Market to Market - January 17, 2025

 

Paul Yeager: Coming up on Market to Market - 

Coming up on Market to Market -

A New Year brings new proposals for laws aimed at rural America. 

A professor hunts for unintended changes from genetic editing.

And commodity market analysis with John Roach, next. 

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“This is the Friday, January 17, 2025 edition of Market to Market - the Weekly Journal of Rural America.”

Hello. I’m Paul Yeager.  

Inflation is the New Year’s houseguest that doesn’t seem to want to leave the economic gathering.

The Labor Department reported this week another 0.2 percent was added to the Producer Price Index, the measure of costs before it reaches consumers. Higher energy demand led the report. 

The annual PPI added 3.3 percent 

The Consumer Price Index was sent higher by prices for gas, eggs and used cars. But overall, the pressure on prices is easing even with a 0.4 percent monthly gain. 

The year-over-year CPI added 2.9 percent. 

The latest retail sales report revealed consumers still seem willing and able to go shopping as the figure for December added 0.4 percent.

A new House and Senate are at work and in just a few days, hours actually, Donald Trump will return to the White House. Across the country, new legislation is being introduced that could impact many aspects of rural America. 

During Senate confirmation hearings Thursday, Treasury nominee Scott Bessent said tariffs would be used with three purposes in mind, addressing unfair practices, raising revenue and a different way of replacing economic sanctions.

 Peter Tubbs looks at some of those proposals. 

Peter Tubbs: Increases in tariffs on products imported from Canada, Mexico and China could be inflationary for the American consumer. 

Guillermo Garcia Sanchez, Economist, Texas A&M: “Canada and Mexico are the biggest trading partners with the United States. Together, they represent close to 30 percent of all trade done by the United States. In the case, for example, of Mexico, close to 23 percent of agricultural products imported by the United States come from Mexico. In the case of Canada for example, 50 percent of energy-related products that the United States imports, they come from Canada.

The volume of trade between the United States and its neighbors means small changes in trade policy could have outsized effects on the economies of all three countries. 

Guillermo Garcia Sanchez, Economist, Texas A&M: “So it's really not a Mexican car, it's a car composed by different products that come from Canada, the United States and Mexico, and that get assembled in Mexico and then re-imported into the United States. So we're not talking about products that are either Mexican, American or Canadian. Really, the trade between the three countries is integrated. We have different supply chains that feed each other and make us more competitive against the world.”

The integration of supply chains across borders is often invisible to consumers, who would pay the bulk of the tariffs proposed by the incoming Trump Administration.

Guillermo Garcia Sanchez, Economist, Texas A&M: “So any tariffs that are imposed are going to be passed on in some way or another into the consumers because tariffs ultimately are put on the importer, not on the exporter, so the companies that are going to be affected enormously are the ones who are importing.”

A bill was introduced this week into the Nebraska legislature to ban lab-grown meat from being produced or sold in the state. 

The bill comes five months after Nebraska Governor Jim Pillen, believed to be the largest hog producer in the state, signed an Executive Order prohibiting state agencies from procuring lab-grown or other meat alternatives. 

The Nebraska Department of Agriculture also plans to require distinct labeling of alternate meat products, and require that alternate meat products be sold in areas separate from conventional meat products. 

The Executive Order went into effect in August of 2024. 

Issues of pipelines, carbon sequestration, and farmland ownership have also been introduced in several states for consideration this session.

For Market to Market, I’m Peter Tubbs.

Paul Yeager: If you say ‘Dolly’ in a word association exercise with someone in agriculture and science their likely response is ‘sheep.’

Dolly was a cloned mammal and she caught the attention of a future scientist who is now working to ensure that gene editing stays on target. 

Colleen Bradford Krantz has our Cover Story.

Colleen Bradford Krantz: The pig cells multiplying in this embryo contain a carefully introduced genetic alteration. By the time this story airs, this University of Missouri swine embryo will have become a piglet in the school’s growing herd of genetically edited pigs.

This herd’s original purposes varied from growing organs for human transplant to studying transmission of diseases in humans and livestock. The herd’s existence helped Mizzou researcher Kiho Lee secure a $3 million grant from the National Institutes of Health. Lee’s study, which also involves USDA research scientists, is designed to pinpoint any unintended consequences of genetic editing. His work will be shared with other geneticists to help them do the same.

Kiho Lee, University of Missouri: “I thought: We need to invest on developing systems to be able to quickly and accurately identify these unintended genetic modifications and develop a strategy to reduce these side effects if any.”

Although he spent much of his life in the U.S., Lee was a high school student in South Korea when a news item about the world’s first mammal cloned from an adult cell – a sheep in Scotland named Dolly - caught his attention.

