Market to Market - Oct. 29, 2021

Coming up on Market to Market -- A washout of a week from coast to coast including harvest territory. The COVID-19 meatpacking infection rate set off alarms at the Capitol. A dry-weather bet pays off. And Market analysis with Shawn Hackett, 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, October 29 edition of Market to Market, the Weekly Journal of Rural America.

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Hello. I’m Paul Yeager

The American consumer is good for almost 70 percent of the U.S. economy. So when we buy appliances, cars and computers, the government reports reflect growth or contraction. ---

Durable goods orders were down 0.4 percent - driven lower by car sales. This was the first decline in four months according to the Commerce Department. 

Overall, consumer spending improved 0.6 percent in September but higher prices are becoming burdensome to households because of supply shortages. 

The measure of inflation on consumers increased 0.3 percent last month, 0.2 percent if you strip out volatile energy and food sectors. 

Wages went up in the last three months as measured by the Labor Department in the Employment Cost Index - most of the bump being erased by inflation. 

We’re back to buying houses as new home sales hit a six-month high with a 14 percent jump. The demand-driven market pushed the median price to a record $408,800. ---

The president is attending the G20 meeting in Europe where economic growth, pandemic and climate change are on the docket.

If conversation lulls, President Biden can always talk about the weather back in the U.S. There was a lot to talk about this week as Peter Tubbs reports. 

Multiple parts of the country were doused with heavy rain this week. 

A heavy storm rolled in from the Pacific and poured record breaking amounts of rain over California. San Francisco recorded 4 inches of rain from the system, while Sacramento set a one day rainfall record of 5.5 inches, breaking a record that had stood since 1880.

Several roads in northern California were closed due to mudslides. A section of Interstate 80 was closed due to snow. Some areas in the Sierra Nevada mountains received over two feet of snow in the early season blast. Donner Summit near Lake Tahoe measured 47 inches of new snow, and set a precipitation record for the month of October.

Unfortunately, the deluge did little to reduce the severity of the decade long drought. The region would need to see double its precipitation average over the winter to move it out of drought, but the forecast is for a drier than average winter.

The high weekly rain totals extended beyond the West as much of the Grain Belt also dealt with big rains which paused harvest of corn and soybeans from Nebraska to Ohio. A large swath of 2-4 inches of rain will make harvesting difficult in many counties. 

Over two-thirds of the U.S. corn crop is in the bin, which is ten percent ahead of schedule. Three fourths of the U.S. soybean crop has been harvested, which is slightly ahead of the 2020 pace.

The National Weather Service confirmed that five tornadoes hit southeastern Missouri and southwestern Illinois late Tuesday. Two storms were rated EF3, while three others were rated as EF1. The series of storms caused widespread damage, but no serious injuries.

For Market to Market, I’m Peter Tubbs.

A new U.S. House report says at least 59,000 meatpacking workers caught COVID-19 during the first 11 months of the pandemic. The new estimate is three times more than initially thought and the true number may be even higher. 

Here’s Josh Buettner with the story.

Piggybacking on a USDA report from last month, this week the Congressional Select Subcommittee on the Coronavirus Crisis issued their own findings and testimony revealing meatpacking worker COVID-19 infections were almost tripled above initial trade estimates from the early days of the pandemic. 

Debbie Berkowitz/Practitioner Fellow – Kalmanovitz Intitiative for Labor and the Working Poor/Georgetown University: “Let’s be clear – the wildfire spread of COVID among meat and poultry workers was not inevitable.  It was preventable.”

Nearly 270 meatpacking employee COVID deaths have been confirmed between March 2020 and February 1, 2021.  Factory shutdowns led some livestock producers to cull herds as prices skyrocketed. 

Rep. James Clyburn/D – South Carolina/Chair – House Select Committee on the Coronavirus Crisis:  “The National Economic Council recently found that meat processors have generated record profits during the pandemic - at the expense of consumers, farmers, and ranchers.”

While USDA concluded eventual changes to crowded conditions and other safety protocols likely led to decreased virus-spread in processing facilities, labor leaders say the former administration made things worse early on.

