Market to Market (May 24, 2019)
- Articles, Blog

Market to Market (May 24, 2019)


Coming up on Market to
Market — Farmers get more aid, as the trade
war drags on. Tornadoes rip across the
Midwest as the water creeps higher. The nation’s attic lets
“year of the tractor” roll on. And market analysis
with Sue Martin, next. ♪♪ 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
from a Grinnell Mutual agent today. Accu-Steel, offering
fabric covered buildings specifically designed for
the cattle industry since 2001. The next generation
of cattle buildings. Information at
accusteel.com. ♪♪ This is the
Friday, May 24 edition of Market to Market, the
Weekly Journal of Rural America. ♪♪ Hello, I’m
Delaney Howell. Stalled trade talks
between the United States and China signaled a deal
may be farther away than rural America had hoped. The impasse triggered a
second round of Market Facilitation Payments. Farmers continue to face
lower prices caused in part by the dramatic
drop in sales to China. The payments will come
from Commodity Credit Corporation coffers. According to Secretary
Perdue, the CCC account will be refreshed with
money from the U.S. Treasury that is, in turn,
being filled by tariff payments from U.S. importers. Peter Tubbs has more. The USDA announced the
broad strokes of the 2019 round of the Market
Facilitation Program Thursday. Tariff relief will total
$14.5 Billion dollars using a pricing model that
is changed compared to the 2018 version. Rather than payment based
on the production volume of each operation, checks
will be based on the tariff impact on the
commodities produced in each county, and each
farms acreage as a percent of the whole. Bill Northy, Under
Secretary for Farm Production and
Conservation: “It’s going to be very understandable
for a producer to be able to understand what that
payment rate is in that county, and they won’t
have to look at it from crop to crop across the
county or different rates from different
commodities.” President Donald Trump:
“We will ensure that our farmers get the relief
they need, and very, very quickly. It’s a good time
to be a farmer. We’re going to
make sure of that. We’ll be taking in over a
period of time hundreds of billions of dollars in
tariffs and charges to China and our farmers
will be greatly helped. We want to get them back
to the point where they would have had if
they had a good year.” Payments will be made in
three segments, with the first expected in late
July or early August. Acres that take Prevent
Plant payments will not be eligible for MFP payments. Farmers must plant a crop
to receive a payout. Dairy producers will
receive aid based on their production volume, and
support for hog producers will be calculated by
the size of their herd. The USDA also announced
$1.4 Billion in surplus commodity purchases to
be distributed to school lunch programs and
groups that address food scarcity. Additionally, $100 million
is being allotted for the development of new
export markets. The American Farm Bureau
Federation says the payments will help. The Iowa Farm Bureau
agreed and added their members prefer
trade over aid. Michigan Senator Debbie
Stabinow, the ranking Democrat on the Senate
Agriculture Committee, railed against the
current plan: Graphic: “Unfortunately, this
complex scheme leaves them with more questions
than answers. I have a number of
concerns about whether this plan is fair and
equitable to all farmers. Government checks are
no replacement for lost markets, and this
temporary support will only go so far.” Secretary of Agriculture
Sonny Perdue: “We would love for China to come to
the table at any time. We had made great
progress in that regard. When they decided to reneg
on those commitments and relitigate tjhose
commitments that we had, it looked like China was
operating in the same way they had operated over
a number of years. It remains to be seen, but
it’s really in China’s court.” For Market to Market,
I’m Peter Tubbs. Record low unemployment,
lower mortgage rates and a solid job market wasn’t
enough to inspire more home buyers to
take the plunge. — New home sales sank
6.9 percent in April. Despite the decline, sales
are still higher than a year ago. Existing Home Sales
slipped 0.4 percent as the pool of properties remains
limited and prices are slightly higher than
buyers are willing to pay. Orders for durable goods
fell 2.1 percent on plummeting autos
and airplane sales. Without the transportation
sector – core durable goods declined
0.9 percent. — Congress failed
to pass a $19 billion disaster relief
package by one vote. Texas Republican Chip Roy
was a ‘nay’ because the bill didn’t included
money for a border wall. Another round of wild
