Market to Market - June 3, 2022

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Yeager: Coming up on Market to Market, USDA unveils plans to assist consumers and producers. Shaking up a niche market. And market analysis with Dan Hueber…Next!

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Announce: This is the Friday, June 3 edition of Market to Market, the weekly journal of rural America.

Yeager: Hello, I'm Paul Yeager. Another movement higher in one sector of the US economy. The number of jobs added during the month of may 390,000 positions were created to extend the streak of solid hiring. Despite high inflation, many sectors added employees with retail being the big exception. The unemployment rate held at 3.6% approaching a pre pandemic low. The MidAmerica Business Conditions Index remained above growth neutral in may on solid manufacturing activity. The survey of supply managers in nine Midwestern states did fall on a month over month reading. Transforming systems like food is no easy task. The pandemic altered the lanes that were in place and then created new ones. Now, USDA wants to take that a step further. Peter Tubbs reports,

Tubbs: The United States Department of Agriculture announced a new round of initiatives aimed at adding flexibility for both consumers and producers for the American food system.

Vilsack: I believe a transformed food system will sustainably produce more food, allowing the United States to meet its global responsibility through exports and donations, to ensure global food security with these investments, the transformed food system will mean more new and better markets, generating better income for producers and better choices and prices for consumers.

Tubbs: The spending aims to improve both market opportunities for agricultural producers and options for consumers looking to feed their families. Independently owned processors and distributors will see guaranteed loans for distribution and cold storage projects to further strengthen the food distribution system. In order to reduce the fragility of the meat processing industry, the USDA will fund the training of potential meat processing workers. The pool of employees could help keep meat processing plants online during another high demand period. Like the one seen during the COVID 19 pandemic. The USDA also will encourage more regional food centers. The move would assist small and medium sized food processors and distributors to better serve their markets. The organic food sector will see increased technical assistance to farmers interested in transitioning to organic practices along with increased crop insurance options. There will be an increase in funding for the farm-to-school program. The infusion of funds will be used to try and increase the amount of locally grown produce purchased for America's school lunches. The healthy food financing initiative will fund grants and loans to improve food access in both rural and urban areas that are underserved by grocery stores or food retailers.

Vilsack: When faced with grave challenges, America seizes the opportunity to transform itself into a stronger and better form of itself. I believe a transformed food system will deliver a better deal for farmers, ranchers and growers and consumers through more new and better markets. Also stimulating our rural economy. I believe a transformed food system will also lead to better health outcomes for Americans by increasing access to healthy, locally grown foods

Tubbs: For market to market I'm Peter Tubbs,

Yeager: Alexander Graham Bell once said "When one door closes another door opens" and this is often said when a layoff or other job change occurs, creating a new path may bring more freedom for an entrepreneur to try something new, but it may also put pressure on that new entry into the marketplace. Josh Buettner explains in our Cover Story.

Buettner: In 2020, the coronavirus pandemic triggered economic fallout, leading to job losses for tens of millions in the U.S. alone. For one recent college graduate being laid off was the final nudge he needed to branch out by returning to his roots,

Sanness: Reconnecting people to the food. They is kind of the idea. I had

Buettner: A sixth generation farmer from Northeast Iowa Tanner Sanness helped raise livestock and row crops growing up.

Sanness: There were some scientific studies that suggest that they, uh, may help a nerve regeneration. They're also really, uh, delicious. They, uh, really good seafood replacement.

Buettner: Now he's acquired a taste for specialty mushrooms shared by a growing number of locals, willing to pay a premium for his ultra fresh supply.

Sanness: I had listened to a podcast and I was talking about the health benefits of, uh, lion's main. And I was too broke. I was in college at the time to afford the supplements. So I ended up buying a grow block of the lion's main. Uh, we fruited it right on our kitchen table and, uh, dehydrated the lions main and made a powder out of it. Um, and then I had kind of fallen down the YouTube rabbit hole of how to grow it, and didn't really see that there was anyone growing oyster mushrooms or lions main in the area. Um, and that's kind of where my business degree came in hand. And I saw the niche in the area.

Buettner: Basic button mushrooms have long dominated us shells. According to industry trade association, the American mushroom Institute mushroom farming contributes over 3 billion annually to the us economy, U S D a data points to California and Pennsylvania as responsible for 90% of domestic supply though. Cheaper imports from Canada, Mexico, South Korea and powerhouse. China are growing as is a hunger for more exotic varieties.

