Market to Market (October 26, 2018)

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Coming up on Market to Market — Making headway in rural America’s battle against opioids. Expanding the market for a fall front porch staple. Those stories and market analysis with Naomi Blohm, next.

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This is the Friday, October 26 edition of Market to Market, the Weekly Journal of Rural America.

Hello, I’m Delaney Howell.

Americans may be holding off on the purchase of a new place to live but they have yet to curb their online order habit. —

The sales of new homes plunged 5.5 percent last month, as prices and mortgage rates continued to drag the index lower.

Orders for durable goods moved 0.8 percent higher – a sharp slowdown from August’s jump of 4.6 percent.

Orders moved just 0.1 percent higher without the 17 percent drop in aircraft sales.

U.S. Gross Domestic Product grew at an annualized rate of 3.5 percent in the third quarter. Some economists are projecting 4th quarter numbers will show the best growth in 13 years.

Even with the positive report, Wall Street continues to retrace its gains causing many to wonder if a slowdown is next. —

Rural American’s face many of the same problems as their urban counterparts. One of them is the fight against opioid addiction. This week, President Trump sent reinforcements to those on the frontlines of what he has labelled “a nationwide public health emergency.”

John Torpy has more.

Those fighting the battle against Opioid Misuse Disorder received good news this week as a positive report from the Centers for Disease Control was combined with a new law aimed at supporting those on the front lines of the epidemic.

Secretary of Health and Human Services Alex Azar announced mortality rates from opioid overdose have slowed this year. His statement was based on a new CDC study showing opioid deaths had decreased in correlation with an introduction of advanced treatment options and easier access to anti-overdose drugs.

According to the study, the increase in the number of opioid overdose deaths declined from a growth rate of 10 percent in a 2017 to just 3 percent in 2018. Officials with the CDC were only able to estimate the number of opioid deaths in this year due to a time lag between reporting and data compilation.

The federal agency also has provided additional ammunition for those pushing back against OMD by infusing $1 billion into ongoing treatment initiatives.

While the news was seen as a win for those fighting the nation’s worst opioid epidemic in history, there were still 50,000 fatalities from opioid overdoses last year alone.

President Trump’s signing of the Support for Communities and Patients Act this week will reinforce those fighting against opioid misuse disorder. The legislation provides new resources for treatment and works to curb the amount of opioids coming across the border and over the counter. President Trump has promised to put a big dent in the epidemic by directing the U.S. Postal Service and the Department of Homeland Security to scan packages entering the country for banned narcotics. The scans will include the search for Fentanyl, an inexpensive drug fifty times stronger than heroin. At the counter, pharmacists are filling opioid prescriptions with fewer pills, in an attempt to keep excess medications out of the illicit drug supply line.

The legislation further expands support for treatment facilities by expanding Medicaid coverage to addicts who are in treatment. The measure also gives the judicial system new tools allowing the courts to send addicts to treatment centers instead of jail.

Peter Komendowski, President for a Drug Free Iowa, ”Peter says something here”.

The slowdown in opioid related mortality rates and continued support from the Trump Administration is seen as a bit of good news by Komendowski and others in the ongoing battle against the disease. But with three out of five drug overdose deaths related to opioids, those who are helping the nation’s 10 million addicts, see a long road ahead.

For Market to Market, I’m John Torpy.

The wet summer drowned more than just corn and soybeans. Heavy rains washed away the Maryland pumpkin crop.

Other states are left to fill the orders for what becomes trick-or-treat beacons and fall desserts. Among them is Illinois where pumpkins are big business.

Josh Buettner has our Cover Story.

Since returning to central Illinois during the farm crisis of the 1980s, John Ackerman has raised various commodities, specialty crops and animals to keep his multi-generational operation afloat.  But embracing his hometown’s unique flavor is what’s truly entwined his family name into local roots.

John Ackerman/Ackerman Family Farms – Morton, Illinois: “We’ve got 32 acres this year of hand-picked ornamental pumpkins, gourds and squash.  And we raise over 160 different varieties too…We have red pumpkins.  We have white pumpkins.  We actually have blue pumpkins here.  This one is a Red Warty Thing.  That is honestly the name they gave this one…”

Despite persistent regional rains threatening some grain and oilseed viability this year, Ackerman says the Morton, Illinois area has seen a bumper crop of pumpkins over the past 5 or 6 years.

