Coming up on Market to
Market — No truce in the trade war. But producers hope for
more fact than rumors to change the story. Finding the right
ingredient for a family business. And market analysis with
Ted Seifried, next. ♪♪ Pioneer Hi-Bred
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Friday, September 13 edition of Market to
Market, the Weekly Journal of Rural America. ♪♪ Hello, I’m
Delaney Howell. Predicting the winner of
a football game between rivals is almost as easy
as guessing what the Federal Reserve will do
with its key interest rates when they
huddle next month. The data point
of producer prices unexpectedly rose in
August 0.1 percent – mostly on the plunge in
energy prices – a signal inflation is
remaining tame. Lower gasoline prices
factored into consumer prices, as the mark
edged up 0.1 percent. However, when energy and
food are removed from the equation, core inflation
rose at its fastest pace in a year – adding 0.3
percent for the third straight month. More shoppers bought
automobiles and made online purchases as retail
sales increased almost half a percent. Many of the items
moved into our internet shopping carts
originate in China. The trade spat between the
two countries took a step back from the
cliff this week. China signaled a return
to moving more U.S. pork and soybeans through
the checkout counter and vowed to lift punitive
tariffs on the two products. Paul Yeager reports. Officially, China has
stopped purchases of America’s agricultural
products, but as the fields turn toward
harvest, so did the story with the economic giant. The Chinese
began buying U.S. soybeans this week. The news came just hours
after a report revealing July was good for
domestic pork producers. The U.S. Meat Export Federation has
reported, despite a 62 percent tariff on American
made pork, Chinese imports of the protein were up
51 percent over a year earlier. Late in the week, the U.S. and China pledged
reductions or delays of tariffs on some goods
caught in the Trade War, the exact concessions vary
but all were made in good faith ahead of scheduled
talks for next month. Steven Mnuchin, Treasury
Secretary: “Well there’s no question, the only
reason why China is seriously negotiating
with us is because of the tariffs. And this president is
dealing with issues that should have been dealt
with for the last 20 or 30 years. So tariffs do work. That’s what brought
them to the table. No different than
sanctions work. And the president of
course is a negotiator, so this this delay was a
goodwill gesture and nothing more than that.” As the president tweeted
about the expectation China would be buying
large amounts of agricultural products,
the Treasury Secretary tempered enthusiasm. Steven Mnuchin, Treasury
Secretary: “I spoke to the Chinese, I believe,
about a week ago. There is a deputy level
meeting that is set up I believe it’s either next
week or the following week. They’re coming here. We expect they’ll be
active worked on. The ambassador and I have
a date in the beginning of October. I think you know with some
of the logistics issues. First, the ambassador is
very focused on getting USMCA done now that
Congress is back in session, so that’s the
number one priority. We have UNGA coming up. The ambassador is working
on the Japanese deal, so it’s really just
logistics issues. My expectation is they’ll
be here in October unless something changes.” As
Congress returned to Washington, farm-state
lawmakers hoped USMCA would be one of the
progress points as well. Sen. Charles Grassley, R –
Iowa: “Modernizing and improving our trade
relationship with Canada and Mexico is a
bipartisan no-brainer.” Sen. Charles Grassley stayed on
the message he delivered while touring Iowa during
the legislative break. Mexico’s president Andrés
Manuel López Obrador pledged support for
passing USMCA and Canada’s Prime Minister Justin
Trudeau is starting his reelection campaign by
touting the benefits of working with the
United States. Justin Trudeau, Canadian
Prime Minister: “We renegotiated NAFTA,
securing trade access to our largest and most
important trading partner at a time of U.S. protectionism and
unpredictability.” For Market to Market,
I’m Paul Yeager. The Environmental
Protection Agency fulfilled a campaign
promise by President Trump, revoking the 2015
Obama-era WOTUS rule. The legislation shielded
a wide swath of U.S. wetlands and streams
from pollution. The policy was opposed by
developers and farmers who said it hurt economic
development and infringed on property rights. Critics of the rule say
the power grab is over, eliminating the patchwork
of regulations. EPA Administrator Andrew
Wheeler announced the move late this week. Andrew Wheeler, EPA
Administrator: “President Trump issued an executive
order directing the EPA and the Army to review and
if appropriate replace the 2015 definition. Today’s action finalizes
step one of our response to the president’s
executive order. Step one repeals the 2015
rule and recodifies the longstanding and familiar
