Market to Market - December 16, 2022

Paul Yeager:  Coming up on Market to Market, snow, tornadoes and high winds sweep the country. We'll also take a look at work being done to keep the Mississippi River open for business. Plus, exploring new shipping routes through the Great Lakes and commodity market analysis with Ted Seifried next.

Speaker 2 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.

Speaker 3 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.

Speaker 3 This is the Friday, December 16th edition of Market to Market, the Weekly Journal of Rural America.

Paul Yeager: 

Speaker 3

Paul Yeager:  Hello, I'm Paul Yeager. The exhale you've heard this week was the economy after the Fed grabbed headlines. But the devil was in the details of several economic reports. The Consumer Price Index moved higher by a 10th of a percent on a month to month reading the core snapshot of inflation without gas and food rose 2/10 of a percent.

Paul Yeager:  The annual figure was up 7.1, which is lower than the peak back in June, when the mark was 9.1%. Retail sales moved lower by 6/10 of a percent in November, as consumers pulled back spending on furniture and electronics. The Federal Reserve surprised no one on another rate hike. What did cause some eyebrow raising was the only half a point increase in the benchmark rate.

Paul Yeager:  The week in weather was heavy. Heavy snow, blustery winds and deadly severe storms in the south. At least three people died in tornadoes that stretched from Texas to Florida. The systems also brought much needed moisture along the watersheds of the Mississippi River. Now, much of the snow will melt and flow downstream for months, which is prompting those along areas still open for barge business to take drastic measures to keep goods flowing.

Paul Yeager:  Peter Tubbs reports from Mississippi.

Tubbs The water level of the Mississippi River has improved in recent weeks, but the river remains too low for normal shipping volumes, draft depths for barges along most of the river are down 30% compared to normal levels. River depth in the lower Mississippi River have improved since record lows in October, but water levels between Saint Louis and Cairo have deteriorated.

Tubbs The river level at Memphis neared the minimum operational limit in October, but has risen 16 feet in the last six weeks. Some barge operators have reduced the number of tows by half, and those tows include a reduced number of barges due to width restrictions on the river. Barges are often loaded at only 75% of capacity. Recent rains in the lower watershed have raised river levels by up to ten feet in sections of the channel.

Tubbs But the long term prognosis is for lower than average levels to be the norm until the drought is broken. Cape Girardeau, Missouri, sits 50 miles upriver from Cairo, Illinois, and is accustomed to dealing with wide swings in the depth of the Mississippi River.

Mayor Stacy Kinder For our area, the last major drought occurred in 2012, so ten years ago. So in between then and now, both of which were record setting drought disasters. We here in Cape Girardeau have seen several record setting flooding issues.

Tubbs While it has experienced some economic loss from the lower river levels on a reduced basis for grains raised in the region has recently experienced damage to its infrastructure due to drought conditions. In October, shifting soil broke a 14 inch water main, which placed the entire city under a boil order.

Kinder So record setting drought, record setting flood, record setting flood. Now record setting drought, that takes a toll on on every city, every industry, every business. And it's just not very well seen. It's not obvious, but there's a lot of expense there.

Tubbs For Market to Market, I'm Peter Tubbs.

Paul Yeager:  William Shakespeare said Sweet are the uses of adversity. The more modern version is making lemonade from lemons. The supply chain challenge of 2020 and 2021 sparked responses from creative thinking and turned into opportunities and diversity in how goods get from one point to another now. Much has been reported about shipping on the coasts, but the Great Lakes region is employing new and cost effective ways to move goods out of the Midwest.

Paul Yeager:  The following story was done by Detroit PBS and their Great Lakes Now program. Laura Weber Davis reports.

Laura Weber Davis:  Since 2020, back ups at ports in the Atlantic and Pacific coasts have left cargo ships stacked up, waiting to unload in the U.S. and rising fuel costs, congested highways and a shortage of truck drivers are also creating headaches for businesses wanting to get their goods in or out of the U.S. interior, and they're looking for other options. Will Friedman is president and CEO of the Port of Cleveland.

Will Friedman:  The companies that need to move these goods, either as a manufacturer or as a retailer, they're pretty desperate. And so, you know, necessity is the mother of invention and they're now asking much more so than previously why can't we get a ship into Cleveland and just avoid all that gridlock at those big ports?

