Market to Market - April 7, 2023

Coming up on Market to Market - An active spring weather pattern keeps farmers out of the field across the country. Yes, there’s trade happening for U.S. goods, but there’s room for improvement. Plus, using technology to monitor weather stress in near real-time. And market analysis with Sue Martin, next.

What's next doesn't happen by chance. It happens when researchers and farmers work together to solve tomorrow's agronomic challenges. We're committed to creating what's next because at Pioneer, our name is our mission.

Sukup Manufacturing. Celebrating 60 years of innovation as a family owned and operated manufacturer of grain storage, drying and handling equipment out of Sheffield, Iowa. Learn more at Sukup.com.

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Tomorrow. For over 100 years, we've worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today.

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This is the Friday, April 7 edition of Market to Market, the Weekly Journal of Rural America.

Hello. I’m Paul Yeager.

Only two percent of the nation’s corn is in the ground. That’s consistent with the five-year average according to USDA.

The next few weeks are traditionally slow for planting, but field work has usually begun in earnest by now.

However, several regions are like the Twin Cities - stuck in never-ending snow drifts as this week’s snowfall cemented third place in snowiest winters.

All across the country unstable conditions led to severe and hazardous weather. David Miller explains.

A second round of damaging weather struck the country this week. This tornado was part of a weekend system in Iowa.

Last week’s active weather pattern spawned more than 80 tornadoes and killed at least 24 in storms across southern and Midwestern states and the system continued into this week.

Rainfall accompanied the fronts - further delaying spring field work across much of the nation’s midsection. The weekly look at precipitation reveals much of middle America with spring showers and heavy rain in Wisconsin and Michigan.

Snowpack remains the story in the Northern Plains with only one or two days suitable for fieldwork according to USDA.

For the Southern Plains and into Texas, the story remains a lack of moisture and plenty of opportunity for field work.

The current Drought Monitor reveals 51.5 percent of the country is in some form of drought, the lowest since July of 2020. Parts of Kansas, Oklahoma and Texas are locked in the most severe drought conditions.

Parched conditions have led to multiple wildfires in Oklahoma. Evacuation orders were issued near Weatherford as about 15-hundred acres were burned in what’s being called the Route 66 Fire. For Market to Market, I’m David Miller.

U. S. Trade Representative Katherine Tai called for a strategy known as “friend-shoring” during a speech Wednesday night in Washington. The building up of supply chains among allied countries and relying less on geopolitical rivals like China has been a common theme the last two administrations.

The pursuit of engaging countries on non-tariff trade barriers is the theme of the Biden version of the policy initiative. 

Tai’s speech comes on the heels of a report naming specific challenges for specific goods.

Peter Tubbs reports.

The Office of the United State Trade Representative released its annual report on foreign trade barriers last week, and the listing of limits to U.S. exports is extensive.

China remains a significant challenge for trade. The signing of the “Phase One” agreement in January, 2020, expanded market access for a variety of American export products. But the report notes a lack of action on commitments on agricultural biotechnology and fulfilling promises on commodity purchases in the long term.

China’s goal to become self-sufficient in multiple industrial and technological sectors is a long-term concern. Developing economic independence requires a wide scope of state intervention and support, and would exacerbate market distortions in multiple areas.

Despite the zero-tariff environment created by the USMCA, pact partners Canada and Mexico both present trading challenges.

Mexico has blocked the import of Glyphosate and herbicides that use the chemical as well as moving forward with a phase out of all Glyphosate products in the country. Mexico has also banned future imports of genetically modified corn, and has proposed ending the use of GMO cotton in the country. The U.S. has demanded technical talks with the nation’s number three trading partner.

Canada, America’s number two trading partner also is on the USTR’s list. Domestic supply management systems for dairy, eggs and poultry hamper the importation of those products from the United States. The system of agricultural marketing boards tries to match production to domestic demand, which increases the amount paid by Canadian consumers, leaving little room for imports. The U.S. continues to push its northern neighbor to import higher amounts of milk protein products and cheese.

For Market to Market, I’m Peter Tubbs

Stress on a corn crop can come in many forms, but it is usually the lack of moisture that leads the list of factors impacting a plant.

An Iowa State University agronomy professor is partnering with NASA to turn to eyes in the sky to better understand what’s happening on the ground.

Dr. Brian Hornbuckle has been researching moisture levels in the soil for decades, but now his focus turns to the plant itself - trying to get a better handle on stressors and growth potential that will ultimately improve the bottom line for producers.

