Coming up on Market to Market - Francine makes landfall while a new batch of large wildfires erupt in California.

The early impact of California's Prop 12 on the hog industry.

And commodity market analysis with Kristi Van Ahn Kjeseth, next.

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♪♪♪ This is the Friday, September 13 edition of Market to Market, the Weekly Journal of Rural America.

♪♪♪ Hello.

I'm Paul Yeager.

Inflation was a talking point in Tuesday's presidential debate.

This week, more data points were released into the discussion in and outside of the Federal Reserve on what to do on the key interest rate.

The Consumer Price Index, the mainstream inflation gauge - added 0.2 percent last month.

The annual reading came in at 2.5 percent - the smallest increase since early 2021.

The advancement in wholesale prices slowed to a 0.2 percent gain on the month and 1.7 in the year-over- year reading.

The pickup came from the cost of services like internet access and banking.

More data on the weather - hot in the West and Midwest, cool in other parts of the country.

The rain pattern has scattered the last few weeks and is reflected in the latest Drought Monitor.

This week's reading is the highest level of drought since January 3, 2023.

The overwhelming majority of the country's moisture fell this week in the Deep South.

Peter Tubbs reports.

The remains of hurricane Francine continue to dump moisture on the southeast.

When it made landfall in Louisiana on Wednesday it was a Category 2 storm, delivering winds of 100 miles per hour and 8 inches of rain in New Orleans.

Across Louisiana 350,000 homes lost power.

Both Louisiana and Mississippi have declared states of emergency.

Some of the areas hit are still recovering from 2021's Hurricane Ida.

Wilson Garner, Ashland, Louisiana: "Ida tore this trailer up and tore the back house up so we didn't come out.

We still trying to get everything straight with FEMA and restore Louisiana to a place to have a home again, and it costs me money I don't have.

I don't know how they expect me to pay stuff when I was in a disaster and don't have money."

Residents of the region were warned of a possible 10-foot storm surge.

In California, wildfires in the mountains east of Los Angeles destroyed dozens of homes and forced thousands to evacuate.

The Bridge fire is burning out of control and has scorched over 50,000 acres in Los Angeles County.

In Orange County, the Airport fire has consumed over 23,000 acres, about 36 square miles, and fire crews have only been able to contain about 5 percent of the inferno.

Cooler weather may help firefighters in their quest to contain all of the blazes.

In an attempt to prevent out of control events like these, the USDA announced a $3.2 Billion dollar Wildfire Crisis Strategy, a plan to safeguard communities that interface with wildlands.

The goal is to reduce the wildfire risk in 559 communities across the country.

Sec.

Vilsack: "Now these resources are going to allow us to work with states, local governments, tribes, and non-profit organizations, working to promote healthier forests throughout this 14-state area and within these projects."

For Market to Market, I'm Peter Tubbs.

The prospects for a new Farm Bill before the next election seem dim.

A fly-in to Washington D.C. by commodity groups this week aimed to ratchet up attention on the legislation that's stalled inside the Beltway.

The National Pork Producers Council met with the ranking member of the Senate Agriculture Committee and the Secretary of Agriculture this week hoping to get a federal solution to California's Proposition 12 in that new bill.

Shortly after the initiative was approved by California voters in 2018, only 4 percent of U.S. sow farms would have met the new standards.

Prop 12 has survived several court challenges and the movement to comply with the new regulations has been measured.

Colleen Bradford Krantz has our Cover Story.

Proposition 12, the controversial California law that dictates how much floor space sows need if pork from their offspring is to be sold in California, doesn't appear to have had an impact on how many Midwest hog farms operate.

At least not yet.

Experts say the reason may be simple: the timing.

Once the dust settled around several legal challenges by pork producers, the survival of Prop 12 ended up coinciding with a downturn in hog prices.

Few hog farmers in the Heartland, especially smaller independent producers, may be in a sound financial position to remodel or construct buildings that comply with the new measure even if they or their packing partners wanted to sell uncooked pork in California.

Lauren Servick, Minnesota Pork: "Most of the time, when I hear farmers tell me about a Prop 12 conversion, it's maybe a site or two.

