Market to Market - October 11, 2024

Coming up on Market to Market - Milton makes landfall with high winds, storm surge and power outages The increasing cost to fight a decades-old disease in the hog industry. And commodity market analysis with Naomi Blohm, 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.

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Family owned and operated for more than 60 years, Sukup Manufacturing is a full-service provider of grain handling, storage and drying equipment, helping farmers feed and fuel the world.

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For over 45 years, Steiner Tractor Parts has shared your love of antique tractors. New parts for old tractors. Learn more at steinertractor.com or at 877-559-7887.

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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.

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This is the Friday, October 11, 2024 edition of Market to Market, the Weekly Journal of Rural America.”

Hello. I’m Paul Yeager.

The government’s read on inflation came in two forms this week - prices on consumers now and the ones coming soon.

The Consumer Price Index added 0.2 percent. Core CPI was up 0.3 percent and the year-over-year snapshot came in at 2.4 percent, 

The cost of items before it reaches you and I is known as the Producer Price Index. For September, the reading was unchanged. Core PPI added a tenth of a percent while the year was higher by 1.8 percent.

Unemployment filings last week jumped to their highest level in a year. Analysts say it is because of the result of the Boeing machinist strike and Hurricane Helene.

Economic news like that will also be part of the second day view in Florida.

Milton reached Category 5 status off-shore, but weakened before reaching land on Wednesday.

More than 3 million were without power while at least 14 people were killed.

Peter Tubbs has this recap.

Cars were seen trying to outrun tornadoes as the twisters were some of the first things to make landfall as part of Hurricane Milton. More than 100 warnings were issued Wednesday in the state.

Even though Milton landed on Florida’s central west coast south of Tampa near Siesta Key, the category 3 storm brought winds, rain and a storm surge of water that was several feet deep. Here in Clearwater, residents were rescued by boat from their apartment buildings.

Farther south in Bradenton Beach, homes were knocked off foundations, but were spared complete wipeouts. Streets were clogged with some debris but nothing close to the major damage that was originally forecast.

The area directly hit was just south of major fertilizer facilities - specifically phosphorus. Officials with the commodity trading firm Stone X say 62 percent of the U.S. production capacity is in the Sunshine State and was spared major damage.

Most of the fabric roof on the home of baseball’s Tampa Bay Rays was shredded in the storm. The stadium was to serve as a shelter for first responders and utility workers in the region.

Outside of the southeast, much of the country has been dry as extensive drought returned across the country.

Since the first week of June, the Drought Monitor has tripled to its current reading of 75.32 - nearly five of those points have come in the last week as rain has disappeared from the majority of the country.

Other locations around the world have been dry as well. Parts of Italy, Uruguay and Brazil have been locked in drought for an extended period.

For Market to Market, I’m Peter Tubbs.

In 2015, the Food and Drug Administration approved the first genetically altered food animal - a salmon that grows faster than its unmodified counterpart. Five years later, it was a line of pigs whose meat won’t activate a rare allergy in humans. Two years ago, it was a strain of cattle genetically modified to tolerate the heat. Industry leaders now say a pig resistant to a troublesome hog virus could gain approval next year, creating the potential for it to become the first widely consumed gene-edited animal.

Colleen Bradford Krantz reports in our Cover Story.

Porcine Reproductive and Respiratory Syndrome, or PRRS, was first identified 37 years ago in the United States. It showed up sporadically in 1987, causing respiratory disease in hogs as well as inducing sows to abort their litters.

The illness, triggered by a virus that can mutate rapidly, has stubbornly stuck around since, overcoming management attempts and spreading globally.

[Dr. Derald Holtkamp, Iowa State University College of Veterinary Medicine] “You go through these cycles of, you know, you are happy that you think you got some solutions and then you realize, nope, it’s found a way to outsmart us again.”

Iowa State University veterinary medicine professor Dr. Derald Holtkamp, along with a peer, released a new study this summer that demonstrates the illness’ increasing cost to farmers through lost animals, lower fertility and reduced weight gain.

