Market to Market - March 15, 2024

Market to Market | Episode
Mar 15, 2024 | 27 min

On this edition of Market to Market ...

The West is reminded Winter is still in season. Fair play comes to the stockyards and poultry barns. Hog producers look for brighter days ahead. And, commodity market analysis with Matthew Bennett.


Coming up on Market to Market - the West is reminded Winter is still in season. Fair play comes to the stockyards and poultry barns. Hog producers look for brighter days ahead. And commodity market analysis with Matthew Bennett, next.

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

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

This is the Friday, March 15th edition of Market to Market, the Weekly Journal of Rural America.

Hello. I’m Paul Yeager. 

The federal economic pilots may be keeping the fasten seat belt sign illuminated due to new data points indicating concerns remain near the surface. The Consumer Price Index rose 0.4 percent as gas prices led the drive higher. The core reading added the same level of gain in February. Wholesale prices were up 0.6 percent giving credence to the argument inflation will linger through spring. Retail sales were up 0.6 percent in February. What that consumer has done and is going to do is of great interest to the Federal Reserve as they ponder action on the key interest rate. The Biden Administration released a budget calling for $7.3 trillion offering tax breaks for families, but higher rates for the wealthy and corporations. More federal spending will be needed in some parts of the country following a week of weather disasters. David Miller has our coast-to-coast wrap.

March may have come in like a lamb, but it is becoming a lion.

Tornadoes broke out in eastern Indiana flipping cars and leaving serious damage to buildings in the community of Winchester. At least three people were killed and 20 more were injured in the system that spread across parts of Ohio and Kentucky.

The mountain states of Wyoming, Montana and Colorado are suffering through late Winter snowstorms.

One system dropped more than 30 inches of snow on the Colorado front range. Major sections of Interstate 70 were closed, stranding vehicles along the route. The city of Denver received up to 20 inches of snow.

Trooper Gabriel Moltrer, l: “If you find yourself going through and one of the roads is closed, don’t try to go around, they are closed for your safety. If you’re trying to go into work, let them know that the road’s closed and you’re not going to be able to make it.” 

The 20 inches of rain that has fallen on California since January continues to cause trouble for the Golden State. A landslide, weeks in the making, caused this hillside near Los Angeles to slump, pulling a home along with it.

Intense storms swept through the Midwest dropping 4 - inch diameter hail in parts of eastern Kansas.

Rain also hit other sections of the Midwest as storms rolled in at the end of the week. 

A drought still grips portions of the Texas panhandle. Last year’s rains helped promote the growth of range grass. What was left after grazing helped create perfect conditions for wildfires. When 70 mile per hour winds and a spark from downed powerlines met in late February thousands of acres burned and thousands of cattle were killed. Despite the fallout and current dry conditions, producers remain optimistic 

Bill Martin, Manager - Lonestar Stockyards: “I don't think in a month, we'll be ready to do anything, it's going to take two to three months for the grass to grow. It's gonna take six months to a year to build some of the fences back. Two to three years, we might see a lot of the places back in operation, but it's just gonna be, we're just gonna have to find out what we can do.”

For Market to Market, I’m David Miller.

USDA released a final rule on clarifying the “Product of the USA” label on meat, poultry and egg products. 

The voluntary measure was announced this week at the National Farmers Union convention but it comes after years of work verifying where a product is born, raised and processed before reaching the store.

Critics contend this is an anti-trade practice and consumers will likely pay more for the homegrown label. 

The Secretary of Agriculture also added more to last week’s movement on the Packers and Stockyards Act which includes attention to the tournament system in the poultry industry.

Peter Tubbs has more.

This week, the USDA announced more proposed rules to level the playing field between meat producers and processors. Secretary of Agriculture Tom Vilsack, appearing at the National Farmers Union Convention, predicted more proposed rules in 2024.

Tom Vilsack, U.S. Secretary of Agriculture: “...we need to make sure that farmers have a fair shake in the marketplace. For that reason, we continue our work on Packers and Stockyards. We recently finalized our second rule, which was focused on eliminating the ability of some to discriminate or to retaliate when producers exercise their right of association or exercise their right to reach out and see whether or not a competitor processor might be willing to pay a little bit better or a little bit more. We're now protecting farmers from any kind of retaliation when they exercise those rights. 

