Market to Market - February 16, 2024

Paul Yeager:  Coming up on Market to Market - 

The economy sends signals that may require the Fed to tap the brakes.

The House opens for business on all things USDA.

Oyster farmers help restore the waters of Long Island Sound. 

And commodity market analysis with Jeff French, 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, February 16 edition of Market to Market - the Weekly Journal of Rural America.”

Paul Yeager: The check engine light keeps flashing on another economic report as we picked up new data points for prices in front of and behind the sales counter. 

Wholesale prices are measured with the Producer Price Index - and for January, the tracker expanded by 0.3 percent. 

The Consumer Price Index for January was up 0.3 percent, a tenth of a point gain over last month. 

The yearly snapshot was at 3.1 percent, above the Federal Reserve’s target of 2 percent.

The core CPI was 0.4 percent higher when the more volatile sectors were removed.

Retail sales fell in January after a holiday splurge. The rate weakened 0.8 percent according to the Commerce Department. 

Even as economic reports have kept coming, the pace of government has slowed with few bills headed to open debate on the House or Senate floor. 

The House Agriculture Committee last held a hearing with a witness in their chambers on June 21, 2023 - 238 days before Secretary Tom Vilsack appeared this week on Valentine’s Day.

Peter Tubbs looks at the back and forth in the hearing room.

Members of the House Agriculture Committee met this week and called Secretary of Agriculture Tom Vilsack to answer their questions. Animal disease and trade were common topics for discussion.

Rep. Dusty Johnson, South Dakota, R: “Talk to us a little bit, Mr. Secretary, about are we getting closer to developing a vaccine solution that would not unduly harm trade so that we can have some alternative to total Depop.”

Secretary of Agriculture Tom Vilsack: “So we were probably 18 months or so away from being able to identify a vaccine that would be effective for this particular HPI that we're dealing with now. The problem, of course, is it mutates and so you have to basically create ultimately a vaccine that is available for all strains. Right. So there's that issue. The second issue is how do you how do you deliver the vaccine? Do you deliver it in a way that is efficient and effective and less expensive, or is an injection required? Well, when you're talking about hundreds of thousands of birds, that's that's difficult.”

Rep. Randy Feenstra, Iowa, R: “Is the USDA concerned about trade disputes, about the USMCA? Is this going to be a big issue because of Prop 12?”

Secretary of Agriculture Tom Vilsack: “I will tell you that we are looking at ways in which we can help assist the pork industry. We know it's under a lot of stress as you do. We recently purchased roughly $100 million of pork products in our feeding programs using the CDC and Section 32. The good news is we've seen a significant increase in pork exports. But whereas obviously a lot of work still to do to try to help and assist them. I think we're going to go through a bumpy period here where farmers have to basically make a decision about whether they're going to participate in that market or whether they're going to be more localized.”

Rep. Randy Feenstra, Iowa, R: “Where do you see I mean, how can USDA help on the free trade agreements and how can we expand export markets?”

Secretary of Agriculture Tom Vilsack: “The reality is I have a hard time understanding the focus on trade agreements when I'm pretty confident and maybe maybe I'm wrong about this, but do you believe that you can pass trade promotion authority in this Congress? You haven't been able to pass a budget. You haven't gotten a farm bill through. Can you pass trade promotion authority? And if you can't? Why not? And I think the reason you why not is because people have an attitude about trade that requires us to to to rebuild people's trust in trade.”

Barry Moore, Alabama, R: “This past June, the Department of. Announced Snap's error rate, a rate that measured overpayments and underpayments. This announcement included a overpayment rate of 9.54%, which amounts to roughly $30 million a day. Certainly that would be an insult, Mr. Vilsack, to our taxpayers. What concrete, serious and forward thinking steps are on the horizon?”

Secretary of Agriculture Tom Vilsack: “States basically administer the program. We are working with state governors to make sure that they understand they need to get back to a more disciplined effort in terms of SNAP. We sort of relaxed the flexibilities or created flexibilities during the pandemic, and we're now asking them to go back to the ordinary work of administering SNAP, which involves two. Representative Bishop's question face to face interviews, which I think will be helpful to restore integrity in the program.”