Since an earlier study began in 2000 and this new one was completed in 2020, the economic impact of PRRS grew from $560 million annually to $1.2 billion, an increase of 114 percent. Even after adjusting for inflation and a larger U.S. herd, the annual losses as of 2020 still exceeded $1 billion a year.

[Dr. Derald Holtkamp, Iowa State University College of Veterinary Medicine] “I thought it was going to go up but I didn’t think it was going to go up by that much…As I do with all of these types of studies, I usually go to my veterinary friends and I say, ‘Is this what you are seeing in the field? Does this make sense to you?’ And without fail, they said, ‘Yeah that looks right to us.’”

The study showed hog mortality rates up to 5.3 percent higher than for those without PRRS. Several vaccines are available but Holtkamp says they seem to be less effective when new versions of the virus crop up. There is no evidence of the PRRS virus affecting humans.

[Dr. Derald Holtkamp, Iowa State University College of Veterinary Medicine] “They’re just extremely severe viruses. That when they got into a herd, the virus replication was just tremendous. More than we’ve ever seen. And the disease caused by those isolates was very, very severe and so, in many cases, the best option was to simply de-populate the herd and start over.”

Iowa pork producer Gene Gourley says PRRS is the reason his family is stepping away from raising sows.

[Gene Gourley, Gourley Brothers - Webster City, Iowa] “Our father started in ‘56 with farrowing three bred animals from a neighbor. And today we are - 65 years later basically - are shutting down our only … sow facility we had left, due to PRRS…otherwise we would still be farrowing sows today.”

There is a potential solution on the horizon: a genetically edited pig that the federal government is in the process of considering for commercial release.

Through gene editing, the Tennessee-based Pig Improvement Company, or PIC, along with the University of Missouri and The Roslin Institute, have found a way to knock out a specific portion of a protein in the genetic code of hogs.

[Banks Baker, Global Director of Product Sustainability, PIC] “We can utilize gene editing and Crispr technology to go in and edit a specific portion of the protein. And once we have that edit, then it makes the pigs completely resilient to the PRRS virus.”

Baker said the work on licensing and regulatory approval have been slow-going but they are hopeful the FDA will approve their PRRS-resistant pig by late 2025. This PRRS-resistant pig would join a short list of genetically altered food animals already approved for human consumption.

In December 2023, the FDA, for the first time, approved a gene-editing therapy for treating humans, in this case, those suffering from sickle cell disease.

[Banks Baker, Global Director of Product Sustainability, PIC] “The benefits of this technology are extremely significant, and we’re excited to be among one of the first companies that are bringing something like this to the market on a commercial population. Because this is likely how we are going to end up solving a lot of the devastating animal diseases that we deal with on a production basis day-to-day.”

Although the first PRRS-resistant pigs are already being bred in carefully controlled facilities, they are not allowed to leave these buildings and cannot be harvested for their meat. Even if the FDA gives the green light, these pigs will presumably be too valuable for their recessive genetic trait to land on anyone’s plate anytime soon.

[Banks Baker, Global Director of Product Sustainability, PIC] “This isn’t like a light switch where all of a sudden we get approval, and these pigs will be available for everybody to utilize. We think about it in terms of more of a dimmer switch so it’s going to take time to breed this trait within those commercial populations and get full coverage.”

Brazil and Columbia have already determined that even though the pigs are genetically edited, because they don’t have additional DNA from other animals or plants, they can be treated as conventional products. However, PIC is moving cautiously.

[Banks Baker, Global Director of Product Sustainability, PIC] “We understand that the global pork market is global in nature and so we want to make sure that we have the appropriate level of approvals across all of the importing and exporting countries.”

PIC, and parent company Genus, are seeking approval from other countries including Canada, Mexico and Japan.

Baker says they don’t want cost to be a barrier for farmers as they hope to bring the genetics to all producers battling PRRS, perhaps three to five years after approval.

The Gourley Brothers farm would have tried to move toward a PRRS-resistant pig if the option had arrived time. But, instead, they are cutting their losses and focusing only on finishing hogs.

