Market to Market - January 26, 2024

Market to Market | Episode
Jan 26, 2024 | 27 min

On this edition of Market to Market ...

Heavy rain replaces Arctic air. Farmers plant their tractors in front of EU Headquarters. A professor hunts for unintended changes from genetic editing. And commodity market analysis with Shawn Hackett.


Paul Yeager: Coming up on Market to Market - Heavy rain replaces Arctic air. Farmers plant their tractors in front of EU Headquarters. A professor hunts for unintended changes from genetic editing. And commodity market analysis with Shawn Hackett, 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.

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.

Announcer: This is the Friday, January 26 edition of Market to Market - the Weekly Journal of Rural America.”

Paul Yeager: Hello. I’m Paul Yeager. You and I are known collectively as the consumer and account for roughly 70 percent of the U.S. economy.  The consumer’s continued willingness to spend even with higher interest rates and prices led the way in the economic outlook. Fourth quarter GDP clocked in at 3.3 percent from October to December. The measure of total output of goods and services marked the sixth consecutive quarter above 2 percent. The government’s preferred measure of inflation added 0.2 percent in December.  The year-over-year rate of the PCE was 2.6 percent.  Durable Goods orders were unchanged in December for items meant to last three years or more.  When the transportation equipment sector is removed, the rated advance 0.6 percent. 

Landowners in five Texas counties are being asked to move their livestock to higher ground because of excessive rainfall upstream over the last few days.

Residents in the eastern part of the state have been inundated with rain this week with more problems on and off the farm.

Peter Tubbs reports.

Peter Tubbs:  Moisture was in ample supply in Texas this week. Schools were closed around Houston due to flooding and elevated risks as torrential downpours swept over the region.  Rain totals between two and five inches were common from areas of Texas, Louisiana, Mississippi and Arkansas.  Snow is still on the ground in the Upper Midwest from I-70 northward.  Last week’s cold snap damaged underground water pipes in Tennessee. Here in the western town of Mason, residents were without water for much of the week and had to line up for bottled water or to fill jugs from a spigot outside of city hall.   A change in weather patterns brought on warmer conditions, melting the more than two feet of snow in the Midwest. Temperatures above freezing in several states were combined with rainfall to move the process along.  The Drought Monitor did reveal some improvement in conditions. For the first time since July 18, 2023, less than half of the country was listed in some form of drought. Even more improvement is expected next week as much of the heaviest rain in the Gulf Coast fell after the data cutoff. 

Peter Tubbs:  Major weather systems in California led to flash flooding in San Diego. The clean up of stranded cars and debris took much of the first few days of the week. The damage followed a downpour of three inches of rain in just three hours setting a city record for the most amount of rain in a single January day.  Another weekend of rain is expected along the West Coast. 

For Market to Market, I’m Peter Tubbs. 

Paul Yeager:  Farmers are looking for better remuneration for their produce, less red tape and lower costs, and protection against cheap imports is increasingly becoming a major crisis for the government of France. 

Protests moved from keyboards to roads and city squares as shouts intensified all over Europe. 

David Miller looks at the efforts that utilized some of farming operation’s biggest assets.  

Over the past two months, protests by European Union farmers have been staged across Germany, the Netherlands and Romania railing against new EU regulations and cuts to agricultural subsidies. Many of the protests have gone beyond carrying signs and chanting slogans to dumping manure outside government offices and blocking traffic.  Last week, German farmers were protesting against planned changes to diesel fuel tax cuts, removal of a tax break for farm vehicles and an increase in the carbon dioxide tax paid by everyone from farmer to urban dweller. 

This week, French farmers slowed traffic and marched in front of E.U. headquarters in Brussels calling for higher subsidies and a reduction in what they call excessive regulation. Many of the country's farmers say they are struggling to make ends meet due to unfair competition from other countries, fallout from the Russia -Ukraine war, a high inflation rate and cumbersome environmental regulations. As the columns of tractors slowly approach Paris, a few federal government officials have shown their support for farmers by asking local authorities to not send police to break up the protests. 

France is the E.U.’s largest agricultural producer with an annual output valued at $9.8 billion. For Market to Market, I’m David Miller.