Sanness: You're basically adding the mycelium, which is the living organism of the mushroom and to its favorite food. And the humidity from the grower makes it, uh, fruit it'll take around a month for it to completely encompass these bags,

Buettner: Initial research and online classes quickly led to a makeshift grow room. Within two months, Santas was selling his harvest at a local farmer's market. Now an upgraded grow space inside a repurposed refrigerator trailer in a barn on the family farm gives him the environmental controls and space needed to bump yields to around 250 pounds per week. His startup reconnected farms supplies, various food outlets within a 60 mile radius of George Chester, Iowa.

 Haugland: We started carrying Tanner's mushrooms November of 2020. And as soon as we started carrying his product, it almost doubled our sales.

Buettner: Brian Haugland is the produce manager at Woodman's market in on Alaska Wisconsin, a suburb of lacrosse where Santas went to college with around 20 stores in Wisconsin and Illinois Woodman's prides itself on high quality fresh produce.

 Haugland: So normally mushrooms they'll be harvested, shipped to a distributor. It might take up to a week before those mushrooms are received in the store. And with tanners they're coming here same day. You know, when you're getting 'em that fresh, you're getting the best product you possibly can.

Buettner: Haugland says health conscious customers prefer the taste reconnected farms brings to the table, as well as the antioxidants and vitamin D not present in many other plant-based foods.

Osmundson: We think of sweet and bitter and salty and sour when we think of tastes. But there's another taste that's known as umami that, uh, is found in many mushrooms. That's sorted more that savory taste.

Buettner: Dr. Todd Osmundson is a mycologist at the University of Wisconsin - Lacrosse who uses DNA to study and identify the geographical distribution of fungi, various strains, and their relationship to different environments.

Osmundson: I think the idea of food is medicine has really taken off. And, uh, there are a lot more supplements that you can buy that have mushrooms in them than there were even 10 years ago. And it's also getting attention in clinical settings.

Buettner: Osmundson says past scrutiny of mushroom compounds has led to pharmaceutical heavy hitters like penicillin and cyclosporin and fungal analysis continues regarding their immune system influence fighting infections and cancer. He adds use of varieties like lion's main stretches back three to 7,000 years between ancient Greece and traditional Asian medicine.

Osmundson: There's been some suggestion that it could be helpful in Parkinson's disease, ALS uh, possibly Alzheimer's disease, any disease that involves neurodegeneration. A lot of these ideas haven't been explored using standard double blind kinds of medical experiments, but there is a long history of use that suggests that they might be really powerful.

Sanness: This is actually the first flush of king trumpets that we've had on the farm. These are, uh, reishi mushrooms

Buettner: While commanding wholesale prices between eight and $11 per pound for current crop, Sanness experiments, with other varieties, with other health benefits, he might offer customers one day. He adds that because reconnected farms uses organic substrate and excludes chemicals and pesticides. Gaining organic certification could be easy and help unleash another product line with even higher premiums as demand accelerates. Sanness hopes to expand deliveries to a 100 mile radius within the Driftless region of Iowa, Minnesota, and Wisconsin, but he doesn't sweat competitors using his roadmap.

Sanness: I think the market's plenty big for multiple growers in an area

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

Announce: Next, the Market to Market report

Yeager: Russia's pledge to open a safe shipping corridor in the black sea, nearly single handedly sunk the trade.

Yeager: For the week, the nearby wheat contract shed a $1.18 or 10% while July corn dropped 50 cents.

Yeager: Bulls and bears wrestled for the narrative on the soy complex. As China bought some grain while money managers and technical traders changed positions, the nearby contract fell 35 cents. July meal declined $24.40 per ton.

Yeager: July cotton shrank a. $124 per hundred weight.

Yeager: Over in the dairy parlor. July class three milk futures gained a penny.

Yeager: The livestock sector was mixed. August cattle put on a $1.45 August feeders added $7.55 and the July lean hog contract sold off 98 cents.

Yeager: In the currency markets. The us dollar index improved by 43 ticks,

Yeager: July crude oil strengthened $4.81 per barrel.

Yeager: Comex gold lost $3.50 per ounce.

Yeager: And the Goldman Sachs commodity index gained more than 15 points to finish at 805.15.

Yeager: Joining us now to provide some insight is Dan Huber. Hey Dan,

Hueber: Hello.

Yeager: You know, sometimes in this show we discuss changing the, the, the order that we talk about things. Wheat though, in 2022 has been in the headlines almost every single week. We've done the show. Oh yes. When you're down almost $2 in 10 days, those aren't the headlines you wanna be.

Hueber: Well, not if you're on the long side of the market by any means. So it, uh, it, you know, and again, as you touched on, you know, there's a lot of things that have kind of combined, which is always the case combined to, to put that pressure on they're the most recent being Russia making this semi offer of opening up shipping channels, you know, how, how generous of them to, you know, let, let people go through so stuff

Yeager: That's not theirs.