John Ackerman/Ackerman Family Farms – Morton, Illinois: “We actually grow thousands of these every year.  These come in all different shapes and colors.  People decorate with these all the time.”

And so once again, iconic Ackerman Family Farms is serving up a vast array of seasonal gourds and squash, with a dash of farm life.

John Ackerman/Ackerman Family Farms – Morton, Illinois: “When we give field trips, we try to let them interact with the animals.  We want them to feel the feathers on a chicken, the fur on a bunny, the fiber on an alpaca, the wool on a sheep, the hair on a goat…We’ve learned that not only are we selling a product – we’re selling produce out here – but we’re selling an experience too.” 

Commercial pumpkin patches are a classic set-piece of harvest-time Americana.  And though Morton, Illinois has earned the nickname “Pumpkin Capital of the World”, it isn’t the traditional jack-o’-lantern style that’s globetrotting…

John Ackerman/Ackerman Family Farms – Morton, Illinois: “Gotta give them a lot of credit.  When they took that wonderful old Dickinson pie pumpkin, that was grown in Kentucky 100 years ago, they developed that seed and they improved on that pumpkin.  And they did so by paying attention to taste and texture.” 

Ackerman began his career in pumpkinry by contracting with a local processor, Libby’s, which cans pumpkin pie filler.  Their Morton factory has been in operation since the late 1920s.  And officials with multi-national parent corporation Nestle say 85 percent of worldwide canned pumpkin supply comes from within a 50 mile radius of the town – going from vine to vessel in less than 6 hours.  Shelf supply surges annually during the traditional harvest-to-holidays baking season.

Jim Ackerman/Agriculture Manager – Nestle USA: “It is a different view to see acres and acres of pumpkins rolled into rows ready to be harvested.” 

John Ackerman’s cousin, Jim, is agriculture manager for Nestle USA in Morton. He says roughly 20,000 vicinity acres are in production during any given year – adding another layer of beneficial crop rotation outside corn and soybeans.

Jim Ackerman/Agriculture Manager – Nestle USA: “This is a little sweeter and a little kneadier.  Our puree is nicer.  Jack-o’-lantern variety is for appearances.  We’re looking for a brix factor or a sugar factor in these also that isn’t in ornamentals.”

Despite shortfalls on crop protection elements and university level studies into pumpkins, Jim Ackerman says there is no shortage of local contractors willing to work into the fold when approached.

Jim Ackerman/Agriculture Manager – Nestle USA: “Nestle’s… Libby’s…has been around for a lot of years and hopefully we’ve treated the growers well.  They keep coming back.”

According to USDA, in 2017, domestic pumpkin yields averaged over 22-thousand pounds per acre. The Land of Lincoln led the pack, trouncing second place California by over 472 million pounds in total production.  Locals say that’s pretty good.

Jeff Griffin/President and CEO – Peoria Area Chamber of Commerce: “It IS pretty good…”

Jeff Griffin heads up the Peoria Area Chamber of Commerce.  Morton falls within the nearby city’s metro area, and Griffin is quick to point out the economic benefits the specialty crop brings to the local economy.

Jeff Griffin/President and CEO – Peoria Area Chamber of Commerce: “The land is right for it here.  The pumpkin industry in Illinois is a $12 million annual industry.  Large employer.  Employers such as Nestle-Libby’s and Seneca Farms in addition to all the smaller farms that contribute to the pumpkin production and tourism and the fun stuff that goes along with harvesting pumpkins.”

For John Ackerman, the diversity pumpkins provide are a welcome respite from the volatility of more common row crops.  And whether it’s working with processors to fill stores shelves or raising ornamentals on his own, he’s always excited by the spirit fall harvest ushers into the area.

John Ackerman/Ackerman Family Farms – Morton, Illinois: “We have the best demographics here.  We get grandparents and families and cooks and gardeners and animal lovers… And I have come to appreciate that, in a retail business, we have the best kind of customers there are.”

For Market to Market, I’m Josh Buettner.