Davis:  But rerouting cargo from congested coastal ports to Cleveland isn't so simple. On the Great Lakes, freighters mainly move bulk cargoes like iron ore, grain and coal that are loaded loose into the ship's holes. But globally, most cargo is moved in containers. Great Lakes freighters and the ports they visit aren't really set up to handle large shipments in containers, but that may be changing.

Davis:  In 2014, the Port of Cleveland saw an opportunity and developed the first container service on the Great Lakes to handle import and export cargo. In partnership with Dutch company Split Half, they created the Cleveland Europe Express with a regularly scheduled route between Cleveland and Antwerp. The Peyton Lin Sea, a small container ship, travels out of the St Lawrence Seaway and across the Atlantic.

Davis:  The trip takes approximately 14 days, with a few days in each port to unload, and the opportunity to move. Other types of cargo on the Great Lakes in containers is providing new cost effective transportation solutions for some shippers.

Friedman:  It actually does help with cost for a ship to come all the way into Cleveland, because the longer you keep cargo on the water, the more economical it is. The majority of the cost to move, let's say a flat screen TV from China to Chicago or Columbus, Ohio, is the Inland Transportation the over the land transportation. Once it's on a ship, even if it's a smaller ship, it doesn't have to be a mega ship.

Friedman:  It doesn't cost that much because you have those, you know, economies of scale and you're just pushing that ship through the water. You're not burning as much fuel. It's also more sustainable. It's also a greener form of transportation.

Davis:  And according to Friedman, shipping through Cleveland avoids the delays that can happen at congested ocean ports.

Friedman:  Unlike the big ports where your container may be on a ship and it sits at anchor, you know, waiting to get to a berth for 30 days or 15 days. Our service is more reliable.

Davis:  In Cleveland, the cargo in containers has been mostly industrial non consumer goods and exports from northern Ohio and bordering states. But on more than one occasion, they have been the answer for a business outside their region.

Friedman:  We just had some rubber, synthetic rubber moving up from Houston, getting trucked all the way up here to get loaded on to the patent and go to Europe. So those are the kinds of, you know, somewhat counterintuitive moves we're seeing here with all these supply chain problems. They could not get a ship or find space on a ship out of Port of Houston.

Friedman:  So they moved that rubber all the way up here.

Davis:  And Cleveland isn't the only Great Lakes port that's looking to expand its container shipping. The Port of Duluth Superior is the largest port on the Great Lakes by tonnage, including the Twin Ports of Duluth, Minnesota and Superior, Wisconsin. And it's making waves in container shipping. Deb DeLuca is the executive director of the Duluth Seaway Port Authority.

Deb DeLuca, Executive Director, Duluth Seaway Port Authority: From here you can reach major markets such as the Twin Cities, Fargo, Des Moines, also Milwaukee and even down to Chicago. So it's from a logistics standpoint that's very attractive.

Davis:  Last fall, the Port of Duluth was granted approval by U.S. Customs and Border Protection to handle shipping containers by water. And just recently, it exported its first shipment, 200 containers of kidney beans from a company in the region.

DeLuca:  They were having difficulties arriving a supply chain solution. With all the snarls and backups and supply chains over the past couple of years...They were not able to get their goods to market, so they were working with the freight forwarder trucking company. They were looking for an alternative solution, and that ended up being Samuel's containers by ship through our terminal.

Davis: Great Lakes ports are also looking into new options, like a feeder service where containers are offloaded in bigger ports and transported along the St Lawrence Seaway in smaller vessels similar to what is done in Europe.

Davis: Along with all the opportunities, there are many challenges to container shipping on the Great Lakes, including the locks of the Saint Lawrence Seaway, which restrict the size of the ship.

Friedman:  If you're coming into the Great Lakes from outside the system, you're limited by the dimensions of the locks. There are 15 locks that get you from sea level up to where we are, which is roughly 650 feet above sea level. And those lock dimensions are roughly 750 feet long and about 75 feet wide. And the controlling depth of the water and all the channels on the Great Lakes is about 27 feet, 27 or 28 feet. So ships can't exceed those dimensions.

Davis:  Another factor that has been challenging for container shipping is the shortened season. Both the Saint Lawrence Seaway and the SOO Locks closed during the winter.