Paul Yeager: If you say ‘Dolly’ in a word association exercise with someone in agriculture and science their likely response is ‘sheep.’

Dolly was a cloned mammal. That project inspired more work including one scientist who is advancing gene editing and the study of potential side effects. 

Colleen Bradford Krantz has our Cover Story.

The pig cells multiplying in this embryo contain a carefully introduced genetic alteration. By the time this story airs, this University of Missouri swine embryo will have become a piglet in the school’s growing herd of genetically edited pigs.  This herd’s original purposes varied from growing organs for human transplant to studying transmission of diseases in humans and livestock. The herd’s existence helped Mizzou researcher Kiho Lee secure a $3 million grant from the National Institutes of Health. Lee’s study, which also involves USDA research scientists, is designed to pinpoint any unintended consequences of genetic editing. His work will be shared with other geneticists to help them do the same.

Kiho Lee, University of Missouri: “I thought: We need to invest on developing systems to be able to quickly and accurately identify these unintended genetic modifications and develop a strategy to reduce these side effects if any.”

Colleen Bradford Krantz: Although he spent much of his life in the U.S., Lee was a high school student in South Korea when a news item about the world’s first mammal cloned from an adult cell – a sheep in Scotland named Dolly - caught his attention.

Kiho Lee, University of Missouri: “I really didn't know what to do as a career or even picking a major in a university. But then that year, Dolly the sheep was born and that got me really intrigued. And I thought as a teenager I wanted to do something unique and special.”

Colleen Bradford Krantz: His dad wanted him to become a lawyer, but Lee stuck with his plan to find his way into livestock genetics.

Kiho Lee, University of Missouri: “And so he was not happy that I went into animal science. Because as a businessman, he always thought, I'm just chasing pigs. But then now that he sees more papers’ news on a xenotransplantation and how we can use pig organs to help a patient, he's very proud of me. And whenever he sees the articles, he sends me a text.”

Colleen Bradford Krantz:   Lately, Lee is focused on improving detection of and reducing any off-targeting events, which refers to those unintended consequences of using modern technology to knock out and replace a portion of DNA.

Kiho Lee, University of Missouri: We may not want to talk about these side effects, but then, as a scientist, we also want to be accurate. So if we, say, introduce a targeted modification, we want that statement to be true. So my interest was to really figure out, okay, so if there is a side effect, what is the side effect? That’s not something we want to hide about. We want to further study that and to develop a system that can minimize or even reduce these side effects.”

Colleen Bradford Krantz: The University of Missouri’s initial study involved 15 of their genetically altered pigs. Many of the pigs had no off-target consequences, others showed naturally occurring genetic changes, but five had off-target genetic modifications associated with the editing. While the off-target events didn’t appear to create any problems for the pigs, Lee says it’s always best to reduce or eliminate the risk entirely.

Kiho Lee, University of Missouri: “So these off-targeting events, many scientists tend to neglect or ignore because, in theory, the type of modifications we introduce won’t impact the phenotype… However, as a scientist, we really wanted to see then: what is the level, what is the frequency of these side effects? And then how do we mitigate it?”

Colleen Bradford Krantz: While the FDA has approved a couple genetically modified animals for human consumption, including salmon, monitoring of off-target events is also important as the nation moves toward the use of genetic modification in human medicine. In a historic move in December 2023, the FDA for the first time, approved a genome-editing therapy for treating humans, in this case those with sickle cell disease. Sickle cell disease is an inherited and debilitating blood disorder affected 100,000 in the U.S., particularly African Americans. 

Colleen Bradford Krantz: The therapy, proposed to the FDA by two Massachusetts companies, will be used to modify the patients’ blood stem cells using genome editing technology called CRISPR/Cas9, the same technology used by the University of Missouri with their genetically edited pigs. Lee is also working on another study looking at Alzheimer’s in pigs, with hopes of finding a genetic answer for humans.

Colleen Bradford Krantz: University of Missouri researchers will also continue to work on genetic solutions for livestock illnesses like porcine reproductive and respiratory syndrome, or PRSS, a viral disease in hogs. Researchers there have already made progress toward building hogs’ resistance to the disease.

