Market to Market - July 14, 2023

Announcer: Coming up on Market to Market. Oppressive heat and torrential rains blanket the country, the grain belts. Land values continue to trend higher. One stop shopping for the overall health of your operation. And market analysis with Sue Martin next.

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Announcer: This is the Friday, July 14th edition of Market to Market. The weekly Journal of Rural America.

Hello, I'm Paul Yeager. While the cost of everything always seems to be on the rise, one sector of the economy held steady last month. The Consumer Price Index rose 2/10 of a percent in June as everyone paid a little more for the place where they live. But the cost of dinner at home remained the same. Even without the volatile food and energy factors, the core CPI rate increased the same amount.

The Producer Price Index an indicator of what may be down the road for retail prices, increased 1/10 of a percent over the same time period. Retailers paying more for food and alcohol led to the expansion. The core rate, which also cuts food and energy, kept the pace with the aggregate index. More than 100 million Americans across 15 states will spend part of the weekend under a heat advisory.

Death Valley is projected to be the hottest place on earth as temperatures top 131 degrees. The Northeast will again be looking to the skies as more rain is in the forecast following a dramatic weekend of weather. David Miller has more in our weather wrap.

David Miller: Vermont residents spent most of the week cleaning up after two months worth of rainfall that fell over two days. High water could be found on almost every street of downtown Montpelier, the state capitol grounds being one of the lone exceptions. The community of 8,000 spent 48 hours worrying about the structural integrity of a dam upstream. However, the dam managed to hold on through the storm surge earlier in the week.

The system inundated parts of the Northeast, causing damage to this road in upstate New York.

Jeff Morrissey, New York Contractor: Washed the road out. Came right down here to the on ramp. Went over the corner, eroded all the dirt, took all the dirt, the big boulders. And it all just went into the river. The water was so intense we found tree branches out in the middle of the bridge, which was almost 150 feet away.

David Miller: A couple of storms swept through the Midwest early Wednesday morning. Much of the region from Pierre, South Dakota, to Lansing, Michigan, received significant rain later in the day. The storms intensified as they passed through the Chicagoland area. Tornado sirens sounded in downtown, but much of the damage was in Elgin, near O'Hare Airport and surrounding suburbs. Much of the Grain Belt’s rainfall came after the data cutoff for this week’s Drought Monitor.

Improvement nationally was recorded, but much of middle America is still locked in serious drought conditions. Highs over 100 degrees stretch from California to Florida as several consecutive days of sweltering heat have residents looking for ways to endure the oppressive temperatures.

Challenges that, you know, it gets hot in the summer. That's that's normal. But we're now in a climate where we're more likely to to experience more severe heat more often in. In in more parts of the country for market to market. I'm David Miller.

Paul Yeager: Last year, the story for record land sales focused on the increase in new members of the $30,000 per acre club. While those numbers tend to skew the overall price picture. Recent surveys show the market moderating a bit. Peter Tubbs has more in this report.

Peter Tubbs: Farmland prices experienced a leveling off in the first half of 2023, according to Farmers National Company, a real estate and property management firm. The first six months of the year saw a slowdown in both sales volume and value growth of farmland. Nationally, fewer properties were being offered for sale and sale prices are increasing at single digit rates, compared to double digit rates common in 2021 and 2022.

The average cropland value in the United States has roughly doubled since 2010 from market to market. I'm Peter Tubbs.

Paul Yeager: If those in and outside of agriculture learned only one thing from the 1980s farm crisis - farmers carry many. Step one - asking for help.  Whether it be financial or family, getting assistance is hard to ask for even though it may ease succession planning or keep the farm afloat.  Several groups have stepped up to offer help - including getting all the parties to slow down, step back and get perspective on what needs to be done. Peter Tubbs has more in our Cover Story.

Branden Brown, Trinity Valley Dairy: It came down to in the end that either we were going to make changes or we were going to have to walk away from the business.

Peter Tubbs: In 2016, Brandon Brown and his wife Rebekah had reached a breaking point with the milk bottling plant they had built in partnership with Rebakah’s parents on their farm outside of Courtland, New York. As the business had grown, each household was expecting help from the other for daily tasks, and defining responsibility became a struggle. New York FarmNet was brought in to mediate the family’s disputes.

Kate Downes, New York FarmNet: And so farms call us for a variety of reasons. They could call for financial guidance and coaching. They could call us for emotional support and communication assistance and building better interpersonal relationships among the family. So we really get a variety of phone calls throughout the year.