Rep. Angie Craig, Minnesota, D: “What should legislators be keeping in mind as we look to strengthen the farm safety net in the farm bill from your perspective, Secretary Vilsack?”

Secretary of Agriculture Tom Vilsack: “Well, I think the challenge is to find the resources to strengthen the safety net without necessarily jeopardizing the capacity of nutrition assistance to do what it needs to do and without taking resources away from conservation, which benefits a broad array of producers. I think that's the challenge. And I think I think there's a creative way to do that that doesn't necessarily limit SNAP and doesn't necessarily take money from the IRA.”

For Market to Market, I’m Peter Tubbs.

Paul Yeager: An estuary is where the tide meets the stream.

One of the nation’s most densely populated areas is New York City and the area’s Long Island Sound has long been polluted. The degraded water quality has led to low oxygen levels and made for a difficult place for fish and other species to survive. 

The 1970’s brought together fisherman, lobsterman and oyster farmers to clean up the water and keep fishing alive. 

John Torpy looks at how there’s more than meets the eye under the surface of this project. 

His report is our Cover Story.

John Torpy: Submerged in brackish waters along the Connecticut coastline, newly nested oyster beds are helping restore the environment and protect generations of family tradition in New England aquaculture.

Robert Norrholm, Owner, Belle Shellfish: “Connecticut was the cream of the crop, pun intended for for oysters, you know, and that we want to see that come back.” 

John Torpy:  Around the turn of the 20th century, oysters became a popular dietary staple for New Englanders. In Connecticut, demand for mollusks was particularly high because of the nutrient rich environments of the natural oyster beds set.  

Tessa Getchis, aquaculture extension specialist, Connecticut Sea Grant: “So what's really unique in Connecticut are these large tracts of oyster beds that are in intertidal areas like this, but also in deep water areas.” 

According to the Connecticut Department of Agriculture, the steep rise in popularity for oysters led to depletion of the natural beds due to overfishing. To keep up with strong demand, oystermen began cultivating oysters and oyster seed to raise their own stocks. As the decades progressed, so did cities and towns. Expanding communities and agriculture took a toll on the water aquaculture farmers depended on for raising shellfish. 

Tessa Getchis, aquaculture extension specialist, Connecticut Sea Grant: “Many places the oyster beds have really been decimated early on by overfishing, but later by developing it here in Connecticut, we've faced all of those impacts early on. But these oyster beds are large and they have been sustained by industry and protected by regulators through the years.”

John Torpy:  Tessa Getchis is an Aquaculture Extension Specialist with the University of Connecticut Sea Grant Program. Getchis works with the fishing industry and seaside communities to help establish and strengthen support for the shellfish industry while  improving the environment where fishermen work.

Even with local oversight and industry regulation, yields from oyster harvests have been on a steady decline, according to the Connecticut Bureau of Aquaculture. Layers of silt have covered existing cultch , prohibiting oyster larvae from setting on shells and continuing to grow into adulthood. Getchis and other colleagues established a pilot program to encourage restoration of the oyster beds as a way to clean up the environment and, at the same time, protect a way of life.  

Tessa Getchis, aquaculture extension specialist, Connecticut Sea Grant: ”So when we started, it was just ahead of COVID and we wanted to bring people together to talk about what is the future of the Connecticut oyster industry and also these natural habitats.”

John Torpy:  When restaurants shut down due to the COVID-19 Pandemic in 2020, oyster farmers were stranded without markets or consumers. At the same time, Getchis needed boots on the ground, or more precisely, boots in the boats, to help launch the restoration plans for Connecticut oyster habitats.

With boats and businesses idle, boat captains were recruited to help get rid of  the silt choking the Connecticut shellfish industry.

Tessa Getchis, Aquaculture Extension Specialist, Connecticut Sea Grant: “ They couldn't sell their oysters. And we were trying to come up with a plan to keep them in business. And we had these beautiful beds that needed to be restored. And this fleet that was just ready to work. And so we really didn't have to convince them to, to get out and help us with this. They knew it was important. It’s their insurance really.”