His comments are part of the next MtoM podcast and is this week’s Cover Story.

Brian Hornbuckle/ISU Agronomy: In the last 10 years or so, we've realized that this water in the plants in the crops could also be useful in telling us about what's going on with the plants. And so, we've done some work and relating this satellite signal to the water and plants. And we had found out that, yes, we can see basically plants growing that as they grow and develop, they accumulate more water. And it turns out the satellite, the NASA satellite that we're using, makes measurements in the morning, and then again in the evening, at 6am. And at 6pm. The reason why we were interested in looking at water in the morning versus one that evening is for the following reason. We think that when plants are happy, in other words, plants are they have enough water to do the thing that they're made to do, which is to turn sunlight into the stuff that we harvest the food feed fiber fuel, that we harvest from crops, when they're happy, they do photosynthesis, which is this chemical process and leaves that turn sunlight and water into and carbon dioxide into these carbohydrates that we harvest in oxygen. To do that, they have to open little tiny holes in their leaves that we call stemmata. They have to open them up because to do photosynthesis, they need that carbon dioxide to come in to the leaves. Okay. Turns out though, when they open their stomata to pink in the carbon dioxide, water vapor leaks out. So, for plants to do photosynthesis and do what we want them to do, they have an A have to have enough water so they can afford to lose some water, when they're bringing in this carbon dioxide, spend a little to make a little band a little to make a little happy plant, we should see a difference. More water in the morning, less water in the evening. Stress plants, we should see the same. That's our hypothesis.

Paul Yeager: You know, the old eyeball test of looking at a field when you're driving by at four o'clock in the afternoon when it's really warm. That leaf really kind of curls under. And it always protects the moisture. And that's when we always think the crop is stress. But if this is way more than eyeballs here on these plants,

Brian Hornbuckle/ISU Agronomy: This is more microwave eyeballs looking at the plant now in a way that we can put a number to it. And so, our hope is that we can look at number one, we want to we want to see if we can see this difference between morning and evening. And then our hope is that we could put a number on that and say, how stressed was that plant that day? And that could help us understand what are we going to get? In the fall when we harvest trees. If we had more stress,

Paul Yeager: You might understand. We had more you might understand that. That is that real stress in June or that week in July or that week in August is maybe why we lost 5% of our bushels per acre.

Brian Hornbuckle/ISU Agronomy: Because the plant couldn't open its tomato during that time because it didn't have enough water to do that. That's what that's what we hope to see. Now we're in the very early stages of looking at this. And we've only done this at three different points in Iowa so far. And we've looked at drought years versus non-drought years. And we see a signal that is consistent with what we think we should see. But there's a lot more work here to be done to really make sure that we're understanding what the data says. But the exciting thing, I guess, Doc, go ahead.

Paul Yeager: Doctor, I'll ask you this. As we get towards the end of our discussion, if I'm a producer of a field, what am I hoping that your data allows me to change or alter my farming practices to better to be a more proficient producer of grain,

Brian Hornbuckle/ISU Agronomy: Right? So here in Iowa, we operate primarily rain fed systems, right? We're not doing any irrigation. So, for the vast majority of farmers here in Iowa, we're now making decisions about should I irrigate or not? If I were in a situation like in western Nebraska, where your irrigation was a thing then this information would help you decide do I need to turn the irrigation on or not? Here in Iowa, potentially what we could use this information for, is to make marketing decisions. We can say, all right, I know there's been this number of water stress days. And I can use that information to say, Alright, I'm going to take this much of a yield hit when I harvest this fall, and that might help me decide whether or not I'm going to sell the grain that I've got stored right now or later, how might prices be like later on when I'm harvesting, I can look at what's happening in other areas in terms of the amount of water stress that's happened over the growing season. So, this information will help you make some marketing decisions, not management decisions because we don't irrigate but some marketing decisions about what to do with your crop and the crop that you've got stored in terms of prices and things like that.

The full interview with Dr. Hornbuckle will be released Tuesday as part of the MtoM Podcast.

Next, the Market to Market report.

