Market to Market - July 12, 2024

Coming up on Market to Market - Farmers give their perspective on the EPA and agriculture. Our midseason crop checkup has some similarities to last year and one big discrepancy. And the commodity market analysis of Matthew Bennett, next.

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.

(music)

Family owned and operated for more than 60 years, Sukup Manufacturing is a full-service provider of grain handling, storage and drying equipment, helping farmers feed and fuel the world.

(music)

For over 45 years, Steiner Tractor Parts has shared your love of antique tractors. New parts for old tractors. Learn more at steinertractor.com or at 877-559-7887.

(music)

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.

(music)

This is the Friday, July 12 edition of Market to Market, the Weekly Journal of Rural America.

Hello. I’m Paul Yeager.

Pocketbook issues have always been top of mind for almost all of us. How much something costs is something we’ve all talked about heavily since 2020.

Since the pandemic, the easy answer for prices has been to say higher. Until now.

The consumer price index fell in June for the first time since the pandemic began, dropping 0.1 percent. The 12-month rate is at 3 percent, the lowest level in more than three years. The core readings for both markers increased.

The decline may be short lived as the wholesale mark of the producer price index rose 0.2 percent for the month and added 2.6 percent on the year-over-year reading.

The driver was a volatile section of the report - however, the core reading was unchanged keeping economists less concerned on this report.

Congress returned for some work in the committee rooms.

The EPA was the subject of two hearings, including one centered on agriculture.

Peter Tubbs recaps the testimony.

This week, the House Agriculture Committee held a hearing to study the effects that policies of the Environmental Protection Agency are having on American agriculture.

Several witnesses testified that while the EPA can be quick to limit some chemical uses in agriculture, they can also be slow to approve or update the use of other chemicals.

Rep. Barry Moore, R - AL “Reading through your testimony, I felt the same issues in my district related to the recent dicamba decision that left many producers scrambling after the purchases for the year had been made. Can you provide insight on how this last-minute nature, this decision, affected your producers?”

Chris Chinn, Director, Missouri Department of Agriculture: “We were really stressed out in the state of Missouri, as were other producers and other states, because we weren't we didn't have the certainty we had the product sitting in the shed, but we weren't sure if we were going to be able to use it. We were very satisfied. The EPA made a quick decision with the existing stocks order, and they helped us for the 2024 growing season, but we still have uncertainty for 2025.”

Rep. Barry Moore, R - Alabama: “So you don't know what to expect going forward. And you change your mind again, right?”

Chris Chinn, Director, Missouri Department of Agriculture: “Right. And the biggest challenge is the seed supply right now this year the seed for 2025 is being grown. And so, if that dicamba product is not going to be available we're going to have seed technology out there. But we're not going to be able to have the crop protection technology to help with that.”

Rep. Dusty Johnson, R - South Dakota: “And I just wanted to give you an opportunity to talk a little bit about, why you think that's the right approach and maybe, maybe starting by the weaknesses of having a more fractured, balkanized approach toward labeling. Doctor Larson.”

Rebecca Larson, Chief Scientist, Western Sugar COOP: “It's very difficult to understand the impacts on human health and the environment from various pesticides. You need formal training and education to understand how to evaluate that. So, thinking that we can push it down to the local level and have county commissioners or state legislators trying to decide what the risk of a pesticide is, is very complicated. It should reside within the EPA with the PhD level scientists that are doing those critical and well thought out experiments.”

Rep. Doug LaMalfa, R- California: “We've been seeing farmers go out of business because they can't keep up with the cost of these regulations and the price of the materials themselves, since they have a narrower window of market.”

Chris Chinn, Director, Missouri Department of Agriculture: “We need to make sure that they have many choices when it comes to crop protection tools, and we need to make sure that the rules and regulations in place are things that are workable. That's why we encourage the state departments of ag being able to be a part of these decisions with EPA, so we can represent what that small farmer and at the boots on the ground are seeing when they try to implement those regulations as written.”

For Market to Market, I’m Peter Tubbs

The massive heat dome over the West is slowly moving east but not before more than 50 cities in California and Nevada set all-time heat records.

