Rebuilding the Cattle Herd, Confronting Extreme Heat and Volatile Grain Markets

[PAUL YEAGER] Coming up on Market to Market, USDA pitches a new tool to rebuild the herd from the field to the farm bill. Extreme heat is changing the conversation and commodity market analysis with Ted Seifried next.

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[ANNOUNCER] This is the Friday, September 4th edition of Market to Market, the Weekly Journal of Rural America.

[YEAGER] Hello, I'm Paul Yeager. Another massive swing in the jobs report Friday from the Labor Department. In just one month, employers added 162,000 positions. In August. Revisions also added to the July and June totals. The unemployment rate held at 4.1%. Now, each of these data points will be part of the equation. The fed will consider at its next meeting on interest rates. The Business Conditions Index added a seven month of readings above growth neutral, with a mark of 57.1. The Creighton University based survey covers nine states, mostly in the Midwest, as travelers approach the Labor Day holiday weekend, AAA reported diesel fuel hit $5.85, a new record high, while regular gasoline topped 414. That's $0.94 per gallon higher than a year ago. The EPA this week exempted 1.76 billion Rin credits from the 2025 RFS, helping 29 small refineries, farm and biodiesel groups were cautiously optimistic that the EPA pledged to reallocate all Rins above a 9.90 million base line back into the market over the next two years. But that relief isn't final, as the EPA still has to finalize a rulemaking to return those gallons to the market, and biofuel groups say they're watching closely to make sure it follows through. Now, farmers affected by that decision were able to talk it through this week at the Farm Progress Show, which featured one high profile guest with direct news from Washington on other fronts. And this was before the president signed an executive order on country-of-origin labeling Friday afternoon. Here's Peter Tubbs.

[NARRATOR] Secretary Brooke Rollins rode in a tractor at the Farm Progress Show in Boone, Iowa, this week, and in a pair of speeches, shared the initiatives of the USDA. Rawlins touted the Trump administration's progress in modernizing the gathering and dissemination of AG production data and the expansion of biofuel production and availability. The Secretary also commented on the new effort to grow the beef herd by using livestock risk protection to protect the economic value of heifers kept for breeding stock versus heifers sent to feedlots. The LRP for heifers is similar to LRP products for fed cattle, swine and feeder cattle, which are subsidized by taxpayers by 35 to 55%, depending on the terms of the policy.

[BROOKE ROLLINS] Yesterday we talked about the new effort to retain heifers under the Beef Retention and National Development Endorsement brand, a fast-tracked new heifer retention endorsement for our traditional livestock risk protection programs in LRP, allowing producers to ensure the economic value of retaining a heifer for breeding over a two-, three-, 4- or 5-year period.

[NARRATOR] South Dakota rancher and U.S. Cattlemen's Association President Justin Tupper questioned the government's role in rebuilding.

[JUSTIN TUPPER] We've seen a lot of those LRP s and it's going to work like an LRP somehow, and I'm not sure I understand exactly how they're going to be able to figure that back. I think it has a lot of things that have to be worked out before it can, but a much better way to signal that we're going to grow the herd is to have profitability and sustainability within the marketplace. And the way we're going to do that is keep the government the heck out of our business, because that any of the ranchers that I talked to, they're not reaching for a handout. They don't want any of those things. We'd much rather have a free and fair market.

[NARRATOR] A falling heifer slaughter rate over the past two years is seen by analysts as an early signal that ranchers may be starting to rebuild the herd. This comes after more than seven years of herd contraction. The 90 day pause on tariffs to allow more lean beef trimmings to enter the U.S. Has taken effect, and action that has angered many in the beef business.

[BROOKE ROLLINS] And so from my perspective, the five things we announced yesterday, the additional 10 to 15 we're going to be announcing later this week, I believe everyone will look back on this time and say, okay, didn't love the three month lift of the TRC, but we're so grateful to a president that is willing to listen, willing to make big, bold decisions, and willing to put it all out there for our American producers.

[JUSTIN TUPPER] The worst part of it is, to me, I don't think that the consumer will see one penny less, I really don't. The only people that can possibly make money are the importers and the retailers. They already know the consumer will pay this much for it. That's how the price point has worked forever.

