Market to Market (November 1, 2019)

Market to Market (November 1, 2019)


Coming up on Market to
Market — The EPA gets an earful from the renewable
fuels industry. Fire sweeps down the
West Coast as snow stops harvest in the Midwest. Farmers add value to their
wares in an urban setting. ♪♪ And market analysis with
Shawn Hackett, 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. ♪♪ This is the
Friday, November 1 edition of Market to Market, the
Weekly Journal of Rural America. ♪♪ Hello, I’m
Delaney Howell. You may have taken a break
to help with Halloween trick-or-treaters
this week. Your consumption of candy,
both purchased and snuck out of the dish, is
helping the economy grow. Consumer spending
gained 0.2 percent last month. The unemployment rate
climbed to 3.6 percent. Even with the drag from
the now-settled GM strike, 128,000 jobs were
created in October. The nine-state Mid-America
Index rose 2 points above growth neutral despite
shrinking inventories and worries over
the trade war. Gross Domestic Product
grew at an annualized rate of 1.9 percent in
the 3rd quarter. The Fed is aiming for 2
percent growth and cut interest rates a quarter
point as part of their strategy. The White House says
they are searching for a new place to sign Phase 1
of the U.S.-China trade deal. Their first choice, the
Asia-Pacific Economic Summit in Chile’, was
cancelled due to political unrest in Santiago. Many U.S. farmers agree it was time
to hold China accountable over trade but their
domestic focus has turned to the loss of
ethanol market share. John Torpy has the story. The Environmental
Protection Agency got an earful this week from
both the renewable fuels industry and
petroleum refiners. At a public hearing
in Michigan, ethanol advocates, oil industry
representatives, farmers and politicians voiced
their opposing opinions on a recently proposed EPA
rule concerning Small Refinery
Exemptions or SREs. Patrick Kelly, American
Petroleum Institute: “The final standards must
recognize it as simply not possible to go back in
time and induce demand for a prior year. Increasing the implied
ethanol mandate above 10% of the gasoline pool does
not equate to more ethanol consumption.” Iowa
Renewable Fuels Association: “And that’s
not how the law is supposed to work. Those gallons are supposed
to be redistributed to the remaining refiners that
don’t get exemptions. So in other words, 15
billion gallons is supposed to be 15
billion gallons. Even when you account for
exemptions.” The bulk of the complaints focused the
impact SRE’s have had on the ethanol industry. Exemptions are given to
small oil refiners who declare a monetary
hardship if they have to blend a certain number of
federally mandated gallons of biofuels into
their gasoline. P Petroleum
Institute: “The final standards must
recognize it as simply not possible to go back in
time and induce demand for a prior year. Increasing the implied
ethanol mandate above 10% of the gasoline pool does
not equate to more ethanol consumption.” In early October, after
enduring numerous complaints from ethanol
industry and farm state political leaders, a deal
was struck with President Trump to restore the
gallons lost over the past two years to SREs. However, the rule
presented by EPA in late October leaves nearly a
third of the unblended 1.6 billion gallons
on the table. Emily Skor, CEO Growth
Energy: For the past three years, EPA has granted 78%
more exemptions than the department of energy
has recommended. So that gives us very
little confidence that EPA is going to follow through
on this commitment.” Officials in corn
producing states argue refiners have had ample
time to adapt to working with ethanol. Sec. Mike Naig, Iowa Secretary
of Agriculture:”Well, look, first of all, the
renewable fuels standards been around for
a few years. And so this is not
something new for any of us to be, to be dealing
with, including the petroleum industry and
the refiners, right? So I would argue that by
now some 15 years into this, uh, that, that the
industries need to have figured out how to
incorporate ethanol and biodiesel into our
transportation fuel system.” Since President
Trump took office, 85 hardship waivers have been
granted to oil refiners. During the Obama
Administration, only 23 SREs were granted
between 2013 and 2015. For Market to Market,
I’m John Torpy. Fall weather continues to
show signs winter is close at hand. On the Eastern Seaboard,
high winds, thunderstorms and tornadoes knocked
out power to 420,000 customers. And nearly the same number
have been displaced on the opposite coast as Santa
Ana winds whip up wildfires. Paul Yeager has the story. Wildfires are sweeping
across California, sending thousands from
their homes. Fires burned in several
regions of the state with some outbreaks adjacent to
major metropolitan areas north of Los Angles. The Ronald Reagan
Presidential Library, in nearby Simi Valley, was
threatened by the blaze. The largest fire in the
Golden State is sweeping across wine country in
Sonoma and Napa Counties. According to the National
Interagency Fire Center, the Kincade blaze has
grown to more than 76,000 acres in size. In an attempt to reduce
the fire danger, Pacific Gas and Electric has cut
power to hundreds of thousands of customers. For 2019, 4.5 million
acres have been scorched in 44,000 fires. That’s less than half of