Kiho Lee, University of Missouri: “If we can enhance these animals, make sure that they don't get sick and it's related to animal welfare, if they don't have to suffer from these deadly viruses and it will really help producers to protect their investment. And if I could help on achieving those goals, that will be my goal.”

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

Announcer: Next, the Market to Market report.

Paul Yeager: Acreage estimates and weather reports coupled with high amounts of unsold grain highlighted the trade. For the week ..  The nearby wheat contract added seven cents, while March corn improved a penny. 

Thursday’s trade erased much of early gains with improved Brazilian weather and slower exports.  The March contract declined 4 cents and March meal shed $7.50 per ton. March cotton expanded by 51 cents per hundredweight.  Over in the dairy parlor, February Class Three milk futures increased 28 cents. The livestock market was higher. April cattle added $7.50. March feeders improved $12 and the April lean hog contract gained $4.62.  In the currency markets, the US dollar index increased 15 ticks.  March crude oil expanded $5.02 per barrel. 

COMEX gold cut $13.60 per ounce, and the Goldman Sachs Commodity Index strengthened more than 19 points to settle at 557-80.

Paul Yeager: Joining us now is regular market analyst Shawn Hackett.

Shawn Hackett: Hey, Paul. How are you? Thank you for having me come after all that wintry weather. You know how I always give you a hard time about we always welcome you in January so you can get the full Midwest experience. But it is that weather that has been a little bit of a story in the wheat belt. Is the freeze strong enough? Is there enough snow cover? Is that the big story in wheat for you this week?

Shawn Hackett: Well, I think it is the big story and I think it's going to be a bigger story coming up. We have the next ten days, supposed to be the warmest it's been for that period of time in the calendar in 100 years. A lot of the snow is going to melt even some winter wheat is going to come out of dormancy. And our work says cold weather polar vortex, just like we saw coming back in mid-February ahead of potentially snow coming in behind it. It could be a significant weather event. Many people ask what's the catalyst to get the shorts out of the market? There's one catalyst right there for you.

Paul Yeager: So you're coming back in February, is what you're saying on next cold system. But, you know, when you look at when you look at I think it was January 18th, there was a lull in wheat. Do you think that's going to stick and hold given what you just said?

Shawn Hackett: I believe with the weather risks that we see and the fact that Russia continues to be backing off those exports, I think that is a good shot of being a low for a considerable period of time.

Paul Yeager: All right. So give me a little target here on this upside. What are you looking at?

Shawn Hackett: Well, I mean, I think if you're looking at the charts, that $7 mark, an overhead resistance seems to be a reasonable target that the market could go to. If we had a kind of a short covering rally we got at $6.50, I think on the last time we had a short covering rally, When we a surprise on a really legitimate weather problem, we could get a little higher than that.

Paul Yeager: The weather is not always the factor in February, January in corn, but we're already looking to spring. Private estimates coming out. We might plant the second largest crop ever of corn. Is that the biggest weight on the market this week?

Shawn Hackett: I mean, everyone saying 92, 93 million acres, we get trend line yields, 3 billion bushel plus carry out three, three and a half dollar corn back to Covid lows. I mean, that's the fear in the market that has made everyone morbidly depressed and why the market continues to struggle trying to gain any upside. But that is the story until proven otherwise.

Paul Yeager: We had four or five days of gains. Was that in sync with something else because of wheat pulling it along or because it's not acting with soybeans, is it?

Shawn Hackett: Yeah. I mean, the wheat market is definitely pulling taking the corn market a little bit. I also think, you know, anyone is looking down at central west Mato Grosso in Brazil, worst subsoil moisture in 50 years at least, knowing that we're going in to a situation where planting is probably going to be delayed somewhat, that crop's not going to deliver what it did last year. And that's something that the markets are going to start to worry more about as we get to pollination in March and April down there.

Paul Yeager: We always talk about that weather window. When you keep mentioning that, does it even matter that it's dry in South America and Brazil right now to us?

