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Coming up on Market to Market -- Merger mania
prompts a summons from Washington.
The Secretary spends a little time in the hot
And heavy rain stops harvest in its tracks.
Those stories and market analysis with Sue Martin,
Funding for Market to Market is provided by
Grinnell Mutual.
You think differently about a customer when you
stand in the middle of his dreams.
We work to make sure you get covered right.
Grinnell Mutual -- a policy of working
Information on finding an agent near you is
available at
This is the Friday, September 23 edition of
Market to Market, the Weekly Journal of Rural
Hello, I'm Mike Pearson.
Harvest machinery has been temporarily sidelined in
some parts of the grain belt but financial
planning for next season has already begun.
Like predictions of record crops, rural America waits
for economic answers in a money lending season of
-- With housing starts down 5.8 percent in August
- and the inflation rate languishing below 2
percent - the Federal Reserve Board declined to
raise lending rates.
The result leaves many speculating what the near
future holds.
No change was seen as good news by Wall Street as the
Dow Jones Industrial Average finished the week
on an up-tick.
Placing the anticipated shake-up over lending
rates on hold shifted attention to fallout from
agricultural mergers.
Recently, the Canadian companies Potash
Corporation and Agrium announced they were
combining forces to create the largest fertilizer
company in the world.
That marriage only amplified concerns over
consolidation and was among the reasons several
Titans of Agriculture were requested to appear before
the Senate Judiciary Committee.
Paul Yeager reports.
Representatives from five of the six biggest
agriculture companies appeared together on
Capitol Hill this week.
The leaders were asked about the big topics of
competition, jobs, and innovation.
The "Big Six" of biotech seed would become the "Big
4" if regulators approve Bayer's $66 billion buyout
of Monsanto, China National Chemical or Chem
China's $43 billion purchase of Syngenta and a
$59 billion deal between Dow and DuPont Pioneer.
James C.
Collins: "Bringing together the innovative
engines of DuPont and Dow into one company, fully
focused on agriculture, allows us to expand the
choices and the competitive price values
that farmers demand."
Robb Fraley: "We're witnessing a new era in
agriculture that's a result of the advances in
biology and data science.
Silicon Valley is digitizing farming around
the world, and breakthroughs like gene
editing are opening up a whole new world of
possibilities in plant biology."
Tim Hassinger: "Combing our R and D capabilities
will enhance our ability to innovate and create
values for farmers.
An innovation driven company creates
Jim Blome: "We expect to advance our digital
farming capabilities and strengthen our focus on
new product development across seeds, traits and
crop protection."
Critics contend the biggest three remaining
companies would control 80 percent of the corn seed
sales and 70 percent of the global pesticide
Roger Johnson: "The damaging consolidation is
occurring at a time when farmers are struggling
with depressed profitability after seeing
an approximate 50% decline in most commodity prices
over the past three years.
Clearly the nation's anti-trust enforcement has
failed farmers and consumers."
Diana Moss: "Any claims that the deal will simply
package complimentary assets should be viewed
with some skepticism.
The companies own documents indicate their
own R and D pipelines compete head to head with
overlaps in R and D for traits, seeds and crop
Much like in pharmaceuticals,
maintaining competition in standalone parallel R and
D ensures strong incentives to continue to
Grassley: "To me, it looks like this consolidation
wave has become a tsunami."
Iowa Senator and committee chair Charles Grassley
cited data from Iowa State University revealing
collective cost of seed, chemicals and fertilizer
for an acre of soybeans has gone up 94 percent
over the last 20 years.
Grassley, also a farmer, said the collective
industry has produced greater innovations and
yields, but questioned the cost.
Charles Grassley: "However, when does the
size of companies and concentration in the
market reach the tipping point, so much that a
market becomes anti-competitive?"
Cotton farmers also could be faced with steep price
increases on seed if a recent Texas A&M study
holds true.
The research revealed a possible 18 percent hike
if the mergers move forward while corn and
soybean seed prices would increase around 2 percent.
For Market to Market, I'm Paul Yeager.
Secretary of Agriculture Tom Vilsack met with the
Senate Agriculture Committee this week for an
annual checkup of sorts.
The topics discussed ranged from budgets to
water quality.
Colleen Bradford Krantz explains.
