Market to Market - June 10, 2022

Market to Market | Episode
Jun 10, 2022 | 27 min

Preparing for one more legal fight on Prop 12. Sorting out the details on the 2023 Farm Bill. Making tough choices in another year of drought. Market analysis with Sue Martin.


Coming up on Market to Market -- Preparing for one more legal fight on Prop 12. Sorting out the details on the 2023 Farm Bill. Making tough choices in another year of drought. And market analysis with Sue Martin, 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.  


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


This is the Friday, June 10 edition of Market to Market, the Weekly Journal of Rural America.


Hello, I’m Paul Yeager.

Another 1981 reference this week, that last time the inflation rate rose this much, the Oakland Raiders beat the Philadelphia Eagles in Super Bowl 15. —

The Consumer Price Index rose 8.6 year-over-year according to the Labor Department.

The monthly rate went up a full percent with higher rents, gas and food prices.   

When the volatile components are removed, the core reading added 0.6 percent. 

The Ag economy barometer from Purdue University and the CME group dropped 22 points. Producers’ perceptions on current and future expectations weakened in May.   —

Work on the next Farm Bill continued this week. 

Two of the biggest issues addressed in the legislation were under review - the safety net for producers and food assistance programs.

David Miller reports. 

On Wednesday, the Subcommittee on Nutrition, Oversight and Department Operations invited witnesses to discuss the Supplemental Nutrition Assistance Program or SNAP. The 2018 Farm Bill allocated an estimated 75 percent of its budget to food assistance programs including SNAP

The experts invited to the hearing asked the committee to make changes to SNAP that would modernize the program and decrease barriers to entry.

Mr. Mike Beal, Chief Financial Officer, Ball's Food Stores: 1:37:05 “Food is a very basic human need, we all know that, right. And I will tell you what I see anecdotally, when people don’t have the money to buy food, they’re still going to find a way to get food. And what we see when they can’t afford to get the food, we see it in our stores today, increasing, because of inflation, the price of gas, housing and everything else is that we see our theft go up. It’s what we call shrink.

USDA statistics reveal that 1 in 8 Americans are food insecure. According to the department, 41 million are currently being assisted by SNAP at a cost of roughly $9 billion per month.

Mrs. Ty Jones Cox, Center on Budget and Policy Priorities:1.36.11 Another key piece for the Center is the 3-month time limit for unemployed adults without children in their home. This is just a harsh time limit there’s no research that shows taking away from food from people is going to make them be able to work.

Included in the discussion were concerns over immigrants and refugees being able to receive SNAP benefits.

On Thursday, the Subcommittee on General Farm Commodities and Risk Management met to talk about two titles for the 2023 Farm Bill, commodity loss payments and crop insurance.

Austin Scott, Ranking Member, Subcommittee on Farm Commodities (8:55) This is administration is clearly showing their lack of regard for fulltime farmers and ranchers that produce our food. Instead of going on Jimmy Kimmel, perhaps the administration could remove the excise tax diesel fuel and reduce the cost of farming.

A large portion of the discussion focused on the future of the farm safety net. Over the past year, potential producer profits have been bolstered by bullish futures markets which kept the current safety net of ARC and PLC payments from kicking in. Even with higher prices, a trade war with China and the COVID-19 pandemic put a drag on the size of those profits. Federal payments were delivered to offset the trade war and the pandemic but the money has failed to make most farmers financially whole.

Rep. Cheri Bustos, D- Chair - House Agriculture Subcommittee on Nutrition (39:04) What’s an appropriate metric we should be using to evaluate how the safety net should be structured.”

Dr. Joe Outlaw, Texas A&M University: (41:11) What we need, Madame Chairwoman, is that prices are going to decline but input prices are going to stay up for a while, and they always do, and that’s going to leave people in a cost/price squeeze. Either looking at some sort of margin or building in the ability to ratchet up the reference price with the cost is my suggestion.

More hearings will be held in the coming months before a markup on the 2023 Farm Bill will be scheduled in the full committee.

For Market to Market, I’m David Miller.

A new 8,000 head beef slaughter plant has been proposed for Rapid City, South Dakota. The facility could be operational as early as 2023.

Also that same year could see news impacting the pork industry and how it raises animals.

The Supreme Court is poised to hear arguments on California’s Proposition 12 later this year with a ruling to follow. 

The case again was a topic of conversation at one of the industry’s largest gatherings. 

Peter Tubbs files this report from the World Pork Expo.   

The 2022 Pork Expo returned to the Iowa State Fairgrounds in Des Moines, Iowa this week, and the sunny skies belied a potentially cloudy forecast for a legal case that hangs over the industry.

