Market to Market - Aug. 6, 2021

Coming up on Market to Market -- Drought’s grip tightens in the Grain Belt. Building common ground on the infrastructure deal. Rural America struggles to find farm labor. And market analysis with Don Roose, next.

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What's the most complex industry on Earth? It's not genetics, or meteorology, or logistics. It's a business that involves them all. It's farming. Thank you, farmers, from Pioneer.  

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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, August 6 edition of Market to Market, the Weekly Journal of Rural America.

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Hello, I’m Paul Yeager.

Tuesday marks the one-year anniversary of the August Derecho. The straight-line windstorm smashed across 700-plus miles of the Midwest -- leaving $11 billion in damage and 4 deaths in its wake. Several thousand acres of cropland were torn up or destroyed.

There is still debate if global climate change is responsible for last year’s weather event. There is the belief that this year's massive fires and crippling drought are directly tied to the theory.

John Torpy reports.

A new wave of hot, dry weather moved into the Pacific Northwest this week, amplifying wildfires and worsening the ongoing drought.

Nat Sound Break

Fire fighters have contained 84 percent of the Bootleg fire - Oregon’s largest blaze this season. So far, more than 640 square miles of the Beaver State have been charred. Numerous lightning strikes over the past weekend kept fire crews busy trying to surround and extinguish 50 new, smaller wildfires.

In California, the three-week old Dixie Fire consumed over 24,000 acres in a single day due in part to strong winds and continued hot, dry weather. So far, California’s largest wildfire this season has burned just over 500 square miles. State officials note the dry conditions impacting agriculture and amplifying wildfires this summer have been compounded by drought conditions in California last fall and winter.

Sec. Karen Ross, California Department of Food and Agriculture: “All of our forecasting is built on history and what we anticipated for runoff from our snowpack and because of early high temperatures, early snowmelt and extremely dry soil conditions and all those watersheds, we had 700,000 acre feet of runoff that did not materialize.”

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The drought conditions plaguing the West are also expanding in the Midwest as areas in the Dakotas, Minnesota and Iowa moved into the extreme drought category, starving corn and soybeans of much needed moisture.

According to the latest USDA Crop Conditions Report, 62 percent of the nation’s corn crop is rated as good-to-excellent, 10 points behind this time last year. The 2021 soybean crop comes in at 60 percent good-to-excellent, down 13 points from a year ago. With just over half of South Dakota’s spring wheat harvest complete, only 10 percent of the nation’s wheat crop is rated as good-to-excellent, 63 points lower than last year.

Reid Christopherson, Executive Director of the South Dakota Wheat Commission: ” Spring crop is probably approaching three-fourths harvested, there was certainly a significant number of acres that were abandoned. So at this point in time, I hate to say it, but any rain now would only complicate the harvest and potentially reduce what quality of wheat is there.”

Since May, the Midwest has received below average rainfall amounts with much of the region registering up to 8 inches below normal.

For Market to Market, I’m John Torpy

United Airlines joined Tyson Foods in requiring all employees to be vaccinated. Tyson is offering a $200 incentive to the unvaccinated employees in their 120,000-strong workforce.

Finding employees is still proving to be a challenge. ---

H-R managers were busy in July adding 943,000 jobs. The higher than expected total pushed the unemployment rate down to 5.4 percent.

Many of those with new jobs used the increased disposable income to buy more imported goods which widened the trade gap to $75.7 billion. --

President Biden took a victory lap on the jobs report and is still pressing Congress to add more workers with his call for an infrastructure deal. But the cost of doing business may be a bridge too far.

Peter Tubbs has more.

The United States Senate began work on its version of a $1.2 trillion dollar infrastructure bill this week. 

The 2,700 page document covers proposed spending on the nation’s roads and bridges, ports and railroads, and also dollars targeting areas where access to the internet is limited or unavailable.

After clearing a procedural vote last week, negotiations on the details began. Debate over sources of funding to pay for the plan may be contentious.

