crop Improvement, Donald Danforth Pliant Science Center – St. Louis: “We had to go through a consultation process with USDA, which we did, and they ultimately determined the edited teff would not be subject to regulation. For us, that makes a big difference; it really reduces the complexity and the cost with downstream product development. It means we can go directly into open field trials without having to deal with conditions of isolation, segregation and the like.”

Colleen Bradford Krantz: 

The Danforth Center has been working on a shorter-stemmed teff that may be less susceptible to lodging, a condition where the plant falls over in heavy rains or high winds, typically reducing yield by a quarter. The genetically edited teff is a modern take on the work done for wheat by Norman Borlaug, who used traditional breeding techniques over many years to reduce lodging, moderated starvation, especially on the Asian continent, and resulted in what is known as the “Green Revolution.”

Getu Duguma, Donald Danforth Plant Science Center – St. Louis: “But now, since we know what genes contributed to the Green Revolution through modern technology called CRISPR genome editing, now we can go find out similar gene in this crop and then knock it out so that the plant can be lodging-resistant.”

Colleen Bradford Krantz: 

Getu Duguma, the lead researcher on the project, grew up on a farm in Ethiopia, where his family raised teff and corn, doing all the field work done by hand.

Getu Duguma, Donald Danforth Plant Science Center – St. Louis: “It’s personal because I grew up with this crop. I know the problems so I know how much farmers are losing by growing this crop because of lodging issues. So that’s why I wanted to be part of that solution…. This is the first gene-edited teff that is planted anywhere else….we want to replicate that where this crop is really valuable…. The main goal is for us to market this crop in Ethiopia…we deliver this free-of-charge to farmers there because we do humanitarian work.”

Colleen Bradford Krantz: 

They are ready to work with an Ethiopian research institute to test the new genetically edited teff in the African countryside. Because no foreign genetic material has been introduced, Danforth hopes the edited teff can be grown without being subject to the Ethiopian agricultural policies that govern genetically engineered crops.

Getu Duguma, Donald Danforth Plant Science Center – St. Louis: “Countries like Nigeria, Kenya have already adopted the favorable policy for gene edited product. But most countries are still considering adoption of gene-edited materials…In a few years to come, I think there should be very favorable policy in place for genome-edited product.”

Colleen Bradford Krantz: 

Danforth has also genetically altered cowpeas to protect them from pod borers in Nigeria and cassava to protect it from a plant virus in Kenya. The seeds are passed to African farmers without royalties, unless the in-country partner chooses to set a fee.

MacKenzie says breeding plants to better endure weather extremes while spending less money and time on regulatory steps is key.

Donald MacKenzie, Institute for International Crop Improvement, Donald Danforth Plant Science Center – St. Louis: “If we consider genetically engineered crops and foods, it’s important to remember that these products have been approved in more than 70 countries around the world, including the European Union for direct use in feed, food and for processing, and in every case, the regulatory agencies have all been unanimous in their approval. We haven’t had dissenting decisions anywhere.”

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

Next, the Market to Market report.

Paul Yeager:  A lower U.S. dollar and some South American weather played out in the trade. For the week. The nearby wheat contract lost $0.03, while December corn cut $0.04. Global factors of weather in Brazil and buying from China supported the soybean complex. The January contract added $0.32 and December meal lost $0.30 per ton. December cotton shrank by $4.76 per hundred weight.

Over in the dairy parlor, December class three, milk futures decreased $0.02. The livestock market was higher. December cattle added 165. January re feeders put on 405 and the December lean hog contract increased 127. In the currency markets, the US dollar index fell 148 ticks. December crude sold off 416 per barrel. COMEX gold dropped 1490 per ounce and the Goldman Sachs Commodity Index decreased more than 11 points to settle at 581.50.

Joining us now is regular market analyst Matthew Bennett. Hi, sir.

Matthew Bennett:  Hello.

Paul Yeager:  So wheat.

Matthew Bennett:  Yeah.

Paul Yeager:  When we look at this market, it has been on this downward scale, the woes that we hear about Kansas City. Then the others kind of caught the Kansas City cough, whatever you want to say. The question, though, of the week is, did we finally set a bottom?

Matthew Bennett:  You know, it sure looks like we may have. I mean, really, wheat's more of a follower right now. It's not the time of year you typically say wheat is going to lead us in or out of anything. Now, over the last year or two, of course, we've had all this Black Sea stuff going on. At times Ukraine says, hey, we're going to shut off the corridor.

Then Russia says, well, we're going to put duties on, take duties off if we don't have any major news. And let's face it, some of the news, some of the even bombings at times over the last three or four months haven't produced the effect that they used to produce. Right now, it just seems like wheat’s following along. But yes, maybe we did score a little bit of a low for the time being.