And it's usually an older site where something needed to happen anyway.I think with the economic situation that farmers are facing, the conversion doesn't pay right now."

Iowa State University economists say 2023 brought the worst farrow-to-finish returns they've tracked in Iowa, even eclipsing losses in 1998.

The university's Estimated Livestock Return model showed an average loss for hog producers in 2023 of $32 a head.

As grain prices have slipped in recent months, lowering feed costs, the hog industry has begun to see improvement to its bottom line.

So far in 2024, returns ran from a loss of $41 a head in January to a profit of $9 a head in July.

Still, on the heels of the rough financial stretch and with futures markets indicating losses again as the year comes to a close, farmers are unlikely to add any major expenses.

Lauren Servick, Minnesota Pork: "On average, if you were going to build a brand new Prop 12 site, you're talking costs 40 to 43 percent higher.

This is according to an Iowa State study.

The upfront cost of just the building itself is significant but then you even see a reduction in the number of the pigs that come out of that site."

When Market to Market asked Iowa DNR officials how many permits had been requested for remodeling or new construction for sow buildings in the nation's number one hog producing state, they pinpointed just 12 since 2022.

There are currently 362 active sow and litter operations across the Hawkeye State.

DNR officials point out that producers who move panels around inside a building or reduce their sow numbers don't have to apply for a permit.

Calls to a few companies that remodel or build hog buildings in the Midwest provided similar anecdotal evidence: little to no activity this summer.

Considering that Californians consume about 15 percent of the nation's pork, it could be that enough of the largest pork processors made changes and may already be meeting that California demand.

A University of California at Davis agricultural economics professor says this idea is reinforced by what appears to be a possible leveling off of pork prices following an initial spike in the state's grocery stores.

Daniel Sumner - University of California, Davis: "We observed prices in supermarkets in California and outside of California.

And the products were always available, starting in October through March.

There was no period where the supermarkets we were scraping said, 'Oh, no pork this week.'

Prices are high in California in general.

Pork chops were more expensive in California before Prop 12 and after, but they seemed to be especially high during this adjustment period."

Although the court challenges to the new measure appear to be settled following a May 2023 Supreme Court ruling upholding the new rules, there is some discussion about including language in the next Farm Bill to limit measures like Prop 12.

Daniel Sumner - University of California, Davis: "I'm not sure we've settled out yet.

There is still enough going on in this and it's just taken a long time.

It's partly because of the legal cases taking so long.

It just makes it so uncertain for producers and for that matter, for the supermarkets and the restaurants and everybody else."

Sumner wonders if California voters would have been smarter to take the state taxpayer money that will be spent on defending and regulating Prop 12 and instead just offered grants to pork producers.

Daniel Sumner - University of California, Davis: "We could have taken that money - roughly $300 million a year - and offered that to hog farmers.

Say: 'Here's 300 million bucks that we're going to pass out to hog farmers if they will promise they will have compliant housing.'

And.it would have been about twice as many pigs - mother sows - that would have been in California housing if we had done it that way."

Gene Gourley, of Gourley Brothers hog farm in central Iowa, says although they are stepping away from raising sows for unrelated reasons, they had already decided against making changes.

Gene Gourley, Gourley Brothers - Webster City, Iowa: "I heard of most of the conversions going on in different regions of the country, either closer to California or just someone doing new buildings or things, which is very few in Iowa, I think.

It's just too cost expensive for us to try and do it."

Gourley pointed out that 85 percent of the nation's pork doesn't need to fit with Prop 12 so it's too big a financial risk to make changes to his operation if the demand is already nearly being met.

Gene Gourley, Gourley Brothers - Webster City, Iowa: "If all the sudden, it exceeds that demand and the packer processor says, 'Oh, we don't need your pigs anymore.'

.Now I'll probably go bankrupt because I made that investment.

And so, it's kind of hard to know what that line is and who needs to do it and who is going to change.

And the investment is so substantial that yeah you better be guaranteed with a contract of some sort.

And that's the challenge: just getting that cost recovery repayment from a processor.

And.they don't know how to sign a contract necessarily if they don't know are we going to be able to sell it on the backside."

For Market to Market, I'm Colleen Bradford Krantz.

