Market to Market (April 26, 2019)
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Market to Market (April 26, 2019)

Coming up on Market to
Market — Assessing historic flood damage
and what to do next. The balancing act of
economy and ecology in the fishing industry. And market analysis with
Shawn Hackett, next. Pioneer Hi-Bred
International is a proud sponsor of
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Friday, April 26 edition of Market to Market, the
Weekly Journal of Rural America. ♪♪ Hello, I’m
Delaney Howell. The U.S. economy beat expectations
last quarter despite head winds of global weakness
and trade tensions. Add in the weather and
rural America was under more warnings this week
as a tornado killed two people Thursday in
northern Louisiana. Flooding from Texas to the
Canadian border remains a story as winter’s fallen
snow is still melting – and continues to leave
large sections of the Missouri River
valley in disarray. Josh Buettner reports. Kevin Kruse/Percival,
Iowa: “We had about 5 and a half foot of water. You can see the line on
the bins over there.” Kevin Kruse farms 1000
acres in Percival, Iowa, straddling Interstate 29
and the Missouri River. His land flooded this
year, much like in 2011, when the waterway’s
corridor was ravaged to the tune of $2 billion
– a bit less than damage estimates this
time around. But Kruse says 8 years
ago landowners had 10 days-notice devastation
was on its way – as opposed to this year’s
bomb cyclone blitzkrieg – and its aftermath. Kevin Kruse/Percival,
Iowa: “We got it in the basement pretty good. About 5 feet in the house. We almost had the
basement cleaned out. We had one more day and
the water came back. Another two feet
of water again. What do you do?” Kruse’s corn and soybeans
were already in the ground when flooding hit in 2011
– and fully reimbursed through crop insurance. This year, he might be
lucky to get anything planted at all. Kevin Kruse/Percival,
Iowa: “Right around $150,000 I got
sitting there.” Kruse has 25,000 bushels
of previously harvested crop on hand, but says
others held onto 8 times as much – and like him,
can’t access and salvage remaining bins. Low prices, oversaturated
commodity markets and trade disruptions have
all helped lead to record on-farm storage
in recent years. But those surpluses aren’t
eligible for current federal aid. Vice-President Mike Pence:
“Right now, Iowa needs disaster assistance. And it’s time for
Congress to act.” The Vice President called
for a relief package earlier this month on
his second trip to flood areas. U.S. senators recently grilled
the Army Corps of Engineers – the federal
agency tasked with dam management along the
Missouri River over flooding in the region. Critics demand flood
control take top priority, but with limited
resources, only Congress can divert from missions
like navigation and habitat protection. Doug Aistrope/Fremont
County Farm Bureau/Sidney, Iowa: “You’ll just have
to play it by ear.” Doug Aistrope, an
insurance agent with Iowa’s Fremont County
Farm Bureau, says area producers may still be
able to beat late planting deadlines, but prevented
planting provisions – up to 60 percent of market
value – may not pay out until late summer. Doug Aistrope/Fremont
County Farm Bureau/Sidney, Iowa: “A lot of it’s wait
and see, because you can’t get to some of
the stuff yet. So much still has to come
down from Montana, North Dakota and South Dakota,
and there’s so many breaches from Omaha south. It is so much bigger than
2011 ever thought about being.” While some may sit out
this growing season, researchers say it’s an
opportunity to heal land polluted with silt,
trash and other debris. Dr. Jerry Hatfield/Lab
Director, National Laboratory for
Agriculture and the Environment/USDA-ARS/Ames,
Iowa: “Restoration of flooded soil is
really critical. So gets roots back into
that soil, get the biology working… It’s going to be a matter
of how quickly can we plant back on there and
then go back to the economic crop?” ” Dr. Jerry Hatfield
directs USDA’s National Laboratory for Agriculture
and the Environment on the Iowa State
University campus. He says harnessing flood
by-products might be a cheap route to
rejuvenation. Dr. Jerry Hatfield/Lab
Director, National Laboratory for
Agriculture and the Environment/USDA-ARS/Ames,
Iowa: “They’re going to get a weed flush
coming up this spring. Look at what weeds are
there and see how they can utilize those as a
potential cover crop. You know, they’ve got
taproots and they really do get down deeply
into that profile. I’d just prevent them