The Congressional Budget Office estimates that the proposed spending would increase the Federal deficit by $256 billion over the next 10 years.

So far, the federal government has added an estimated $3 trillion to the deficit combating the COVID-19 pandemic and the resulting recession.

If the bill is approved by the Senate, it will have to find approval in the House before being sent to President Biden to be signed into law. The Senate begins its August recess on Monday, August 8th and the House members have already left for a three-week work period in their home districts.

For Market to Market, I’m Peter Tubbs.

An Iowa State University study, commissioned by the National Pork Producers, revealed that despite competitive wages and an expanding workforce, the U.S. pork industry continues to struggle to find labor.

The complaint of how to get and keep farm labor has been stymied by more than one labor law.

Colleen Bradford Krantz takes a closer look at the problem in our Cover Story.

Help-wanted signs are not unusual in the town of Hartington, but the outcry for willing workers has reached a more fevered pitch in recent months. The northeast Nebraska town of 1,500 isn’t alone.

Labor experts say restaurants, retail outlets, and companies with physically-demanding jobs, including those in agriculture, are struggling more than ever to fill openings in communities nationwide.

Miranda Becker, Economic Development Coordinator, Hartington, Nebraska: “People are having a hard time finding good employees. Not only someone to just fill the job, but actually showing up, you know, and doing good work and staying on for more than a few months.”

Complicating the situation is the fact that Nebraska, as of June, has the lowest unemployment rate in the country at 2.5 percent. Becker says many business owners end up working longer days to fill the gap left by a lack of extra help.

Miranda Becker, Economic Development Coordinator, Hartington, Nebraska: “They mostly try to deal with it on their own. People are pretty self-reliant and it’s hard for people to ask for help sometimes.”

Additionally, newly opened local business are competing for a limited number of employees who are able to take advantage of work-from-home jobs, many of which were not available before the COVID pandemic.

One labor expert says that some states have high unemployment rates persisting even with a large number of job openings.

Tom Bortnyk, Mas Labor, Virginia: “There was some statistic I saw just the other day where there is something like 10 million job openings in the U.S. And businesses….struggle to find people to come back to work... Americans have more options than ever. I’ve heard many people call it the ‘Great Resignation.’

With these new opportunities, and the addition of government COVID payments, it increased the difficulty of luring workers into more physically demanding farm jobs.

At Burbach’s Countryside Dairy, based just outside Hartington, Dean and Lisa Burbach have gotten into the habit of advertising job openings well in advance. They even convinced a retired farmer to work a few hours a day.

Dean Burbach, Burbach’s Countryside Dairy, Hartington, Nebraska: “The livestock is different because there’s no rest. You don’t get a break from them. If you take a break, they don’t survive. You have to be there feeding them every day, taking care of them to make sure they aren’t sick.”

Burbach says that because fewer Americans have grown up around livestock it has made hiring more of a challenge. Rather than searching locally, he now advertises nationally when looking for candidates.

Dean Burbach, Burbach’s Countryside Dairy, Hartington, Nebraska: “We will wind up with people who have zero agricultural experience. ‘Oh, I love animals,’ they say. It’s like ‘Well, that’s different than actually taking care of the animals.’… It generally does not work out well.”

The National Milk Producers Federation and others in the dairy industry have been asking Congress for years to revise the international workers’ visa program, known as H2A, so year-round agricultural operations, which include most livestock producers, can hire from outside the country. Most seasonal grain and produce farms can hire international workers for up to nine months of the year under the program. Other livestock industry groups, including the National Pork Producers Council, have joined dairy in the quest for H2A program revisions.

Tom Bortnyk, Mas Labor, Virginia: “We’ve seen an uptick in demand from poultry producers and poultry processors who are absolutely desperate for workers. And that’s a fairly recent trend…

 The use of H-2A workers has increased about 20 percent a year over the last decade, and Bortnyk doesn’t expect that to fall off anytime soon.