At the annual event, officials with the National Pork Producers Council laid out their challenge to California’s controversial Proposition 12. The 2018 ballot initiative mandates minimum space requirements for breeding sows, and other farm animals, that produce offspring which are eventually sold as meat in the Golden State. However, after nearly four years, no specific regulations have been finalized. The NPPC’s lawsuit has been considered to have merit and will be on the docket to be argued before the United States Supreme Court in the coming session.   

Michael Formica, General Counsel, NPPC: “It is as close to a per se a case of an unconstitutional final extraterritorial law is you're going to find the you know, the first type of this case that the Supreme Court has taken up in literally decades. You have the state that produces zero pork, that passed a regulation, passed a law with the intent of applying that outside of the state and imposing its will on pork producers that are 100% located outside the state. And that is not allowed under the US Constitution.”

The case will hinge on the limits of the laws of one state affecting business practices in other states.  

Michael Formica, General Counsel, NPPC “Iowa can have its own laws regulating its own citizens and its own businesses. New York can have its own laws regulating its own citizens and its own businesses in And another state can't impose its regulatory reach into those states. W feel very confident in our chances and look forward to bringing our case to the Supreme Court.”

The Supreme Court calendar for the 2022-2023 session has yet to be released. 

For Market to Market, I’m Peter Tubbs

California’s Central Valley has also been known as the nation’s salad bowl. Del Bosque Farms has played host to a president, several governors and other Congressional and state level representatives. Labor and food issues often come up for Del Bosque, but there is one that tops the list. Our conversation is part of the next MtoM podcast and this week’s Cover Story. 

Joe Del Bosque: But by and large, the biggest topic is, is water because for most farmers here in the Central Valley, that's their biggest concern. Labor is for those of us who grow fresh fruits and vegetables, but everybody here and in California, actually all the farmers need water.

Paul Yeager: You are pretty much right in the Central of Central Valley. Is that accurate?

Joe Del Bosque: Yes, I'm on   the west side. But in the central part of the San Joaquin Valley, you know, Central Valley is really two valleys. San Joaquin and Sacramento, San Joaquin is the larger one. And I'm kind of in closer toward the middle. Yes.

Paul Yeager: And your farm, what is behind you over your right shoulder there.

Joe Del Bosque: These are cantaloupes right here behind me.

Paul Yeager: and what's to your left then.

Joe Del Bosque: And on the left that you can see that is fallow fields. Basically, we planted, we tried to plant some grain or cover crop there and hope that the rain, nature waters it, but we didn't. So some of it came up and just died. So there's no crop there. We're just, it's just something that if we get rain, we get something, but there was nothing. So it's important to understand that here in California, you know, we don't, we don't depend on what rain falls here. Really, these melons don't depend on rain that falls here. They don't want rain. They don't want rain right now. We're dependent on rain that falls in the north part of the state that is captured in a reservoir, save and brought to us when we need it, and where we need it. And that's the way it is not just for agriculture, but also for urban areas. You know, Southern California gets a lot of their water from Sacramento Valley and Shasta and, and the Bay Area gets a lot of water from the Eastern Sierra Nevada, or central Sierra Nevada. So we all in California, are dependent on a man-made water system that captures the rain or snow melt saves that for when we need it. And then we have a system of canals and so forth to distribute it.

Paul Yeager: What's the status of that reservoir right now?

Joe Del Bosque: I just happened to go by San Luis yesterday and I stopped there. It's at 44% of capacity, which is very low for this time of year. You know, typically, it fills up about the end of March, early April. And then it starts to come down slowly. But it never got full this year. It only got up to about 60 or 60 some percent full and it's been draining ever since because as the temperature gets hot, people use more water and of course agriculture irrigates more as temperatures rise.

Paul Yeager: I think I saw maybe Sacramento was back in March had a 90 degree temperature and it was the earliest 90. Was that right?

Joe Del Bosque: There were some very high temperatures back in March. And so that created a lot of snow melt. And typically snow stays up there in the mountains till about this time a year and then it starts to trickle down. But because temperatures are so high, most of the snow melted. And I don't know how much they captured the snow melt. I would like to think they captured everything they could, but you never know sometimes they just let it run out to the ocean.

Paul Yeager: Well, and that's when you see that happen that you just have to but I need you know that how serious is the water situation right now?