from going to seed.” Kevin Kruse welcomes the
advice, but thinks he’ll be at the mercy of the
river for months before levees are patched and
water levels subside. Kevin Kruse/Percival,
Iowa: “Hey that’s Mother Nature, I guess,
you know… That’s farming life. You pull the boots up
and go back at it.” For Market to Market,
I’m Josh Buettner. Give a man a fish, feed
him for a day, teach a man to fish, feed
him for life. The Chinese proverb leaves
out some of the hurdles those future commercial
anglers may face when it comes to providing
for a family. A few of the regulatory
and environmental challenges have steered
many to other vocations. Colleen Bradford Krantz
reports our Cover Story. While stopping short of
comparing sightings of other young commercial
fisherman to seeing the Loch Ness Monster, North
Carolina’s Mack Hopkinshasnoticed how few in the
Outer Banks seem to be preparing for a future
in the industry. Mack Hopkins, F/V
Watersport, Manteo, N.C.: “Around here, I feel like
there’s really not that many young people
coming up in it. My friend Brandon, he’s
right here, and we’ve just got a couple of us good
buddies that I feel like we are the young
crowd coming up.” Hopkins, who works on his
family’s boat fishing for tuna, mahi-mahi and
swordfish in the Atlantic Ocean, says while
government regulations have helped make U.S. seafood some of the safest
in the world, and have protected shellfish, sea
turtles and other species, some rules may be
inadvertently choking out a way of life in
oceanside communities. As a boy, Hopkins learned
to fish running his own small skiff in
Albemarle Sound. But regulations intended
to protect sea turtles and other species have put a
damper on the practice of children setting out
on spontaneous fishing expeditions. Mack Hopkins, F/V
Watersport, Manteo, N.C.: “That’s where a lot
of boys start young. And you can’t hardly
do that anymore. … It’s very,
very strict now. .. Mainly in the sound
it’s because of the sea turtle encounters, which
is understandable, but there’s a very strong
population of sea turtles in the sound now. There’s no
shortage of them.” Fisheries Specialist Sara
Mirabilio, an employee of the federal-state
research and educational partnership, North
Carolina Sea Grant, understands the concerns
of oceanside communities, but applauds the progress
made in protecting the area’s marine life. Sara Mirabilio, North
Carolina Sea Grant: “We want long-term continuance
of our natural resources, but we also want to
balance that so that we have a coastal economy.” Another threat facing the
area is rising sea levels. Although experts disagree
whether a predicted 1/8-inch per year
encroachment is valid, Outer Banks fishermen are
more worried about current financial conditions than
losing six inches of shoreline over
the next 50 years. Sara Mirabilio, North
Carolina Sea Grant: “They have a lot of threats at
them right now, they have a lot of regulations that
are curbing how much they can catch, you have
development pressures that are going on… The fisherman, they are
more concerned about how they are going to put food
on the table a year from now…They aren’t looking
50 years because they feel like they may be out
of business in five.” Thomas Wesley Peele,
Fisherman, Manteo, N.C.: “It’s a bad thing to say
but as far as hurricanes and stuff, and rising
waters, I haven’t seen a lot of difference
over the years. I know it’s millimeters or
whatever but I’ve never seen it… It’s such a
minute increase.” Peele, who is a
fourth-generation fisherman, operates
in this state- and federally-regulated
climate trying to balance the need to protect
endangered species while making a living. He has to be careful to
keep wild sea turtles out of his nets and even a
few close encounters with these creatures, such as
an accidental catch, will mean an early end to
his fishing season. Certain fishermen are
required by law to have on-board video or
in-person monitoring to prove they are
following the rules. Some types of sea turtles,
which must be released if accidentally caught, have
been on the Endangered Species List
since the 1970s. Local fishermen believe
the population has rebounded enough that
it is time for another assessment. Sara Mirabilio, North
Carolina Sea Grant: “They are going to catch more
turtles just by sheer probability. It’s a numbers game… So if a fisherman has done
really well, followed the rules, used sea turtle
protections, the population rebounds, his
fishing opportunity goesdownbecause the fishery
closes sooner because the level of turtles that they
