Market to Market - January 5, 2024

Paul Yeager: Coming up on Market to Market. The employment report opens a year of economic snapshots. Dramatic changes in mountain snowpack in the West. High school classwork. The returns, dividends to the community and commodity market analysis with Mark Gold next.

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Announcer: This is the Friday, January 5th Edition of Market to Market, The weekly Journal of Rural America.

Hello. I’m Paul Yeager.  The new year picked up where the old one left off - jobs are still available and those who need one are still in short supply.

The monthly jobs report revealed 216,000 positions were added last month. The unemployment rate stayed at 3.7 percent - adding a 23rd month to levels below 4 percent.  Average hourly wages rose 4.1 percent from a year earlier, up from a 4 percent gain in November, which could make it harder for the Fed to slow inflation back to its 2 percent target.

Iowa has been in some form of drought for more than 4 years - the longest streak since 1958.  California ended its extensive drought streak last year at this time - but 2024 is reverting back to the dry times in the Golden State.  David Miller reports. 

Dave Miller: The first snowpack measurement of 2024, at California’s Phillips Station, looked and provided dramatically different results than a year before.  This year’s survey revealed levels at 30 percent of the average for this date. In 2023, the snowpack was at 177 percent of the average. The figures are calculated using records that stretch back nearly 75 years.  The measurement takes place near Lake Tahoe and is part of a bigger picture.  Sean de Guzman, Snow Survey Manager, California Dept. of Water Resources: "Snow water contents is really that critical measurement we're always kind of looking for because theoretically that's the amount of water contained within the snowpack, because that's really what we're interested in is how much water is in the snowpack? And it's information and data like that that we're able to plug into various models to figure out how much runoff we'll have once the snow melts in the spring and summer to refill our reservoirs for water supply."

 The five feet of snow at this location a year ago contributed to the recharge of depleted reservoirs after years of drought.  Sean de Guzman, Snow Survey Ma nager, California Dept. of Water Resources: “Today's result shows that it's really still too early to determine what kind of year we'll have in terms of wet or dry. And there can be so many things that happen with our storm systems."

Currently, snowpack around the country is limited. Moderate melting around much of the country occurred this week as both coasts, again, prepared for a late week system that could provide some precipitation. December also proved to be the warmest on record for several Midwestern states.  The weekly Drought Monitor from the University of Nebraska reveals a return to the trend of drier conditions across the country. For Market to Market, I’m David Miller. 

Paul Yeager: The help wanted sign is hung in nearly every business’ door. Along rural main streets - the posting may go unanswered for a longer period of time. Some industries and communities have taken creative routes to grow the next set of employees through specialized high school classes.   Peter Tubbs has more in our Cover Story.

Peter Tubbs: School buses drop off students on a rainy morning in Mantachie, Mississippi. The district of 1,000 students in the northeast corner of the state has the usual classroom offerings for students, but excels in agricultural trades instruction. Fourteen students in the Meats 2 class are working on breaking down deer carcasses that area hunters have delivered for processing. As some work on whole carcasses, separating the large cuts, others do trim work, or grind the venison through a grinder.  Matt Spradling, Mantachie Instructor: “Students that is working together right now. Those students have three or four deer out at one time. And but that being said, you have to have communication to keep all of that straight so that whatever deer came out of the cooler stays with that same person's name as it goes through to be processed and finished that way.”

Peter Tubbs: Whether a student is doing the knife work or holding the carcass for others, they are applying what they have learned in the classroom to the cutting table.  Matt Spradling, Mantachie Instructor: “I guess the easiest thing to pick up is just making sure that everything is clean. And part of that is because we do go over that so much. I guess that would be the easiest. The hardest thing that I would say for them to pick up is our students sits on our break down table whenever that carcass comes out there is four different muscles within a hind quarter of that animal.  A lot of the times it takes several days for students to understand how to actually cut those out without cutting part of another piece off with one. You know, they might cut out one and a half pieces and only half of the other.”

Peter Tubbs: Students in the Meats class find the nuance of separating the different cuts challenging, but rewarding. Wesley Umfress  “Really getting down the cuts. Really cutting, right. And really, because you got to separate the muscles and the meat. So really just doing that and making sure you get everything right and get everything clean and just cutting.”