Secretary of Agriculture Tom Vilsack, wrapping up
what is expected to be his final months of an 8-year
stretch on the Obama administration cabinet,
urged Senate leaders this week to do a better job of
studying the needs of the nation's shrinking pool of
farmers before fixating on budget cuts.
Tom Vilsack: "If you look at every hot spot in the
world today, I think most, if not all of them, do not
have a functioning agricultural economy and
have a lot of hungry people.
So if we are serious about protecting our own people,
if we are serious about making sure the world is a
safer and better place for our kids and grandkids,
then we have to understand the role agriculture in
this country and agriculture around the
world will play in providing that level of
Several senators, while praising Vilsack's tenure,
said the nation's farmers are growing increasingly
leery of governmental involvement in their
lives, particularly when it comes to the
Environmental Protection Agency.
Thom Tillis: "The issue that comes up every single
time I meet with these farmers is the uncertainty
created by regulation - either the burden by
existing regulations or the threat of other
regulations that could be very harmful to the
Senator Pat Roberts, the chair of the Senate
Agriculture Committee, said new EPA rules
defining the "waters of the U.S."
under the Clean Water Act had an exemption for
"common farming practices" but the sentence was
followed by 88 pages of exceptions, explanations
and definitions.
Pat Roberts: "That's why a lot of folks that I
represent feel ruled not governed.
And they get really upset."
While Vilsack said he won't speak on behalf of
the EPA, he has encouraged the agency to meet the
farmers whose livelihoods may be affected by their
Tom Vilsack: "We don't define the problem before
we define the solution, and we don't educate
people about what we are trying to do before we do
So there is a natural reaction."
For Market to Market, I'm Colleen Bradford Krantz.
Harvest is underway in earnest across the
Most states are on track to bring-in the projected
record 15.1 billion bushels of corn and 4.2
billion bushels of soybeans.
However, field work in some regions of the upper
Midwest was stopped in its tracks.
It's a soggy start to fall for several Midwestern
states, where heavy rain has flooded homes, closed
major highways and stranded motorists in
Minnesota, Wisconsin and Iowa after nearly a foot
of rain fell in several location of the Tri-State
The rains couldn't have come at a more inopportune
Combines will be delayed in several dozen upper
grain belt counties as farmers had just begun
what is expected to be a record large crop.
A state of emergency was declared by Gov.
Scott Walker for 13 western Wisconsin counties
that have been drenched by torrential rains since
The Wisconsin National Guard is providing
assistance to those affected by the disaster
which has caused widespread flooding and
mudslides in the region, including one death.
Volunteer crews in several southern Minnesota towns
were building sandbag walls to hold back rising
Residents in Saint Clair received 14 inches of rain
in 48 hours.
Sections of several area roads were washed away in
the deluge.
And some of the residents in the northeast Iowa town
of Greene were ordered to leave as the nearby Shell
Rock River roared out of its banks.
About 60 homes in the northeast Iowa town took
on waist-deep flood waters.
Interview: The weekend forecast is for more rain
in the region, so fields that escaped the first
round of moisture may find themselves moist by
For Market to Market, I'm Peter Tubbs Next, the
Market to Market report.
Inclement weather across all of the Americas and a
weaker dollar laid the groundwork for volatility
in the commodity markets.
For the week, December wheat was flat and the
nearby corn contract, despite a midweek move
higher, also finished flat.
Strong soybean sales, strong export sales were
not enough to outweigh higher yields as the
October soybean contract lost 11 cents.
October meal declined $10.40 per ton.
In the softs, December cotton added $2.79 per
Over in the dairy parlor, October Class III milk
futures lost 50 cents.
The livestock sector was under pressure as the
October cattle contract fell 60 cents.
October feeders lost 57 cents.
And the October lean hog contract dropped $1.48.
In the currency markets, the U.S.
Dollar Index lost 66 cents.
Crude oil advanced 86 cents per barrel.
Gold rose $31.50 per ounce.
And the Goldman Sachs Commodity Index gained
more than 2 points to finish the week at 351.20.
Pearson: Here now to lend us her insight on these
and other trends is one of our regular market
analysts, Sue Martin.
Sue, welcome back.
Martin: Thank you, Mike.
Pearson: This has been a week of stability in the
wheat markets.
We saw some export news come out.