last year’s reach at this same date and the smallest
amount of acres burned since 2014 – behind the
10-year average pace. Conversely, a pair of
winter storms delayed the already slow
harvest of 2019. Snow left only a small
trace on some acres, but other operations were
stopped in their tracks and will take a few days
to get back in the field. The 2019 harvest for
soybeans is 16 points off the 5-year pace while corn
is 20 points behind the average. For Market to Market,
I’m Paul Yeager. Outdoor farmer’s markets
are the typical path for adding value to produce. Reaping that extra profit
often comes at the cost of taking valuable time to
operate a stand in a busy downtown area. But, as Peter Tubbs
reveals in our Cover Story, there are a few
venues that cut out everything but
delivery time. “Those are great for Baba
Ghanoush, parmesean, all that.” A Tuesday morning
negotiation over eggplant is part of the routine
at The Wild Ramp in Huntington, West Virginia. The 3,000 square feet of
floor space has the feel of a carefully crafted
specialty grocery store. The reality is that this
is a hybrid farmers market, open six days a
week, where products are sold on consignment. Kelsey Abad, Manager, The
Wild Ramp: “So the wild ramp started a consignment
style farmer’s market where producers still
maintain the ownership of their product while
it’s here in store. They set their prices, how
they want to see their products sold. And then our staff and
volunteers are the ones that merchandise and do
the communication and the marketing on behalf of all
our producers so farmers can get back out to the
farm and do what they do best. And then we get the
opportunity to communicate their story to
our customers.” Calvin Hall is a retired
coal industry manager, and raises vegetables in a low
tunnel an hour east of Huntington. Calvin Hall, Farmer:
“Well, the wild, The Wild Ramp gives you the ability
to come in, bring your produce. They’re here all the time. I’m back home doing work
and it’s a great thing for our extra produce. If you raise very much
produce, you’ve got to have more than
one outlet.” The ability to sell
produce away from a standard farmer’s market
fits into the part-time nature of agriculture
for many in the region. Even the name of the
market, The Wild Ramp, is a nod to the wild leek
common to Appalachian forests. Rural Appalachia is
challenging land to farm. The steep hills and narrow
valleys often limit agriculture to poultry
and eggs, grazing and vegetable crops. Less than 5 percent
of West Virginia is considered harvested
ground by the USDA. Because of the shortage of
farm ground, the majority of farmers in West
Virginia work part-time in agriculture. As a result, three out of
four farms in the state have an annual gross
income of less than $10,000. Each farmer that sells at
the Wild Ramp stocks their products when
they are fresh. Items that are packaged,
like berries, get barcode stickers. Loose items have companion
price sticks that the purchaser takes to the
register, matching the produce with the farmer
who brought it to market. Unique items attract
shoppers who know they can find produce that won’t
appear at the grocery store down the street. Kelsey Abad, Wild Ramp
Market Manager: “So we try to encourage people to
use sustainable practices while they’re farming and
also to go outside of the box to try and grow some
more heirloom varieties, things that are either
different colors, different shapes,
different sizes than you would see in a
conventional grocery store as a way to kind of carve
out a little niche for themselves and be able to
charge a fair price for their product and also
educate consumers on just the Cornucopia of options
that are out there.” Kelsey Abad, Wild Ramp
Market Manager: “And local for us means 250 miles. So everything in our
store, whether it’s fresh produce, jams and jellies,
dried products, even our beer and wine section is
all sourced within 250 miles. And about 70% of our
products, they’re actually within a 50 mile
radius of our store. Um, so we’re not just
local as the USDA defines it, but local for us is
much closer to home.” Park and Lacy Ferguson
both work full time while managing their farm near
Wayne, West Virginia. While eggs, broiler
chickens and beef cattle are all sold directly to
consumers, their most profitable product
is seasoned salt. Flavoring local salt dried
from underground brine, the Fergusons add the
herbs, peppers and mushrooms that grow
on their farm for a lucrative, shelf
stable product. Park Ferguson, Farmer:
“Well, the, The Wild Ramp is really great for us
because we work full time and because we add value
and have a lot of shelf stable products, uh, so
it’s really convenient to take things there at a
time that works for us and to know that our things
can sit there for a while and they’re gonna move,
uh, you know, eventually. Uh, so it’s really nice, a
really nice outlet for us to be able to take
things there.” Twenty five dairy cows
come in for their evening milking at Laurel Valley
Creamery near Gallipolis, Ohio. Each ounce of milk from
this herd of Guernseys will go into the making of
nine varieties of cheese, which is sold locally to
restaurants and retail customers. The ability to add value
on the farm allows the Nolan family to remain
small and financially stable. Celeste Nolan, Dairywoman
