Market to Market - August 30, 2024

Coming up on Market to Market - A sweltering end to August comes with a strong dose of severe weather. A look at producers growing their own grains and markets. And commodity market analysis with Sue Martin, 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.

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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.

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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.

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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.

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This is the Friday, August 30 edition of Market to Market, the Weekly Journal of Rural America.

Hello. I’m Paul Yeager.

While the Federal Reserve has indicated it may cut interest rates at its next meeting, two new data points came out this week pointing to benign movement in consumer activity.

The orders for long lasting items - durable goods, were up 9.9 percent in July, making it 5 of the last six months with a gain. Transportation drove the increase in items meant to last at least three years.

The core reading without transportation moved lower by 0.2 percent. 

The Federal Reserve’s new preferred measure of inflation, the PCE, moved higher by 0.2 percent.

The year-over-year snapshot was up 2.5 percent. The core readings were similar in movement. 

This is widely seen as strengthening the case for the Fed to lower the key interest rate in mid-September.

Drought has returned in August - 16 points have been added to the nationwide reading and more than half of that came in the last week.

A mixed bag of heat and storms headlined the week in weather as David Miller reports.

A burst of late summer heat swept across the country as at least 61 million Americans were under some form of a heat advisory this week.

State Fair goers in Minnesota were looking for cool spots to see animals and grab food but the misting stations were some of the most popular attractions.

Residents in Chicago were handing out free water to help others stay hydrated in the triple digit temperatures and more than 4,000 bottles of water were handed out in this neighborhood alone. Walking and riding were hard activities to participate in due to the hot conditions.

Animals at the Lincoln Park Zoo were given ice treats.

Dave Bernier, Lincoln Park Zoo: "People think animals are like adapted to weather extremes like heat, because they come from more tropical areas. But they're really Chicagoans just like us, and they experience the same weather we do."

But then the pattern changed and severe weather slashed across the upper Midwest.

High winds knocked over more than four dozen empty train cars that had been on the tracks near the central North Dakota town of Steele. The system spawned at least five tornadoes across the Dakotas late Wednesday.

Much of the same area was in the path of severe weather again on Thursday. Power poles were snapped in southeast Michigan by winds of at least 70 miles per hour.

Nearly 300,000 customers were without power following the severe storms.

Brian Kalka, DTE Energy Vice President of distribution operations: "The damage is significant. This is not necessarily lifting a limb off of a line and restoring power. You've got broken poles. You have broken infrastructure. Replacing that infrastructure can take a little bit of time, and that will be a challenge as well. But we are fully committed to the work at hand, and everyone is really laser focused on doing what they can to restore power as quickly as they possibly can."

Damage stretched more than 150 miles from eastern Michigan to the Ohio border.

For Market to Market, I’m David Miller.

Progress is the second word of the long running Farm Progress Show that took place this week in Boone, Iowa.

The gathering highlights advancements in agriculture with technology, iron and investments on display.

Innovation can also come in marketing.

Sometimes to move forward you have to take matters into your own hands and create your own opportunities.

You also may be able to add to a customer base that is closer to home.

Peter Tubbs reports in our Cover Story.        

In 2015, Harold Wilken had a problem - he was farming 700 acres of organic grains, but was trucking it hundreds of miles from his eastern Illinois operation for use as animal feed.

Harold Wilken, Janie’s Mill: “I was loading out a semi load of wheat to go to Lackawanna, New York for chicken feed, and I thought, you know, that's really kind of stupid. There's 10 million people in the Chicago food shed, and I know some of them eat bread. So, then I started thinking about milling flour.”

Wilken had been working in the organic space for 10 years selling the output from his Janie’s Farm. He knew there were no local mills to process his grain.

Harold Wilken, Janie’s Mill: “Well, so I went to my banker, and he had seen, he had seen that organic was working. And you go, you know, we could go closer to the, you know, the consumer and, you know, he said, well, what kind of a market you got? Well, not much.”

In 2017, Wilken opened Janie’s Mill and began looking for customers. The mill, like the farm operation, was named in honor of his daughter Janie who lost her life in a car accident in 2001.

Their first flour buyer was Ellen King, who was located two hours to the north in Evanston, Illinois. King, who’d opened her bakery Hewn in 2013, had been sourcing flour from other Midwestern producers but needed a higher volume of flour.

