Market to Market - Jun. 25, 2021

Market to Market | Episode
Jun 25, 2021 | 27 min

Finding ways to capitalize on carbon in farm country. More debate over price transparency as a new packing plant comes off the drawing board. Reducing the chances of famine.  Market analysis with Jeff French.


Announcer: Market to Market is everywhere you are! Subscribe to Market to Market on YouTube, find us on the PBS Video App to stream on-demand and add our three podcasts on your favorite podcasting app.

Paul Yeager: Coming up on Market to Market, finding ways to capitalize on carpet in farm country. More debate over price transparency. As a new packing plant comes off the drawing board. Reducing the chances of famine it's going to depend on is a crop out there and market analysis with Jeff ranch. Next what's the most complex industry on earth. It's not genetics or meteorology or logistics. It's a business that involves them all. It's farming. Thank you farmers from pioneer

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. This is the Friday, June 25 edition of market to market the weekly journal of rural America.

Paul Yeager: Hello, I'm Paul Yeager. If a product isn't available making the sale is a challenge. Try getting a new vehicle, not on the lot or a house, not listed with the realtor sales of existing homes fell for the fourth straight month. As a limited supply and storing prices kept many would be buyers at bay orders for big ticket manufactured goods rose for the 12th time in 13 months, the commerce department reported transportation orders were a big factor in the expansion. Consumer spending was unchanged in May as incomes drop for the second straight month as stimulus money wound down, Congress went shopping for new roads and bridges this week as part of a bipartisan agreement on infrastructure over a five-year $973 billion bill in new spending the Senate. Meanwhile created a third party carbon certification program at USDA. The issue of carbon could offer farmers a new avenue for revenue. Josh Buettner reports.

Josh Buettner: This week Iowa road the bleeding edge of monetizing climate value through regenerative and sustainable farming practices by forming a carbon sequestration taskforce, Republican governor Kim Reynolds will chair the group created by executive order who will review research, bird-dog economic opportunities, and determine the state's role in aligning with Biden administration priorities on climate change.

Monte Shaw: I guess it really doesn't matter what you or I or your viewers think about it. Our customers are telling us to lower the carbon footprint. So if we do that, that's how we make more money. As you get a premium in those types of markets,

Josh Buettner: Iowa renewable fuels association, executive director money, Shaw lauded Reynolds, move to get ahead of the curve. But as regardless of politics, business shifts, climate are driven by consumer dollars.

Etienne White: MasterCard. For example, have a carbon calculator. When you get your credit card statement at the end of the month, they can tell you based on your spending, what your carbon footprint has been in

Josh Buettner: Recent months, several farm space, virtual events, like one this week hosted by indigo ag have highlighted the demand for domestic carbon credits generated through farming.

Paul Hawken: There is truly a market there for these carbon credits

Josh Buettner: Proponents say conservation efforts like cover crops and reduce tillage, improve soil, lower input costs, increase profits and offset pollution from industrial sources looking to mitigate their own carbon emissions.

Jodi Manning: Not only do we need to neutralize and decarbonize, but we need to start drawing down war and a carbon removal do that. Soil is a carbon removal

Josh Buettner: Near weeks in a bipartisan bill passed the Senate to break down technical barriers for farm and Forester entry into carbon credit markets citing a recent lab study, which found typical biofuel plants have lowered their carbon footprint by nearly 25%. Over the past 15 years, Shaw says Iowa now has a unique opportunity.

Monte Shaw: Think about corn ethanol that corn plant sucks. Carbon dioxide down from the atmosphere when it grows right now, when we ferment that corn into ethanol, it releases that carbon dioxide it's just kind of an annual cycle, goes back and forth. But if we capture that carbon dioxide and then do the sequestration that this taskforce is looking at, we actually could become carbon negative

Josh Buettner: For Market to Market. I'm Josh Buettner.