Next, the Market to Market report.

Positioning ahead of the USDA's report kept movement muted, but few surprises did happen after the report was released.

And we had limited trading at the end of the week.

For the week, the nearby wheat contract added 28 cents and the December corn contract gained seven cents.

The projected size of the soybean crop was reduced by USDA, a flash sale to China and drought in Brazil factored in the soybean complex.

The November soybean contract put on a penny while October meal weakened $2.40 per ton.

December cotton expanded $1.94 per hundredweight.

Over in the dairy parlor, October Class Three milk futures improved $1.20.

The livestock market was mixed.

October cattle expanded $2.47.

October feeders put on $8.18.

And the October lean hog contract dropped by $1.05.

In the currency markets, the US dollar index decreased 5 ticks.

October crude oil found $1.04 per barrel.

COMEX gold gained $87.70 per ounce.

And the Goldman Sachs Commodity Index increased 3 points to settle at 522 even.

Yeager: Joining us now is one of our regular Market Analysts Kristi Van Ahn-Kjeseth.

Kristi, good to see you again.

Van Ahn-Kjeseth: Good to see you.

Yeager: Wheat has been a story of global issues.

Russia, Ukraine, Argentina drought.

Do the global stories subside any time soon to put out this rally?

Van Ahn-Kjeseth: I don't think so.

Wheat feels good to me, to be honest.

I really hope it does.

The chart looks good on wheat.

It has been kind of that steady Eddie to be able to rally up.

So, it feels really good.

I think that one thing the wheat complex doesn't have is any sort of premium in anymore for the risk in Russia and Ukraine.

I just feel like they've taken out so much of that.

You're starting to slowly put some of that in there.

And just the attention on South America I think has been a big one.

Yeager: A little attention in the U.S. too.

It is kind of dry in the Southern Plains.

Van Ahn-Kjeseth: Yeah, I think you look at the drought monitor and you can kind of see that creeping back in.

And to be honest, it has been a dry finish to this crop.

And then you kind of are looking at winter wheat conditions and saying hey, you're drying up there, what is that going to do to potential planting down the road?

So, I think it's got its attention.

Yeager: You have made some windshield miles this week heading over to North Dakota and then down here.

What does the corn crop look like to you in those regions?

Van Ahn-Kjeseth: Yeah, it looks good.

But I am seeing it turn pretty quick.

And I think that's one thing that caught me off guard is that this crop has looked so good for so long, not that it looks bad, it's time for it to turn, but it has been so lush green for so long.

It was kind of a flip of the switch and you've really pushed this crop along.

And I think that has given attention to the corn market as well.

You're starting to hear people talk about the less than ideal finish to corn and beans.

I don't think it really makes that big of a difference.

We're looking at a big crop, so I'm not sure.

But I do think that it pushed the crop along.

Yeager: USDA though thought it's getting bigger.

So, was that -- do you agree with the sentiment that most analysts called it a surprise?

Van Ahn-Kjeseth: To a degree, they analyzed yields boots on the ground from August 24th to September 1st, I think it was, and so you really looked at that crop towards its gravy spot.

And so that doesn't surprise me so much.

But I wonder if that's not the biggest corn yield, you're going to see, not that it really needs to drop all that much, but I do think that you probably caught it at its most ideal timeframe to be looking at the crop.

Yeager: Given factors from the government, given factors from a crop that is in the field, does that December contract look like an opportunity to sell right now in your eyes?

Van Ahn-Kjeseth: You know, we're waiting for $4.26.

It's not like it's that far away.

I hate to be the bearer of bad news, I don't see a ton of topside to the corn market.

I don't see a ton of downside to the corn market right now either.

So, I do think that it's extremely range trade.

That is what is has been proving to you for quite some time now.

But you look at it and you can kind of see those extended contracts and that's where I see some.

Yeager: So, are you thinking corn is more bullish or bearish right now?

Van Ahn-Kjeseth: I would say bullish, but when I say bullish don't quote me on that.

I mean like 25, 30 cents.

Our targets are $4.26 to $4.47 on December corn.

Yeager: Not a capital B bullish, lower case.

Van Ahn-Kjeseth: Right, like just a little timid one.

