Market to Market - December 13, 2024

Coming up on Market to Market - Keeping a close eye on HPAI. From the Farm Crisis to Farm Bills -- a retrospective of the second decade of our program.

And commodity market analysis with Naomi Blohm, 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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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, December 13, 2024 edition of Market to Market, the Weekly Journal of Rural America.

Hello. I’m Brooke Kohlsdorf. Paul Yeager is away this week. 

Even though inflation has tumbled from its peak of 9.1 percent just two years ago, prices for staple foods like milk and effs are still under pressure.

The producer price index - a track of inflation before products reach consumers - rose 4 tenths of one percent last month.

Without the more volatile food and energy sector included, core PPI rose only two tenths of one percent.

The consumer price index climbed 3 tenths of one percent, the biggest increase in 8 months.

The core rate, which drops the same two factors as the PPI, rose the same amount.

The H5N1 Avian flu virus has been percolating in poultry herds for years, and this year it jumped to dairy cattle in dozens of states. The virus made news on multiple fronts this week.

USDA has stated that properly prepared poultry is safe to eat and pasteurized milk is safe to drink. However, in an effort to keep an eye on the spread of the virus among both species, the agency is stepping up its testing efforts.

Peter Tubbs has a round-up.

This week, the H5N1 Avian Flu virus continued to disrupt agriculture across the country.

The virus was detected in three different poultry flocks in northwest Iowa.  Two flocks of layers had confirmed infections, and a commercial flock of turkeys was also found to have been infected. Over 4 million birds were destroyed.

The U.S. Department of Agriculture announced the beginning of a milk testing program nationally to determine how widespread Avian Flu has become in the country’s dairy herd. The testing of bulk milk tanks on farms will begin in six states, but will eventually be national. While the USDA tracks confirmed infections, it does not report the individual farms or even the counties where infections are found.

Part of the concern about the H5N1 virus is the potential for it to mutate into a variant that can easily spread to humans. Scientists at Scripps Research reported this week that a key change to the protein structure on the surface of the virus would allow it to easily infect human respiratory systems.

There have been 58 confirmed cases of avian flu in humans in the United States this year, mostly among farmworkers or poultry cullers. There have been no fatalities.

For Market to Market, I’m Peter Tubbs

We are celebrating our 50th season of bringing you the news that affects those of us who live and work in rural America. In our second installment of a look back at the five decades we have been on the air, begins at the height of the biggest story that agriculture has faced in the last two centuries.

David Miller takes us on a journey through the second decade of our news, features and market analysis in our Cover Story.

The Farm Crisis was bearing down on rural America as 1985 unfolded. High interest rates, low commodity prices, mounting debt and the fallout from the 1980 grain embargo continued to put pressure on farmers.

Sen. Tom Daschle, D-South Dakota (1978-2005) “That our national security depends just as much on how many farmers we’ve got as how many missiles we’ve got.”

Sid Sprecher, the second executive producer of the program, was concerned the 1970s farm boom would lead to a collapse in the heartland.

Sid Sprecher: Executive Producer 1984 - 2003: “It’s kind of like one farmer described it as ‘you're like you're spinning a bucket of water and you're going faster and faster and you know you don't know how you're going to put the bucket down’ and then the bucket came down and everybody got wet.”

Thousands of foreclosures brought several century old farming legacies to an end. There were farmers who just closed the door and walked away, others committed suicide. Land prices plummeted, by some estimates up to 60 percent. One farmer murdered his banker.

Sara Frasher, a producer on the program, was one of several reporters on the Market to Market team that followed the 80s Farm Crisis.

Sara Frasher, Producer 1977-1992: I always felt a profound obligation to be accurate. And I say that word specifically because I don’t think there is anything such as truth. You give the facts and you let people figure out how they feel about them, come to their own truths.”

Rock and roll musicians joined country music artists to raise money to help farmers retire their debt as part of the first Farm Aid concert. (clip from 1051)

By 1986, Chapter 12 was established in the bankruptcy code. It basically allowed farmers to keep their land, continue farming and pay off their debts. But the struggle was far from over. (1116)

Talk show host Phil Donahue, the nation’s top talk show host of the time, touched on the topic as network media began to cover more of the crisis in rural America. (1120)

Unidentified person: “I don’t want your damn charity, I don’t want your subsidies, I want a price in the market.”

As 1987 rolled around we followed problems with the Immigration and Naturalization Service, now known as Immigration and Customs Enforcement, as they sorted out how to enforce the Immigration Reform Act of 1986. Confusion over the interpretation of the new law was preventing agricultural workers from crossing the border to pick fruit and vegetable crops that were in danger of rotting in the field.

Donna Nicholson Svendsen was part of the team in the 1980s covering the countryside from Maine to California.