Peter Tubbs: Conversations about school with students from other districts illuminate how unusual the meat program is at Mantachie. Wesley Umfress Mantachie student:  “. The conversation with them is a lot of "That's crazy. All we do is sit in a classroom", It's definitely something different that nobody else really gets to experience. So I enjoy it very well.”

Peter Tubbs: The agricultural curriculum at Mantachie also includes courses on forestry and general agriculture. In an average year, 80 percent of Mantachie 8th graders take an agriculture class as an elective.  Peter Tubbs: The agriculture program at Mantachie has a long legacy in the community. Many of the students in this class have parents who took the class themselves. Instructor Matt Spradling grew up in Mantachie and took the classes he now teaches. Matt Spradling, Mantachie Instructor: “Uh, my family's been in Mantachie for several generations. Mantachie is home to me. Oh, always has been and will be. And it's nice getting to come home to your school that you put something into as a student, and now then getting to keep putting into it as a teacher.”

Peter Tubbs: The strength of the agricultural instruction carries over to the success of the FFA program. Mantachie FFA often competes in regional and national meat competitions. As the only meats lab in Mississippi public schools, it joins the few dozen meats programs that are part of the national FFA.  Both the startup costs of building a certified meat processing room and the scarcity of meat cutting instructors keeps limits the number of meat programs across the country.  Matt Spradling, Mantachie Instructor: “Hopefully, you know, some of these students will go into the career of a butcher or something one day. I even have a couple of students right now that is helping out at a local, you know, meat shop in town and even get some that them as well as some of their family have their own deer processing facility at their house that they're using what they're learning here to go and make money somewhere else.”

Peter Tubbs: Students rotate positions from day to day, but each has the part of the butchering process they prefer. Keileigh Spencer, Mantachie student: “The table I'm on right now, which is like the grinding table, the pre grinding table, which is where we take what's came from the break down table. So most times it can be like the front shoulders, the ribs and all that. And we cut it all off, take off the all the meat. And just that's going to sound really disgusting. So you cut off all the blood clots and all that and cut it off the bone and get ready to go into the grinder. So that's probably my favorite part.”

Peter Tubbs: Students in this class will process up to 500 deer between November and March, along with some beef and pork carcasses. Once trained, one student is able to break down one deer carcass each hour. Tracking each cut through the process is paramount. Matt Spradling, Mantachie Instructor: “If I bring in a deer, I get my exact deer back kind of deal. And that teaches communication, teamwork, work ethic and these students, the more they do it, the better they get at it. And, you know, sometimes when something happens, you know, they make something wrong off of one deer because they didn't read a tag correctly. Some students don't like cutting. They got a role. They can work on the grinder, they can do the tenderize or vacuum sealer write on the bag to let people know what cut they're getting in that bag. So there's a job for everybody. Even though you're not physically cutting the meat, there's still a job for you somewhere in that meat facility.”   Peter Tubbs: Even though the number of those who pursue meat sciences as a career is small, Spradling agrees learning a hands-on skill can leave students with the courage to try new things, and enter the job market with the confidence to learn new skills. Matt Spradling, Mantachie Instructor: “So people just ask pretty much about what we do and then they're pretty amazed at how much stuff that we have that a lot of places don't.”

For Market to Market, I’m Peter Tubbs

      Paul Yeager: An eye on the size of crops in South America and demand for product kept pressure on the trade.  For the week .. The nearby wheat contract lost 12 cents, while March corn dropped eleven cents.  There was a selloff in the soy complex as widespread rain fell in Brazil.  The March contract declined 42 cents and March meal shed $16.60 per ton. March cotton shrank by 81 cents per hundredweight.  Over in the dairy parlor, February Class Three milk futures fell 16 cents. The livestock market was higher. February cattle added $2.08. March feeders improved $1.05 and the February lean hog contract gained $2.02.  In the currency markets, the US dollar index increased 100 ticks.  February crude oil expanded $2.50 per barrel.  COMEX gold cut $20.40 per ounce, and the Goldman Sachs Commodity Index added more than a point to settle at 537-90.

Joining us now is regular market analyst Mark Gold. Happy New Year, Mark.