Robert Norrholm, Owner, Belle Shellfish: “These gaps right here that allows the shell to pass through the direction and keep the shell on the bottom. This will hold the oysters in it. So we're eliminating keeping the shell on the bottom, but we're taking up any other shell that the guys have that's on the bench to put it right back down.”

John Torpy:  Robert Norrholm is owner of Belle Shellfish and is part of the seven generations of his family who have spent their lives harvesting clams and oysters off the coast of Connecticut. 

Robert Norrholm, Owner, Belle Shellfish: “So one, I love to tell this to everyone. One full grown oyster will filter 50 gallons of water a day. Now, multiply that by how many oysters are on the bottom. So the more we cultivate, the more oysters that can be produced. We'll filter more water. That’s going to increase the water quality of Long Island Sound.”

John Torpy:  Norrholm is an early adopter of the Shellfish Restoration Program, acknowledging benefits to the oysters….and the future of his business.

Robert Norrholm, Owner, Belle Shellfish: “So the process, you know, and how, how we work is we're doing it in a way where we're not gouging the bottom or harming the bottom. We're just scraping along the top. And that's going to be enough to remove the silt. Once we get the oysters there, it's going to it's going to help the industry in a long way because they have an area where they can go catch oysters to plant on their own grounds and put into the market. So the small industry guys that are able to do it, they're going to benefit from it years from now.”

John Torpy:  Norrholm’s passion for shellfishing has deep roots. He relies on a long established family history and personal experience to help him pay it forward, helping to keep the industry alive for future generations.

Robert Norrholm, Owner, Belle Shellfish: “My grandfather is still my teacher and he is still going to teach me until he decides to retire, which I don't see coming any time soon. His idea was to get this natural bed cleaned up, get it cultivated and the silt removed, and that way more oysters can grow because that's what he wants to see.” 

For Market to Market, I’m John Torpy.

Paul Yeager: USDA’s Outlook Forum provided a bearish view on demand - and sees U.S. farmers planting fewer corn and wheat acres. 

For the week ..

The nearby wheat contract lost 36 cents, while March corn fell 13 cents. 

USDA predicts more acres planted with soybeans and weaker export demand. 

The March contract declined 11 cents and March meal fell $1.20 per ton.

March cotton expanded by $2.11 per hundredweight. 

Over in the dairy parlor, March Class Three milk futures fell 13 cents.

The livestock market was higher. April cattle added 82 cents. March feeders strengthened $3.88 and the April lean hog contract improved $4.08. 

In the currency markets, the US dollar index increased by 24 ticks. 

March crude oil expanded by $2.41 per barrel. 

COMEX gold shed $11.60 per ounce, and the Goldman Sachs Commodity Index lost more than four  points to settle at 555-25.

Joining us now is regular market analyst Jeff French.

Paul Yeager: Joining us now, regular market analyst Jeff French. Hi, Jeff.

Jeff French: Hi, Paul. Good to be here.

Paul Yeager: Keep that smile because you have to smile through all of the week commentary right now. It is, as I wrote in italics here, to emphasize, weakest on the block. Do you disagree?

Jeff French: Well, it's, you know, right there, the Kansas City wheat, four year lows. I mean, you can say that with the corn as well. But yeah, pretty steady trend of lower lows and lower highs. I mean, it's a it's a pretty dismal trade right now. One positive is we were able to hold 550. I think that's a big psychological number in there. But there's a couple of factors. You had the US dollar make four month highs here this week. That's going to limit our exports moving forward. And then news out of Russia, Black Sea, they're predicting potentially a record wheat crop in Russia as well as record exports.

Paul Yeager: And a cheap product that they keep putting out in the market.

Jeff French: Not only Russia, but also Frenchmen. Motif wheat is cheaper than our product right now, and that looks to continue. So, you know, you got the funds, you have the money flow and funds right now are pressing the short side. They are nearly record short corn and beans. They have plenty of ammunition selling ammunition, too, to add on to this wheat.

Paul Yeager: Ryan in South Dakota, ask a question that I was going to ask and plus, but I'll just use it right now. He asks. Every week you analysts predict that we just found its bottom. Do you think this week it actually has?