We expect and anticipate to see more rules coming out from Packers and stockyards. The next rule that will likely be proposed, is a proposed rule involving the poultry tournament system. We expect and anticipate this year as well, to roll out a proposed competition rule as well as potentially a price discovery, cattle rule as well.”

The additional rules come after years of complaints over the poultry tournament system. Tournament systems base producer payment on poultry metrics compared to the averages of all producers during a given period, and are criticized for being opaque and arbitrary.  

For Market to Market, I’m Peter Tubbs.

Hog producers say 2023 was a year they’d like to forget. 

The new year hasn’t brought much optimism as the next Farm Bill has yet to be released and some lawmakers are hinting another extension is likely. 

One inclusion some livestock advocates want is a national rule on what to do about California’s Proposition 12 which went into effect January 1. 

Colleen Bradford Krantz looks at the status of other issues facing the industry in this week’s Cover Story. 

While many segments of agriculture were having a relatively strong year, the pork industry got pounded in 2023. Feed prices were high, demand was down. Several major pork producers closed sow farms. Processing plants were shuttered. And on the horizon were new rules in California coupled with efforts to curb foreign ownership of farmland.

Scott Brown, Agricultural Economist, University of Missouri: “Both 2021 and 2022 were phenomenal years of growth in U.S. farm income in this country. I think I heard Secretary Vilsack recently describe 2022 as the second or maybe the best time ever for U.S. agriculture. That's not equally felt, however. It’s commodity by commodity.”

Brown likes to point out that 2023 can also be viewed as a return to the norm after a few years of strong prices following short supply associated with COVID, when packing plants temporarily closed or slowed production.

Scott Brown, Agricultural Economist, University of Missouri: “I like to remind us that we’re just going back to the demand levels we might have seen in 2020. That 2021 and 2022 are going to be what stick out as extremely positive years, not that 2023 is so negative. It’s just putting us back on the same track.”

Iowa State University economists say 2023 brought the worst farrow-to-finish returns in Iowa since 1998-99, and, depending how 2024 goes, the pair might go down as the worst two-year stretch on record. Iowa State University’s Estimated Livestock Return model forecasts an average annual loss for hog producers in 2024 at $18 a head, which looks bleak but is an improvement over the loss of $32 a head in 2023. 

Brown acknowledges that feed costs remain a concern. Corn prices have been higher for much of the last few years.

Scott Brown, Agricultural Economist, University of Missouri: “I will say it’s amazing how well this industry has done with what’s been record-level corn prices at least for part of the time. I think that’s been part of the important profitability question at the end of the day. Where hog prices are today, if we were talking about sub-$4 corn, the profitability would look a lot different than it does today.”

Although exports have offered some hope to farmers, sales to other countries have slipped back to levels seen before China’s African swine fever outbreak that struck between 2018 and 2021. Brown says adding more markets in places like Central America could help reduce the reliance on major players like China.

In past decades, when more independent producers were raising hogs, Brown says experts would have expected a more traditional pork cycle: two years up and two years down.

Scott Brown, Agricultural Economist, University of Missouri: “If feed costs were to go up, what did the industry do? You would have folks who would not produce at 100 percent of the capacity they might have had at the time. When you think about where the industry is today, by and large, it’s characterized by a lot of very large confinement operations that have huge capital outlays in those facilities. So, I often say we're becoming much less responsive in the short run to things like higher feed costs because if I'm operating one of those confinement operations, I have no choice but to be at 100 percent efficiency.”

USDA data backs that up as the December 2023’s snapshot of the national hog inventory sits at 74.9 million, the fourth largest since 1963. Even when sows are culled, those cuts are offset by a typical sow having more piglets every year. The number of piglets per sow per year shifted from 18.2 in 2007 to 21.8 in 2022.

Bank accounts might dip further into the red if producers undertake sow building renovations to comply with California’s Proposition 12. The new rules, which went into effect at the beginning of the year, dictate that sows must have a certain amount of floor space if their offspring are to be marketed in the Golden State.