Next, the Market to Market report.

Weather, lack of demand and weakness in the equity markets pushed the bulk of the grain markets lower. For the week, December wheat lost a dime, and the nearby corn contract found a floor and bounced back to finish nearly even with last week’s close. The January soybean contract dropped 13 cents as the oilseed market continues to suffer from the loss of Chinese demand. The December soybean meal contract dropped $5.80 per ton. December cotton finished 61 cents higher per hundredweight lower. Over in the dairy parlor, December Class III milk futures fell 26 cents. The livestock market ended on a high note as the December cattle contract added $1.62. January feeders put on 95 cents. And the December lean hog contract surged 12 percent to close $6.33 higher. In the currency markets, the U.S. Dollar index improved 67 ticks. December Crude oil fell a $1.69 per barrel. COMEX Gold gained $7.10 per ounce. And the Goldman Sachs Commodity Index fell more than six and a half points to finish at 468.15.  Joining us now to offer insight on these and other trends is one of our regular market analysts, Naomi Blohm. Naomi, welcome back.

Blohm: Thanks, Delaney.

Howell: Naomi, we certainly had kind of a roller coaster week here but especially when we look at the wheat markets. We were down I think 30 cents approximately for the week and then Friday we hit a 17 cent rally. What was going on?

Blohm: Yeah, a lot of movement there. Just when it looked like it was going to take the next plunge lower on Friday we had news that one of the big marketers down at the Gulf was very aggressive about trying to make a sale to Egypt and it worked. And so they had to fill up the load and so basis improved 15 cents down there and so that was the reason that the wheat market just shot up higher today plus it was able to get back above some of those support levels that had broken on the technical charts. And so to get back at that move higher was really important and little bits of news that Argentina now, the wheat crop there potentially 15% of it has moved to the very poor category as far as the quality of the crop. So there’s little bits of supportive news. It’s not enough to just make the market take off and rally higher but I think it has given us a nice floor for the moment.

Howell: Should producers be worried if they didn’t make some sales or lock in some prices here on this Friday?

Blohm: I think let’s make sure we’re looking at things Monday morning. And we’re going to be taking a look to see if other outside market influences and if we can get other cash news that can be supportive to make the market move higher but this would be an opportunity to get a little bit more current on sales if you’re in a situation where you need to.

Howell: You mentioned that Egypt, who traditionally buys from Russia, ended up buying some wheat sales here from the U.S. or making wheat sales with the U.S. Naomi, moving forward do you think we’re going to continue to see that happen?

Blohm: I would say that we’re going to be in the game a little bit more here and there but Russia continues to just dominate that market. And Egypt this week bought the bulk of their wheat from Russia. So we got the token sale, but we haven’t had a token sale from Egypt in a really long time so it was nice to see that. And I do think because of just the quality that we have here is good quality I think that we’re going to be able to keep exporting little bits more along the way.

Howell: Let’s talk just here briefly about exports. Export numbers were not pretty in any of the grain markets this week, wheat included. I wanted to ask specifically here when we look at Australia’s wheat export market, Australian Bureau of Agriculture and Resource Economics and Sciences, it’s a little bit of a mouthful, but they lowered their crop about 2 million metric tons below what the USDA had projected earlier in the WASDE report. Will that translate into more exports for the U.S.?

Blohm: It really could be helpful for us, especially if the crop in Australia continues to just get smaller and smaller. So it will be helpful for us without a doubt. We still have Russia as our biggest competitor. But any little piece of news that the global crop is getting smaller is supportive to wheat prices in general. But again, it may take until winter until we see something dramatic for a price movement. But that’s an opportunity for producers to be making cash sales for old and new crop.

Howell: Okay. Naomi, let’s talk about export sales when we look at the corn markets. We’ve seen two weeks in a row here of poor export sales. What’s going on?

Blohm: I think it’s mostly harvest pressure and I’m wondering if some of those countries are thinking that they can get things a little cheaper yet. But if you step back and look at the bigger picture our corn export sales actually are a bright shining star for the grain markets. Our export sales for corn are really quite good overall and they are really meeting the USDA projections. So for the corn market, today we were able to finish 7, 8 cents higher, market is back up against some resistance areas trying to work higher overall. And so if we can continue to see that demand story there with exports and with the ethanol, corn is still the leading market indicator for the grains right now and I don’t think we’re going to go any lower. I really don’t.