Ellen King, owner, Hewn: “And so when Harold came in, I said, you produce it, you grow it, mill it, and we'll buy as much as you can produce for us. And so, it was kind of a year collaborative work of going back and forth with him to,”

The relationship went beyond just buyer and seller. As Wilken tuned the mill, King tested different grinds for suitability in breads and pastries.

Ellen King, Hewn: “Once we kind of perfected a flour that worked for our bread that maybe was like 95 percent whole kernel flour with 5 percent of the bran and germ sifted out of it. So, it was really almost 100 percent whole wheat. “

Eighty percent of the flour used at Hewn is sourced from Midwestern growers, and is primarily baked into loaves of bread.

After mixing, dough spends hours rising and then is kneaded by hand. The baking qualities of stone milled flour change through the year; moisture content drops, and protein levels shift slightly.

Ellen King, Hewn: “We actually rely on the skills of our bakers. So, it takes about a year for a baker to come and work at the bakery to really understand what we're looking for.”

Milling grain using stone millstones rather than steel rollers leaves most of the germ and bran in the finished flour, producing a stronger flavor. Spinning at 300 rpm, the millstones tear the grain into a powder. A series of screens separates a percentage of the bran and germ out to create the desired texture of flour. The mill runs seven days a week and has added an overnight shift to keep up with demand.

Traceability of the product is important to Wilken’s customers. Janie’s Mill can track a bag of flour to the batch when it was milled, to the bin where it was stored, and to the field where it was grown.

Wilken began transitioning the farm to organic in 2005, and today works 3,000 acres. The specialization shields the farm from the swings of the conventional grain markets. But organic farming has its own challenges.

Ross Wilken, Janie’s Mill: “The biggest hurdle in organics is just figuring out how to, - basically rethinking everything you've done and figuring out how to control weeds mechanically and working with the soil to adapt and, and, do things the natural way.

Harold Wilken, Janie’s Mill: “But yeah, that was quite a time, you know, kind of thing. But, but fortunately, you know, the consumer wants clean grain, clean flour, you know, and once it's stone milled. And so, we're offering a product that not very many people do.”

Wheat is grown on only 3 percent of Illinois’ 22 million acres of farm ground, and organic wheat is only an estimated 7,000 acres across the state. According to data from the Artisan Grain Collaborative, many of the members of the Collaborative struggle to source all of the bushels of food-grade wheat, rye and barley they wish to buy.

Ross Wilken, Janie’s Mill: “Dad's always been the big picture guy. Loves, loves, loves chatting with people and loves doing the mill side of things with going out and meet new customers. And I've always been kind of nitty gritty in the background. And so, I've, I've absolutely loved being the, the, the business side on the back side. And so, we, we work really well together. And so, I've been blessed, find a perfect business partner in that, in that regard.”                    

The mail order operation at Janie’s Mill mail saw a large bump in sales during the COVID-19 pandemic. Yet sales have continued to grow since lockdowns have been lifted. Part of that growth comes from one-on-one interactions with customers. Harold makes deliveries to many of the mill’s commercial clients himself.

Harold Wilkin, Janie’s Mill:” Well, so it started out that when we started the mill, I wanted to deliver myself so I could get the feedback from the customers. But now it is become. They're my friends. You know, they appreciate what we're doing. They come visit us at the mill. You know? Everyone smile. There's a loaf of bread. Gets stuck in my hand when I leave a bakery. (edit) And they really love the idea that I come to their back door, bring them the flour from the grain I raise, and sometimes I don't have time. We send out other people, but it really is a relationship. This is all about how you treat people and how you take care of one another. It’s a relationship.”

For Market to Market, I’m Peter Tubbs.

Next, the Market to Market report.

Preparations for the holiday weekend may have taken steam out of big reversals in the trade. For the week, the nearby wheat contract added 24 cents and December corn gained a dime. More sales to China added optimism in the soy complex. The November soybean contract improved 27 cents while October meal strengthened $7.80 per ton. December cotton shrank 83 cents per hundredweight. Over in the dairy parlor, October Class Three milk futures added 62 cents. The livestock market was higher. October cattle improved $2.90. October feeders put on $3.37. And the October lean hog contract expanded $1.68. In the currency markets, the US dollar index added 143 ticks. October crude oil fell $1.18 per barrel. COMEX gold lost $11.50 per ounce. And the Goldman Sachs Commodity Index increased almost 7 points to settle at 537 even.