Donna -Donna Svendsen (Producer/Director, 1983-1989) We were on the vanguard, I thought of, of a lot of stories in particular you know the agricultural policy, agricultural lifestyle stories… we were doing stories that at the time were, nobody else was really doing and we were covering them at a very deep level.

Along with covering the Federation of Southern Cooperatives, Svendsen reported on new cloning technology for the cattle industry.

The drought of 1988 was leaning hard on farmers with potential yield losses and the associated grain terminal backups caused by low river levels 1341

We took a look at the fledgling online cattle auction business as we showed how bidders could be half a world away and look over what was up for sale from the comfort of their living rooms. 1402

Trade is something we have covered throughout our history. In this 1988 episode, we reported on the expansion of the General Agreement on Tariffs and Trade that now included agriculture. 1412

Ringing in 1989 saw parts of rural America being rolled over by an expanding drought. Kansas wheat farmers were particularly hard hit as parts of the region received only 50 percent of the average annual rainfall.

One of our first interviews with Temple Grandin took place in 1990. We were able to find out a little more behind Grandin’s compassion for animals that motivated her to design better ways to move them through feedlots and packing plants. 1540

Temple Grandin, Livestock Handling Consultant: "I think it's very, very important that we treat them humanely.  You know, we're going to shorten their life a bit, but while they're here on this earth, they want to give them a good life.”

As the year closed, we continued with our exploration of how small communities were working to solve the perpetual problem of bringing doctors to rural America.

In 1991, after nearly 16 years in the host chair, Chet Randolph retired. His replacement was veteran farm reporter Mark Pearson. Over the preceding 12-months, Pearson had been appearing frequently. At Chet’s request, the switch was made quietly from one host to another without any fanfare.

We explored the concept of urban sprawl with a look at outlet malls being planted on farmland.

After reporting on the 1989 launch of the advertising campaign “Pork, the other white meat” we took time in 1992 to see if the money being sent to the National Pork Producers Council from the Pork Check-off was meeting the needs of producers. 1438 & 1724

As 1993 dawned, we were looking at the controversial use of BST, a growth hormone used to increase the output of dairy cattle. 1831

It was also the year of devastating Midwestern floods that paralyzed Des Moines, the capital city of Iowa. The major metropolitan area received a knockout blow when its water treatment plant was covered by flood waters. 1840.

In 1994, we took a closer look at who had rights to the scarce resource of water in California.

 A North Carolina hog lagoon ruptured in June of 1995 sending 25 million gallons of hog manure into tributaries of the nearby New River. The resulting fish kill was one of the opening shots in what became a long fight between North Carolina hog producers and a large number of the Tar Heel state’s citizens. 2041 and 2042

By August, Congress was debating the 1995 Farm Bill. What was dubbed the Freedom to Farm Law called for the end to farm subsidy programs by 2002. Critics of the landmark legislation dubbed it Freedom to Fail. Wrangling over the bill delayed its passage until 1996.

And we continued to analyze the markets with the likes of Walt Hackney, Doug Jackson and Virgil Robinson. John Roach was often seen across the second decade of the program. This was also the decade where Sue Martin began her tenure as the first woman to join the analysis crew.

For Market to Market, I’m David Miller.

Next, the Market to Market report.

Tuesday's report opened some upside potential for corn, but the lack of bullish news pulled prices lower, while soybean prices lacked a reason to rally. For the week, the nearby wheat contract lost a nickel and the March corn contract added 2 cents. The range in the soy complex remains tight as soy oil continues to be the leader. The January soybean contract fell 6 cents while January meal dropped $1.20 per ton. March cotton contracted 83 cents per hundredweight. Over in the dairy parlor, January Class Three milk futures added 67 cents. The livestock market was mixed. February cattle put on $5.85. January feeders gained $1.82. And the February lean hog contract cut $1.73. In the currency markets, the US dollar index went up 85 ticks. January crude oil improved $4.13 cents per barrel. COMEX gold added $18 per ounce. And the Goldman Sachs Commodity Index moved more than 15 points higher to settle at 546.30.

[Kohlsdorf] Joining us now is regular Market Analyst Naomi Blohm. Hi, Naomi, good to see you.

[Blohm] Hi. Thank you for having me.

[Kohlsdorf] Well, there's been no shortage of stories this week impacting the commodity markets. We've had the WASDE report is out, a lot of geopolitical news and now of course lots of speculation on trade wars. Where is there hope for wheat farmers, wheat producers right now?

