Market to Market - September 27, 2024

Paul Yeager: Coming up on Market to Market -

Tariffs return to the campaign trail and are being aimed at an agricultural giant. 

Rural health care options become more scarce.

And commodity market analysis with Dan Hueber, next. 

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Announcer: “This is the Friday, September 27 edition of Market to Market - the Weekly Journal of Rural America.”

 

Hello. I’m Paul Yeager. 

The exact impact of the Fed’s interest rate cut last week is still working its way through the economy. 

Sales of new homes were lower in August by 4.7 percent. Analysts expect the 50 point basis cut to increase support for new construction.

Orders for durable goods were flat last month - a win for those saying there will be a sharp decline in the purchase of items meant to last at least three years. 

The rise of inflation in the government’s preferred measure, the PCE, came in at 0.1 percent. The year-over-year inflation rate moved higher by 2.2 percent. 

Scholars, economists and politicians have debated the effectiveness of tariffs for decades. 

The impact of the tariffs in the Trump administration is still under review. The former president vowed to go even further with U.S. companies taking production from on-shore to off if he were elected again.

Peter Tubbs reports. 

Peter Tubbs: Former President Trump has threatened to use one of the trade tools he is famous for invoking to shape the farm economy. In a campaign stop in Pennsylvania, Trump promised to place tariffs on John Deere products made in Mexico.

Former President Donald Trump: “I love the company, but as you know, they've announced a few days ago that they're going to move a lot of their manufacturing business to Mexico. I'm just notifying John Deere right now. If you do that, we're putting a 200% tariff on everything that you want to sell into the United States, so that if I win, John Deere is going to be paying a 200%.They haven't started it yet. Maybe they haven't even made the final decision yet, but I think they have, John Deere is going to and anybody else that does this because it's hurting our farmers, it's hurting our manufacturing. And if you do that, you're going to have a 200% tariff put on the product that you make in Mexico right across the border.”

 

Peter Tubbs: Economists agree that the cost of tariffs are paid by both the companies that are importing the goods and the customers who make the final purchases of those products.

In June, John Deere announced it would be moving some production of skid-steer loaders to a plant in Mexico by 2026. 

The Trump Administration levied a series of tariffs on Chinese products in 2018. China then reduced its purchases of American agricultural commodities causing the U.S. price of soybeans to plummet. China did eventually sign the Phase 1 Trade Agreement which guaranteed the purchase of nearly $40 billion worth of U.S. agricultural commodities. While Chinese purchases have exceeded pre-tariff numbers they have yet to achieve the levels agreed to in the agreement. 

For Market to Market, I’m Peter Tubbs

Paul Yeager: According to Kaiser Family Foundation research, about half of U.S. adults say it is difficult to afford the cost of health care. A study on Iowa’s overall health care landscape reveals challenges for providers and citizens. Rural areas in the state face some similar and unique challenges.

Dr. Chelsea Lensing is an economics professor at Coe College in Iowa and spent her summer researching the number of health care options in the state for the Common Sense Institute.

Here is part of our conversation from a recent episode of the MtoM podcast. 

This is our Cover Story.

[Chelsea Lensing] There definitely are some real challenges at the absolute level. But then when you look more broadly at what Iowa is doing in comparison to the rest of the country, we're actually doing pretty well. So what we found at kind of the big picture level was that there's a lot of challenges that Iowa was facing, but we're holding up pretty well in comparison to kind of what everyone is facing in the country.

[Yeager] So we're not we're not unique, but there are challenges. And I'm going to guess the challenges are there's not enough access to care for everyone and maybe, urban areas, there are more opportunities than rural areas. Does that hold up?

