Market to Market - November 8, 2024

Coming up on Market to Market - A big election night for Republicans puts them in charge at both ends of the National Mall and what that could mean for rural America. A small insect makes a big impression on the landscape. And commodity market analysis with analyst Matthew Bennett, next.

What's next doesn't happen by chance. It happens when researchers and farmers work together to solve tomorrow's agronomic challenges. We're committed to creating what's next because at Pioneer, our name is our mission.

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This is the Friday, November 8, 2024 edition of Market to Market, the Weekly Journal of Rural America.

Hello. I’m Paul Yeager.

The Federal Reserve cut its key interest rate by a quarter point on Thursday.

The move follows the same action taken in September following the steady decline in inflation. 

The “I” word was paramount in this week’s national election.

Republicans will be in the majority in the Senate, likely will keep the House and Donald Trump will return to 1600 Pennsylvania Avenue as president.

Committee makeups will be different. The new Congress will have many priorities to accomplish and campaign promises to fulfill. Those who see the Farm Bill as helpful to their livelihood hope this piece of stalled legislation makes it to the passage lane sooner rather than later.

David Miller has an election recap.

Amidst congratulations from foreign leaders, domestic agricultural groups and his opponent Vice President Kamala Harris, former President Donald Trump capped a nearly 2-year long campaign-run by being elected the 47th President of the United States.

President-Elect Donald Trump: “Can you believe it?”

On the campaign trail, Trump laid out a few of his plans for the agricultural sector. These included telling John Deere that any of its equipment made on production lines moved from the U.S. and then sent back to the United States would be subject to a 200 percent tariff.

As the 45th president, Trump imposed tariffs on more than $300 billion worth of goods imported from China. The move kicked off the 2018 tariff war that devastated U.S. exports of corn and soybeans. Despite the initial effect on farmers, those tariffs have remained in place throughout the Biden presidency. Economists agree the cost of tariffs are paid by the companies that import the goods and the customers who make the final purchases.

The President-elect has also stated he will reinforce the country’s southern border and deport all of the estimated 11 million undocumented, some of which allegedly have jobs on the nation’s farms and in its meat packing facilities. However, the President-elect wants migrant labor to legally cross the border to work in the U.S.

Colorado residents rejected measure 309, an issue covered by Market to Market, which would have banned packing plants inside the Denver city limits.

Sixty percent of South Dakotans rejected a ballot initiative that would have protected carbon sequestration pipelines through a requirement that local governments prove to state regulators their restrictions on pipeline locations were reasonable.

The Dakotas joined Florida in defeating statewide ballot initiatives for the legalization of recreational marijuana while Nebraska approved measures legalizing medical uses and regulating the industry.

For Market to Market, I’m David Miller.

Despite widespread heavy rain in much of the Grain Belt, the Drought Monitor this week actually increased in intensity.  Areas to the east of the Mississippi River were hotter and drier than normal which accounted for the offset from the 10 inches in rainfall that fell across an area from Texas to Missouri.

Much of this same footprint is also known to be where the Emerald Ash Borer has decimated hundreds of millions of trees all over North America.

The tiny beetle has forced the harvest of trees, but creative entrepreneurs have given the lumber new life.

Cameron McCoy has our Cover Story.

Neighborhoods like this are becoming an increasingly common sight. Ash trees with thinning, upper canopies, flecked bark damage and shoots of new branches at the trunk.

Tivon Feeley, Iowa DNR: “All telltale signs that these trees have been infected by the emerald ash borer. Should be emerging right here. That's an exit hole. The smaller ones are emerald ash borer leaving the tree.”

According to the Iowa Department of Natural Resources. There are roughly 3.1 million community ash trees in Iowa. As ash is one of the most commonly planted street trees in the state, the emerald ash borer is having huge economic impact on the forest resources of cities and towns.