Scott Brown, Agricultural Economist, University of Missouri: “I just think we're early in the what's the long-term change that the industry makes trying to service California because we again, we know the cost of changing my operation so it's Prop 12 compliant is not zero…I think we're going to have operations continue to grapple with that.” 

Global leader Smithfield Foods, closed 35 Missouri sow farms in October of 2023. Officials said many of the buildings were older. They also say they are maximizing efficiency during a period of challenging market conditions.

Local officials in northern Missouri, where many of the facilities were closed, saw the immediate impact in jobs being relocated or eliminated.

Cheston Easter, Associate District Commissioner, Mercer County, Missouri - “Ag in general is our largest economic driver. And when we’re looking at livestock, crops, you know, specifically here in Mercer County, it is pork production. … And so, they are our largest employer: almost five out of ten directly and another four out of ten indirectly.”

Amid all of this, states like Missouri are looking at banning or tightening foreign ownership of land beyond the current limits. Residents of counties like Mercer understand the concerns the state legislature is trying to tackle, but also hope to avoid additional closures by Smithfield Foods, whose parent company, WH Group, is a publicly traded company based in Hong Kong.

Cheston Easter, Associate District Commissioner, Mercer County, Missouri: “Obviously it would be a big impact here with tens of thousands of acres in Mercer County that are owned through Smithfield. …The exact language has gone through several iterations so we’ll have to see what ultimately it would be. I’d be surprised if there was a total foreign ban and we tend to go with property rights, but we’ll have to see.

Easter remains optimistic while recognizing the complexity of the debate. 

Cheston Easter, Associate District Commissioner, Mercer County, Missouri - “If you asked anyone who lives here locally, they would say, ‘Well, no, I don’t want my neighboring farm to be foreign-owned.’ But at the same time, you may have children and grandchildren who are employed by Smithfield and that’s what helps fund, not just the labor force, but property taxes, sales tax for the local area, school districts, emergency medical services…. It’s a unique balance here.”

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

Next, the Market to Market report. 

China canceled wheat orders all over the world as Russia kept flooding the market with cheap product and a rally in corn met resistance mid-week. For the week, the nearby wheat contract fell 9 cents and the May corn contract lost three cents. A technical-driven rally ended Thursday after an optimistic start to the day as South American weather forecasts improved. The May soybean contract added 14 cents, while May meal lost $6.70 per ton. May cotton shrank by $1.33 per hundredweight. Over in the dairy parlor, April Class Three milk futures dropped 12 cents. The livestock market was mixed. April cattle lost 35 cents. April feeders cut $1.97. And the April lean hog contract improved $2.55. In the currency markets, the US dollar index strengthened 74 ticks. April crude oil expanded $3.18 per barrel. COMEX gold fell $22.10 per ounce. And the Goldman Sachs Commodity Index bumped up more than 12 points to settle at 573-even.

Yeager: Joining us now is regular market analyst Matthew Bennett. Hello, sir. 

Bennett: I'm doing great, how are you doing? 

Yeager: You are doing well? 

Bennett: I am doing very good. 

Yeager: You've been all over this week. 

Bennett: I've been everywhere, man. 

Yeager: We'll talk about that in Market Plus about your travels and what you're being asked. But I'm sure people were curious. Tell me more about these cancellations? And do they matter whether it's soybeans -- soybeans was always the story, now we're getting these wheat cancellations. 

Bennett: Yeah, a million tons out of Australia. U.S. wheat -- a half a million out of French wheat that we're hearing. The bottom line right now, I think China is looking and there's other wheat in the world that is cheap. We've all heard about basically cheap Russian wheat, it's kind of hurting the market. I don't think that they have missed that. I think some of that wheat will find it into Chinese hands. And yes, they have cancelled these shipments, but I think that they're going to end up buying wheat. 

Yeager: I have a quick follow up to that, that the viewers want to know and this came in via social. This one I think was emailed actually to us. And it is from Larry in Minnesota and he wants to know, Matthew, how can China cancel grain purchases that they have made? When we contract grain at an elevator, we are required to deliver on that contract or buy it back. 