Shawn Hackett: Well, everyone knows if you start with the tank empty your chances for a good crop go down markedly. They're starting with the tank completely empty with subsoil moisture. And if they have a dry pollination season in March and April, there's doesn't take much of that to have yields really cave in on top of it. How many acres are the Brazilians going to want to plant in dry soil?

With the current economics of corn? Probably not as much as they would have otherwise.

Paul Yeager:  This is a question a couple of weeks ago, was do we see a 3 or a 5 next in corn in your mind?

Shawn Hackett: To me, the way I look at the corn market, there's so many things that can still happen to change the narrative about the bear story. We're starting off with everybody bear’d. We do that normally, by the way. We're going to have all this corn. We're never going to make it work out. I think there's a better shot and a $5 plus market than a three than a sub- $4 market, at least going to the early part of the growing season.

I think there's too many risks to the upside given the current positioning of the funds.

Paul Yeager: You didn't even want to say the number three. You said sub four. I like that Shawn. But if you would have sat in that chair a week ago talking soybeans, you would have been in that side of the. I asked you about being on the side of the bubble with all the bears. To some of those bears jump off this week.

Shawn Hackett: Yeah. Look, I mean, we're getting some. Right now, Brazil is harvesting their crop. What happens when that happens? Harvest pressure. We know that not every Brazilian farmer sold when they were supposed to. We know there's a storage shortage down there. Basis blowing out to the downside in Brazil, meaning we're going to have to really struggle with our exports until we put that crop away. It's not unusual to see harvest pressure when one of the largest exporters in the world is harvesting their crop. We still have another couple of weeks of that to get through before I think the bears will lose some ammunition that they currently feel they have.

Paul Yeager: So was this a sugar induced rally this week and beans that then we kind of burned it off here Thursday/Friday?

Shawn Hackett: Well, it's kind of we know the crops are short from what it was supposed to be. Crop results keep coming out and it keeps suggesting the crops are going to be low earlier than we thought it was going to be. That's a positive story once the crops are put away. So I think we're stuck between, hey, that's a smaller crop, but they're harvesting it.

Shawn Hackett: And so I think it's this back and forth action that we're probably going to continue to go through until we put the crop away.

Paul Yeager: Once we get it away. The dollar still gained this week, but smaller than last week. The US dollar has not been helping exports. Do we need that dollar to be lower for the American soybean to get back into this market?

Shawn Hackett:  I mean, I think with the shorter Brazilian crop, we will get better exports over time as time goes on. But obviously any time we can weaken that dollar further, it helps our cause even further. And with the if the Federal Reserve is truthful, that they're going to start lowering interest rates and they start doing that, then I think that the dollar, you know, a trend here could really start to break harder on the downside. And that would be great news for anyone looking to sell more corn and soybeans out to other people.

Paul Yeager:  Let's pause after the first three grains and ask this question. So, Dan in Oregon here, if we could, please. He asked us via X, “What will the weather story be for the ‘24 North American growing season? Drought? Floods? Perfect?”

Shawn Hackett:  Whenever we have a crashing El Nino into El La Nina, which is what we expect by mid-summer, you tend to have flooding in the South Texas, the Deep South, you tend to have frost risks, which I talk a lot about, especially in May as well. And then you tend to have a hot blowtorch, dry back half of the growing season, which really would be a significant issue for the soybean complex. So that's kind of the weather scenario we're kind of looking at at this point. Doesn't mean disaster, but it probably doesn't mean making trend line yields again. It looks to me like we're going to come up short yet again, I think for the fifth year in a row.

Paul Yeager:  Is there a certain region that's more at risk for what you're talking.

Shawn Hackett: In this kind of a pattern? Central-north, central-west, Canadian prairie. So would be that quadrant there that would get the brunt of this kind of a hot, dry back half of the growing season, if we're correct about what is to take place. Think of it like a few years back when spring, we really gotten to a lot of trouble.We think that kind of a weather scenario. Here is what we have in store coming up this summer.

Paul Yeager: Cotton country had a whole lot of rain this week. Is that the only reason for a rally?

