Market to Market – November 10, 2023

Paul Yeager: 
Developing on Market to Market, what’s being finished to reduce the harm from the newest HPAI outbreak. Greater inputs are changed by one other I-word within the I-states as a reason for financial concern. And an in-depth dialogue on an rising marketplace for U.S. commodities. And we’ll have the commodity market evaluation of Ted Seifried subsequent.

What’s subsequent, would not occur by probability. It occurs when researchers and farmers work collectively to resolve tomorrow’s agronomic challenges. We’re dedicated to creating what’s subsequent. As a result of at Pioneer, our identify is our mission.

Tomorrow, for over 100 years, we have labored to assist our prospects be prepared for tomorrow. Belief in tomorrow. Info is out there from a Grinnell Mutual agent at this time.

That is the Friday, November tenth version of Market to Market, the weekly journal of rural America.

Paul Yeager: 
Hi there, I am Paul Yeager. The Nationwide Turkey Federation estimates 88% of Individuals will devour Thanksgiving turkey this yr. That interprets to greater than 46 million birds. Now, in the important thing manufacturing areas, HPAI is once more breaking out. However as David Miller stories, the dimensions of the outbreak is dramatically completely different than it was practically a decade in the past.

David Miller: In February of final yr, Excessive Pathogenic Avian Influenza returned to U.S. business flocks after a a number of yr hiatus. Producers in Iowa, one of many nation’s high poultry producing states, have seen new instances in simply the previous couple of months.

Mike Naig is Iowa’s Secretary of Agriculture.

Naig: I do not assume people thought it was a shock. I feel we had finished, I feel all of us had discovered that there was a relentless menace and finish is to the query about whether or not or not our producers had been making ready and whether or not we had been making ready. The reply to that’s sure. 

David Miller: In the course of the 2015 – 2016 outbreak, Iowa recorded 77 particular person instances of HPAI that impacted practically 33 million birds. Egg costs spiked because the virus rolled over the nation’s primary egg producing state. Over the previous two years in Iowa, there have solely been 41 instances of Avian Flu, impacting simply over 16 million birds. 

Naig: Now, what’s that let you know? That tells you that farmers understood and did a greater job on biosecurity. Preserve what’s exterior, inside and outside, inside.

David Miller: USDA helps make producers entire by paying for a portion of the misplaced birds in addition to the prices for cleansing and disinfecting when the animals are depopulated. The Iowa Division of Agriculture gives for emergency response bills like PPE and journey. 
Officers with USDA say the possibility of HPAI- contaminated poultry getting into the meals chain is extraordinarily low and that you just can’t get Avian Flu from birds which have been correctly cooked.  Naig says the turkeys that you just see within the grocery retailer have been harvested months in the past and there’s little probability of a scarcity. 

Naig: It is a fixed menace, as is African swine fever, as is foot and mouth illness. That’s how now we have to think about excessive path avian influenza. That is the mindset that our producers must have. That is the extent of readiness that now we have to keep up right here and at USDA is that it may occur actually now at any time.

David Miller: For Market to Market, I’m David Miller.

Paul Yeager: 
COVID 19 tangled provide chains and rising inflation have been pushed apart by larger rates of interest because the main financial sentiment influencer. The benchmark rate of interest in October of 1981 was 15 and 1 / 4. The final time it was double digits was November of 1985, and the final time the market was this excessive was early 2007. That price to borrow cash is the place the agricultural economic system is targeted for 2024 asPeter Tubbs stories.

Peter Tubbs: Agricultural lenders see declines in 2024 farm profitability in accordance with a survey of lender sentiment launched this week.

Profitability is being seen as seemingly for three-quarters of debtors within the present farm yr, and lenders imagine that two-thirds of debtors might be worthwhile in 2024. 

The prices of rising rates of interest have change into the most important concern for lenders, changing enter prices which dominated the steadiness sheets of the farming sector in 2022 and 2023.