Martin Rosas/United Food and Commercial Workers: “In April 2020, President Trump issued an executive order invoking the Defense Production Act – literally giving a green light to these companies to disregard the safety and well-being of these workers at a time when the federal government was not requiring any COVID-19 safety measures.”

Critics want industry overhaul – including additional funding for government safety agencies, industry-standard wage requirements, sick days and paid leave for all essential workers.  Such demands come at a flashpoint for American labor, particularly for workers who endured arduous circumstances during the pandemic.

 Edward Flores/Associate Professor/University of California – Merced, Community and Labor Center:  “So what we’ve been hearing, from workers and organization that work with workers, is that people finally began to really think about the relationship between themselves and their employers.  And we may still very much be seeing the downstream consequences of that.”

For Market to Market, I’m Josh Buettner.

The number of monthly business applications has been on a steady rise since 2010 when the number was around 200,000. After a dip in the early days of the pandemic, the rate of those seeking tax ID’s has nearly doubled and has been holding above 400,000 this year.

Some want to work for themselves while others formed new ventures born out of despair.

For one South Dakota producer, the 1980’s Farm Crisis provided an opportunity for his operation. 

Colleen Bradford Krantz reports in our Cover Story.

The 1980s Farm Crisis hit southeastern South Dakota just like it did across the rest of the country, bringing a severe economic downturn that affected many farmers and their communities. The Edinger family of White Lake survived the crisis by relying on their father Wayne’s second income as a teacher, but they received additional help when the elder Edinger planted a field of sunflowers.

Charlie Edinger, Edinger Brothers Partnership: “It was tough times in the ‘80s. And so my Dad, luckily for us, did a good job of forward-thinking.”

Forty years later, his sons, Charlie and Chet, still raise sunflowers, dedicating about 15 percent of their row crop acres to the edible seeds.

Charlie Edinger, Edinger Brothers Partnership: “I would say year-in, year-out, they’re one of our best money-making crops. I mean it’s definitely challenging. I think we live in a good area with our amount of rainfall or our climate and soils that, you know, we are in that 20 to 24 inches of rainfall every year. So they are a good dry-weather hedge.”

The 2021 growing season offered a challenging dry-weather test for many sunflower-growing regions.

John Sandbakken, National Sunflower Association: “The Dakotas and Minnesota throughout the growing season, about 95 percent of the growing area has either been from a severe to exceptional drought. The conditions here have been just awful. You know producers in some areas planted seeds of other crops that didn’t germinate, they didn’t come up.”

Sunflowers, often planted last in the northern plains, caught some of the limited rains in those key regions. USDA estimated yields are down about 13 percent, but some industry leaders were happy it wasn’t worse.

John Sandbakken, National Sunflower Association: “In comparison to some other crops, that’s pretty good. I mean, honestly, that’s very good considering some places had maybe six inches of moisture since January 1.”

With total pounds produced nationwide expected to be down, sunflower prices have already climbed, reaching a point not seen since a similar drought a decade ago.

John Sandbakken, National Sunflower Association: “Obviously some of that is people trying to position themselves to get stocks to last throughout the year to buy ahead. But in just the demand for the seed, when I look at what oil is being crushed and what was left over in stocks at the end of the month, there not a lot left. I mean it’s moving out of the door because of the demand.”

The health benefits – large amounts of vitamin E and high monounsaturated fat content – have kept demand high. Sales of the black oil varieties, crushed for cooking oil, and confection varieties used for human consumption, are regaining some lost ground. And sales are booming for sunflowers used as bird feed.

John Sandbakken, National Sunflower Association: “With Covid, our numbers have really gone through the roof. It’s just incredible. The amount of people obviously being stuck at home and looking for something to do just to pass time, so bird feeding has really had a resurgence here.”

Sandbakken believes the U.S. sunflower industry could easily support another million acres of production on top of the estimated 1.3 million acres grown in 2021.

