Market to Market - February 9, 2024

Paul Yeager:  Coming up on Market to Market - 

Warmer temperatures take hold across much of the country. 

A new wave of farmers joins widespread European protests 

Having that difficult talk with your elders - farm transitions. 

And commodity market analysis with Ted Seifried, 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 at Pioneer, our name is our mission.

Announcer: Tomorrow, 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.

Announce: “This is the Friday, February 9 edition of Market to Market - the Weekly Journal of Rural America.”

Hello. I’m Paul Yeager. 

The big matchup of the year is playing out in the desert - so too is the Super Bowl - as parts of the West have been slammed again with heavy rains. 

NOAA issued a La Nina watch this week - saying it could replace the El Nino pattern we’ve been in for months. 

If past performances are any indication, this year’s Atlantic Hurricane season could be more active because of the change. 

What it meant this week was that more than 230 million Americans were in temperatures above normal.

David Miller has our weather report.

Weeks of bitter cold weather with sub-zero temperatures have given way to another warm weather week with unseasonably high temperatures. 

Despite the swing, California is still suffering from its proximity to an atmospheric river that brought heavy rain and snow to the region.

Ariel Cohen, Meteorologist, National Weather Service: "This is truly been a historic storm for Los Angeles. We're talking about the third wettest two-day stretch since records started in the 1870s."

David Miller: Nearly 500 mudslides have plagued the area so far this week. Nine lives were lost during the storms that precipitated the slides with nearly half being killed by falling trees.

Drivers faced tough road conditions in Big Bear, CA this week where a winter storm brought additional snow and gusty winds making travel difficult.

In the Midwest, record warm temperatures melted the piles of snow that appeared to be here for the long haul. In just a few days, the snow cover has disappeared from much of the country. Despite the break in the cold snap, winter is still officially here for another month and a half. More than 200 million people in the U.S. experienced above average temperatures.

The new U.N. chief of the World Meteorological Organization, Celeste Saulo, says the rate of human-caused climate change is accelerating and warmer weather in the Arctic has pushed polar vortexes outside of their traditional boundaries.

Weather for the coming week is predicted to see the rain shut off on the coast and colder temperatures throughout the upper midwest. 

For Market to Market, I’m David Miller.

Paul Yeager: Farmers in Spain, Italy and Poland have joined in the ongoing protests against European Union farming policies. Recognized as one of the most powerful political groups in the EU, farmers are demanding measures to combat production cost hikes, reduced profits and unfair competition from non-EU countries.

Peter Tubbs recaps the week. 

Farmer protests expanded across the European Union this week. Farmers in Bulgaria and Italy blocked traffic with their tractors as part of the expanding movement.

The EU proposed rewriting its controversial plan to reduce pesticide use in response to the protests. The original plan has sought to reduce the use of pesticides in agriculture by 50 percent by 2030. The plan would cover farms in all 27 member states of the EU. 

Protesting farmers are also asking for protections from imports of cheaper agricultural goods, as well as shelter from higher input costs and support to protect them from the effects of a severe regional drought. 

Protesters in Bulgaria, the poorest country in the EU, argued that the war in Ukraine has depressed crop prices as Russia is selling grain below market rates to evade sanctions. 

Ventsislav Mitkov, Chairman, United Agricultural Producers:  “The last two to three years have been a kind of hell for the Bulgarian farmer, we are surviving on the edge. The small and medium-sized agricultural producers in Bulgaria will be bankrupt for up to six months if there is no change.”

Peter Tubbs: Elections for the EU Parliament are scheduled for June, and the concerns of farmers have taken center stage. The EU spends over 50 Billion Euros each year on agricultural programs and supports and has proposed changes in agricultural practices in the union’s quest to reduce carbon emissions by 2040.

For Market to Market, I’m Peter Tubbs

Paul Yeager: Nebraska is one of six states with an inheritance tax. A proposal was discussed this week to join Iowa in repealing the levy.

Transitions from one generation to the next can be costly if pre-planning is left alone.

The conversation can be awkward, heated and could lead to hard feelings for years.