Nate Kauffman, Federal Reserve of Kansas Metropolis: “..the energy in financial progress in 2021 and actually even by means of 2022 and now this yr has been fairly good and possibly even in some locations stronger than what may need been anticipated.  In order that that’s supportive them that of an atmosphere that that that has export exercise in both path. If we have been to see for no matter motive a extra vital financial slowdown whether or not it is in Mexico or america, a few of that ties again to how now we have to consider financial coverage and rates of interest. We all know that results related to enhance in rates of interest do not occur instantly. It could actually take a while for these results to to play out.”

Peter Tubbs: The impact of the upper charges is anticipated to ripple by means of farm funds for the following three a long time.

Jackson Takach, Economist, Farmer Mac: “So in Farmer Mac portfolio, we expect very long run. So loads of our ag mortgages are out 25 – 30 years and people farmers who refinanced at 21 and 22 have fastened charges which are good for a very long time at very low, very enticing rates of interest. So it will take just a little little bit of time for the actual property aspect and even the equipment and tools and a few of these intermediate time period financings to essentially be impacted by the upper rate of interest. You are going to have to attend until a few of these notes mature after which they may begin to see these creep up.”

Peter Tubbs: Debtors can count on to see tightening underwriting requirements, and steeper mortgage phrases so long as the rate of interest atmosphere stays risky.

For Market to Market, I’m Peter Tubbs.

Paul Yeager:
India took over because the world’s most populous nation in June of this yr, topping 1.4 billion individuals. Cities are rising and the infrastructure is making an attempt to maintain tempo. The nation has proven they’ll fill the demand for commodities from a number of nations, together with america. Jordan Fife just lately returned from India on a enterprise journey. He is president of Buying and selling for Bio Urja, a world vitality firm primarily based in India. Fife’s perception is our subsequent MTM podcast and this week’s Cowl Story.

Jordan Fife/President of Buying and selling, Biourja: There’s so many individuals there. So clearly which means if all of them begin driving, there’s large demand there. All of them begin consuming extra proteins. There’s large demand there for agriculture and all the things like that, regardless that loads of India is vegetarian. There’s different methods to get it in there. However they’re rising in a method that I feel China has already occurred. They’re in that first wave of true industrialization over the past 10 years, how a lot they’ve invested in infrastructure and highways to hyperlink Mumbai and New Delhi and all that. It is really unbelievable see, after which from an ethanol standpoint, clearly they solely import industrials, proper now they don’t import gas grade, if that have been to ever change that’s the the silver lining to each ethanol producers cloud proper now, if India have been to step in and say we wish extra FL, it might be a sport changer. China used to import extra. And now they’re constructing their very own ethanol vegetation. At present, India has ethanol vegetation that make it from molasses from sugarcane. However it’s simply they do not have the infrastructure to do it. They may take extra tomorrow, Modi, their Prime Minister has additionally elevated the quantity of ethanol they do take into their automobiles. They are not hitting it proper now. However the truth that they’re making an attempt to do it’s encouraging. So both of two issues goes to occur in my view, one, they finally say you possibly can import gas or two, they are saying Hey, may you come assist us construct this stuff and present us easy methods to run them? Both method? I feel it will be good for us.

Paul Yeager: How lengthy have a very good for the US?

Jordan Fife: I do not assume India is completed rising? So actually, the query is, how lengthy will they hold increasing? And I feel they’re going to proceed to do this for the following 20. So 20 to 30 years. Now, if they’ll industrialize that a lot they usually do develop sugarcane and all the things like that, they might doubtlessly begin making their very own. So it simply will depend on the industrialization, you are gonna want it close to there populous areas, you are gonna must construct these vegetation in and round Mumbai, New Delhi, Hyderabad, the place there’s main metropolitan areas to make a dent, or they should enhance their, their ports cities to soak up extra and construct tanks. It will take some funding from any individual, however any individual’s gonna get it proper and possibly make a ton of cash. Do you see India importing extra of our items? Or our perception on items? 

Paul Yeager: You talked about bettering refineries, issues like that? That is what I imply.