Yeager: All right, so let's talk about the size of the crop and what that might mean for on-farm storage.

A good question here from Matt in Michigan.

We had a couple of them this week similar.

Will on-farm storage pay this year?

And if so, how long will we need to hold out?

Van Ahn-Kjeseth: Yeah, I think this is a fantastic question.

I think this is a question that every producer needs to really be focusing on right now is this market has very large carries and what those carries are telling you is that hey, store the crop, pick up that incentive.

And so, when I talk about December corn being a target of $4.26 to $4.47, we have March corn at like $4.28 to $4.30.

So, if those are our December targets, we're already there in the March contract.

And so, I did start on some marketing there just because I do think in general producers are behind on marketing on where they need to be and that is out of their mouths, that is out of grain buyers' mouths as well is a fraction of the crop that needs to be sold is sold right now.

So, I look at those carries as an opportunity.

My biggest thing is do not keep storage as a crutch.

You don't need to hold it that long.

And honestly, I think when you're talking corn, you could probably put beans in here too, that December/January timeframe could be a very great timeframe for not only sales but basis.

I think you're going to see what you need sold right now off the combine and then I think those bin doors get shut for a while.

And to be honest, such a tight turnaround, do you really want to be selling right away or delivering?

So, I think you could see some great opportunities there.

Yeager: Four months, not four years.

Van Ahn-Kjeseth: Right, exactly.

Yeager: All right, beans.

Flash sale came through.

There's this little sentiment that China is buying just enough to be under certain reporting standards and that is influencing the market.

Is the trade wising, wisening, being wise about this?

Van Ahn-Kjeseth: I never thought I would be so annoyed at private sales but they are just there, right, and I would love to see one of those bigger sales.

But it seems like they are skating by.

I think that you see China watching the forecast in Brazil and saying let's just cost average here, let's buy a little bit, you look at kind of the price of soybeans generally lower, quite a bit lower than they were this summer.

So, I think they see it as a decent buy.

I am disappointed that we aren't seeing those big ones.

But, to be honest, I think their preference is Brazil and I think they're going to stick with them as long as they can.

Yeager: So, $10.06 is where we finished on November on Friday and that was flirting even lower than that.

Do you still see $10 as a resistance on this November contract?

Van Ahn-Kjeseth: I'm not all that friendly on soybeans.

So, soybeans have this big wild card in dry concerns in Brazil and it is so dry when you look at that.

So, I don't want to shake that off like it's not a concern.

My only fear is that it tends to be dry and then you have the monsoons come.

So, if we see those, I look at this really big crop that we have here, the potential right now, you look at what USDA has posted for production levels in Brazil coming up, they haven't planted the crop yet, but they are just thinking massive growth in that production.

And so, I am fearful of soybeans that if you see that moisture, we will test the lows.

Yeager: So, I guess go back to the corn situation of the four months, four years.

We really can't even wait four months in the soybean contract.

We really are in, what, four weeks?

Van Ahn-Kjeseth: Yeah, I'm a seller of soybeans.

We moved on marketing here this week on soybeans, within the last week I should say.

My whole week blurs together.

But we moved on it, I think we got up to like $10.31 on November futures.

There is a good carry there as well.

The hard thing with soybeans is you don't want to roll that contract out too far unless you have a good relationship with a crush facility nearby.

Otherwise, our beans really go out the door so heavy early in the year that those basis opportunities are there.

Also, you're looking at parts of the Western Corn Belt have caught a bit off the P&W.

We know river levels are low.

China has been active buying.

So right now, to be honest, basis levels for harvest delivery beans through Minnesota into the Dakotas has been favorable.

And so, you have to take that opportunity when it's there.

So, we've been moving on marketing.

Yes, you could have problems.

And yes, if Brazil stays dry, you're going to get that attention.

But right now, I feel like that decision is to be smart and do some marketing.

Yeager: You sound very similar to what everybody else has been saying here over the last three, four weeks about they're not real, they don't see good opportunity for beans.

Let's move to livestock if we could.

Live cattle, again the stock market keeps doing this up, and then down and it's terrible.

Live cattle doing the same thing.