Peter Tubbs: The first call for assistance is often difficult, and producers frequently don’t understand where the problems lie.

Kate Downes, New York FarmNet: Oftentimes folks call us asking for financial guidance because that’s an easier question or an easier thing to ask for help for and with on a farm. So if you know we get a call from a farmer saying they want financial coaching and analysis, but then we show up and see that, you know, the senior generation and the junior generation are fighting in the driveway. That’s when our family consultants, they pick up on what’s going on and they’re like, OK, there’s a little bit more going on here.

Peter Tubbs: FarmNet’s financial and family consultants work as teams, bringing different skills to the situation.

Kate Downes : Our financial consultants have that farm business management. Some of them used to work in ag lending. They used to be farmers themselves and have retired. on. So we help them work through the nuts and bolts of the farm business management stuff. And then our family consultants help with that social, emotional, interpersonal communication work because 97% of farms in New York are family owned and operated, and many of those family farms are multiple generations working side by side. And that’s often where there can be disagreements and challenges and pressure points.

Peter Tubbs: Generational disagreements brought the Browns to their emotional limits.

Branden Brown, Trinity Valley Dairy: So we when we first started our business, we came back to the farm from two different jobs, my wife and I. And from day one, we really never had anything in writing or what everybody’s roles were. It was kind of assumed, well, everybody’s roles are going to be. But, you know, as the business progressed and got bigger and we decided to do more things, you know, different roles shifted and responsibility shifted.

Peter Tubbs: With help from FarmNet, they were able to sort out the details.

Branden Brown, Trinity Valley Dairy: They got us talking and we got to really see where everybody's heads were at, like, what did everybody really want to do? So it kind of opened up conversation and it allowed us to keep that conversation going.

Peter Tubbs: The conversations allowed for a formalization of each person’s role in the operation and agreements on how work across the farms would be compensated. The improved communication allowed the Browns to expand the dairy herd and add cheese making to their Trinity Valley brand.   According to Downes, on many farms, what might feel like financial problems are in reality communication problems. A reluctance to hand over responsibility to a younger generation can compound a farm’s challenges.

Kate Downes, New York FarmNet: the family consultant picking up on those nonverbal cues can really help grease the wheels of open communication and building those interpersonal relationships and even helping the senior generation turning over the reins to the junior generation. Because the junior generation might be in their 60s and has never written a check or made an actual business decision for the farm. But in recent years we’ve actually seen more farmers, farm family members, farm employees calling us and asking directly for assistance with emotional support. And you know, some of those mental health challenges that everyone has gone through in the past few years.

Peter Tubbs: FarmNet receives over 300 calls each year seeking assistance, and can have as many as 800 open cases at any one time. The group serves farmers in all 66 counties, including the five boroughs of New York City. But with dairy earning nearly half of New York State’s agricultural receipts, it’s not surprising that dairy farmers form the largest share of FarmNet’s clientele. The daily demands of milking cows can create a special kind of stress. Enabling families to communicate their thoughts on the operation can help a farm move forward both financially and into the next generation. 

Kate Downes, New York FarmNet: So really for us, what we love to see when a farm family, quote unquote, graduates from farm, that is a family that can have a functional business meeting you know, as in, everybody has a turn at the table and everybody gets to speak their mind and they’re allowed to speak their mind and that those generations who might be working side by side are working well together.

Peter Tubbs: The renewed partnership at Trinity Valley facilitated expansion on both the dairy and packaging parts of the business. A robotic milker was added, which reduced labor costs for the farm. An on-farm store was opened, which captures some of the retail dollars that had been going to the company’s wholesale buyers. A corn maze on the farm has become both a source of tourism dollars and serve as a marketing platform for their milk and cheese products to the 10,000 visitors each fall.

For FarmNet, turnarounds like Trinity Valley are common. Downes believes their clients consistently improve their operations using the agency’s consultants. In a typical year, their group serves over 700 farm families. FarmNet also receives an additional 300 calls annually from struggling farms across the state. The families that operate Trinity Valley see the assistance they received as invaluable.

Branden Brown, Trinity Valley Dairy: Just that little step six years ago has made all the world a difference of the health of our business and the future health of the business.

Peter Tubbs: For Market to Market, I’m Peter Tubbs.

Announcer: Next, the Market to Market report.