Hueber: Well, not theirs to begin with. So it, uh, you know, you, and again, when you really think about that topic, you know, Russia not only attacked, uh, started a war with Ukraine. They really started a war against everybody who needs import food in the world. And particularly, you know, nations that are very dependent on, on wheat imports having, uh, difficulties of their own. I mean, the, the, the Horn of Africa is, is working through drought. And of course, very dependent on getting that grain outta the Black Sea. And, you know, there's, there's really a situation. A lot of these nations, it becomes a question of, do we feed our people or do we pay our debts? And you know, now we're at the point where probably some countries are gonna begin, begin to default on debt because they need to feed their people first and foremost. So it's a, it's a very, it's like I say, it's a war on not just Ukraine, it's a war on the rest of the world. In many respects.

Yeager: The wheat story is probably one of the most global that we, we talk about here on a regular basis. Yeah. However, we have our own domestic story going on here. It seems to be, I sound like a broken record each week asking about, well, there was rain in the Southern Plains and the Northern Plains was as wet. There's finally maybe been a window starting to open up for some spring wheat. Right. Right. And some other crops, all the questions are pretty much asking that same question. Sure. So now on the Spring wheat, United States, mini-wheat kind of had a week for a little while, despite the USDA saying, yeah. There's not a lot planted. Right. And what's going on.

Hueber: Well, not lot planted. I mean, again, progress is being made. And again, it's, I think the, wheat's probably looking at the, the global situation yet. Yes. I mean, we are. Yeah. I mean, not that we still start still, aren't a, a major player in the wheat market, but compared to other nations, you know, we're a little bit more of a minor role, particularly when it comes to supplying outside. Uh, there was news this week that Australia is looking like they're getting off to a great start. Again, could probably will be, unless there's an issue, come up the third, uh, very large crop in a row, if not pushing a record crop. So, you know, those type of things kind of temper the, uh, the enthusiasm, but, but I think as much as anything, you know, so much hype happened this year, and I don't just call it hype, but panic building risk in, we don't know what happened with Russia.

Hueber: We, uh, we know we had difficult difficulty with crops here and in Canada last year. So we built a lot of premium in because of that risk. And I think, you know, now that people are getting a little bit accustomed to, you know, our is, is the war going to be as bad? Did we, did we plant as much or as little as we thought in Ukraine, you know, every time you get a little relief there that takes a little more risk premium out of the market. And I think that's exactly what happened with wheat.

Yeager: Well, I, my question was gonna be simple, but you just maybe may maybe change it, midstream there, you make it sound like if the premium were, we're taking advantage of that, the easy question is, is the low in and wheat, but what you just said, I don't think it is.

Hueber: Oh, I, yeah. I don't think we're done yet. You know, I, I, if you wanna say that is the high wheat, I would, I would certainly agree with that one, but, you know, short term. Yes. I, I think probably within the next few days, we've pushed it far enough, uh, for this kind of a correction and probably chances are, we we're, even though that's kind of seasonal, uh, we probably should see a rally in June, but I, I think it's gonna be a, a corrective rally. It's not a new drive into something new into the upside.

Yeager: We might not be the big player on the block when it comes to wheat, but the United States is when it comes to corn.

Hueber: Absolutely.

Yeager: Coming into today, we were down 80 cents in two days. But back to Russia and Ukraine, that story is spilling over into the corn market. But there's, what else is at player? Cause someone else is.

Hueber: Well, part of it is lack of demand at this point. You know, you're really not seeing any, uh, any demand to speak of on old crop corn. Uh, you know, the sales were really pretty disappointing again for a second week in a row on corn. And yes, we had a little tension when we could not, uh, when we were late on getting into the field, but, you know, that has picked up very rapidly. Uh, yes, there's a, there is, uh, no doubt that we're probably gonna lose some acreage in the Northern Plains. Uh, same token. I, I talked to a number of guys through an Illinois in the "I" states. The, if they could get the available supplies of seed, they, they put in some extra corn. I mean, you know, now we're talking about major, but you know, a hundred acres here, 200 acres there ultimately adds up. So, uh, I think we're gonna see that kind of balance out to what is lost in the north, you know, not to mention, uh, you know, look at the yield differences between those areas. So, you know, a hundred acres of gaining in Illinois, uh, certainly more than offsets a hundred acres loss in, uh, in North Dakota.