The Drought Monitor is at its lowest level since the first of the year as rains have been plentiful in much of the upper Midwest. Including parts of the eastern Corn Belt which were dumped on by what was left of Hurricane Beryl this week.

In the wake of those weather systems, we have two farmer perspectives to share this week. One in Nebraska and the other in Michigan. They are part of our ongoing MtoM podcast and portions of those conversations are this week’s Cover Story.

Donald Oesterle, Producer - Michigan: We are not doing anything today. Nor will be. Will we be for probably at least a week. So, we got quite a bit of rain over the last 24 hours. So, 4 to 5in. So. We'll be doing regular people do.

[Yeager] The last time we chatted, you were trying to basically get in rainstorms to plant, and I and I watched the weather and I felt bad that I probably took you that 20 minutes. Probably cost you some time in the field, but you had, again, small windows this spring.

[Oesterle] Yeah. Small windows. We never really, We never. It's been that way. All spring. We never get any stretch in whether it was planting or spring or hay. It was all a couple days here, a couple days there. So, where we don't get too tired so we get plenty of rest.

[Yeager] There's no big sprints for you.

[Oesterle] No, there's been no marathons this year. It's just, you know, just, you know, just little dashes. [Yeager] You, is everything in and planted?

[Oesterle] Yep. We got everything in, in good shape. It was, the last little bit. Got in June 4th. So, just a few days later than what we wanted. But we were pretty happy.

[Yeager] And if I remember correctly, that June 4th is ahead of last year's late plan that you had, right? [Oesterle] Yep yep yep. Last year we were like June 10th or 11th, I think.

[Yeager] So improvement?

[Oesterle] Oh yeah. Well, last year we had zero rain in June. So that's not the case this year. We've had plenty of rain in June.

[Yeager] Okay. So, everything's up or everything's in. Everything came up. Is everything done that you want done to your crop?

[Oesterle] Yeah. Pretty. We just have a little bit more spraying we were hoping to get done before we got all this water. just to touch up some beans, but everything else is done. Well, scratch that, we. It's not done wheat, but wheat is going to be, sitting for a second. Well, what we run into a lot this week goes right to the mill's right here. And so, it's all on quality. So, if you have good quality wheat, you can get rid of it easy. If it turns poor quality, like if it starts to sprout in there then you're fighting it the rest of the year just to get it out.

[Yeager] So what's the target date to get the wheat out?

[Oesterle] Well, it would have been this weekend, but we're hoping to get back on next week. You know, I don't know if we will or not. We. I've to be honest, I've never had this much rain at one time on this farm. So, I don't know how long it's going to take for it to dry out.

[Yeager] There are not many people that have used the word ideal in describing this year at all. So how many ideal days if you had Bryan.

Bryan Pippitt, Producer - Laurel, Nebraska: Well, this has been ideal for spraying. We did not have all ideal days during planting, but we were more fortunate than a lot of others. I feel like so it was stress all the time, but considering I think things look pretty good and I think maybe were through the most stressful part of it, I hope.

[Yeager] You are in northeast Nebraska, and your parallel is even to where some of the heaviest rain has fallen in the Midwest this year. Yeah. what were you in that path? Did you have a lot of water?

[Pippitt] We've had a lot of rain, and we've had one big event, but the rest has been able to handle. I've had some big rains that we didn't get all soaked in, but we had a 3.5in rain, I believe, April 16th. But that was our biggest volume at once. And I'd say we're probably pushing 20 inches of rain since planting or shortly before planting, but it's come not all at once like some of our neighbors have. We haven't had a lot of storms yet, and for the most part a little excessive at the time. But after last year, we weren't going to complain either. So, we took it, managed and got it in.

[Yeager] I guess I'm going to guess that 20in of rain since April would be equivalent to what you had the previous two years, almost combined?

[Pippitt] Oh yeah, maybe more. But yeah, very close.

[Yeager] I had a guy ask me yesterday, he heard it in Nebraska that the pivots aren't really running, like they normally would by this time. What's your report from your area about pivots and how many are running?