[Blohm] Yeah, that's going to have to come from some kind of a production issue somewhere around the world. So, wheat prices actually the story continues to be supportive on the global front because our global ending stocks continue to trend a little bit lower, they're at kind of the lowest levels for a decade. So, there is a friendly story that wants to potentially erupt because the demand has been strong. But there's always just enough wheat right now being grown around the world that it's kind of limiting that marketplace. We've got Chicago, Kansas City and Minneapolis wheat futures that are just stuck in 25 cent trading ranges. But we continue to keep an eye also on the war with Russia and Ukraine. Any flareups there could make that wheat market move higher. But I think it's going to have to come from a production issue in order to really spur prices higher in the short-term.

[Kohlsdorf] So, that was going to be my question about the snow in Russia and some restrictions potentially on their exports. Would that be enough to do anything?

[Blohm] Well, it's enough just to keep the pot percolating, so to speak. But it's not enough yet to get it to really go higher. So, if Russia this winter doesn't get the snow cover or if they just don't get that precipitation, because their crop is not great as they are in dormancy season here, but they are going to really need to see something further to spur that marketplace higher. And the funds have been comfortably kind of just sitting at short levels, about 70,000, 80,000 contracts. And they aren't too excited right now to exit those short positions and buy them back. It really feels like a big wait and see attitude in the complex right now.

[Kohlsdorf] The WASDE report out on Tuesday. So, usually this is a quiet report but there was a lot of selling after that came out. Where are corn prices headed from here?

[Blohm] Yeah, so the corn market after that WASDE report pushed a little higher initially. The report was supportive in the standpoint they cut ending stocks a little bit more than what trade was anticipating because they raised the demand for exports, they raised the demand for corn use for ethanol. But the market went right up to the $4.50 price area on the March contract and hit a brick wall. That is a big technical resistance area, the 200-day moving average and then also just a psychological resistance area as well. So, prices fell down lower from that. Even though the report was supportive, $4.50 corn and 1.73 billion bushel carryout is not really a reason for the marketplace to have to scream higher from here. So, a little bit of a price pullback, might see the market pull back maybe another dime. We're still in a short-term uptrend actually. But we don't have any big new news to get that market to get above $4.50 for the nearby contracts. So, I think maybe for the rest of this year we're going to start to see corn nestle back into a trading range. But because of the fundamentals right now it is well supported. And any time it breaks lower, maybe down to that $4.25 or $4.30 area on the March contract, it's a great place for end users to get more aggressive on what their needs are.

[Kohlsdorf] Our next question comes from social media. So, it's about the USDA and corn. So, Gary in Wisconsin is wondering with corn prices rising, could it be a sign that the USDA yield might be a little too high?

[Blohm] Well, that's a good question. So, yes, corn prices have been rising, the basis levels have been strong. The USDA in November did a pretty aggressive yield cut. So now the question would be will they do any more of a yield cut in January? I'm not sure is the answer. But it does make you wonder as to maybe is demand stronger than the USDA is even saying? Or is that yield number going to come down a little bit more? And that's something that we'll have to wait for, for the January report in about three or four weeks.

[Kohlsdorf] Okay, so CONAB came out with some fresh news today about production of soybeans. They're forecasting a big crop, maybe even a crop that they've never seen before. So, are they -- with that much supply that we know is around the world, what is going to happen? Or what is going to help I should say?

[Blohm] Yeah, so the CONAB numbers, the Brazil government equivalent of the USDA, they still had big numbers out there for production. Their production number is just a little bit smaller than USDA, but that is actually kind of normal. But what that is going to be is a large crop. So, unless the weather in Brazil suddenly turns to hot and dry the marketplace is really viewing it as sufficient amounts of soybeans for the United States and for the world. Global ending stocks still at near record levels. And it's going to be hard for that soybean market to really rally from here unless the weather turns hot and dry in Brazil or maybe we get some good biofuel numbers and information from this administration before the exit and before the new administration comes into place. And I think that is also why soybean prices have been in a very stagnant 25 cent trading range for three weeks now and that's kind of not normal for soybeans. But something really to be mindful of for producers is that if these support levels fail on nearby contracts, so March soybeans have $9.80 price support, the November contract has $10 price support, if those support levels fail from a technical perspective there is a head and shoulders formation forming and it actually points to a dollar downside. So, that's really something to be mindful of. So, we're hoping we see some friendly news to happen for soybeans, but usually as we flip the calendar to January, prices have a tendency to actually fall a little bit lower anyway. And I think also end users and farmers need to be aware of what the new administration might bring in terms of tariffs. There's still questions surrounding that. But I think in general it just looks like it's a market that is ready to tip over. Supplies are sufficient.

[Kohlsdorf] Could some of the friendly news come from China deciding to buy from us? Or are we still too expensive for them?