Clint Fischer started in farm sales and has since founded Braintrust Ag - helping assist in that communication between generations.

Our chat was part of the MtoM podcast and is this week’s Cover Story. 

Clint Fischer/Braintrust Ag: Generally speaking, I like to have that younger generation approach, the older generation, with this kind of framework in mind. It's saying, I have, especially if they have their own operation, and they just don't know what's going to happen with the land base or with the equipment. You know, the older generation just doesn't talk about it. They didn't. Anytime it gets brought up it gets shut down.

[Yeager] What? What, whoa, whoa, whoa, you're saying that maybe an old farmer might not talk and talk about something important, like that is just breaking news, Clint, let's sound the alarm. So let's keep going. 

[Fischer] Once or twice, I've seen it happen. But really, the approach is this. If I'm in that younger generation's shoes, I'm saying, I'm looking out for my family, I'm looking to protect what I've built, whether that's part of the operation or not. And part of that part of being a good steward of my operation, and part of being a good business owner, for my family, is understanding and planning the future. And so, you know, Dad, uncle, whoever it is, I'm looking at planning out, you know, 5, 10, 15,  20 years from my operation right now, you know, and I like to say, you know, say that you talk to me say that you talk to a third party, or that just generally neutralizes things, you know, you know, I was talking with, with the guy who works with this kind of thing, and, and he really encouraged me to see, you know, part of my 5, 10, 20 year plan is, I don't know, you know, what, what place I have in your future plans. And so you just kind of bring it up as I'm looking out for my family, I just, I need to plan this to be a good business person. And you approach it with humility, and humble and with the approach that says, I'm not expecting anything. I'm not anticipating to  receive anything. But to be, you know, to have a well thought out plan. I just need to know whether there's anything on the table here or not, or how things are going to look. But really, it's I think it's key to approach it, that I'm not entitled to anything here.  You know, and I think that, once you have that attitude, going into it, understanding that I am looking out for my family here, that generally they're a little bit more willing to open up now. Not all the time. It all and I've heard some people say, my dad said, well, you'll find out when I pass away, you know, and if that's the case, then so be it. And then that's when I tell that younger generation, okay, then you can assume that you're getting nothing, which is probably use this and then the rest is a windfall. Yeah, right on that basis, and then the rest would be a windfall. 

[Yeager] What's that conversation maybe we should be looking at if we're not directly tied to agriculture, or we are. And we need to have this conversation because we need to have it. 

[Fischer] First and foremost, I would just encourage, strongly encourage the owner generation to be the ones to initiate it. That conversation goes something like, he re's what our plan is, or we don't have a plan. And we are working out putting a plan together. And getting everybody in that room. And it's saying, here's our plan, you may or may not agree with it, you don't have to like it. But ultimately, these are our assets that we're going to pass along in this manner. We have some farm kids, we have some off farm kids, here's our current plan. This could change depending on a nursing home stays. If we buy a house in Arizona, you know, things could change. But as of right now, here's what our plan is. Any questions. As simple as that. Now, that's assuming that there is some type of a plan in place. If there is no plan in place, that's what I really encourage, you know, reaching out to somebody like myself, or, you know, a good trust estate attorney, you know, some CPAs can give you some good, you know, tax guidance and, and referrals. But whenever I work with, with a farm transition, there's, there's a couple of key things that are just right off the bat, the first thing is taking a complete inventory, what do we own? And how do we own it? You know, how are things legally titled, just because when we dig into that, we find out a lot of hidden, you know, potential pitfalls that could happen with just that one exercise. So that's step number one. Step number two is we sit down separately, the owner generation, we're going to list out what are our goals and objectives? And then the successor generation? What are our goals and objectives? Separate rooms, not together? Right? These are what you see happening in the future. Now you can take these two sheets of goals and objectives, put them together and see what things line up, and what things don't line up. And oftentimes, there's going to be a few that do line up. But there's a lot that don't. Now, those are areas that we need to open up the communication on and then that's when that family meeting needs to happen. And then we can collaborate, you know, depending on the relationship dynamics, but that's the approach that goes into it now say, Hey, I don't have a plan, what do you kids think should happen to this stuff. And then you have, you know, husbands and wives and in laws that they all have opinions. And that's when things can get messy, and then in then it becomes a, I don't want to deal with this. It's uncomfortable. There's conflict surrounding this. I'm going to kick this can down the road, until eventually, there's no more road to kick the can down.

