Market to Market - April 14, 2023

Coming up on Market to Market - Another day in court for the control of water on your operation. Commodity groups sound off on their interests for the next Farm Bill. Plus, how climate change may be playing a role in creating more powerful storms. And market analysis with Mark Gold, 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.

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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 14 edition of Market to Market, the Weekly Journal of Rural America.

Hello. I’m Paul Yeager.

Like a stubborn or hard-headed child, inflation continues to defy description. The trend continues this week as the data revealed another set of mixed indicators.

The Consumer Price Index added 0.1 percent in March as less expensive gas and food provided some relief to Americans.

The wholesale side was lower by 0.5 percent on plunging energy prices. The Labor Department’s Producer Price Index core gauge also fell 0.1 - the first drop in nearly three years.

Retail sales were down 1 percent last month as consumers shied away from auto dealers, electronics stores and the home and garden aisles. 

The White House proposed cutting water allotments for those along the Colorado River including deliveries destined for California, Arizona and Nevada.

Decisions on what to do over a shrinking river due to drought are still needed.  The snowpack in the Upper Colorado River Basin is at 162 percent of the 30-year average but much of the region remains abnormally dry.

The Biden Administration was in the middle of two fronts over usage and regulation this week as Peter Tubbs reports. 

This week, a North Dakota federal judge granted a stay of implementation on the newest set of definitions for the Waters of The United States, or WOTUS. The stay, which blocks changes introduced by the Biden Administration in March, is effective in the 24 states that filed the suit, and joins Texas and Idaho which earned their own stays in March.

The stay reverts WOTUS enforcement to pre-2015 rules and will also be used by the EPA in the other 26 states that are not part of the legal action. The lawsuit brought against the administration’s changes argued that the new definitions would place an undue burden on the state agencies responsible for enforcement.

The Environmental Protection Agency, which is charged with protecting water quality under federal law, has struggled to define the waters under its jurisdiction across multiple presidential administrations. The new rules expanded protections to “adjacent wetlands” and “additional waters”, as determined by the EPA and the U.S. Army Corps of Engineers.

Another argument for the stay is the pending WOTUS-related decision in Sackett v Environmental Protection Agency, which is expected from the United States Supreme Court by June, 2023. The ruling is expected to address many of the unresolved legal issues surrounding WOTUS and its implementation on the ground.

For Market to Market, I’m Peter Tubbs.

An explosion at a Texas dairy farm killed 18,000 cattle this week. The exact cause is under investigation, but the disaster impacted almost three percent of the state’s dairy cows.

Massive losses are nothing new to agriculture where risk is a giant part of the equation. Having coverage for annual activities and disasters provides support to those feeding and fueling the world.

Some of the solutions will be part of the next Farm Bill. The formulation stage for the trillion-dollar legislation is in high gear as the writing of the next five-year roadmap is underway.

David Miller explains.

Listening sessions focusing on the next Farm Bill continued this week in Ames, Iowa. Three members of the Senate’s Agriculture committee heard from various Iowa farm groups. 

Sen. John Boozman, R - Arkansas: “it's all about a way of life, it's all about producing the cheapest, safest food supply of any place in the world. The Farm Bill is only about 14% now about farmers. And so, we want to make sure that you're well represented. I'm a co-chair of the hunger caucus, I understand how important the nutrition programs are, and we're going to support those.”

Senator John Boozman of Arkansas, who is the ranking member of the Senate Agriculture Committee, was invited to Iowa by fellow committee members Chuck Grassley and Joni Ernst.  All three are Republicans. 

Dennis Friest, Iowa Corn Board of Directors: Mexico on the GMO corn issue. Thank you. Thank you, thank you. That's our best market and corn. So that's a big thing.”

Many of the issues brought up were specific to a commodity as comments moved down the line for each of the titles under Congressional review.

Trish Cook, President, Iowa Pork Producers Association: “The vaccine bank is really important in the Farm Bill. What keeps me up at night is African Swine Fever being a pig producer. And of course, there is no vaccine for that. But for years, we have been asking for money about a vaccine bank for Foot and Mouth Disease.”

Wendy Wintersteen, President, Iowa State University: “How does agricultural research be respected and funded as other federal research agencies are funded at very high levels in comparison.”

Grant Kimberley, Iowa Soybean Association: “About a third of our soybeans are destined for China. They are the largest market for soybeans by far. And there is China by 60% of the world's globally traded soybeans. So, there's no market that really can replace them.”

According to Boozman, crop insurance and the ARC and PLC safety nets remain top priorities for producers. The Senator also has heard calls for conservation funding and pandemic planning. However, trade is the one big issue being brought up at every stop on the tour.