regulatory texts that existed previously. It also sets the stage
for Step Two our proposed revised definition of
waters of the United States. In December of last year
the EPA and the Army issued a new proposed
definition that would clearly define where
federal jurisdiction begins and ends in
accordance with the Clean Water Act and Supreme
Court precedent.” Multi-generational
businesses are rare. The dreams of the next
group can take the original mission
off course. Other times the industry
changes dramatically. By the time the seventh
wave of a family comes along, the original
operation might need spicing up or
the dream dies. A brother and sister went
back to the preverbal salt mines to reboot a dormant
business as Peter Tubbs reports in our
Cover story. The 400 million year
journey of this artisanal salt ends at a
pair of tweezers. Impurities and debris are
meticulously pulled from the product before
packaging at the J.Q. Dickinson Salt Works in
Kanawha County, West Virginia. Nancy Bruns, Partner, J. Q. Dickinson Salt: “it’s been
an amazing personal and professional journey to
bring back this business of my brother and myself. And we really, um, you
feel the weight of those seven generations
kind of watching you. Nancy Bruns is the seventh
generation of her family to make salt in the
Kanawha River Valley. The family business began
in the early 1800’s by boiling water drawn from
the ancient Lapetus Ocean. Sitting 300 feet below the
Appalachian Mountains of West Virginia, the 400
million-year old brine is pumped into pools covered
by hoop barns, and dried using energy from the sun. The trip from brine to jar
takes five weeks with the brine being dried three
times, the salt gathered by hand, and the crystals
sorted and sifted into different sizes
for packaging. The Bruns family has been
exploring new markets for their product and taken
advantage of the growing interest in
specialty foods. Nancy Bruns, Partner, J. Q. Dickinson Salt: “I mean,
uh, consumers and chefs around the country really
wanted locally made high quality products. Um, the so-called farm to
table movement as well as, um, there are very few
salt makers in the U.S. who make it by natural
evaporation, solar evaporation. And I saw a real
opportunity there. The salt industry thrived
in this corner of West Virginia in the 19th
century, and was the state’s biggest consumer
of coal before the Civil War. Pork processors in
Cincinnati were the primary destination of
salt from the Kanawha River Valley. Production of salt from
West Virginia declined in the years after World War
II as underground salt mining became
more economical. The Dickenson family moved
into mineral extracts to keep the company afloat
until the 1980’s. Nancy and her brother
Lewis revived the family business by targeting
specialty foods in 2013. Nancy Bruns, Partner, J. Q. Dickinson Salt: “It’s
a really bright, bold flavor. You actually end up using
less because it’s a strong flavored salt. Um, and the texture
of it is very unique. It’s not hard like rock
salt and it’s not soft and flaky. It’s got a nice crunch,
but it’s a delicate crunch and it really adds a nice
pop of flavor in your food that’s unlike any other
salt in the world.” The flavor and crunch
found a fan base among chefs and food lovers
across the country. The market is split
between wholesale and retail customers, and
consumers can purchase directly from the company. Sales have increased
at the same rate that production has expanded. The initial 400 pound test
harvest has grown to an annual production of over
20,000 pounds of salt. The only limits to output
are the number of sunny days in the Kanawha Valley
between March and October. Their over-the-counter
business sees many of the same challenges faced by
other niche food marketers including the need to
convince customers to pay a price premium for
an otherwise readily available product. Nancy Bruns, Partner, J. Q. Dickinson Salt: 1.25 “But
you really, once people understand that a
naturally made sea salt is better for you, the
mineral content is good for you and the difference
in the flavor it makes on your food. They don’t go back. So if you can just get
it in their hands and in their kitchens, they’re
really loving it and they don’t turn back
to the big guys. To greater diversify their
marketing plan, J.Q. Dickinson Salt Works is
also a popular event space for weddings and
gatherings, providing revenue when the business
would otherwise be closed. The company also hosts a
monthly dinner series with regional chefs that
supports local non-profits, and a salt
festival in September. Overall, reviving a
business created by earlier generations has
been a rewarding second career for the siblings. Nancy Bruns, Partner, J. Q. Dickinson Salt: “And here
we are on the same land where they made salt for
so many years and it’s, it’s an unbelievable
experience. And even though we’re
doing it very, very differently than they
did it, it’s, um, it’s actually something that’s
brought our larger family together because we have