are allowed to interact with is met quicker
because the population is recovering.” While Peele appreciates
how some of the rules have protected sea life for the
future, he is frustrated knowing that fishermen
from other nations typically have to comply
with looser regulations. Like many in the U.S. fishing industry, he faces
the cost of buying more expensive fishing gear
that is safer for non-target marine life. Thomas Wesley Peele,
Fisherman, Manteo, N.C.: “Yes, I do understand they
are protecting them but as far as putting people out
of business and losing livelihood, that’s
going too far.” Dewey Hemilright, a
commercial fisherman for 30 years who was appointed
by the state of North Carolina to the
Mid-Atlantic Fishery Management Council, says
leveling the playing field worldwide would help. Dewey Hemilright,
Mid-Atlantic Fishery Management Council: “Other
countries don’t have these strict regulations so what
they are able to do is catch the fish that are
highly migratory and send the fish back into
our marketplace. They don’t have to have
vessel monitoring systems, they don’t have to have
observers, they don’t have to have certain gear
restrictions …. And so they are allowed to catch
these fish, not use friendly gear out there,
and are allowed to ship into our marketplace. It puts the U.S. fisherman at a
disadvantage.” Mirabilio says the
situation makes it difficult for fishermen to
implement good business planning and decide on
future gear investment because they never know if
they will be able to fish for 30 days or only seven. Sara Mirabilio, North
Carolina Sea Grant: “This should be sort of a
victory march for natural resource managers
and industry. What we did worked. The protections we put in
our commercial fishing industry worked. We are seeing banner
nesting years. The problem is the
allowable interactions have not changed in years
and years and years. The fishermen are getting
closed out of fishing sooner and sooner
and sooner.” Dewey Hemilright,
Mid-Atlantic Fishery Management Council: “It
shouldn’t be that, you know, we force
regulations on U.S. fishermen and make him
the posterchild to go to everyone else if we are
going to give them the marketplace…If everybody
else was as eco-friendly as a U.S. fisherman, there’d
probably be a lot more critters in the ocean.” For Market to Market, I’m
Colleen Bradford Krantz. Next, the Market
to Market report. 17th century English
author Thomas Fuller coined the phrase “the
darkest hour is just before dawn”. Many in the trade are
hoping first light appeared in the form
of late-week gains. For the week, July wheat
fell 6 cents while the nearby corn contract
also dropped 6 cents. The broken record of no
trade deal with China and a nearly-complete South
American harvest impaired upward movement. The July soybean contract
plummeted 27 cents. July meal lost
$3.10 per ton. July cotton declined 57
cents per hundredweight. Over in the dairy parlor,
May Class III milk futures improved 62 cents. There was a big sell-off
in the livestock market. June cattle dropped $7.63. August feeders fell $7.83. And the June lean hog
contract shed $8. In the currency
markets, the U.S. Dollar index
gained 59 ticks. June crude oil lost
98 cents per barrel. COMEX Gold rose
$12.60 per ounce. And the Goldman Sachs
Commodity Index fell five points to finish
at 444.10. Joining us now to offer
insight on these and other trends is market
analyst Shawn Hackett. Shawn, welcome back. Hackett: Thanks. Howell: Shawn, I want to
start out here talking about the wheat market. We saw July KC put in a
new low, Minneapolis and Chicago were not far
behind maybe to touch some of those contract lows. How much lower can we go? Hackett: Well, we’re kind
of doing the pre-harvest pressure that you
typically see a lot of farmers sell wheat right
off the field, they don’t store it. Right now the ratings are
way up from last year and so everyone is
expecting a big crop. Of course, weather is
still en vogue, there’s a lot of excessive moisture
coming in for Oklahoma, for example, and Kansas
and that may still create some problems. But right now the market
is saying big crop, harvest coming, pressure,
we’ve got to find a bottom for this place and so
this is kind of typical pre-harvest action,
probably not a whole lot more to go where we are
now, but probably not a whole lot of reason to
rise unless Mother Nature gets involved here in May. Howell: So what are you
expecting to see for a range if we’re not going
to maybe head much lower but we’re also not
going to gain much? Hackett: I think $4 on the