weather will certainly add to the mounting costs
associated with this year’s floods, fires and,
this week, tornadoes. Paul Yeager reports. Another week, another
round of rain washing over the Corn Belt. Planters were delayed
again, this time by severe weather as tornadoes
touched down in ten states over a five-day period. One of the hardest hit
areas was the Missouri capital of Jefferson City. At least three people died
in the overnight twister. A repeating pattern of
storms followed by heavy rain blanketed much of the
country’s mid-section. Some residents had to be
rescued from their homes following rapid rising
water in Oklahoma. Three people were killed
by flooding in the Sooner State. The Cimarron River took
out swathes of land around the northcentral
town of Crescent. Another sign of the power
of water came when two barges broke free on the
Arkansas River, finally smashing into a dam
at Webbers Falls. The state’s governor
warned of worse things to come. Gov. Kevin Stitt, (R) Oklahoma:
“So, the biggest concern is more rain. I mean, there’s some more
rain in the forecast for North Tulsa, for Northern
Oklahoma, the Tulsa area. So, as Keystone gets more
and more in flow, that’s going to determine how
much more water they have to let out into the
Arkansas River.” Some planters did roll
this week as farmers tried to reverse the slowest
planting progress since 1995. Machinery was operational
in parts of North Dakota which is nearing their
five-year pace on corn. The South Dakota situation
is more serious. Only 19 percent of the
state’s crop is in the ground, compared to the
five-year average of 76 percent. Saturated fields remain
in much of the state like this one near eastern
town of South Shore. Nationally, the wet
weather pattern forecast continues. The 7-day precipitation
forecast from the National Oceanic and Atmospheric
Administration calls for another 3-5 inches of rain
over much of the same area as last week. The weather has more than
one farmer considering the prevent plant provisions
in their crop insurance policy. Payouts can help defer
the cost of inputs. Consulting an insurance
professional can help with the decision. For Market to Market,
I’m Paul Yeager. The transition from horses
to tractors had farmers trading leather reigns
for steering wheels. The Smithsonian has
acknowledged the switch by America’s farmers from hay
powered beasts of burden to ones fueled by
diesel or gasoline. The tribute by the
nation’s attic is a testament to the life
changing invention that supplements hard work,
sweat and calluses – the basic building blocks
of modern farming. John Torpy has more
in our Cover Story. Shortly after the turn of
the twentieth century, the introduction of the
tractor to agriculture was a landmark innovation that
helped farmers make a giant leap forward in
reducing workload. A century has passed since
mechanical farming began reshaping the landscape. To mark this anniversary,
the nation’s attic decided to honor one of the first
widely used tractors. Peter Liebhold, Curator,
National Museum of American History: “For
the American Enterprise exhibition here at the
national museum of American History, we have
an entrance icon which we change every every year. And this year we decided
to make it a year the tractor. Because the tractor is so
important as a business story. Not just a farming story
for the business story to the nation.” In the spring of 1918,
the John Deere Company, looking to expand into
a newly growing tractor market, bought the
Waterloo Gasoline and Engine Company in
Waterloo, Iowa, The introduction of the
Waterloo Boy tractor was seen as the pivotal switch
in farming, from animal power to mechanical power. Peter Liebhold, Curator,
National Museum of American History: “There
had been tractors earlier but 1918 is when they
really start to take off. And by taking off it
changes the way that ag is done. It’s an industrial
revolution. Instead of having horses
and mules to provide power, machine start
to provide power. This is a fundamental
change to rural America.” Although the early
machines seemed to be more work than farming with a
team of horses, every new model plowed the way for
farmers to do more with less. Tractors named Avery and
Advance were in the field before 1918, but they were
large, cumbersome beasts that required a steep
learning curve for operation. The advantage of a tractor
working all day still set those farmers apart from
their colleagues who remained committed to
a culture of working animals. Peter Liebhold, Curator,
National Museum of American History:”Those
big tractors in fact didn’t work well
for farmers. They were too big. They were too complicated