Paul Yeager:  A neutral to negative USDA report gave way to the market righting itself on a cheaper dollar, drier forecasts and rumors of renewed foreign purchases. For the week, the nearby wheat contract gained 12 cents, while September corn expanded 19 cents.   A bearish reversal in soybeans was countered by rumors of Chinese buying out of the PNW.  The August soybean contract jumped 53 cents, as August meal put on $21.00 per ton.  The nearby wheat contract gained $0.12, while September corn expanded $0.19. A bearish reversal in soybeans was countered by rumors of Chinese buying out of the PNW. The August soybean contract jumped $0.53 as August meal put on $21 per ton.  December cotton bumped up a nickel per hundredweight. Over in the dairy parlor, August Class Three milk futures increased 57 cents. The livestock market was in the green. August cattle put on $3.18. August feeders moved $1.22 higher and the August lean hog contract improved $1.05. In the currency markets, the US dollar index dropped 236 ticks. August crude oil gained $1.63 per barrel. COMEX gold added $31.90 per ounce, and the Goldman Sachs Commodity Index climbed more than 13 points to settle at 563.60 Joining us now is regular market analyst Sue Martin. Hello, Sue.

Sue Martin: Hello there, Paul.

Paul Yeager: I see all these pictures of wheat harvest and I see these farmers saying we're finally getting into the field, sometimes four weeks behind. What's that doing to the wheat market right now? That delayed harvest in spring or winter wheat?

Sue Martin: First the hard red winter wheat. I think that at first that was putting a little support under. But then you keep catching rains. And our forecast is that they will continue to get pretty good rains. So in Oklahoma, Kansas and up into Nebraska. So our take is that if they continue to catch too much, it could be a quality issue. And hard red winter awaits the protein wheat. So that would be a concern. But for now, everybody's saying, hey, it's adding in more bushels.

Paul Yeager: You have to take gifts where you can. So then when you look towards those spring contracts, you look at Minneapolis, that one has performed differently than the other two.

Sue Martin: Well, you know, the Canadian prairies certainly have their share of issues. And Canada competes on exports of wheat and they raise a lot of spring wheat. And of course, so does North Dakota. And the dryness is kind of trying to work its way down into North Dakota. Saskatchewan certainly is having their share. I mean, they raised their one of the major producers of wheat in Canada. And then you've got the western side of Manitoba also having their share of issues. Alberta is getting saved a little bit. So the trade, it's really been watching that and focused on it. Their forecast hasn't changed. It calls for continued hot and dry. That's a big concern. And everybody wants to talk about the drought dryness in the Dakotas, Minnesota, Wisconsin.

You know, maybe on down into the northern half of Iowa. But there's more to that weather forecast.

Paul Yeager: Oh, and I think you'll get to that right now when I ask about corn. This USDA report, the negative response to the market then was replaced by a big positive bounce and were higher on the week. So does that USDA report matter?

Sue Martin: I think they've already dialed it in. I think the trade was disappointed that the yield didn't drop more, but our guess was around 177.5 because we felt this is as of July 1st and you haven't even taken the crop into task selling pollination or what have you. So I thought the USDA was right on, NASS was probably right on.

I think the yield still comes down. But the kicker and as I sort of just alluded to, the kicker is the weather services that we carry, we carry several different ones, but we have one that has really been pretty on target. Now, back in June, early June was talking about how we were going to turn cooler in the latter part of that last half or so of July on through August and get cooler through the fall, has done a total flip gone hot and dry.

Now, some of these forecasts that you see are starting to allude that we're going to see after the 20th 24, something like that, that will start turning a little bit warmer and drier. The forecast that I'm alluding to is talking about that this hot and dry pattern is actually going to hit the Eastern Corn Belt again. And estimating 77% of the Eastern Corn Belt coming back as hot and dry as they were in May and through June.

Paul Yeager: So at what point does the market reflect what you're talking about, what this weather is alluding to? And what do I do if I'm in that Eastern Corn Belt or if I'm in the Western Corn Belt?

Sue Martin: Well, I think they also alluded to about 28% of the Western Corn Belt. Not sure where that 28% is. Is it just west of the Mississippi? They've had a lot of good rains or is it back towards more the western side of Iowa? The northern part of Iowa might be that. But I will say this. I think the trade hasn't gotten back there yet because they are so focused on Canada, the Canadian prairies, North Dakota, South Dakota, you name it.

But they'll get there before long. I would say probably about the latter part of July, they'll start realizing this is probably here to stay.

Paul Yeager: And later, July has provided some fireworks in the past and so maybe we'll see it again. Let's move to beans here, because in the USDA report, a similar scenario in the sense of a surprise and a shock and then almost 180 the next day. So what does that tell you?