KC wheat, for example, is probably your low, it was
a low that we hit last year. When we look at relative
value of KC wheat to all other commodities it is
right now trading at the third cheapest
level in 50 years. So we’re at levels where
we really don’t have a lot of examples of wheat
getting much cheaper but at the same time that’s a
longer term forecast, it doesn’t mean that we
have to rocket higher. But I would say could
rally 20 or 30 cents just because of short covering,
that sort of thing right now. Howell: Okay, let’s talk
about short covering going on in the corn
market right now. We saw some strength
on Thursday. Was that because the funds
are finally starting to maybe sell out of some of
those short positions? Hackett: Well, certainly
that is happening a little bit. We never know why they buy
or why they sell because the algorithm is sort
of secret, right. But certainly as we get
into this weather scenario that we’ve been dealing
with, in April fine we can catch up, no worries, but
we’re continuing to see excessive moisture, snow
in the northern belt, and for the next two weeks at
least into mid-May we’re just not going to catch up
the way it looks over the next couple of weeks and
I would say some of the funds have to have in
their algorithms some point where they say this
could be a problem, we need to start covering. That might have happened
on Thursday when we had that reversal, $3.50 or
$3.51 July corn and then we rallied right
off the lows. I think weather is
starting to finally, finally maybe play into
the psychology of the corn market at least. Howell: How much can we
really gain from the weather market because,
Shawn, as we know farmers can get into the field,
they can probably plant in a week, week and a half if
they have really good dry weather with the
technology and equipment we have. So do we have that much
more of a weather premium to build in? Hackett: I think we do if
we get into mid-May and we’re still
way, way behind. The University of Illinois
said two weeks if you have good weather and everyone
rocks and rolls that you can get the crop planted
in the main corn states. And so if we get into
mid-May and we’re still way behind and we’re still
not seeing any big windows to open up I think there’s
definitely more weather premium to put in and it
wouldn’t surprise me if another 10 or 20 cents
could put into the corn market if we get into
mid-May and we’re really not catching up much. And I don’t think we are. It looks really,
really bad right now. Howell: It does. And maybe we’ll see some
differences on this next week’s planting
progress report. Is weather the reason,
you mentioned in your newsletter this week, that
you believe smart money is moving closer
to a buy signal? Hackett: We never know why
smart money or insiders do what they do but
we can speculate. I would speculate that
probably the weather is starting to make the smart
money consider buying, juts the fact that we’re
getting so low in many markets that the economics
are so good that they can’t help themselves but
buy some and I do think as much as we keep thinking
about the trade deal and it’s not happening, maybe
they know something we don’t know, maybe they
know it actually is going to finally come to
fruition, because they’ve gotten really aggressive
here in the last two weeks when they really have not. So maybe they know
something we don’t and I’m hopeful they’re right. Howell: Okay. I think that poses the
question, this is a question I get from
producers a lot, and quite a few producers wrote in
and asked essentially this question. We’ve got one here
from Matt in Amherst, Wisconsin. He said, is it okay to
throw the seasonal trends charts out yet for all
grain commodities? Hackett: I would say no,
it’s not time yet to throw the seasonal trends out,
but sometimes seasonal trends are abided by and
sometimes they’re not. That’s an average. Right now we have
obviously not been following seasonal trends
— Howell: In any of the grain commodities? Hackett: Yeah, we
really haven’t. We’ve been kind of doing
everything the opposite of what you expect to see. And there’s so much going
on that has caused that, strong dollar, trade
problems and it has just been a confluence of
things but I don’t think we can say that the
seasonal pattern is dead yet. But certainly we’re not
following it so there’s a possibility that if we
don’t rally now that we might rally counter
seasonally later in the season. So we have to be
ready for that. Howell: So let’s talk
about the beans and what is going on with the
Chinese trade deal. Of course, as you