[Gene Gourley, Gourley Brothers - Webster City, Iowa] “It’s hard on your heart strings because you’ve had those animals all your life and you’ve cared for them and you’ve had mothers you’ve been able to tend their litters and take care of them, and see that production from start to finish. And you had the pride of your dad starting it and raising us kids and that’s how we’ve grown our farm operation …. It’s just, it’s not sustainable to keep doing what we’re doing.”

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

Next, the Market to Market report.

The China economy, improved South American weather and USDA’s WASDE report were the market influencers. For the week, the nearby wheat contract added nine cents and the December corn contract cut nine cents. USDA slightly lowered soybean yield and production in their report which sent the market lower on Friday. The November soybean contract fell 32 cents while December meal dropped $15.40 per ton. December cotton shrank $1.06 per hundredweight. Over in the dairy parlor, November Class Three milk futures decreased 34 cents. The livestock market was higher. December cattle added 58 cents. November feeders put on 52 cents. And the December lean hog contract increased by $1.50. In the currency markets, the US dollar index added 32 ticks. November crude expanded 40 cents per barrel. COMEX gold gained $9.40 per ounce. And the Goldman Sachs Commodity Index fell almost 2 points to settle at 558.30.

[Yeager] Joining us now is one of our regular Market Analysts Naomi Blohm. Welcome back.

[Blohm] Thanks for having me.

[Yeager] Wheat is a commodity that is global and seems to be the biggest impact on the trade right now. Now throw in, in the United States, dry conditions as we get ready to plant the winter crop. Which is the biggest influencer on that market right now?

[Blohm] Everything is the biggest influencer with wheat. There's so much happening right now with the wheat market. I think that is why we saw the funds just have been exiting those short positions because they're very much aware that that negative sentiment is gone. And they're not long yet in the marketplace but they are at the point where they can become long if the news becomes friendly fast. Or just maybe sit on the sidelines. So, we're watching, to your point, we're watching how dry it is in the Southern Plains of the United States. That's a big deal. And we're seeing global production numbers start to drift a little bit lower. We saw in Russia that they've got a little bit lower production. Ukraine came out with slightly lower production. So did Argentina. And even in the United Kingdom. So global production is down just a little bit and that’s starting to keep that market supported. Russia came out this week and said that they were going to be increasing some of the export duties so that way they can try to kind of slow things down there for the exports. So, with all of the global production numbers starting to go a little bit lower, the wheat market is maybe on the verge of really waking up. Global ending stocks for wheat are at nine-year lows. Today's USDA report, not a lot of changes for global ending stocks for wheat. But we are at a point where if the war with Russia, Ukraine, anything flares up there, the wheat market is going to respond. If we have any further global weather issues, the wheat market is ready to respond. So, probably I'm thinking the wheat market maybe stays a little quiet for another week or two. But it's ready to pounce if that news becomes friendly. The funds are going to be ready to take action.

[Yeager] Given what you just said, how does one participate? Pause? Leave that market?

[Blohm] Yeah, I would encourage producers I think right now to be watching it daily because if there is some upside potential, if the news becomes friendly, the technical upside potential on the Kansas wheat and Chicago wheat futures points to about a 50-cent rally. But again, we need to have the fundamental friendly news to justify it. So maybe if you're concerned that prices could fall lower, I'd look at some shorter term puts to protect for the downside. But that is the friendliest grain market right now of the three is the wheat complex.

[Yeager] Given -- take everything else we're going to talk about with corn for a minute -- can wheat lead corn moving forward?

[Blohm] It could if the global weather situation and with more Russia and Ukraine war flares up. It has that potential. But the corn market is also starting to develop its own friendlier story as well. So, everything is seeming like it's kind of waiting in the wings right now, the funds getting out of short wheat positions, short corn positions, short soybean positions. Everybody is on the sidelines. So, today's USDA report didn't give us anything big for fresh news and that's normal for the October report. But it just sets us up that if there's weather issues or if there's any geopolitical issues these commodity markets are ready to just have a big triumphant rally from here or they might just kind of trade sideways in the short-term until we get a little bit more under us between U.S. elections. We're still watching Chinese economic policy issues. And, of course, global weather.