Sen. John Boozman, R - Arkansas: “it's a great opportunity right now, because we do need to diversify from China, for all kinds of different reasons. But the other thing too, when you go to Cambodia, when you go to Asia. They want to diversify too, you know, they don't want to put all their eggs in that basket. And so, it's just a good opportunity right now. And again, I'm not being partisan on this, but I think even our Democrat colleagues would agree that we haven't done a good job with trade administration's come and go, we really do have to figure that out.”

For Market to Market, I’m David Miller.

The rain started in South Florida Monday and kept going for days.

The Fort Lauderdale area recorded between 15 and 26 inches of rain. By Wednesday, the airport there closed as runways were covered.

Amounts like this are more common in hurricane season, but for April it is unusual.

Normal may be a word of the past as we will see in the third and final installment of Iowa’s Wild Weather.

Here is John Torpy with this week’s Cover Story.

In August of 2020, a collection of thunderstorms, packing hurricane-force winds, leveled large portions of landscape across eight Midwestern states. The widespread event set a record for the nation’s most expensive thunderstorm, causing more than $12 billion dollars in damage. Weather forecasters labeled the powerful storm a Derecho.

Sec. Mike Naig, Iowa Department of Agriculture:” What is so distinct about that storm is frankly, the length of time that it was on the ground. I mean, you're talking from South Dakota to Ohio. You're talking about a swath across the center part of Iowa, basically, the center third of Iowa from river to river saw damage of some kind, not all of it severe, but some damage. And then the intensity of the storm itself, the winds and then how long those winds were present. Those are things that make this really an unprecedented event.”

Described as a hurricane without an eye, the tempest did most of its damage in Iowa, wiping out millions of acres of row crops. According to the Iowa Department of Agriculture, the derecho inflicted damage in more than 60 counties, with 36 experiencing massive levels of destruction.  In all, nearly one-quarter of the corn and soybean crops were damaged or destroyed.

Sec. Mike Naig, Iowa Department of Agriculture: “The damage was so significant on some of these farms and you're looking at a crop that was damaged. Where do you even start to? To start to clean up and rebuild? And people just told me, well, we just we just got after it. And people helped and neighbors came and a family came and those are some things that that really stick with me. But and folks relieved that there was their families were safe. And yet knowing that there was a pretty major effort that was still ahead of them to try, to try to recover. And then, of course, as the days went on, then people really started to look at that crop that was in the field and say, what are we going to do? What do we have here and will we have to go harvest? What's that going to look like? And I also remember visiting with farmers who had then gone about harvesting or attempting to harvest those crops and go in one direction at mile, mile and a half, you know, per hour in the combine, you know, being really hard on equipment in that process and just grinding through a harvest that was just wouldn't end. It took forever.”

Iowa is not alone in dealing with evolving weather patterns and storms pushing wind speeds higher and rainfall amounts to record levels. In December of 2021, a severe line of storms produced an EF4 tornado in Mayfield, Kentucky. The twister was part of a much larger system that stretched over six states. The supercell thunderstorm spawned multiple tornadoes on its eight-hour, 350-mile journey through several Mid-Atlantic states. For Glisan, the significance of this storm wasn’t just the system’s severity, but the storm’s timing.

Dr. Justin Glisan, State Climatologist of Iowa: “And eventually what would become a derecho, by no means as devastating as the August 10th show, 63 tornadoes were spawned from that event. We're talking the middle of December. Okay. The largest tornado outbreak for December for the United States in the United States history across Iowa, but also the largest outbreak of tornadoes for the state of Iowa for any month in December. Blows your mind. It still blows my mind thinking about that.”

The conditions needed for storms to spawn multiple tornadoes, coupled with expanding and shifting storm fronts across the country, are among the conditions Glisan and other climatologists have been watching for several years.

Dr. Justin Glisan, State Climatologist of Iowa: “The general summary there is we're seeing more outbreaks of tornadoes as opposed to one off tornado events, tornadic events. We're also seeing some semblance of a shift from the classic tornado alley, which is in Nebraska, Oklahoma, down in Texas, and expands into parts of Iowa. It depends on what your definition of tornado alley is. We're seeing an increase in tornadoes in Dixie Alley. So, in the mid-Atlantic states, Kentucky, Tennessee, Alabama, Mississippi.”

Glisan believes that climate change is playing a role in the severe weather trend being experienced by Iowan’s over the past decade. How much climate change may have influenced the conditions that launched the 2020 derecho may not have a simple answer.