[Pippitt] Yeah. That's correct. I know we mentioned on our earlier chat that you want to see a pivot up close and the sun that we didn't get cooperative lighting but I background the neighbor has he is running a pivot in the cornfield behind us. But he's also putting on his nitrogen. I think the only pivot on radish right now, they're putting on fertilizer through the pivot. I don't think it is just running to water yet. I think it's all I would say. There's a I don't know, we got some neighbors running, but I know they're all putting on fertilizer with the pivot. So, I think that's the only ones running that I know of right now.

[Yeager] That has to be almost unheard of.

[Pippitt] Yeah. Last year we were, heavily irrigating in June. We had made a few circles already in June. So yeah, we're in our profile for and on the field just a half mile south of here, we have a corn field with a soil probe, moisture probe in it, and it still says we're like 91% full. I just checked it before you because I wondered if you'd ask him. So, yeah, I don't know. We it sounds maybe the extended forecast sounds a little bit dry. Not overly hot, but we may run next week just to run just so we're. But our profile is probably, I suppose has been in maybe three years. I don't know for sure two years. So, I mean, even if we do start irrigating, at least we have something to work with this year. Last year we were just irrigating to keep the ground wet, and now we have subsoil moisture this year. So, we're way from their head than we have in the past years.  I would guess since March we probably have had 22 or 23 inches of rain on most of our farms. So that's our annual rainfall in a matter of a month and a half, two months. So yeah, it should charge up. The groundwater should be up. I mean, it should just help with everything.

The full MtoM episode will release Tuesday.

Next, the Market to Market report.

Optimal weather for harvest and pollination pressured the trade. For the week, the nearby wheat contract fell 40 cents and the September corn contract lost 9 cents. China broke the seal on placing orders for new crop, but limited weather concerns cast the bigger shadow over the soy complex. The August soybean contract shed 61 cents while August meal decreased $18.40 per ton. December cotton expanded by 29 cents per hundredweight. Over in the dairy parlor, August Class Three milk futures weakened 40 cents. The livestock market was lower. August cattle shed $4.05. August feeders cut $2.83 cents. And the August lean hog contract lost 73 cents. In the currency markets, the US dollar index weakened 73 ticks. August crude oil contracted 79 cents per barrel. COMEX gold added $22.70 per ounce. And the Goldman Sachs Commodity Index was down almost 11 points, to settle at 577.65.

Yeager: Joining us now is regular Market Analyst Matthew Bennett. You've got a smile. I don't know how.

Bennett: The markets went up today.

Yeager: The markets went up today. Let's start with wheat, then we'll get into the report. Today's report is more of a, is it a confirmation of two weeks ago? Or is it a leader?

Bennett: Okay, if you want to talk wheat, essentially what the report told you is that yes, this is a big crop. As far as the total wheat crop size, 134 million bushels higher. And so, they toyed with demand just a little bit. But bottom line is you took carryout up 100 million, or 98. I will say this, Paul, if you look at the world balance sheet you continue to see some restriction or constriction of the world balance sheet to whereas we're still kind of drawing stocks down a little bit. Overall, you've got to think that that will keep you from an absolute plummet in the market over the long-term. And the wheat market has been beat up bad enough over the last several weeks anyway. I've got to think we'll find some footing. But boy, after the report we certainly dropped double digits.

Yeager: Speaking of big carryouts, how about that corn carryout?

Bennett: That was an interesting report to say the least. I will say this, Paul, whenever I first saw -- the first number I saw was new crop carryout at 209.7. Thank you, but what is this? And so, essentially what happened was with old crop, Paul, they took feed and residual usage up 75 million bushels, which is interesting considering the June quarterly stocks implied usage was 120 million bushel lower than what the trade had expected. And so, you would expect that usage would have gone down. Correct? But essentially you saw exports go up 75, which I can get on board with that, but exports the last two or three weeks concern me a little bit. We're still competitive in the world market. But as far as feed and residual usage, I was very surprised to see them raise that. It's a good thing for us, clearly, but I was not expecting that. And then feed and residual for next year is just out of this world.

Yeager: But is it a compensation for other reports or other sentiment?