Tivon Feeley, Iowa DNR: “You look at history and we had Dutch elm disease come through. In Iowa, the biggest years were kind of in the sixties and seventies and wiped out the elms, and then we had to replace these trees and this was the number one tree. Green ash is highly resistant to salt and heat and handles a variety of soils and grows very quickly. And so, we didn't learn from Dutch Elm disease, we kind of went in, replanted lots and lots of ash or lots and lots of maples. And so, when we have an invasive pest like emerald ash borer and it came and it was able to run down those streets like we see here pretty quickly.”

Emerald ash borer is kind of a unique insect. It's an invasive insect, like you mentioned, not native to United States, it comes from China, Korea, some of those Asian continent areas. It was introduced in 2002 to Detroit, Michigan, and it's a primary killer of all Fraxinus or ash trees.

The emerald ash borer was first discovered in Iowa in 2010 on an island in the Mississippi River. Despite the Iowa Department of Natural Resources putting a quarantine on moving the wood, the beetle continued to make a westward push through the state.

Tivon Feeley, Iowa DNR: It went through the state tremendously fast. But I have a publication we put out, it was looking at the railroad, and the railway is what moved it quickly through Iowa. They fly around in the spring, get on the cars, take a ride. So, the rail communities were hit the hardest.

Adult beetles live on the outside of trees and feed on the leaves during the summer months. The larva feed on the living plant tissue underneath the bark. The tunneling and feeding activity of the larva is what ultimately kills the trees. When the bark is peeled back, you can see the dizzying patterns left behind from the larva.

As millions of these trees are cut down, several factors come into play. How do communities efficiently remove wood from neighborhoods? What's the financial cost of cutting down the trees? And what should communities do with such a volume of wood when most of it is perfectly usable for other purposes?

Tivon Feeley, Iowa DNR: Are these trees worthless? It's a tough one. So, the cash market, believe it or not, pre 2002 was pretty good. You know, you could sell and mill out most trees, urban trees. They're tough because you don't know what's inside of that tree. So, it's really hard to dispose of these trees. And what do you do with all of this wood when it comes down? You know, just on this block alone, we're probably looking at, I don't know, maybe five, 600 trees that are going to come down in the next year or two. That's a lot of wood material and we really don't have answers for it.

According to the U.S. Forest Service.

If recovered and repurposed wood from the country's urban forests could produce nearly 4 billion board feet of lumber each year.

Upcycling is becoming a popular trend for urban wood. The Iowa DNR Forestry has been working to connect people all along the supply chain to build community, business and consumer interest to embrace this underutilized resource.

Tivon Feeley, Iowa DNR: There are some creative things happening. There are a few smaller communities that have the wood milled out and they take the wood to work in their shop classes. Others have turned them into benches. The city of Waterloo ended up mulching the wood and turn them into pellets and then they get turned into power, the pellets are burned for power. So, everybody's got some creativity with it. A little different use, but not it's not universal, it really depends on where you're at in the state.

Becky Button, Bear Creek Hardwoods - Earlham, Iowa: “We've got a lot more ash now than we ever had before.

Monty and Betty Button owned Bear Creek Hardwoods outside of Earlham, Iowa. They were a full-service lumber mill and kiln that takes locally sourced wood and repurposes it.

Becky Button, Bear Creek Hardwoods - Earlham, Iowa: “Used to be that they would just cut down all the trees, mulch them up, or take them to a landfill. And that was such a waste that wood is so beautiful and it's so purposeful that there has to be a better way to do it. It's an easy one to cut. It's not really, really hard. It's got great characteristics. It's got a lot of nice grainage like oak has, but it's a lighter wood.

As more and more ash comes into mills like Bear Creek Hardwoods. They are using the repurposed wood for a variety of projects.

Becky Button, Bear Creek Hardwoods - Earlham, Iowa: What we've done a lot with Ash is we will make dinner tables, mantels. We do a lot of flooring with Ash. There's really no limit on what you can do with Ash because it's just a real nice stable wood.

The fight in stopping this pest from infecting trees is over and it is not clear if ash will ever rebound again in the state.