Can you talk about where you see this wheat market
Martin: Well, I think the wheat market is very
oversold, very cheap, it may still move sideways
for a little bit longer but all in all the funds
are heavy short, near record short and so what I
find is when a market moves sideways for a long
period of time in a market that is loaded short as
this one is, it's usually not advantageous to be too
willing to be sellers.
So I'd either stand aside of it, I would not be
selling cash sales, or if I did I'd find a way to
re-own it, the problem is the basis is so horribly
wide how can you even do it?
So my thought is go ahead and save it, keep it in
the bins if you have room and then maybe just put
some flooring under it with puts or something.
I don't even think it's worth putting floors under
it, if you want the truth, because what you would put
into puts, you can say that's your risk on the
upside, or downside I guess.
And we had India this week lower their export duty,
or import duty I should say, down from 25% to 10%.
Their demand is growing.
They're going to outstrip what they produce and
they're a good producer, huge users of wheat.
And in the meantime you've got Egypt who managed to
get some funding from the IMF, ironically, about the
time now they're willing to take a move back to the
international standard of 0.05% -- Pearson: Okay,
so that was my next question.
I know they had a tender and they had several
offers but they dropped that zero ergot role.
Martin: Yes, they did, they dropped it and moved
it back to the international standard.
I believe, and of course far be it for me to ever
think badly of anyone, but I believe that Egypt, one,
they're the world's largest importer of wheat.
Two, they're financially strapped.
And three, they know they don't dare run out of
wheat because if they do they remember what
happened to the previous president.
So I think that when they, they've been playing a
I think they were using the ergot and that zero
tolerance as an excuse that if they started to
get a shipment in all of a sudden the price was
cheaper than what they originally bought, well
let's just refuse it.
And I think that's been a game and all of a sudden
world exporters, it would be nothing to have 14, 15
offers on a tender and they haven't been getting
I think the last one was 4 even when they had dropped
the rating of ergot tolerance.
So I think what's happening is they're
finally realizing, and of course IMF stepped up and
kind of helped them with some funding.
So now the playing field should be a little better.
Pearson: And now we finally it looks like are
starting to maybe see a light at the end of this
tunnel here in the wheat market.
And now Russia is projected to drop their
export tariff on wheat.
Is that going to be a significant headwind as we
head into this next week or two?
Martin: Well, I think so.
Russia is going to continue to be
But usually the Black Sea every year is competitive
for a while, but they don't last super long and
then they're out of the way.
We all know that global stocks are huge and some
would say burdensome.
But the problem is, is that a major percentage of
those global stocks are poor quality, feed
quality, poor quality and you need food.
And therefore when you have a crop that is feed
quality or poor quality it tends to disappear faster
because it takes more of it to find, to be able to
reach the objectives you have.
And I believe the U.S.
is in a good spot because we have good quality
They're going to buy U.S.
wheat to blend off over in Europe and then they'll
One thing though, we did see France load ships out
this week that should arrive on the East Coast
by October 2nd coming out of France for feed wheat.
That's kind of interesting.
Pearson: So we're importing feed wheat even
as we sit on 1.1 billion bushels here.
Martin: Exactly, but that's going to change
because I think if you look at a year ago the
Eastern Corn Belt dealt with a lot of issues.
This year they're going to have a crop and so that
will start to move eastward and so I think
that will solve that issue down the road.
Pearson: Now, you do work with a lot of producers,
as you look at this corn crop, Sue, have you been
hearing harvest reports?
Is this going to be, in your opinion, a national
record average yield?
Martin: Well, I think so.
I think we're going to have a good crop, it's
going to be a big crop.
I do think it's variable.
But boy I'm hearing yields all over the place.
But one thing that stood out to me this last week,
and we were talking about it before I came on the
show, was that even in Indiana and to Ohio where
a year ago they really had issues with too much rain,
this year they were drier and the yields are down
from what they, if you've gone back to 2014 or
whatever, way down but better than a year ago
maybe by 30, 40, 50 bushel to the acre.
So when it's bad, but it's still better than a year
ago, so I'm wondering how that plays into the mix.
The other side of the coin is there's a lot of stalk
rot out there and in Central Illinois we're
hearing reports of diplodia and even in parts
of Minnesota and what have you and I'm sure with all
the rain we've been getting this week that
probably isn't helping the cause at all.