Tom Bortnyk, Mas Labor, Virginia: “If you are in the ag sector, depending on your industry, you very well could qualify for the program. And if you do, the program is a godsend.”

Steve Pederson, with Heinold Hog Markets of Dakota Dunes, South Dakota, has been in the hog business for nearly 45 years. Pederson says he’s never seen a labor situation like the one now facing the industry.

Steve Pederson, Heinold Hog Markets: “…at this point we’ve got opening at several of our facilities and we’ve used outside hiring agencies, but we just don’t get any applicant flow…We don’t have a playbook for how to deal with this one.”

The average pay for hired agricultural workers in the U.S. increased by six percent in 2020, a more rapid pace than had been typical, landing at an average of $15.97 per hour. Still, experts say the increases haven’t had much impact. While automation is used in some packing plants and some livestock production, Pederson says there are still jobs that need the human touch.

Steve Pederson, Heinold Hog Markets: “We can’t automate productions in those farrowing rooms. That takes hands on….We need people that are willing to work and you know, we don’t discriminate if it’s where they’re from. We just need full-time people that are committed to proper care of livestock to come to work every day.”

South African Jan Du Plessis, is working on a row crop farm near Mitchell, South Dakota. At age 19, he applied to be an H-2A worker after a friend told him how the strength of the U.S. dollar could help him gain more ground financially if he came to the U.S.

Jan Du Plessis, H-2A Worker, South Dakota: “I think it’s a very good idea. We are willing to work. We are here to work, not just work 9 to 5. We are here to work until the job is done.”

The 23-year-old hopes to continue returning to the same farm for a few more summers, before focusing on a pecan grove he’s started in South Africa.

Jan Du Plessis, H-2A Worker, South Dakota: “I can’t really see myself sitting at a desk and doing a desk job all day long.”

Bortnyk says many Americans don’t fully understand that farmers pay a premium to ensure jobs aren’t taken from U.S. workers. They are also required to cover housing and travel expenses for those employees. Bortnyk believes proposed legislation too often combines changes to these visa programs with elements related to undocumented workers.

Tom Bortnyk, Mas Labor, Virginia: “This is certainly not a cheap alternative to U.S. workers. Quite the contrary…. I think the way to look at these programs is as a last resort.”

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

Next, the Market to Market report.

Chinese buying, private predictions of lower yields, and chances for rainy weather made for a mixed finish in the commodity markets. For the week, September wheat gained 15 cents as the nearby corn contract added 8 cents. Soybeans had a volatile week as the soy complex battled the same factors which pushed the September contract lower by 11 cents. September meal gained $4.50 per ton. December cotton added $2.31 per hundredweight. In the dairy parlor, September Class III milk gained 13 cents. Another mixed week in the livestock sector as October cattle gained 68 cents. September feeders put on $1.53. And the October lean hog contract shed 43 cents. In the currency markets, the U.S. Dollar index gained 63 ticks. September crude lost $5.73 per barrel. COMEX Gold lost $50.40 per ounce. And the Goldman Sachs Commodity Index dropped more than 16 points to finish at 525.30.

Yeager: Now here to provide insight is one of our regular market analysts Don Roose. Hey, Don.

Roose: Great to be back, Paul.

Yeager: So, this whole wheat market, we just talked about the weather out West. They're wrapping up winter wheat harvest. It's pretty much done. No rains in sight. Then all of a sudden rains start showing up in a forecast. Is wheat driven mostly by weather like the other commodities? Is it the canary in the coal mine indicating what's ahead?

Roose: Well, that's a good point because the wheat market this week actually is the new leader to the upside. And you look at it, it makes sense because the world supplies continue to tighten. If you look at the problems we had in the U.S., we've had issues in the spring wheat well documented. That moves into Canada, a big wheat producer. And then Russia, the largest exporter in the world, they are 50% harvested right now and their yield so far is down 7%. So the U.S. is really a follower. We're only 12% of the total world trade so we're not really the big elephant in the room. But I think most definitely what wheat is trying to do is move out of a feed wheat category. And right now Black Sea feed wheat is still competitive with corn. So it's trying to move out of that category. So that is what it was about this week. Technical buying, we bottomed in July and we've had over $1 rally in most of the wheat classes.