and cheesemaker: “It shelters us a lot
from commodity dairy. So instead of selling milk
for less than it cost to produce it, I add value to
the milk, um, by turning it into cheese. And then for the most part
determining my own price. I haven’t sold any milk on
the commodity market and eight years, and I don’t
know what the milk price is, which for uh, for a
dairy woman is unheard of. ” The consignment model
of the Wild Ramp is attractive to producers of
finished food as well as vegetables. Celeste Nolan, Dairywoman
and cheesemaker: “It’s so much easier to sell cheese
at the wild ramp than it is to sit at the
farmer’s market. I’m just taking cheese
there once a week and letting them keep the
hours as I can do. I can make deliveries at
the wild ramp and three or four restaurants and drive
the hour each way in the same amount of time that I
could set up at a farmer’s market.” The Wild Ramp has a mobile
truck to sell produce at locations around the city,
and has added a commercial kitchen to create prepared
foods from produce nearing the end of its shelf life. Preparing products that
are less seasonal gives the market items to sell
during the winter when the volume of produce slows. But perhaps the most
valuable product created at The Wild Ramp
is producer time. Lacy Ferguson, Farmer:
“The biggest handicap we have is time, aside from
finances and you know, it’s, you kind of have to
decide, am I going to go to the farmer’s market for
eight hours or am I going to sit, um, you know, on
the side of the road for eight hours, or am I going
to be out in my garden working, which is why I
got into this, you know, this is what I
wanted to do. So it’s just been a really
great model for us.” For Market to Market,
I’m Peter Tubbs. Next, the Market
to Market report. Even with weather,
potential sales to Asia and a weaker dollar the
commodity markets were relatively quiet. For the week, December
wheat lost 2 cents, while the nearby corn contract
gained 3 cents. Dry weather in Brazil and
potential sales to China did little to fire up the
soy complex as the January contract closed
two cents higher. December meal improved
60 cents per ton. December cotton dropped 67
cents per hundredweight. Over in the dairy parlor,
November Class III milk futures increased 68
cents, to a 5-year high. The livestock sector
finished mixed as the December cattle
contract added $3.45. January feeders
improved $4.40. And the December lean hog
contract fell 48 cents. In the currency
markets, the U.S. Dollar index
declined 57 ticks. December crude oil shed
47 cents per barrel. COMEX Gold added
$2.90 per ounce. And the Goldman Sachs
Commodity Index was flat to finish at 415.30. Joining us now to offer
insight on these and other trends is one of our
regular market analysts, Shawn Hackett. Shawn, welcome back. Hackett: Hey, Delaney. How are you? Hopefully we don’t spook
the markets today on Halloween. That’s the best I’ve got. Howell: Okay, well we
appreciate your attempt at a little Halloween humor. Shawn, let’s talk here
about the wheat markets this week. They have had a couple of
exciting weeks and now it seems that they are
relatively flat. Is the December wheat
contract due for some sort of retractment here? Hackett: Well, this time
of the year we’re normally looking at Russia. What does Russia’s
crop look like? What do the
exports look like? And what we’re seeing
is that in the month of October their exports are
down 14% over last year. The ending stocks in
Southern Russia which is where all the exports come
from are down 20% from two years ago and down
13% from a year ago. So even though last year
we were looking for those exports to come off, it
looks like this year they actually are going to come
off and with improving ruble it looks
like the U.S. is going to get a
lot more business. And we’ve seen some very
good exports here the last couple of weeks. So we think the wheat
market has some decent upside into the end of
the year because of that. Howell: Even if the U.S. dollar has some strength
here do you still continue to see the wheat market
have some upside potential? Hackett: Right now we see
the dollar going down. It looks like
it’s rolling over. We had the Fed Reserve say
they’re going to do QE4, lower rates. Everything says the dollar
actually looks like it could be topping out. So we don’t really see a
lot of strength in the dollar into the year end. It’s always possible but
we’re assuming flat down dollar and that is good
for wheat exports. Howell: What about
corn exports? They have been just awful
the past couple of months really. How does the U.S. dollar impact
our corn market? Hackett: Well, it always
makes us more competitive but you have to kind
of remember what the Brazilians did. They front ran a trade
deal with China and the U.S, six fold increase in
exports year over year is what they have been doing,
they kind of shoved all this corn in the market
and the market just has too much corn, it
has to digest it. And so we’ve been feeling
the impact of that. The good news is that is
behind us and as we start whittling away those
inventories the U.S. is going to start getting
business, especially with a weaker dollar coming up. So we’re optimistic we’ve
seen the worst for exports for corn and we’re going
to see better times ahead. Howell: Well that is good
news for producers sitting at home. Shawn, I want to turn
