Market to Market - Dec. 3, 2021

Coming up on Market to Market -- Pitching in to help repair America’s inland waterways. The EPA misses an obligation at the pump. Shaking up the niche market with a fresh supply. And market analysis with Mark Gold, next.

(music)

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.

(music)

(music)

This is the Friday, December 3 edition of Market to Market, the Weekly Journal of Rural America.

(music)

Hello. I’m Paul Yeager.

The omicron variant was this week’s news and market mover, but the lasting impacts of the delta wave are still creating variables in the longer lookback economy.

Last month, 210,000 jobs were created - more than half of what Wall Street was forecasting.

The number of people looking for work or already employed moved up to 61.8 percent, the highest labor force number since the beginning of the pandemic.

The unemployment rate fell to 4.2 percent, spurring some economists to predict a strong recovery from COVID-induced inflation.

The Mid-America Business Conditions Index fell 5 points in November to 60.2, remaining above growth neutral. The biggest drag on the index is still concern over supply chain bottlenecks lasting well into 2022.

During the Trump Administration, the ethanol industry cried foul over the slow walking of RVO numbers for the next year. Even though there has been a change of administrations, the industry is still experiencing the same problem.

Peter Tubbs has the story.

The Environmental Protection Agency missed it’s November 30th statutory deadline to release Renewable Volume Obligations under the Renewable Fuel Standard. The EPA had already proposed extending the deadline earlier in the month.

The EPA is required to finalize RFS blending requirements for the following year each November. The initial proposal was issued in May, but is still being evaluated by the White House Office of Management and Budget.

The OMB is believed to be struggling with estimating demand for gasoline and ethanol in 2022 as the economy recovers from shifts in consumer habits brought on by the COVID-19 pandemic. Overall gasoline sales have been over 4 percent below 2019 sales levels. 

Ethanol proponents are frustrated by the delays.

Sen. Charles Grassley, IA - R “No, just the opposite. They've indicated that they aren't ready to announce them and is contrary to law. I think Monday of this week they should have been announced and they aren't following the law, but more importantly than not following the law. Biden, who campaigned for the Democratic nomination in Iowa, said he was a strong supporter of biofuels”.

RVOs are the targets of biofuels for refiners to blend into the nation’s fuel supply. American ethanol producers were distilling over a million barrels of ethanol a day pre pandemic. USDA predicts more than one-third of this season’s U.S. corn crop will be used in ethanol production.

For Market to Market, I’m Peter Tubbs

Shoppers are used to sticker shock. Taxpayers are too, as some estimates to repair and improve aging locks and dams along the Mississippi River will cost billions of dollars. If those facilities are compromised by a breakdown, the cost to shippers and end-use customers could easily match the cost of the repairs.

There is a precedent of private money being used to move a public project on the river forward. New groups have joined the coalition to push the U.S. Army Corps of Engineers into action.

John Torpy has more.

Several farm organizations are working to help jump start infrastructure projects along the nation’s busiest inland waterway.

In an effort to promote improvements to lock and dams along the Mississippi River, the United Soybean Board, the Soy Transportation Coalition, and multiple state soybean associations offered $1 million to offset pre-construction costs at the aging Lock and Dam 25 at Winfield, Missouri. The farmer-funded organizations want to get several of the proposed Army Corps of Engineers construction projects along the Mississippi River moving forward.

Several of the same agricultural organizations, as well as several inland maritime fleets, have been sounding the alarm for decades about what they see as dilapidated conditions at aging lock and dam facilities along the nation's busiest inland water super highway. 

Built in 1939, the 600 foot Lock and Dam 25 helps move almost every bushel of harvested grains from the Midwest to shipping facilities in Louisiana. Thirty years past its expected lifespan, this St. Louis District Lock and Dam will be the first of five revitalization projects identified by the Navigation and Ecosystem Sustainability Program, or NESP. If approved, the plan would expand the length of the lock to 1,200 feet, more than doubling the efficiency of the facility and allow for moving unbroken 15-barge tows down river. Currently, most existing locks require the same load to be broken in half which increases the lock-through time from 30-minutes to 2 hours. 