I'm not super friendly. I'm not too bearish down here either, though.

Paul Yeager:  So I'm reading that as a neutral.

Matthew Bennett:  I'm neutral. I'm neutral to friendly, but again, it's going to follow along. If you have some of the stuff going on that we're going to talk about, for instance, in the bond market and corn market, you know, and you get some support, I think that wheat has the ability to go ahead and rally. Fundamentally, it's not in bad shape.

Stocks are tighter than what historically they would ever have been. But bottom line for me, I don't have a story. There is just very quiet on the news front.

Paul Yeager:  The other question then, when you move into corn is it has been quiet on the news front. There's always that discussion that a bull market needs to be fed. Hadn't been much to eat there. What is and again, it's the same question. Have we hit the bottom there?

Matthew Bennett:  Well, corn lost ground on the weak, you know, And if it would have been for Friday, it had been ugly, quite frankly. Yeah. And if it wouldn't have been for soybeans, I'm not so sure that corn would have had the kind of day it did Friday. But, you know, you look at this corn market and I've got to think that some of the steady dose of info over the last several days, Eastern corn belt sure sounds to me like yields are pretty darn good.

I think that you're seeing some of the later yields, maybe a little more impressive than what people thought they were going to be. The demand for it's not bad. I mean, ethanol numbers this week were awfully good. You look at exports, they haven't been abysmal by any means. We've gotten some decent exports. But overall on corn, in my opinion, I think that you're still in kind of a path of least resistance.

Seems lower right now. Are you going to go ahead and get under that 4.67 and three quarters and maybe go towards a 4.50 type trade? You know, before Friday's trade, I could have seen that potentially happening. But at this point, I've got to think that maybe we found ourselves a little bit, sells a little support.

Paul Yeager:  However, I'm not trying to put water on a market, but things can go quickly. Let's look at corn this week. Highest close for December corn this month was 5.05 on 10/19 of the lowest close was earlier in the week at 4.78. So things can erode... what would make the bottom fall out of this market?

Matthew Bennett:  You know I think that if you come in here on Sunday, Monday, and they say, you know what, we're going to get broad based rain through the areas that need it in Brazil. And quite frankly, some of these beans have been planted for a while and they haven't even come up where they have really uneven stands. In that particular situation, though, if the weather quits being a huge feared, hey, we're actually going to get these beans planted in reasonable time, going to get the safrinha crop planted in decent time. If all those things come to pass, you've got to think the bean market's going to take it on the chin.

In my opinion, corn could really struggle in that particular situation. This week, at times I thought corn was weaker than even what I thought it might be. I haven't been a bull by any means. I felt like you look at U.S. stocks, you look at global stocks, Paul, there's just not a bullish story there. You're looking at going from one, three, five, two, two, one or more.

You know, demand could even be worse than the USDA is particularly projecting right now. So you have to be cautious is to get to bulled up there.

Paul Yeager:  Well, that's the 23 we're about to go into 24. But let's look a little farther down. Mike in Iowa, had a question for you, Matthew. He says, what's it going to take to get this corn out of the trading range? But then let's extend it here. What's your target for December 24?

Matthew Bennett:   Target for December 24? So to be honest, Paul, we've been fairly aggressive already on 24. And you kind of know where I come from on some of this. If I'm buying fertilizer, personally, I like to take a look at, you know, how many bushels it take to pay for that fertilizer, because the folks that got themselves in trouble in the 23 crop bought a lot of really expensive fertilizer a year ago now. You know, and they didn't sell enough corn and I'm not trying to be a Monday morning quarterback or anything.

I'm just saying that, you know, you open yourself up for disaster there. And so obviously fertilizer continues to creep a little bit higher in here. We have to be cautious. But the ratio with fertilizers, cheap is what it was, let's say farm progress show time and everyone is prepaying versus $5 plus corn. Actually, that was a pretty good ratio.

You can make some money there. And so what am I targets? I think if you if you get this these corn again in this 525.25, 5.30 if you get it would be fantastic. But remember, 5.30 for a lot of folks is $5 corn in the United States. There's going to be a ton of people wanting to sell in there.

So if you've got cheap fertilizer bought, right now is a pretty good time to sell some corn.

Paul Yeager:  Is it a good time to sell any beans?

Matthew Bennett:  You know, after the rally that we've seen? Yes. You know, I had a guy call me actually on on Friday before I came on the show and just said, you know, what, should I sell some beans? I said, how much if they if they come up here in the last three or four weeks? He said, well, last time I really thought about selling beans.