Paul Yeager: If Economic logic of competition benefits, the consumer, the same can be said about the provider of goods. If more can bid on your wares, the fight for your product creates opportunity for growth. The beef producer has been looking for more options with an eye on raising prices paid at the packing house door. John Torpy has more

Sen. Stabenow: Turn to Senator Smith, who I believe cattle

John Torpy: Industry officials and researchers were on Capitol hill this week to examine the issues facing producers

Sen. Grassley: Does captive supply create more leverage for Packers to pay lower prices for fed cattle and the cash market

John Torpy: Appearing before the Senate agriculture committee, the panel discussed a range of subjects, including price discovery and the impact of the cash market on the supply chain. When

Justin Tupper: The big four can have, uh, all of that captive supply. So they do not have to go out and compete for those cattle. Then they can push down the prices along

John Torpy: The border of Nebraska and Iowa, a fourth generation cattle feeder believes building a beef processing plant has the potential to solve some of the concerns addressed in this week's hearing. The last

Chad Tentinger: Two years in the cattle industry has taught us is that we have and deficiency and capacity to process cattle in the Midwest

John Torpy: For a decade, Chad Tigger has been looking for ways to build a processing facility that meets the needs of the region's cattle producers. If all goes, according to plan, the Cattleman's heritage processing facility will open near the end of 2023,

Chad Tentinger: Twelve hundred head family farms is our target, and we plan to have our, all our cattle in our pipeline coming through our plant already. So we won't necessarily in five to seven years beyond the open market bidding against anybody else, they will already be procured by us in our pipeline

John Torpy: By locating the plant in Western Iowa. Tennigar hopes to attract a workforce from nearby Omaha, Nebraska, while giving producers in six Midwestern states access to a regionally located processing plant.

Chad Tentinger: The fact that matter is if you look at the industry, there are plenty of profits in this industry, from the ranch, all the way to retail, our attempt using the family farms is to spread that profit around. There's plenty for everybody

John Torpy: From Market to Market. I'm John Torpy

Paul Yeager: Food insecurity is a persistent problem. In some cases that insecurity has led to famine the world food program estimates 155 million people in 55 countries faced acute hunger. Last year, the bleak numbers have been motivation for governmental and non-governmental organizations to keep up the fight to eradicate hunger and famine. Despite the persistent problem, Coleen Bretford Krantz found the outlook may be a bit more positive. This is our cover story

Colleen Bradford Krantz: Just a generation ago. It would have been hard to imagine someone saying this.

Ken Menkhaus: We have been, uh, quite successful, uh, at reducing and almost eliminating outright famine, uh, from the world

Colleen Bradford Krantz: Ken Monkhouse a political science professor at north Carolina's Davidson college. Isn't the only one who has noted how close the world has come to wiping out famine

Jean-Paul Rodrigue: Historically they were recurrent. So famines have disappeared. That's excellent news.

Colleen Bradford Krantz: The one exception noted by these professors and the United nations, which helps determine when a hunger crisis is officially declared a famine is the situation in the African nation of Somalia, just over a decade ago.

Ken Menkhaus: I think in the seventies and eighties and into the 1990s, a famine was tragically very much a part of the, the political landscape, uh, in a variety of places, especially in Africa, it would have surprised people to hear me say, uh, just 20, 30 years later, uh, that, that, that we thought we had conquered famine. And that's why the famine in Somalia in 2011, which, which claimed over a quarter of a million lives, uh, was such a setback. And so stunning for us, it was a reminder that we haven't in fact solved all the underlying problems.

Colleen Bradford Krantz: The world has however, dramatically reduced famine related deaths. Most of which result from weakened immune systems combined with normally minor illnesses, rather than directly from starvation. Since the 1860s, the Americas have represented a small portion of such death. The same is true of the middle east, historically Asia, India, and China in particular, struggled for generations with severe and recurring famines, a situation that eased with agriculture's green revolution, which provided the region with better plant genetics in the 1970s, parts of Europe suffered famine during the early to mid-1900s, including a world war II cluster of hunger related deaths. Since the 1990s Africa remains the only region still struggling with famine though on a smaller scale than was typically seen in the past. Many of the historic famines were tied to either war or natural disaster such as crippling drought, but with improved transportation and logistics for the movement of food and advances in agricultural production experts say today's natural disasters are less likely to result in widespread death.

Jean-Paul Rodrigue: You can now move efficiently place, uh, supplies from places which are surpluses to places which have shortages in a very rapid fashion. And that's the reason they've met the famine in human history in the past. It was not because the food supply was not there. Its meanings could not be moved.

Ken Menkhaus: More responsive. Government is key, uh, that, that, uh, Amartya Sen, uh, famous Indian writer on this topic, uh, made claim that was backed by strong evidence. That democracies don't experience famine because democratic governments have to respond to the needs of their people. But there's also a number of other factors that green revolution has dramatically increased production. Um, we've got much better, uh, food aid, distribution systems. We've got high tech and low tech abilities to monitor, uh, crops and yields long before we get to allow humanitarian crisis.