Shawn Hackett:  Well, that's one of the reasons. But another reason we've had some big, big numbers of imports going into China from here. Cotton prices in China been breaking out to new six month highs and they put a $300 billion or propose a $300 billion stimulus to support the stock market and put more money in the hands of Chinese consumers. All these factors suggested that cotton demand, very cyclical to Chinese demand, you know, had a reason to go higher. We had terrible crops last year, so supplies are not bountiful. If we get any pick up in demand, which is what we saw.

Paul Yeager:  We mentioned the economy off the top, hogs up $4, feeders up $12, cattle up $7.50, S&P up to levels we've not seen before. Livestock driven by more tied to the S&P and the stock market than normal for you right now.

Shawn Hackett:  Well, that's a psychological thing and always has been. But the pork cut out price up 10% in the last few weeks. The beef cut out price up 10% in the last few weeks. Both going and we're starting to see improved demand for dairy. The last two weeks, something has happened for the consumer in the last two weeks that we're getting demand into markets that typically tend to be very consumer driven, sensitive. And this course, the stock market going up always feeds into that narrative.

Paul Yeager: So that sounds like to me then the consumer feels like they have more money to spend if they're buying expensive cuts.

Shawn Hackett:  Well, we had three months of decline.

Paul Yeager:  So you're saying you've bought you're factoring in the fact that we did decline? And that's why we're finally entering back in.

Shawn Hackett:  Got to a level where the value buyer who wants to eat beef, including myself, saw this decline in beef prices and said, it's time for me to stop, you know, put my money, you know, put more of that beef into the freezer. I think it was a more of a value buying thing than anything else.

Paul Yeager: The consumer still thinks that way and still drives that. So now let's look. We also had a pretty high direct cash. Again. Why?

Shawn Hackett:  You know, this wintry weather for the cattle, for example, you know, you couldn't get the animals to where it needed to go. We had an improved beef cut out. Better margins at the processors. You couldn't put the weight on. You know, a lot of things, you know, to create a strong cash market. And if we're going to have another round of this here in mid-February onward, we could have a repeat of what we just saw yet again.

Paul Yeager: You like to be optimistic, Shawn.

Shawn Hackett:  I do.

Paul Yeager: There are those in a camp around livestock that says there is a little bit I'm going to use the word bubble coming and this could explode this summer. Do you fall into that camp?

Shawn Hackett: Historically, we've always made our epic tops in cattle when we start and mature the herd rebuilding cycle. Last time I checked, we haven't really gotten a herd rebuilding cycle going that's still slated for mid-to-late this year. So it would fit into the idea that if we start to do that, that's where your tightest actual supplies come in.

Paul Yeager:  Well, next week I believe we get a really good look at the number of animals. I think we get the big cattle report that comes. Do you anticipate that being a big mover this time?

Shawn Hackett:  It could be. I don't really think this particular number is going to drive the market dramatically. I don't think this particular one is going to be a big market mover. I don't anticipate that.

Paul Yeager:  Hog wise, you mentioned a little bit about some of the cut out improvement there. Where are you sitting on this? China is or not helping our market for hogs?

Shawn Hackett:  Well, China is not helping our market yet. The first thing that has to happen, the piglet price has to go up saying that the herd is rebuilding, that they've done liquidating. We're starting to see that. Second thing is the hog price has to start rallying. So showing that their liquidations over here, we're starting to see that the last thing we need to see is big pork imports from China saying they need to replenish because they're seeing a shortage coming up.

Shawn Hackett:  We have not seen that yet, but two out of the three boxes have been checked off. We're watching for the third one to give us more excitement that China would be a driver. We think right now it's just the value consumer buying pork cut out, going up. But we do think China is going to get involved in the mix later on in the year and provide a much better chance for hog producers finally to bring some more money home on the farm than what they've had in the last six months.

Paul Yeager: And we need to bring this show home. Thank you, Shawn, Good to see you again.

Shawn Hackett: Thanks, Paul.

Paul Yeager:  Hold on here, we are going to pause this analysis and continue our discussion about these markets in our Market Plus segment. You can find both Analysis and Plus on our website of We really do like hearing from you on story ideas, general feedback and your favorite farm photo. Drop us a line about the program to Market to Market at Iowa Next week, a look at the expansion of no-till farming practices. Thank you so much for watching. Have a great week.

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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