[Lensing] Yes. Yeah, absolutely. One whole section of the report that we looked at was the differences between urban and rural communities. You know, and there's a whole bunch of ways that you can measure access to care. So there were three primary ones that we had looked at. We looked at primary care physician rates. We looked at facility openings and closures, and then we looked at more of an intensive margin of supply when you think of hospital beds and department closures. So that first one, the primary care physician rate, so that's adjusting for the number of primary care physicians for the number of people. Right? We would expect there to be more primary care physicians in the more populated areas because there's more people. But even once we adjust on a per capita basis, we see that there are significantly more providers in these urban areas. So if you split all of the counties in Iowa into urban and rural, which the USDA has definitions of what constitutes urban, rural, 77 of our counties are considered to be rural. And if you look at trends in the number of primary care providers between these two types of counties, over the last ten years, for urban counties, we've seen about a 1% decrease in  primary care physician rate. But for the rural counties, we've seen about an 8% decrease in primary care providers. Again, this is already adjusted on a population basis. So we're seeing a much larger decrease in the rural counties. But even further than that, counties are not just urban or rural, even within the rural counties. We have 22 of those 77 counties have 100% of the population living in a rural area. So if you take those more extremely rural counties and you compare them to the counties that have, say, fewer than 20% of the population living in a rural county, there's about double the amount of care - primary care providers in those urban counties than what we see in the more extreme rural counties. So there's a really big divergence when we are looking at primary care physicians as a measure of access to health care. The higher the percentage of individuals you have that live in a rural area in a county, the lower the options are for care.

[Yeager] Is there a theme in Iowa about mental health care, rural versus urban, or does it even matter? We just have issues. 

[Lensing] Yeah. So the two ways that we were looking primarily at mental health access in Iowa is through the number of facilities and then through the number of providers. And so we'll start with facilities. And we looked at facilities that were overseen by the Iowa Department of Health and Human Services. And so it doesn't include all facilities, but it includes a lot of mental health care facilities, such as, community mental health, more like long term or rehabilitation, mental health and those types of facilities. We've seen a significant increase in the number of closures and hardly any openings over the last ten years. And so these dedicated mental health centers are closing at a concerning rate. And so that's one area in which we see a big decrease in supply for mental health. But at the same time, we're seeing an increase in the total number of mental health care providers on a per capita rate. So, for example, even in rural counties over the last ten or so years, since 2015, the number of mental health care providers per capita has doubled. And so even though it's still only about half of what we see in the urban counties, there's still a big gap between urban and rural counties. We're making a lot of progress. But again, it kind of stands in the face of all of these closures of these specific mental health care facilities. And so it really depends on the type of mental health care that individuals are seeking. and where exactly those centers are. 

[Yeager] Back to the money, always back to the money. any economics, tied to mental health and what that does to an economy. Do we know anything in those fields? 

[Lensing] Yeah, yeah. And there's a lot of evidence from an economic perspective that ties together when we're having an economic downturn. So when we're having higher unemployment, things like that, we tend to see higher rates of deaths of despair, which are also, you know, related to the mental health of, of individuals. Deaths of despair can include, you know, things like suicide, but also excess alcohol consumption, opioid or other drug consumption.  Premature death rates was something we did identify in the rural section, focus of the paper because not only are we seeing an increase in premature death across the state, it’s substationally higher for our rural communities. The absolute rates are higher and the increase  is higher for these rural counties. So even if you are just measuring our economy with the unemployment rate, that might not be telling the whole story. Right. And something else is going on here with our rates of premature death. And ag ain, we don't have the data to parse out how much of that is due to mental health, but I think it's all extremely related, right? How individuals are feeling, how they're dealing with the economy, how they're dealing with family life. 

 

This MtoM podcast is available now. 

Paul Yeager: End of quarter positions and an approaching USDA report seemed to be upstaged by drier conditions in Brazil. 

For the week …

The nearby wheat contract added 12 cents and the December corn contract expanded 16 cents. 

The soybean complex fed on the stimulus news from China while also benefiting from a soybean oil rally. 

The November soybean contract gained 54 cents while December meal jumped $24.90 per ton.

December cotton shrank 79 cents per hundredweight. 

Over in the dairy parlor, October Class Three milk futures declined 80 cents.

The livestock market was mixed. December cattle strengthened $1.28. November feeders put on $3.92 and the December lean hog contract fell by 85 cents. 

