Market to Market - June 16, 2023

Coming up on Market to Market - The dry conditions expand and intensify across the Corn Belt. The Farm Bill hearings shift to infrastructure. Plus, the legacy left on the track - what’s next for greyhounds. And market analysis with Don Roose, next.

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This is the Friday, June 16 edition of Market to Market, the Weekly Journal of Rural America.

Hello. I’m Paul Yeager.

If you say “show me the numbers” on inflation you may avoid debate but you will likely spark an entirely new argument of the direction of the economy.

The Consumer Price Index moved higher by 0.1 percent - extending the past year’s steady easing of inflation thanks to lower gas and smaller gains in grocery prices.

One step up in the chain - wholesale prices - dropped 0.3 percent - the third drop in four months.

American shoppers were back in the stores last month as retail sales added 0.3 percent with stronger purchases of auto and parts dealers.

Then there’s the Federal Reserve’s inaction - leaving the key benchmark rate unchanged, pausing for the first time in 15 months.

An outbreak of severe weather late in the week came at a heavy price as deaths were reported in Texas and Florida.

The outbreak in the Texas Panhandle hits an area that up until recently was classified as the most severe form of drought.

Dry conditions remain in more than half of the country. This week the areas that grow the majority of America’s grain experienced a decline in growing conditions. 

David Miller reports.

Ninety-degree temperatures along with a lack of moisture is slowing the progression of the nation’s top corn producing state.

Nationally, 57 percent of the corn is experiencing drought, a twelve-point increase in a week and the highest since 2012 for this time period. 2023 conditions have deteriorated earlier in the growing season than in 2012, when the biggest impact was felt in July.  Indiana has deteriorated quickly from virtually no drought to D2 severity in just a month.

Dan Quinn, Purdue University Professor of Agronomy and Extension Corn Specialist: “Drought is so important, because it's going to impact corn, how much grain it's going to produce, how much biomass plant matter, it's going to produce. So many levels of drought throughout the season, could potentially be pretty detrimental to the to the corn crop around the state.”

Nationally, drought conditions actually decreased to 54.47. However, the biggest spots of concern are in Kansas, Nebraska and Missouri where the largest areas of extreme and exceptional conditions have the tightest grip. 

The director of the Midwestern Regional Climate Center at Purdue University says annual amounts of rainfall may stay the same, but wet, in fall or spring causes its own set of challenges.

Beth Hall, Director, Midwestern Regional Climate Center at Purdue University: “So we need to really think about when is the timing of the drought critical, because we could have a dry month. And that may not be a problem. But if it's at a critical time of vegetative development, this could be a disaster.”

Conditions deteriorated in soybean fields by 12 points this week. 

Early season stress will impact the process of getting nitrogen into the plant. Mid-season drought stresses vegetative growth.

Shaun Casteel, Purdue University Extension soybean agronomist: “If we continue to have a drought, these beings are going to abort those flowers, they're going to continue aborting those. And so, if you have flowers that are boarding, you don't have the opportunities for pods to be produced and don't have the opportunity for seeds to be produced.”

For Market to Market, I’m David Miller.

The process to enact a Farm Bill dates back to the 1930’s.

Each has expanded in scope and in 1973, a nutrition title was added.

The 2018 Farm Bill has 12 titles and work on tweaking each one is well-underway. This week, it was time to get into the literal nuts and bolts of building things.

Peter Tubbs reports.

Work on the 2023 Farm Bill continued this week with testimony on the infrastructure needs of rural America.

Financing the modernization of aging water systems in rural communities was a repeated topic.

Rep. Marie Gluesenkamp Perez, D - Washington: “When I was reviewing requests for congressional funding projects. Um, I really put a focus on municipal water programs and over and over what we're seeing and hearing from people operating these is that they are, um, often past the recommended lifespan. They're undersized, they're on the brink of collapse.”

Matthew Holmes, National Rural Water Association: “They, they do the best with what they have and they have to spend an excellent long-standing program. But again, we are dealing with so many new challenges in the water sector. It's changed out there in rural America.”

Rep. Nikki Budzinski, D - Illinois: “Can you weigh in on the issues as the similar issues as well and further discuss your organization's idea to create a rural investment initiative?”