Jordan Fife: I feel the insights are most likely the simpler method. And look, you already know, should you have a look at America proper now, the best way it is trending, tech is type of one in every of our greatest exports, proper? That is extra thought primarily based than it’s items base, you already know, we have type of shifted just a little bit from, from uncooked supplies and all the things like that, you already know, to a extra tech associated economic system. So I count on that that can proceed to fall by means of. And it is simpler, proper. However the items are tougher, such as you talked about, India would not want to enhance their ports, they can’t consumption in additional if there is a bottleneck, so they should work to the underside with that, as soon as they do this, I feel there’s a excellent alternative, once more, to have some form of commerce settlement with them. Since they’re once more in Asia, that it is a pure drawl to China. However China is just not actually an enormous exporter, both, you already know, they’re a big importer, as effectively. So it actually comes all the way down to Russia and into the Center East. And that is going to be extra oil primarily based to start with. So far as agricultural merchandise go, I imply, in South America, they will attempt to attract off as a lot as they’ll, after which do as a lot as they’ll domestically. However I used to be there, I drove round within the nation, I went to a number of farms. They have a protracted method to go. I imply, they are surely nonetheless doing like water buffaloes and plows. That is not facetious in any respect. That is simply the best way it’s proper now in loads of locations over there.

Paul Yeager: Is there any comparability India is to a different nation? Has there been any individual else that is adopted? This template or any individual 50 years in the past that, yep, right here comes India. That is what occurred in that nation. 

Jordan Fife: I might put it because the one which I might put it with, and possibly I am fully unsuitable, however it appears like it’s our neighbor in South Mexico. , that they had, they’ve actually come alongside, clearly, you already know that should you have a look at Mexico’s refining, you have a look at their agricultural, you have a look at their infrastructure, you have a look at telecommunications, you have a look at the web, all the things is you already know, I do not know the final time you are in Mexico. However should you go to a developed space of Mexico, it very a lot feels such as you’re in america. In case you’re in Cabo or Cancun or any of these, you are in america with a pleasant seaside, proper? Secure and all the things like that. It is obtained its issues, however what nation would not. However I might say it is most likely like a 50 yr in the past, Mexico, the place it was rather more rural. And now we’re seeing loads of consolidation in Mexico Metropolis and all these different cities, Monterey, you are seeing this consolidation and a willingness to work with us with america. They’re clearly one in every of our largest commerce companions. So yeah, I might hope that it goes that route.

Paul Yeager: The total dialogue might be a part of the MtoM launch on Tuesday.

Subsequent, the Market to Market report.

Paul Yeager:
We’re producing this system on Thursday in observance of Veterans Day. The next corn crop and demand emerged from this week’s USDA report. For the week. the close by wheat contract added $0.08 whereas December corn minimize $0.09. South American climate and an enormous China buy assist of the soybean complicated earlier than large loss adopted the USDA report launched on Thursday.

The January contract shed $0.08 and December meal improved $7.80 per ton. December cotton shrank by $3.10 per hundredweight. Over within the dairy parlor, December Class three milk futures decreased $0.22. The livestock market was decrease as December cattle misplaced $9.53. January feeders offered off $14.82 and the December lean hog contract fell $0.30. Within the forex markets, the US greenback index added 91 ticks.

December crude oil offered off $5.40 per barrel. COMEX gold dropped $37.80 per ounce and the Goldman Sachs Commodity index decreased greater than 23 factors to settle at 558.10. Becoming a member of us now, common market analyst Ted Seifried. Hello, Ted.

Ted Seifried: 
Hello, Paul.

Paul Yeager: 
, wheat has been one in every of these canine for fairly some time.

Ted Seifried: 

Paul Yeager: 
Within the final couple of weeks. It is put collectively just a little little bit of a choose me up. Is the occasion over, or does it hold going?

Ted Seifried: 
Are we saying occasion to the draw back over? Or is the pick-me-up over?

Paul Yeager: 
The choose me up over.