Howell: Even after we broke that $3.60 support level earlier in the week?

Blohm: Right, we did break that, but because this Friday we were able to close back above it and get right back up to that 100 day moving average on that December daily chart that was a really important indicator. And the funds are overall more of a neutral, they have been a little bit short, they go a little bit long, so they have the momentum to be buyers going forward and seasonally this is the time of year where corn starts to work higher and now that harvest is over half done I think that harvest pressure is now behind us.

Howell: All right. Naomi, how much higher are we headed here?

Blohm: Not too much. Maybe a dime to fifteen cents just because it is a big crop that’s out there.

Howell: It still is absolutely a big crop. I want to talk here, you mentioned South America planting in your newsletter this week. How much is that impacting the corn market right now with them being ahead of pace?

Blohm: Yeah, so South America planting is ahead for corn and beans both. Things are just moving strong and solid and so what that’s going to do is for later on this winter when normally South America wouldn’t necessarily be harvesting they’re going to be harvesting a little earlier than normal. So it may take some of our marketplace away down the road but at the same time right now I think you’re going to see corn is cheap and we have elections to get through in Brazil this weekend and also of course our elections here within a couple of weeks. So there’s more outside market influences that I think are going to take the lead for the grain markets and for prices. But of course the supply story is big for corn but the demand story is stronger.

Howell: All right. I like that. Let’s move on here to talk soybeans exports. I want to start there. Again, I feel like a broken record, but they were just not good when you look across the board here. Will we continue to see lower export numbers for soybeans as well?

Blohm: We’re going to continue to see that until President Trump meets with President Xi at the end of November. And I would think that with as cheap as beans are, being 25% cheaper than the Brazilians, why wouldn’t China step up to the plate sooner than later? But at the same time they’re digging their heels in, the United States is digging their heels in on this trade issue. So once we have our election results figured out that will be the first piece of the puzzle. But we’re also consistently hearing that the soybean yields because of that wet fall and that essentially two week delay that we had, we’re hearing that the yields are coming in smaller. So now we’re back to a situation where okay, it’s not maybe that huge crop that we’ve been talking about, it’s still big, there’s no doubt about it, but now there’s a little bit of uncertainty. So once we get the elections done and we get more harvest results I think the bean market is going to try to find a low here in the short-term. Of course $8.25 is support on that November contract and if we can climb back above $8.50 on November that would really be helpful.

Howell: It would really be helpful. Naomi, November contract falling off the board next week. Where does it head from there?

Blohm: Great question. In the short-term, again, probably not too much of anywhere is the answer because we still have to watch the elections and then also we have our next USDA report shortly after that. So probably quiet but that’s better than falling apart.

Howell: Yeah, absolutely. Naomi, we got a ton of great questions this week on social media, a lot of them related to the bean market and we’re going to save most of those for Market Plus. But I want to kick it off here with a great question from Matt in Northeast Michigan. He said, so many beans, we’ve seen so many beans that our local elevators are full. What is a good strategy to combat the wide basis?

Blohm: That’s a really important question for right now and unfortunately the basis isn’t going to get much better until we get the export market moving and that is just the flat out fact about it. So there’s nothing that really can be done. And so I hate to be blunt but that’s the truth. And so we need to get the exports moving and then basis will start to improve and that’s just the bottom line about it. So what producers need to be doing is deciding am I storing at home? Am I storing at the elevator? Should I take into account what the cost is for storage? How many months am I going to be needing to pay for storage? And can the market eventually rally high enough to justify paying for that storage? So this is an important time to really be penciling out what makes sense for your family and for your farm and hopefully we get an export deal sooner than later. We all need it.

Howell: Hopefully, yeah, absolutely. We’re going to continue talking a little bit more about storage and that in Market Plus. So please tune in to hear your questions answered. Naomi, you’re kind of our resident dairy expert so I want to slide in a dairy question for our dairy producers listening. USMCA, we’ve had the Class VII milk taken out of effect now. Will we see much of a bounce? We haven’t seen much of a reaction so far.