The United Soybean Board successfully made a similar monetary move on the Lower Mississippi River. The organization raised $2 million dollars to help kick-start a dredging project in Louisiana, deepening the channel for ships hauling commodities to overseas markets.   

For Market to Market, I’m John Torpy

A There are many stories about daughters and sons moving back from the city to rekindle the flame of a country lifestyle. Some have discovered their place is in the feedlot while many more may think the cab of the combine fits just right. Still others may find the best place is at the head of the table for a company growing an old school commodity.

Josh Buettner has more in our Cover Story.

In 2020, the coronavirus pandemic triggered economic fallout leading to job losses for tens of millions in the U.S. alone.  For one recent college graduate, being laid-off was the final nudge he needed to branch-out - by returning to his roots.

Tanner Sanness/Owner – Reconnected Farms, LLC/Dorchester, Iowa: “Reconnecting people to the food they eat is kind of the idea that I had.”

A sixth-generation farmer from northeast Iowa, Tanner Sanness helped raise livestock and row crops growing up.

Tanner Sanness/Owner – Reconnected Farms, LLC/Dorchester, Iowa: “There’s some scientific studies that suggest that they may help in nerve regeneration.  They’re also really delicious…really good seafood replacement.”

Now he’s acquired a taste for specialty mushrooms shared by a growing number of locals willing to pay a premium for his ultra-fresh supply. 

Tanner Sanness/Owner – Reconnected Farms, LLC/Dorchester, Iowa: “I had listened to a podcast, and it was talking about the health benefits of lion’s mane.  And I was too broke…I was in college at the time – to afford the supplements – so I ended up buying a grow block of the lion’s mane.  We fruited it right on our kitchen table and dehydrated the lion’s mane and made a powder out of it.  And then I had kind of fallen down the YouTube rabbit-hole of how to grow it – and didn’t really see that there was anyone growing oyster mushrooms or lion’s mane and that’s kind of where my business degree came in hand and I saw the niche in the area.”

Basic button mushrooms have long dominated U.S. shelves.  According to industry trade association The American Mushroom Institute, mushroom farming contributes over $3 billion annually to the U.S. economy.  USDA data points to California and Pennsylvania as responsible for 90 percent of domestic supply, though cheaper imports from Canada, Mexico, South Korea and powerhouse China are growing – as is a hunger for more exotic varieties.

Tanner Sanness/Owner – Reconnected Farms, LLC/Dorchester, Iowa: “You’re basically adding the mycelium, which is the living organism of the mushroom, into its favorite food – and the humidity from the grow room makes it fruit.  It will take around a month for it to completely encompass these bags.”

Initial research and online classes quickly led to a makeshift grow room.  Within two months, Sanness was selling his harvest at a local farmers market.  Now an upgraded grow space – inside a repurposed refrigerator trailer in a barn on the family farm – gives him the environmental controls and space needed to bump yields to around 280 pounds per week. 

His startup, Reconnected Farms, supplies various food outlets within a 60-mile radius of Dorchester, Iowa.

Bryan Haugland/Produce Manager/Woodman’s Market - Onalaska, Wisconsin: “We started carrying Tanner’s mushrooms…November of 2020, and as soon as we started carrying his product, it almost doubled our sales.”

Bryan Haugland is the produce manager at Woodman’s Market in Onalaska, Wisconsin, a suburb of La Crosse - where Sanness went to college.  With around 20 stores in Wisconsin and Illinois, Woodman’s prides itself on high-quality, fresh produce.

Bryan Haugland/Produce Manager/Woodman’s Market - Onalaska, Wisconsin: “So normally, mushrooms, they’ll be harvested, shipped to a distributor...might take up to a week before those mushrooms are received in the store.  And with Tanner’s, they’re coming here the same day.  You know, when you’re getting them that fresh, you’re getting the best product that you possibly can.”

Haugland says health-conscious customers prefer the taste Reconnected Farms brings to the table, as well as the antioxidants and vitamin D not present in many other plant-based foods.

Dr. Todd Osmundson/Mycologist – University of Wisconsin – La Crosse: “We think of sweet and bitter and salty and sour when we0 think of tastes, but there is another taste - that’s know as umami - that’s found in many mushrooms.  That’s sort of more that ‘savory’ taste.”