mentioned, maybe the funds know something
that we don’t. But, Shawn, if we get a
trade deal in place we still have a really
large global stockpile. So does the U.S.-Chinese
trade deal change anything for the futures long-term? Hackett: It depends
on the details. We hear all these rumors
about how much they’re going to buy, they’re
going to buy 30% and half the soybeans we have. The reality is given what
we see with the planting weather, maybe gaining
an extra million or two million acres of soybeans,
we’re looking at a billion bushel carryout, it would
seem a trade deal wouldn’t be enough to rid
ourselves of our bearish fundamentals, we would
need a weather problem in August to do that. And so any rally that we
would get on a trade deal, should we get it,
probably should be sold. That’s the way it
looks to us right now. It’s really hard to see
how they would buy that many soybeans from us
and remove this bearish overhang. But it could create a
short covering rally if we were to get it. Howell: Shawn, final
question for you when we talk about beans because
we definitely have a lot to talk about in the
livestock and dairy markets. The path of least
resistance seems to be down for the
bean contracts. July put in a new
contract low this week. How much lower
is that path? Hackett: We have clear
support in the low 8’s really. That’s kind of
where we were. If you remember at harvest
time and then we got excited about trade and
the market moved higher and we’ve been sort of
holding the line and everyone is just getting
so frustrated and they’re finally just giving up
like this is not going to happen and we’re seeing
more acres possibly coming in and so we’re just
pushing this market down but there’s more
downside here. Short-term if there’s no
trade resolving low 8’s is on the docket. The chart pattern was
pretty clear on this. Howell: Okay. Let’s talk about the
charts when we look at the cattle market. Let’s start with the
live cattle market. The chart you look at it
and it was a drastic drop here over Thursday and
Friday, Wednesday had some rough closes. What’s going on there? Hackett: The African swine
fever is driving the livestock markets crazy. We see with hogs limit
up, limit up, limit down, limit down. So the cattle market has
gotten some headwinds not only from some really
nasty weather this winter but also from speculators
coming in and buying the market thinking that
African swine fever is going to create
substitution demand for beef. And it is, but the devil
is in the timing and the details and once the hog
report came out that we didn’t really sell a lot
of hogs this week and they went down, limit down,
then the speculators just kind of caved in and sold
that market really, really hard. And with the deluge going
on everywhere else it’s pretty hard for the long
speculators to say I’m going to stay in here when
everything else is falling apart around us. The dollar made new rally
highs, it was just time for them to just kind of
get out and really exit the market and when they
do it they do it fast and furious, the computers
don’t hold back. Howell: So were the
closes this week just a short-term correction? Or do you think that now
the trend is to continue heading down? Hackett: I don’t think
it’s that way for cattle. Cattle had some of the
African swine fever in it but there’s a lot of
non-Chinese reasons for the market to hold itself
in here and kind of develop a base. I have a hard time feeling
that the hog market is at a bottom yet. I still think we can
correct that market. There’s been a lot of
speculation and there’s a lot of trade related
speculation that has gone on there we just don’t
think that market is done ridding itself of some of
the excess that was in there. We think that could
come down lower. But we don’t think it
brings the cattle market much lower, we think the
cattle market digs its heels in ahead of the
grilling season when we normally have really,
really good underlying demand for domestic
demand for beef. Howell: So how much lower
can the lean hog markets go then if you say maybe
we’re not done correcting that move yet? Hackett: I think we could
go down another 5 points down, maybe another limit
down day or something like that, and maybe a little
more follow through. We think that’s
very, very possible. And then we would come to
some kind of chart support that we had last time
before we had that big surge back up. So I think there’s a
pretty solid base 5 to 8 lower in this market
that we could hit. Could it be next week? If the Chinese don’t buy