They were $0.60 lower than today. And he said, But what if they go on up? And I said, Who cares? $0.60 higher than what they were before is still a better sale. So, you know, I think in the short run I could see some support for corn, Paul, but in the long run, when we look at 24, you got to be really cautious.

Whenever you're looking at world and U.S. stocks growing to the point that they're growing.

Paul Yeager:  And also where the crop is growing. Right, Because it's kind of like what you mentioned with corn in Brazil, but also in China. If they're going to buy, not buy, they're in that game. So do soybeans continued in your eyes and 24 still have a big global story.

Matthew Bennett:  The thing with beans is that you've got a really diverging story between the U.S. and world. You know, U.S. stocks are going to be tight. I mean, that's all there is to it. They're going to be extremely tight. And depending on where this yield ends up, you've got to think that a 200 to 220 type carry out is going to keep you fairly excited, so to speak.

Matthew Bennett:  We know crush is going to be awfully good here domestically. Obviously, crush margins have been fantastic. But then you look at the global situation and you could potentially be looking at record global stocks for soybeans. We know that Brazil is going to tend to plant more bean acres this year once again. I mean, it's like almost what they've done the last 20 years.

But, you know, corn that's not the case. They're restricting a little bit on corn. I think that they're taking a look at the soybeans and saying, you know what, we're just going to keep on planting them. Your question, is there a story there? Okay. And so I think what you've got to remember is when you get this type of a rally like we've already seen, what are people talking about now?

Instead of the rally from 12 and a quarter up to 12.75, can we get 13? You know, Well, let's be cautious there, Paul, because there's been a lot of years that we have given our right arm for 12.75 beans, okay. And so I just want to be a little bit cautious as to get too greedy here whenever we've already had what I would say is a pretty darn good rally, especially in the face of what I think is pretty large global stocks.

Paul Yeager:  Pretty good rally in feeders this week. Can it continue?

Matthew Bennett:  You know, I think that the cattle market definitely responded well. Okay. It looks to me like, you know, we come in here and we we basically we we cover that gap that we we created with just the debacle after the cattle and feed report. We all knew that the market was going to move lower. But if we stop and look at that, yes, numbers were high, but what about overall numbers?

You know, what about the cattle herd? I mean, the cattle herd being at 65, 70 year lows tells me your cattle on feed numbers are going to continue to get you're going to have a wow moment probably in the next 2 to 3 cattle on feed reports to where I think a lot of the folks that were buying like for instance, April's to get them up pushing the $200 level.

And I really want to get to 200 because, Paul, I told you we are going to get to 200 and we haven't gotten there yet. Will we though? And I think that you've got a really decent shot to have it happen. Is it going to be on the timing that I thought it would happen? Not necessarily, but this week was definitely a nice week.

Of course, Friday we didn't close the way we wanted to, but five straight sessions of up markets there for the cattle, that's pretty, pretty strong showing, in my opinion.

Paul Yeager:  In Hogs, there continues to be a liquidation story about China and producers worried about African swine fever, sending them their animals to market early depressing prices. But here we rallied in the United States. Why?

Matthew Bennett:  You know, I think there's a couple of things. I mean, exports haven't been bad, first of all. But, you know, you look, you know, meat as a whole. And when cattle are continuing to be as strong as what they are, I think that there's a little bit of sympathy going on over towards hogs. Plus, they've just they've been bludgeoned, you know, and they finally were able to get a little bit of an upswing here.

I don't know that I get bullish just yet, but by all means, I think they've been beat up for long enough.

Paul Yeager:  Real quick, before we close on cotton, in your best 30 seconds of cotton, big five and a half percent drop this week. Why?

Matthew Bennett:  You know, the producers selling a heck of a lot of cotton in the south. First of all, they're talking about a huge acreage out of South America as well. So right now, cotton is kind of under a short term pressure. I don't think long term that you'll continue to see this sort of weakness. But I think you're going to go back down, maybe test that 77 level that was in May.

I don't know. You better hope that holds.

Paul Yeager:  I got a lot of good questions for you coming up here on Market Plus. So stand by, please. All right. Thank you, Matt, Matt, Bennett everybody. We are going to hold here and pause the analysis and continue our discussion about these markets and our Market Plus segment. You can find both analysis as well as plus on our Web site, of markettomarket.org.

Many of you have found our YouTube page and we'd like to keep the party going by adding more of you into the tent. Follow us at Markets to Market on YouTube for the first look at the program the Market Plus and the MTOM Show podcast. Next week, we learn new insight on an emerging market looking for both grain and knowledge.

Thank you for watching. Have a great week.

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

Announcer:  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.

Announcer:  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.

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