[NARRATOR] For Market to Market. I'm Peter Tubbs.

[YEAGER] A new NPR and Boston University investigation estimates that heat contributes to about 9000 U.S. Deaths each year, more than five times the federal average of about 7700 recorded heat related deaths. The discrepancy may come down to how deaths get recorded, as heat can trigger a heart attack, but the death certificate often only often only lists that as the cause. Now, Heat's toll isn't as visible as hurricane or flood damage, which is exactly why resilience planning matters for both rural and urban areas. A reminder on heat arrived just this week, as the heat dome over the central and southeastern United States recorded heat indices well above 100 degrees. Dr. V Kelly Turner is an associate professor of urban planning and geography at UCLA. She will be the guest on the next MtoM podcast. Part of our conversation is this week's cover story.

[KELLY TURNER] I mean, we see that folks in the agricultural sector are having to think about things like growing and planting times, and even things like fertilization. Like the whole process is built around climate and weather. I mean, nobody knows weather better than farmers. And I mean, you could argue that like most of our kind of cultural institutions, like the school year are all built around things around agricultural seasons.

[NARRATOR] This is not a new phenomenon in our lifetime. But what has changed from when we were kids to now?

[KELLY TURNER] Not a lot has changed in terms of the infrastructure, the air conditioning, access, the tree canopy and all that stuff. But yeah, I think a lot of people are surprised to find out that he kills more people than all weather-related disasters, but it doesn't create that kind of property damage. Mark, where you see, you know, after hurricane, it looks like a hurricane has been there. After extreme heat event, you don't have quite that impact. And so, I think that it can be harder to make the case both kind of on a visual level, but also because that property damage translates to dollars. And that's what a lot of our kind of recovery systems are tied to. So, making the case that heat is a crisis requires rethinking, okay, it's not about how many buildings were knocked over and destroyed. It's about how many people ended up in the air.

[NARRATOR] Can we build to protect against heat?

[KELLY TURNER] Well, I think it takes building and management. So yes, absolutely. The solutions to heat are here. And you know why we know they're here because some people have them.

[NARRATOR] I used to when I worked at a weather or a TV station in eastern Iowa, our meteorologist would say that the area changed as the community that we were in grew larger and hotter, that weather patterns seemed to change. Systems used to kind of go around a warmer community than maybe they used to. Is that was he on to something or was that bunk?

[KELLY TURNER] Yeah, that that absolutely is true. I know that precipitation patterns can be affected by urban development changes. The experience of the climate, but I would argue also it creates new opportunities, especially when it comes to heat, because you're so clustered together, you have that shade opportunity, but also access to services. This is where there's sort of an urban rural difference. We hear a lot about protecting cities from heat, but we also need to just protect communities from heat. And so, if you're in a rural community and the next building is get in a car and drive 20 minutes away to get to a cooling center, that's a much different prospect than living in an urban area. So, we've got to kind of rethink about the lifestyle and the kind of morphology differences there.

[NARRATOR] You also hit on something with the building, and I want to just explore this for a little bit. We talk about in Florida, we build homes that can sustain hurricanes. In Iowa, we build homes that can withstand a tornado. You're saying that there's technology there in. I think you said something about a smart roof that can maybe help cut down on some of the heat in areas is tell me a little bit more about that.

[KELLY TURNER] Yeah. I mean, we need to treat the whole building envelope the same. You know, we have we have things like regulations and building codes about the amount of insulation and like roof reflectivity, the cool roofs that can reflect sunlight, energy away and make it, you know, less warm in the building. And that means that it's cheaper to cool the building as well. If you need to do that. So that's for new buildings. But then there's some kind of gaps. There's retrofitting old buildings. And that's a huge issue we find in some older homes that, you know, it's not so easy to put air conditioning in because the building isn't set up, it's not wired. It becomes a whole prospect of re electrification. So that's one issue. And then, you know, a home is not a home. It's not a home. There's rentals and there's mobile homes and there's, you know, there's all different categories of homes. And so, the easiest one to, to kind of attach heat, new heat values to is the new buildings through building codes.