The full MtoM is available now. 

Announce: Next, the Market to Market Report.

USDA did little adjustment to the size of the Brazilian crop leaving grain bulls sidelined. 

For the week ..

The nearby wheat contract lost three cents, while March corn cut 14 cents. 

Widespread rains in Argentina along with wetter forecasts took out much of the rally in the soy complex. 

The March contract declined a nickel and March meal fell $10 per ton.

March cotton expanded by $4.67 per hundredweight. 

Over in the dairy parlor, March Class Three milk futures fell 38 cents.

The livestock market was mixed. April cattle added $2.98. March feeders strengthened $2.35 and the April lean hog contract fell $2.68. 

In the currency markets, the US dollar index increased by 15 ticks. 

March crude oil expanded by $4.42 per barrel. 

COMEX gold shed $15.50 per ounce, and the Goldman Sachs Commodity Index improved nine  points to settle at 558-30.

Joining us now is regular market analyst Ted Seifried.

Ted Seifried: Hey, Paul.

Paul Yeager: Let's start with wheat.

Ted Seifried: Okay.

Paul Yeager: Because we like things that go sideways, right?

Ted Seifried: No, no.

Paul Yeager: No, no. But the thing with this market is it has been a global story. Every time we think there's a U.S. development. Sure, it still becomes global.

Ted Seifried: Always is.

Paul Yeager: It is the same. Russia has again, put more onto the market.

Ted Seifried: Right. Well, wheat is always a global story because there's so many exporting countries. Wheat is grown everywhere here, Right. So wheat is very sensitive to the US dollar. So there's that. But, I mean, if you look at how wheat has traded since the end of December, it's been absolutely sideways. At times, the range has been fairly wide. But we really keep gravitating back to the $6 level. And I'm talking, you know, March Chicago wheat. But we've got our major moving averages all the way from the ten, 20, 50, 100 day moving averages, all within about $0.10 of each other, just below five or just below six. And the average price since the end of December has been about 6.01 and a quarter. And I feel like we trade that price a few times per week. At some point the wheat will break out in one direction or the other. It's kind of strange for markets to go this sideways for this long, but the question is what and when? And I don't think any of us have the answer for that. I mean, we trade futures and not today's. If we knew the answer to that, we'd be doing it right now.

Paul Yeager: Let's go to corn. There was a story on well, there was a WASDE report this week. Did you feel that corn was a headliner?

Ted Seifried: No.

Paul Yeager: Impacted? No.

Ted Seifried: Impacted.

Paul Yeager: So what's the story in Corn this week?

Ted Seifried: Well, you know, we were looking for the corn carryover to come down just ever so slightly. I think there's a lot of justification for corn exports to move a little bit higher. I would like to see in the U.S. a bump put up 25 million bushels on exports just to say, hey, we're paying attention. We've got some good numbers. They didn't do that. They lowered FSI, Feed Seed Industrial, by 10 million bushel, and didn't come from ethanol. So I'm not exactly sure what that was all about, but it added 10 million bushels to carryover that we were thinking or the average trade guess was for a little bit of a smaller carryover, ended up being a little bit bigger. And I think the biggest takeaway for corn is that instead of trending towards a 2 billion or below carryover, we're trending closer and closer to 2.2 billion. We're moving the wrong direction, Paul. And that's the problem that corn has right here. We just can't find anything to get terribly excited about. Yes, it's great to see more exports, but until they really pile up, it's not enough to really put a big significant dent in that big, big. Carryover we have right now.

Paul Yeager: I probably have 15 questions about corn from people watching at home and reading. I won't get to them all. But there's one thing that Naomi Blohm wrote this week, and she said that the funds are short and people asking, are the commercials record long? And she did some homework and said, yes, they are. What does that tell you?