Jeff French: I'd like to say it has, but I just don't see that catalyst to shake the funds loose. And that's what you're going to need. And it's just the wrong time of year. Right now, the wheat looks excellent. The winter was good. There's been moisture. I was on the road down in southern Illinois last week. The wheat looks really good, so we need to get into the actual growing season to get that trigger so the funds buy back those short positions in corn.

Paul Yeager: The ag outlook form expects 91 million acres down 3.6, but carry out still really high. That's not a good recipe for corn. Does anything to improve that formula.

Jeff French: You bring down, you know, 2 to 300 million bushels. So that carry out. But, you know, a 2 billion bushel carry out is burdensome and we've had it in the past. And every time we've had it, we've had the corn futures in that 375 to 4 and a quarter area.

Paul Yeager: If you look at that deferred contract in December, as we put the trend line up on the screen here, in a moment, you will see that is like everything else. But is there a point that a producer has to say, I just better take this now before it could get worse?

Jeff French: So we don't advise of selling the cash into a market like this. We will buy put options to stop the bleed to give you a price floor. But absolutely. I mean, you look at it, you know, for 57, for 56 here, you know, if this thing turns into a bear market and many people are suggesting that I mean, you got to go back four years ago when the contract lows of December 24 corn were scored and that's 395 a bushel.

Jeff French: So if this is a true bear market, that contract low has a big target on its back.

Paul Yeager: Is the story different at all in soybeans? Yes.

Jeff French: Right now it's all about the Brazilian harvest. And right now the beans are in that 1150 1160 1170 area. And historically in the last 20 years, beans just don't trade in the elevens very often. You know, they're they're very few times and it's either from ten up to 12 very quickly or from 12 down to ten very quickly. So with Brazil, only 25% harvested right now, I think there could be potentially some more harvest pressure. Now we are two and a half dollars off the highs. So, I mean, you know, for us to call it bottom, you know, maybe here at 1150, you know, possibly, but with the harvest pressure coming from Brazil, lower prices certainly shouldn't surprise anybody right now.

Paul Yeager: Ted Sifford sat there last week and said the concerns that he has about soybeans is China not buying even from Brazil, let alone the United States. Do you have that same concern?

Jeff French: Brazilian basis has fallen out of bed. I mean, it's right now the bean base is down. Brazil is at a five year low. And we watch those flash sales as analysts every day. You know, we follow those very closely. We haven't seen a bean flash sale for over two weeks. So, yes, the the big gorilla in the room has gone kind of silent here right now. And they have been very quiet on the buying front.

Paul Yeager: Is it going to take them getting back in, the big gorilla getting back into the market to make any change?

Jeff French: I you know, from a demand side, yes. I mean, demand domestically here in the U.S. remains very strong for beans. But then we got to get into the growing season. We've got to be able to get this planted. You know, they're saying 87 and a half million acres. You know, I'll you know, I won't weigh on that quite yet, but we'll see come this spring because I could see maybe a little heavier bean.

Jeff French: She'll be a little heavier corn acres, maybe a little lower, be negative.

Paul Yeager: There was a thought about all of the the big three that we've just talked about, that very slow Monday, Tuesday, Wednesday, whether that was ahead of USDA news. But do you get the sense that we are going to be almost the same type of minimal trading between now and the next big USDA report at the end of March?

Jeff French: Well, unless it comes from the outside markets, but it's just been a grind lower. I mean, the volume is very subdued. I mean, we're running, you know, 60 to 70% of normal volume. And it's just kind of a trickle lower. And my fear now here, you got march corn at 415 for 16. You know, why don't they want to press this thing and maybe get a three in front of this? That's what I'm saying. But next week we do have March option expiration. There are a lot of puts that are deep in the money so that market, you could see a rally on option expiration very easily next Friday. But overall the trend moving lower right now.

Paul Yeager: We'll get into some of those specific questions in our marketplace. We have a few good ones for you, but I want to start with one that came from Kennedy Farms in Oklahoma. Thank you for submitting that via Facebook. An X or formerly known as Twitter, we ask each week. But this is the question for you, Jeff. Is there enough beef in the country to give the corn growers an option to lock their car in the market? Or are beef prices too high for even that to be an option?