Yeager: Joining us now is regular Market Analyst Sue Martin. Sue, the reason I said what I said at the beginning of running out of steam, this is one of those weeks you didn't want to end if you wanted to see markets go higher.

Martin: That's right.

Yeager: Why is it that wheat has all of a sudden turned on a dime, maybe posted a key reversal? What's the big driver?

Martin: Well, I think first off, you look around the world and global supplies are tightening. You've had bad weather. In fact, they're fearing that the Argentine wheat crop is going to end up taking a pretty decent setback because the weather hasn't been ideal for them and they've had freezes. And then you look at Ukraine and production is down there and of course exports are down as well because of the fact that they've had the hot, dry weather. Russia unfortunately has had a little bit of everything. They've had -- to the Siberian side they've had way too much heavy rain and they're trying to harvest. And quality issues, that crop is dropping. And then the winter wheat was hit with drought and so their production is down. So, you look at Australia and they might have a few places that are struggling a little bit but basically, they'll be okay. So, you look around the world of production and basically wheat is downsizing pretty decently.

Yeager: So how long does this window last that we have to maybe make some sales if we have these troubled spots around the globe?

Martin: Well, for one thing in wheat you seasonally will tend to rally in September anyway. So, I think wheat has got a chance to still try to push further. We might make it up over $5.80 and possibly if it's good enough we can push a little harder than that. You've got Egypt coming back into the market. They're after that 3.8 million metric tons. The president is worried about the fact that they've got food shortages and I think they're building reserves. I think they're trying to get prepared because of the fact that bread over the past few months has gone up 20 cents a loaf and that is something that is a major staple in their country. So, I think it's just you look around the world, you look at wheat, it's a major food staple and I think with supplies going down and demand up that sets the stage here for this market to at least follow a very nice seasonal.

Yeager: If there were traders who took Friday afternoon off, the technical bots are going to look at a close of 4 as what? Is that opening the door to higher prices?

Martin: For?

Yeager: December corn, sorry.

Martin: Yes. I want to tie wheat with corn for a minute. Both of them on a weekly chart have Elliot wave and anyone who follows Elliot waves will understand what this means. But they both have a small Elliot wave 5 under this week's lows and a large 5. Corn has two of them, two large 5s side by side. 5s are what puts bottoms in. And so, I think both of them have that. We've gotten that deferred pricing contracts covered by the elevators and commercials. And we've got the market looking at -- beans do this too -- seasonally try to have a pre-harvest rally. And that pre-harvest rally can sometimes last into September 8th, 9th, 10th, 12th, right in through there.

Yeager: You don't think the markets knew that you were coming and they went bullish?

Martin: That would sure be sweet, wouldn't it?

Yeager: Wouldn't it though? Let's go long-term then. Let's look at this harvest. We talked about December already, but deferred months, do you see that I think Naomi Blohm said this week eight of ten of our harvest lows sometimes appear in September -- I've never seen one before September 1 -- did we maybe already stick that harvest low?

Martin: I have seen some in August. Beans especially will do an August low. I think when I look at the corn I could see where we could try -- and I know everybody wants to tie this back to insurance, that they want to rally the price of corn through October -- but when I have these 5s underneath me I think we priced in what was going to be a large crop and now with this ending of August weather it wasn't what we needed to end and I think the crop size is coming down. Another thing you have is in the Eastern Corn Belt there's reports of tar spot and also southern rust. And those are very detrimental to a corn crop. They can really drop your yields fast. And my understanding is the state of Indiana is one that is really at risk. And so, I think just all of this we priced in with the Pro Farmer Tour, the yields and what have you, and I think now the market is looking at something different. And I think another thing we have to remember, we have funds that have been short all year, they've had a wonderful year, and they are record short beans, corn and wheat. So, to have a rally, a short covering rally here, I think isn't out of line at all.

Yeager: Real quick, are we selling right now or are we holding for a little higher on corn?

Martin: I'm holding for higher.

Yeager: Okay. Beans, are we moving technically or fundamentally right now? We were at the 20-day moving average, which is usually a technical open door for higher prices, which is driving it most?