Bennett: That's an excellent point and that is something that we have all been faced with at one time or another, trying to answer that question. We don't know the details to all of those contracts. But you've got to be clear that that's not China buying wheat off of the U.S. necessarily. That is COFCO, ADM and COFCO. Those are agreements from multi-national companies. There is likely some sort of a penalty that they have to incur. But there is an agreement, most likely, that they are going to still buy that wheat eventually. And I've got to think that they're going to. So yes, it's frustrating. Yes, it's handled differently than what we see handled as far as what we've got as producers and purchase contracts. But it is what it is. I don't have all the details and they won't want us to have all the details. 

Yeager: What details do we have in corn that we were able, I won't say hold onto a three-cent rally, but it's a lot better than we've seen in the last couple of weeks. Do you see brighter days ahead? 

Bennett: Yeah, and so you look at this corn market, Commodity Classic two weeks ago on Monday morning, made a new low for the move and then we settled higher four out of five days. So, we had a weekly close higher, another weekly close higher, a reversal in the market. We actually had the reversal this time get a little bit of buying support it. And then you come in this week, of course you lose a little bit of ground, but quite frankly after the kind of day that we had on Thursday, the market turnaround and closing higher on Friday I think was a very good sign. A lot of things are going on here. I think that the funds are covering shorts. But at the same time, producers have quite a bit of corn on the other side of those shorts. 

Yeager: Our friend Angie Setzer had a very enlightening tweet, the first farmer who is storing and ignoring to call her and book something is going to get a free hat. Do you still feel that the farmer is holding onto everything? 

Bennett: I don't know about everything. I think whenever you are forced with do you roll out to the May on some of these basis contracts and producers, are you going to go ahead and pay another month of storage in those situations? I think there was a fair amount of grain that hit the market there. How many bushels? I think the USDA was talking closer to 10 billion, if you read between the lines whenever we're looking at that January report. I would probably trim maybe 20% off of that, 25% off of that since then. And so, you're probably still holding onto somewhere between seven and eight billion bushels, which is still a ton of corn. You've got to understand as a producer that whenever we've got that much corn on hand, any sort of a rally in the market, you're likely to see some basis weakening. Now, basis has held in fairly good so far. But I think if you continue this rally higher, I think you're going to start to get some stiff resistance as far as basis goes. 

Yeager: Well, we saw resistance, 40, 50 day moving average was kind of that ceiling. So, then it gives credence to the argument this was a lot of technical things moving. Do you see it that way? 

Bennett: Yeah, there's no doubt whenever you reverse the market and selling actually showed up that it gave people a little bit of fire power, if you will, to step in and buy this thing. But at the same time, people understand the fundamentals of the corn market, on a global basis and on a domestic basis, are not all that great. And so, if we start talking about acreage and what not, and I know you're going to want to go there, but if you pile 92 or 93 or more like some folks are saying onto a 2.172 carry, that all of a sudden gets you to some numbers none of us really want to think about. And I will say, the last time you had a 2 billion plus carry was back in 2018 and the average cash price in 2018 was $3.66. 

Yeager: You've said enough with the three. Allandale this week 93.42, USDA still at 91. We'll get a better picture here at the end of the month. Your private estimates in between those two numbers? 

Bennett: Yeah, we're at 91.5 on corn. I think that this is a really tough one to gauge, Paul, because we had a fantastic fall, no doubt about it, Mother Nature was great to just about everyone in the Corn Belt. And so, we got most of the work that we wanted to get done, we got the anhydrous put on, the anhydrous pipeline essentially ran dry when you talk to most of your suppliers on the retail side of things. But, at the time, whenever we were making those decisions, corn penciled better than beans. I've got to think we've quantified a lot of corn acres. But the ones that haven't been quantified, Paul, in a lot of areas beans actually pencil better than corn today. And so, I think that some swing acres could go over towards beans. Now, as of March 1st, given how pathetic the corn market was, I think some folks might have already been thinking about switching a few around. 91.5 for me is where we're going to sit as far as our company goes. But I'll tell you that we wouldn't be surprised if we're not off a little bit here because this is a very interesting subject here given the way that these markets have moved. 

