Market to Market - October 25, 2024

Coming up on Market to Market - BRICS nations gather in Russia for a summit.

A simple strategy to lower temperatures and open up miles of new habitat.

And commodity market analysis with our senior market analyst John Roach, 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, October 25, 2024 edition of Market to Market, the Weekly Journal of Rural America.

Hello. I’m Paul Yeager.

Housing is proving to be the stickiest factor keeping the inflation rate higher than the Fed would like it. Sales of existing homes slowed to the weakest annual pace in 14 years.

The monthly figure was off one percent from August. Even with the slower movement of units, home prices increased for the 15th consecutive month.

New home sales jumped 4.1 percent in September with smaller and more affordable builds selling.

Orders for long-lasting items were off 0.8 percent last month. Fewer commercial aircraft orders pulled down the durable goods report.

When the transportation sector is removed, the reading was up 0.4 percent.

Global powers not named the United States or Europe are gaining size and impact on the global economy.

BRIC countries were named in 2001 by an economist and since have added more members to their roster beyond Brazil, Russia, India and China.

Many BRICS watchers say the expansion only increases the complexity of finding common ground on issues or agreeing on objectives.

Peter Tubbs reports on their meeting this week. 

Economic and political rivals met this week to improve partnerships as a counterweight to Western economies.

The economic grouping known as BRICS- Brazil, Russia, India, China and South Africa - invited 31 other developing nations to Kazan, Russia, to discuss working together on the world stage.

Representing 45 percent of the world's population and 35 percent of the global economy, the group seeks ways to turn expected economic growth into financial and political leverage. Egypt, Ethiopia, Iran and the United Arab Emirates have become members of the coalition; Turkey and Saudi Arabia are seeking entry.

Although the group is informal, one discussed goal is moving away from the dollar as their primary trade currency, reducing the influence of the United States on international trade.

Yet some observers believe that regional rivalries will limit the potential of a BRICS economic bloc as they attempt to supplant the leadership of the G7. China and India, the group’s two most populous countries, also share a contested border. However, trade between the world’s 2nd and 5th largest economies is small at nearly $115 billion in 2023, mostly on Chinese imports. China and Russia maintain a lukewarm relationship. Total trade between the two world superpowers is at $240 billion in 2023 with a larger amount of exports heading to Russia. As a point of comparison, trade between the U.S. and China hit $575 billion in 2023.

For Market to Market, I’m Peter Tubbs

Low water levels are plaguing the Mississippi River for a third consecutive year. Locks and dams along that waterway help maintain some consistency in levels, but dams also serve another purpose.

According to Army Corps of Engineers data, there are more than 92,000 dams in the United States. The average age of those concrete or earthen structures is 63 years. Only 3 percent of those dams produce power and most of the rest are being used for flood control with a side benefit of recreation. But there is a movement to remove some of these dams.

Laura Weber Davis from our friends at Great Lakes NOW! reports in our Cover Story.

Located on a tributary of the Kalamazoo River near Allegan, Michigan, the Swan Creek Dam helps manage water flow and provides residents with recreational opportunities such as fishing and kayaking. But this dam is coming down because the Department of Natural Resources wants the river to be colder. Fish biologist Matt Diana explains why it's a necessary step.

Matt Diana – Senior Fisheries Biologist, Michigan Department of Natural Resources: “Cold water streams in Michigan are imperiled because of global climate change. We're seeing, we've already seen in the last decade over a two degree increase in water temperatures. When there's impoundments on the system that just exacerbates the issues.”

An impoundment is the artificial lake that forms behind a dam. As river water backs up, the sun can heat the water in an impoundment more than it would heat a flowing river and the effect can be surprisingly large.

Matt Diana – Senior Fisheries Biologist, Michigan Department of Natural Resources: “They're creating water temperature warming, in addition to what global climate change is causing. Our monitoring here shows it heats it up about 10 degrees.”