Dr. Todd Osmundson is a mycologist at the University of Wisconsin – La Crosse who uses DNA to study and identify the geographical distribution of fungi, various strains, and their relationship to different environments. 

Dr. Todd Osmundson/Mycologist, University of Wisconsin – La Crosse: “I think the idea of food as medicine has really taken off and there are a lot more supplements that you can buy that have mushrooms in them, then there were even ten years ago…and it’s also getting attention in clinical settings.”

Osmundson says past scrutiny of mushroom compounds has to led pharmaceutical heavy-hitters like penicillin and cyclosporine – and fungal analysis continues regarding their immune system influence fighting infections and cancer.  He adds use of varieties like lion’s mane stretches back 3,000 to 7,000 years between ancient Greece and traditional Asian medicine.

Dr. Todd Osmundson/Mycologist, University of Wisconsin – La Crosse: “There’s been some suggestion that it could be helpful in Parkinson’s disease, ALS, possibly Alzheimer’s disease…any disease that involves neurodegeneration.  A lot of these ideas haven’t been explored using standard double-blind kinds of medical experiments, but there is a long history of use that suggests that they might be really powerful.”

Currently, a novel study led by UC – San Diego and UCLA is underway, evaluating the therapeutic benefits of Chinese herbs and medicinal mushrooms turkey tail and agarikon for treating acute cases of COVID-19.  The random, double-blind, placebo-controlled clinical trials are set to wrap in June 2022.

Tanner Sanness/Owner – Reconnected Farms, LLC/Dorchester, Iowa: “This is actually the first flush of king trumpets that we’ve had on the farm… These are reishi mushrooms…”

While commanding wholesale prices between $8 and $11 per pound for current crop, Sanness experiments with other varieties, with other health benefits, he might offer customers one day. He adds that because Reconnected Farms uses organic substrate and excludes chemicals and pesticides, gaining organic certification could be easy and help unleash another product line with even higher premiums. 

As demand accelerates, Sanness hopes to expand deliveries to a 100 mile radius within the Driftless Region of Iowa, Minnesota and Wisconsin.  But he doesn’t sweat competitors using his road map.

Tanner Sanness/Owner – Reconnected Farms, LLC/Dorchester, Iowa: “I think the market’s plenty big for multiple growers in an area.”

For Market to Market, I’m Josh Buettner.

Next, the Market to Market report.

Fund liquidation and higher world production impacted the wheat market. And for the week, the nearby wheat contract fell 37 cents while March corn lost 8 cents. The bearish outside economic news coupled with China’s “are-they- done-buying-or-not” story impacted the soy complex. The January soybean contract added 15 cents. January meal improved $9.20. March cotton shrank by $7.58 or nearly 7 percent per hundredweight. In the dairy parlor, January Class III milk futures added 12 cents. A mixed week in the livestock sector as February cattle shed $2.25. January feeders declined $3.02. And the February lean hog contract expanded by 47 cents. In the currency markets, the U.S. Dollar index improved 1 tick. January crude oil decreased $2.32 per barrel. COMEX Gold dropped $3.60 per ounce. And the Goldman Sachs Commodity Index lost almost six points to finish at 536.25.

Yeager: Joining us now to provide some insight is Mark Gold. Mark, it is so good to see you.

Gold: It's nice to be here in person for a change.

Yeager: You guys, your generation, all you want to do is be on your screens all the time.

Gold: No, I would much rather be out here than sitting at the screen in Chicago, believe me.

Yeager: Well, the trip out, harvest is pretty much done. But start looking at the conditions of the ground, maybe not so much here in corn country, let's go to wheat country. It is starting to remain dry in a lot of areas. Terrible export news. It's dry. What is the third strike on wheat?

Gold: Well, one would think that if Russia moves into Ukraine that is going to be an issue. Now, what can the issue be? Are they going to stop exports so that could actually boost prices? That may be a ramification. What is going to be bearish out there is if we do get rains in the Plains. That will put an end to this in a hurry. Wheat has gone into dormancy. We have very little snow cover. I think somebody said 8% of the country has got snow cover. It's interesting, Denver hasn't had one snow yet this year, yet Hawaii just got a blizzard warning for a foot of snow and 100 mile an hour winds. Now, that is on the slopes of one of the two volcanoes on the big island of Hawaii. But still, it's pretty weird weather we're having out here.