Joe Del Bosque: It's very serious. Everybody in California should be very concerned and the governor has asked people to conserve water. The ag people have and I'm talking residential. They've actually using more water than they did last year. And so I think he now has ordered or mandated that water in like, I guess unnecessary landscaping, like maybe dividers on the highways or maybe factories if they have some lawn, not to water anymore, but the residents have not been mandated to cut back the water. We've been mandated. We've, we've had our water cut in, there's no doubt about agriculture, we get cut every year. But it isn't very often that that residences are cutting back.  it almost feels like the state of California doesn't value our agriculture as much as we do. And as much as other parts of the country in the world do. I mean, people come all the way here from Sweden to find out what's going on with their supply their, their source of almonds, it's important to them. And yeah, we don't see that kind of urgency with California.   They're just they just basically say get used to it. You know, some of you are going to be gone and and that's it. But you can't this is food supply. You can't just are you going to tell people will get used to your food supply part of your food supply is going to be gone. So get used to it. People aren't going to get used to it. And and we're trying to save that we're trying to save the food supply that we all love and and enjoy both in California and out of California.

The full MtoM is released each Tuesday. Subscribe via our YouTube channel or wherever you get your podcasts to hear Del Bosque talk about a different labor challenge this year.

Next, the Market to Market report.

The weather story paused at week’s end for USDA’s WASDE and crop production report. For the week, the nearby wheat contract added 31 cents, while July improved 46 cents there in corn. A tight bean supply added to the bullish story in the soy complex. The nearby contract gained 48 cents. July meal jumped $21.20 per ton. July cotton expanded $6.88 per hundredweight. Over in the dairy parlor, July Class III milk futures added a penny. The livestock sector was mixed. August cattle put on $2.35. August feeders increased 60 cents. And the July lean hog contract fell $5.27. In the currency markets, the U.S. Dollar index improved by 202 ticks. July crude oil strengthened 87 cents per barrel. COMEX Gold added $24.10 per ounce. And the Goldman Sachs Commodity Index gained almost 7 points to finish at 811.90.

Yeager: Joining us now to provide some insight is Sue Martin. Hi, Sue.

Martin: Hi there, Paul.

Yeager: Thank you for coming in.

Martin: Thank you.

Yeager: I wrote the part about the weather because it seems all of a sudden weather has been all we've been talking about. We had this report, June is usually insignificant. Let's just quickly, we can sum it up, the report today was basically --

Martin: Neutral negative.

Yeager: Neutral negative. So let's start with wheat. Are we at the mercy of Putin only for wheat in the world and in the United States?

Martin: No. I believe that we've got French wheat has declined for the sixth week consecutively in conditions. You've got Germany, which is a very major producer as well in Europe that is having issues. India, which surprisingly the USDA did not reduce India's production or exports as much as we thought they should. But exports 2 million metric tons and 2.5 I think it was on the production where many in the industry think it should be more like at least 6. And I think that the fact that India banned exports was a major thing. And they didn't only ban exports of wheat, they also banned exports of sugar. And so I think that when you're looking at yes, the situation with Russia and Ukraine, back in February of '21 when I came off with my projections into '23, of course that was not on my radar. And I think that what we're in is a massive global demand market. And that was a disruption that helped drive this market. But I think that with time we're still going to see wheat prices evolve higher but you're heading into harvest and so right now you've got a wheat market that of course surprised everybody at the beginning of the week with 60 cents up because of Putin, but also then you turn around and we kind of give a chunk of it back. The market is kind of ebbing and flowing right now and so I think it takes patience. But I don't think we're done in the wheat market.

Yeager: Done, not done. 3% on the week. But let's look at deferred, mostly United States focused now. How does anybody prepare for the weather story that they've had to deal with? Again, wet in the north, dry in the south and then it turns wet. Kansas just got dumped on a week ago after we taped this show.

Martin: They did but the problem was that was probably a little too late for a chunk of that crop. So I think that if anything the rains were still a good thing as a whole for pastures and maybe for crops coming in after wheat for double cropping. I think in that light it was a good thing. But probably for the wheat crop as a whole a little too late.

Yeager: In corn, the almighty corn continues to try to pop out of the ground. We're facing weather in that story as well. We're done with the 70s business. It's going to get hot next week. What does that mean?

Martin: Well, at first heat should be a good thing because of the fact it's going to give the crop some growing degree energy units and it's going to encourage growth. So we're going to get the corn, it will be like you could almost stand there and watch it grow, beans pop out of the ground, it's going to help. But it also is going to cause probably if it's in an area where it has been wet and farmers have mudded crops in, it's probably going to create some crustiness on the ground. So that is not a good thing. But if we go past the next two weeks, traders right now are saying okay, two weeks of heat, we could use that. But if it goes beyond two weeks then they're going to start to get a little nervous. And a lot of this crop did go in later than it did a year ago so that means your pollination comes a little later and so traders are certainly going to be on cue because the last thing you need is a weather issue now. We have 1.4 billion bushel carryout for '22, '23. That is nothing real burdensome at all. And if you start lowering the yield on weather, well you've had issues in South America, issues around the world, and by the way traders probably weren't paying attention to the coarse grains globally fell too. So you're going to have some concerns with this crop. We just can't afford any issues.