The Edinger brothers, who now raise confection sunflowers for human consumption, are based in southeast South Dakota, which, as of October 5, 2021 had received less than 14 inches of precipitation, seven inches shy of normal. Even with the reduced moisture, their sunflower crop still did well, beating their five-year average by 22 percent.

Charlie says that anyone considering getting into sunflower production, however, needs to be ready to work.

Charlie Edinger, Edinger Brothers Partnership, Mitchell: “Insects can be a challenge: seed weevils, sunflower moths. Diseases can be a challenge in wetter climates. They may not be a good fit for you. Blackbirds are one of our biggest challenges here…. If you were to start raising sunflowers, I would start with the black oil variety. That way you can kind of get a feel on how to raise them and other production issues you may have with them before going to go toward the more specialty option.”

Once their sunflowers are harvested, the Edingers’ edible seeds are delivered to Advanced Sunflower in Huron, South Dakota, an hour’s drive to the north. Advanced Sunflower handles about 120 million pounds of sunflower seeds annually. The seeds are cleaned, sorted by size, roasted, salted or flavored, and sometimes de-hulled.

Nationally, about 15 percent seeds are exported. But that represents a decline as the U.S. now faces more competition from overseas sources than has in the past.

Danny Dale, Advanced Sunflower, Huron, SD: “The U.S. was the primary area where the selective breeding was done to move them from wild to something we could use for snacks and oil and that, but now some other countries have gotten into producing sunflower seeds so there’s been a shift in the last 15 years… It has been a challenge to keep up with their prices.”

Sunflowers are typically contracted ahead of time by companies like Advanced.

Danny Dale, Advanced Sunflower, Huron, SD: “Sunflower is not a price leader. It’s a follower. So if corn and beans go down, sunflowers go down. And if they go up, sunflowers go up. We have to pay a competitive price to buy the acres. And some years it’s a struggle and some years it’s pretty easy. This year was a great year to grow sunflower because it’s been so dry and sunflowers actually prefer it dry.”

John Sandbakken, National Sunflower Association: “Something that happened this year that I hadn’t seen in a long time is that we had 2022 new-crop prices out in August. And that’s rare. Normally in this industry, we wouldn’t see a new-crop price until October, even into November sometimes. …The crushing industry, the confection industry, they all want to start getting acres lined up already …They just want to get crop in the ground as soon as possible and expand acres for next year. ”

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

Next, the Market to Market report.

A weather market played out on two sides of the trade – too wet for some, too dry for others. For the week, the nearby wheat contract added 17 cents while the December corn contract improved 30 cents. China bought some U.S. beans, but still lagged behind pace to keep up with USDA projections while the planting of the South American crop surged. The January soybean contract gained 19 cents. December meal increased $5.20 per ton. December cotton expanded $6.59 per hundredweight. Over in the dairy parlor, December Class III milk futures fell 91 cents. A mixed week in the livestock sector as December cattle added 95 cents. January feeders shed $1.20. And the December lean hog contract strengthened $2.75. In the currency markets, the U.S. Dollar index improved 48 ticks. December crude oil decreased 46 cents per barrel. COMEX Gold dropped $11.70 per ounce. And the Goldman Sachs Commodity Index fell almost 6 points to finish at 584 even.

Yeager: Now here to provide insight is market analyst Shawn Hackett. Hey, Shawn.

Hackett: Hey, Paul. How are you? Glad to be here again. Sorry I'm not there personally, I tried.

Yeager: You're so far away. Nobody ever wants to be in the same room anymore. You did try. We'll talk about your travel troubles in Market Plus. You also have been traveling, I want to hear about this Brazil trip in a minute. But let's start with wheat because first it was the story of Minneapolis, now it's the story of Kansas City controlling this market. What's next?

Hackett: It's really the story of high quality wheat. We've had a crop failure in the spring wheat crop last year and of course winter wheat was not that great either. We have a high quality wheat, this is for human consumption, at a time when we're worried about not being able to get things from A to B, delays, all kinds of issues with logistics, no one is going to take a chance with high quality wheat. So they're buying what they maybe would have bought three months from now they're buying today to make sure they get delivery on time and we think this is a long way to go, Paul. We don't think that we're done pricing this high quality wheat situation because quite frankly we're not going to get any new supplies until late spring, summer, and if we're correct about a chaotic planting season post-dormancy we may still have much further to price this market in.