Ted Seifried: Well, so that tells me a number of things. One, it says that there's a lot of on farm storage. Right. Because if commercials had it in their hands, they wouldn't have to be long. So that means that the US producer is a very large, long position in corn. Okay, so everybody talks about the funds being record short, which by the way, I'm very curious to see what happens on the commitment to traders for the next two weeks because these little inner week rallies that we've had, even though they fallen apart, I think the funds are very sneakily getting out of some of these short positions to take some near-term profit. That being said, the next or while the funds don't have to keep selling for the market to go down. There is another very large entity in the market that when they start selling, that could be our next big leg lower and that is the producer. Unfortunately, Paul, we've seen time and time again we get more cash movement, not with the carrot, i.e. selling into a rally, but with a stick, i.e. selling it and throwing in the towel, panic selling on a bigger move lower. That, unfortunately, might be the next thing that happens to get that cash movement. Maybe it isn't. I'd love to see a profit taking short covering rally coming from the funds. I would love for producers to take that as an opportunity to get some of those long positions, those natural, long positions out of the market. But I don't know. You know, the price action doesn't feel great.

Paul Yeager: But does the action from Brazil or South America change your tune at all or influence or maybe harden your opinion?

Ted Seifried: Look, the thing that could help corn and I think the grain complex as a whole would be a big weather problem for that second season corn crop in Brazil. We know that Brazil has different soils. South America has different soils. They are still affected by weather. Unlike if you look at our growing season last year, I'm going to say is probably the second worst growing season that we've had or the the worst growing season that we've had since 2012. Yet we ended up with 177.3 national average yield, if you'll believe that. I don't know if we can get really excited about a weather issue during our growing season anymore, but we can get excited about something in South America as we saw how big, how, how, how, how that impacted Argentina in a very negative way last year. So there is that possibility. But I hate the idea of hanging my marketing hopes on a possible weather problem for the second season corn crop in Brazil.

Paul Yeager: So do you believe more the report out of South America about the size of their soybean crop or the United States in the guess of the South American crop and how that in fluence is the soybean trade?

Ted Seifried: Yeah you know it and it's not just CONAB, it's really all the private analysts and everything like that. I think what we're having here, Paul, is a problem with where the number started or should have started right? Yeah CONAB continues to lower their production, but they're not raising their beginning number. If you look at what's happened in the last seven years, the U.S. has had to go back and raise the Brazilian production because their exports see their production was bigger and last year they had a rate to this point and they just did it an extra 2 million metric tons on this report. At this point, it's 4% above what they thought last year's production was. So I think what's going on with USDA is they're looking at their 163, which was their original projection for Brazil, and saying that it might have been about 4% too small. So if we add 4% to that, that brings us to a 169.5. So to go from 169.5 down to 156, that's a 13 and a half million metric ton of reduction. That's 8% of their overall crop. That makes sense. So what I feel like is happening is the U.S. is getting ahead of not wanting to have to revise this crop higher and therefore it's allowing them or justifying them for not lowering it as much as how everybody really feels like it should be. And by the way, if you lower it 10%, that takes us down to about a 153 million metric tons. That's still not a number that I think gets us really excited. And Paul, it's not us that need to get excited the way we know if there's a problem with Brazil, the way we know that if global ending stocks and soybeans are going to get tight and therefore our domestic ending stocks are going to get tight is if China comes in and starts buying aggressively. We've seen the opposite of that. The last three weeks. export sales for soybeans have been very poor at a time of year. They should be really, really good. That is a problem. We're seeing more switches out of unknown destinations to their actual destinations. By the way, it means that we're going to see some big export inspections numbers here over the next couple of weeks. But the sales are lacking at a time where we really need them. And that's why the U.S. raise rates aren't raised, ending stocks, but lowered our exports 35 million bushels. Even with problems in Brazil, that's a problem.

Paul Yeager: Because I think what you're saying is if USDA doesn't see China buying from Brazil, they're not going to buy from the U.S. therefore reduce our exports to China.