That's enough heat to cause some major stress for certain species of the Great Lakes region, especially for trout.

Matt Diana – Senior Fisheries Biologist, Michigan Department of Natural Resources: “So as the waters warm, we're starting to lose more and more trout. We use a threshold of 68 degrees for trout survival. Above that temperature they don't grow well and they don't survive well.”

And that's not the only trouble dams cause.

Matt Diana – Senior Fisheries Biologist, Michigan Department of Natural Resources: “There's a number of different impacts that dams have on river systems. The most obvious one is fish migration. In the Great Lakes, we have a lot of fish that rely on river migrations. All salmon and steelhead, lake sturgeon, which are a threatened species. We're seeing lake whitefish have really important migrations in the streams. You know, so if a dam is in place that limits the migration, that limits the habitat that's available to them.”

Dams also block downstream movement of sediment which can deprive the downstream river system of an essential ingredient needed for fish habitats.

On top of this, many dams around the Great Lakes region have another problem. They're old. In some cases, they've outlived their usefulness and they're expensive to maintain. Swan Creek checks both of those boxes.

Matt Diana – Senior Fisheries Biologist, Michigan Department of Natural Resources: “This particular dam was built in 1937. A lot of dams were built around the early 1800s, mid 1900s, and then a lot of hydro dams were built, associated with kind of World War II. All of those dams are old. The concrete used, the construction used are usually 50-year type construction. So, most of them are past their living lifespan. They’re either requiring maintenance or constant, kind of Band-Aid fixes in order to keep them in place.”

The hefty cost of maintenance and repairs deters some from taking action. But ignoring aging dams presents enormous risks. When older dams aren't maintained, a breach or a total failure can occur, and that can spell disaster to the surrounding area.

Lynn Coleman: “There it goes. There it goes.”

Matt Diana – Senior Fisheries Biologist, Michigan Department of Natural Resources: “Midland, Michigan is a good example of a dam failure and the kind of impacts that are that happen when a dam fails.”

Gayle King, CBS Mornings: “Breaking news coming from Michigan this morning.”

The 2020 failure of the Edenville and Sanford dams in Midland resulted in over $250 million in property damage and extensive harm to the fishery. To help prevent disasters of this scale and defend against climate change, a wave of dam removal projects is happening right now in Michigan and across the U.S.

Matt Diana – Senior Fisheries Biologist, Michigan Department of Natural Resources: “As these dams age, they're really not serving a purpose other than creating an impoundment. And, so we're looking at opportunities with these dams instead of repairing them. There's a lot of money out there to do things like removals, through grant programs and state funded programs to try and improve fish habitat.”

A recent influx of state and federal money allows the DNR to remove more dams than previously financially possible. The DNR prioritizes dam removals in a number of different ways.

Matt Diana – Senior Fisheries Biologist, Michigan Department of Natural Resources: “One way we prioritize it is by the risk of the existing dam. Dams are rated as high to low risk based on what would happen if they failed. So, a dam in a city might be more high risk because if it failed, it could flood houses and even cause loss of life. So those become high priority dams from a safety aspect.”

The DNR prioritizes low risk dams based on how big of a boost the fishery will get from removing them.

Matt Diana – Senior Fisheries Biologist, Michigan Department of Natural Resources: So, one factor that we use is how many miles of stream is a dam blocking off from fish migration? So, in this case, we could remove a dam and, and open up 40 miles of stream that fish moving upstream couldn't access in the past.”

Twenty miles upstream of the Swan Creek Dam, is where the Otsego Township Dam was removed in 2016 returning this stretch of the Kalamazoo River to its natural state.

Matt Diana – Senior Fisheries Biologist, Michigan Department of Natural Resources: “This dam was removed because it was failing and because it had contaminated sediments behind it. So, if it failed, we would have had contaminant sediments go downstream.”

Since removal of the dam. Researchers from Western Michigan University routinely monitor the area.