Olga Morales-Pate, National Cooperative Business Association: “For example, the funding that you get through USDA, you actually don't see the money until you close at the time of closing. So, between the pre-development and that design piece, there is a lot of pre-development funding that is necessary to advance those projects, and it can take up to two years. The decisive communities that we work in do not have the cashflow or the ability to be able to move through that process. Unfortunately, I've seen projects that have had to be de-obligated because we're not able to get them to the closing.

Rep. Glenn Thompson, R - Pennsylvania: “What initiatives should we consider for the 2023 Farm Bill to bring high quality in demand jobs to rural America.”

Cornelius Blanding, National Cooperative Business Association: “Chairman, I think there's a lot of things already underway. Congress, USDA has been talking about infrastructure, like beef processing facilities and others, so we think it's important to look at the anchor in rural communities, which is always based around agriculture.”

For Market to Market. I'm Peter Tubbs

Animal rights activists can claim two big victories in 2023 - the upholding of California Proposition 12 and another state ending greyhound racing.

The last heat in the state of Arkansas ended as the calendar flipped to the new year leaving only West Virginia with live events.

A year after greyhounds stopped running around the track in Iowa has supporters of the dogs saying life in retirement is rewarding.

Josh Buettner reports in our Cover Story.

Greyhound racing hit its final stretch in the Midwest, in the spring of 2022, as Dubuque’s Iowa Greyhound Park, the state’s last remaining track ended over 35 years of live races.  A strong kickoff in the 1980s paved the way for a casino gambling boom, which took the financial lead.

Public Address Announcer: “Everything we do from now on is pure profit.”

Less than 10 years ago, casinos, local businesses and governments parlayed their influence into a deal with the Iowa legislature to phase out millions in state gambling subsidies, which had kept tracks afloat.  Even as dog racing decline nationwide last year, the well ran dry.

Brian Carpenter/General Manager – The Iowa Greyhound Park: “It’s a great sport to bring your family and kids up and enjoy watching it.  But it just…financially, we just can’t hold up anymore.”

General Manager Brian Carpenter began his career as a teenager leading out racers to the starting box.  He’s seen other tracks rise and fall, and additional forms of gambling peel off market share.

Brian Carpenter/General Manager – The Iowa Greyhound Park: “Florida, kind of, was the dagger in the heart.  When Florida closed, there was a lot of tracks for people to be able to run down there.  When you bred, if it didn’t run very well at one of the bigger tracks, you could go down to Florida and get your money back.”

Carpenter estimates the Dubuque closure will impact local veterinarians, dog food and other suppliers, and over 70 track and kennel workers.

Brian Carpenter/General Manager – The Iowa Greyhound Park: “It’s going to be hard for a lot of the employees.  I have many of them that have been here as long as I have been – 37 some years.  And it’s something that you work and do.  It’s part of your life.”

A surge in attendance during the park’s waning days made for a bittersweet final run.

Vera Rasnake/Trainer – Plum Creek/Oxbow Trow Kennel: “All of us coming up here and weighing our dogs in…I mean, you know, we…we put on a good game face, but believe me, it’s…to look at the dogs, because the dogs do love this.”

Now-retired trainer Vera Rasnake says public misconceptions about how dogs are treated have hounded the industry.

Vera Rasnake/Trainer – Plum Creek/Oxbow Trow Kennel: “I don’t think there was enough done to really educate on what greyhound racing really is.  And you know, a lot of it, you just hear bad.”

Rasnake says Iowa Greyhound Park’s eight kennels were easy to regulate.  And she designed conditioning around intensity of schedule and each animal’s individuality.

But animal rights groups like Grey2K say greyhound racetrack conditions are inhumane, and that dogs are subject to a host of potential athletic and career ending injuries, poor diets and drugs.  The Iowa Racing and Gaming Commission’s 2021 annual report revealed of nearly 1700 greyhounds tested, eight were positive – mostly for muscle relaxants.

West Virginia now has the only two remaining dog tracks in the country.  And while Congressional action to ban greyhound racing has stalled, a majority of states have already made it illegal.

Public Address Announcer: “This is a day we all knew was coming.”