Expanding drought conditions in the Southern Plains while any glow in last week’s USDA reports faded in double-sided trading. For the holiday-shortened trade week, the nearby wheat contract dropped 17 cents, while the May corn contract sold off 17 cents. The post-report rally retreated as the size of the Brazilian crop came a little bit more into focus. The May soybean contract fell 13 cents, while the May meal contract lost $11.70 per ton. May cotton expanded 42 cents per hundredweight. Over in the dairy parlor, May Class three milk futures dropped 48 cents. The livestock market was mixed as June cattle improved 97 cents. May feeders added 15 cents. And the June lean hog contract cut $3.45. In the currency markets, the US dollar index lost 67 ticks. May crude oil added $5.19 per barrel. COMEX gold went up by $37.60 per ounce. And the Goldman Sachs Commodity Index gained almost 16 points to settle at 586.75.

Yeager: Joining us now is regular market analyst Sue Martin. Hey, Sue.

Martin: Hi there.

Yeager: This week you were writing a lot about the weather, specifically the wind. You saw just a few minutes ago on the program the drought conditions, specifically Kansas, Oklahoma, Texas. When is the weather market impacting the U.S. trade on wheat? Or has that already been factored into this trade?

Martin: I think that's been pretty much factored in. I think for wheat the weather that is going to affect it is more the colder temps, which we noticed KC wheat on Thursday was higher. And I think that helped instill that rally in the KC wheat versus the Chicago wheat, which weather there is turning drier which it so needs. But I think as we go forward temperatures are going to heat back up. But I think the Southern Plains might catch some showers, might be thunderstorm type activity. But I'm looking for a very warm shift in the weather that encompasses much of the Midwest on into the Eastern Corn Belt and all of a sudden maybe we have probably the second fastest planting season that we've seen.

Yeager: Well, we are expected, at least here, to warm up, go from the 40s to the 80s in about four days. What does that mean for the trade if we all of a sudden warm up and get this into the ground? Because we have a couple of questions about delays, delays, is that impacting us? Is that why the market maybe reacted a little lower this week because it saw the forecast?

Martin: I think so. I think the forecast had part of it. The market had had a nice rally, like a V bottom in beans and corn with a head and shoulders bottom. So, I think that was part of the reason our high was hit on Monday and we broke all week and we closed the week lower. Coming into next week we might start off on Sunday night maybe a little bit softer and trade both sides and maybe try to bounce before we start to ebb back lower again. I am looking for, let's put it this way, in the last 50 years, this is a follow up on Naomi's comment last week, in the last 50 years, 24% of the time the market has made lows in April to May. And I'm thinking we're into that. And I kind of go back to the year of 2020. We put lows in on April 21st. I have timing for April 21st this year and I think if we break into that it should strike a nice low. We've broken maybe in price because of the weather being ideal and planting takes off and runs and all of a sudden this concern about delayed planting and loss of acres in the Northern Plains like North Dakota, parts of Minnesota, will maybe take a back burner and we'll see the markets drop. And then all of a sudden the market says, whoa wait a minute, we're kind of getting a little dry here too and so what might happen is we put a low in here in April, lift a little bit into May. I have two dates in May that we could come back and take a look at this low, May 2nd or May 15th. And then we're strong right on into the summer.

Yeager: So, are you specifically talking all commodities or one in particular here with this timing? '

Martin: Basically, I'm looking more at corn and soybeans and the wheat market I think with the weather, if they catch some rains in Kansas and Oklahoma I think that is going to set the wheat market back. But I think our bottom is in on wheat and I think it's just a moment of time before we continue to try to work higher. Usually for wheat in April and May the reason we rally is because we're putting weather premium in because of cold temperatures. Now, granted, in Kansas there was some 25-degree temps, 27. So that might have put a little support under the market. But I think the wheat market might vacillate a little bit along with the corn and beans. But I think then it kind of turns and tries to push. But that will be a little counter seasonal on wheat.

Yeager: Specifically on corn then, if I'm a producer do I just turn the markets off for a little bit and focus on getting that crop in the ground? Do I have much positive news in the next six weeks?

Martin: Well, the one thing for corn producers, if you look at that stocks report, Iowa is very tight supplied on stocks, on corn stocks. They're tight on beans too, but tight on corn. And so, there's parts of Iowa where we're having to already pull from other areas. The basis levels usually improve as you go into planting season in a normal year. So, I think this is a year be it where we're at because I think we're going to pull in Iowa from the Eastern Corn Belt, like Illinois. And I think what happens is we see a really good basis as we go through the spring and producers might want to watch that basis to lock up a basis contract with the thought that maybe they try to sell in June or possibly July.

Yeager: All right, I have a general question here that I think encompasses both corn and beans that ties into I think a lot of the sentiment that you're talking. It's from our friend Phil in Ontario who, by the way, has had a whole lot of rain this week. They don't have any snow on the ground there left in Canada. But he's asking, has the bullish agricultural commodity environment of the last couple of years evaporated or is it simply eroding?