Kiho Lee, University of Missouri: “I really didn't know what to do as a career or even picking a major in a university. But then that year, Dolly the sheep was born and that got me really intrigued. And I thought as a teenager I wanted to do something unique and special.”

His dad wanted him to become a lawyer, but Lee stuck with his plan to find his way into livestock genetics.

Kiho Lee, University of Missouri: “And so he was not happy that I went into animal science. Because as a businessman, he always thought, I'm just chasing pigs. But then now that he sees more papers’ news on a xenotransplantation and how we can use pig organs to help a patient, he's very proud of me. And whenever he sees the articles, he sends me a text.”

Lately, Lee is focused on improving detection of and reducing any off-targeting events, which refers to those unintended consequences of using modern technology to knock out and replace a portion of DNA.

Kiho Lee, University of Missouri: We may not want to talk about these side effects, but then, as a scientist, we also want to be accurate. So if we, say, introduce a targeted modification, we want that statement to be true. So my interest was to really figure out, okay, so if there is a side effect, what is the side effect? That’s not something we want to hide about. We want to further study that and to develop a system that can minimize or even reduce these side effects.”

The University of Missouri’s initial study involved 15 of their genetically altered pigs. Many of the pigs had no off-target consequences, others showed naturally occurring genetic changes, but five had off-target genetic modifications associated with the editing. While the off-target events didn’t appear to create any problems for the pigs, Lee says it’s always best to reduce or eliminate the risk entirely.

Kiho Lee, University of Missouri: “So these off-targeting events, many scientists tend to neglect or ignore because, in theory, the type of modifications we introduce won’t impact the phenotype… However, as a scientist, we really wanted to see then: what is the level, what is the frequency of these side effects? And then how do we mitigate it?”

While the FDA has approved a couple genetically modified animals for human consumption, including salmon, monitoring of off-target events is also important as the nation moves toward the use of genetic modification in human medicine. In a historic move in December 2023, the FDA for the first time, approved a genome-editing therapy for treating humans, in this case those with sickle cell disease. Sickle cell disease is an inherited and debilitating blood disorder affected 100,000 in the U.S., particularly African Americans. 

The therapy, proposed to the FDA by two Massachusetts companies, will be used to modify the patients’ blood stem cells using genome editing technology called CRISPR/Cas9, the same technology used by the University of Missouri with their genetically edited pigs.

Lee is also working on another study looking at Alzheimer’s in pigs, with hopes of finding a genetic answer for humans.

University of Missouri researchers will also continue to work on genetic solutions for livestock illnesses like porcine reproductive and respiratory syndrome, or PRSS, a viral disease in hogs. Researchers there have already made progress toward building hogs’ resistance to the disease.

Kiho Lee, University of Missouri: “If we can enhance these animals, make sure that they don't get sick and it's related to animal welfare, if they don't have to suffer from these deadly viruses and it will really help producers to protect their investment. And if I could help on achieving those goals, that will be my goal.”

For Market to Market, I’m Colleen Bradford Krantz.

[Announcer] Next the Market to Market report.

Yeager: The post-USDA trading sessions following a tighter fundamental picture were higher and extended after a phone call between the president-elect and president Xi. 

For the week …

The nearby wheat contract improved 8 cents and the March corn contract added 14 cents. 

The attention of the trade shifted back to South America where Argentina and Brazil faced different weather patterns. 

The March soybean contract gained 9 cents while March meal dropped $1.10 per ton.

March cotton expanded 60 cents per hundredweight. 

Over in the dairy parlor, February Class Three milk futures declined 4 cents.

The livestock market was lower. February cattle dropped $2.03. March feeders cut $1.35 and the February lean hog contract declined $1.42. 

In the currency markets, the US dollar index subtracted 40 ticks. 

February crude oil found $2.01 per barrel. 

COMEX gold expanded $27.20 per ounce, and the Goldman Sachs Commodity Index moved higher by more than 21 points to settle at 576.95.

Joining us now is senior market analyst, John Roach.  Welcome, John.

John Roach: Thanks, Paul. Nice to be here.

Paul Yeager: Good to see you. I look at the wheat market and I'm sure everybody else does. And it's become so dependent on Russia. What just happens if Russia stops exporting wheat and putting wheat on the market in the world? Does it? Well it respond? Are we to that point yet?

John Roach: That's due to happen actually, because Russia is due to cease their exports here for a little bit. And what they've done up to this point is they've been very aggressive sellers, same way with Ukraine. and we've just seen a lot of wheat get moved into the world, and now it's about to shut off. And so I think wheat will have some recovery. And the commodity funds are still major shorts as of a week ago. I don't have today's report, but as of a week ago, they were short of 150,000 contracts across the three wheat contracts. in a market where everything else is going up and, and we're seeing inflation, and you saw by the index, the commodity index, were inflating. And so I think that the wheat market is getting ready for, for a run up here, but we've got to get up above the trend lines in order to stimulate that fund buying.