[NARRATOR] Before we started recording, we were talking about the Iowa State Fair. One thing that the Iowa State Patrol was they had a truck in a pretty high populated area, direct sun, and they've had it for years. But it shows what the air temperature is and what the temperature is inside the car. We've seen those demonstrations before. We've seen local news put a plate, a sheet of cookie dough in the dash of your car to see how it cooks. The fry the egg on the sidewalk. Those are temporary ideas to try to get on our brain, but it sounds like we need constant help to think about other ways to actually address the heat issue, not just tell us the heat issue. Is that what I think you're saying?

[KELLY TURNER] Yeah. And I think there's actually an opportunity coming up that's like super relevant to state fairs, which is there's a farm bill hanging in the balance and, you know, that has protections for food and food, refrigeration built into it, but not necessarily for people. I think that every time there is a chance to, you know, structure funding in communities, my hope would be that we're thinking about, okay, will this survive extreme heat events? Because that's going to be the reality that we're living through. So, we got to bake it into everything we're already doing.

[NARRATOR] The full MtoM episode will release Tuesday.

[ANNOUNCER] Next, the Market to Market report.

[YEAGER] One prospect of peace appeared to be the sinker of the grain rally, which returned to volatile trading patterns midweek. The nearby wheat contract fell $0.50 and the December corn contract was even. Hot and dry weather still loomed over the soy complex. The November soybean contract added $0.22 and December meal gained 620 per ton. December cotton weakened 505 per hundredweight. October Class three milk futures lost $0.63. The livestock complex was higher. October cattle found one 22nd October feeders put on 362 and October lean hogs improved $0.40 in the currency markets. U.S. Dollar index fell 53 ticks. October. Crude oil surged higher by 7.57 per barrel. Comex gold lost $48.90 per ounce and the Goldman Sachs Commodity Index added almost 33 points to settle at 73713. Here now to lend us his insight on these and other trends is regular market analyst Ted Seifried. Hello, sir.

[TED SEIFRIED] Hey, Paul. How's it going?

[YEAGER] You know, a week ago, two weeks ago, we were talking one headline dominating wheat. That headline changed dramatically. Early part of the day changed middle of the day. Why is wheat so susceptible to what's going on with the Black Sea between Ukraine and Russia still?

[SEIFRIED] Well, I mean, Russia is the number one wheat exporter of the world, and Ukraine is 2 or 3. So obviously, we're going to be very sensitive to that. We have been sensitive to it since the war started, but we hadn't really seen any real infrastructure damage or any real disruption of exports from those two countries. Recently, we have been seeing that, you know, there's some reports that one of the Russian ports is going to be at least four months before it's fully operational again. I don't know for sure, but the fact that there are actual disruptions occurring at this point, now, we really have what we've always thought was, was a possibility from when this thing started. Now we have an issue where we might start seeing wheat shipments having to be displaced to other countries, and we've already seen that France signed a deal with Egypt. Egypt usually goes to Russia, right. And France, given their drought issues, doesn't have a whole lot. So that that we know that that tank is, is, is not going to last very long. So yeah, now we have some actual structural issues. And that's what's really creating the, the drama in the wheat market. But not only that, I mean, every day you hear, oh, well, maybe we're going to have peace talks again. And then there's some more attacks. And then what? Maybe we'll have peace talks. So, it's really back and forth. You've seen crazy volatility in the wheat market. And we are hanging on the headlines.

[YEAGER] And has that spilled over to other commodities.

[SEIFRIED] Well absolutely. Corn. You know corn is the big one for Ukraine, right. I mean, that is well, the big one that we care about really. But yeah, I mean, Ukraine exports a whole lot of corn. And that's really, really slowed down dramatically in the last few weeks. If it stays like that, oh boy. Then, you know I know you're going to bring it up. But you know, the term I use for corn a couple of months ago was a potential powder keg. Well, we've seen the first act of that in corn, but the second coming of that could be global corn exporters having issues pushing more business to us. If that is going to be the case. Well, this is now going I mean, that furthers on the idea of the potential powder keg.