this joint history and now it’s alive again.” For Market to Market,
I’m Peter Tubbs. Next, the Market
to Market report. The trade fed on goodwill
gestures between China and the United States, a USDA
report, and drier weather conditions. For the week, December
wheat was up 20 cents while the nearby corn
contract gained 13 cents. China’s removal of a 30
percent tariff on U.S. soybeans helped extend a
rally in the soy complex. The November soybean
contract rocketed higher 41 cents. December meal added
$8.50 per ton. December cotton improved
$3.70 per hundredweight. Over in the dairy parlor,
October Class III milk futures gained $1.44. The livestock sector ended
in the green as October cattle improved $3.20. October feeders
put on $3.68. And the October lean hog
contract rallied $2.98. In the currency
markets, the U.S. Dollar index
lost 10 ticks. October crude oil declined
$1.83 per barrel. COMEX Gold dropped
$22.90 per ounce. And the Goldman Sachs
Commodity Index gained a point to finish at 405.15. Joining us now to offer
insight on these and other trends is one of our
regular market analysts, Ted Seifried. Ted, welcome back. Seifried: Hi, Delaney,
thanks for having me. Howell: Ted, let’s talk
briefly here about wheat. They had a very impressive
4% move in December futures over last week. What happened there? What was going on? Seifried: Yeah, wheat
for the most part was a follower for corn
and soybeans. And when you have row
crops improving, wheat likes to follow along
with, we’re a little bit concerned about the
quality and harvest delays that we’re seeing with
the spring wheat crop. But, again, it’s mostly
following what the row crops are doing. And we had a report there
on Thursday, it was extremely benign for the
wheat, came out almost exactly as far as
expectations were concerned for both U.S. and world, really
nothing to see there. Howell: So let’s talk
about the report as it pertains to the
corn markets, Ted. Was there anything to
write home about there? Seifried: There’s a number
of different things going on in that corn report. For one, we saw a big
increase in old crop ending stocks therefore
new crop beginning stocks and that offset
a smaller yield. Ending stocks came in
higher than what the trade was expecting, yield came
in higher than what the trade was expecting, so
it was a bit of a bearish report for corn. We had the knee jerk
reaction lower, we were down 5 or 6 cents or so,
and then we closed the day up 7 cents. So you had a reversal
higher day at a timeframe where we’re usually
looking to put in this sort of harvest
or seasonal low. So that sort of reversal
action on a negative report is really
very good news. Now I’ll say this, I think
some of us were worried that corn report could
have been a lot worse than what it really was. Some people thought maybe
they’ll raise the yield. So the fact that they
didn’t do that I think is a good thing. We’re looking at, the USDA
does ear counts but they don’t do ear weights on
the September report. So we’re looking at
ear counts being down basically at levels we
haven’t seen since 2012 but ear weights are
still rather strong. And the question is, is
that ear weight number going to come down as
we get into harvest? And I have a sneaking
suspicion it might. So I do think that there
could be a lower yield. I also think harvested
acreage could be lower. One or the other I think
has to take a fairly large cut. So for me the production
number will continue to come down. I’m very curious to see
what quarterly grain stocks look like at the
end of September because I’m a little bit skeptical
about this big carryover that we’re seeing
for old crop. I think feed and residual
numbers might be higher than what the USDA is
currently looking at. But we’ll see. I think there’s maybe some
positive headwinds coming for corn at least now
between the end of the year, early January. Howell: Ted, I want to go
back to something you said earlier on there about the
key reversal we put on this week and the seasonal
tendencies to form a bottom now. With the reversal that we
had does that indicate that a bottom is in or
still need to put that in? Seifried: First of all,
not quite a key reversal because we didn’t set
a new contract low on Thursday. But a lot of time these
sorts of reversals are indicative of either a
bottoming formation or the beginning of a
bottoming formation. When we started the no
planting rally back in the spring we had a key
reversal on that day and then we never looked back. That could be
the case here. I think a lot of it
depends on soybeans. But either way I do feel
like corn has reached a price level, a timeframe,
and sort of a fundamental outlook that now would be
a time where I think we could bottom and I do
think we’ll have a halfway decent harvest recovery. Howell: Ted, before we get
to the soybean discussion I want to ask a question
here from Pete in Frost, Minnesota since you’re
kind of our ethanol guy. He said, what is long
range effect of refinery waivers on the ethanol
and 2020 corn price? Seifried: Okay, Pete, I