It looks like it's heading up to maybe take out a top.

Do you think?

Van Ahn-Kjeseth: Yeah, so I think the biggest thing is cattle is so sensitive right now to the outside markets.

And you know it's crazy times when you come into the office and you're like oh, weird, the Dow is down 700 points and you kind of shake it off.

But that is the volatility we're seeing right now in those outside markets.

I think the story is still there.

When you look at cattle, I think that cash trade is still telling you everything is going to be okay.

But we are at such a tight reflection point right now on both live cattle and feeder cattle charts.

I would like to see it get through that before I become really optimistic.

Otherwise, we really consolidated here.

We'd like to see demand.

And honestly, we're importing a lot.

That needs to kind of cool off as well.

Yeager: Importing feeders too.

Van Ahn-Kjeseth: Yes.

Yeager: Do you see that being a long-term problem?

Van Ahn-Kjeseth: I do.

I think that there's lots of little problems when you look at cattle.

Everyone wants to talk about inventory numbers being as light as they are.

But when you look at it, our weights are really heavy and they have been for quite some time.

So, if our inventory is light, but our weights are coming in so much heavier, do we have that problem?

And so, I'd like to continue to see consumer demand remain strong as far as that goes.

I'd like to see exports too.

But it would be really nice if those imports could just kind of slow down and focus on kind of what we have around here.

Yeager: Is it anything tied back at all on this feeder expansion or domestic homegrown -- does that Southern Plains drought story start to factor in then too with anything you're saying?

Van Ahn-Kjeseth: I think you could.

I think moving forward the cattle on feed reports, the next couple of ones, are going to be really important to watch placements and I think that's going to really tell you where everything is at.

So, we'll be watching that really closely.

But overall, we've gone so long without having that story of real severe drought issues, if we go back to that it could be a much different situation.

Now, we're looking at a lot cheaper corn than we were when they were in that drought.

So, it's a little bit of a different situation.

Yeager: China comes to be always a topic when it comes to the hog market.

There's this they're still importing, they're not importing story.

What are you buying this week?

Van Ahn-Kjeseth: Yeah, on the hog side of things I think that you tend to see cash trade kind of soften as we go through and I think futures have kind of factored that in over the last two weeks, week to get that little bit of a pullback.

But I think moving forward the biggest thing on hogs would be the tie to the U.S. dollar and I think that U.S. dollar would be huge if we got that pullback.

And I think you potentially could with interest rates see a pullback on the U.S. dollar and I do think that would bring China back to the table and see that demand.

Yeager: Huge question in 30 seconds, of course.

But the way the dollar has weakened, some of that is always factored into the trade just like it is in commodities.

Do you see that reaction being limited because it's already factored in?

Van Ahn-Kjeseth: Yeah, I think it's kind of specific to certain commodities.

Hogs, their desire for China.

The soybean market, China coming in compared to Brazil.

Wheat because it is so demand driven across the world.

I don't see the U.S. dollar being quite as much of an influence on corn.

I think in general it would.

But I think you can tie it to specific ones and hogs are one of those ones I tie them together.

Yeager: All right.

Well, we've got to tie a few other things together in Market Plus, good questions coming.

And we'll talk about crude oil and the dollar and I think I have one other surprise.

Cotton of course we'll get to.

All right, thanks Kristi, good to see you.

Van Ahn-Kjeseth: Good to see you.

Yeager: All right, Kristi Van Ahn-Kjeseth.

And that is going to pause the Analysis now.

We'll continue our discussion about these markets in our Market Plus segment.

You can find both Analysis and Plus on our website of markettomarket.org.

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Next week, we'll look at the attempt to solve the problem of safety when entering the bin.

Thank you so much for watching.

Have a great week.

♪♪♪ ♪♪♪ ♪♪♪ 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.

♪♪♪ Family owned and operated for more than 60 years, Sukup Manufacturing is a full-service provider of grain handling, storage and drying equipment, helping farmers feed and fuel the world.

♪♪♪ For over 45 years, Steiner Tractor Parts has shared your love of antique tractors.

New parts for old tractors.

Learn more at steinertractor.com or at 877-559-7887.

♪♪♪ 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.

♪♪♪