[YEAGER] I was going to bring it up, but might as well get it out on the table now. Why not? You saw a lot of this coming and a lot of these factors kind of all aligned. Are we still in alignment even after this week? And what do you see getting us off track?

[SEIFRIED] Yeah. You know, I think the new analogy that I'm using is this is kind of like a fireworks show, right? Where you open the show with a big hurrah, and then it kind of simmers down a little bit. And then you get into the finale. I think we've seen the big initial hurrah opening of the show. I think we're kind of we're going to kind of get into the time frame where it might slow down a little bit. The Second coming in my mind, is going to happen in the winter time into the early part of 2027. The reason I say that is we just saw the largest rally in the month of August that we've seen in over 50 years. Okay. That is the market. A late season rally that is adjusting for lower yield, lower production. I think at this point, we've got that mostly factored in. That really depends on what the USDA has to say next Friday. But I think for the most part, we've really factored that in at this point. And now you have funds that are record long for this time of year, second longest, second biggest long position that they've ever had in corn. And you have your natural seller, the US producer, that I think still has a fair amount of old crop of that 17 billion bushel crop that we had from last year. That is probably going to go to town before we really get into the bulk of harvest. And you've got a whole lot of sales out there that should be happening for new crop. Guys have really taken a back seat on that because with corn had been, you know, higher every day really through the month of August. You wait, you know, you don't sell into strength like that. I'm not saying you shouldn't sell into strength like that. I'm just saying that's the mentality. If it's going to be up another $0.10 tomorrow, why would I sell today? So, the natural seller and the fund that is extended about as far as they've ever been before, makes me worry that we could see a pretty significant pullback in the corn market at some point in the relatively near future. Now, that being said, the super El Nino for South America, the lack of fertilizer there, fertilizer inputs are down over 11% year on year. The issues that were in the EU, France in particular. We’re going to have to pick up a lot of that business because the French corn crop, which is I mean, they export 40% of their crop to the rest of the EU. They're not going to be able to do that this year. So, we'll have that business potential. Picking up Ukrainian business. And the big wild card is does China start buying as part of its $17 billion of US ag and ag related products, all of that. These are the next stories that perpetuate the powder keg or that finale to the fireworks show. But that might not happen until we get further into the fall, into the winter, or especially into the early part of the next calendar year.

[YEAGER] Harvest may be here quicker in the soybean area because of this heat this week. Did this heat do anything to move this market more than token and or did it significantly pull off some extra top bushels?

[SEIFRIED] I think it did pull off some top bushels, although we did have a better start to August this year than we've had in the last couple of years. Soybeans do everything they can to sacrifice, sacrifice themselves, sacrifice the plant to put as much moisture as they can into pods. But the heat. Yeah, I mean, we dry down very, very quickly. So, I do think we took the absolute top end off of the soybean yield. We're still, though, in the process of determining soybean yield. We're much further along in that process for corn. And we had that rally in August. Soybeans were still trying to figure that out. We are very, very curious to see what the USDA has to say on that next Friday. What their fields say, what their test fields say. I don't know, you know, I sit somewhere still in the mid 50 twos for soybean yield because we had that better finish at the beginning of August, even though we had lower pod counts when we were out on crop tours. But I don't know, you know, I could see that number swinging into bushel. Well, two bushel in either direction, but more so possibly the downside.

[YEAGER] I know you talked about old crop corn a little bit, some who might have some leftover. If anybody has any leftover beans, have they missed the boat and getting rid of anything.

[SEIFRIED] Right. No, I don't know about yet that I'd be more I'd be more concerned about the old crop corn. I think there's more of it out there. Old crop beans. Yeah. I think you can kind of afford yourself some time with that. The thing about beans is that the demand side of the equation is very inelastic when it comes to if China's going to buy 25 million metric tons of soybeans, no matter what, no matter what the price is just for political reasons, that means the rest of the world business that the USDA has on their balance sheet is at 13 year lows. There's not a lot of fat to trim off the bone there. The other thing is crush. Crush isn't that dependent on flat priced soybeans. Crush is dependent on crush margins, which are really, really good because of soybean oil mostly. Although meal has really picked up the pace recently. And so, if you're not rationing crush, you've got export demand to countries not named China. At 13 year's lows, there's not much to ration there. And you absolutely just can't ration the 25 million metric tons unless there's a change. Change in the political tide, man, that demand side of the soybean balance sheet is pretty much there. So, if you start cutting into production, you can't ration demand or it becomes a lot harder to ration demand. Well, that is now the new powder keg.