Iowa hasn’t taken that step, and, in fact, passed House File 2497 in early 2022, which could expand simulcast options to more tracks outside the U.S.  The Humane Society has requested a veto, but the bill was signed into law last June.

Preston Moore/Iowa Director – The Humane Society of the U.S.: “Particularly of concern is in Vietnam and Tijuana, Mexico – some tracks that have some long history of animal welfare concerns.  But this bill that passed is worded in a way that the commission shall grant simulcasting licenses.”

Dubuque ran an abbreviated final season in part due to a shortage of new dogs as national interest subsides.  But breeders like Gary Reicherts are soldiering on and rebuke activists for taking credit for racing’s downfall – saying a proliferation of convenient sports gambling options is the biggest culprit.

Gary Reicherts/Owner – O Ya Greyhounds/Osage, Iowa: “Every once in a while, there’s, you know, in any occupation, there’s a person that just doesn’t do what they should be doing and that’s the ones they dwell on and then they lump us all together.  They have so much money that people are donating to those groups and none of it’s going to the greyhounds – nothing.”

Reicherts turns out about 50 racers per year and says his pups are raised in sanitary conditions, given ample space, freedom to move about, a solid diet and plenty of love.  For him, it’s paid dividends.

Gary Reicherts/Owner – O Ya Greyhounds/Osage, Iowa: “They’re supposed to be the best dogs in the United States.  They come there to race and we won it.  They run all day long.  They just love to run.  Why would I want to abuse my dog that I’m trying to make money off a dog?  We love our dogs and our dogs are almost like our kids and stuff.  These are like family.”

Drawing the ire of the greyhound trade in the U.S. is the notion that once canines stop racing, they’re euthanized.  While extreme trauma or debilitation could lead to such outcomes, Reicherts champions wildly successful adoption programs that find good homes for former racers.

Kanya Petersen/Altoona, Iowa: “We fell in love with Lucy when we met her the first time.  She showed up for a home visit and we were in the kitchen and she came around the corner and she had one of my slippers in her mouth.  So, she said this was hers and that we were going to be her family.  So yeah.”

Critics argue greyhound racing creates a population that needs to be rescued, but many who’ve adopted them and gone on to foster more find the dogs’ demeanor fits right into domestic life.

Kanya Petersen/Altoona, Iowa: “They’re so gentle.”

Jody Phelps/President – Heartland Greyhound Adoption: “I have had so many of our members come out, want to foster, you know, help transport, and that was a really good feeling – particularly since the Dubuque track was ending.”

Jody Phelps is president of Iowa-based Heartland Greyhound Adoption, one of many such groups in over 40 states and Canada endorsed by the National Greyhound Association.  Dogs come to Phelps aged 18 months to five years old.  She works with vets to determine any necessary rehab and tailors a suite of options to mesh with new homes.

Jody Phelps/President – Heartland Greyhound Adoption: “They’re just great pets to have.  We’ll still work with the breeders in Iowa that are running at other tracks.”

Phelps dismisses euthanization rumors, adding her organization has relocated nearly 4,000 greyhounds, though numbers are dwindling.

Jody Phelps/President – Heartland Greyhound Adoption: “We’ll be here until the last dog is ready to retire.”

For Market to Market, I’m Josh Buettner.

Next, the Market to Market report.

A full-blown weather market erupted in the grain trade this week as the chances for moisture were on the decline and the number of forecasts lacking even the possibility of precipitation were few and far between. For the week, the nearby wheat contract gained 58 cents, while July corn moved 36 cents higher. A better crush report than expected added to the weather story in the soy complex as the July soybean contract improved 80 cents, while July meal expanded by $19.20 per ton. July cotton shrank $2.69 per hundredweight. Over in the dairy parlor July Class three milk futures fell 64 cents. The livestock market was mixed as August cattle declined 12 cents. August feeders cut $4.07. And the June lean hog contract moved higher by $3.22. In the currency markets, the U.S. dollar index lost 136 ticks. July crude oil added $1.58 per barrel. COMEX gold lost $3.90 per ounce. And the Goldman Sachs Commodity Index improved more than 10 points to settle at 553.35.

Yeager: Joining us now is regular market analyst Don Roose. Hi, Don.