Blohm: Yeah, the exports overall for dairy for this year had actually been phenomenal, really quite phenomenal. So much of that has been factored in. What we’re dealing with more is just this glut of fluid milk that is out there. So interestingly enough though we are actually starting to see cow slaughter numbers from the dairy market increase. And so the herd is slowly getting smaller. The other bit of good news is that now that the milk prices bottomed, $15 is a big support area, this is the time of year that cheese demand starts to pick up and so we’ve already started to see that. The block barrel price $1.35, that’s where cheddar was holding all week, and so that was really important, we saw buyers step up. And so because of that the milk futures started moving higher and if we actually start to finally see smaller production now because the herd is getting smaller I think that we’ve got our worst behind us for the moment and then we can start to see the market move back up on a technical bounce but also a seasonal bounce heading into the holiday season.

Howell: True. Everybody needs to get out there and eat some ice cream, egg nog, milk, all of it, cheese. Naomi, you mentioned there slaughter of dairy herds. How is that impacting the live cattle markets?

Blohm: Well, interestingly enough the cattle market hasn’t really been doing much of anything overall for a good month. The cattle on feed report that we had shows large numbers of feed, animals on feed, but the placement number was lower than thought. So that is supporting the deferred contracts higher. The futures market still continues to trade at a premium so over what the cash market is doing but cash markets are starting to improve a little bit. And looking forward I don’t feel that we’re going to see the cattle market fall lower for prices but we need more confirmation of stronger cash sales in order to see it work higher overall. So it may be a quieter market in the short-term. And there’s no substitute for beef, we know that, we just know that. So that market has such strong demand both domestically and exports as well.

Howell: So we had a smaller replacements number but still we’ve got a lot sitting on here for going into feedlots. I was at a livestock auction a couple of weeks ago and guys are still paying a lot of money for replacements even with the large herd we have. Why is that happening?

Blohm: That’s a great question and that’s something that we’re all watching and wondering. And I’m thinking it’s just down the road just the demand is there. And as long as our export demand can stay strong and the consumer demand can stay strong we’re going to be fine. But yeah, there’s some high prices going on out there.

Howell: There absolutely is. Are you worried about exports either domestically or internationally then that we will continue to see this strong demand?

Blohm: I’m always keeping an eye on it because if it fails for some reason then we have an oversupply story and we already have an oversupply story with the poultry and with the hogs out there for right now. So we need to see that consumer demand stick and stay strong.

Howell: Let’s talk about the pork markets here briefly. We saw a 12% surge in prices from last week. What is going on? Is African swine fever having an impact?

Blohm: Yeah, I think that is probably the biggest part of it and then what we had this week the cold storage report showed that the numbers were down from last year and so that was supportive as well. And it’s the opposite for the hog market than the cattle market. So in the hog market the futures are trading lower than where the cash is at so the futures have also eneded to start to come up as well. But the December contract is up against some overhead resistance on daily December charts, 60 is that resistance point. If we can get through there you can see that market push $4 to $5 higher pretty quick just more on technical buying from the futures side of it. But we have to really get a better handle even more so on the African swine fever as we try to figure out is it going to be affecting our exports that we can actually export more overseas and that’s going to be what we’re watching too.

Howell: All right. Naomi Blohm, thank you so much.

Blohm: Thank you.

Howell: That wraps up the broadcast portion of Market to Market. But we will keep this conversation going on Market Plus where we’ll answer more of your questions. You can find it on our website at iptv.org/mtom. It’s harvest season. Have you gotten back into the field? Tag us in your photos so others can see them on our Facebook page. View the entire collection by searching IPTV Market. Join us again next week when we’ll explore the next steps for a young couple that moved from the city back to the farm. So until then, thanks for watching. I’m Delaney Howell. Have a great week!

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Market to Market is a production of Iowa Public Television which is solely responsible for its content.

Pioneer Hi-Bred International is a proud sponsor of Market to Market. 

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

Accu-Steel, offering fabric covered buildings specifically designed for the cattle industry since 2001. The next generation of cattle buildings. Information at accusteel.com.

           

 

2018-10-26 23:42:32

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