hope you’ve got about 30 minutes for this answer. No, look, yes RE’s are
not a good thing for the ethanol industry, we’ve
seen I think 23 plants close in the last few
months, that’s not great, closed or idled in the
last few months, that’s not great. The thing is that a lot
of these plants that are being idled they’re coming
from companies that have other more efficient
facilities that are kind of picking up some
of that slack. We haven’t seen a huge
drop in ethanol production but it’s not a good
feeling going into next year. It’s not great when you
see the USDA cut 25 million bushels off of
new crop ethanol usage. So ethanol is a problem. And when we get into
this winter and se start talking about elections
you feel like this administration right now
is really poking its constituency by the trade
deal with China and also the ethanol issue. I feel like one or both of
those need to get fixed before we go back
to the ballots. I think the easier fix
would be ethanol and I’m optimistic that something
gets done with that. But I’m, I want to be
optimistic about our ethanol export demand. Again, a trade deal
would help with that. I think ethanol, the rest
of the world is coming along, maybe we’re not
domestically as much, we need to really be
pushing E85 more. But I’m optimistic
for ethanol. However, we need to fix
the RIN problem and the SRE problem. Howell: I always know I
can count on you to be pro-ethanol,
pushing that E85. Ted, let’s move on and
talk a little bit about what happened in the
soybean markets this week. There was a lot of
news that sparked some excitement here at
the end of the week. Opening up Monday do we
have legs to continue higher? Seifried: Well, I think
so, with one little kind of asterisk there. A lot of this is coming
from South American weather and I think that’s
getting kind of overlooked a little bit because we’re
talking about the USDA report, we’re talking
about how pod weights are so high, the USDA is using
record pod weights for this current crop and all
of us are saying no, I think that number is
going to come down. So the general outlook I
think after we see this report, after we saw this
report on Thursday we looked at pod count, which
really kind of confirmed what we had seen on the
Pro Farmer Crop Tour, pod counts are down sharply,
lowest that we’ve seen in four or five years, more. But the pod weights
are off the charts. And we understand why
the USDA does that. The idea is less
competition so the plant is going to give more
resources to each individual pod to
add onto weight. The problem is, is that
with a lot of these soybeans being planted
really late or really, really late the plants
aren’t just going to continue to pack on weight
like corn would because soybeans are more
dependent on daylight rather than temperatures. So I figure that these
late planted soybeans aren’t going to really
see these huge pod weight numbers. I think that number is
going to come down. I’m worried that our
national average yield in soybeans ends
up 45 or below. So I think there is
bullish reason to think longer term for
the soybeans. But right now the trade
deal with China, who knows, we could come in on
Monday and that could all blow up in our face,
it’s happened before. So we’ve got to kind of
really be on edge about that. But South American weather
for me is maybe one of the bigger drivers right now. They’re really quite dry
right now and they don’t have a lot of rain
in their forecast. Howell: Ted, I also want
to ask, the report this week lowered ending stocks
and new crop stocks for soybeans and you’re
mentioning maybe pod weights are lower or bean
sizes are lower so yields could be lower. What does that do
for our carryout? We were talking about a
billion bushels maybe this time last year. Now the story seems
to be changed. Seifried: Okay, so in
July, the July WASDE report we were looking for
an over a billion bushel carryover. Now we’re down
to 640 million. So that’s a significant
reduction in just a couple of months. If yield continues to
drop I think those ending stocks are going to drop
almost the equivalent amount because I don’t see
a whole lot of fat to trim off of the demand side
of the balance sheet. As far as exports are
concerned we’ve been so pessimistic about that for
so long that we’re not really looking at high
expectations for exports anyway. And then as far as the
crush is concerned, crush margins are good. I don’t see any reason why
we would want to cut the crush more than 20 to 40
million bushels at most even on higher prices. So if you start taking
away from that production number, 80%, 90% of that I
think comes off the ending stocks and if we get down
to levels like I was talking about, 45, 44,
44.5, even 45.5 for a national average yield,
pretty quickly we’re going to be talking about
something close to between a 400 and a 500 million
bushel carryover. And then if we do start to
get a hint of a trade deal or a trade truce with
China and China starts buying more soybeans
like they were doing on Thursday, all of a sudden
