Market to Market - July 19, 2024

Coming up on Market to Market. 

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

Announcer: 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.

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.

Paul Yeager: Coming up on Market to Market, a derail show strikes the Grain belt again, marking another change in the normal weather pattern. Honoring the tradition of cheese making and the commodity market analysis of Arlan Suderman next.

Announcer: This is the Friday, July 19th edition of Market to Market, the Weekly journal of Rural America.

Paul Yeager: Hello, I'm Paul Yeager. The American shopper is a key cog in the economy. And in June, there weren't fewer or more transactions just the same. And in the case of market expectations being benign was a better performance than expectations. The 2024 weather pattern has been anything but normal. Tornadoes, early season hurricanes and a wet pattern have dominated the headlines this year in the Grain Belt. David Miller looks at another volatile week that stretched over much of the country.

Dave Miller: This week, a region from the Midwest to the East Coast was hammered by strong winds, heavy rains and tornadoes. Hundreds of thousands of customers were without power as record temperatures rolled in and spiked thermometers across the path of the storms. A suburb of Iowa's capital city, Des Moines, was struck by two tornadoes as the storm front came through.

A derecho and a tornado struck Chicago and nearby suburbs. Winds over 75mph along a 250 mile path hit the Windy City and points east in downstate Illinois. A dam broke after the rain dropped up to seven inches on the community of Nashville. City officials in the town of 3000 reported that 300 people were in the evacuation zone. Heavy rains in Arkansas dropped as much as 11in of precipitation across the state.

Flash flooding took out a bridge and forced the evacuation of a local nursing home, and a tornado destroyed homes and smashed church steeples. In the upstate New York City of Rome and. As the storm blew out, the thermometer rose across much of the affected region with temperatures 8 to 10 degrees above normal. In the heavy weather week. Several places across the Midwest received rainfall up to 800% above normal.

Despite the rain, drought conditions intensified by more than two points, showing that more than half of the country was in some form of drought. Portions of Kansas and Oklahoma, along with areas in the southeast, have gotten drier since the last report. The outlook is for cooler than seasonal temperatures and lower moisture levels over much of the plains south and southeast parts of Nebraska, Kansas, Colorado and New Mexico are expected to see temperatures 11 degrees below normal.

For Market to Market, I'm David Miller.

Paul Yeager: While the dairy industry navigates HPAI outbreaks, it also is trying to compensate for slipping fluid milk sales. Market research firm Circana released news this week. The refrigerated dairy aisle has been the largest category in retail grocery, with $76 billion in sales for producers. Making a profit between the dairy parlor and the store shelf is often done through further processing. Butter, yogurt and cheeses have become key products for adding value to what's in the bulk tank. Cheese, in many forms, has been around for centuries and for some. What's old is new again? Josh Buettner reports on the tradition honored in our cover story.

Rufus “Junior” Musser IV/Owner – Milton Creamery: It's really neat how you just take a simple bat full of milk, and six hours later, you got down 100,000 pounds of cheese. There's a lot involved in cheesemaking. There's art, there's science, there's passion involved.

Josh Buettner: Rufus Musser, IV or “Junior”, as he's known in the rolling hills of southern Iowa's Van Buren County, is an integral part of the family operation, helping to boost the local economy.

Rufus “Junior” Musser IV/Owner – Milton Creamery: You got all your different products here primaries, garden. Vegetable chatter. Tomato, garlic, black pepper, caramelized onion, four alarm old style cheddar. We're in all 50 states.

Josh Buettner: Satisfying demand for the award winning, globe trotting cheddar cheese varieties crafted by Milton Creamery creates jobs and allows for profit sharing with fellow Mennonite and Amish sourced dairies.

Rufus “Junior” Musser IV/Owner – Milton Creamery: Cheese gets made and the other building comes out here for aging. So what aging does. It allows the flavors to develop. This particular cheese has been here a over a year.

Josh Buettner: It took a little time for Milton Kramer's gastronomic accomplishments to ripen as well. Junior's parents relocated their Mennonite family from Pennsylvania to Iowa in the early 1990s. Away from selling homegrown produce and into dairy farming, which brought its own challenges.