[Yeager] We are almost smack middle to where -- it feels like you've been here several weeks because I've talked about you for several weeks about the research you did about the market low, or the harvest low that comes in. I mention it all the time. And that election. We're kind of right in the middle of that spot. So, are we looking -- do you think harvest low is in our rearview completely and we're focused solely now on that election?

[Blohm] I do. So, the harvest low happened. That average rally was 51 cents. We made it right about to it for the corn market. Funds are about neutral in the marketplace. And now we sit and we wait. So, it probably is a quiet couple of weeks. We're waiting to see if any additional things happen with Israel. We're waiting to see if anything additional with Russia, Ukraine. And Russia this week attacked four different vessels in the Ukraine, in the Black Sea region. So, they're poking at things. Waiting to see how the U.S. elections finish out. And waiting to see global weather. So, I think it's going to be maybe quiet markets. So, when you have quiet markets that usually means prices trade sideways a little bit lower just because there's nothing to talk about. But again, everything I think right now is going to be more focused on outside market influences and it's really going to be focused on U.S. elections.

[Yeager] Let's go local. Everybody's favorite basis. Mike in Iowa has a social media question. Looks like the basis is really starting to fall off the cliff. I'm starting to see some big corn piles already and we are just getting started. What would you recommend that we do now?

[Blohm] So, I think a lot of people were able to do some basis contracts. But without any rain to slow harvest down, this harvest is going to be fast and furious. So, you are going to see piles coming into the elevator just because our pace is so fast. I know in portions of the Midwest the yields have been phenomenal, but there's other portions of the Midwest where it's hit or miss. So, if you're in a location where your basis is widening out, give it a month and then the basis will start to improve again after they just get through this initial harvest glut. So, it might be a standpoint of maybe do nothing in your cash market now, but look at some short-term puts under the marketplace in case we get some kind of a black swan and prices go lower. Again, I think we're going to see kind of a quiet trading range here for the short-term. There is potential for upside for prices heading into Christmas and New Years, as we keep an eye on South American weather, as we keep an eye on all of these geopolitical issues. But in the short-term there's just nothing to grab onto. So, if you're storing your grain at home, I would really consider just having some puts under the market to protect, just in case, because you just never know if the market is going to fall apart. But I do think just give it a few more weeks and the basis will start to improve once we get this glut of early harvest out of the way.

[Yeager] You mentioned South America. We're dealing with actual rain in the forecast and rain falling and that seems to be dampening soybeans. How long does that last?

[Blohm] Soybeans are the follower in this complex because we have a good enough USDA report today. They did lower the yield just a little bit, but it still is a record crop. We have 550 million bushels for carryout, which is pretty darn sufficient for the Midwest here. And the global carryout numbers are still strong too. So, the beans are going to be the follower. If November beans break $10 support on charts, I think you're going to see a technical washout of about 25 cents lower just because there's not any immediate friendly news to turn it around and take it higher. If we see that price set back lower it's probably a reownership opportunity or some kind of a buying opportunity for an end user and I don't think it would stay down there for too long because there is still so much South American weather to play out. They are dealing with parched soils in South America. They have the lowest river levels. And so, while this rain is coming through, it has been a little bit spotty. It has been sporadic. It's not totally, totally widespread, so we still are going to have some weather issues to play out in the bean market going forward. But in the short-term we're going to be lacking on some news.

[Yeager] Any news in the dairy market this week?