Colleen Bradford Krantz: Both professors say the work done so far to feed the world during the COVID-19 pandemic has been a remarkable example of the resiliency of the world's food system.

Jean-Paul Rodrigue: Yeah, it depends on Nick was a gigantic stress test on our food supply systems in the United States. In particular, it took some few weeks and months to be a lot of eggs to adapted it, but it was no technical shortages.

Ken Menkhaus: I remember going to the store at one point and they had no blueberries. And for second I was a little kind of put off, but then I realized, well, dude, we're living in a pandemic. You know what I mean? Maybe there aren't supposed to be blueberries here now.

Colleen Bradford Krantz: One potential consequence of the pandemic on future famines. However, is the financial pressure that follow the U S government's accumulation of an unusually large amount of COVID related debt in the last two years for an aid, however, is typically only a small percentage of the federal budget. About 1%, most years

Ken Menkhaus: It could affect down the road, the level of us foreign aid that is manifested in actual money that's allocated to the development assistance. I don't think it's going to affect humanitarian assistance in part because we are, we continue to be a major producer of surplus food, and we want to find constructive ways to use that

Colleen Bradford Krantz: Menkhaus is more concerned about the most significant remaining barrier to fully eradicating famine. We'll

Ken Menkhaus: Never see famine eradicated as long as food can be used as a political weapon. And that unfortunately is what's happening right now. The Tigray region of Ethiopia, Northern Ethiopia, um, there is a war and an a, a military operation going on, um, in which food aid is being blocked. And we're now hearing that we are just a few short steps away from the possibility of seeing outright fam. And there again.

Colleen Bradford Krantz: Menkhaus who witnessed hunger and starvation while living in Somalia during an earlier famine says it's important to remember food insecurity will continue to be a major concern. Even if the world keeps the wolves at bay, by holding off future famines,

Ken Menkhaus: That has a searing effect on you. When you see babies that malnourished. Um, I got back to the United States and my first trip to the local grocery store, just to pick up groceries and set up normal life. I got to the produce section and I just started crying. I just, I just lost it. It was the only time I had to wait until I got all the way back to the U S to see that level of plenty, to realize and process what I had just seen in the famine. It just strikes you what a miracle our food system is.

Colleen Bradford Krantz: For Market to Market I'm Coleen Bradford Krantz

Announcer: Next, the Market to Market report

Paul Yeager: The effect of next week's acreage report from USDA on the commodity markets was reduced. When on Friday, the Supreme court ruled in favor of petroleum refiners in a battle over exemptions for blending renewable fuels for the week, July wheat lost 26 cents. While the nearby corn contract shed 19 cents, the soy complex also received pressure from the court's ruling for the week. The July contract dropped 66 cents. July meal fell 26, 20 per ton, December cotton added $2 per hundred weight over in the dairy parlor, July class three, milk weakened by a nickel, a mixed week in the livestock sector. August cattle added a dollar 25 August feeders increased 4 52 and the July lean hog contract plummeted 6 73 in the currency markets. The us dollar index lost 33 ticks August crude oil expanded to 67 per barrel. Colmex gold gained $8 per ounce and the Goldman Sachs commodity index drops by more than 10 points to finish at 5 2995.

Paul Yeager: Now here to provide insight is market analysts, Jeff French. Hello, Jeff.

Jeff French: Paul. Great to be here.

Paul Yeager: All right. I'm going to throw you a curve ball right off the bat. Okay. All right. I got two maps. I'm going to show you. And it's ones that I talk about all the time on our social media channels. One is the drought monitor. This is the drought monitor data. Cutoff is Tuesday morning. You can still see the west North Dakota, South Dakota, Montana, Iowa, Minnesota, back towards the east. This is a look at what the rain was then for the week. This is a weekly estimate, not the areas that needed it the most, but some areas that are big producing states. So which map had a bigger impact on commodities this week? The drought monitor or the rain precip?

