Market to Market - December 22, 2023

Paul Yeager: Coming up on Market to Market. Grain and cargo hit roadblocks around the world. Wet weather strikes the coast as dry weather persists in the grain belt. Honoring life long contributions to global food security and commodity market analysis with Jeff French next.

Announcer: What's next? Doesn't happen by chance. It happens when researchers and farmers work together to solve tomorrow's agronomic challenges. We're committed to creating what's next because a Pioneer. Our name is our mission tomorrow.

Announcer: For over 100 years, we've worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today.

Announcer:  This is the Friday, December 22nd edition of Market to Market, The weekly Journal of Rural America.

Paul Yeager: Hello. I’m Paul Yeager. Home is where the heart, holiday celebration and many economic reports are for this week. Existing home sales snapped a five month losing streak with a gain of 0.8 percent as mortgage rates eased. However, new home sales fell again in November but may not stay that way much longer as builders added a third month of gains as they broke ground on new single family units. Durable goods orders jumped 5.4 percent in November giving a boost to the manufacturing industry for items meant to last at least three years. The government’s preferred inflation gauge - the PCE - slowed again last month - this time growing by 0.1 percent and 2.6 percent in year-over-year calculations. 

The modern day Santa arrives in a truck or van delivering goods to neighborhoods. Two years ago supply chains were working through backups and bottlenecks at seaports. Now issues on the routes in oceans, seas and inland waterway are  forcing detours and delays. David Miller begins with the stoppage along a major avenue between two North American trade giants. 

David Miller: In an attempt to stop thousands of undocumented people flowing across the nation’s southern border, officials with U.S. Customs and Border Protection temporarily cut off traffic on two major rail lines. This is the second time in four months that trains running south to Mexico through the Texas towns of Eagle Pass and El Paso have been stopped.  Thousands of railcars were halted on both sides of the border as the 24 trains that normally cross each day sat idle. 

The move brought a storm of protests as politicians, rail companies and a long list of agricultural advocacy groups raised objections. The National Corn Growers Association, the American Soybean Association and the Meat Institute were joined by 43 other groups pressuring federal officials to reopen the rail bridges that cross the border to the nation’s number two trading partner.

Traffic on the Mississippi River continues to be slowed by low water levels. Normally, ice stops the movement of goods during the winter months but there is little if any on the route north of St. Louis. Lighter loads continue to be the order of the day as goods move towards Southern U.S. ports.

Further south, low water has cut the daily movement of container and cargo ships transiting the Panama Canal. Daily runs of up to 40 ships per day have been slashed by 40 percent to a maximum of 24 vessels every 24-hours.  

According to the Panama Canal Authority, water saving measures have been successful but the transport of soybeans, grain and other commodities has been severely limited. According to the Soy Transportation Coalition, companies that pay higher toll fees like cruise ships, container vessels or automobile carriers will continue to have priority over agricultural loads.

The attacks on commercial ships in the Red Sea by Yemen’s Houthi rebels have shipping companies increasing the length of the routes for loads going towards the Suez Canal. The move is expected to trigger delays and increase shipping costs for oil, natural gas, grain and electronics that typically travel through the waterway separating Africa and the Arabian Peninsula, where 12 percent of the world's trade passes. In response to the growing impact to global trade from the attacks, the U.S. and several other nations have created a new force to protect those ships.

For Market to Market, I’m David Miller

Paul Yeager: This week, organizers of the Minnesota Ice Festival canceled their 2024 event as uncharacteristically warm conditions remain in the forecast. Drastically different weather conditions are in place for both coasts and everywhere else in between. John Torpy has our weather wrap.

John Torpy:  The East Coast led off the week with a wind swept mess that took at least five lives.

Almost five inches of rain fell on the Atlantic Coast from Massachusetts to Maine. At Cape Neddick, Maine wind blew high waves into structures along the shore. Emergency workers were sent out in the elements to clear roadways of downed power lines and other debris.

More than 30,000 were without electricity in the impacted area as trees fell on power lines. Wind gusts topped 60 miles per hour along the Atlantic shoreline as flood warnings were issued for sections of Pennsylvania and New York City.