Rufus “Junior” Musser IV/Owner – Milton Creamery: We don't have a lot of population, so to get much milk out there, I'm going to have to do a lot of driving, a lot of delivery time. Dad kept looking at the price of milk in the store and the prices, and he was getting on the farm and he said, somewhere somebody is making money in between here.

Josh Buettner: The eureka moment came around 2000, when the elder mushers attended a value added dairy conference in Wisconsin and came away convinced that specialty cheese making, not milking cows, was their best path forward.

Milton Creamery Employee: Straight off the farm right there, there's a here's our niche.

Rufus “Junior” Musser IV/Owner – Milton Creamery: This is where we need to be. You can bring milk in beans. Milk is 87% water. You take the water off, you condense the cheese. Now we can afford to ship it across the country.

Josh Buettner: After breaking in and lighting up farmers markets for several years with their celebrated cheese curds, Milton Creamery unveiled Prairie Breeze to much acclaim.

Rufus “Junior” Musser IV/Owner – Milton Creamery: The American Cheese Society would describe it as a sweeter cheddar or a new aged cheddar. We decided that's going to be the kind of like that's going to be what's going to drive the business forward. And it truly has.

Josh Buettner: Their success allowed for expansion, which helps ensure a steady stream of customers with discerning tastes. Just this summer, Milton Creamery Old Style Cheddar won gold at the International Cheese and Dairy Awards in the United Kingdom.

Megan Jennings/Villages of Van Buren County: Well known in Van Buren County and around the world.

Josh Buettner: County tourism officials celebrate the musters and a rising tide of similar endeavors, which help bring things like tax relief and school funding to local communities.

Megan Jennings/Villages of Van Buren County: I mean, we're very fortunate we do have the Amish and the Mennonite and how they do work with us to they know that they have wealth coming in, but they also want to share it. They support economic development. We have bakeries, woodcarving, cabinetmaking. It offers unique tourism for people who want to experience their life or just buy that unique crafts or food that they make.

Josh Buettner: The Amish reputation for exceptional craftsmanship and work ethic is well known. Though larger groups are found mostly east of Iowa, the Hawkeye State's Amish population ranked ninth in the U.S. in 2023 at just under 10,000, according to statistics compiled by Pennsylvania's Elizabethtown College.

Dr. Gail Carpenter/Assistant Professor & State Dairy Extension Specialist – Iowa State University: Iowa actually has quite a large Amish Mennonite population, a plain population, and they're actually a quite a big contributor to our agricultural sectors. in dairy in particular, Amish milk makes about 25% of the milk that's produced here in Iowa. So they're definitely big players.

Josh Buettner: Iowa State University assistant professor and dairy extension specialist Doctor Gail Carpenter says larger mainstream dairy producers consolidated mainly into northern pockets of the state, harness various technologies to maintain high animal welfare standards and milking efficiency for their huge herds. She says while the Amish shuns such advancements, Mennonite beliefs are less strict in practical application, though they adhere to stringent quality standards. Complementary partnerships have emerged, like Milton Creamery and the five dairy farms they buy from within 25 miles of their plant, the largest herd being 80 head. Together, they leverage value added niche opportunities inside a smaller footprint.

Dr. Gail Carpenter/Assistant Professor & State Dairy Extension Specialist – Iowa State University: They share a lot of the same values that their producers would. So I think that that creates a lot of trust there. It's also a very competitive market trying to look for places to sell milk. It can be hard for small producers to find a co-op that wants to buy their milk from them, because they just don't have the same volume as a farm that milks a lot more cows would have. So having that stability and that surety, in that lack of risk with selling the Milton Creamery fits in with their culture and their values as well.

Josh Buettner: Carpenter adds, each dairy cow in Iowa contributes roughly $24,000 to their local economies. And in a world of fewer producers, freight connections between customers and food sources, a spirit of nostalgia has emerged, driving demand for products like specialty cheese. The Musser family's vision has led to benefits for their business and the region for creamery workers. Hard work also pays off in more ways than one.

