Market Plus: Dan Hueber
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Market Plus: Dan Hueber

This is the Friday, August
23, 2019 version of the Market Plus segment. Joining us once
again is Dan Hueber. Dan, we had some very
exciting news come out while we’ve been taping
the show today which we’re trying to fix in the main
show so I’m not sure how it’s going to
come together. But President Trump put
another round of tariffs on Chinese goods. How is the market
going to react to this? Hueber: Well, it’s
probably fortunate that it’s happening on a Friday
afternoon so the market or the market participants
will have a couple of days to think about it. And to a certain extent I
think people are getting fatigued from all of this. Granted, earlier today
when he started rattling some threats about what
China was doing and other various things this week
it did get the market just a little bit excited but
of course that happened during the session. I think people tend to
react in kind of a knee jerk fashion. With this happening on a
Friday afternoon maybe by Monday morning they’ll
have reconsidered a little bit. I would tend to think
if it’s going to have a negative impact though
it’s probably going to be a little bit stronger in
the financial world than in the agricultural
world and particularly statements that U.S. companies need to quit
doing business with China. I think Apple, 20% of
Apple’s revenues are China. GM sells more cars in
China than they do in the United States. So it really has
potentially a bigger impact. We’ve already felt the
impact in ag and we’ve seen our bean business
dry up to nothing. Of course they were not a
corn buyer to begin with so we’ve already absorbed
a lot of this negative news where some of these
other industries are maybe just starting to feel the
wrath here at this point. Howell: And when you look
at what’s going on then from a global economy
standpoint we’ve got a really interesting
question. I’m going to kind of
rearrange our questions we had today because when you
look at the inverted yield curve and maybe the
potential that we’re heading in a recession I
think this is a really interesting question. I’m excited for
your answer. It’s from John in
Iowa off of Facebook. He said, what has been
deemed financially worse for farmers, and I want
to add in for just the general economy, the
Carter grain embargo or the Trump tariff debacle? Hueber: The Carter grain
embargo we have the luxury of being able to look
back and seeing what the impacts were on that,
not just the immediate impacts, but to recognize
what that did long-term. And of course what it did
long-term was provided our traditional customers
incentive to invest elsewhere. And I think if we have the
luxury of maybe being 20 years in the future now
and looking back at what happened with this one
we’re going to say the same thing. We already know that China
has, just COFCO, the Chinese grain company has
invested $200 million in infrastructure in Brazil. We know the Chinese
government and other governments are doing the
same thing and not only in Brazil but in Argentina
and Africa and I think the ill effects that we’re
going to feel on this, yes this immediate impact
might, in the greater scheme of things is
relatively short-term, it’s a year, maybe
it’s a year and a half. It’s very painful,
don’t take me wrong. But the real impacts are
going to be 10 and 20 years down the road
because we are not going to recapture the lion’s
share of that business that we once had. Howell: And I think that
you teed us up nicely here for another question
looking at the business we will, it sounds like from
your standpoint, very most definitely lose
to South America. Bradley here in Upland,
Nebraska has a question about that. He said, how many bushels
of bean exports will the U.S. lose to South American
acreage expansion next year? And probably because of
this trade war debacle? Hueber: Well, the acreage
expansion I guess is they can only clear so much
each year, although President Bolsonaro down
there when he took office said we are open for
business, we’re looking for investment, and I
think the raging topic, no pun intended, is with the
fires in the rainforest here at this
point in time. And I think the belief is
every year, it’s supposed to be illegal, every year
Brazilian farmers will go and burn off a certain
amount of ground. But it is kind
of held in check. They try to control what’s
happening there and I think the accusation at
this point is nobody tried to hold it in
check this year. Once it’s burned off it’s
very little stopping people to try
to increase it. Is that going
to be 2%, 3%? I guess that’s unknown
at this point as far as additional acreage
down there. But realistically they’re
probably, they’re already set to maybe produce 125,
130 million metric tons, so another 8 to 10 million
metric tons over and above what they are
for this year. So absolutely. Now, here again, we don’t
know what the weather is going to hold either
so they could have a disastrous year
weather concern wise. But they’re already
positioned to take advantage of our bad
relationships with China and take it a step
further, the Brazilian farmer’s prices are
reflective of the strength in the U.S. dollar. The stronger the dollar,
the better the prices for the Brazilian farmer. So the longer the dollar
continues to hold the strength, the more
incentive they have to put extra acreage in beans. So it’s kind of a vicious
circle here at this point. Howell: But then the flip
side of that would be if we do head into some sort
of economic recession, our dollar should weaken, and
then we should be able to export agricultural
commodities supposedly? Hueber: Correct. And again it could, it
doesn’t have to be China although China is
certainly the 800 pound gorilla when it comes
to the bean market. But that could boost our
total exports with a weaker dollar and I think