again we could certainly continue that
momentum downward. Howell: And is Chinese
buying, is that really what we need to see more
strength or continued strength, maybe a reversal
back towards a higher trend? Hackett: Well that’s what
has been driving it. We didn’t see it before
the market crashed, then we saw it, the market took
off, then we didn’t see it, the market crashed. So right now we are
trading the weekly export report and I think we’re
going to continue to trade that until or unless we
get a trade deal that says they’re going to buy
a lot and regularly. Howell: Yes, which is
what I’m sure a lot of producers are hoping for. The bright spot this week,
which hasn’t had a bright spot maybe in quite some
time, was the dairy markets. Thursday’s closes
were spectacular. We put 62 cents on the
week from last week. Shawn, what’s
going on there? Hackett: Well, our
production is finally coming to wraps. We’ve been at .5% growth or less for the
last five or six months, in fact we had a negative
production report. Anyone who knows U.S. dairy, we almost never
go negative, it’s almost impossible to get the U.S. producers to go negative
on production but we did do that. We had to go back to
February of 2017 for the last time we had a
negative report. And so with that kind of
production we’re seeing cheese stocks relative
to last year starting to narrow in terms of the
year over year difference. And we can see that we’re
going to be in a position of drawing down these very
large cheese stocks pretty substantially if we keep
this production down and this .5% growth or less,
which we think we will. And we have international
prices for GDP prices up 30% to 50% over the last
six months and we usually lag them but
then catch up. So there’s a lot of
reasons to think this rally has legs to it. And milk prices tend to
trade differently than the grains and differently
than the other livestock markets. It’s kind of on a
different cycle, a different phase. It goes up when everything
else is not and so it’s a perfect time for the
market to rally. So we like this market and
still feel that farmers are on the mend and will
have a chance to sell finally some prices that
work for them later on in the summer. Howell: We’re approaching
high 16’s, maybe low 17’s in some of the
deferred contracts. How much higher can some
of those dairy producers expect? Hackett: I think right now
based upon what we see with everything we think
we can see solid mid-17’s, maybe even 18 and let’s
say in the deferred contracts when supplies
were tighter we think it’s going to be very hard to
do much better than that unless we get some help
from a trade deal, some help with a weaker dollar
which was hurting exports, but we think with what we
have in place right now there is a clear path to
the mid’17s or 18’s and that would be a pretty
good place probably to start putting some sales
on or at least buying some puts to lay a floor
into the market. Howell: You mentioned
trade deals. Just really quickly,
Shawn, does the U.S.-China trade deal, does that add
any support to the dairy markets? Hackett: It can. And they’ve always been
a big buyer of dry whey, what we’re hopeful that
they might be a big buyer of is nonfat dairy and
what we’re also hopeful they might be a
buyer of is U.S. cheese. We know they went from
buying no cheese five or six years ago to being
one of the largest cheese importers in the world. And so if they were to
come in and start buying our cheese it could have a
big impact but of course the devil is
in the details. Howell: Right. Of course. Shawn Hackett, we’ll
continue this discussion in Market Plus. Thank you so much. Hackett: Thank you. Howell: That wraps up the
broadcast portion but as mentioned we’re going to
continue this conversation on Market Plus where
we’ll answer more of your questions. You can find it
on our website at As some of you begin
spring field work, others are relegated to just
looking at images via Instagram. We’ve already posted
a few of our own. Take a look at IPTVMarket. Join us, again, next week
when we look at another battle brewing over
water, this time in the Heartland. So until then,
thanks for watching. I’m Delaney Howell. Have a great week! ♪♪ Market to Market is a
production of Iowa Public Television which is solely
responsible for its content. Pioneer Hi-Bred
International is a proud sponsor of
Market to Market. Tomorrow. For over 100 years we
have worked to help our customers be ready
for tomorrow. Trust in tomorrow. Information is available
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