Yeager: What am I doing right now if I have some wheat that I think I want to price? Am I holding?

Roose: Well, cash is king. What we're telling producers in all of these markets, Paul, right now is you really have to manage your own situation because the profitability for a lot of people are there if you didn't have these big weather issues in the wheat like we did in the spring wheat area. So upside looks like it's going to stay strong into the winter but things can change. COVID bubbled back to the top again. Those were real problems for us. So we're definitely in a year where make sure you manage your margins, manage your risk because things can change pretty fast.

Yeager: You bring up a couple of points that someone tweeted at us. I'm going to go ahead and bring in Lori in Osceola, Indiana's question that she sent via Twitter. She says, near my areas if you had old crop corn, one location paid $1.50 a bushel over big this week only. In my short time involved in ag I've never seen this, corn at $7. So my question, to add to her comment, is are there more days like this ahead?

Roose: These markets can move pretty fast. Corn feels like it has some strength under it here short-term for old crop. But like she's alluding to and I think this is the musical chairs, old crop has these big premiums but when you get to new crop the premiums erode like $1, $1.50 pretty quick. So how long do you sit there before your old crop looks like new crop and then you feel like what was I doing? So make sure that there's other ways to own the crop if you think there's still more positiveness. When you have basis like this and you're moving to a harvest, we're harvesting in south and we're moving, yields are pretty good there. So supplies are coming to the market.

Yeager: I just did a whole big state driving tour around some areas, good corn growing areas and there are a lot of spots that look good but there are those spots that don't. There's this eastern versus western Corn Belt battle right now. There's rain in the forecast as we sit here tonight, Don. How do you make sense of it and which side of that border you're on?

Roose: Well, and you analyzed it quite well. Where we're really at this the corn market after the July report, it was sitting around $5.14, $5.34. That was the July report. It shot up to about the $5.70 mark, $5.73 and a half was the high. And actually for a month we've been in a trading range basically between $5.40 and $5.73. So your questions, the market can't sort it out. It hasn't sorted it out yet. And last year the market got beat during the month of August and I think that is why they market very nervous, very concerned. Seasonals are negative right now, there's gaps below the market at $4.77 and a half. But we're starting to move into a demand-led market in wheat. Does that happen in corn? And there's gap above the market at 73.5 on Dec corn to the upside too, Paul. So I think what we're really doing is the August report next Thursday is going to be a big indicator on kind of how the government things we're sitting.

Yeager: I'll ask you Ken's question later but he's got a similar question about your gaps that you're talking about. Okay. One last thing on corn. I thought the market was supposed to sort some of this stuff out. Is there just that much unknown right now?

Roose: Well, there is that much unknown because it's all about weather. Remember last year the government in the August report took the yield up 2 bushels to a record 181.5 only to have egg on their face and have to drop it sharply during the end of the next report because the yield just wasn't there. The kernel counts were there for guys but we don't sell kernels, we sell weight, and the weight wasn't there and consequently we end up a yield 172 and we can't have a yield of 172 this year or you're going to have to have a demand rationing market.

Yeager: Same issue in the soybean market, we've got to have those pods filled. Are they going to fill?

Roose: Well, the soybeans are even more dicey because when you're talking a carryout of $150 million if you lost 2 bushels per acre basically you've lost the whole carryout. So that is why the market is so sensitive right now. The market has had big swings, it tries to break to the downside, then it can't, then it tries to break to the upside and it can't. So you have to be careful chasing rallies and chasing breaks in this market. And the weather is going to be a good guide here. But watch the Chinese came into the market on the soybeans this week, the end of the week, particularly on Friday. So is that a start of something or not? Just to back up real quickly on the exports this last year were up a billion bushels versus the prior year. That is where the whole difference was and soybean exports were up 600 million. So do we add onto those? Take away? The government says we're going to take away some. But do we put it all back on? So I think it's all in the exports really what we do on demand.