Roose: Paul, thanks for having me back.

Yeager: One word, weather. Right?

Roose: Yeah, this market is weather, weather and more weather. It's all about weather. And I always say about 80% of a market over time in the U.S. and the world boils down to weather and certainly proof the last week.

Yeager: Wheat 9% up on the week. Normally harvest is beginning this time of year. There's harvest pressure. Where is the harvest pressure? And is this weather impacting wheat?

Roose: Well, and that's a good point. I think wheat is not on its own. It basically was following the corn market up, the soybeans up. Russia is still selling wheat below the world market. But I think that's the point. How far can we move up with Russia really supplying the world for the summer with the wheat? So, just a follower, not on its own during harvest.

Yeager: Do you see that wheat has become an alternative for maybe some of those livestock folks for feed already and that's why the rise in wheat? Or is this, again, as you said, just an attachment to the other two?

Roose: Well, if you look at it the funds were caught short about 100,000 contracts of wheat. So, I think it's more, these markets, Paul, are so technical that I think it was just one that turned the trend around. We hit some positive signals, buy signals, and away we went to the upside following the corn. And, by the way, oats is the one that led the market to the upside starting April 23rd. Oats knows.

Yeager: Dang it. I was going to say that. You said it. What does corn know right now though?

Roose: Well, what the corn market knows is we went too low too early anticipating these big yields from the government, 181.5. We go to 490 and three-quarters on Dec corn too low and then we found out that, uh-oh, maybe we're not going to get a big crop. So, what we really did is we balanced back to where we were during January and February up around this $5.96 mark, tried to get to $6 on Dec corn. Now, what we're going to find out next week, does the weather give us the indication that we can go past that, Paul?

Yeager: Well, we have a great question that came in from William in Iowa via our Facebook page and he wants to know, dry, forecast for more dry, three-day weekend. How are you going to talk to your farmers into selling new crop Tuesday morning if we continue to see a weather market? Roose: Well, the one thing we know, weather markets come and go fast. Like we always say, in a weather market you take the stairs up, the elevator down. This is a market that has gone straight up. We have went up $1.07 on corn since the 1st of June. It's a market that only three weeks ago the producer could have only dreamed of. So, I think what you really have to look at, keep your marketing plan in place and if you're concerned with it then work on some alternatives to protect it is what we're seeing with some different alternatives, call options, Paul.

Yeager: Let's go specifically Dec corn, up 12.6%, 67 cents, we're just short of $6 here on Friday as we record. What are the factors that could push us even higher? And how high?

Roose: What you have to look at, each week in a weather market my experience says you have to ask yourself, do you think the crop is getting bigger or smaller? And of course, that is going to be dependent on weather. So, this market is very stretched out going into the end of the week. We've got a three-day weekend and if we come in and the weather looks hot and dry extended -- now, we've already got a weather forecast at these price levels probably dialed in through to next weekend. So, that's not the case, we already are out in the futures market far ahead. So, you're probably going to have to have it extended past that, Paul, probably have to have it close into the 1st of July.

Yeager: Corn is one thing, beans are another. Why are the beans so responsive to this weather forecast like corn is?

Roose: Well, the corn the concern is that we're forming the size of the ear right now so we're moving up. The soybean market is a little bit different. It's just sitting in place. It's waiting to see if we can get some rain. But if you look at it, it's really the soybean market really, corn took off first, soybeans didn't quite get there, while corn is back to the winter highs that $5.96, the November soybeans it's really $13.50 to $14, so we're still shy of $13.50. So, let's put it this way, soybeans are playing catch up.

Yeager: Well, the Nov beans there, you see the end of that trendline just shoot right up approaching $14. We were clinging to the $13 mark just a couple of weeks ago. Things change quickly. So, I guess I ask on the other side of this, how quickly can this go down specifically in soybeans if A, it rains over the weekend, be a forecast dramatically changed, or something technical expires?

Roose: Well, we're on a $2.17 rally in soybeans, remarkable, $1.07 on corn since the 1st of June and it's a market that can, it's a supply-driven bull market, Paul. And so, what that means is that we're not going up on the demand side, so that is a dangerous market. If you look at it the July corn has lost 42 cents to the September soybeans, July has lost 77 cents, the basis levels have collapsed. So, as we're moving up we're losing demand. What you're really seeing is the South American farmer, he's selling into this crop because he's selling his new crop at our old crop prices on corn and soybeans and that is anchoring the market. And our producers are selling a little bit but it's really South America, Paul.