Jeff French: Oh, I think the rain precip, uh, you know, we're going into pollination here pretty soon. And when you have this amount of rain forecasted for Iowa, Illinois, and parts of Indiana, they're saying, you know, 60% of the belt here over the weekend could receive up to upwards of one to four inches. And sometimes even locally, even more than that. So, you know, it's been hot out there, but we're getting some relief with some cooler temperatures. And I think that drought monitor, when you look at Iowa next week is going to show some improvement, especially central and west Northern, Northern needs rain. Yeah.

Paul Yeager: Up towards Minnesota and the Dakotas you've heard from everybody, but let's go into wheat country a little bit. Rain has been an issue, uh, in Kansas, Oklahoma for parts of this year, Texas. Is that the pressure on the market this week and wheat or, or is it just harvest pressure?

Jeff French: A little bit of both. I mean, it's also the pressure from their harvesting. Some of the best yielding wheat they've ever had now it's production wise. It's not going to be the biggest crop because acres were low. You know, a lot of this wheat planted last winter was our last fall was planned with a four in front of it. So we've had a big run up here, but, uh, uh, guys were hurrying to try to get this harvested before the rain, but, uh, their yield reports that I'm hearing from are better than expected. And, uh, that could continue to pressure prices in the winter wheat. But it's a major different story when you're looking at the spring wheat up north,

Paul Yeager: Are we going to be done seeing corn, uh, with a six in front of it? I mean, we've already seen December is flirting with going back below five. Are we done with sixes and fives for awhile?

Jeff French: Um, I think we're going to have to see what next week brings, uh, you know, the demand has been good, but this markets are about momentum and we've seen momentum up to the upside. The last two weeks. We've seen it come down here to the downside, you know, DC corn has lost more than a dollar here in the last two weeks. It held the a hundred day moving average at five 18. Uh, we have not closed December corn below the a hundred day moving average since August 13th, 2020. That is the exact day that this rally began on. So watch that number. I think that is a big issue and, and technically a big sign. If we close below that you get below $5, there's a gap down to the daily charts at 4 77.

Paul Yeager: All right. That 4 77 is a scary number. So if I haven't the whole, if I have any bushels left discussion is done. And in the past, if I've got anything left to contract for the fall that I feel comfortable doing with corn, do I do it now?

Jeff French: You know, I, I don't, we we've made sales at higher prices. Uh, we have our downside put protection in place in case it continues to go lower. Uh, we want to see what comes out next week. Uh, you know, the, the trade is anticipating, you know, th th this big growth in, in, in, in corn acres, which, you know, I can't disagree with, but that's already been built into this market. That's well expected. Um, you know, what about if the USDA doesn't increase the acreage as much as the trade anticipates? You know, that would be the bullish surprise. Uh, the trade is anticipating a pretty good growth in, uh, planted corn acres.

Paul Yeager: All right. Let's take a question right now that came in via Twitter, and this is pumpkin man in Michigan, and he says, do you think we may have taken the top off yield potential? that's a weather factor and the markets are only trading large acres.

Jeff French: Uh, it could be most, I mean, depending on where you're looking at geography geographically, uh, you know, if you're looking into the Dakotas parts of Minnesota, you know, yeah. Probably at the top of the yield has been taken off, uh, some places in Iowa, you know, we've got some good rains here that Slack's weak, and we got some more, uh, coming, hopefully here this weekend. So, you know, I'm not ruling out yet that we can't see trendline yields. I mean, we'll just have to see what the weather in July brings. And we all know that corn is made in July, not in June.

Paul Yeager: What about soybeans? Uh, well, it's a little early for the weather story to take effect there what's exports. What's the weight right now?

Jeff French: Well, it's really the whole bean complex. Uh, we saw a huge run-up in the bean oil, uh, the edible oils throughout the world. Uh, there was just a massive run of demand with low supply, and that kind of led us up well, that's corrected and that's led us down here. Um, you know, beans here in the last two weeks have shed almost $2 and 20 cents a bushel, uh, watch that 1265 area in November. Uh, that's a big technical area that opens the door to lower prices, but, you know, you know, we're talking about all this rain and price declined, you know, the balance sheets, especially in beans remain extremely tight. I mean, you're talking about a stocks to use ratio below 4% still. So, you know, again, it comes back to the momentum and right now it's to the downside, we had some news out there that was negative. And, uh, you know, Friday, you'll see market sell off like this.

Paul Yeager: You see the USDA, what's the crystal ball. I mean, mark, the trend is saying one thing about acreage next week, where do you see it?