But like the local craft beer movement or the local food movement, mills like this are building a local wood movement, all of which can help improve local economies, repurpose a waste product and create something of lasting value for years to come.

Becky Button, Bear Creek Hardwoods - Earlham, Iowa And it's neat just to know that this item that we have was grown in our own soil as is just being repurposed. And it's just very interesting to know that this is from Iowa.

For Market to Market, I’m Cameron McCoy.

Next, the Market to Market report.

Pre-Election and USDA report calm kept the markets neutral for most of the week. Slight volatility Wednesday was replaced by rangebound trade by the final sessions. For the week, the nearby wheat contract added a nickel and the December corn contract put on 17 cents. Trade war fears moved to the back burner in the soy complex as USDA reduced the size of the crop Friday. The January soybean contract gained 37 cents while December meal improved 90 cents per ton. December cotton expanded 79 cents per hundredweight. Over in the dairy parlor, December Class Three milk futures fell 65 cents. The livestock market was lower. December cattle decreased $2.23. January feeders cut $1.77. And the December lean hog contract shed $3.65. In the currency markets, the US dollar index improved 77 ticks.  December crude oil strengthened 76 cents per barrel. COMEX gold lost $52 per ounce. And the Goldman Sachs Commodity Index added just over 8 points to settle at 549.10.

[Yeager] Joining us now is one of our regular Market Analysts Matthew Bennett. Hello, sir.

[Bennett] Hello, Paul.

[Yeager] Wheat if we could start with that, like we always do. It rained in some areas that needed rain. The crop is going to get a good takeoff coming into the winter months. But domestically is not always the story in the wheat market. We're still looking at dry conditions in Russia. We're still looking at a cheap product in Russia that is flooding the market. Is that all there is to talk about in wheat this week?

[Bennett] The report didn't really offer us anything. The wheat market really didn't do anything afterwards either. It was pretty much unchanged. And quite frankly, you would expect some sort of a break out in there at some point. We just kind of went sideways. As far as the U.S. weather, it's definitely a good factor. We feel much better about what the crop might look like. But at the same time, outlook numbers showed acreage wasn't going to increase any and maybe a little bit smaller crop next year. But Russia is an issue. Any time you see any sort of a wheat rally it seems like that pretty much is what holds us back. So, if I was going to see a break out of some sort, though, I kind of feel like wheat might be a little more of a follower. So, if you see strength in the other grains maybe you'll get a little bit out of the wheat market as well.

[Yeager] When you see a neutral report though on a commodity that obviously must mean traders feel like they've got it dialed in.

[Bennett] Yeah, I think that they do. Right now, it's that time of the year where you just don't get a whole lot in the way of wheat news. It's really not going to be your leader at this time of year typically.

[Yeager] How about more news in corn? What is your lead story in corn this week?

[Bennett] The corn market, it has been a very interesting dynamic in that we've posted a bit of a rally here. We all knew it was a big crop. Reports showed us a bit of a drop back though. Illinois back down to 218, still a record, but it gives you a national yield of 183.1. So, we're a little bit lower than what we thought we were before. The interesting thing, maybe more so than the report though, spreads have been awfully strong. Basis is increased or narrowed if you will. You've seen the grower get an opportunity at some cash prices that look vastly different than they did in the thick of harvest. And so, lead story wise I'd say your cash corn price looks awfully attractive as compared to what we've been talking over the last three, four or five weeks.

[Yeager] A mutual friend of ours and I were talking this week and she said that growers, her clients don't seem to be as nervous as they were, like you said, before harvest started. Do you concur?

[Bennett] Yeah, I don’t know that I feel as bearish maybe as what we did previously. We all knew it was going to be a pretty good-sized crop, first of all. But what we didn't know is that the cheap prices, curing cheap prices would happen maybe as quickly as what we've seen. Exports have been fantastic. Now, you've got to be really careful with these exports in that a lot of people have felt like these were front loaded. Mexico had some concerns reportedly that maybe some of the tariff situation after Trump might be elected, and he was, maybe that's why they were front loading export demand so much. But at the same time, again, the basis, the spreads, they have indicated that there are folks out there that don't have enough corn bought right now. And so, I'm not feeling as bearish as what I did previously.