Though their fieldwork isn't complete, the team has seen a clear shift in the types of species present in the water since the dam was removed.

Sara Diller, Ph.D. Student Western Michigan University: “We see a lot more species we typically see in a river. they're more adapted to riverine conditions, whereas where the dams are in place, we see species that are more adapted to lake-like conditions and where the dams have been taken out, we see more sensitive species. They're intolerant to pollution but where the dam is still in place, we see species that are more pollution tolerant.”

Matt Diana – Senior Fisheries Biologist, Michigan Department of Natural Resources: We’ve seen a shift from lake-like fish populations. So, things like common carp, largemouth bass, bluegill to more riverine and are what we call lowdic systems, where it's smallmouth bass as pike, which are neonative and more appropriate for a river ecosystem.

And that's good news for the fishery.

Matt Diana – Senior Fisheries Biologist, Michigan Department of Natural Resources: “The kind of information that Western Michigan is collecting here is really valuable to US fisheries managers. We take this kind of information and we use it in order to evaluate these projects and see if there's any need for additional, restoration. My ultimate goal with these projects is to see the river look as natural as it did before the dam was here, restore the fish habitat and really create better fisheries for the public in Michigan.”

Next, the Market to Market report.

Daily flash sales have helped cycles move above last week’s lower closes but the air seemed to leak out of the tires of the rally at week’s end. For the week, the nearby wheat contract fell 4 cents and the December corn contract added 11 cents. A surge in soybean oil helped pull the soy complex along. The January soybean contract gained 28 cents while December meal cut $9.80 per ton. December cotton shrank 31 cents per hundredweight. Over in the dairy parlor, November Class Three milk futures fell $1.13. The livestock market was higher. December cattle increased $1.82. November feeders put on 98 cents. And the December lean hog contract expanded $1.85. In the currency markets, the US dollar index added 80 ticks. December crude oil improved $2.55 per barrel. COMEX gold strengthened $22.80 per ounce. And the Goldman Sachs Commodity Index put on nearly 10 points to settle at 543.95.

Yeager: Joining us now is our senior Market Analyst John Roach. Good to see you, John.

Roach: Thanks, Paul. Nice to be here.

Yeager: The easiest thing to do in a market if it has no fresh news is to move sideways then down. Hello wheat. We've seen Russia and Europe weather be a story. Is it still the story impacting the wheat market the greatest right now?

Roach: For a moment. They're in a very critical time of their growing season. They've got to get the crop into a little bit of growth here before it goes into dormancy. And so that is the area that is right now suffering the most. But they've been exporting at a pretty rapid pace. And so, after shorter crops this year they're expected to run out here and then we'll become the market.

Yeager: But in the United States we have weather issues of our own in the Plains, Oklahoma and Kansas, a little bit of light rain but not really enough to change anything. Weather domestically is also -- so if you're sitting there with dry soils are you planting wheat with caution right now?

Roach: Well, I think everybody has to look at what their rotation is and so forth. But yes, I think you do plant wheat. The world stocks, if you look at the ending stocks for wheat forecast for this upcoming year, they're actually smaller than what they were last year. And last year was smaller, let's say the end of June were smaller than it was the year before. So, world stocks are coming down while U.S. stocks are increasing. So, what has happened here is the world has been slow to come by and this really applies across all the grain We had high prices and so the users became slow buyers and really have very little inventory. And now just in the last couple, three weeks they have really stepped up. We had big export sales that we saw this week. And we think that there's more business ahead. And so, it's a matter of finding a price level that we can get enough grain out of farmer's hands and that level is going to go up. Farmers don't like this price, it doesn't work in the budget.

Yeager: We're going to get to reluctant farmers in a minute. I think we're going to talk soybeans. You wrote something this week that caught my attention. Let's talk corn first though. Again, it's a weather story but it's the South American one. You laid something out there this week, again caught my attention. At what point does the South American delayed planting become a United States story and impacting farmers here?