Paul Yeager: What the magic question is, what's that timeline? So if I'm a wheat producer, how long do I need to sit here on the sidelines?

John Roach: we frequently will see a move up during this time of the year coming into February. We look for market peaks in February most years.

Paul Yeager: Okay, so we're close I think.

John Roach: So I think we think the bottoming process here, is complete. And now I think we get ready to have a run to the upside.

Paul Yeager: As we turn our attention to corn. Last week, that was the big story kind of out of the report, phones ringing off the hook on Friday into Monday and Tuesday. And then we kind of lost a little bit of steam. Was that about how you expected that to play out, given what the report was last week?

John Roach: Actually, the corn market has performed better than I thought it would. We've moved into a long corn, prior to the report coming out, and then the market surged after the report and, and we added to sales. We think selling into this rally is the right thing to do. The fundamentals have tightened. That's what the USDA told us. but what we've done so far since harvest is we've actually maybe since mid-summer, as we've seen a big advance on the amount of buying that's happened in the, in the grain market, for the cash commodity. And we've seen a big advance in the buying from the commodity funds, commodity funds are now up into, massive long position markets still trending higher. So they're still going to be buyers. but it gets to a certain point when they sort of run out of ammunition to put into that market, and we're not very far away from that. So we've really had a double up of buying both the user and the in the spec fund. And if you remember the last time I was on, in the fall, we talked about look for the users to buy in a bigger away because they were starting with very bare cupboards.

Paul Yeager: Right.

John Roach: And, and so they've had to go from a bare cupboard to stockpiling, so we've really put a lot of demand into the corn market, and we think it makes sense for a farmer to be selling some corn out of the bin. And we think it makes sense to sell a little bit of new crop corn that you're going to harvest next fall.

Paul Yeager: The old crop story was kind of one that developed midweek. And you're kind of it sounds like you're saying this is a great opportunity everybody. Great opportunity to sell.

John Roach: We think that. Yeah.

Paul Yeager: And then the new crop side. How heavy are you thinking that this needs to lean into some selling right now.

John Roach: Not very heavy 5 to 10% conservative yields. the bushels that you're going to need to take the town, work on those bushels.

Paul Yeager: Do you see the corn market doing, or facing some of those that the wheat always faces the dollar pressure? Do you see any dollar pressure on the corn market right now?

John Roach: Well, at, some, but, but we're kind of the only market in town, right now in corn. So if you want to buy corn in the world, you kind of have to come to America's price.

Paul Yeager: All right. Do you also get the sense of, ten, 5% right where you were last week and said, after the report, it becomes national. We look to the acres story for the next few days. Where do you see acres right now in ‘25. Do you see corn expanding, declining, holding pat.

John Roach: We're going to increase the corn acres this upcoming year, and we're going to decrease them because the job of the marketplace right now is to get farmers to reduce their soybean acres because of the big crop that's occurring down in South America.

Paul Yeager: Phone calls. That was the big story in the soybean market Friday.

John Roach: Well, it's a hope. You know, what we've lived with here for a while is a fear that when the president comes in, that we're going to put some sort of, of a tariff on China and they'll retaliate by not buying our crops and, and now we're kind of feeling like, well, maybe I mean, the market is feeling like maybe, maybe there will be some other kind of deal here and that won't happen. We're all guessing, we don't know what, what the extent of those phone calls are, of course. but when you have a market that's trending higher, you have funds that are continuing to buy and farmers made around of sales. And the interesting thing about farmer sales is when a farmer makes a sale and then the market moves up afterwards, they hesitate because it's like, okay, this is maybe got more power. And I covered my bills and I don't like the price. And so and so farmer sales, dry up in this kind of environment. And that allows the buyers to carry the market forward.

Paul Yeager: Would you like to read my text messages from farmers this week who were telling me they sold and then the market went higher and they got frustrated, but they did what I think they're told if it rallies to a certain point, you got a sell and it keeps continuing. So if I'm hesitant to pull that trigger, why should I not be hesitant or be make just sell and don't wait?

John Roach: Well, I think you have to sell into strength. And I wouldn't sell all my bushels. I mean, I think you have to keep some powder dry for what might happen in the spring of the year. You know, we may have problems in this country, but what you can't do is fail to reward a rallying market when we have plentiful supplies. And so, take advantage and make some sales. the market pulls back. You can come reown some bushels if you want to participate further, but you've got to pay bills and you don't want to wait and have to pay a bill when the market's in a valley.