Sue Martin: Well, I think the disappointment I think the trade was too ambitious and expecting the yield to come down again. It's July 1st and August is bean month. And yes, beans are short in many areas, but beans are prolific. You give us some rain and they can surprise you. And short beans can produce better than you think. However, again, that forecast that's coming out is a big concern because that could really hit the bean crop hard.

And I think we could see in the August report maybe a slight cut. The September report is the one where I think the corn and the beans really come home and have that Jesus talk. You know, I think that and those reports in September could be very important. I think that the bean market, you know, 14 dollar beans is good price and we're having trouble getting there.

We keep pushing up to it, but our supplies are a little tight and in fact, they are tight. Although the USDA was creative and finding ability, they cut the crush and exports for next year. Well, maybe their mentality was, well, if you have less acres, you've got less beans. There's only so much of it to go around. So they cut that.

But I think when we look at this crop and it comes down with yields start to trickle down. And of course, if we get into August and we've been hot and dry and then we turn around and we maintain that in August, I think the bean market could be very surprising. $14.27 has been the high on November beans since December, and you'd even have to go back to maybe August or so of last year.

I think the bean market is very prolific. However, that is the market that attracts longs easier and the corn market, we've been down to $4.81, $4.81 and three quarters. The trade piled into a lot of shorts and got burned. And we have to remember, crop insurance price is $5.91. The last three years we've been over the February base price.

I don't see that happening this year. I think we'll be under it, but under it could be $5.50. You know, who knows? I think we still have lows coming.

Paul Yeager: Let's quickly summarize what you just said with a question from Phil in Ontario. At this stage of the game, do soybeans offer more hope than corn for price appreciation moving ahead?

Sue Martin: Well, boy, I think beans are going to have to have that weather push to stay back up over the $14 area. I could see us going to $14.05, $14.08, maybe $14.14, something like that. But I think we have to have that weather push. And right now we have Brazil's beans kind of stealing our thunder and yet export sales and shipments are still pretty good.

So we're doing okay there. I think that the one thing I view is as we go into ‘24 is that I think we're going to draw more bean acres back and we're going to lose corn acres. And maybe price does something with that, I don't think. And here's the other thing, crop insurance, soybeans were actually below the crop insurance base last year.

Contrary to corn. So, you know, does that mean it has to stay below? No. Beans could be the surprising thing. But we may be push up over $14. You know, here's another thing. I have indicators that I watch very closely. They've served me well. And those things on monthly data are turned long on half of them. And the other half is just sitting there waiting for a nudge.

And I think that's going to come. And when that does, that tells me and corn is not far behind it either. That tells me that these prices, maybe we make some lows here in August. I thought corn could make a low in August, some think early to maybe mid-August. I was thinking more like around August 23rd, 29th, something like that.

And then we start to work our way around a meander.

Paul Yeager: All right. I need to get to livestock very quickly for a few seconds. Box beef just had a some pullback, but yet we rallied to a near contract high. What's the nudge in cattle moving forward? Is it a nudge higher or lower?

Sue Martin: I think it's still back lower. I think what we're in is a cattle market that is volatile and it's whipping back and forth. One good example was this week when you had corn down off that report, like 20 some cents or more and feeder cattle dropped. And I thought, wait a minute, that's not a good thing. I think the market is whipping and you're seeing and I think it'll continue to whip while the product continues to drop.

Sue Martin: And I think we'll do that into August. That would be a friendly situation for the longer term on this cattle market. If we rally with new highs in the fats and feeders too, whatever, into August, that's usually not a good sign into October or November. But I tell you, the numbers, we have a decent supply of numbers right now. Here's the thing that's going to hit that cattle. Okay, if the rains fix the, you know, help out the pastures and this winter we see the whole batch of heifer's for heifer retention, for breeding, and that's what sends that market flying.

Paul Yeager:  All right. We'll get you some more predictions in a moment. Thank you. Thank you, Sue Martin. Here, we're going to pause this analysis, continue our discussion about these markets in our Market. Plus, you can find both analysis and plus on our website of markets and market dot org. These resources are free. Our YouTube page is the place to find our full program marketplace and the stories that we feature each week.

Paul Yeager: Subscribe to our feed of YouTube.com slash Market to market. Next week we see how drones are delivering unusual packages that help producers. Thank you so much for watching and have a great week.

 

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

Announcer: 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

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.