Ted Seifried: 
Yeah. we closed over the 50 day transferring common on Wednesday for the primary time in three plus months. That is a constructive signal. , there are some constructive indicators to say that, hey, wheat is likely to be making an attempt to backside right here. However Paul, I really feel like now we have this very same dialog each month and a half, I come right here.

And but we have not had any vital rally. Like I stated, first time mover closing over the 50 day transferring common in fairly a while. By the best way, we had been over it one different day in the course of I feel center of October. However then we did not shut, we closed beneath it. Both method, there are some indicators of life lastly.

I do not know if now we have a basic motive to go sharply larger at this level. Perhaps a corrective bounce, however we simply noticed on a USDA report at this time, you already know, rising steadiness sheet, rising carryover for the US, not by an entire lot. They made some small tweaks on the demand imports got here in just a little larger, 10 million bushels larger.

Once more, it is simply we’re missing something to get actually enthusiastic about in wheat. And remember, I imply, that is virtually three years into Russia invasion of Ukraine and we’ve not seen this large inflow of of our exports. We have not seen, you already know, tremendous tight home or world steadiness sheets. We have been in a position to simply type of get by means of it and costs have not wanted to go sharply larger.

So I do not know. I am hopeful. I am optimistic. I assume the perfect factor I can say about wheat is that possibly the promoting stress has subsided for now. However once more, I am not doing leaping jacks a couple of sharply larger wheat market within the close to time period.

Paul Yeager: 
Any trigger to do leaping jacks? I imply, it is a it is a decrease week in corn, after all. However is there any motive to have a good time there?

Ted Seifried: 
Yeah, no, I see there’s actually no leaping jacks for Ted this week.

Paul Yeager: 
Form of like your final look.

Ted Seifried: 
Yeah, I do know, I. I am sounding like a damaged file. I really feel like Paul, however, you already know, we had a USDA Wasde report at this time. Right now’s being Thursday. Completely happy Thursday, Paul. It was not a very good report. Now, I feel there’s going to be quite a few analysts that say this was form of a ho hum report. I do not see it that method.

You’ve yields going larger and each corn and soybeans bucking the pattern that we had been in, you gave 1.9 bushels again to the corn yield. now we’re just below 1.75, which is considerably higher than the place the corn crop was final yr. Beforehand, we have been speaking about that this corn crop being worse than final yr. Now now we have a file producing corn crop.

The intense spot in corn is that we’re in a position so as to add to the demand figures. 25, 50 and 50 for a complete of 125 million bushels going again into the demand aspect of the equation, offsetting a few of that 170 million bushels enhance in manufacturing. So that you solely, solely have the carryover growing by 45 million bushels, however it’s a rise in steadiness sheet.

Enhance in carryover, we’re effectively above 2 billion bushels. And now while you have a look at demand, roughly 7 million bushels above the place we have been final yr, you surprise how rather more demand we will add to that steadiness sheet. How rather more demand may we even purchase at decrease costs? There’s only a restrict to how a lot demand you possibly can you possibly can recapture in a single yr to the following when you could have as a lot demand destruction as we had final yr.

Demand creation is a way more troublesome factor to do. Decrease costs are solely a part of that equation since you additionally must regrow that want. So, you be ok with the demand aspect of the equation. It is simply the overwhelming large 8 million acreage, 8 million in harvest that enhance from one yr to the following. That enhance in manufacturing is simply we will not overcome that and we’ll be above a 2 billion bushel carryover.

I do not see a pathway to get beneath that.

Paul Yeager:
Demand would not simply come out of nowhere although.

Ted Seifried: 

Paul Yeager: 
So why does it appear to be that was a shock?

Ted Seifried: 
The USDA has a factor the place once they add to manufacturing, they actually prefer to attempt to discover methods so as to add to demand. We’ll get to that in soybeans in a second, by the best way. However I feel all the things they’re doing is justified. , we’re our export program is nice. It isn’t superb. This isn’t the time of the yr the place we’d like it to be superb.

However for the time of the yr, our export program is nice. Ethanol, We’re grinding loads of corn. Ethanol shares are fairly low, comparatively talking, so we’re utilizing lots within the mix. That is actually excellent news. Ethanol revenue margins are good. So I see that demand rising demand there justified. The feed and residual class. I imply, that is the slush bucket, proper?