On the other side of the country, California is experiencing rain and bracing for more this weekend.  Flood warnings have been issued from San Diego to the Central Coast region. Flooding and mudslides are expected from the Pacific storm as millions prepare to travel for the holidays. 

Despite all the rain, a lack of moisture remains a problem in the non-coastal areas of the country. Much of the nation’s midsection is locked in extreme and exceptional categories of drought.  More than 50 percent of the U.S. has been suffering in some form of drought since mid-July.

Many of the same areas are also low on snow. The latest snapshot reveals depths well below average in North Dakota and Minnesota. The mountain west also is seeing limited snow cover as is a stretch from Virginia to the Great Lakes.

For Market to Market, I’m John Torpy.

Paul Yeager: Norman Borlaug is heralded around the world as the father of the Green Revolution. His likeness is celebrated each year in the heart of corn country with efforts to improve food security around the globe with the awarding of the World Food Prize. This year’s laureate has switched careers from telling stories to making many of her own throughout efforts inspired by work from the Old Testament. David Miller has our Cover Story.

David Miller: Heidi Kuhn accepted the World Food Prize’s top honor in Des Moines, Iowa in October. It was her work on the other side of the planet that led to this moment but it all started on the west coast of the United States during the 1970s.

Kuhn was inspired by the peace movements of the era.  Her motivation to help others came while she was studying political economics at the University of California - Berkley. 

After graduation, she began traveling the world via a career in journalism - even starting her own news organization with some of her work being featured on several networks around the globe.  

During what could have been the peak of her first career, Kuhn was diagnosed with cancer. After emerging from treatment in 1997, she founded Roots of Peace, inspired by Princess Diana’s work clearing land mines. 

Building on her passion for peace, Kuhn started turning mines into vines. Her first big effort was in Croatia where thousands of explosive devices were removed from the ground. The next steps included replanting of the cleared areas in grapes and orchards. To fund the venture, she rallied renowned Napa Valley vintners behind her cause, eventually gaining help from the U.S. State Department and other international organizations.  

Roots of Peace moved forward with clearing minefields and rebuilding the economic base of several rural communities in the wake of the war. The seeds that were planted became opportunities for Kuhn’s work to help relaunch the wine industry across Croatia.

Heidi Kuhn: “I believe this is a moment in human history for the removal of a landmine and the planting of a grapevine or tree of life is an act of peace.”

David Miller: Soon after, she turned her focus to Afghanistan - helping reclaim the country’s fields - ushering in growth and prosperity - all while bringing back native varieties. Afghani’s were able to raise table grapes on cement trellises - boosting productivity by taking the produce away from pests and moisture.  

Kuhn: “Peace is possible. Peace through agriculture. Ladies and gentlemen, this award is not something to put on a shelf. This award is a platform for peace on Earth.”

David Miller: This move helped double yields while improving agriculture and management processes in Afghanistan.

Her next project took her to the DMZ in Vietnam in 2010. After demining, the explosives were replaced with 1.6 million black pepper trees. The restart of the industry put 3,500 farmers back to work. 

During the past quarter century, Roots of Peace has funded the removal of over 100-thousand landmines and unexploded bombs from fields around the world benefitting more than 1 million farmers.

At the Borlaug Dialogue in the days ahead of the formal ceremony, Kuhn announced an expansion of her work to the country of Ukraine, taking on the task of demining and removing unexploded ordnance in the southern region of the country near Odessa.

Heidi Kuhn: “So we're working on a partnership with these wonderful deminers and most importantly, the Ukrainian Wine Association, because this is a country that, you know, has provided the most beautiful wines and and from mines to vines, again, to be very clear, the fruit of the vine may be fermented in a fine bottle of wine, but in the case of Afghanistan, it's only fresh grapes and raisins.  So we're very sensitive to the culture of the country. We're working. But this is a very, very special bottle that was sent to me by the farmers in Nikolayev. And it is the Roots piece Cabernet Sauvignon, harvested from the former mine fields of Ukraine.”