Dr. Justin Glisan, State Climatologist of Iowa: “So when we talk about climate change impacting severe weather, winter weather, any kind of weather event that we talk about, we don't use one event to dictate a trend. As a scientist, we need multiple data points that tell us in a direction that we're moving. Warmer atmosphere via physics has to hold more water vapor. So, one-degree Fahrenheit is basically 4 percent more water vapor in the atmosphere, a warmer atmosphere with more water vapor availability increases instability in the atmosphere, especially during spring. So, we've had peer to peer reviewed studies that have shown that the days in which severe weather environments have increased, especially in March, April, May, April, May, June are due to a warmer climate. So definitely there are climate change fingerprints on the larger scale structure of the atmosphere. Now for individual events was the August 10th Derecho supercharged because of climate change? We don't know yet.

For Market to Market, I’m John Torpy.

Next, the Market to Market report.

USDA’s kicking of the stocks can down the road did little to move the needle in the trade. Weather had the biggest influence on the market as spring planting shifted into high gear. For the week, the nearby wheat contract gained 7 cents, while the May corn contract rose 23 cents. Meal and oil moved independently of rising crude prices in the soy complex. The May soybean contract bumped up 8 cents, while the May meal contract added $5.40 per ton. May cotton retreated 34 cents per hundredweight. Over in the dairy parlor May Class III milk futures dropped 28 cents. The livestock market was mixed as June cattle put on 63 cents. May feeders added $2.50. And the June lean hog contract shed $1.30. In the currency markets, the US dollar index lost 25 ticks. May crude oil added $1.91 per barrel. COMEX gold fell $5.40 per ounce. And the Goldman Sachs Commodity Index gained just over 8 points to settle at 595-even.

Yeager: Joining us now is regular market analyst Mark Gold. Hi, sir.

Gold: How are you? Nice to be back.

Yeager: Good to have you here. I was talking to a friend in Oklahoma today and we were talking about how things go and it's the same conversation I think we have in July and August with a corn or soybean farmer that says it's so dry around me, why is X not happening? Why is X not happening in wheat right now, Mark?

Gold: Well, it did today. Kansas City wheat rallied 40 cents off its lows. Chicago rallied 25 off its lows or more. It came back and had a very powerful close here on the charts today. I was kind of surprised most of the week when Kansas City wheat was kind of taking it on the chin. I keep getting report after report about how bad the drought is and the yields and what's going to be plowed under and not even harvested out there. And the crop is in serious shape. And Kansas City, it had gotten up to about $9, they had put the July Kansas City/Chicago spread way out, maybe a little bit too high. It was close to $2. It backed off quite a bit. But long-term I don't know how you can be short Kansas City wheat and even Chicago wheat looks like we're trying to make a little bit of a rounded bottom on the charts, the market looks good. The price action today was exceptional, an outside up day on the charts. So, I thought it all looked good.

Yeager: But the stocks, lowest in eight years, right? So, there's some fundamental, there's some technical things you're talking about. Give me a little advice on this deferred crop then for wheat moving forward given what we have right now.

Gold: Well, I can't say I'm bearish the wheat at all. But as a risk manager would I throw a cheap put underneath it just to have something on? I probably would. If you've got wheat sold I would certainly be looking at buying call options to keep the upside open in the wheat market. And we did that on Monday in corn and beans, haven't quite pulled the trigger yet on the wheat. But I think pretty soon here. All of them I think look pretty good, particularly the old crop.

Yeager: Corn wise we didn't really change the carryout number, we didn't really change this, didn't really change that. On this old crop, to the moon, Alice?

Gold: Well, it's in position to go to the moon. We've got lower stocks, we've got this decent pretty good Chinese buying out here. We know the Argentinean crop keeps losing. Today I think they cut it down to 32 million metric tons in the corn and 23 on the beans. I mean, it's a disaster down in Argentina. So, I think ultimately, particularly in old crop we could see some higher prices. New crop corn 92 million acres planted, maybe we'll lose 500 to a million acres, 500,000 to a million acres between North Dakota and Minnesota. They're going to get some more snow in Wisconsin today, more over the weekend. But I think this has been the greatest week I've ever seen in April for farmers to get out there and plant corn. And farmers love to plant corn, they love to grow corn, they love to harvest corn. And can those acres, despite what is happening in Minnesota and North Dakota, can they stay at 92 million and maybe even move higher? I think they can. I think Monday's crop progress report will show maybe one of the biggest gains for this timeframe that we've ever seen.

Yeager: The old saying is plant in dust your bins will bust. There's some duds up there in the mud that you mentioned to the north. So, if I'm in the middle of this how do I plan, how do I take care of these spreads and figure out the best way to protect myself or position myself in corn in December?

Gold: Well, for new crop corn it's a different animal. We closed right at $5.60 which has been the real resistance area, closed right on it. Would I be looking to buy a cheap put underneath it? Yeah. If anything, if there's one section of the commodity market I'm bearish on it's new crop corn. I think the acres are going to be big. I think we're off to a great start. The weather looks pretty good. But I continue to believe that old crop corn, old crop beans, will continue to gain on new crop.