I imply, you by no means actually know. That is simply form of their residual is the key phrase there. However I feel that larger demand is justified. I simply do not know the way a lot larger, larger can get from the place they’ve it proper now.

Paul Yeager: 
Perhaps it comes from the place our query is and let’s go together with Tony in Nevada. And he desires to know, Ted, this week China was an enormous purchaser of beans. Do you assume they’ll come for corn subsequent?

Ted Seifried: 
Hello, Tony. what? They have not. I am undecided. , their corn crop wasn’t stellar this yr. There appears to be a necessity for corn for China, however they’re actually trying on the Ukraine that is form of been there for for a protracted time frame. Actually, I feel it goes again into the early 2000s. They’ve had a cope with Ukraine to purchase no less than 5 million metric tons of corn yearly.

And no less than it has been greater than that in most years. And Ukraine nonetheless manages to get corn shipped. And most of that corn, by the best way, goes to China or good proportion of it, greater than 50% of it. So between that and the brand new relationship that they’ve with Brazil on corn and given Brazil’s actually fairly good corn crop that that they had final yr, I am undecided they will want to come back to us for corn they usually’re reluctant to take action,

To this point type of tells me that they most likely will not. And in the event that they do, it is most likely not going to be any large quantity like we had seen like throughout the Trump negotiations of extra bushels coming or, you already know, them shopping for extra agricultural items. Properly, that was nice. However since then that is actually tailed off for corn particularly.

Paul Yeager: 
However China did come knocking for beans this week. Yeah, that is the distinction there.

Ted Seifried: 
Properly, you already know, China simply has this overwhelming want for beans, proper? They can not develop anyplace close to they import near 100 million metric tons of beans yearly. So clearly, they will want a few of that from us. China got here right here for the primary time since 2017 to signal their ceremonial nonbinding buy contracts of 5 million metric tons.

And these gross sales that you just’re seeing on a every day flash sale, I imagine are only a reflection of that. We have recognized about these for 2 weeks. And should you add the six days from Friday after which Monday, Tuesday, Wednesday, Thursday, every a kind of days we noticed flash gross sales to China or unknown locations. In case you put all that collectively, it is 2.98 and alter is just below 3 million metric tons.

So hopefully there’s that further 2 million metric tons on the market. However this isn’t unaccounted for on a USDA steadiness sheet. This isn’t an enormous shock. The timing of it’s shocking solely as a result of it is later than you’d have thought you type of would have thought you’d have seen this a couple of week in the past.

Paul Yeager: 
You are saying the timing of the purchases is is what you are referring to?

Ted Seifried: 
The delay between the ceremonial signing and once we’re seeing the flash gross sales. However not solely that, you do really feel like these purchases may have occurred possibly two, three or 4 weeks in the past fairly than now. You do type of surprise if the climate considerations that we’re seeing in Brazil specifically, are possibly fueling this just a little bit extra. However whether or not they’ll go up and above that 5 million metric tons that they ceremonial ceremonially signed for, I do not know.

Yeah, I feel they’re going to beat that quantity. However I do not I do not assume that that is going to be an additional 5 million and even 3 million metric tons above and past what that they had initially supposed to buy. And I do not assume their wants are fairly as sturdy as what they’ve been in the previous couple of years due to their hog herd.

They’re having to for no matter motive, we will discuss that in hogs, however they’re scaling down their hog herd. There’s lots coming as much as advertising at first. Their crush margins aren’t good. I do not see a very sturdy want for soybeans in China proper now. They may be capable to get by to the Brazilian crop. Loads of that’s going to rely upon what occurs with Brazilian climate.

Paul Yeager: 
Mainly a sure or no on this one. If I did not promote beans early on this week, did I miss my probability for a rally?

Ted Seifried: 
It is a climate market, I might say sure. I feel seemingly it would begin to rain in Brazil sooner or later.