that has been one of the things that even when we
were a bit panicky about the weather situation
before those end of June reports, I think the
strong dollar was the thing that was really kind
of holding our prices back from really accelerating
at that point in time. So a weaker dollar I think
would be a great boon for the ag sector. Howell: The weather has
obviously been varied as you mentioned there. We had the crop tour
going on this past week. We’ve got another question
here from Gary in Wilton, Iowa asking
about just that. He said, the crop
tours are winding up. In the past a 2 bushel
variation in what the USDA predicted either dropped
or increased the prices dramatically but this
year’s reports are not looking very promising. And the market seems to be
responding opposite of the reports. Are they hedging
for an ugly fall? Hueber: I really think
it was probably more a reflection of the other
factors that were impacting us here this
week and I think those numbers, each one of them
came out daily and I think were supportive to the
market but I Think it was just not enough yet
to really attract new interest or to scare those
out who were ready to push it to the downside. So no, I don’t think it
tried to react in an opposite fashion, it
was just too many other mitigating factors that
held us from really stabilizing with what
we heard this week. Howell: Okay. And then when you look at,
I know it’s a bit past due now, but kind of in the
aftermath of last week’s WASDE report we had a
question here from John in Ohio asking how many
prevent plant acres are being recognized in the
report and factored into the market at this time? Hueber: According to the
USDA they have looked at the numbers, they have
not told us if they have factored any in there. Now they are running a
slightly wider harvested acreage versus, less
harvested acres versus planted partially
reflecting more corn going to silage but that said,
if we look at the numbers from the FSA, the 11
million, supposedly 11 million unplanted acres in
this nation, I fail to see where those, unless we
want to believe we were going to plant 100 million
acres of corn it’s pretty difficult to determine
where they’re in there. Howell: That is a question
I’ve heard from a lot of people was 11 million
acres of prevent plant but we were never forecasted
to plant — Hueber: — to plant that much
to begin with. Exactly. So at this point
I would say none. Ultimately it could be a
situation where they just change it in the
harvested acreage. They might leave that
planted acreage number alone and then do a wider
harvested acreage number to compensate for it. Howell: So it’s really
going to be September, harvest time. The market is waiting. Hueber: Exactly, kind of
the show me mentality — it’s kind of difficult to
blame the market in the respect that there is
so much uncertainty. And honestly, not that I
want to preach about it, but I come back to
that July report. I think it was
irresponsible to put a number like that out
without some major preface saying this is a
history setting year, unprecedented problems, we
need to treat the numbers as such and it was
probably just as irresponsible of the
marketplace to actually take them as gospel
truth as well. So it has just been kind
of a collection of errors and I think they have led
us to the point we’re at now. Howell: I think that sets
us up nicely here for our last question. I’m guessing this is what
Brad from South Dakota is implying with
this question. He said 7th worst crop
conditions report, all the other problems but yet
saying that this is the 5th all-time
record yields? How? Hueber: Most specifically
talking about corn, 169.5 bushels is what the USDA
had, Pro Farmer was 163 on the tour, which is
probably far closer to reality. Okay, you can say the 5th
highest but it’s not very far behind 4
and 3 at 169.5. So I have a difficult time
finding that realistic, particularly with what we
know just as far as the wet holes and those type
of issues that everybody confronted this year. Howell: I guess one final
question I have for you, Dan, in talking to
some producers I guess specifically I’m
talking Iowa here. But we’ve seen a lot of
variance really all across the western and eastern
legs of the Pro Farmer Tour and we’ve seen some
variance in yields showing maybe better than usual
yields while others are showing obviously well
below normal yields. How much of a variance
there will we see? I guess what I’m asking is
the acres that are looking really good, is that going
to be enough to make up for the acres that
are looking poor? Hueber: That’s of course
the challenge even with a physical crop tour is you
can only cover a very limited amount of space. And I look forward to the
day when we can kind of move beyond that and
recognize or rely on satellite technology to
give us a better handle on that because realistically
that gives a so much larger, more comprehensive
picture out there. Some of the companies we
work with that are putting out the satellite readings
were dramatically less than what the USDA, 85
million acres of corn and yields in the
150 bushel range. Maybe that was extreme
to the other side. Again with a year that
has just been marked by uncertainty from day one
that is probably why we’re going to be September or
October, really this year we’re going to say
October, November because of the lateness of the
harvest before we really have a great handle on
what kind of production there is this year. Howell: Kicking that can
further down the road. Hueber: Yes we are. Howell: Dan Hueber,
thank you so much. Hueber: My
pleasure, thank you. Howell: Join us again next
week when we explore how the mushroom capital of
the world goes for an upgrade and Elaine Kub
will join us at the Market to Market table. Until then, thanks for
watching, listening or reading. I’m Delaney Howell. Have a great week!

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