Bennett: That's a really good question. But what I'm going off of is what were stocks June 1st? What were June 1st stocks? And they were more than we all thought that they were. So, it's very interesting to come in here and say, actually usage is a lot better than what we all thought, even though just a couple of weeks ago we told you usage is not as good as what we all thought. So maybe you're looking at last year's crop, maybe having to constrict that just a little bit. I will say basis levels, especially out here in the west are awfully good, even in my part of Illinois there's a lot of corn on the farm. USDA said 3 billion bushels. But basis levels are awfully strong. Why? Because people have been stubborn about selling corn and so they're kind of waiting around. Basis is trying to do the work but at a place like ADM-Decatur, which I'm close to, even basis included, from three weeks ago we're about 50 cents lower on the cash price.

Yeager: This is the most questions I've had in quite some time and they're pretty much everything you just said in that sentiment. But I have one I want to give you specifically here. This was Keith, came off of X. When will the producer cry uncle and move old crop grains and oil seeds in order to make room for new crop? Or will they leave it in storage and deliver new crop at harvest?

Bennett: That's a really good question. Essentially it has been very hard for the producer to take a look at, hey here's what my old crop is worth, here's what I had invested in that 2023 crop. Moreso, here's what my '24 crop cost me to put it in. Are they going to sell '24? Either one of them, Paul, if we're going to be clear about it, are going to be sold with the producer not making money on those bushels. It's not fun to talk about. But that's the bottom line. And so, it makes it so hard to make sales. I get it. But the problem, Paul, once you hold old crop bushels past pollination, if you're in a year, which was relatively speaking a very large carryout year, especially compared to the previous few years, it's typically not real good for price action. So, you've seen these folks trying to get a hold of bushels, you see basis narrowing up, bottom line is this, the producer has been tight-fisted. Once these bushels start moving, I am very concerned once you get into the month of August that you could really see basis go away from you very quickly because in the South, they're going to start harvesting fairly early. Any folks in my part of the world that started planting in April with a hot summer, when I get home from the Farm Progress Show I know where I'm going to be, I'm going to be in the seat of a combine.

Yeager: Well, I have a couple of other new crop questions we'll get to in Plus. But I need to get to soybeans for a minute because it's almost the same as wheat and corn here. It's like copy paste of still a large carryout, still a great crop, potential is out there. Let's start old crop. Again, are you going to have to sell something to make this market move?

Bennett: You know, I don't see as many stocks of old crop beans as what the trade told us as far as June 1st was concerned. A lot of the originators out there are like, where are the beans? We're having a hard time finding the beans? And so that is kind of an interesting dynamic that we're dealing with. But is the producer going to sell beans? If they've got them, I've got to think they'll go ahead and reward the market somewhere in here. It's very concerning to see, for instance, new crop beans fluttering around on both sides of $11. Any time we get above $11, which last we were above $11 and Paul, I talked about in my newsletter, hey we probably ought to be considering selling some of these beans. I had several people reach out and say, don't you think they have a shot at going to $12? No, I really don't.

Yeager: Do you think it has just as much of an opportunity to go to $12 as it does to $9?

Bennett: That's a really good question. I would say it's got as much opportunity to go to $12 as it does to $9, but a much greater opportunity to go to $10 as what it does to $12. I'm firmly confident and I don't take joy in saying this, but there's going to be a lot of cash beans sold with a 9 in front of them this fall. If they're sold across a scale, I've got to think -- and so if your needs, if you've got cash needs for fall let's stop and look right now at what you can get. What are your cash needs? Lock something in, lock in a worst-case scenario because I'm pretty concerned, especially when you look at that new crop world balance sheet. You're talking just a massive increase over the two-year period from 100 million tons of beans up to 128. That's just a massive increase over the two marketing years that the USDA gave us. And why is that? Well, Safras & Mercado said here this week that they see 171 million metric ton crop out of Brazil next year. That's a big crop. That would be the 19th year in a row they have planted more soybeans.

Yeager: And we have a question about Brazil and there's rumors in Brazil. So, what do I do if I read things on a global scale and I'm sitting here with new crop and it's hovering around $10.50 and you're telling me $9? You're telling me to book something.