David Miller: At the same event, Kuhn cited the bible as the inspiration for her work. 

Heidi Kuhn: “And I just Cheryl would like to hold this shovel up in my battle cry for peace. And the words that are respected by various faiths, in Old Testament, may they beat their swords into plowshares and their spears into pruning hooks. So that nation shall not lift up sword against nation, neither shall they learn war anymore.”

For Market to Market, I’m David Miller. 

Announcer: Next, the Market to Market report.

Paul Yeager: End of year trading volume slowed - giving the bears an easier time to settle in the trade while a border closure issue heightens tension. 

For the week ...The nearby wheat contract lost 13 cents, while March corn also shed a dime. Even with tight ending stocks in the U.S. the trending of growing piles around the world influenced the soy complex. The January contract subtracted 16 cents and January meal declined $6 per ton. March cotton shrank by 9 cents per hundredweight. Over in the dairy parlor, January Class Three milk futures fell 46 cents. The livestock market was mixed. February cattle fell 82 cents. January feeders put on $1.85 and the February lean hog contract dropped by 55 cents. In the currency markets, the US dollar index lost 73 ticks. February crude oil added 1.70 per barrel. COMEX gold increased by $31.70 per ounce, and the Goldman Sachs Commodity Index added almost 13 points to settle at 548-20. Joining us now is regular market analyst Jeff French. Hey, Jeff.

Jeff French: Paul, great to be here.

Paul Yeager: Good to have you here. Just before we started recording today, there was an agreement reached to reopen the railroad crossing between the US and Mexico. The rail, that was a big deal. 41 different commodity groups are responding to that. Even now that this has been reopened, the does that heighten the issue that we are in a very precarious position when it comes to trade relations with wheat because Mexico likes to buy a lot of U.S. wheat?

Jeff French: Well, and there's a lot of poultry producers in Mexico. And the main one was corn. And they said in that 48 hour, 72 hours, that up to a million bushels were stopped on rail. But they were trucking it in. They were using alternative routes, but yeah, that is behind us. But that doesn't stop the fact that we have a 2 billion bushel carry out. We're down here at three and a half year lows, right on a very important number of 470. We held it here this week, which was good to see. But if we take that out here during the shortened week, next week you go down to 455, maybe even lower force from there.

Paul Yeager: And you're talking corn right now because yeah, I mean, if we had 470 wheat, I would I threw I threw you off there. Sorry. So let's stick with corn then for just a moment because there is you mentioned these these tough spots, but there's also this whole lot of question about on on farm storage. And we have a question that came in via James in Oklahoma. And I guess it's really the question everybody else has, Jeff, is how cheap will corn get before before farmers give up and sell what's in their beans?

Jeff French: Well, I mean, we'll have to see there. But I mean, for 70 years, a big number. I mean, that was the high back in 2019 and we haven't been below it since then. So if we do take it out on a technical basis, again, we can go down to 455. Longer term, you could go down to the long to the low force and looking just looking at the carry out number, 2 billion bushels, historically just the price of corn. When you have 2 billion bushels is somewhere in that 375 to 4 and a quarter. I don't know if that's going to happen, but when we've had 2 billion bushel carryout, that's where the price of corn typically is. When you say long term, what's your definition there? The next 4 to 5 months get through the suffering of corn crop. You know, the Brazil is dry. They got some rains here this week. They are forecasted to get rains here next week as well. But this dryness is really a corn story because they planted 100 and 1012 million acres of beans. I mean, they're going to have beans to export here. But if they don't get the moisture, they will cut back on corn acres. When they plant the corn here in the next 3 to 4 months behind the bean harvester.

Paul Yeager: A lot of times we hear soybeans as the story from South America. But in the U.S. soybean story, do you get the sense the market, is it all reacting to weather stories in South America? I saw something this week that thought, no, it's not.