Rufus “Junior” Musser IV/Owner – Milton Creamery: Forcing the cheese curds during the sold in very intense. Also, when you put the 40 pound blocks into the hoops to put in the presses between the weight of the hoops plus the cheese in it, you're looking at lifting 60-65 pounds. I like to tell new employees when they start here in the production facility, you can cancel your gym membership.

Josh Buettner: For Market to Market. I'm Josh Buettner

Announcer: Next, the Market to Market report.

Paul Yeager: Ideal growing conditions helped add bushels to the crop, but cooler weather and global issues helped stabilize the recent fall in the trade. For the week, the nearby wheat contract lost $0.08 and the September corn contract fell $0.12. Weather played on both sides of the current crop, and some new sales started to trickle in to the soy complex. The August soybean contract shed $0.08, while August meal decreased $2 per ton. December cotton shrank by $0.57 per hundredweight over in the dairy parlor. August class three milk futures added a quarter. The livestock market was mixed. August cattle improved $0.72. August feeders cut $3.05, and the August lean hog contract found $3.13. In the currency markets, the US dollar index strengthened 28 ticks. August crude oil lost $2 per barrel. Comex gold subtracted 2040 per ounce, and the Goldman Sachs Commodity Index was down more than ten points to settle at 563 even. Joining us now, regular market analyst Arlan Suderman. Hello Arlan.

Arlan Suderman: Good to be back.

Paul Yeager: Good to have you here. We were discussing weather here for a moment. And weather is a big story in wheat country. It was in the United States. But it's also become a big issue globally where, European, Russian, Ukraine, wheat is coming to the market or coming to the combines, but they're getting dumped on.

Paul Yeager :What's that doing to the market right now?

Arlan Suderman: Well, it helps support wheat at the end of the week, we started hearing reports of low protein, disappointing quality in France. Now there are 14% harvested. So it's very early. Same thing in Germany that started causing the world to start saying, okay, what's the quality of the wheat crop?

Arlan Suderman: Because we have kind of a shortage of quality milling wheat. and then in that environment, you look at hot, dry conditions in the spring wheat belt of Russia. same thing in the Canadian prairies, northern Plains. And so a little bit of short covering at the end of the week. Don't know that it's enough of a problem yet to really justify sustaining a rally, but certainly something the markets watching.

Paul Yeager: Okay. I'm sitting at home with some unsold unprocessed grain. What are, what am I looking at for indications of what I should do next?

Arlan Suderman: Probably wheat's in the best situation to maybe be able to take this if we continue to see these weather risk. Keep in mind we have plenty of wheat in the United States. That's the bad news. We are overwhelmed with wheat after the last crop report and a big push, big increase in production estimates. The good news is the market trades Black Sea fundamentals more than they trade us fundamentals. So if this heat wave does continue and there's some question about that. But if it does continue we may have an opportunity to take wheat prices higher. Farmer selling is kind of dried up now for a little while. That seasonally happens. We tend to get a little bit strength. Perhaps we get a little bit more of a rally here to sell corn and soybeans. The farmers, the big long end user, knows it. Manage money, knows that. They know that if something happens to create a scare, the farmer will sell in. Really let them off the hook. So rallies are going to be very difficult to sustain for half the. Perhaps the strength in a wheat can help that a little bit if it gets going. But the farmer being long is really hurting right now.

Paul Yeager: If you are the corn producer specifically sitting on that old crop, sitting in the bin, the government says there's these huge amounts of stocks. There's still going to be a large carry out. Oh, and by the way, we have this ridiculously large crop that continues to grow. If I'm sitting old crop specific, am I really only going to get help from wheat or. You mentioned a scare. Is that really what we're at right now?

Arlan Suderman: You know, from a weather standpoint, we could get a scare in the Black Sea because a lot of Ukraine's corn has has been in a lot of heat and is facing some yield loss in that region. That's not going to positively affect our exports for another six months or so. So that's waiting quite a while to really have an impact. Then you're waiting to see if La Nino has an impact in South America. Look at what basis is doing now really strengthened because farmers aren't selling. But we know there's a wall of corn we anticipate coming at some point. So are you going to be one of the first people take advantage of that strengthened basis now and do your interest payments, or perhaps put your money out of the interest that you have, and then use that money, if possible, to reopen. If a story does develop,