Bennett: I am. I am. Here's the problem whether we're talking corn or beans, for a lot of folks, Paul, booking something right now does not mean that we're going to make money. It's not a fun topic to talk about. But here's the thing. What is the potential of the market? Is there still downside risk? Absolutely. And so, if there's downside risk and I'm in a position that I can go ahead and lock in something, whatever it is, whether it's a smaller loss than what I'm afraid of, go ahead and lock something in and then you use risk management just in case you get some sort of a recovery rally. But I would say the risk for the producer is still to the downside right now.

Yeager: Let's go to livestock. For the live cattle, all of a sudden there is a flashing technical sign that I think has some attention. What is it?

Bennett: Oh, as far as cattle are concerned, I want to go here first. As far as feeders went this week it was not a great week. But overall, you've got to ask yourself this, Paul. What is the cash market doing? I had guys asking me last night, I was in northwestern Iowa, should I be buying $3 feeders? And I said, well what do you think your price of your cost of gain is going to be? And the problem is, is that booking out is pretty tough to do because the bottom line is a lot of these cash prices, the disparity between the cash and front month futures is so large, but from a technical standpoint really when I look at live cattle you still have an uptrend in place, but I just, I'm getting a little bit concerned that the trader does not want to be 100% committed, for instance, to make a new all-time high. I thought that we could for a while this year. I think cattle on feed is going to be extremely bullish moving forward because the numbers were so high September through December last year. That means that you're probably going to have some pretty low looking numbers this year. I don't think the trader wants to get super bearish in front of those, but I think they're running out of, they're just running out of enthusiasm to stay long.

Yeager: But I have to look at that contrarily and think if they're short everything else on grains, why would they not continue to go long on live cattle because it has been a winner for them?

Bennett: It has been a winner for them, but at some point, whenever the cost of corn comes down many times you will see the price of proteins trend lower. Now, the producer can make a lot of money with cheap corn. Correct? But the bottom line is a lot of times historically you'll see cattle follow suit eventually. And so yes, the numbers are going to be tight, we know that. From a fundamental standpoint this is really the best thing that we've had to talk about for months. It has been the most bullish, most fun thing to discuss and I've enjoyed discussing this. But at the same time, I think it's getting long in the tooth as far as this market goes.

Yeager: Not been very fun to discuss the hog market though.

Bennett: No, it hasn't. The hog market, when we got into triple digits here just six, eight weeks ago I said I just can't imagine trying to buy triple digit hogs in here. What have we seen lately? We've seen sows going to market. We've seen production go up significantly. I don't look for any big Chinese demand coming up. I just am very concerned about hog prices. I think they could stabilize in here, especially with the cattle market staying fairly well supported. If the cattle market stays supported, I don't think hogs are just going to plummet. They've already done their plummet in my opinion. I think they find some support down here. But I'm still not bullish.

Yeager: Are you -- but do you see any opportunity to turn bullish in hogs before you see the bearishness set in, in cattle?

Bennett: Not necessarily, no. I think that if you would see cattle run up, let's say cattle run up with a really bullish cattle on feed report, which I think we get, if you saw them run up significantly then I think you could see hogs go up. If cattle go down, I don't see hogs going up.

Yeager: I hate to put you in a tough spot but I had to. Thanks, Matt, appreciate it.

Bennett: Absolutely, absolutely.

Yeager: Matt Bennett everyone. 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. YouTube is the first place this program appears. Stay in the loop by subscribing to our channel clicking on the bell to get notifications of new content and let the technology work for you. Find us at Market to Market on YouTube. Next week, honoring the tradition of cheesemaking. Thank you so much for watching. Have a great week.

(music)

(music)

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

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.

(music)

Family owned and operated for more than 60 years, Sukup Manufacturing is a full-service provider of grain handling, storage and drying equipment, helping farmers feed and fuel the world.

(music)

For over 45 years, Steiner Tractor Parts has shared your love of antique tractors. New parts for old tractors. Learn more at steinertractor.com or at 877-559-7887.

(music)

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.

(music)

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.