In the currency markets, the US dollar index lost  32 ticks. 

November crude sold off $2.91 per barrel. 

COMEX gold improved $23.30 per ounce, and the Goldman Sachs Commodity Index increased more than a point to settle at 533 - 25.

Joining us now is one of our regular market analysts Dan Hueber...

Dan Hueber: Hi there. Good to be here.

Paul Yeager: This wheat market had a nice little bump in September, but the month is coming to the end. The quarter is coming to an end. Is that really the big factor in the market right now?

Dan Hueber: Well, certainly it, helped some of the short covering in all of the markets. I mean wheat, corn, soybeans, all three. You know, I think wheat, of course, doesn't have a big harvest story to talk about, as we do in the corn and beans here at this point in time. So a little bit more of a follower than a leader. I think at this point in time, which to a certain extent is unfortunate for corn, especially because of corn is really not going to go anywhere unless wheat really kind of starts picking up the ball and running with it. So it's, But again, with wheat, we just don't have enough of a story to excite it right now.

Paul Yeager: Watching the last three out of four months, it's pretty even absolutely on the trend. What do you see breaking it out?

Dan Hueber: Well, you know, again, that's normally a typical pattern when markets are at a bottom. You know we're trying to find value. We're trying to a transition area you know maybe definitely is a strong word. But it seems to be in a transition area. You know it could be some, something in the southern hemisphere. You know, we're really not just getting going with the soybean planting in the southern hemisphere, but, you know, we've got wheat conditions to look at. Same thing over in Australia. I think Australia has been pretty respectable weather here so far. But, you know, they just seem to go back from forth from feast or famine. So, so, you know, any of those things could really powered up. You know, Russia, Ukraine or I was going to be major influences on what we have for Russia, especially when it comes to the wheat market. And, you know, we'll see what the winter weather holds in store for them.

Paul Yeager: So in corn $4.16 seemed to be that strong resistance point. We closed above that today. What does that mean?

Dan Hueber: I think longer term it probably says we are transitioning away from a bear market, at least into a sideways market. I don't think it necessarily means we're going to scream out of here at this point in time, but I think it provides further credence to those of us who think we have a major low in the markets at this point in time. Now we're just going to have to start developing a reason that we can come out of these ranges, which might take a little while.

Paul Yeager: This harvest low is very early…

Dan Hueber: If that's the End, if it.

Paul Yeager: Is right. It would be early September.

Dan Hueber: Yes, it is. Although we truly have not moved very significantly away from that point at this time. And, I wouldn't be surprised. It will bounce around. We'll try to maybe we won't test the extreme low again, but we might come back. you don't have to. Three quarters of what? We've just rallied, you know, sometime here over the next 30 days. But I think it's unlikely that will, that will, probably go all the way down, test it or take it out. But, you know, I think and when you look at the markets as a whole, we've been lower for two years. And in any bear market, I mean, that's really about as long as you can extend them down. So, you know, not that surprising to see maybe a early seasonal low after a situation like that.

Paul Yeager: So any credence to the thought that maybe this harvest isn't as strong as what once was thought, maybe even as little as six weeks ago?

Dan Hueber: You know. Again, I guess I'm not a I haven't walked enough fields to put a lot of credence to it. The folks I've spoken with so far that have done corn have been very pleased with the corn. You know, not only for….

Paul Yeager: We’re not supposed to say that out loud.

Dan Hueber: Well, you know, I guess I was going to add into that. You know, soybeans, maybe not so much. Not that the yields have been bad by any stretch of the imagination, but you know, that dry August, I think you, I mean, throughout most of the Midwest, I mean, when you really need to be filling out those soybeans just wasn't there. So, I mean, in fact, the fellow I spoke with the day before yesterday said a lot of beans, a lot of a lot of really little beans, you know, so the test weight's there, but boy, it, it's just not what you're going to look for Gangbuster type yields.

Paul Yeager: So maybe more in beans is on the size of the harvest. Not, it's dry in Brazil and it might rain at some point or China came to buy. Are any of those three stories more dominant than another?