Jeff French: Oh, I think it's absolutely I mean, Brazil right now is right in their June to July timeframe. So and they've been dry, but they've got some rain. So, yes, when we see forecasts, the beans absolutely affect that. And we've seen beans come down here. You've seen them in the last 30 days. Beans are down a dollar per bushel. And we're right on that psychological support, that $13 area. So we held it here. But if we get these rains that Brazil is forecast, let's say in 2 to 3 inches here in the next two weeks. So if we get that, we could see beans down another 30 to $0.40 pretty quick.

Paul Yeager:  Is that also in that timeframe that you mentioned in corn?

Jeff French: Well, I think it's going to be.

Paul Yeager: Quicker in the equipment being sold in. What do I do in this situation if I'm looking at that number going below $13, the November is off significantly from that. I hate to pull the trigger on something right now, do I? But do I have to?

Jeff French: Well, we don't sell cash into a negative market. What we do is we buy put options and right now what we're doing is buying the 1280 February put for $0.15 a bushel on beans. What that will do is that will lock your downside floor at 1280 for the next 35 days. We have that January 12 to final production report. That's going to be a big number the second week of January, because that sets the stage here for the first quarter of 24.

Paul Yeager: Do you get the sense of China is done buying us beans temporarily?

Jeff French: Well, seasonally they should be buying our beans. But do they continue to buy our beans? February, March, that's typically when they start to focus on the Brazilian crop. So time will tell. We don't have any shipments, very few shipments for those dates because they start to focus down on the Brazilian crop in Argentina. Your crop, Argentina has had phenomenal maybe too much rain this year compared to last year. So there's going to be some competition here for the beans moving forward.

Paul Yeager: Let's go back to wheat for a minute on you mentioned weather, rain in South America. There's also rain in some of the key growing states of wheat and winter wheat, specifically. What's that doing to the market right now?

Jeff French: So we had that nice rally two weeks ago when China was buying all of our software and we we rallied it 99, 95, $0.90 off the lows we've set back here because of the rains. So those were good rains in Kansas and Oklahoma. But the wheat here in the last two weeks has been very quiet, very choppy. But I'm actually at all three. I would say I'm most friendly wheat. Couple of reasons. We have the US dollar at five year low or excuse me, five month lows. It looks like it wants to go. It's right at one on one right now. Looks like it wants to go test the July lows there at 99. So continuing weakness there, making our exports more attractive. But you also look at the world, Kerry, out of wheat. We're down here at 258 million metric tons. That's an eight year low in the world. Kerry out of wheat. So it's not going to be easy. I mean, Egypt tendered for wheat here this week and 13 of the lowest offers were all out of Russia. So the Black Sea will continue to dictate wheat prices. But I see some potential positive. I mean, we've held this $6 mark. We might be able to move higher here from here.

Paul Yeager: So who is most beholden to a lower dollar in terms of would love to see a dollar go lower to help them out? Wheat, corn, soybeans?

Jeff French: Well, I think, you know, volume wise, I think it'd be corn. I mean, we we definitely export more corn, but all three of them will benefit from it. So a weaker dollar is definitely more attractive for our commodities.

Paul Yeager: Okay. That's always something to think about because it almost seems as of late the lower dollar that we were two consecutive weeks of pretty big losses and haven't seen the sales translate to any sales. So does that say that to you that the dollar was too high?

Jeff French: Well, yeah. And then you had the Fed come out, you know, two weeks ago and indicate that, you know, they're done raising rates and potentially next year going to start cutting rates. And that's what really triggered the sell off in the dollar. So will that translate into more exports? Exports have been solid. You know, they haven't been too bad, but they can always be better. So, yes, we'll we'll be continuing to watch it.

Paul Yeager: Cattle on feed came out on Friday. What did that report tell you?

Jeff French:  You know, not a reason to buy the cattle here. You know, we've been long cattle for seasoning. You should be buying cattle first week in December, sell them first week of January. And that trade has worked out well. I mean, fats are nine, $10 off the lows. Feeders are 15, $16 off the lows in the last two weeks. But the numbers alone, I would just say, you know, we'll probably open lower Tuesday morning. It will be important how we close. But the placements once again, I mean this is the third cattle on feed report in a row that we've had higher placements than the trade was looking at.