Pearson: And diplodia, for those who are not familiar
with the term, is basically the kernel
Martin: That's right, and mold, it's a white mold.
And my understanding is, Bob Straight is an
agronomist, and my understanding he is
recommending drying that corn down, if you've got
diplodia drying it down to 13% before you put it in
your bins.
Pearson: Okay.
So now if I'm looking at additional drying costs,
I'm looking at this market that can't really seem to
find some footing here, how do I handle my
marketing as I look out in the fourth quarter of
2016, Sue, for corn?
Martin: Well, here's the interesting thing.
I think that, we know that corn struck a low here at
the end of August, the first day of September,
right in there.
And there was timing there for a cycle low.
Corn and beans both are dealing with an 84 year
cycle bottom that is in the process.
And our second window, the first window was March 2nd
and we got a good bottom, a V bottom, there was a
second window, which was right at the end of August
to about the 6th to the 11th of September.
There is one more that comes in late December,
And we think by the middle of January that's done.
And so I think that we're dealing with this, so what
I see happening here is I think the commercial is a
little concerned, one because harvest is
starting to get a little delayed in Iowa, not to
mention on beans too, but the commercial knows that
the farmer is going to probably move beans and
save his room for his corn and store the corn.
And once that corn goes in the bins they aren't going
to turn around and take it right back out.
So they're going to have to bid if they want it
right now.
So I could see the market holding a little better
right now and maybe moving up into October, maybe
November and then we turn down as we go towards the
end of the year and roll the year over as farmers
are working with bankers, getting their year-end
books lined up and whatever.
I think farmers start to move some grain to pay off
some bills and what have you and in the meantime
that maybe gives us incentive to turn around
and drop right back down as we roll the year over.
Pearson: Okay.
So on the upside as we get here through harvest into
November, are you seeing $3.60, $3.70, $4?
What's the top end -- Martin: Well, I don't see
There is a head, technically a head and
shoulders bottom, nicely based head and shoulders
bottom on corn.
And that would project to the upper $3.60s, low
But, as I had a gentleman one time on a blog tell
me, a head and shoulders in corn is only accurate
about 40% of the time.
I can't prove that, but we'll see.
But at the moment I see a market that is probably
more willing to move sideways, maybe you'll get
that little lift, if you do probably be willing to
sell some there because I think you're going to get
another chance as we roll the year over to come back
and buy it again.
Pearson: Get some reownership.
Now let's take a look at this soybean market.
We're down 11 cents in the November bean contract,
Sue, As you mentioned harvest is being delayed
in Minnesota, Iowa, Wisconsin, parts of
Where does this lead us into next week?
Martin: Well, it was interesting because we
noticed this week, yesterday on Thursday I
should say, the market ignored bullish news.
You had sales to China, it ignored that.
You have all this rain, it ignored that.
The market is like in a little bit of denial but
it's also hearing a lot of these yields coming out
that where the combining is going, dry land beans
anywhere from 45 to 72 all good yields for dry land
beans in Nebraska, irrigated beans 80s,
Indiana 64 to 80s, upper 80s and Illinois same way.
I have heard some beans out of Illinois that are
coming out where they had sudden death and those
bean yields are a little disappointing, after you
hear all the others, but still maybe a little
respectable considering around 50s, mid-50s.
So that's not so bad.
But one thing I will say is when you look at the
state of Iowa a good third of the state having major
issues and they aren't going to be in the field
for at least a couple of weeks or at least a week
and a half, two weeks and that's if everything dries
The forecast for October is kind of up in the air,
it could be another wet month.
And then you look at Minnesota, the lower third
of Minnesota, and I've got to tell you, that's some
of the best land in Minnesota.
And then you look at Wisconsin, same situation.
I think we have to, I think the market is a
little bit in denial because they're listening
to these yields, but as we go forward I think we're
going to start hearing some poorer yields.
And I also think we have to keep one thing in mind,
Argentina when they were harvesting went through a
similar situation where they caught way too much
rain and what happened to the production in that
country, it went south.
Why wouldn't we be the same?
Pearson: So we could get that news trickle out here
as harvest progresses and maybe provide a lift.
Martin: I think so.
Pearson: Alright.
Well now, Sue, as we take a look at the livestock
markets, on the cattle side this was a fairly big
week in terms of news.
We had China agree to begin accepting U.S.
beef and we also had a cattle on feed report come
out on Friday.