Ted Seifried: If China thinks there's a problem with Brazil, they would be aggressively buying. Well, it says one or two things. If he decides that China doesn't believe that there's a problem with Brazil and they're more along the lines of what the USDA’s production number is. Or they don't have the demand or a combination of those two things. And either way, if they're not buying from us, they don't have a sense of urgency to come in. They don't worry about that Brazil problem. There's no reason to say, oh, prices have to go sharply higher because we're not selling the soybeans, Paul.

Paul Yeager: If I get political and say, what would a tariff do to change that story.

Ted Seifried: I can't be good, right? I mean, that's basically that's you're what you're saying is we're threatened to go back into trade war all over again. Right. I mean, like, we've never really relaxed the tariffs that we already have on. But if you increase those dramatically, China's already threatened to reverse the course of the good measures that they've tried to set forth. They were here in Des Moines last year for the first time since 2017. That's not going to happen again, Paul. We're not going to see the 10 million metric ton purchases again. That'll really hurt us.

Paul Yeager: If that happens. Yeah, I get you. Okay. I need to move to livestock because that was some positive news out of WASDE for cattle market.

Ted Seifried: Sure.

Paul Yeager: Right. Do you agree?

Ted Seifried: Absolutely. Look, you know, I, I really didn't understand the slide that we saw in cattle, but especially feeder cattle from September into the first week of December 6th, I think was the low. We've really overshot the mark to the downside, and that is a very good example of how managed money can really affect markets, especially thinner traded markets like the livestock complex. We really overran what I would consider fair value. Now we've had a very significant bounce back. We've had some good data. The stock market indices continue to march higher. We kind of feel really good about consumer domestic consumer demand. Our export demand has actually been pretty alright. And I mean, everybody I talked to is just saying the animals are out there. You know, feeder cattle are just so hard to find. So this makes more sense. You know, basically what's happened since the middle of December to now makes a lot more sense. Now, the question is, since we've had a very significant bounce, really we're talking about a 66% retracement in Fibonacci off the lows. Where do we go from here? And the volatility that we've seen in the last couple of days, the fact that we weren't able to hold on to strength on Friday, I'm a little worried that we will get a bit of a correction. But longer term, I'm still really rather friendly on the cattle complex as a whole. As long as our domestic economy stays strong.

Paul Yeager: On, that's the cattle side. But the feeder side is way more tied to it than it ever used to be, it seems here in this rally up. So what do you see on the feeder side?

Ted Seifried: I mean, look, contract lows and contract lows and corn. Day after day with improving pasture conditions. These are all really good things. Right. And that is a friendly thing for feeder cattle to look. The feeder cattle market is trying to serve a purpose and it wants more animals. Right. And it's going to I think it really will continue to have more upside potential until it gets what it wants.

Ted Seifried: And you've got cheaper feed stocks, you've got other options as well. So I think that happens over time, but we're not there yet Paul.

Paul Yeager: Best 30 seconds on hogs this week. What's going on?

Ted Seifried: You know, we were really, really down and out on hogs going into the end of the calendar year and into the first couple of days of trading this year, we were very worried about the California effect. We've since kind of moved on from that and realized that, hey, life goes on. And while I'm not super bullish on hog prices going forward, I think that we've got a nice bottom there. We've really had a nice bounce off the lows. We do have a lot of up and down days here, so we might have seen some topping action here in the near term, but I'm not expecting a big flush out in the hogs. I think we've gotten past that point now Paul.

Paul Yeager: Yeah, the chart is again heavily volatile and hard to keep up with. All right, Ted, I appreciate your time. Thank you so much. Good to see you.

Ted Seifried: Always a pleasure, Paul. Thanks for having me.

Paul Yeager: Thank you, Ted.

Hold on here, we are going to pause this analysis and continue our discussion about these markets in our Market Plus segment. You can find both Analysis and Plus on our website of markettomarket.org.

Before we go, agriculture lost a great champion this week.

Bill Northey served as a deputy secretary of USDA under Sonny Perdue. Prior to that, he was elected as Iowa’s Secretary of Agriculture for eight years. 

Northey was 64 years old.

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 at Pioneer, our name is our mission.

Announcer: Tomorrow, 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.