Mark Gold: Happy New Year. Nice to be here.

Paul Yeager: Beat you to what you're going to tell me first. Sorry. I wanted to be ahead of you once. I never entered this wheat market. When we look at the differences, it's always a different aspect. We look at lower Kansas City, we look the side to side in Chicago. Then there's Minneapolis. Which of those is, do you think, the biggest influence on the wheat market as a whole right now?

Mark Gold: Well, I think Chicago generally is unless there is a major weather issue somewhere. We have seen, you know, Minneapolis go way above either Chicago or Kansas City in one particular year. But in general, Chicago is really the main market. It's the main market because that's where the funds play the biggest game. And that's going to be the biggest market mover are generally going to be the funds.

Mark Gold: So any of those other markets, either Kansas City or Minneapolis, can certainly have their day in the light. But for the most part, it's going to be most people tend to follow Chicago.

Paul Yeager: And we look, though, let's talk about Kansas City for a minute. In wheat country where winter wheat is growing and rain is falling domestically, the story is there's moisture in the plains. Is that the biggest weight on the market right now?

Mark Gold: Well, they've had some much better weather than they've had, but we keep getting these ten and 15 cent rallies during the day and we had a pretty good close despite the poor closing the corn in the beans. So it's kind of on its own thing here. Maybe the wheat is worried about this cold snap that's going to come down and maybe there's not enough snow cover.

Mark Gold: So I'm guessing that's what it is. But the conditions on both Oklahoma and Kansas City wheat for the month improved dramatically. And I think that's certainly a result of the rain.

Paul Yeager: But the big question is, who wants it? Well.

Mark Gold: Certainly none of our typical export partners. I mean, the exports this morning were just terrible. The dollar is still too strong. So, you know, unless we see the dollar really take out 100 points, then I think we might see a little bit of pickup in business. But the Chinese aren't buying it. It's it's not buying it. The Russians still have plenty of wheat.

Mark Gold: Ukraine is still doing a good job for them of getting whatever grain they have out. So, you know, like you said, who wants it? We really don't have a lot of people. There's a good domestic usage, but the export markets a dog.

Paul Yeager: So traditionally when there's no news or anything moving a market, it's going to fall lower. So if I'm somebody sitting there wanting to make a position, make a sale, what am I looking at here?

Mark Gold: Well, in the wheat market, I wouldn't be in a big rush. The wheat is certainly held up best this first week of the year. And, you know, when you can't figure out when we had all this moisture and some negative news in the wheat and it opened, I don't know, seven or eight lower and came back and closed ten or 12 higher.

Mark Gold: That's pretty impressive. And then following it up with another. Okay. Closed today, That's impressive in its own right. And I think what it is, is the funds coming into the week were short about 80, 85,000 contracts. So wheat, I think they've been pretty good buyers. There's been talk about rebalancing the funds after the first of the year. I don't see it doing it in corn right now, but I do see it in the wheat.

Mark Gold: So maybe that's why wheat staying as strong as it is.

Paul Yeager: So you're trying to tell me that corn is weak right now?

Mark Gold: Well, I've been telling people in my newsletter that don't expect the corn to rally till we get the corn out of the farmer's hands the majority of the the corn out of the farmer's hands into the commercial hands. If you look at the positions that the American farmer has, you look at the very, very small short position, the commercials have.

Mark Gold: It's telling you the American farmer is holding on to a lot of corn. As I've said many, many times, a market the corn market will not rally until the corn is out of the farmer hands. Once it's out of the farmer hands. Now we've got a chance to rally the market. And farmers always say, Gee, how come the corn never rallies when we own the grain?

Mark Gold: It's because you own the grain and you know, nobody wants to sell a break in this kind of market. And if you're going to sell it and get it out of your hands, make sure you look at buying a call option sometime in the next couple of weeks. I don't want somebody coming back to me six months from now saying, oh, you told us to sell the corn to get out of it. I'm also telling you to buy the call option to keep the upside open, because once it's out of your hands, then the market will run.

Paul Yeager: What is the timeline that we need to see the selling happen to make something move?