[YEAGER] Speaking of political issues, country of origin, an executive order by the president signed just before we started to roll. What does that mean for the livestock market right now? We only have like 90s.

[SEIFRIED] Yeah. Talk about breaking news, right? I read this three times right before we started talking. And from what I can tell, this is entering into a 90 day period of a review from the U.S. Secretary of Agriculture and the Trade Representative's representative to see if it's even something that we can do and what the economic impact of it would be at the end of that 90 days. That's when we decide they decide if they're going to move forward, forward with it or not. So, for me, from what I read very briefly before we came on here, it's not a certainty that that is going to be a thing. It's in a review process. That's how the government works.

[YEAGER] And the markets didn't have much reaction to it when it started leaking out late this morning. But quickly on feeders or cattle, which one do you want to give us a little insight on the market this week?

[SEIFRIED] Either way, we had a kind of a knee jerk reaction lower. And then we kind of came back. You know, we've been in a downtrend. We are in this downward trending channel. And we came up and we tested the upward end of this channel and then kind of backed off of it here today. It looked like at the end of the day, Thursday we could break out to the upside, but we didn't do it here on Friday. There's still a potential to do that though, because we didn't make a new lower low. So, it does look like there is possibility that we're trying to bottom the cattle complex here at this point. But it's too early, too early to tell.

[YEAGER] Yeah, that one was the big part where you kind of thought maybe we'd hit that. Hogs, though, finally put on a positive week. Is this a sign of better things ahead for them?

[SEIFRIED] Could be. I mean, yeah, hogs do look better on a chart. They had gotten very oversold at the very least. I think they're due for some sort of corrective move.

[YEAGER] All right. And as before we leave you saw the story on retention. You also saw the story on diesel fuel. Are you confident that the high is in on diesel yet?

[SEIFRIED] No, no. I mean look, nothing has changed with the issues in the Middle East. And I don't know if that'll happen anytime soon. We also have a tendency to overshoot fair value in either direction. I don't think we've done that yet for the diesel fuel. Unfortunately, there could be more upside.

[YEAGER] Ted. I have about 15 questions of my own, let alone all the ones I've submitted. We'll get to them in Market Plus. Great to see you as always.

[SEIFRIED] Always a pleasure, Paul. Thanks for having me.

[YEAGER] Ted Seifried everyone. You've been watching the analysis portion of our program. In a moment, we'll continue our discussion in an online only segment that we call Market Plus, which is available wherever you get your podcasts. You can also go to our website at markettomarket.org .org to listen. We roll out new material on our YouTube channel every week. We put up some regular features on this program, as well as some classic content from our vault. Subscribe [email protected] slash Market to Market. Next week we look at issues facing Congress as they head back to Washington ahead of the midterms. Thank you so much for watching. Have a great week.

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[ANNOUNCER] Market to Market is a production of Iowa PBS, which is solely responsible for its content.

[ANNOUNCER] Market to Market is made possible in part by a grant from the Corporation for Public Broadcasting.

[ANNOUNCER] Support for Market to Market has been provided by a bequest from Philip Lietz of Alta, Iowa in recognition of public television's commitment to agricultural programing.

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[ANNOUNCER] 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.

[ANNOUNCER] I wouldn't be here without my customers.

Yeah, I'd like to thank the customers. They're very dear to our hearts.

It's about the people that you're working with and the relationships that you have.

Thank you, thank you, thank you.

Thank you from the bottom of my heart.

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[ANNOUNCER] Tomorrow., for over 100 years, we've worked to help our customers be ready for tomorrow.

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[ANNOUNCER] Trust in tomorrow. Information is available from a Grinnell Mutual agent today.

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