Dan Hueber: You know, I think I would probably weigh the South American issues as the dominant one. I mean, they are not really getting moving on planting and soybeans and they're definitely behind a year ago at this point, you know, probably counterbalancing there is that Argentina is probably going to go a little stronger on beans this year. On corn. But, you know, they're not looking at the greatest conditions either. So I think that that rises to the top. The other two are supportive factors. Certainly that move of the bean oil this week really kind of get the ball rolling. Now that fizzled out Thursday or Friday. But, you know, meals turned around picked up the slack today. So.

Paul Yeager: Well, I've asked you this question I think twice. Let's do the third time. Okay? I'm going to give you a different answer on this one. This is Gary in Wisconsin - who wants to know, Dan, what is the larger factor in the shorts getting out of the beans? Is it the China stimulus that just passed or South American weather?

Dan Hueber: You know, I'll tend to shift a little bit harder to the Chinese or the South American weather. Okay. And you know, again, seasonality, you know, this is the time of the year where we know we in the next 30 days, we have got our heaviest supply of beans for the next year. And so that's already factors of the market. So why stay short at this point in time.

Paul Yeager: When you hear a story about tariffs and you hear on elections coming through and you hear China's economy is soft, where does China factor in right now, Dan, on the commodities. And is there one in particular that we need to be sensitive to about our relationship with China?

Dan Hueber: You know, the, I mean, China is always going to be important, particularly when they're being market, you know, corn certainly a much, much less of an input there. I mean, Mexico is probably going to be a bigger, bigger question mark on that one with some of the talk we've heard, you know, China is going to use us as the, the supplier of last resort. No two ways about it. The, you know, granted, if things really turn sour in Brazil, they'll step up their purchases here. But, gosh, when you look at the numbers over the last year, I mean, they have really shifted away from us, down a great job. Now, granted, they've had the available supply in South America. There's no guarantee that will necessarily be there, as large, moving forward. But you know, they're going to be the dominant player in the bean market. But, you know, we get a smaller and smaller percentage of that share each year. So it's you know, granted, that's probably only had a drop so far, but they've had their own issues in not only economics, but of course, in the hog industry over there. You know, that's probably stabilized a little bit. They might see their numbers stabilize. But boy you know they've had less demand for soybeans. Soymeal you know in total.

Paul Yeager: So this is a, hopefully, a quick question in beans right now November closed at getting that in the light pole. $10.66 okay. Is that something that you're selling right now?

Dan Hueber: I think, and I was kind of shooting for being to $10.70, which they pretty much did today. So, yes.

Paul Yeager: And that corn at $4.18. Are you selling some of that? 

Dan Hueber: Right for $4.18 to $4.25, certainly. I think you, you take a little piece of that, I think over time, you know, you're going to see better levels down the road. But if you need to move some product out of the field, those are good numbers to work at.

Paul Yeager: Because I think we've sat here in recent weeks, past going, if we could just get a quarter or a dime here, we got $0.50 right. And we're thinking, let's hold a little bit more. Yeah. All right. Let's go to cotton. if we shall, this is, a market that had gone higher and higher and then middle of the week to the end of the week came China or an export story, or is it a little hurricane?

Dan Hueber: Well, the hurricane, certainly is added into it. And it was going to disrupt some of the harvest as we move forward here. You know, not that China couldn't fit into that picture too, but no, I mean, I think the, the, the advance we saw was long overdue really a few weeks ago that had, market had tried to start turning out. It was acting like it wanted to come out of the base. you know that the stimulus of the weather probably helped that, help that, task, just a little bit here, here again, I don't think we're going to get carried away. We probably milked about all we can out of this, this first move up here. But I think cotton is, along with most of the other commodities, seems to be in a transition phase. You know, we've moved from a two year long bear market, pretty dramatic bear market in cotton. And, you know, now we're transitioning to a stable to, I think higher prices as we move into the months ahead.

Paul Yeager: I think you said you use the word hurrah in one of your newsletters this week for live cattle is the last hurrah here for live cattle.