Mark Gold: Well, you would think after the first of the year for tax purposes, guys generally wait till after the first of the year. Now we're starting to see some small farmers sales, which is pushing the market down a little bit. The funds are short somewhere between 180, 190,000 contracts of corn. What are they going to rebalance? I would I would if I was one of the funds, I wouldn't rebalance till I saw at least 50% out of farmer hands.

Paul Yeager: But Mark, the cost of what's on the board right now is not profitable for me. Why should I sell if I'm just going to lose money?

Mark Gold: Well, if you want the market to go higher than sell it. If you don't want it to go higher, just keep it in the bin and wait. But markets do things for for realistic reasons. And once we can change ownership from the farmer to the commercial, now we have a chance for me for the market to rally.

Paul Yeager: Okay, so there's that side of that story. What's the other story of the the fundamental issue of South America and whether and China will or will not buy? I mean, is that the weather is not dependent on farmers selling, but China coming in to buy might be.

Mark Gold: Well, certainly we've seen the exports being a pretty good disappointment out here. They've come in at times and bought some weekly numbers have been 1,000,000 million to in that range part of that's China a good part of that's been Mexico it's a very valuable trading partner we can't lose. So you know, is China going to buy more? I'm not so sure.

Mark Gold: They may they may be done with that for the time being. And with the rains that we've seen in Brazil, the second Serafina crop is going to be a big crop. They've been ratcheting it down just a little bit by the exports, but not significantly. And I think these rains will certainly help it. And we're going to see a big corn crop out of Brazil.

Paul Yeager: I heard from a viewer who has a relative or two in Brazil right now as we speak, saying they drove hundreds of miles yesterday in rain. Yeah, when the farmer is looking here in the United States to what's going on in South America and they see rain reports. What should they do with their corn specifically?

Mark Gold: Well, there's no carry in the market, maybe a dime carry in the market, maybe $0.12 carry in the market. Certainly doesn't pay the cost of storage. I have no idea why farmers have been storing this through since harvest. Makes no sense to me from a financial standpoint. They should have been selling it months ago and they should have been looking to buy some call options now if they haven't done anything yet.

Mark Gold: You hate to tell a farmer to sell grain on a break where a contract was by one farmer is selling on contract loss. No, but there is more downside risk in this market. I can just tell you this. If you need the money to pay the bank or the loans, whatever you're going to do where you own it with a call option, because that'll be the time where the market will rally.

Mark Gold: And again, I just don't see the market rallying until the farmer does that.

Paul Yeager: Is there any carryover to the soybean story then from corn.

Mark Gold: Carryover in terms of the carry outs coming out? Correct. You know, it's been the tightest of all of them. And certainly what gave the market a bit of a spook was this November and December. Weather in Brazil, hotter 105 degree heat, virtually no rain. And the market paid attention to that. But as the forecast started to change, the funds were long about 80, 90,000 contracts of beans.

Mark Gold: They started to get out of that. Now they're short after today, probably 40, 45,000 contracts of soybeans. So we've seen the funds liquidate. Their long positions get short. They're still long, about 45, 50,000 meal. I think once they're finally going to blow out in the rest of the meal, then I think it's probably time to buy some soybeans.

Paul Yeager: We had, I think, Tuesday, the lowest close in six months. What's to say we can't have another one of those in the next few days?

Mark Gold: Nothing that I see. The rains are still there. The beans everywhere except Mato Grosso will be benefited by these rains Mato Grosso, the big question there is and they're the biggest soybean producing state. How much damage was irreversible? And we don't know that. We won't know that until harvest. But there is a significant amount of beans in Mato Grosso that aren't going to make it with these rains.

Mark Gold: So now we play the guessing game. Is is Brazil going to produce a 158 crop or 153 crop? Kind of comes out next week. We'll get a better idea. But the rest of Brazil, well, Mato Grosso maybe continues continuing to lose yield. I think the rest of Brazil is starting to ratchet it up a little bit. You won't see that in this month's estimates, but you'll start to see it next month.

Paul Yeager: All right. Take the three markets that we just talked about, three commodities. And let's put this question to it. Matt in Iowa wants to know what market movers should we be looking for in 2024? Is it any different than what you have said?