Jeff French: You know, it's, it's gonna come down to that corn acre number. I mean, the trade has got kind of that 94 million acres, uh, penciled there. And that's kind of the average, um, you know, what are the, the private analysis last year that was pretty spot on. I mean, they, they actually have bean acres going down. I mean, that would be a shock. Uh, you know, everybody is expecting more acres to be planted. I mean, we had a great run-up in prices. Why wouldn't you plan it? Uh, there was definitely, uh, uh, you know, reward there be to be made if you've got the planted in. So we'll just have to see what they say next week,

Paul Yeager: Livestock wise. Um, this is one that has really confounded a lot of people live cattle. We just had a story about the beef packing industry. Congress has been involved their sniff into a problem that we knew existed, that there's just not many people processing. Is this the consumer driving this live cattle train right now?

Jeff French: No, I mean, this is the Packers. I mean, you know, the week that they have a Senate hearing, you know, cash prices jumped three to $4 a higher, I mean, there's plenty of room for them to be paying up for animals. I mean, they're making anywhere upwards from 800 to $900 a head. Um, you know, next week though that the USDA report will drive the livestock prices. I mean, you have feeder cattle up here and this $161- 64 area. Uh, I, I think personally that needs to be protected and going to this because if there is a Boulder surprise and corn does rebound, uh, you will see the feeder cattle, you know, they, they came into this week rallying and, uh, they'll reverse course real quick.

Paul Yeager: Cattle on feed, uh, on feed a hundred percent placements, 93 marketing's 1 23, any surprises in the cattle on feed report?

Jeff French: No major surprises. It's pretty friendly. I mean, the placements came in 3% lower than expected. Uh, you know, I look at the August board at $122, I think it's too cheap with cash at $126, $125 areas. So I would look for us next week to get a bounce early, and then we'll have all eyes on the U S degree report on Wednesday. So what would be a barest scenario if I'm a feeder from the acreage report next week? Um, 92 and a half million acres planted, and you'll see corn probably, um, you know, 25, 35, maybe even lock limit up higher. And, uh, you have November feeders, we've got a double top on the charts at $164, uh, you know, put on an August $155 put for the next week. See what happens?

Paul Yeager: Are you making recommendations then I absolutely need to be covering a whole bunch of feed needs right now?

Jeff French: Uh, yeah, I mean, it's on sale down here. I mean, if, if, if I'm a feeder, uh, and I'm looking at covering my fourth quarter needs, absolutely. I mean, you have meal right now, bean meal, that's a hundred dollars off its highs per ton. Uh, corn prices, a dollar off their highs in the last two weeks and beans, you know, two 20 off the high. So yeah, I would be covering feed needs here.

Paul Yeager: In the hog market. We're flirting with that a hundred dollar mark, and what's going to keep us from staying above it or going below it.

Jeff French: Well, we've had a big sell off here. I mean, we've broken 20 to $24 per a hundred off the highs here in a real quick fashion. Um, you know, the funds are going to control that the funds had a massive position. They were long 88,000 contracts. Um, you know, it's estimated now they're probably long about 65,000. Uh, so do they want to defend that position or do they want to continue to liquidate? You know, you look at the fourth quarter hogs, they're down here at 86 cents. So are we anticipating a, a falloff of demand? I mean, typically yes, the summer months after, you know, 4th of July, we do see a little bit slower demand kind of the dog days of summer. Um, but they're pricing in priority a pretty steep decline already. Uh, we'll just have to see where that brings us,

Paul Yeager: Uh, real quick, uh, cotton in 10 seconds, cotton acres. Um, are we going to see that there was maybe more taken away to soybeans and cotton?

Jeff French: I think it's going to be less than 12 million acres, uh, and it's been tremendously wet down there in the Delta. A big problem.

Paul Yeager: Well, I asked you a question in 10 seconds, my own fault, Jeff French. Thank you. Thanks Paul. That's my hazing. All right, that'll do it for this installment of Market to Market. We will talk more and Market Plus, so you can join us there. Find that on our website of market to, YouTube has something for everyone, including full episodes stories and our market plus subscribe by going to our page of Market to Market next week, the data markets and surveys of the USDA. Thanks 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 the most complex industry on earth. It's not genetics or meteorology or logistics. It's a business that involves them all. It's farming. Thank you, farmers from pioneer

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.

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