Paul Yeager:  Also, we could have our third report in a row where we've had dramatic movement in the day after the report. Throw in a holiday. Are you saying Tuesday could be wild.

Jeff French:  With the reduced volume? I mean there's a lot of traders that will take next week entirely off, you know, go, go enjoy the holiday with their families. So, yes, you could have big moves on reduce volume. Again, I anticipate that we will open lower. How we finish, how we close out Tuesday will be important.

Paul Yeager:  Do you anticipate then with cattle, we just put the cattle chart up there and we we had seven weeks of sell offs and this week. Right. And Yeah. Do you think it's going to end. I guess I should ask that it's an actual question.

Jeff French:  Well we've had five classic sell off waves during that seven week lower. I mean it was it was brutal. I mean, it was but we also had 12 months consecutively of higher closes in the cattle coming into those seven weeks. So, yes, seasonally, you should be long cattle here in December, especially the week after Christmas going into the new year.  And then also pretty strong seasonal for the first quarter to be higher than the previous fourth quarter. So we're selling cash here in this one 7171 area during the third week of December. We'll look just for cattle prices to be higher here come next year.

Paul Yeager:  Hog market. The China story, you know, we're getting to that year end where that kind of changes with what their intention of buying. Are they influencing the trade as we had a little bit of a peak this week and then kind of fell off.

Jeff French:  Very strong export sales in the hogs here this week, very strong, some of the strongest that we've seen here for some time. But the Hog and Pig Report, I mean, we're just we have plenty of hogs. I mean, that's what it comes down to. And we're doing the pigs per litter continues to overperform expectations. So, you know, I look at the summer hog market at 93, $0.94. And to me, that looks like an awfully good level to put some hedges on here for the next six, seven months. So that's what we're telling our producers.

Paul Yeager: In the final seconds here. We're also in the final days of 2023. This is the time when I know on our growing up it was pretty busy with people trying to make some some sales, trying to book some things. Are you recommending or have you seen anybody buying fertilizer, buying fuel, buying seed more or less than what they would normally do?

Jeff French:  No, I mean, I've had a lot of meetings with, you know, all the my clients are having their CPA meetings and deciding if they needed to take more profit or add more revenue for the 23 year. I would just tell my clients that if you are forced to make a sale in corner beans down here at these lows, get it re owned here out into May or July with call options. I never like to be forced into a sale. Typically it's not what you want.

Paul Yeager:  Are you forced in? Are you? Do you know of anybody that's maybe buying extra fertilizer or fuel right now to for tax purposes on.

Jeff French:  I don't personally, but I you know, I've seen I expect us to get it into the ground really quick. I mean, I drove Iowa here yesterday, December 21st, and I saw two guys working around because of this weather has just been phenomenal this fall.

Paul Yeager:  Who have said they actually get money out on Christmas Day. We'll see how it goes. Jeff French, good to see you. Thank you.

Jeff French:  Thank you. Merry Christmas.

Paul Yeager:  Merry Christmas to you as well. Nice look, by the way, too. Thank you, Jeff. And we'll discuss the beard in our marketplace as we're going to pause the analysis and continue our discussion about the markets. And we have a whole bunch of your questions here ready for Marketplace. You can find both analysis and plus on our website of market to market dot org. Our YouTube channel is uploaded twice a week with our market plus the stories from the program and our Empty home show podcast Follow today and know when we post and be the first to watch our content by heading to YouTube.com slash market to market next week. A look at the year that was 2023 and how it impacted rural America. Thank you so much for watching. Have a great week.

Announcer: Market to Market is a production of Iowa PBS, which is solely responsible for its content.

Announcer:  What's next doesn't happen by chance. It happens when researchers and farmers work together to solve tomorrow's agronomic challenges. We're committed to creating what's next because a Pioneer. Our name is our mission tomorrow.

Announcer:  For over 100 years, we've worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today.

Trading in futures and options involves substantial risk. No warranty is given or implied by Iowa PBS or the analysts who appear on Market to Market. Past performance is not necessarily indicative of future results.