Friedman:  Many who use the system or ports on the system are like me advocate for let's keep the system open longer. We think that's feasible from a technology point of view. We all know, unfortunately, with climate change that we're not getting as much ice cover anymore, whereas aren't as severe. Let's allow more year round shipping or closer to year round shipping.

Davis:  Both the ports of Cleveland and Duluth expect to move more shipping containers in the coming year.

Speaker Next, the Market to Market report.

Paul Yeager:  Drier conditions in Argentina and colder U.S. weather impacted the trade. For the week, the nearby wheat contract at a $0.19 while the March corn contract, it improved $0.09. China's emergence from COVID restrictions provided a volatility jolt to the soy complex as the January soybean contract lost $0.04, while January meal dropped by $8.60. March cotton expanded by 97 cents per 100 weight.

Paul Yeager:  Over in the dairy parlor January Class three milk futures added a penny. The livestock market was mixed as February cattle added $0.23. January feeders cut $0.15 and the February lean hog contract, a busy Friday, ended on a gain of a $1.78 for the week. In the currency markets, the US dollar index added 22 ticks. January crude oil improved to 62 per barrel.

Paul Yeager:  COMEX Gold shed $10.60 per ounce and the Goldman Sachs Commodity Index was higher by nearly 19 points to finish at 588.85. Joining us now is regular market analyst Ted Sefried. Hello, Ted.

Ted Seifried:  Hey, Paul.

Paul Yeager:  I want to look at headlines. I want to make sure I get something right here, because this is the week of early in the week. We're asking, is this a dead cat bounce? Kansas City shows some promise. Then we had no fresh news. Then all of a sudden, it got cold. Yeah. What's the biggest mover in wheat this week, in your opinion?

Ted Seifried:  Well, I mean, look, that cold is an issue. There's a lot of weather as a whole. I mean, when you look at snow and things like that, which is I mean, there's snow is good to a point. You throw 22 to 24 inches two feet of snow on something that's maybe getting past that point of good. But for the areas that didn't get snow, I mean, there's some really, really cold temperatures coming in here.

Ted Seifried:  That's kind of what we're looking at. We're worried about, you know, winter kill, it's wheat. You know, we can kill wheat how many times and it still can manage to yield. But with conditions being as poor as they were even before that, with all the drought conditions, I don't know if we'll have such a resilient crop this year.

Ted Seifried:  And you look at the drought conditions and the correlations, there's been a lot of studies done. We are not set up for a very good wheat crop this year.

Paul Yeager:  What are we set up range wise then, given what you're saying?

Ted Seifried:  Well, there's the other side of that equation, though, Paul, is demand. And the demand for wheat has been really lackluster as well. And, you know, you look at wheat, we are well off the highs that we had from the initial, you know, short squeeze that happened when Russia and ready to invade Ukraine. But we're still with kind of relatively high prices for wheat.

Ted Seifried:  So, you know, given all the fundamental inputs, the supply issues, but also the demand issues, you know, you can really make a you can make a bullish case on the supply side. That bullish case gets diluted by the demand side of the equation. And then again, you look at where the prices are. You know, if we were trading $5.80 wheat, you'd have to say the supply issues are enough to give us a rally.

Ted Seifried:  But based on the fact that we're not trading, we're well higher than that. You're really kind of left in limbo and you're left with a market that's just really searching to try to find a bottom. And maybe we have I don't know, you didn't have very convincing price action this week. But, you know, sometimes it takes a long time to carve out a longer term bottom.

Paul Yeager:  We didn't have enough action to form the bottom. Is that what you're saying?

Ted Seifried:  You can have a convincing price action. Okay. That's the lows in now.

Paul Yeager:  All right. So but we did pull corn along for a little bit for all of week, but corn also had some export news that was encouraging. No?

Ted Seifried:  Better than it has been, but we're still 48% behind where we were this time last year.

Paul Yeager:  So given the news of the week ...

Ted Seifried:  Yeah.

Paul Yeager:  Have we set either a bottom or a top in the near term for corn?

Ted Seifried:  That's a good question. I mean, we're heading into some very well potentially very light holiday trade, choppy holiday trade. And generally speaking, the seasonality is positive for the time frame between the December report and the end of the calendar year. And that's usually because we don't end up making a whole lot of cash sales in that time frame.