Paul Yeager: 
Let’s get to livestock as a result of it was brutal once more, dwell cattle, December, they gapped decrease on Monday. Then they stored taking place. That is falling off the charts to a degree. Is that this simply technical or is there a much bigger story right here?

Ted Seifried: 
, loads of analysts need to say that is all due to the cattle on feed report that we had, you already know what, three weeks in the past. However this began earlier than that. There’s loads of issues happening. There’s loads of concern concerning the general economic system. There’s loads of energy within the greenback with rising rates of interest that you just talked about earlier.

There’s loads of concern. And that signifies that, you already know, the funds, the speculators which have actually loved being the long term bull market that we have had in cattle are altering their tune. And when you could have this mass exodus for the doorways, you are particular person speculator will get fully run over margin calls mount obtained to get out proper. After which you could have this disassociation.

Lots of people will say that the cattle market is damaged. And what we have seen within the final couple of weeks and at this time specifically, type of actually proves that time. You’ve money cattle buying and selling at a premium to futures for the primary time since COVID. Is there a very good motive for that? I imply, you continue to have money cattle buying and selling within the 180-181 vary.

Why are we breaking futures as laborious as we’re? And it is a cash move factor and it’s disassociated from what’s really taking place within the bodily market. And that’s irritating. What it would do, although, is it improves backpackers margins. It’s going to supply them a chance to proceed to pay money costs within the one eighties or larger vary.

The query might be what’s the American shopper do? Are we going to select up our demand if we see decrease costs on the grocery retailer?

Paul Yeager:
Properly, and the urge for food for the demand has began to wane. You are beginning to see these tales begin to emerge. However I assume then within the feeder story, it’s a little little bit of the identical since you do have some lengthy positions being vacated. Is that the one consider that market?

Ted Seifried: 
We now have extra animals on the market than we actually thought doable, and there is for quite a few causes for that. Clearly, feeder cattle coming from Mexico was one thing that that we did not see coming, no less than not within the measurement that it did. So I’ll say the basics I feel have modified a bit since from the place we have been or what our beliefs have been,

Our ideas have been, say, three months in the past. However I do not assume they’ve modified as a lot as what the markets are reflecting. You’d assume that sooner or later we’ll discover some floor and discover some footing and begin to come again just a little bit. I might see I do not know if we’ll see new highs in cattle from right here on out.

I would say that the long run bull pattern is damaged at this level, however a retracement again up in the direction of these highs I feel could be justified. It is simply while you begin buying and selling exterior of fundamentals, like I really feel like we’re doing proper now, you need to let the mud settle earlier than you get again.

Paul Yeager: 
We’ll pause for a second. We’ll get your hog feedback in Market Plus. Thanks Ted.

Ted Seifried:
My pleasure, Paul. Thanks for having me.

Paul Yeager:
I respect the time. Maintain it there, everyone, as a result of we’re going to pause this evaluation, proceed our dialogue concerning the markets in our Market Plus section. You could find each the evaluation and plus on our web site of 9,000 of you could have discovered our YouTube web page and we might prefer to hold the occasion going by bringing extra of you into the tent.

Observe us at Market to Marketplace for the primary have a look at this system, the Market Plus and the MTOM Present podcast. Subsequent week, a have a look at the financial relationship of one in every of our greatest buying and selling companions. Thanks a lot for watching. Have an excellent week.

Market to market is a manufacturing of Iowa PBS, which is solely answerable for its content material.

What’s subsequent would not occur by probability. It occurs when researchers and farmers work collectively to resolve tomorrow’s agronomic challenges. We’re dedicated to creating what’s subsequent as a result of at Pioneer, our identify is our mission.

Announcer: Tomorrow. For over 100 years.We have labored to assist our prospects be prepared for tomorrow. Belief in tomorrow. Info is out there from a Grinnell Mutual agent at this time. 

Buying and selling in futures and choices entails substantial danger. No guarantee is given or implied by Iowa PBS or the analysts who seem on Market to Market. Previous efficiency is just not essentially indicative of future outcomes.

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