President Barack Obama Celebrates Earth Day in Iowa
The New York-based Conference Board announced this week its monthly index of leading economic indicators fell 0.3 percent in March, marking its 9th consecutive monthly decline.
According to the National Association of Realtors, existing home sales fell 3 percent last month to an annual rate of 4.6 million units. New home sales fell just over one-half of one percent.
Meanwhile, General Motors, which received another advance of $2 billion from Uncle Sam this week, announced it will temporarily close 13 assembly plants this summer in the U.S. and Mexico, laying off more than 26,000 workers.
And the Commerce Department reported orders for durable goods dropped 0.8 percent last month. Though negative, the decline was about half of what many economists expected and likely will be welcomed by manufacturers.
But on Earth Day, President Obama cited the rebirth of a once-shuttered manufacturing plant as evidence that America’s investment in renewable energy is good for the environment AND the economy.
Celebrating Earth Day in the Corn Belt this week, President Barack Obama outlined what he calls a step towards "21st Century American Energy.” Standing amidst massive wind turbine bases, Obama reflected upon the tough economic times in Newton, Iowa. The small Midwestern town’s major employer, Maytag, once employed 4000 workers on its bustling washer and dryer assembly lines. The plant closed in 2007, but today one of its buildings is home to the Trinity Structural Towers assembly plant for wind turbine bases. Nearby company TPI Composites opened in 2008 and hired more than one hundred workers who turbine blades.
President Barack Obama: “These floors were dark and silent. The only signs of a once thriving enterprise were the cement markings where the equipment had been before they were boxed up and carted away. Look at what we see here today. This facility is alive again with new industry.”
While Obama’s speech centered largely on the unique situation of Newton’s new employer Trinity Structural Towers, much of the address focused on legislative proposals. The President outlined a massive cap-and-trade plan that, if passed, would commoditize Co2 emissions.
President Obama: “…we'd create a market where companies could buy and sell the right to produce a certain amount of carbon pollution. And in this way, every company can determine for itself whether it makes sense to spend the money to become cleaner or more efficient, or to spend the money on a certain amount of allowable pollution.”
But the Obama Administration’s cap-and-trade proposal is not without critics. Many Republican lawmakers and business interests are concerned that additional taxes on carbon dioxide could hamper an economic comeback or send some business sectors into bankruptcy.
Nevertheless, some energy companies are hoping to profit. Business conglomerate General Electric, a major player in wind energy, hopes to turn a cap-and-trade program into earnings.
Victor Abate, GE Vice President Renewable Energy: "You need to monetize carbon and that will reflect in the technology structure and the true value of alternative technologies like wind and solar. Without monetizing the value of greenhouse gases, you're comparing apples to oranges from a technology perspective."
Regardless of any cap-and trade initiative from Washington, Newton’s Mayor says wind power is here to stay.
Mayor Chaz Allen, Newton, Iowa: "To have some recovery this early is a good thing in our community. With Trinity and TPI, that's 700 jobs within two or three months of Maytag's closure. Wind energy and renewable fuels will be a big part of our future in the community."
Barn Restoration
AFT leaders cited Environmental Protection Agency research indicating agriculture and forestry offer the most cost effective and readily available methods of reducing and mitigating carbon emissions.
Though better known for its efforts to conserve the nation’s farmland, AFT has a long history of agricultural advocacy. According to AFT, the U.S. food and farming system employs 17 percent of the nation’s labor force and contributes nearly $1 trillion to the national economy.
Too often though, America’s fertile fields succumb to development and disappear forever. And so do the rustic barns that once dotted the rural landscape. Increasingly though, landowners are investing time and money in hopes of saving the iconic structures. Andrew Batt explains.
In the last fifty years, 
changes in farming practices have altered the rural landscape dramatically. In Iowa, it’s estimated that only 60,000 barns remain of a legion that once numbered over 200,000.
And the Hawkeye State loses 1,000 more barns every year.
Jacqueline Schmeal, Iowa Barn Foundation: “Can you imagine Iowa without barns, without corncribs, without silos? And all these metal buildings are just going up everywhere. We're just going to look like an industrial park like much of the U.S. is starting to look. And if we can save these, it’s going to be special.”
Jacqueline Schmeal is the president of the Iowa Barn Foundation… a non-profit organization dedicated to the preservation of Iowa’s rural buildings. Scmeal says the barns are “symbols of Iowa’s early agricultural heritage and a way of life that is disappearing.” The Foundation provides matching grants to farm families for barn restoration. In exchange for the grant, the owners sign an easement obligating all future owners to keep the barns in good repair.