Ted Seifried:  Generally speaking, we're all we don't want to mess with our taxes any worse, any more than we have. It's time we spend families. So we're not really busy hauling in things like that. And generally speaking, we are a little bit concerned about South American weather. So usually that's a it's a good time of year to see a little bit of a bump.

Ted Seifried:  It's also a really good time to get some of the new crop marketed. Whether this year's the same or not. I'm not 100% sure. We're already kind of at some elevated levels. We've already factored in some South American weather in the form of Argentina dryness. If that Argentina forecast changes dramatically over the next couple of weeks, I think we could see a counter seasonal move.

Ted Seifried:  But that's a big if if it doesn't change. Yeah, I think there there's a chance that we have a halfway decent recovery in corn after the break that we saw earlier in the month.

Paul Yeager:  But the line is so small between Argentina and Brazil. Brazil gets rain. Can they get enough and create enough to counter your counter seasonal rally that you're talking about?

Ted Seifried:  Brazil looks pretty good. There are some problem areas in Brazil and that's for sure. So the question is, going forward, do does the issues in Argentina spread northward to Brazil? And are we talking about a wider a bigger, bigger drought impacting a bigger area, but also maybe in a more important area in Brazil? Or are we looking at the Argentinean issues maybe starting to dissipate and go away?

Ted Seifried:  Like so many times in our growing season in the US, we'll start with some dryness, but by the time you get to June or July, the weather pattern changes and all of a sudden we're talking about a normal or maybe even better than normal crop. There's still a chance for that to happen in Argentina. Argentina is 53%, 55% planted at this point.

Ted Seifried:  They're still planting this crop. So it's not like it's July in Argentina right now. There's still a lot of time for that to turn around. It doesn't look great at the moment. The extended forecasts don't look great. It's a lot of heat, but weather patterns can change.

Paul Yeager:  Soybeans also had some export story to tell. Yeah. Did you like the export story better in soybeans?

Ted Seifried:  Well, the export story for soybeans has been better for quite some time. I mean, we are on pace to hit the USDA target and maybe even beat it if we are going to continue to see these sales elevated the way they have been. It was, I think, the second best week for soybean sales in this marketing year so far.

Ted Seifried:  Yeah, the soybean sales are good. You almost wonder with the fact that exporters are continuing to sell as aggressively as they are they must not be too terribly worried about running out of soybeans further on down the line. So you wonder what that means for that January report, you know, so pretty soon we'll start talking about what our expectations are for that January report.

Ted Seifried:  That's a big, big deal. You know, that's the final production number, a quote unquote final, which is the final numbers have a tendency to get revised as well. But there'll be big changes on that January report. The question is in which direction?

Paul Yeager:  All right. Let's do a little range game then with soybeans. Between now and that report that you're mentioning on the 13th of January, what do you see for a top in the November contract for soybeans?

Ted Seifried:  The way the way it was acting on Friday, the way the price action has been acting this past week, it seems like soy, soybeans want to probe higher. But every time we see that, we run into the $15 level and we kind of fail, I think there's a pretty decent chance that we're going to take a shot at like $15.12, somewhere in that neighborhood.

Ted Seifried:  But then again, it's a weather market right? If that weather changes or the news changes, I mean, there's so many different factors that can come out of the blue. I mean, if we've learned anything in the last five years, Paul, it's that we should expect something to be coming out of the blue at any moment. So look left to our own devices, really no change in weather, no change in outside factors.

Ted Seifried:  Yeah, I think we can check out that that $15.12 area or so, but who knows?

Paul Yeager:  What you said gave me a question. I'm going to ask you in Market Plus so I’ll tease that you have to come into Market Plus to see us talk about that. Let's get Glenn in Ohio's question to Ted here now, because Glenn's a little bit looking ahead there. He says planting in Brazil and Argentina nearly complete. Will the dry weather in that region dominate the supply demand conversation, or will other fundamental events in the U.S. be the primary market mover now until spring?

Paul Yeager:  He's extending the past the report have kind of danced around both. Now we're going to make Glenn put you on the hot seat.