and frankly they were too heavy, crushing
the fields. But the lightweight
tractors were simpler to operate. Much cheaper to build
and turned out to be a different technological
asmith and really began to be successful.” Randy Riley, Creston,
Iowa: “Previously to this tractor coming along
people were farming with horses and mules. And you were severely
limit on how much you get done every day because
the mules or horses got tired./These
tractors came along. They made them fairly
cheap where farmers could afford to buy them and
they, this tractor would replace maybe a
team of horses.” The Waterloo Boy tractor
was not a power house, having about the same
horsepower as today’s standard riding
lawn mower. It also lacked the
comforts seen in later models. Peter Liebhold, Curator,
National Museum of American History:”It’s
clearly not as massive as a modern day tractor, the,
the steel cleated steel wheels or are different
and fantastic decals on it the seat hanging
off the back. All these things make it
look a lot different than a modern day tractor.” The “N” was the first
tractor model to carry the John Deere name, and the
simplicity of the machine fit with the popular
tractors selling at the time. Peter Liebhold, Curator,
National Museum of American History: “Early
on there were vast numbers of Manufacturers. Very little in sales. But in 1916 there were
nearly a hundred different manufacturers of tractors. By 1918 Tractor sales,
really start to begin to build and by 1920 the
number of Manufacturers drops considerably. Really just a couple dozen
and sales are up to a quarter million
tractors a year.” As the celebration for the
Waterloo Boy continues, farmers are left to
reminisce about the importance of what
has grown from humble beginnings. For Market to Market,
I’m John Torpy. Next, the Market
to Market report. The weather leads the
trade war for dominance in the commodity markets. For the week, July wheat
gained a quarter while the nearby corn contract
rocketed 21 cents higher. The soy complex fought a
see-saw battle as prevent plant, weather and the MFP
decision pushed the market around. The July soybean
contract gained 8 cents. July meal bumped
up $6.20 per ton. July cotton gained $2.40
per hundredweight. Over in the dairy parlor,
June Class III milk futures fell 16 cents. The livestock market
had a down week. August cattle lost $3.33. August feeders shed $2.27. And the June lean hog
contract cut $4.43. In the currency
markets, the U.S. Dollar index
dropped 36 ticks. July crude oil declined
$4.22 per barrel. COMEX Gold rose
$8 per ounce. And the Goldman Sachs
Commodity Index plunged more than 16 points
to finish at 426.15. Joining us now to offer
insight on these and other trends is one of our
regular market analysts Sue Martin. Sue, welcome back. Martin: Thank
you, Delaney. It’s nice to be back. Howell: So we have a very
exciting week this week, got a lot to talk about. Let’s start really quickly
here the wheat markets. They have also seen a
spark in their futures this week. Was it weather
related or otherwise? Martin: Well, I think
it’s a couple of things. Weather is a big one. You have the hard red
winter wheat that was huge or very high in good to
excellent ratings all through the season and now
that it’s heading towards home base, so to speak,
towards harvest, all of a sudden it’s just getting
inundated with too much rain. And of course the rains
keep following that path that the snowstorms did
this past fall, or past winter, and that is kind
of weighing on the market. It’s causing quality
issues, concerns over disease, fusarium, that
type of thing, and it’s also happening into
the soft red as well. So that is part of it. But then you have Russia
who has their domestic prices lifting quite
strongly at 5 week highs right now and the exporter
is not the one that is getting it, he is having
to pay up to get it because it’s the end
users, the domestic end users that are
buying the wheat. So exports are dropping
out of Russia. And then you have the
Volga River basin looking at heat and dryness and
you’ve got Canada looking at a huge area of dry
weather as well in the Canadian prairie. So it’s kind of a weather
issue more than not but not necessarily
totally here. Howell: Okay. Let’s move on because I
think the bulk of our time needs to be spent on the
corn and soybean markets after the assistance
package was released this week. There’s a lot of questions
about should I take prevent plant? Should I be planting corn? Should I force it in? But we’re nearing
final insurance dates. There’s no argument
about that. Does this latest round of
assistance package change maybe in your mind some of