[Yeager] All right, so, if I don't have much bought right now and I'm sitting on maybe still some '23 and now I just have this new '24, at these prices is a producer inclined to sell or hold?

[Bennett] Yeah, I think if a producer is sitting here today and vastly undersold, which the average producer is if we're honest about it, you're looking at prices that got 45 cents off of the lows, first of all. Second of all, some of these basis appreciations have been so strong in some of these areas as you get out past harvest, of course the producer once they decide if it's in the elevator, hey I've got the minimum amount of storage, probably not going to do anything for a little bit. Once it goes in the bin, typically we don't want to do anything right off the bat. But just a week ago on the river we saw, towards the end of October, the last few days of October, the cash price was five under the board, December 1st price was 35 over the board. And so, as a producer if I've looked at a 40, 45 cent rally and basis appreciation in some areas of anywhere from 20 to 40 cents, selling an increment into that makes a heck of a lot of sense to me. I'm not saying I'm bearish and it doesn't mean you're bearish because you're selling some, it just means you're smart.

[Yeager] It means you're taking advantage of what the opportunity is.

[Bennett] Absolutely.

[Yeager] Another mutual friend, you've got to think about base hits instead of home runs.

[Bennett] No. That's taking something right out of every presentation I make because the thing is what our mind typically will tell us to do right now, Paul, is that hey, this corn market is starting to catch some life. How much more can we get out of it? Instead of hey, what does 50 to 60 cents a bushel mean for my operation times 230 bushel yield? And that’s serious money that a lot of us felt like we weren't going to be able to latch onto previously. It's no secret the average grower if we would have kept prices at $4 and below would have lost money this year. We know that. Now, can we make money at $4.10 cash, $4.20, $4.30? That's still going to be really tough for the average producer. but it's better than what it was.

[Yeager] Let's look at that March contract, $4.44, up again this week. Are you looking -- do you like any of the deferred months to place some type of a hedge?

[Bennett] Yes, I do in this situation. Let's say a grower is sitting here with bin corn and they say, you know what, I don't want to do anything right now, I want to sell maybe some carry in the market. Now, is there enough carry in the market for, you're still talking 1.39 billion bushel stocks number, I think carry should be a little bit wider than what it is, Paul. But that doesn't mean as a grower I don't look at, for instance, you get out to some of these levels, $4.45, $4.50, if I sell out to May or July I'm selling carry in the market, basis improves for me, that's exactly what typically we used to do in the grain business is we hedge the carry, we wait on the basis to come to us, try to make the bins pay for themselves. And on-farm storage, in my opinion, you could put yourself in a much better situation than what we thought we were going to be in. But just putting it in the bin and forgetting about it doesn't always make a whole lot of sense. So, I don't mind selling the carry, even though there's not enough carry for me, I think it should be more. But if I'm ready to make the decision today I don't mind selling the carry. If I've got the bins, I think I can make that work.

[Yeager] We're going to get back to that bin discussion in a minute. But I need to get to soybeans because we're solidly above $10 and there's this seems to be some momentum. We've retraced half of the move back. If you look at the chart we're bouncing. However, technically it also means we might move lower too.

[Bennett] Oh absolutely. The thing you've got to be cautious with whenever it comes to soybeans, so this report, we took quite a bit of air out of the sails. And so, you go from 53.1 down to 51.7. That's a big drop. I don't recall a drop from October to November, anything close to this. I have to go back and look but I don't believe we've ever done this before. And so, with that being the case, the market you would think taking carryout all the way down to 470 it was a bullish report clearly. The market didn't act like it was a bullish report but we have had some strength. Post-election on Tuesday night we were down 20 cents and a lot of folks felt like well there's reason for that, maybe China is going to back away from the export table. That had been widely discussed. But then here you sit at the end of the week almost 50 cents off of those lows. So, Friday's move, I'm not super concerned with it, but I did think it wasn't quite as good of a reaction as what you would expect with a report that was that bullish.