we always have to worry about running out
of soybeans here. So I think I’ve been
saying it for a while, the story of the spring was
the corn, the story of the fall is the soybeans
and that story is just starting to play out now. I think there’s a lot
more upside potential for soybeans. Howell: Ted, we’re going
to save dairy for our Market Plus segment. Folks, you can catch that
at markettomarket.org. We’ve got to talk about
the live cattle and feeder cattle this week. There are some gaps in the
charts on both feeders and live cattle. Are we starting to go back
up and maybe fill some of those gaps that
we’ve placed? Seifried: Yeah, so on
Friday we saw the feeder cattle take a little
bit of a step back. With December corn closing
over that $3.67, a very key technical resistance,
now we’re going to be a support level, I think the
feeder cattle market is getting the feeling that
corn has more upside potential and that kind of
spooked a little bit on Friday. But overall, yeah, we had
that gap lower based on the Tyson plant fire. The cattle market had
a job to do when that happened. When that fire happened
we had to make packers margins very enticing for
that production to get offset by other
facilities. And for the most
part it has been. So boxed beef prices
seem to be stabilizing. We are in sort of that
time of year where demand kind of softens a little
bit as we get out of the key grilling season. But it starts to pick up
again as we get into the holidays. So it’s just a short
period of time. I think domestic
demand stays strong. I think our export
demand stays strong. I think we’re currently
in a bottoming, overall bottoming formation. I think we’ll go and
minimally fill those gaps. But into the end of the
year I’m looking for strength in cattle. Howell: Okay, Ted, I was
traveling around the state of Iowa this week talking
to all sorts of Iowa pork producers and I promised
we would make sure and spend an adequate amount
of times talking about the hogs, especially
this week. Is this a turnaround week
for the lean hog markets? Seifried: Turnaround
is an understatement. We were limit up on
Thursday and then expanded limit up on Friday. That’s as far as you
can move in 2 days. No, that’s fantastic. Again, a lot of this is
all China news, really all China news. We had been very
disappointed in the hog market or from our pork
exports to China because China had not really been
coming in and buying like we had anticipated they
would with the ASF problems that
they’ve been having. So we rallied on ASF but
then when they weren’t buying we took all the ASF
premium and then some out of the market. Well now that we have
China waiving tariffs on pork, we saw on Thursday
that they had already come in and bought 11,000
metric tons of pork, there were rumors on Thursday
morning that they were buying more aggressively
and we might see that on the export sales
sheet next Thursday. So now we’re back to the
idea of ASF is going to cause a whole
lot more demand. So now we’re reacting to
that, we’re trying to get back to the pricing that
we probably should have been or stayed at
in the first place. I think there’s more
upside potential as long as China does follow
through on their purchases. Howell: So, Ted, with that
being said, we don’t know, China is a wild
card right now. For those independent
producing, pork producing friends that we have out
there watching the show should they be
rewarding this rally? Seifried: I don’t think
we’re quite there yet. After 2 limit up days,
limit up and expanded limit up, yeah you could
have a setback at any point. We’re leaving gaps on
the chart on the way up. But really I think the
work to do is what we do over Friday’s high. Maybe $4 or $5. If we’re expanded limit
up again o Monday then I would start to make sales. But for right now I’m
going to let this situation kind of
play itself out. Howell: And opening up
Monday where do we think that trade is
going to open? Seifried: There was still
a fairly decent size pool and the synthetics
were trading higher. Ask me again Sunday night
because who knows what sort of political news
we’re going to get or trade war news that we’re
going to get over the weekend so I don’t want to
get too aggressive with that. But I would think that we
would be higher if not sharply higher on Monday. Howell: Sharply
higher on Monday. Seifried: We’re
going to try. Howell: All right, Ted
Seifried, we’re going to continue this discussion
on Market Plus. Thank you so
much for joining. Seifried: The pleasure’s
always mine, Delaney. 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 Market-to-Market.org. Fall foliage and harvest
season are drawing near. Search IPTVMarket on
Instagram and keep track of the great images we
capture in the field in addition to finding
behind-the-scenes images from our producers. Join us again next week
when we’ll look at an industry facing
winds of change. So until then,
thanks for watching. I’m Delaney Howell. Have a great week! ♪♪ 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.