Paul Yeager: Speaking of turning our attention, we talked about, what could go on with China, what's going on in Brazil, what's going on in Argentina, and what is the impact here for our soybean market?

John Roach: Well, the crop they're starting to harvest in Brazil. And the crops, a pretty good crop. it's maybe not quite as big as what it looked like it was going to be. But it's still going to be a very big crop, and we're going to have plentiful supplies. And when we look at the ending stocks forecast for this year, it's smaller than what we had, you know, two weeks ago before the USDA report. But it's still big. And it's going to take a weather problem somewhere, in order to get us out of this burdensome supply situation. Now, that weather problem could occur still in Argentina, but Brazil is kind of getting to the point where even when once you start harvest, there's it takes a harvest is a long period there. And so there are some beans that are still can be impacted. But, every week we go along there crop is more made and harvested and competing with us in the world. And they will take over the marketplace. And so maybe Argentina weather could, could give us a tightening of supply or we could have a weather problem, the United States and that certainly could happen, but it won't happen until maybe April. So. So we've got a long period of time here where we're in harvest of the biggest soybean crop in the world.

Paul Yeager: Therefore not controlling the narrative like we have been. That's correct in the past. All right. I want to take a question, Phil, in Ontario, question on X. He's saying November 25th beans and December 25th corn futures aren't showing me much. Well, mid-June for corn in August or will mid June for corn and August rainfall for soybeans still give us our best new crop pricing opportunities?

Paul Yeager: Or is right now good?

John Roach: Well, right now is a good time to get started. Again, we're talking maybe five, maybe 10%. We're not going after that market heavily, but we're starting because we're dealing with a weather problem. We're dealing with a time when we're relatively tight supplies, when the United States is the only market because Brazil's crop wasn't quite ready. And so we reward that market. There's two growing seasons in the world. One is now and another one is as we get into May-June in the northern hemisphere. So we like to reward a rally when we get a sell signal in the midst of the South American growing season, and then average those prices with making sales during our growing season when we're in the midst of a weather worry period.

Paul Yeager: Speaking of rewarding a market, is that what cattle producers did this week on live cattle?

John Roach: Well, we certainly have seen high prices in the cattle market and, and we've seen cattle move. The cattle story is still a very positive story, though. There's not really a bad part of the cattle story right now. What we worry about is that black swan kind of event or something that comes along that changes everybody's attitude. But right now, the attitudes are very, very positive. And the only thing that we can see to do is that you want to make sure you pay attention to your insurance program, protect some of the equity that you have in those cattle for some of the profits that you have in the cattle. because we have seen those disappear before.

Paul Yeager: And that's also kind of the story. And feeder cattle, too. It sounds like, the advice that we're hearing is let's put some defense in place, if you haven't already.

John Roach: Well, exactly. We pay attention to the cattle crush, which says, what? What's, the opportunity to buy feeder cattle, buy, feed and sell fats? How does that look compared to ten years worth of history? And between now and June, it's a single digit. In other words, it's the it's the lowest 10% opportunity that we've had in the last ten years. So that just says that if you're putting feeder cattle in, you've got to be careful here because it's a risky situation. When I was here in October, it was in the 90 percentile buying feeder cattle and putting them on feed on paper. And now we're clear down in the single digits. So it's time to be very cautious if you're buying feeders or if you need to sell feeders, it's a pretty good time to take them to market.

Paul Yeager: Yeah, the feed. But feed needs the soy meal contract is kind of been kind of had a little whipsaw to it right now. Is that helpful to the hog producer?

John Roach: We have a buy signal right now in soybean meal. So we think it is time to be buying a meal and accumulate some feed cover 90 days worth or more. because again, we're down at bargain price levels. And so you have to take advantage of that.

Paul Yeager: What else do you see impacting, the hog market right now?

John Roach: Hog market is being helped by the cattle market and our and our, broiler numbers are the tonnage is down here since the beginning of the year. hog numbers are down compared to where they should be. so we're a little bit concerned about, the numbers of on of hogs coming to town. but with the beef market as strong as what it is and, and the broiler numbers down a little bit, the hog market's holding in here. Not too bad. we think that, you know, we're going to go back and forth in that market. Pork is a pretty cheap meat right now. in comparison.

Paul Yeager: Yeah. Protein in itself I mean the egg price again, that's still a story. And we'll talk about it a little bit in Market Plus, John.

John Roach: Thanks, Paul.

Paul Yeager: 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.

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Next week, making the farm transition to the next generation in a non-traditional way. 

Thank you so much for watching. Have a great week.

Announcer: Market to Market is a production of Iowa PBS, which is solely responsible for its content.

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: 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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