Yeager: Well, and we had an issue this week in Nebraska and parts south with the hail that came in. The pictures were just awful to see. So there's that question of, what if that's a million acres there? We talk about this million acres in Minnesota or South Dakota, prevent plant. At what point does that all add up and I need to change my philosophy with December? What do I need to think about with that December contract?

Martin: Well, I think what it does is first off, a market never pays attention to hail. They always tend to think that that's kind of isolated situations. So the market doesn't pay attention to that. But if you start to get a drought going again, that will ignite this market and of course beans all-time high $8.49 and a half and we haven't quite made it there on a lead contract. But also keep in mind that was a December contract that did that in 2012. And so you start kicking this in and you could take corn up to $9, $9.50.

Yeager: Could also probably take beans up too. Are they the leader of this market right now?

Martin: Right now they have been. Soybeans, what is driving the bean market is the energies. You look at the demand for crude oil, gasoline prices high and all of a sudden the need for biofuels or renewable fuels is putting a push under the bean oil and also the lack of tighter supplies around the world of veg oils. And then you look at soybeans and they're bidding like crazy to get them and they're not buying them. And so they're saying okay, we're at pipeline supplies. Well, in the old days I was kind of around then, the pipeline supply would be viewed as 100 million bushels. Are we still that or are we closer to 200 million bushels with all the huge demand we've got going? I go back and look at the 70s, like '70 to '73 and the things that were happening then are on steroids now. You didn't have a pandemic globally where we do now and people around the world had given up having reserves where back then reserves were kind of cool, it was an expected thing. But you don't have that now and these countries have come to the realization they need to build reserves. But right now they're just living hand to mouth. I have not seen anything remotely say we have rationed yet.

Yeager: All right, I have another couple of soybean questions that we'll get to in Market Plus because this cattle market has had its own story and own life this week. We're looking at the numbers that continue, the weights are down, the numbers are up. What are you hearing and seeing in this cattle market that is causing this?

Martin: Well, first off, I think the beef cow slaughter the first five months of this year was up 115% from last year. And then you look at the imports and we're getting cattle, hogs too from Canada, Mexico because why? The dollar exchange is huge and it's profitable for the producers in those countries. And also if you look at Mexico, they're dealing with a lot of heat also as is Texas and the forecast, by the way, for the next 10 days is temperatures like Waco, Texas as high as 107 degrees not once but maybe two or three times and 104, 102. What does that say for the corn crop there, the cotton crop? But also what about livestock? And Mexico is going through that same thing so they're sending them into the U.S. and they're lighter weight animals that we're getting. So it's, again, cattle going into feedlots and you've got to feed them.

Yeager: Yeah, the southwest is extremely hot. You can't come too far north because that corn, the feed is expensive. So if I'm someone with a feedlot, where am I finding my feeders? Am I finding them to expand right now?

Martin: Your feeder cattle or the grain?

Yeager: Yeah, my feeder cattle.

Martin: Oh, they aren't having a problem finding feeder cattle. They're getting the feeders because they were moving off of pastures. Now that might slow up a little bit. But another thing we're seeing in that feeder market in the cow calf herd is individuals that have decided to call it quits and are retiring. Just it's a lot of work, prices for the calves isn't as good as it should be and they're just saying, when they look at grain prices they're saying, I'm done, I'm retiring, I'm going to quit. And you're seeing a fair amount I think of that as well. But then they don't have to look too hard because again, we've got cattle coming in from Mexico. So the next thing is when these cattle are into the feedlots they'll light weight in, they'll be light weight going out but they've got to have feed for them. I heard yesterday that there was feedlots in southwest Kansas paying $2.25 over the board for corn.

Yeager: That's a lot.

Martin: It seems like a lot. But will it be in the end?

Yeager: Well, we'll find out. I only have a few seconds left for hogs as we wrap up. Just give me a quick yes or no. Is that bottom in? This thing keeps falling.

Martin: I don't think so. I think the hog market is going to see, drift its way lower. The last day or so we've seen an improvement in the cutout or the product and I think that gave a short covering rally. But I don't think it's done.

Yeager: All right. Guess what is done? Our time in the show. Thank you, Sue, appreciate it.

Martin: It went fast.

Yeager: It does, it always does. Thank you. That will do it for this installment of Market to Market. We're going to talk more in Market Plus because we have a whole bunch of your questions to answer so join us there. You can find that free on our website of YouTube has something for everyone including full episodes, stories and our Market Plus. Subscribe by going to our page of markettomarket. Ring that bell to be notified each time that we post. Next week, weather and climate take center stage on Capitol Hill. Thank you 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.

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.  


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.