Yeager: I had a great conversation over the weekend with someone who had not sold anything new crop related, corn or soybeans. Looks pretty smart now. But, now smart can that person be? How much longer before maybe they should think about rewarding this market with a few sales?

Roose: Well, a weather market can make you look really smart and really dumb pretty fast, Paul. So, that's why I say keep a marketing plan, be very careful because these -- we go home Friday very, very stretched out. You're going to have to have continued news. A bull needs to be fed daily, for sure weekly, and a bear just has to show up. So, be pretty careful. These are markets that turn on your quickly. We've seen them all. I remember even in 1988 we went from limit up, you weren't supposed to rain on a Friday and bingo, that was the top and the whole weather forecast changed and we go home Friday and the weather forecast everybody agrees hot and dry, the media is on this market, and those are dangerous markets.

Yeager: Especially the days that we talked about that we have on Monday. Let's get to livestock. That had a bump a couple of weeks ago. Now we've kind of retreated a little bit. Are these technical moves right now?

Roose: Well, if you're looking at the cattle market it had a key reversal a couple of weeks ago. That is a sign of a major top or a major intermediate top it looks like it now. The cattle market has continued to slump lower. It looks like the cash topped out this week. We dropped $4 to $5. In the summer months are just too big of a discount, waiting for the cash to catch up, so that's really what is happening in the cattle market here.

Yeager: Do you anticipate that this topping leads into some type of wave back up?

Roose: Well, on the cattle market usually we drop from the top on cash to the bottom in the summer about 10%. So, if you look at it, if you believe that, look at that, our demand usually this time of year as we move closer to the 4th of July it's hot dog and hamburger time. So, we should get into a slump. It's a cyclical bull market, so a summer slump followed by some kind of a rally again. But at $188 where we were on April 24 cattle, you have the cattle price you would think almost fully valued in. So, it's not that we're in a cyclical bull market, it's how much have we got dialed in?

Yeager: What about in feeders then? I mentioned earlier about feed alternatives already. They look like maybe was there a small window to cover some feed needs in feeders? Has that evaporated? Or is that why we saw this decline as the grain went up?

Roose: Well, of course the feeder cattle are kind of the opposite of the grain market. So, same thing, they had a key reversal a couple of weeks back with the cattle. But, the grain market moving up, the back months of cattle moving down, interest rates going up, feeder cattle come under pressure kind of logical. Their seasonals are negative too on the feeder cattle, Paul.

Yeager: Let's see, hogs have gone up I think it's $2, $2 and now $3 the last couple of weeks.

Roose: I think the last time I was here we were talking about the hog market was getting too low and it rallied $20 and the funds were just too short. So, I think where we've done now is we've rebalanced back. But we've got a lot of liquidation going on, Paul, up to 300,000 sows, so that means maybe you're back up to some hedgeable risk management places up here is what we're seeing now again. But certainly, the hog market looks like it's got a bright future, you get past February on into next year. But you're at $96 in the summer months of next year.

Yeager: So, we have some better months ahead still in hogs is what you're saying?

Roose: Yeah, I mean, I think because of the liquidation we probably stall here. But then when you look out a year from now -- if we were to liquidate 300,000 sows, which is looks like that's going to be eventually if you calculate it out, 25,000 pigs a week, slaughter comes down.

Yeager: All right. Thanks, Don, appreciate it.

Roose: Thank you, Paul.

Yeager: That's going to do it for our Analysis. We'll pause it here. We'll continue in our Market Plus segment and we'll answer some of your questions. You can find both Analysis and Plus on our website of MarketToMarket.org. These resources, by the way, they are free. We make it easy to never miss any of our offerings when summer season hits full stride. We have three podcasts to keep you informed of markets and the stories around agriculture with our MtoM podcast. Follow today to stay up to date. Next week, we take a look at why scientists are sounding the alarm over the lack of genetic diversity in livestock. 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.

(music)

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)