Roach: Well, it possibly could with corn. It will depend on where prices are and so forth and how many acres of double crop corn will get put in because they're going to go in late because of the bean plantings being late. And it's still dry in South America. And they've had some rains. But when you look at the weather maps, we're really dealing with a very dry area with some rains. And we don't know for sure that we're going to have good rains all the way through the season. So, come next January, February as they're harvesting soybeans, it will be a question as to whether they want to put corn in or not. It will depend upon their weather conditions and what the price levels are.

Yeager: Flash sales have been a story this week. China buying corn. Is that a -- not a drop in the bucket -- but an indication of more things to come?

Roach: I think so. Not necessarily just China. We've had a lot of business from routine kind of buyers. Mexico has been certainly a big buyer here recently. Again, if you think in terms of where we came from, we had very high price levels and everybody let their inventories dwindle down. And then we had a growing season in the United States that we really didn’t threaten the crop very much and there was no rush to get anything purchased. And so, the buyers have really gotten themselves into a spot where they don't have big inventories. They have very small inventories. And now they're coming to the marketplace and they're getting bargain prices and so they're buying and I think that they'll continue to buy here. And so, I think that will be supportive. On the other side, we have the commodity funds that were big shorts and they were buyers and that took the market higher until this last week. And I haven't seen the numbers for today but as of last week they were big sellers again. So, we really have a two-sided kind of trade in here and I think that is what we deserve to have for a while is a two-sided trade back and forth at a level that we're able to get grain to move from the farm and at a level that the buyers will continue to buy.

Yeager: Is this happening earlier than normal? We're still in the middle of harvest. We're more than halfway done on corn harvest. That seems to be activity that happens in November, December. Are we ahead of schedule?

Roach: Well, I think that we're behind schedule on the buying side. The buyers just didn't find a spot that they needed to buy. There was no rush to buy anything. And suddenly they saw the prices start to move higher. And put yourself in the position of a procurement manager, you just had the lowest prices in a long time and you didn't buy any inventory? That's how you lose a job. So, the buyers need to get coverage and I think they're going to stay busy there on every break in the market. They're going to be buying and that will continue until we get done with harvest and then you'll have to deal with the farmer who doesn't want to sell at that price level.

Yeager: Let's speak of that farmer who doesn't want to sell. Argentina, the farmer there is holding onto crops, I think you said because of currency exchange issues and maybe some tax programs. What is the impact of that to us here?

Roach: Well, again, we're seeing grain not want to move off of the farm or off of the farmer ownership. And as long as there's harvest going on you don't notice that so much. But once harvest gets finished and once we get the crop put away then we're going to have to find a level that you can get the grain away from farmers. And I think it's at a higher level. I'm not trying to be optimistic or bullish about the market at all. I just think we're too cheap to move the quantity of grain the world wants.

Yeager: I'm going to put you on the spot here. What does that mean? How high are we talking here?

Roach: Not lots higher. Not lots higher at all. If you look at the supply demand tables for the United States some people would say we don't deserve to go higher at all, we should go lower. But I don't think that we'll be able to do any business, you won't be able to source the grain from farmers if you take prices lower.

Yeager: And I think you wrote this week, we've kind of defended the 20-day moving average in wheat, corn and beans a lot this week, beans though not as much as the other two.

Roach: But we've been up testing it. We've been trying to get through it. Corn actually got through it but then fell back down. And the reason the 20-day moving average is important is that tells you the trend. If the price is higher than the average for the past 20 days, that's an upward trending market. And when you have an upward trending market, you get the spec funds in buying, and you also stimulate the users to make sure they're there on the next pullback.

Yeager: You know the easy thing to say now, John, is the trend is your friend because there's usually something -- I'm trying to use your line on things. Is that right?

Roach: Yeah, that's the old adage and it's true, it really is true.

Yeager: Well, let's talk about '25 then and a question here from Trent that he wrote to us this week. Will there be any crop trying to buy acres in the spring of '25 given what you've just said about the reluctance to sell? And will that impact our acres?