Yeager: Talk about beans for me in the relationship to global activities on this old crop versus this new crop.

Gold: Well, the old crop we've got tightness, there's no question. It could be by the time we get any new crop supplies it could get very tight in here. We know that Argentina has had a real disaster. Meal prices are strong. When they're crushing these Argentinean beans they're getting green oil, which people don't want. They're getting mush for meal. And the one surprising commodity is soy oil. I would think soy oil would be moving with the crude oil. Crude oil has had a tremendous rally. Why is the bean oil staying down here? I really don't know. But I certainly don't want to be short with the funds already short and what is happening in Argentina.

Yeager: Spreads, are they the biggest story in soybeans right now?

Gold: I would say so. This old crop can get very serious very quickly. Brazil has got a huge crop. I've been saying for the last three months I thought it was going to be 154, 155 when people were down there at 152 and 151 and 150. I thought the rains were plenty and I think we're seeing that. So, they're going to have a huge crop. But how much can they export to China? We know that the Argentinean farmers, even with this new soy dollar, they laughed at it. With the inflation they're seeing in Argentina they just aren't selling beans. So, Brazil is the game right now. They're done with harvest. We'll have to see how much business the U.S. can pick up. But we're tight on beans old crop.

Yeager: Let's go to livestock quickly because the inflationary story at the top of this broadcast, live cattle seems to be moving with inflation, mixed signals. What's live cattle, what are they up to?

Gold: Well, live cattle other than boxed beef -- look at boxed beef over $300, strong demand, there just aren't the cattle out there. We've been saying that for four or five months anyway. And we had contract highs. We backed off in the feeders and in the fats a little bit here. It's still a matter of the slaughter it was down last week because of Easter. But we just don't have the animals. Those 18,000 cows that blew up, granted they're dairy cows, but eventually they'll wind up as hamburger. But we just don't need any more losses out here. But the fact of the matter is the cattle market has been incredibly strong. What is going to cool it even with lower numbers? It's going to be the demand at the grocery store. Is Mrs. Consumer going to look at hamburger and see the prices they're getting for a pound of hamburger and start cutting back? Poultry is relatively cheap. Hogs we know are real cheap. And there are other substitutes. So, I think we're getting into a kind of a risky area here in the cattle and that is one market I would be looking for protection right now.

Yeager: But in live, I'm sorry, in feeder cattle, how is expansion possible when it's dry in the cattle areas? Does the geography of where we're going to raise cattle change quick enough to lean into this market?

Gold: You know, you put $220 and $230 on feeder cattle prices and guys will figure out a way. I heard stories just the other day of cattle operations moving into Mississippi where they can get some feed and get their cows. The markets will adapt, farmers will adapt to those prices. And are we going to see a huge shift? Of course not. But markets go in cycles, we know that the numbers are low. We know they aren't going to get better. But if you look at the spread between April cattle, June cattle, April is considerably above and I think that is telling us that come June and August we're going to see some more cattle out here.

Yeager: You said hogs were cheap. Are we going to stay that way?

Gold: No. I would certainly be looking if I was a producer and I've sold some hogs here would I want to reown it with call options? You bet I would. We're just too darn cheap in my opinion. And I think the prices can certainly move higher. We're trying to put in a little bit of a bottom the last two days. And hopefully that will hold and we can see some higher prices out here.

Yeager: All right, real quick I have to slip something in about feed needs that happened during the broadcast. Layton in Alberta asked us, he says, I'm an end user. Do I start covering fall feeds or wait until I'm closer to harvest to cover some feed needs?

Gold: Well, that's really a weather question. If you think the weather is going to be great, you can wait. If there's any scare in the weather, everybody is short December corn against something else, it could really jump up and bite people in the back side. What I would do is not play that game. I'd buy some December call options out of the money, spend 20 cents and protect yourself in case something happens because if there is a drought this summer, which I think is unlikely, everybody is short December, the funds are short now, so I would be looking to cover.

Yeager: All right, and I'm looking to say thank you, Mark.

Gold: My pleasure, always great to be here.

Yeager: Good to see you. We are going to continue this analysis but we're going to pause it right now and we're going to change it and call it Market Plus. And that is a different segment you can find both the Analysis and the Plus on our website of MarkettoMarket.org. By the way, these resources are free. Our Instagram feed was busy this week with spring field work and planting. Keep an eye on the work by following us @MarkettoMarketShow. Next week, we look at how water quality remains a challenge for Iowa utilities as well as farmers. Thank you so 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)