We've got a question here from one of our Twitter
followers, this is from John, @4720john.
He wants to know, how will the opening of the beef
market to the Chinese have an effect on our markets?
And how long will it take?
Martin: Well, I don't know how long it's going to be,
they haven't really said.
I do think that was part of an in some ways maybe
trying to smooth the wound of the U.S.
filing a complaint to WTO over them for subsidizing
their farmers.
Of course then today they turn around and raise the,
they don't ban imports of DDGs, they just raise the
ante of what it costs, the import duties to --
Pearson: Added a 38% tariff?
Martin: 33.8.
Pearson: 33.8% tariff on DDGs.
Martin: So but I think that import tariff being
raised was more to do with they haven't sold hardly
any of that crappy corn that they have.
It is poor, poor quality corn and I think they're
trying to dissuade the end user or the processor from
importing corn so that they can maybe try to
still get rid of some of that corn.
But I think that the beef, I think that we see it
happen, I think it's a good thing down the road,
it's just not here today.
Pearson: Got a lot of negotiations left.
Martin: We do.
And the one thing we have to keep in mind is October
is pork month so you're going to have some
featuring of pork.
We might see it next week.
You're going to have, you've got a ton of
You go in the grocery store and the retailer
just really hasn't been real good about lowering
the price of beef, especially hamburger.
And so I think when we look at the beef market, I
think that first off weights coming back up,
for the past three weeks now we've seen weights
start to come up, which was a little bit of a
In the north though I've also heard where there's
starting to be some heavier cattle and it's
because of all this corn that's sitting around,
trying to feed it off through the cattle.
And so I guess that's typical of a year like
But I think that when I look at the cattle market
the feeder market was, well even the fats was
wild today.
They beat the market to death and then they turned
around and brought it all back and closed everything
At the end of the day October feeders are only
down about $1.70 from the high of the week.
Pearson: Does that lend some excitement to you as
we look into next week?
Are we starting to turn this cattle complex
Martin: Well, it was impressive because it now
leaves a big spike low on the chart.
And of course it's a low of higher degree too.
Who would have thought?
We made higher highs for the move on feeders on
Thursday and then turned around and we put a
secondary higher but close to the lows and we came
out of it.
And the cattle on feed report was sort of ho-hum
in a way, 101% on feed but that's the fifth month now
consecutively where we showed increase of cattle
over a year ago.
And then on top of it we had placements at 115%,
trade was looking for 113%, that should be
negative to the deferreds and then the marketings
was at 116.8%, 117% if they rounded it off, it
came out at 118%, that would say yes, we are
pulling cattle ahead.
So there was some good news up front, maybe a
little negative, but for guys who have got cattle
that will be in December, February, something like
that, why not just instead of hedging those cattle
because they're too cheap, why not go, if you're so
concerned about prices, why not go out and sell
the spring feeders.
Pearson: Alright, Sue, 30 seconds left.
I'm going to do this to you again.
Hogs lower or higher on the next week?
Martin: Oh, good grief.
Well they're going to feature pork but you've
got to remember pork production 8% higher than
a year ago.
Pearson: We've got numbers.
Will we get the demand?
Martin: The largest weekly kill that you had since
2007, December of 2007.
Weights are up three pounds.
Pearson: It's a coin toss.
Martin: Well, it is, but yet the cattle inventory
showed supplies down so that shows the retailers
moving it.
Pearson: Well we'll pick this up in the Market
Thank you, Sue.
That wraps up the broadcast portion of
Market to Market.
But as I mentioned, Sue and I will keep the market
conversation going including answering more
of your questions during Market Plus available on
our website.
Are you wondering about our coverage of antibiotic
Go behind the scenes with the latest edition of the
MtoM podcast.
You'll find it wherever you get podcasts by
searing M-t-o-M.
And join us again next week when we explore how
heritage breed farmers are producing pork with a
So until then, thanks for watching.
I'm Mike Pearson.
Have a great week.
Market to Market is a production of Iowa
Public Television which is solely responsible for its
Funding for Market to Market is provided by
Grinnell Mutual.
You think differently about a customer when you
stand in the middle of his dreams.
We work to make sure you get covered right.
Grinnell Mutual -- a policy of working
Information on finding an agent near you is
available at
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Market to Market (September 23, 2016)

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