our attention to acreage because we’ve got the
November WASDE report coming out next week. They are going to be
adjusting the corn acres in Minnesota and North
Dakota and some of those areas that have been
really affected by weather. What do you see that doing
for the WASDE report then? And what do you see that
doing for impacts into the market next week? Hackett: It all depends on
what the expectations are already built in. We’re already 40 or 45
cents off the lows so a lot of expectation
is built in. For sure we’ve always felt
that harvested acres will be coming down anyway. So we think they’re
going to come down. But probably the market
has dialed in lower acres in this report, we don’t
think there’s going to be surprise there, especially
with corn near resistance at $3.90, $3.95. Howell: If we can break
through that resistance level, Shawn, what
is your next target? Hackett: Well, the next
target is $4.15, $4.20 and that’s really the longer
term barrier that we briefly got over in June
when we had the weather scare and then came
right back below it. So that would really be
the longer term resistance if we can break through
this midterm resistance at $3.95. Howell: Shawn, I want to
turn our attention here to both corn and soybeans
because we’ve got a good question come into us on
Facebook I believe from Shane in Bloomfield,
Nebraska. He said, the market seems
to be suppressing this problem of snow and
harvest delays on top of the planting
delays that we had. Should producers be
selling cash grain now to take advantage of strong
basis and then reown the grain on March contracts? Hackett: Well, whenever
you have a strong basis, we do have strong basis,
we’ve had strong basis for a while, you always want
to reward the market that is worth rewarding. And so whether you sell
cash we’d definitely be locking in doing
basis contracts. We still think there’s
upside to corn going into the end of the year, as we
said, with better exports, lower dollar. But we don’t think the
basis is going to get much better and we do think
that farmers ought to be locking in that basis
now, that’s a really good opportunity for
the long-term. Howell: For both corn and
soybean locking in that basis? Hackett: Corn for sure. Soybeans not as much. We think the corn basis is
really the one to be doing right now. Howell: Okay, turning our
attention to more heavily on the soybean market,
we see the November and January spread continuing
to tighten up a little bit there. What is that
indicating to you? Hackett: Well, the ending
stocks were supposed to be a billion, then they went
down to 600, now we’re 450, a little more
adjustment we’re at 350 and so all of a sudden you
start looking at what is going on if the Chinese
start buying more soybeans as part of a trade deal
and I think the market is concerned that we might
be getting ourselves too tight and we just didn’t
plant enough acres this year and that is a
consequence of that. Howell: How much upside
potential does that leave us then? Hackett: In the spread
or in the price? Howell: Let’s
say in the price. Hackett: Right now the
$9.50, $10 is going to be a really hard barrier to
get over, we don’t think we can get over that
without something new coming out to take
the market higher. We think that is going to
cap any rally attempt and it has thus far. Howell: Is the Chinese
trade deal, is that enough to move it? Is that enough of a
catalyst so to speak? Hackett: Well, as always
we need to know the details of what it says. It was supposed to be 50
billion, then it was 20 billion, then
we’re not sure. I guess it could be if
it’s a surprise that they have bigger numbers in
here than we think. But unfortunately we just
don’t know, we’ll have to wait and see. But I don’t think it’s
going to be enough right now. Howell: Okay, Shawn, the
cotton market really took it on the chin this week,
I think it was a 67 something cent
loss this week. Was it all due to
the U.S./China trade negotiations
falling apart? Or is there something
else impacting the cotton markets? Hackett: Well, if we rally
from 55 cents up to 65 cents, which is a big
resistance level on the chart, so that was a
logical place for the market to stake a step
back, we had some uncertainty on trade, the
market is just kind of looking at all the
economic data and saying maybe we’ve done enough
for now, why don’t want take some chips
off the table. Farmers are harvesting and
so they have some fresh supplies they
need to price. So I just think it was
more of a technical factor than anything else. We’re still pretty bullish
this market going higher. It’s an economically
sensitive market. It likes to look ahead and
with the Fed doing QE4 and lowering rates it usually
means better economic activity a year from now. Howell: Okay, a year
from now is a little bit further out there but it
does give some producers a light at the end
of the tunnel. But I think really the
winner of this week’s market has to be the dairy
market as we saw there just in that cover story. Some producers are looking
for alternatives to make ends meet. But $20 milk, five
years, that is crazy. What is going on? Hackett: That’s an
outstanding price and everything that could
go wrong a year ago, everything is
going right today. Three things are
really going on. We had very, very poor