[Blohm] There has been some news in the dairy market. So, in California they're dealing with bird flu. So, we're going to ultimately see lower production in California. And that is not going to come into the market probably for another few weeks until we can see some concrete numbers behind it. But the other thing that has been bothering the dairy market is lower cash cheese trade. We've lost 54 cents in cheese, which is a big drop, and it was 14 out of 15 days that cheese market saw losses. So that has been weighing on the Class III milk futures. But the bright note for the cheese complex and the dairy complex is that our exports have been good. They were up 2% from a year ago with cheese actually and butter leading the way. So, we're kind of balanced I think here in the shorter term with front month contracts holding onto the $21 support area. But there's going to be some things going forward. We should see a pick-up in holiday demand for cheese, so that's encouraging and maybe this setback on prices will encourage some buying coming in. And then we have to keep an eye on what's happening in California with production.

[Yeager] Seasonality in the cattle market, summer never seems to end. I mean, it continues. I think you said this week we did have a bearish reversal getting close there on the summer high test. Is that still holding up with what you said?

[Blohm] Right, so markets are at back up to the summer price highs. So, it makes sense, cash markets had improved, boxed beef values have been stronger because the consumer is buying cheaper cuts of beef and buying ground beef. And so, the retailers have been stocking up for that. But now we're back up to those summer high prices and there is a stare down going down between the feedlots and the packers. And the feedlots are wanting more cash, of course, and the packers are saying we are only going to buy what we need just to get by until we know for sure what is happening in terms of demand, domestic demand and export demand. And exports this past week weren't that great. So, we're at resistance. Do we have enough news to go through resistance is what we're going to be finding out in the coming weeks? But right now, I would still be a little bit cautious and do some hedging.

[Yeager] I want to make sure I get this right. Stare down is you and me looking at each other, not stair step down, which has been a tendency to happen sometimes. We don't usually get that slow decline. Do you see a slow decline yet coming in the feeder market given what you just said about the packers and the feeders?

[Blohm] Yeah, so the feeder market has been still pretty good in the cash markets. There's been some strength there. But the feeder market also getting near its summer highs as well. So, that stare down is going to start to continue there. It's a matter of the funds who had been buyers. Are they going to continue being buyers in those marketplaces? Is there enough fundamental reason to justify going through those major overhead resistance levels on the charts or not? Otherwise, we might see profit taking kick in. So, lots to balance there and the coming weeks are going to be I think very exciting for the cattle industry and most commodities as we deal with weather, geopolitics and of course our elections.

[Yeager] Hog market, we really kind of -- we haven't mentioned China but the U.S. was expecting to see some stimulus out of China. That really impacted grains. Did it impact the hog market at all?

[Blohm] So, not quite as much. We had really good export news for hogs this week. Hogs up near their summer highs as well. And we are going to be wanting to see how North Carolina fares because that is the third largest hog producing state for the United States. So, as they come out of the hurricane issues there and keeping an eye on that global demand in general. So, we do need to keep an eye on China. They're supposed to be having another meeting soon to talk about potential further stimulus issues that could help with their economy. If we see good things come out of that, that should be beneficial for commodities. So, lots to keep watching over the next couple of weeks.

[Yeager] I have like six things that we need to follow up on Market Plus that you have dropped and I appreciate it because that's going to make it kind of fun here in just a few minutes. Naomi, thank you so much.

[Blohm] Thank you.

[Yeager] All right, that's going to do it here for our Analysis. We're going to pause for a moment. We'll continue our discussion about these markets in our Market Plus segment. You can find both Analysis and Plus on our website of markettomarket.org. We know that harvest is at a high point and we've made it easier to keep up on what's happening in the markets each week. Take us along via YouTube for the full program, the Market Plus and the MtoM podcast. Subscribe now and be sure to click on that bell -- you know, the one in the upper right-hand corner -- for push notifications so that you will know when we post our content. Next week, we put recent weather systems into perspective. Thank you so much for watching. Have a great week.

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

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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.

(music)

Family owned and operated for more than 60 years, Sukup Manufacturing is a full-service provider of grain handling, storage and drying equipment, helping farmers feed and fuel the world.

(music)

For over 45 years, Steiner Tractor Parts has shared your love of antique tractors. New parts for old tractors. Learn more at steinertractor.com or at 877-559-7887.

(music)

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.

(music)

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.