Martin: Neither, it's pausing. I believe that the markets -- when I first came out with my really enthusiastic optimism of $30 beans and $18 corn and wheat up to $40 or so I was thinking, what I missed was that China would stay in lockdown for three years or close to three years and it's the world's largest importer. So, that I think stalled us a little bit. Now going forward they're out of lockdowns. The one reason I think they went into lockdown, besides COVID, I think there were other reasons more pushing that agenda was that I think President Xi wanted to make sure he made it in and he didn't want any protesting. But more importantly, he knew how tight their food supplies really were. I believe in June of 2020 he was already warning the Chinese population to conserve, don't waste your scraps, don't throw away food, be very conservative and I think he realized by then that Sinograin, their managers of graineries had been lying and they were in trouble.

Yeager: I want to touch on beans real quick. Would you be worried if you were long beans this weekend given some of that China news, the Taiwan a little unrest? Am I going to have a hard time sleeping if I'm going in long this weekend on beans?

Martin: I think you might get a little bit of a bounce. But here's one thing in beans, when you look at the crush, and nobody really mentions the crush, but when you look at the crush margins, in the last five months those crushing margins have dropped $2.60 a bushel. And I would say in the last month or 30 days, 90 cents of that came. So, we wonder why the meal market is taking a drop, which was very supportive to beans, and why the bean market sort of melted here. I think that that crush will gain some footing. But you've got to remember, what has happened in this timeframe, it's African swine fever in China. And so, they aren't needing quite as many beans to crush right at the moment. And then you've got Argentina, yes, coming out with starting here with as we go into Monday, starting out with their soy peso initiative and it lasts through the end of April. So that I think was weighing on this market as well. But then you look, okay, the last two soy initiatives farmers sold the beans, the exporter got them. This time I think it could be the crusher that grabs them. But they're expected to move about 5 to 7 million metric tons of soybeans. And so, then you look at okay the crush margins have evaporated a little bit here. What if Brazil has more beans? For every million metric tons that they produce more they could account for 800,000 metric tons of soy meal that they could take care of in place of Argentina.

Yeager: Okay, livestock quickly. Long positions returning here for live cattle?

Martin: Oh, I'm very enthusiastic about cattle. Now, one thing I will say, not much higher we have Elliott wave 5s, major 5s above us, but there's like three of them. And they get up as high as $175. And that would be basis June. The good thing about the cattle market is, is that it's cash led and that is a hedger's dream. So, this is a beautiful market. We cleaned it out, which it probably needed badly, but we cleaned it out on the concern of the banking industry that happened back in March. And so, the market lost a lot of long liquidation there and now it's healthier so it's coming back but it's cash led and that is a very good market and it's also a bull led market where the fronts are leading the way.

Yeager: What about in hogs?

Martin: Hogs is a different story. Our supply, the hog and pig report evidently the trade was really negative. I wasn't maybe as negative as them, but they were really negative and the report came out pretty much in line with what they were seeing. I also think we're catching hogs coming in from Canada. But I will say this in defense of hogs, I think that's a market that 85 cents on the hog market and also we have aligned with the index, so I think that market has almost got itself clean. Is it ready to take off? I don't think so. But I also don't think I'd want to be selling it here. My monthly indicators that I follow are just absolutely dirt low and that tells me just to let that market prove to me it's turning and then go on it.

Yeager: Let it ride.

Martin: Yes.

Yeager: All right, thank you, Sue, appreciate your time. That's Sue Martin everybody. We're going to pause this analysis, continue our discussion and we are going to keep going about the markets in our Market Plus segment. You can find both analysis and Plus on our website of MarkettoMarket.org. By the way, both of these resources and everything we have is free. Our Instagram feed is about to perk up with spring field work images. Keep an eye on others' work as well by following us @MarkettoMarketShow. Next week, we're going to look at how climate change plays a role in more powerful storms that are striking the Midwest. 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 next doesn't happen by chance. It happens when researchers and farmers work together to solve tomorrow's agronomic challenges. We're committed to creating what's next because at Pioneer, our name is our mission.

Sukup Manufacturing. Celebrating 60 years of innovation as a family owned and operated manufacturer of grain storage, drying and handling equipment out of Sheffield, Iowa. Learn more at Sukup.com.

(music)

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.

(music)