Jeff French: Yeah, high cattle, cheap corn, I mean, it's usually it's, you know, cheap corn, cheap cattle and it's the exact opposite, you know, Are they able to walk the corn off? You know, certainly a little bit. I mean, but we are at the lowest herds since 1957. Now, the cattle, these days are twice as big as the cattle back then. But yeah, it will help. But no, we we have a burdensome amount of corn here that we'd have need a lot more cattle to walk the corn off the farm.

Paul Yeager: Looking at that cattle chart as it does trend higher, there's always that temptation to say the high is in or is this just a pause to go higher? Earlier this week on our MT on podcast talked to Darrell Peele down at Oklahoma State. He thinks this thing has a whole lot more upside to it. Do you concur?

Jeff French: You know, if you would have talked to me earlier this week, it looked like we were kind of rolling over. And then we get into Friday and we you know, we hit up to three and a half, four month high. So the market is very strong right now. We've been here before and I've just had many conversations with my guys that, you know, when whenever we get closer to 70 feeders or 190 fat cattle, you know, put on some protection, is that LRP or is that put options sound some calls up here, you know, because this market can change fast. And we've all been through the October-November time period where it just we didn't think it would ever find the bottom. So these are fantastic prices and the margins are so thin. I mean, this is big business now with these cattle prices. So you definitely need to be looking for some protection here.

Paul Yeager: I also asked Dr. Peele about feeders, and I said, Oh, did we miss the chance to buy, you know, buy at the top? You know, the worst thing possibly says no. He also sees feeder going higher because there's fewer of them. Again, do you concur? We have a cattle on feed coming next week. Any insight on where that might be headed?

Jeff French: The feeder cattle have been led by the cash market, and the cash market has been absolutely on fire. So I don't know if these guys that are buying these cattle, high priced calves, what they are seeing out in the future, but they're betting on higher prices for sure on the fat cattle side. So again, the market looks strong. It can change for no reason. We've seen it before. We've lived it before not too long ago. You know, these are fantastic prices and a lot of risk on the table.

Paul Yeager: Lately. We've not been able to end on a positive note because we always end with hogs. This week was different. Why?

Jeff French: Absolute massive export sales, 71,000 metric tonnes per day. And perspective. That's 150% more than the same week last year. So I mean, 30,000 metric tonnes a week is really strong. To double that up this week was big time demand. The futures have reflected that. Now you look at the summer months up there, right, right below $100. If we can bust through that, I think this thing can run another probably $78.

Jeff French: But if, you know, the first couple of days next week, if we're not able to get through that hundred dollar mark, you know, that's not a real good sign because that's four or five, six days of not being able to get through that resistance 100.

Paul Yeager: So where that's a heck of a rally coming up here. I mean, do you think that.

Jeff French: The summer months. 

Paul Yeager: Okay. So why are we looking at the near.Sorry, I didn't have that one in my head as much. So I guess I'll quickly ask the question about the soybean issue. Is trying to come back into buy any hogs to to influence this as well.

Jeff French: They were the number two buyer this week. Mexico continues to be the very strong number one buyer, but China is there every week. They typically alternate, but this week they were number two. So that's definitely good to see.

Paul Yeager:In the final seconds. Is there one commodity that we have talked about tonight that you have optimism for in the next month?

Jeff French: Well, when you look at, you know, we're down here at four year lows on corn and wheat, so I'm not going out on too big of a limb to say that there definitely could be some upside. And they've just you know, everybody's bearish out there, you know, So, I mean, it's it's lean heavily to the one side. So we could definitely see short covering rally the wheat could be the most explosive, I think.

Paul Yeager: All right, Jeff, thank you very much. Jeff French, everybody. Thank you. Thanks for having me. All right. Hold on, because we're going to keep going with Jeff and and our analysis and continue our discussion in the market segment we call Market. Plus, you can find both analysis and plus on our website of market to market dot org. We are again approaching a milestone on our YouTube page and it is because of, you.

Thank you, Jeff.

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 markettomarket.org.

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Next week, we look at those taking an experiment in cover crops to the next level. 

Thank you so much 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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