production in the U.S.. It made the cheddar
production go down to flat. Cheese prices based upon
cheddar price and cheddar fundamentals which is the
Class III price and the dry whey price. So that has caused this
tightness in the cheese market for cheddar, not
other cheese, but for cheddar alone has been
driving the market higher. Secondly, we’ve had
weather problems in New Zealand. This is the time of year
that New Zealand is the primary exporter of
milk powder and other derivatives to the Chinese
and the rest of the world and they have had very,
very cold, very wet weather, production is
going to be flat for the year during their peak
production instead of being up. So now there’s concerns
that as China binge buys into the end of the year
they’re going to drive up the milk price. And lastly, we have been
hearing some things that African swine fever has
been causing dairymen locally in China to cull
their dairy cow herds to sell into the beef market
which has been soaring and that production could be
hurt there which may mean that the Chinese will be
even larger buyers into the milk market just as
New Zealand is not going to have as much
as we thought. So it’s a perfect storm
and we think we can still spike trade this market
even higher into the end of the year before we
might kind of exhaust this market to the upside. Howell: Well and that was
my next question, Shawn. We don’t get a lot of
dairy folks on so I’ve got to take advantage of
you since you’re here. Are we going to see some
sort of hangover effect so to speak for the dairy
market after this all plays out? Hackett: Absolutely. We see some early bearish
warning signs, in the month of September U.S. production was at 1.3%,
cheddar production was at 1.2%. It’s the first time we’ve
had an up month for the entire year like that. So it’s already telling
you we’re starting to get the response domestically
for these high prices. It’s not enough yet to
make a difference but once we get over what we have
to do here there’s going to be a hangover and so
dairymen should not look a gift horse in the mouth
too long because it might just go away on us. Howell: Okay. We also had big moves this
week in both the live cattle and feeder
cattle markets. Shawn, I want to ask first
about the April live cattle contact. Are we into putting some
seasonal highs here? Hackett: Seasonal highs
really take place in the first quarter so we do not
think we’re anywhere near a seasonal high. When we look at the cattle
market we’re coming off that Tyson fire spike low
and we’ve been running the market higher. As you know we follow
smart money capital flows in ag markets and what is
amazing is this entire rally up there’s been
almost no smart money selling which is very,
very unusual and suggests this is not just a
tradeable rally, this is a order rally and
it has been. April has clear
resistance at $130. We don’t see any reason
why we can’t go there first before there might
be some pause in the market or some
retrenchment from a big move so we still think
there’s more upside to be had here. Howell: $130 is your
target in live cattle. What is your new target in
the March feeder cattle contract? Hackett: The feeder market
has a wall of resistance in that $155, $160 area. We would just think that
is likely going to hold the market back on any
kind of rally attempt so it’s not as big of a move
as let’s say the live cattle market but we still
think the market moves smartly up from here. But that would be, has
been a long-term target that did hold the market
back last year around that level. Howell: All right, Shawn,
your quick thoughts here on the lean hog market. We’ve seen jumps in weight
three weeks in a row. We’ve seen dismal prices
again in the hog market. Where do we
head from here? Hackett: Endless supply,
endless demand and there we go. We’re stuck in this
violent trading range based upon whatever wins
out in a given week and until we get to the
first quarter when pork production domestically
is going to start to come down it’s going to be very
hard to sustain a rally beyond the trading range. So that’s where we’re at
and it’s frustrating, at the same time it’s
understandable. Howell: What is the
trading range that you’re watching let’s say for
the February chart in particular? Hackett: I think our top
side you’re looking at something like 70 cents,
something of that nature, and a 10 cent range, we’re
looking for kind of a 10 cent back and forth range
that we’ve been stuck in and it’s really hard for
us to see us getting out of that until we get
closer to the end of the year when the Chinese tend
to binge buy ahead of their holiday season and
that is when the markets start to worry about these
tighter supplies coming into the first quarter. But it still could be a
slog for another 30 days before we get there. Howell: Okay, Shawn
Hackett, thank you so much, always a pleasure. Hackett: Thanks. 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. We’ve been filling our
Instagram Stories feed with some of the best fall
images in rural America and we added a
behind-the-scenes look at our production day. Find us at IPTVMarket
on Instagram. Join us again next week
when we’ll see how one agent spent three decades
investigating ag-related crimes. 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.

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