Martin: I think there's fundamentals here driving it, but there was also some technical. On a price projection it's called the rule of seven. We had a price objective on the downside of November beans at $9.53 and a quarter. The market got to $9.55 pretty close and now we've turned and we're responding to that. I should throw in a wave 4 on corn is $3.53 and a quarter. So just an FYI on that and that is base Dec. But the thing is in the beans I think we're finally waking up and starting to want to pay attention to Brazilian weather. Brazil's weather is horrific. It hasn't changed at all this whole season or whole year almost. They are still hot and dry in the center and center west and very hot and dry in the north. Now normally this time of the year they can be dry, but this is even accentuated and worse than almost worst on record. It's just horrible. And as we ended the week, they were looking at temps that could be 102 to 107 on Friday. So, I think we're paying attention to that because the Brazilian farmer is now looking at planting soybeans.

Yeager: And later than normal, right? Isn't that -- so that would also throw off some timing too.

Martin: Well, he will be later than normal probably because normally they weren't supposed to plant before -- I think it was in 2015 they made that rule that you're not to plant before the 15th of September because of Asian rust. Well, the now recently here they have raised that to at first, I had heard September 1st but it's September 5th they can start planting. However, farmers are struggling a lot in Brazil, just like in the U.S., and so they're probably not going to risk planting without moisture. So, they're going to wait and it's going to shove that crop out further. And the monsoon season I think starts in October. So, they'll probably wait and so that means later beans going in means later for the safrinha corn getting planted too.

Yeager: I want a question here, keep beans and corn in your mind for this one, and it came from Kada in Illinois. Would you rather store with the interest rates or sell off the combine with the hedge right now, given everything you've just said about corn and beans?

Martin: I would say store. The problem you've got is these carrying charge markets. The Sept-Dec got out to 80% of carry. So that spread got pretty wide. Now it has narrowed quite a bit here and I think we're around 22 cents or so here on Friday's close. But the thing is, I think you're going to get a chance to market as we go into 2025. I went back and out of curiosity I thought I'm going to look at what years of a five look like. And I looked at corn and I've got to tell you, years of five on a corn, first off, I'll tell you, I would say nine out of ten, actually eight out of ten it was a December low for the year and one year was November and then there was an outlier year of 1995 where your low came in January and you rallied the whole year. Well, that's going to take something pretty special I think going forward. And then on beans the one thing I noticed, yes, they tended to put their lows in sooner than corn, but I noticed that their highs were earlier, like it could be February, March, April, more times than not early.

Yeager: Okay, I need to get to livestock in two minutes. Real quick, live cattle, we had oversold signals early, then all of a sudden, we had a rally, then we had the end of the week. Are we done? Have we topped for now?

Martin: Well, I think one thing we've done here with the cash market to the futures is we're taking from an inverted basis and going to a normal basis where the futures are premium to the cash. I think we're doing that. And we're pretty close to it if we haven't already got it done at the end of this week. I also think than when I look at the product I think after Labor Day here I could see the choice especially in decline for a chunk of September. I think we're seeing a shift away from ground beef that is moving over and looking towards pork, ground pork. And I think that is one of the reasons the hog market has kind of found a little footing here. But the cattle market, one thing I've noticed is when I look at the chart on feeder cattle, I don't want to be short here for a little bit. I think that market is going to give us something.

Yeager: Wow, that's a little contrarian thoughts there. So, let's go to hogs then. You talked about feeders. Hogs have finally put a couple of weeks together. Is it because of what you just said with people looking at that market or is there something else?

Martin: I think there was more than the shift of demand for meat. I think it was also the fact that when the August went off the board, the October was $17 discount. And I think rather than selling into that, I think shorts covered, some might have bought it because of expecting a little bit better alignment. And I think we're in the process of doing that. I will also say an Elliot wave we're looking on October cattle, or hogs I mean, at a small c and a large 4. So that is something you don't buy into.

Yeager: Okay. All right, Sue. I've got to pause you right there but we'll keep going, okay?

Martin: Oh, I can't wait.

Yeager: I know. We've got lots for you, Sue. Sue Martin, thank you. We're going to pause that Analysis and continue our discussion about the markets in our Market Plus segment. You can find both Analysis and Plus on our website of markettomarket.org. We have something new for you. It's called the Market Insiders Newsletter. We will start each week with an email filled with behind the scenes information on the program, the stories around the tapings of the show, and what's ahead. Stay in the know and sign up at markettomarket.org. Next week, we'll start our series of lookbacks at the first 50 seasons of this program. We do want to thank you for watching and please have a great week.

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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.