Yeager: Well, Denver didn't know they were participating in no snow November, but here they are. It's dry in central Montana, wildfires ripping through areas, Canada is still dry. So I guess I ask, i s it more going to be a weather story or an export demand story that pulls moving in the next two to three months?

Gold: That's a good question. I view the exports as being very, very dicey. We've got the dollar at 96 cents. I think the last time that we were here we were saying if the dollar got over 92 cents that would be pretty bearish for all the grains. Now we're up to 96 cents and it's just making it that much more difficult to capture any of this outside export market. Despite what is happening in Russia with all the taxes they're still on wheat that we're not. So I think that is an issue. But on the other hand, if we see this whole winter go through with very little snow cover and we get some cold temps and we do some damage out here it's going to be a problem. I think we have to keep in mind American farmers when they look at a wheat crop and it has been dry and it has been cold, that plant is dead. And three months later they get a little rain and oh geez, we're going to have a pretty good crop. So it's hard to get too bullish based on the conditions today knowing that wheat is a weed and just give it some water at some point and we'll get a crop.

Yeager: We've had a pretty good crop of corn.

Gold: You know, look at how bad the weather was this year. We used to joke that we'll be able to grown corn on concrete someday.

Yeager: We're getting close.

Gold: We're getting pretty close. And I think that it's pointing out is both in beans and corn, you just give the crop enough rain at the right time and you're going to make a crop and in this year's case, record crops. What are we going to do if in 2022 we have good weather? What are these yields going to do? Are we going to go to 60 bushel beans? Are we going to go to 180 bushel corn? Looking at what they did in a poor year and knowing what yields came in where they had some rains tells you that there could be huge crops out there.

Yeager: Well, let's ask Phil in Ontario's question. He's got a question about corn and about pricing some things forward. Looking at December '22 corn is approximately $5.52. Historically he says, this is a good time to price new crop corn. Does that still hold for 2022 given what you're just saying?

Gold: It's going to take one heck of a bullish weather scenario in South America in my opinion to push March corn much over $6. Is this a good time? You've got $5.50 new crop corn. How many times in the history of the last 40 years have you been able to do that once you've come out of the field? So to me it's a great marketing opportunity. As a marketer, if we're telling clients to sell corn out here, which we have, we're also telling them to replace it with some call options to keep the upside open and then to have some puts on for what they're not selling. But at $5.50 corn we know we can go right back to $4 in a hurry if things pan out and to leave that price on the table to me is foolhardy in my opinion.

Yeager: Well, let's look at last week. We recorded on Tuesday. Wednesday was kind of unstable. We came back from Thanksgiving, it's like the market got indigestion, it ate something poorly. Friday dropped off the table, continued onto Monday, Tuesday looked terrible and then all of a sudden we come back.

Gold: Come back again. IT has been that kind of a market. But we've had a lot of bullishness based on all this inflation talk. And now when you look at crude oil going from $73 to $60 a barrel, when you look at silver going from $25 to $22 an ounce, when you look at some of these other markets out here, Bitcoin from 69,000 to 55,000, I'm not sure that inflation bug is still here. And yeah, we know land is expensive, we know fertilizer is expensive, but I believe a lot of these things are going to come down. And I'm not bullish based on inflation.

Yeager: Okay, I want to get into a deeper discussion on crude with you about inflation, but I want to ask a quick question then about crude oil and if it does continue to fall. I think a couple of weeks ago you wrote that might be why we've had inflation is higher crude. We've let out the steam of that, natural gas off 25%. What is the ethanol producer thinking right now when it sees those two headlines?

Gold: Well, I think he's got to be a little concerned. The cheaper gas gets, the less demand we're going to see for ethanol. Longer term in ethanol I'd be more worried about electric cars than I would be anything else. We've got to find some replacements three, five, ten years down the road because there's going to be an impact. But the fact of the matter is, if crude continues on this downward slope and we get back to $50, $40 a barrel, I believe that crude oil as much as anything has been the driving force behind inflation. Yes, cars are more expensive, rent is more expensive, fertilizer as we talked about and all these other things are more expensive. But I think they're about to start coming down.