Paul Yeager: you have a question that I think I'm going to ask and market plus very similar to that, you must have, peeked ahead at my question sheet here. Let's talk new crop for a minute. because, like, retail sales neutral is a good thing. We don't have weather is neutral, but if not, it's good. Which ends up being bearish to the crop. But then we turn to a cold streak. Cooler streak. What weather story is going to be the headline grabber enough for traders in the algos

Arlan Suderman: Right now the risk of a hot, dry pattern seems to be lower than what was anticipated. I still say one of the bigger risk to watch is warm nights during the greenfield period of time. That can hurt yields. Probably still less than 50% odds of that. But I think this is still the type of year where that could develop some watching that for now, the last half of July and August.

Paul Yeager: Do you what you mentioned the whole, the weather is different. I mean, because there was always this talk of a hot July, we're already three quarters of the way through the month and we haven't had a hot July, and it's not really going to get much worse next, hotter next week. Has that ship sailed then, other than the hot nights that you're referring to?

Arlan Suderman: Yeah, I think the hot nights is the bigger story, temperature wise, that that could moves market. But the other thing to keep in mind, I know there's a lot of people watching here are saying, but what about the flooded out areas, the ponded areas in Nebraska? What about the hail storms? We can see them on the satellite data. I do think harvested acreage is going to come down. And when you start bringing harvest acreage down, if you bring it down a million acres, that's 180 million bushels off that bottom line. We need to take about 600 million bushels off in order to get the market interested. Okay. Take 1 million or 2 off. That's a start in the right direction. That's not enough. But that does reduce the margin for error. Should we have warm nights and or we have problems in the Black Sea reduce or crop and or we get la Nina does create problems with the South American crop this coming year. That makes an easier path to get to something like that.

Paul Yeager: Well, I think I've asked this question three times. I'm going to ask it a fourth. This is Neil in Ohio who wanted to know. Arlan, what will it take to reverse the bear sentiment in the markets? And when that happens, will the door be large enough to loud let out all the traders out of their short positions?

Arlan Suderman: Right now, with the farmer being the big long Probably. So that's why they're so comfortable in the corn and soybeans. In the wheat, not so much, because now we're getting into a time period when the farmer's not selling. You may sell some more. When is 30 days free? storage runs out. But a little bit more concerning wheat, which is why wheat may have a little bit more chance, but corn and soybeans management is pre sitting pretty comfortable right now with the farmer being the big long. They get rid of that then it'll be a different story.

Paul Yeager: The beans story seems a little more this week. Rangebound are we set on that path for the next two weeks?

Arlan Suderman: Yeah, we got a little bit of a pop, in this market because chart support held there for a few days. And then you combine that with the heat and dryness in the black Sea, which is reducing the size of the canola crop, the sunflower oil crop, the soybean crop. And then the same thing in the Canadian prairies and northern Plains that may have a little bit more legs on it. We'll have to see and watch if soil can provide some support for soybeans, but that's really what we're putting our hopes in right now. As long as this looks like it's going to be a good crop.

Paul Yeager: New crop story towards the end of Friday started to emerge. China may have overextended itself and how much new crop buying they were wanting to do. What does that do to a market over the weekend?

Arlan Suderman: Yeah, as we look at China's importing about 6.5 million metric tons in July, August and September, beyond what they did a year ago and beyond what they need. And that means that they can use those soybeans then in the fall, when they normally would be buying from us, reducing, their dependency on us even more than they did last year. If you look at the last time I looked here a week ago, they had purchased about 22 million bushels of soybeans, which is about a 10th of the new crop, soybeans they normally have this time of year. There was a big sale to unknown destination midweek this week. We don't know if it was China. It may have been. There's some speculation in China that Sino Grain, which buys for the reserve, may be trying to stock up on US soybeans for the reserve before the election day, before a possible Trump victory. Well, we can't confirm that the commercial buyers for the Crushers, though, they think there's going to be cheaper beans ahead and they're still waiting.

Paul Yeager: And there is a political sentiment to the markets for China, specifically in soybeans. And we can fully fleshed that out a little more in marketplace because it needs more than 30s that I have quickly on cotton, we're seeing an export story turn again back to the negative.