Mark Gold: Well, certainly the remaining weather in Brazil, our spring weather and our summer weather, it's going to be the biggest mover. I think you've got to watch world problems out there. You've got the war in the Middle East. You've got the war between Russia and Ukraine. That doesn't seem to be letting up any time soon. Are they going to stop exports out of Ukraine if exports out of Ukraine stop and corn and wheat, then we can jump this market.

Mark Gold: If they continue to export, then they've got plenty of wheat. The Russians have got plenty of wheat. The Ukrainians have got corn to sell. So that'll keep a damper on it. But I think we need to watch the dollar, we need to watch the weather. We need to watch these world consequences and we need to watch what's going to happen with the politics here in our own country. You know.

Paul Yeager: It is an election year mark. It isn't always severe. Let's move to livestock. We had live cattle and all three that we follow higher this week. Start with live cattle. Why?

Mark Gold: Well, I think partly because of the storms that have moved into the plains. The box beef has just fallen out of bed. It went from 193, 194 down to 177, 178. But the cash markets stay relatively strong. We were looking at 174, maybe even 175 in Iowa this week, which is a bit of a surprise. The futures of now that we've got the Fed futures up front right in line with the cash market, maybe the cash is a little high relative to the futures.

Mark Gold: But, you know, you wonder how the futures are going to and the cash market's going to stay so strong with the banks backing off. But it hasn't been a good barometer of where prices are going to go.

Paul Yeager: Why is box dropping? Are we not wanting hamburger?

Mark Gold: Well, I think we're seeing cheap poultry. We're seeing cheap pork out there. And the American consumer is looking to save some money. And I'm guessing that's what it is. But we had the same situation a month ago when boxed beef was at 194. So it's hard to know.

Paul Yeager: Feeder wise, you mentioned the storm had a conversation with somebody in Oklahoma yesterday talking about, yes, there is cattle back in places where they weren't. There's feedlots starting to expand. Is there room for expansion? Is there capital to expand for some of these people?

Mark Gold: I would say so. The cattle guys have had some pretty good years out here. And I think if you we've got to see what the January 1st numbers look like. What's what's where and what I think when it's all said and done, we could expand the cattle business out here. There's room for it. In my opinion. We need to keep the demand going.

Mark Gold: It's tough being in the cattle market. You know, you look at these prices 225 on feeders and 174 on on fat cattle. Historically, these aren't cheap prices. So if we do start expanding, do you want to consider using some hedges by some puts to protect things that you're going to put in the feedlot? Let the market do its thing?

Mark Gold: I think it would be foolhardy to say that there wouldn't be some risk in the cattle market, if demand keeps winning the market. That looks good. Technically, as the hog market. We had a good week in the.

Paul Yeager: Hogs except for one day. Yeah, pretty rough day. But why did that thing rebound? And does it have legs to keep moving higher?

Mark Gold: We need to see something happen in China where we may pick up some demand there. I don't know why we had the sharp down the sharp up the next day, but suffice it to say from a technical standpoint, it looks a whole lot better this week than it's looked in quite some time. And maybe it's partly the demand that's picking up.

Mark Gold: We're starting to see that. So, you know, markets will find their own level and I think hopefully hogs have seen their bottom and we can see a bounce in here. Now.

Paul Yeager: Do we see the hogs benefiting from a demand domestically or a global demand for U.S. pork?

Mark Gold: I think domestically, you know, beef is high priced, as I've talked about. You know, prices of steaks in Chicago, When I go out to dinner, which is all too often, it's not uncommon to be $65 to $68 for a 12 ounce, 16 ounce prime steak. It's a lot of money. Most people having a little trouble getting that kind of dough.

Paul Yeager: Well, we are out of time. Mark, thank you for the insight. I see it a sophomore in 24 hour. Stay there for a minute there. Okay. Well, all right. So hold it on. And we're going to pause this analysis and continue our discussion about the markets and our Market Plus segment. You can find both the analysis and the Plus on our website of market to market dot org.

Paul Yeager: Let us help beat the winter doldrums with some podcast offerings each week. We have three that are release the Market Analysis. The Market Plus and the MTM Show search and follow in your preferred podcast player. Next week we'll look at two large government reports with some big insight in a panel format. Thank you for watching. Have a great week.

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