[Yeager] It was a pretty positive response initially. And then we closed much closer to an even for the day. So, why did that happen then?

[Bennett] I think there's a variety of reasons. I know that during the middle of the day there was an announcement that they thought that Lighthizer was going to be our U.S. trade representative. When that was announced, beans went lower at the time. And then all of a sudden you turn around and you go back higher. Clearly, he was involved in tariff discussions. So, that is something to kind of keep an eye on, there's no doubt about it. That's something we're going to talk about for some time in here. Until something happens there, I guess I'm not going to lose any sleep over it. But I think the bean market is going to be pretty reactive with that kind of information.

[Yeager] And we're still going to sort out a bunch of things. But let's sort out weather if we could. Let's play forecaster. Phil in Ontario wants to know, La Nina is building in the Pacific. What does history tell us this means for South American crop production in the next three months? What implications will it have for U.S. production in '25? See, we're back to the bin talk there.

[Bennett] Yeah, so first of all, obviously Brazil was extremely dry when they were supposed to be dry. But we turn off in October and we got moisture down there, they started planting, they're on a normal pace. Sometimes in a La Nina environment they get wetter actually later in the growing season as well. They stay wet. We've had instances like that. I don't think that total overall production looks like it's at a major issue at this point. As far as U.S. production though for next year, there's a lot of correlation between a very dry September and October to the next year having drought implications. And so, I do know there has been some fairly prominent people that have talked about '25 being a drought year. As of right now there is a decent correlation based upon the weather that we just exited. I know you and I just talked before we went on the show and we had four and a half inches of rain around home over a four or five day period. We were so dry that we didn't have a tile running. And so, everyone was dry. The Drought Monitor will show you that. But by all means, this rain was very much welcome that we had over the last week to ten days. Fortunately, river levels came up just a little bit and we've got hope that that continues to happen.

[Yeager] They didn't lose and that's actually a win considering what it has been. Livestock, live cattle, ended a six-day losing streak but it's still down for the week. I asked one of your guys a couple of weeks ago, I asked Ross, have we seen the peak? What do you think?

[Bennett] I was on I believe around a month ago and I did not feel like I wanted to be bullish in the high 180s. I still feel this way, the funds had a long position in cattle for quite some time. It kept sticking around hoping maybe are we going to push back towards these all-time highs? Cattle on feed reports have been a little underwhelming. They haven't been quite as bullish as what I thought they might be. You've got to ask yourself though, why are people still, for instance, putting heifers in a feedlot? Well, you know what, the Drought Monitor will show you that the pastures just simply aren't there. And so, you would think, well maybe this cattle market could go on higher, right? I just think the funds have gotten tired of pushing that envelope. Boxed beef dropped like a rock here towards the end of the week. At this stage of the game, I can't be real bullish in here and I would say the same thing I said last time, if I am a guy or a gal with a lot of risk, I've got to at least have a floor in here. This cattle market is still historically very, very strong. But I wouldn't just sit here and do nothing.

[Yeager] You feel the same way about feeders too? Do something, not nothing?

[Bennett] Yeah, here's the thing with feeders. It's still hard to get feeders bought. I just saw in the last week some 400 pounders bring $4 a pound, Paul. That's just absolutely insane. I know that the board doesn't reflect that. But at the same time, if I had a lot of risk there, I think I would be moving on it. If I was trying to decide, I'm going to move on and get these feeders out of my possession.

[Yeager] And I'm going to move on from our discussion. We'll see you in Plus in a minute. Thank you, Matt.

[Bennett] Absolutely. Thank you.

[Yeager] That's Matthew Bennett. We're 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. Our latest offering gives you a behind the scenes look at this program and insight on what will be in our next program in our Market Insider newsletter. Subscribe today at markettomarket.org. Next week, the competition for bragging rights in the world of the giant pumpkin. Thank you so much for watching. 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)

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.