Yeager: So what is the indicator to know which way that is headed?

Roose: Well, I think you have to watch how competitive we are in the world market. And then do we see some buyers come in? Our exports in June on soybeans were the lowest in 8 years. So China has gone just very quiet. It's good to have a big customer but when they're the big customer if they're not there then they cause a lot of problems which is what has happened this summer.

Yeager: All right. The cotton market too, we talk about this rain situation. Is that what is benefiting them now that they've put on such a good crop? Or is it too much rain?

Roose: Well, if you look at the cotton market really you're back at the highs. And so I think it's more of the same. I think it's the demand underneath the market again. It's China again underneath the market, they're the big elephant in the room. So I think that is really what is giving us support at these highs.

Yeager: The cattle market there is some support at buying but then, again, so sensitive of a market. What is the prompt this week that is moving us one way or another?

Roose: Well, the cattle market we've been in a range, we haven't moved basically for 18 weeks on cattle, the cash cattle market is just sitting here. The bulls are trying to believe that we're going to move to the upside quickly because of counterseasonal. We've got big premiums already dialed in the market so you have to be careful because of that. Could there be a black swan? When you're at $140 on April cattle those are areas you have to be concerned. But again, most of these meat markets, Paul, it's all do we need to add grain premium to the market or take it away? So you have to watch the grain market pretty close too.

Yeager: Well, that's the feeder story is there were some calls to buy corn this week because it was lower, it broke lower earlier. To help your feed situation what is the feeder facing?

Roose: Well, the end user most definitely hay is at two year highs so you're in just this extreme drought. You look at the cattle market though we're still in a liquidation phase. Our beef cow herd was down 2%. We’re still bringing cows off of the pastures that are dry. So the cattle market is building that problem but the demand is just unbelievably strong so far and the packer is making a lot of money. It has been week after week, month after month making between $400 and $600, $700 a head and only handles them a few hours.

Yeager: And there doesn't seem to be these congressional hearings are doing anything to scare the market, right?

Roose: Well, it doesn't appear to be scaring the packer because if you look at it, if you paid $10 a hundred weight more that's only $150 a head off of his $600 profit per head. So I think it's just the fact that the beef is strong. The numbers are just there. The packer seems to have his way. Hopefully that switches as the numbers of cattle go counterseasonal and get tighter, which they should, Paul, from now all the way into the winter months.

Yeager: Okay, keep an eye going into the winter months. Okay, hog market wise. We keep hearing swine fever issues. Is that the only driver because China started to come in and buy some pork this week I thought I read.

Roose: They did, they bought 50% of our exports went to China this last week on the sales. The big issue that you have with the hog market is you've got the cash market still very strong up around $112. You've got October hogs that are next month up are sitting there just around $87 a hundred weight. That's a big discount. So you have the big record discounts -- so you have the big discounts in the market anticipating that China is not going to be in the market as their prices are, their retail prices are down 56% this year, they say that their hog herd is completely rebuilt and they have been buying pork domestically. So why do they have to come to the U.S.? But they did. So that is the spook in the market. It's does China leave and we come under pressure? Do the disease problems cure themselves? So we're just kind of battling here right now. The technicals are weak.

Yeager: We'll sort it out further in Market Plus. Thank you, Don Roose.

Roose: Thank you, Paul.

Yeager: That will do it for this installment of the TV show we call Market to Market. But Don and I will continue with Market Plus. Find that on our website of MarketToMarket.org. We've shared many of your posts in our stories section of our own Instagram feed of MarketToMarketShow. Follow us today to see the pics. Next week how combatting a glut in the hemp market led to competition with recreational marijuana. Thanks for watching and have a great week.

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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.

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

What's the most complex industry on Earth? It's not genetics, or meteorology, or logistics. It's a business that involves them all. It's farming. Thank you, farmers, from Pioneer.  

(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.