Ted Seifried:  Yeah. And I kind of usurped Glenn a little bit here because, again, Argentina is you know, they're not quite 60% planted. So when we say almost complete, I don't know. I don't know if that's a fair statement. Also, look, Brazil has multiple crops and it is a very, very big area. So they are planting and harvesting at the same time in a lot of a lot of times.

Ted Seifried:  So the South American weather story is really just getting started. That's something that we'll be watching very closely into June, for that matter. So when you talk about the second season corn crop and harvest and everything like that.

Ted Seifried:  So yeah, I think the best way to answer this question, Glenn, is that lack of any other strong outside market influences, right? We are going to focus on grain fundamentals. And what those grain fundamentals are for the moment is really based on South American weather and what's happening from an export standpoint. Those two things are very much related, by the way, but as we talked about, at any given time, we can get something to come into the market and completely shock it and make the outside fundamentals more important than the actual grain fundamentals.

Ted Seifried:  We're not in that time frame right now. Not saying that can't happen, though, at any given point.

Paul Yeager:  All right. We need to move to livestock real quick. Cattle equity pressure or do you buy this as a technical move? And then we gapped lower on Thursday. Still in an uptrend with cattle.

Ted Seifried:  You've got a nice little bull flagging kind of situation happening on the near-term cattle chart where the expectations are for just for supply to drop very dramatically in the first, second and third quarter of next year. If that happens, that's going to keep a pretty solid floor under cattle. You do have to worry about that equity market really kind of coming off.

Ted Seifried:  You know, our is the domestic demand going to be a problem but short of a big, big problem in the stock market or overall economy as a whole I think the cattle market's got some pretty firm footing underneath it. I think we'll try to go higher at some point. Break out of this. Again, bull flag scenario is a good, good thing to look at on a chart.

Ted Seifried:  And the way it traded on a Friday to me acted like it wants to stay in this range for now with the potential breaking out further on down the line.

Paul Yeager:  Same theory in feeders.

Ted Seifried:  Same theory in feeders. Feeders are going to be, you know, more tied into corn activity. And it was a positive week for corn. Corn had that that strong day right off the bat in the beginning of the week and then really held it throughout the week. I think that weighed on feeders a little bit, but yes, I'm optimistic there's upside potential for feeders as well.

Paul Yeager:  I looked at grains at midday and forgot to check the livestock market. The hogs kind of took off. What happened?

Ted Seifried:  Yeah, hogs really did kind of take off. So, you know, hogs have been trading this very wild range for quite some time and the moves have been pretty significant. We had gotten very oversold in the short term. Surprisingly cut outs came out quite a bit better. I think that is kind of what sparked it. But being oversold and being in this choppy range, I think that just, you know, kind of lit a match for a technical fire and you had a really nice recovery day there in hogs.

Ted Seifried:  Now whether we're able to follow that up early next week or not is the true test. You know, is that going to legitimize what happened on Friday or not? I really don't know.

Paul Yeager:  In our few seconds remaining is the China story about they're just opening wide up after COVID. Is that impacting which market the most, the hog market, the soybean market or something else?

Ted Seifried:  Do I think soybeans the most? I mean, look, soybean meal for a number of reasons, maybe some of them unknown right now has been on fire. And that's what's really helping the soybeans. And I think China has something to do with that. But then also South America. And as far as the hogs are concerned, you know, the Chinese story would be extremely helpful for hogs if we were to start seeing that reflected on an export sales sheet.

Ted Seifried:  To this point, we've not seen that. So we have to wait and see over time if that those are not.

Paul Yeager:  Great questions to come in Market Plus. We're going to get into ethanol and oil, plus questions out of Canada, Nebraska, Wisconsin and Iowa. So the gamut come in for you, Ted. All right. Thank you very much. That's going to do that for the show. We're going to put a pause on this analysis, continue our discussion about these markets and our Market Plus segment.

Paul Yeager:  You can find that on our website of markettomarketorg. We have that in podcast form. We also have it on YouTube. And all of these resources, by the way, are free. The season for catch up, clean up and make sure you be good for Santa is here and we can help keep you in the learning mode with a podcast.

Paul Yeager:  We have three options the market analysis, the market plus and the MtoM. Wherever that you get your podcasts next week, we highlight an individual working for the greater good and feeding the world. Thank you so very much for watching. Have a great week.

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

Speaker 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.

Speaker 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.

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.