[Blohm] So, actually we're quite competitive yet from the global scene and China did a great amount of buying from us this fall. That is when they normally buy from us. The question would be -- now that would be the surprising factor if China comes to the table quick in terms of tariff and trade agreements. President Trump extended an invitation to President Xi to come to his inauguration in Washington, D.C., so there's some olive branches being passed around and that would take the market by surprise. What if the U.S. and China suddenly got along and the trade deal really came together quickly and maybe they bought more beans? That would be a bullish surprise. We'll see. But that would be a neat story to have happen.

[Kohlsdorf] All right, so let's talk about dairy. You are our dairy expert. So, prices were going down since October but they have recently had a rally. What is behind that?

[Blohm] Yeah, so when prices started to go lower it was because milk production numbers were increasing and also more cows being milked. So, the milk numbers were increasing as well as far as the herd goes. So, that is what made milk prices plunge lower. But recently we've had some really good demand news come to play with global dairy trade auction really going well, cheese exports are phenomenal and actually cheese inventories are coming down. So that has been enough to give that market about a $2 price spur in the last two weeks. So that has been really exciting. So, things that we're going to be watching into the end of the year, we'll have another milk production report coming up and then we have to just keep an eye on all of that export front and the news there and how tariffs may or may not affect the market as well.

[Kohlsdorf] Okay, the feeder market continues to be red hot right now. So, it has kind of been crazy territory for months now. Have we seen the highs in that market?

[Blohm] Well, that's what we're all wondering. So, cash feeder marketplace is definitely, to your point, red hot. The demand is there. And what really pushed the cattle market higher this week was news from the USDA saying that they thought that the border might be closed for a while to our imports of Mexican feeder cattle. And so that is a market mover to support prices. And we saw a nice price rally earlier in the week because of that because then that would be limiting on production numbers in general. But then on Friday, Reuters News came out and said that they think that the border is going to be opening before Christmas and that the USDA is trying to set up holding pens at the border that those animals can be looked over for that virus and issue before they come back into the country. So, now if that happens then that recent price rally that we've had this week is going to dissipate and prices might ease a little lower. And keep in mind, the funds are near record long in the cattle complex. So, if they have a reason to see prices go lower, they might sell off those long contracts and push prices lower into the end of the year and they could show a really nice profit on the book for the end of the month and the end of the year as well.

[Kohlsdorf] With live cattle, are packers deciding to hold off on buying until after the holidays?

[Blohm] Well, that's kind of something that we're watching as well. We saw cash markets working a little bit higher this week. But the question is, is holiday going to be met or not? And I think there's still a lot of tug of war in terms of prices right now between waiting to see where demand is, waiting to understand what is going to be happening with this border issue. So, that I think is why the market has been a little bit cautious. We still are near the summer high prices. But we're very cautious about having a reason to go blasting through them. And, again, if we can get that border open, that is going to push prices lower. So, I'm kind of still of the mindset to be defensive because there is a point too where the consumer will balk at higher values, especially as credit card bills become due after the holidays.

[Kohlsdorf] That's right. We're right there on the edge, huh?

[Blohm] That's right.

[Kohlsdorf] Okay. So, what about the hog market? It has been moving up. What will make the market go higher?

[Blohm] Yeah, so from here we saw that the USDA is thinking that 2025 production numbers are going to be down a little bit. That has been supportive. But they're also talking about importing potentially more hogs. So, hog prices, like the cattle complex, up near some lofty high prices and the funds are long in that hog complex too. So, for prices to go higher from here you're going to need to see more signs of demand or, we don't wish it, what if that PRRS virus came back in for the hog complex or some kind of thing like that over the winter? That would make the market price go higher. So far, no signs of any of that. But it would have to be a production issue to make prices go higher or signs of new demand. Otherwise, it does look like the hog market might be taking a little bit of a breath. We saw some price consolidation here near these recent highs and a little bit of profit taking starting to happen too. So, the next couple of weeks as we finish out the year might bring some volatility to the hog complex.

[Kohlsdorf] Okay. To be seen. So, we've got about 30 seconds left. Key interest rates could be lowered next week. Has that already been kind of factored into the market, the trade? Have they already --

[Blohm] Yeah, they are expecting a quarter point interest rate cut and I think that definitely has been factored into the marketplace. So, we'll be wanting to see what the Fed has for commentary along with that because then we'll start to be thinking what is going to be happening for 2025 and then of course what is the new administration going to be bringing as well?

[Kohlsdorf] Naomi, it has been great having you on the show today.

[Blohm] Thanks for having me.

[Kohlsdorf] 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. We have also a perfect holiday gift for you. It's an email from Market to Market. Each Monday the Market Insider newsletter is sent out with behind the scenes information on this program, how we put stories together and exclusive details about our 50th season celebrations. So, sign up now at markettomarket.org. Next week, we take a look at two people who are saving seeds to help feed the world. Thanks so much for watching and 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.