Roach: I'd flip it over the other way. There is going to be a push on to not plant soybeans. The soybean supply demand tables are scary. We have a record world ending stocks coming at us and we have a big ending stocks coming at us in the United States. And so, we're going to distort the relationship between corn and beans so farmers will plant more corn and less beans.

Yeager: That is interesting and that has been consistent with a lot of people that have sat in that chair. Just the bean outlook long-term doesn't look real good.

Roach: It doesn't look good if the Brazilians have a good crop. Now, if they have weather problems and have crop issues then it's a whole new ballgame again.

Yeager: But we seem to have this issue a number of years. At what point does it become, it gets to be too late for rains to come to Brazil where it becomes a major story. Is that a November 1? A December 1?

Roach: It's probably a late November story.

Yeager: All right, let's go to livestock if we could. Just when you think cattle can't go any higher, the buyers return. Why did they come back?

Roach: We have holidays coming up and the packers are making money and farmers are, the feedlots are reluctant to sell because they need more money in order to make the cattle work. And so, they're putting extra weight on, but meanwhile are having to bid up to get the cattle to move. And that is good as you come up into the holidays. But as you come out of the holidays, particularly with the credit card situation that we're hearing and the concern about people's money situation, we think we could have a really tough sledding once you get through the holiday. So, we think you've got a period of time here where it's a good party, enjoy it, and make sure you get your protection in place here at these higher price levels.

Yeager: Right before we recorded on Friday cattle on feed came out and on-feed was 101%, placed on-feed in September 98%, fed cattle market during September 102%, other disappearance 98%. What is your take from those numbers?

Roach: A little bit bigger numbers on feed, a couple percent more than what people were anticipating, a little more placement, bigger placement number, a couple percent more than people were thinking about. And so, they will be considered negative reports. But that's a little longer term. The immediate situation as far as beef movement is concerned will be what governs the market next week.

Yeager: We had a good long discussion about livestock last week and it, again, kind of centered around that first question I asked you about where hard to believe we can go much higher. But what are you hearing about lots and filling up in some of the cattle feeding regions? Are they stocking up at regular pace? Or are they hedging their operations?

Roach: The interesting thing is that we look at the cattle crush, which is the cost of feeders, the cost of feed together with the price of fat cattle and most of the weights, particularly the heavier weights, you're in the upper 90 percentile of what profits have been available looking over the last ten years. So, it really is a good time to take a look at, particularly if you're a hedger, of coming in and accumulating replacement cattle and putting hedges in place.

Yeager: In the hog market, we look at, this was a new one for me. I didn't understand why would Brazil farmers delay in planting have an impact on the hog market?

Roach: I'm not sure that it has had that much of an impact on it. The hog market, we've just got solid demand and we're just moving on higher. But again, we're up into that area where we think it's time to be looking at protection and understand that we'll have two different kinds of markets. One is before the holidays and one is after, in my opinion.

Yeager: Before we go, dollar, a strong rally this week. Does that have - is that going to be much more volatile here in the next two weeks before the election? Is that going to be the biggest influence on it?

Roach: It sure could be. The election has got everybody's attention. But the other part of the lead-in that we talked about that I thought was important and that is look at inflation, look at what the commodity index is doing, look at gold, look at petroleum, we're not deflating, we're inflating.

Yeager: Okay. We'll continue on that one because I do like that topic. That's a good one to discuss. John Roach, good to see you. Thank you.

Roach: Thank you much, Paul, appreciate it.

Yeager: We are going to pause our Analysis and continue our discussion about these markets in our Market Plus segment. You can find both of them on our website of markettomarket.org. We have launched the Market Insider newsletter and there's still time for you to join our exclusive club. Each Monday we deliver inside information about this program as well as information on what's ahead and only insiders will get the first dibs. Subscribe at markettomarket.org. Next week, big ideas to help feed the world. 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.