Yeager: Well, and again, all these questions about the same thing. Let's just go to a question now we're gonna go to Gary in Franksville, Wisconsin, where they've had their own, uh, weather story this year. Sure. Gary's asking will corn's price drop, uh, this week, plus high propane, natural gas prices and cooler temps be the three strikes that keeps the corn planters in the shed for the last acres and lead to either prevent plant or switch to bean acres.

Hueber: The, uh, you, what, again, each farm's gonna be a little bit different, you know, as far as what they have on economics, what they have as far as booked in for fertilizers and those type of things, you know, absolutely, there's gonna have to be a, a pickup in the prevented plant claims out there in, particularly in the Northern tiers. Uh, you know, again, you know, even though we've, we've pulled back, this is not a discouraging price on corn by any stretch of the imagination, you know, for, for this year or for the next year or the year after, as far as that's concerned. So, uh, I, I, I think guys will plan it up to the very end and, and some might even go beyond their, uh, their insurance date because the, I think the profitability is there for people who have those inputs covered.

Yeager: However, okay. When you've looked at 80 cents, 50 cents melt away, how do you still position yourself here moving forward next week?

Hueber: Well, you know, one, that's assuming you haven't done anything as far as up up to this point. You know, some people might have been a little more aggressive on getting things sold. Uh, you know, here I, my, my viewpoint kind of on the corn and the wheat, I guess the same way is, you know, there's no time to, there's no sense panicking. We still have too much growing season ahead of us. We know the next 30 days is almost always an important period in the corn market, but you know, now it's time to kind of put on the hat of thinking of, I need to sell the rallies more than thinking about, you know, just how extreme can it get or, you know, do, do I need to worry about buying the breaks and covering the sales I made already? No, I think we've done enough damage that we've probably seen the high, but that doesn't mean we can't rebound and, and give us second third opportunities to make sales,

Yeager: Wheat and corn sound more like fundamental stories. Is the beans story more of a technical one?

Hueber: Uh, no, I would say it is part of it is still fundamental as well. I mean, I think there was a, when you look at the basis levels, we've seen throughout some of the, uh, Midwestern states, I mean, Illinois dollar over some of the processors. Now, granted some, some plants have shut down for maintenance, maybe doing it a little bit premature, but I think it's, they're having a very difficult time securing the beans that said, you know, we're, we're really kind of on the border, you know, could we have broken out to the upside this week? Well, we, we knocked on the door, but just couldn't quite get the job done. So I think it's, we're gonna need a, a new, fresh story. If we think beans can accelerate beyond where they're at. And I, I'm not exactly sure where that's gonna come from. So you'd almost think it'd have to be weather because demand is slacking to their as well. So,

Yeager: Well, and there was a question, I, I think you wrote this, uh, a little bit about this bull story. It's kind of to what you're saying, the fresh news, the bulls need the fresh news, right. But what is going on with this bull spread in the beans by the money managers?

Hueber: Well, and you know, here again, I think that's typical in a market like this. Yeah. We have difficulty finding availability of bulk crop beans. There is good margin in crush, if you can get ahold of the beans, but when you look at the new crop, you know, we're still looking at, uh, a good plant pace. Uh, you know, we're looking at more acreage, you know, let's go back to the, the prospective planting report. You know, there was the, the bearishness in the beans in that, you know, we were looking at a couple million more acres than anybody really thought that was quickly forgotten about, but if the weather stays good, we get beans in the ground that will come back into the story, again.

Yeager: I, I used one of your lines a couple weeks ago, and somebody thought I said something differently. You, you like to write "word of gov", that's coming up next week. What is the "word of gov" going to tell us on these first three crops that we're, uh, looking at this week?

Hueber: You know, I mean wheat could, because that is more of a developing crop. We could have a, uh, some interesting news. I, I would suspect in the beans, they might need to, uh, push up some of the usage a little bit. Uh, you, you generally don't get anything, you know, major in that June report, just because at the end of June, of course, we end up with final planting as, as final as it's gonna be until hopefully the end of the year at that point. So it's, uh, yeah, they tend to just do tweaks in, in, uh, in June, but I would, you know, corn probably not looking for a whole lot of change. I doubt they will change the yield, particularly since they came in with a little lower yield on that initial report that anybody really anticipated. Uh, but beans, I think you could see a little boost in usage. There's the one, you know, you look at corn availability, it's not burdensome, but it's certainly not, uh, worrisome either. You know, particularly if we get an decent crop coming. So I means that's, that's a tight one. So

Yeager: I need to slip in real fast here on cotton. We slipped below the 50 day, moving average for the first time in quite some time. Right. Does that mean the end is near there?