Yeager: Let's move into beans because that looks like there was some hope. And do you think it faded? 

Bennett: You know what, Thursday you traded to the highest level we'd seen -- 

Yeager: Very quickly.

Bennett: -- right, you got over $12 and people said hey, this is great, this is fun, we're going to keep going. Now, there's people that work on my team actually that feel like we could go up and fill these gaps on May and July beans. Those gaps are at $13. And I'm not saying that they're wrong, I'm not saying -- I'm probably not quite as friendly. I'm more along the lines of hey, you know what, as you rally, if you do get a rally like that, that none of us were expecting necessarily two weeks ago, maybe we ought to be rewarding as we go. But, has the hope faded necessarily? I'm not so sure. I think that you've got to get a better handle on what is this Brazilian crop size going to be? Last week on the USDA report we took 4.1 million metric ton out of the market. The marketing year start two years ago, the stocks, USDA went back and changed world stocks. I thought it was very interesting. And then of course the USDA is running 8 to ten million metric tons on Brazil estimates over everyone else essentially. So, there's a lot to learn here. I don't know that we're going to be in a stocks building world situation like is currently being forecasted. It may be status quo at the end of the year. 

Yeager: Ross Baldwin was on last week, gave us a lot of good insight on the livestock market. Cattle wise we didn't quite get -- I told him as he was walking out of the studio -- about positioning yourself and hedging things differently and options. There seems to be a whole lot of movement in that direction. Any advice for people watching the cattle market? 

Bennett: All right, so obviously you and I had talked last year, I thought we were going to get fats to $200 and I think you raised your eyebrows at that. But, you know, I felt like the fundamentals would support this massive move. We got a really big move, dropped $35, April just absolutely plummeting and now we get this run back almost to $190. And so, Ross and I have talked about it, our whole team has talked about it, do we see the potential to go up and make new all-time highs? At some point this year, yes, we do. But for the time being, if I'm someone that is prone to risk there and I'm taking high $180s or even $190s and snubbing my nose at it, I don't think it's a smart move. So, what we've said if nothing else, set a floor in under this thing if you want to let the upside run. Doing nothing whenever you've gotten another $20, $25 up after this massive move lower is probably not the smart thing to do. 

Yeager: And the volatility though, it seems to be this week in the feeder market. 

Bennett: Yeah absolutely. But here's the thing, go try to buy feeders right now. I know what the market is doing on the board, but in the real world feeders are hard to get your hands on. When you look at fats, there's $190s out there, $188s, $190s. Bottom line is people are out there hunting trying to get a hold of fats, trying to get a hold of feeders. This cattle market is far from over. But I don't think the real fireworks are going to occur until you get out past this next cattle on feed report, which we would expect due to the January report not being, for January that was released in February, not being as bullish as what we thought it was going to be, I think this next one might be a little more bearish than what we originally though it might be. You have to get out past it and I do think the funds could come back in and buy this thing. 

Yeager: Are the funds interested in the hog market at all? 

Bennett: It just depends. I never thought that we would see triple digits on several of your front months. Export sales stunk this week. But still, I think that moving forward hogs have kind of rallied in sympathy with this cattle -- cattle have helped hogs in my opinion. But moving forward am I a buyer or seller at the levels we're at? I'm probably a little standoffish. I want to manage risk here. I'm not saying we can't move higher, but I would certainly be setting a floor in under these hogs. 

Yeager: We have a whole lot of questions we'll get to here in Market Plus, so stay tight for us, will you please? 

Bennett: Absolutely. 

Yeager: Matt Bennett, thank you. We are going to pause because I've got this full list right here of questions from you. We'll continue that discussion in our Market Plus segment. You can find both Analysis and Plus on our website of We have a secret almost 10,000 of you already know -- our YouTube channel releases this program, Market Plus and our news stories all before it is on your TV. Help us remove the ‘almost’ and put us over the 10k mark by subscribing at Next week, working to connect that last mile of the digital divide. Thank you so much for watching. Have a great week.

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

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

Tomorrow. For over 100 years, we have 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.