Dan Hueber: You know, that was a, I think, a relatively impressive rebound we saw this week. But yes I don't see where we really continue to push the cattle up here. I think there's too many competing meats out there. Granted, the pork has done a pretty good job of coming out of its depths of depression here a few months ago. But even there, I think that one's probably exhausted itself for the time being, maybe needs a little bit of pull back, but I think it's just I think we can continue to push cattle up on the new highs once again, I think is, is a tall order.

Paul Yeager: Only one person gets the top, you can't see the top or you can't pick the top, but you can. You see it from here is what I'm hearing you say.

Dan Hueber: I think we but we probably look backwards and see it. But it's close enough time. Not time to be greedy about what we have in front of us in.

Paul Yeager: The feeder cattle market. Then where's the top in that one?

Dan Hueber: You know, a similar situation in the feeder cattle market. You know, it's had a nice rebound overall over the last 2 to 3 weeks. You know, particularly if we're going to see the grain markets, corn market in particular, start to look a little livelier to the upside. I think that's going to deter some demand in that feeder market. So, yeah, I think we're probably exhausting that one as well.

Paul Yeager: So possibly part of the most recent rally was because of the lower corn and fueling it a little bit.

Dan Hueber: Well, you know, I mean, certainly the lower corn or the stagnant corn probably helped stimulate it. Again, thinking that, you know, maybe what we're going to try to feed a little bit more than what people thought maybe even a week or 3 or 4 weeks ago. But yeah, I think that if we start seeing corn generally stabilize here, it's going to be pretty difficult to sustain any strength in feeders.

Paul Yeager: Live cattle seem to have this tied to the economy in general, feeder cattle a little more tied to the weather and the conditions. It's plenty dry in cattle here and continuing to get dry. Is there any factor in that in either cattle or, feeders that we're watching too?

Dan Hueber: You know, I guess it would be silly to say that isn't there isn't a some kind of an impact there, but it isn't a major one at this point in time, moving into the winter months, I don't okay, that's probably as big as we normal year hogs.

 

Paul Yeager: And the hogs had a report this week. What did you see from.

Dan Hueber: That neutral report? I mean, pretty much everything was right on top of expectations. You know, herds are very stable here at this point. Don't seem to be generating much, much growth or contraction, either one. So it, you know, the hogs big thing we need in hogs is additional demand here at this point.

Paul Yeager: Where does that come from?

Dan Hueber: Well, you know, and again, there's where China could come into play. I mean, they do continue to import a little bit of pork from us, but it's, you know, the demand is probably going to have to be generated at the retail counter. And if you look at dollars and cents, wise boy, it's pretty tough to beat the value of pork here compared to a lot of other meat. At this point in time.

Paul Yeager: Crude oil has some value for some, frustrating for others. OPEC said you know what, we think we are going to do some production changes boosting.

Dan Hueber: Yeah. And again it's always been an age old story. They come up with their quota and we're going to cut back in production. There's always on the fringe somebody cheating on that. And it really looks like the Saudis have decided, you know, we're giving up too much market share to other members. We're going to go ahead and start boosting production here at the end of December. You know, we're at the lowest levels we've seen in crude oil since the mid 20s. You know, probably a bigger concern or a risk for them is, is the economy in China going to stabilize or is it going to continue to deteriorate because they are the major player on world crude imports at this point in time. So, we'll see if that really takes us down to the bottom. But I mean, at a minimum, I should say we're not looking at outlandish fuel prices as we move over the next 3 to 6 months or so. 

Paul Yeager: All right, Dan Huber, good to see you.

Dan Hueber: Good to see you. Thank you.

Paul Yeager: Thank you so much for the time Dan Huber.  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.

The harvest ‘24 images are great to see on Instagram. We’ve posted some of our own and love to see the tags you’ve given to at Market to Market show. Give our account a follow as well if you’re scrolling.  

Next week, we’ll give extra attention to a large government report landing in the middle of harvest. Thank you so much for watching. Have a great week.

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 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.

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