Hueber: It would appear. So, you know, they, uh, we tried to rally back today. Yeah. Didn't do a great job of holding onto it. So yeah, the cotton market looks as well. Like it's probably, and you know, here good, some pretty good range in, in west Texas where the, uh, where the cotton's in. And, uh, so, you know, not, not that it's great conditions down in the south and Southwest, but it, uh, but improved conditions, let's

Yeager: It's also cattle country down there on the feeder side, we're up a $1.45, the live cattle story is that bullish here now?

Hueber: I, it, it looks like we've probably finally sparked up here. I mean, really for the last two to three weeks, it just could not come off a dead center. Uh, you know, and granted historically, you know, $1.30 cattle is not exactly a depressed level, but on the same token, I, I looks like we ready to turn up. Of course the feeders, you know, probably are, are, uh, being depressed as much of anything because of the break in the corn market. So it should make things a little bit more attractive there, but, but here again, too, you know, the, uh, uh, if we're gonna see those kind of, uh, the feed grains under, under, uh, under pressure, then maybe the best way to get corn to markets walk it there.

Yeager: Well, and it's walking through the feeder market up 4.5%, $7.55. I think you said depressed, but do you not see as bullish of a story for the feeders?

Hueber: Oh, no. I can say, I think if, if the corn is, is depressed. Oh, I see. It translates into a full story for the feeders. Yes. Correct.

Yeager: But, so I'll ask the question. That's the easy one. Sure. Are you expanding any, uh, cattle herds right now? Any of those feed lots.

Hueber: I, uh, a good question. I, I guess I haven't really talked to enough people to, uh, to think of a good answer on that, but I would, uh, you know, if, if it's coming off of, uh, I mean, I think the, the cattle on feed earlier this year, things came off of pasture because of the right conditions. But, uh, you know, if that, uh, I guess my biggest hesitation thinking, you know, think, trying to think through this is that, uh, if there is concerns about the, uh, the economy, which, you know, I think there's, you know, enough people rattling the recession bell here at this point in time. that probably could put a little hesitation in the retail side of it. And we, we already know inflation has been, uh, pinching the, uh, consumer out there. So, you know, that might be the tempering effect. You know, why, why try to put a lot of cattle on feed at this point, if, uh, we're not sure how that retail count is gonna act this summer?

Yeager: Well, retail sales have, they've just shifted, right? We're still buying stuff as Americans, we've got money and reserves there. We said that today in the, in the jobs report, but we're not buying as many hogs or are we because that at the, at the meat counter, when you go, that seems to be the, the, the cheaper option on protein.

Hueber: So, well, I mean, it should be the cheaper option. I, of course it would've been poultry. Had we not have the, uh, the flu situation that it really kinda decimated the herd there for, for a while. That should be coming back. I did it did here today that the, uh, um, several states have lifted their restrictions on, uh, on, uh, on feeds here or allowing access to, to birds and, uh, keeping 'em out of the open. So, but, but same token. Yeah. I, I think, uh, pork, um, you know, here again, we, the last couple months have been a little bit difficult there, but you know, same, same token. We're not exactly depressed levels there. I think we've just kind of gone through a correction, maybe have a little bit further to go there, but it's, you know, I, I, I don't see, we see where we have a complete, wipeout going to the pork market.

Yeager: Yeah. I mean, we closed on Friday, $110.75 on the July contract. That's not a, but it's about perspective. Oh, sure. So how do you alter your perspectives and protect yourself here.

Hueber: Now from the producer side?

Yeager: You talking? Yeah, let's out, let's say producer side.

Hueber: The producer side, you know, again, I think granted the big detriment there of course is the, the high price of feed stuffs at this point in time. But, you know, once again, it's just keeping your pencil sharp when you see opportunities a hedge hedge, because I don't think this is gonna be your runaway to the upside. Now

Yeager: I'm trying not to do too much in pencil, more in ink, but, uh, I'm. I see, they're telling me to write it and say, wrap up and we're done. Oh, thanks, Dan. Very good. Thank you. Good to see you. All right. Great. We'll keep the conversation going here, uh, in Market to Market, cuz that's gonna do it for this installment, but we're gonna keep going in Market Plus. We have a whole bunch of your questions to ask. So join us there. Find that free in our website of markettomarket.org. Wanna let you know that we've been on the Flipboard train for several years, pinning stories we're reading as the producers of the show and think that you may find interesting and helpful. Search Market to Market reading material on Flipboard. Next week, a drought reality check for agriculture in the West. Thank you for watching. Have a great week.

Announce: Market to market is a production of Iowa, PBS, which is solely responsible for its content.

Announce: 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

Announce: Tomorrow for over 100 years, we've worked to help our customers be ready for tomorrow trust and tomorrow information is available from a Grinnell mutual agent today.