Yeager: Even though it's a major global product you're saying a lot of what this market is going to be dependent upon is United States produced wheat?

Hackett: Certainly and Canada is one very important area, obviously Russia is another very important area. But from what we see Russia playing all kinds of games with trying to restrict exports, constantly trying to say, you know what, we want to keep some more at home, we don't like what's going on with weather over there either and we just feel that with what we see with La Nina coming back and with probably a very cold, late ending winter it could be really some fireworks for the high quality wheat market. So we think there's more to go here.

Yeager: Okay, so we've got a 7 in front of the number right now. Are you saying there's a possibility of an 8? Do I hear 9?

Hackett: Well, back in '07, '08 and back in '11 and '12 we did see a 10 handle on the wheat market. It wouldn’t surprise us if we're correct about our weather forecast over the spring that we might see a 10 handle again. That is certainly a possibility.

Yeager: Okay. In corn this is a story that we're back up again. We were right on that $5 mark and we've held, this week we just kept adding. Is there more adding ahead?

Hackett: I think as we get into the upper 5's, Paul, we're probably going to slow this market down. But when you really think about it, Brazil had a failed corn crop last year and we're not going to see anything from South America corn until late spring and so the market is going to have to deal with the USA, even though production was good it wasn't great, and it still leaves the market tenuous when we're trying to get product from A to B and struggling to do so.

Yeager: All right, there's struggles, inflation. We've talked about it until we're blue in the face. It is now dripping into commodities. There was thought that Wednesday's spike was due to inflation concerns, maybe losing 3 million acres of corn. Where do you see that argument right now?

Hackett: Well, it's either one of two ways, either we're not going to plant the corn, at least on the fringe acres we're not going to plan the corn and/or when we do plant the corn in the core acres we may not put all that fertilizer down that we're accustomed to doing because it's such a high input cost crop. However you slice it and dice it, it's going to be very, very challenging to produce a big corn crop next year with December '22 corn in that low to mid 5's. If I'm a livestock producer I want to be thinking about how do I lock in that December '22 corn price? We think that is a very, very solid hedge right now.

Yeager: We'll talk about feeders in a minute because that is kind of what my line of questioning was going to be. But you mentioned fertilizer. N, I can't tell you how many times I saw N in a tweet asking for questions this week. Nitrogen is on the minds. I had a guy tell me right before we came on the show, he knows of somebody that prepaid nitrogen, they're not able to get it. Are you hearing similar stories across the country?

Hackett: We are and it's going to be a situation where you may not be able to get it at any price for a little while. And maybe there's some questions about how long or when will the fertilizer prices ebb. And we really don't think we're going to see an ebbing in the fertilizer price until we get through the Northern Hemisphere winter. We think we're in for a long cold winter and specifically natural gas, U.S. natural gas prices we think have considerably higher to go and it's going to be hard for the fertilizer market, especially the nitrogen fertilizer market to correct if natural gas prices are going to be catching a strong bid all winter long.

Yeager: So does this mean beans benefit?

Hackett: Beans will gain acres. They certainly were the winner of these -- to put a soybean crop in the ground is obviously much less. And that's a bearish factor, Paul, it's a bearish factor. We were down in Brazil and everywhere we looked there was more soybeans in for coffee acres, more soybeans in for coffee acres, more soybeans in for coffee acres and it looks great. It's in early. It looks like we could have a really, really big soybean crop down there. So, soybeans as much as the renewable diesel story is a big story forward we still have to deal with this potential for some pretty big supply in the nearby.

Yeager: Well, and that was, you mentioned diesel but there's also the crush story. There is word of a plant coming on in Kansas, there's expanded capacity if you already are crushing soy. Is that a bullish story?