those producers’ decisions to plant corn or not
plant corn and switch to soybeans? Martin: Well, I think the
one thing that is going to make decisions for them,
first off, prevent plant isn’t probably going to
be the total cat’s meow. So farmers may try to
plant if they can. Will they switch
over to beans? I don’t think you’re going
to see much of a switch to soybeans. Prices on corn are going
to have to move higher to entice that farmer to say
I’m going to go ahead and keep trying to plant. They’ll switch into
shorter terms, shorter season varieties, which
are a drag on yield. We are going to see some
prevent plant acres, South Dakota is going to
have a fair amount. Before I always was in the
3 to 5 million acre camp, now I’m kind of
more like 8 to 10. The bottom line is by the
time you have prevent plant acres and you pull
the acres away from the total that we were
talking, 92.8, and then you look at the drag on
yield that we’re going to see with the shorter
season varieties, and the ponding, the plants per
acre, plant populations are going to go down so
yield is going to go down. Looking at at least 8
of the last late, late planted years, example
in 1993 May to the final yield dropped 22
bushels to the acre. There were I believe 3
years, maybe 4, well there was one year unchanged,
but 3 or 4 of the years, one thing I noticed was
when the yields went down, or went from May to the
final and dropped they dropped largely. When they went up, not so
much, maybe 2 out of 3 years, less than 1 bushel
to 1.1 bushel per acre increase. One year was unchanged. And the one year increased
9 bushels to the acre. I don’t think you’re
looking at a year this year that we’re going
to see an increase. I think because in 1993
the crop was planted, it was just that June was
the huge month of rain. So this year has been a
struggle and the crop is going in very late and
we’re getting into June and the one thing that
people need to keep in mind in this corn market,
if we noticed it today in fact where the July, the
old crop started gaining more on the new. Howell: And why is that? That doesn’t make any
sense in my mind that old crop should be gaining
because it has already been planted
and harvested. Martin: Well, what it is,
is the elevators in a year where there’s weather
problems like this especially they’ll start
moving their bids out to December for corn and
November for beans and then they work the basis
to grab a hold of the old crop because they’re
starting to get worried too that they’re thinking
wow, how much are we going to have for a new crop
supply because it’s possible with the right
situation we could see our stocks to usage
ratio drop under 5%. That will be maybe next to
the lowest on record and it might be the lowest on
record when we’re all said and done. I believe we’re in a bull
market that is, with the short crop probably one
that is going to work its way higher into
fall this year. Howell: My question has
to be, Sue, sorry to interrupt. But with all those bullish
factors how high can the December new crop corn
contract go here? Martin: Well, first off
December corn of 2019, the high that contract had
last year was $4.23 and three-quarters. Now, we’re fairly
close to that. We’ve already taken
December 2019’s low out that it made in 2018. So if we take $4.23 and
three-quarters out, you now are opening up the
door for a key reversal year. And then the next one is
taking out $4.29 and a half, which was last
year’s December contract high on May 24th. And so I believe that we
have a market that is going to see higher highs
in June and I think if we take out this $4.23 and
three-quarters then I’m looking for a
move over $5. I think that we’ve got to
keep one thing in mind, and I’ve talked about it
before on the show, we’ve got these huge gaps
resting above the market. I think one of our more
bullish markets will be the July contract of 2020. And we’ve got a gap on a
lead contract that goes from $4.59 and a half, or
$5.49 and a half, up to $7.09. That’s a huge gap, the
largest I’ve ever seen, and I’ve been in this
business a little while. So I think that we’ve got
potential here, it’s a short crop and short crops
sometimes have a long tail. Howell: Absolutely,
that they do. Sue, we’ve got to talk
about the bean markets as well. I know you think maybe
we’re not going to see quite as many corn acres
switch to beans, maybe market prices entice that
to stay corn acres or prevent plant. But there will likely be
some acres that transition from corn to soybeans. Has the market
factored that in yet? Martin: I think to some
degree it has because if you notice beans aren’t
really the lively one. They are also the one