Yeager: Are the Chinese done buying U.S. beans for the near-term?

Gold: Probably not. If we get down to $11.80 the Chinese will be back. The Chinese are as good a traders as anybody in the world. They need grain, there's no question about it. But where are they going to get it from? We've seen them already buy Brazilian beans now. This is the time where the U.S. should be making those sales to them. So it tells us that with the dollar at 96 cents and bean prices at $12.50 we're not that competitive. So what is going to happen when this window of exports generally closes sometime after the first of the year? Maybe they're going to buy some more but they better do it in the next four weeks or we're going to lose this window of opportunity from harvest in September through the end of the year.

Yeager: So then, okay, say the window closes and they're done writing checks to the United States. Do we have enough demand in this country to chew through some stockpiles here that we have domestically?

Gold: I don't think so. But you look at the crush number, it was 197 million, a new record. So we're crushing an awful lot of beans out here. Livestock, the meal prices have been really high. But I just don't see that these bean prices can sustain themselves without those Chinese purchases. We already know we're down 8%, 10%, some people are saying it's going to be 20% before it's all over. That's a lot of beans that normally get chewed up by the Chinese that are going to be in our market with the American farmer still holding onto a lot of grain. I think that's an issue.

Yeager: Well, let's look at the hog market. We've seen that has been the only one going up the last couple of weeks has been the hog market. Is it because, why?

Gold: Well, I think it has been a function of they got a little too cheap. And with cattle prices moving as high as they did, pork became attractive again. So I think that has been as much of the input on hog prices as anything else. But overall the cattle has had one heck of a run here over the last several weeks. We pushed December cattle to $140, we backed off a little bit, kind of back stepped a little bit, but we're still looking at a very strong cash market and I continue to believe that is going to stay around for a while here, maybe through the end of the year, and then maybe back off again. But in the meantime, hog prices looks relatively cheap to cattle so I think that market will continue to be on the firm footing out here.

Yeager: So cash is impacting hogs, it's also impacting beef you were saying. So do you see the cash business being better for another month or two?

Gold: In the cattle market for sure and the hogs will probably tag along for that ride.

Yeager: So what else do you see as factors? We hear about labor unrest at a couple of plants that might slow down and we know if one plant goes down or slows down that has had a major chain reaction.

Gold: But we've seen some of the smaller plants pick up some of that slack. Guys want to get back to work, I'm convinced of that. I think that is why these slaughter numbers have come back up. A week ago we were at 667 I think it was. That is telling me that these plants are operating at a pretty full capacity out here.

Yeager: Are you adding to your feeder pen right now?

Gold: Not at these levels.

Yeager: Because?

Gold: They're just too high priced.

Yeager: The meat. What about the inputs?

Gold: Corn, every time the corn rallies the feeders break it seems like. Pretty much corn goes up, feeders go down, corn goes down, feeders go up. And that relationship is going to be around forever I think. But I just, I look at these prices on the feeder cattle and I think awful high prices to be putting more in the pens right now. But the demand has been good. We're still eating a lot of beef. Restaurant trade is picking up. So I think that's all positive.

Yeager: Is the weather, back to the wheat discussion, having any impact on some of these larger feedlots in areas where it's dry?

Gold: Certainly you can't get into the pasture areas if it's that dry and they're going to have to substitute something else. Is it going to be corn? Is it going to be meal? Some of that will pick up. But if it does continue to get dry and stay dry let's say through January and February then we're going to see some shifts in feed and feed usage on corn and wheat could go higher without a doubt.

Yeager: All right. Mark Gold, thank you so very much for the time. Good to see you again.

Gold: Good to see you.

Yeager: All right. That will do it for the TV show that we do call Market to Market. We're going to keep talking, we're going to record it, we'll call it Market Plus so join us there. Find that on our website of MarketToMarket.org. Now, subscribers to our YouTube channel, they already know that they are the first to get our content from full shows, the M-to-M podcast and Market Plus. Subscribe today and ring that bell in the corner to get notifications and be in the insider club. Next week, we take a look at what one couple discovered about the realities moving from the city to the countryside. Thank you for watching. Have a great week.

(music)

(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.

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.