Hackett: Any time you bring up pressure in that wants soybeans it's nothing bearish about that. But remember, it's a two-edged sword, everyone is crushing beans to make more bean oil and we're making more bean meal that we may or may not need. If you're looking at that spread between meal and oil it has gotten uncharacteristically wide. So how depressed are we going to get the bean meal market against bean oil before crushing so many soybeans becomes less attractive? That's what we're looking at.

Yeager: All right, so Ryan in Byron, Illinois is asking, has the '22 acreage battle already begun? And what should guys be anticipating based off of possible planting intentions next year? Please use the comments you've already used to answer this question now, Shawn.

Hackett: Yeah, we did an analysis, Paul, and rice and corn were the two crops that had the highest input costs relative to all the inputs, fertilizer and such. And so those crops are going to be very, very challenged at current prices to deliver on the acres that the market will need and want. So either the prices don't move up and the price does or at some point the price has to move up before those final plantings are made. But either way we think those are two crops to watch on the acreage front.

Yeager: What about on the cotton market because they keep buying and adding like they're trying to buy acres too?

Hackett: They are. But we're dealing with over $1 new crop cotton for next year, over 90 cents. That's a pretty good price for cotton. They’re going to plant it, the cotton guys are going to plant that crop at that price if it stays that way.

Yeager: All right, in the feeder market, let's start with feeders in the livestock market. You mentioned how they are, you're saying lock in some December feed needs right now. What else are you telling a feeder?

Hackett: Well, certainly you've got to get your feed needs taken care of. If not, we think you're going to be in a world of hurt going into spring and summer. The other thing is think about a very, very cold snowy record snow packed winter. We had that back I think it was 2018-2019 and what does that mean for the feeder market? It means less animals, it means tougher conditions, tougher breeding. It's not a good situation for future supply. It may be a good sign for price, Paul, but in terms of wanting to move the animals like we're accustomed to, a harsh winter against a harsh drought that we've seen out west really is not what they're looking for at this point.

Yeager: What does that mean then for the live cattle market?

Hackett: Deferred prices we think are going to have a supply problem, a bullish supply problem. We think that by the time we get into the spring and the summer of next year the animals are going to be thinned out, the weights are going to be thinned down and that whole packer problem of through put, we can't bring the animals through, too many people not coming to work, all that that we've been dealing with is off the table and we think we could be actually bidding for animals like they have done in the hog market in the past for the first time in a long time. And maybe, just maybe, Paul, the livestock producer gets the upper hand here.

Yeager: I'm sorry, you cut out right there. I think you said something about the livestock producer benefiting. It must be lost in translation. But the hog producer, the exports there have helped the hog market a little bit this week, right?

Hackett: Yeah, they've got some better numbers. The market got hit very, very hard but came right to a triple bottom support there. Buyers came in and said, this is a place that we've been rewarded to buy in the past and so they came in and were rewarded again. I still worry though, Paul, that unless China really comes back and gets back into buying like they had been the supply of pork and pigs are going to grow in the future and I'm worried there's going to be a mismatch here at current prices.

Yeager: When does this mismatch become exposed?

Hackett: We think it's between now and really the first of the year, we think this is when it really, really comes out. Now, there's a flip side to this. The African swine fever is ebbing in China, they have liquidated all these animals and they're going to have to start to rebuild again and that means that pork and pigs over there are going to start to take off again. So there is a yin and a yang here. We've got to get through the yin down before we get the yang back up. So it's really a tale of two different markets, bearish into the first quarter, but then we're pretty optimistic that from second quarter onward we could see some better prices.

Yeager: All right, Shawn Hackett, good to see you. We'll talk to you in just a moment. Thank you so much.

Hackett: Thank you.

Yeager: That will do it for this installment of the TV show we call Market to Market. We will talk more in Market Plus so join us there. Find that on our website of MarketToMarket.org. And information comes from all different sources and we have compiled many of the stories that we are reading into a Flipboard magazine called Market to Market Reading Material. Click on the red and white F on the homepage of MarketToMarket.org. Next week, we look at the tug-of-war over water quality. Thank you so very much for watching. Have a great week.

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

What's 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.