Arlan Suderman: It really is. And it's largely just like soybeans and corn. Brazil has cheaper cotton. China buys 40% of our exported cotton, and they're going to Brazil.

Paul Yeager: All right. In livestock, we have, cattle on feed. Came out today, 100% on feed place 93. What is that telling you? for direction guidance here in cattle or feeders

Arlan Suderman: placements for a little bit lower than what was anticipated. They're expected to be lower because of two fewer business days in June this year than last year. But that was even lower than expected. So it's mildly supportive for Monday,

Paul Yeager: Which is a surprise, isn't it?

Arlan Suderman: Yeah, it really is. And that's why the market hadn't anticipated or priced it in.

Paul Yeager: Live cattle specifically. There's the whole we're done with. We're not going to celebrate anymore that there's no more barbecues to be had. The demand window is past. Beef is still high, still enjoying very large prices. At some point this party has to end.

Arlan Suderman: We did see this past week the choice cuts start to break. Hamburgers still really tight. because the cow slaughter is coming down. That's the first step in starting to rebuild the breeding herd. Now we'll see if we start holding back heifers in the fourth quarter.

Paul Yeager: Who is driving that decision?

Arlan Suderman: It's really going to come down to weather and obviously the economics to do so. but it looks like we've got another round of tightness coming ahead.

Paul Yeager: How soon on that?

Arlan Suderman: We think maybe the fourth quarter of this year. We thought maybe that last year, but then the weather didn't cooperate. We didn't have the pasture and so put it off a year.

Paul Yeager: Speaking of pastures on feeders, pretty good feeder pasture condition in many parts of that area. What does that mean to the market?

Arlan Suderman: Well, and particularly if we can get rains in the plains going into the fall, good wheat pasture and everything that tends to help encourage that cycle, holding the heifers back and start to rebuild

Paul Yeager: Hog wise, it goes back to China again. There's this content of we're going to import, we're going to send some exports to China, but then they're not. Then they are. Where are we?

Arlan Suderman: Yeah, I think China, it's hard to depend on them. We've seen good shipments elsewhere this year. That's been good. But overall the demand really hasn't been as much story is an oversupply more supply than we anticipated. But the whole product situation seems to have really felt better this last week. The market product market just kind of felt a little firmer this past week

Paul Yeager: as we closed the dollar. that is one of those that continues to be whenever we have a global grain need that becomes more dependent. Is that going to change anytime soon?

Arlan Suderman: Yeah, I'm really afraid that the dollar is going to continue to be one of our problems. Achilles heel in the commodity markets because Europe has more problems. the yen has problems. the other major currencies we compete with have significant problems.

Paul Yeager: What does all that mean?

Arlan Suderman: That means a strong dollar. Harder to compete. That's the biggest advantage Brazil has right now.

Paul Yeager: And they needed they needed another advantage to I mean, a lot of things have been going Brazil's way right now

Arlan Suderman: 

Yeah they really had in this last week I had a group of Brazilians in my office, Brazilian farmers and hedge fund people, and they're saying, you know what prices are going to take for the farmer in the Midwest to plant less corn and soybeans. I said, I hate to tell you this, but they're not going to. And they just got a depressed look on their face.

Paul Yeager: Well, I'm not depressed. I'm happy you're here. Arlan, good to see you. And we'll continue our discussion here in a moment, okay?

Arlan Suderman: Okay.

Paul Yeager:  All right. Arlan Suderman. And as I said, we'll pause. This is the market analysis. We're going to continue in market. Plus as we keep talking about the markets in that segment, you can find both analysis and plus on our website of Market to Market.org. The first place that this program appears is on our YouTube channel. Stay in the loop by subscribing to our feed, clicking on the bell and getting those notification of new content. Let the technology work for you. Find us at Market to Market on YouTube. Next week, an extended discussion on the livestock and commodity markets. 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 at Pioneer our name is our mission.

Announcer: 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.

Announcer: For over 45 years. Steiner Tractor Parts has shared your love of antique tractors. New parts for old tractors. Learn more at Steiner tractor.com or at (877) 559-7887. Tomorrow. For over 100 years.

Announcer: 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.