that the shorts are still staying in. So the market is going to
be interesting because it could be if we catch
rain and they can’t get anything much done this
next week, which my forecasts that I follow
are turning drier, but if that happens all of a
sudden, and it’s going to take almost a week to
try out in some of these places, now you’re getting
into the second week, maybe past the
6th of June. That’s going to
be a concern. But you’re going to go
shorter varieties, again. And those will, and beans
mature on daylight hours, so as they mature and
you’re now coming to the longest day of the year
you’re really cutting your window of hours of
daylight and so the beans will shut down sooner. Beans don’t like wet feet
and from what I’m hearing we may come back with a
wet August and possibly September. If that happens that’s
not going to help either. One thing I think we will
see, and I want to just jump for a second back
to corn, is the last two years or so we’ve had
these accumulator contracts, $4
accumulator contracts. I think this year those
are going to bite a bullet and I think they’re
going to be costly. In the beans I think
beans could be a sleeper. If we continue into the
month of June and we start to catch this moisture
still into the first week of June then I think this
market is going to start to come to life a little
bit as the shorts start to cover a little
bit in the beans. Howell: Okay. Sue, let’s take a
social media question. Weather is definitely on
the minds of many this week. We’ve got a question from
Austin in Northwest Iowa. He said, is there any
reason for the livestock markets to get bullish, to
get a bullish reaction due to the delayed
planting at any point? Martin: Well, usually when
you have grain prices going higher and
enthusiastically, if anything it gives concern
that it starts to cramp the style of feeding. And today the cattle
on feed report showed placements on feed up 2%
and placements not as high as they thought, up
9%, and then of course marketings was like
everybody though at 7%. But, the bottom line is
we’ve got plenty of mouths to feed. And same thing in the hog
industry and the same thing in the
poultry industry. So I think what it does
more than anything, it says to them they really
need to manage their feed costs because they have
been spoiled for quite a few years and so they need
to be watching ways to limit the expense and
maybe call options is one way to go about that. But I think they need
to be watching that. Now, I’ve heard some talk
in past few years or whatever, whenever corn
would rally, the feeder cattle would rally and the
deferred contracts and they say, well it’s
because of the corn market. In the old days that
didn’t work that way. In the old days it was
corn going up when cattle started to drop. Howell: Okay. Sue, let me just get your
quick 30 second synopsis here on the
lean hog market. We had a limit down
close day on Friday. Are we opening back up
after the holiday weekend here? Are we heading further,
are we pulling back further? Or are we heading
up higher? Martin: I think
we’ll be lower. It was a disappointment to
see the close that we got here today. And I think we’ll start
the week out on the softer side. We’ll have expanded
limits of 450 points. But I think we’ll
start off lower. The product needs to
catch here and firm up. I think the market is into
a cleansing right now trying to basically it was
so long and heavily long that the market is
cleansing itself and pulling those
longs back out. And there may be a lot of
options in the markets and they’re going to take them
worth less if they can. Howell: All right. Sue, we’re going to
continue that discussion in Market Plus. Thank you so much
for being on today. Martin: Thank you. Howell: That wraps up
the broadcast portion of Market to Market. But we will keep this
conversation going on Market Plus where we’ll
answer more of your questions. You can find it
on our website at Market-to-Market.org. While you wait to get back
into to the field, we have just the thing to keep
you company, three weekly podcasts to stay on top of
happenings in agriculture. Download where you
get your podcasts. Join us again next week
when we’ll explore changes to the 35 year old
Conservation Reserve Program. 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
from a Grinnell Mutual agent today. Accu-Steel, offering
fabric covered buildings specifically designed for
the cattle industry since 2001. The next generation
of cattle buildings. Information at
accusteel.com.

About Ralph Robinson

Read All Posts By Ralph Robinson

Leave a Reply

Your email address will not be published. Required fields are marked *