Shirley and Larry Ellis have lived on their farm near Lytton, Iowa for more than three decades. Their classic structure is a local landmark known as “The Big Red Barn.” Built in 1918, the barn is 40 feet tall to the eaves and features of 3 x 12-inch A-frame timbers.
Over the years, the Ellis’ have worked on nearly every structural component of the barn, from the ground up. The work included replacing and, in some cases, relocating siding, doors, windows, and the entire roof.
Orinally built for dairy, “The Big Red Barn” benefited from and Iowa Barn Foundation Grant. And while the Ellis barn no longer used as a dairy, it continues be a safe haven for traditional farm animals, like chickens and the few head of cattle the Ellis’ own. The main residents of the barn, these days though are Red Rock Arabian Horses.
Larry Ellis, Lytton, Iowa: “I’m really proud of it. I really am. It was just a neat project altogether, and this winter when the animals are in there and you can go to bed at night and know that they’re housed nicely, that gives you peace of mind too. So, it was worth it. Yes, it was worth it. I’m pretty proud of it. I’m as proud as the guy who built it.”
In 2001, the Ellis Barn was on the first All-State Barn Tour held by the Iowa Barn Foundation. Held annually, the tour is a weekend-long open house of barns that have received matching grants from the foundation. The 2001 event was the first of its kind in the nation and drew thousands of barn enthusiasts from 20 different states.
Dennis Heflin, Harlan Iowa: “As we get older, we get more of an interest in saving some of this history for future generations and I think that's what's happened here. We just all have to age before we realize maybe there is a reason why we should do this.”
Dennis Heflin farms near Harlan, Iowa and the barn on his family’s farm has been a stop on eight of the Iowa Barn Foundation’s All-State Barn Tours. Built in 1901, the classic structure has served four generations of Heflin’s.
Dennis Heflin, Harlan Iowa: “So we've seen life go through here, we've seen death happen in it and just about anything and everything else in between.”
With its four-gabled roof line the Heflin barn is distinctive. At one time, there were several similar barns in Shelby county, but today only the Heflin barn remains.
Dennis Heflin, Harlan, Iowa: “To me, if we didn't see barns part of the landscape, it would signify that we're not maintaining our heritage, were not maintaining the history that was there, and that we’re just letting the old go away and just let them be no more. ”
The reasons people cite for restoring their barns are as diverse as the structures themselves. Family heritage was the primary motivation for Charles Anstey to renovate his barn near Massena.
Charles Anstey, Massena, Iowa: “I did it to kind of remember my parents and grandparents—grandfather. He built the barn, for my folks. as a wedding present when they were... the following year after they were married. The house and the barn both, at the same time.”
For others, like barn enthusiast Wendy Elliot, there is a spirituality in barns. With their cupolas that reach for the sky, Elliott sees the iconic buildings as cathedrals of the cornfields.
Wendy Elliot, Colo, Iowa: “I've always like going in barns ever since I was a girl because I think you can almost feel the spirit of all the animals that have been in the barn. So, I think it's definitely a sanctuary and I think it also represents the heritage of the entire state.”
Wendy Elliot and Joe Rude were Midwesterners living in New York City who decided to return to Iowa when their children were born. The barn on the property they purchased was in such disrepair that it took two different house movers and a team of Amish builders to straighten the building. Lee Gelder helped repair the roof.
Lee Gelder, Elliot-Rude Barn: “I think it's fairly important that people do this. I know my children really don't have any idea what the purpose of a barn is. They just look at it as a big old building that is 90% of them are empty. If somebody doesn't do something, children are not going to know what a barn was even used for in another 20 years. You'll be lucky to find a barn.”
For “Market to Market,” I’m Andrew Batt.
Market Analysis: Tomm Pfitzenmaier
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For the week, May wheat gained 6 cents, and the nearby corn contract moved nearly 5 cents higher.
But the recent rally in soybeans ran out of steam as the May contract lost 13 cents, and the nearby meal contract was down $1.70 per ton.
In the softs, cotton had another winning week as the December contract posted a gain of nearly $1.50.
In livestock, April cattle moved 57 cents lower. Nearby feeders gained 38 cents. And the May lean hog contract was down $2.70.
In other markets of interest, the Euro gained 223 basis points against the dollar. Crude oil was down nearly $1 per barrel. Comex Gold advanced more than $46.00 per ounce. And the Goldman Sachs Commodity Index lost nearly 7 points to close at 369.35.
Pfitzenmaier: Thanks, Mark.
Pearson: Well, it's been an interesting spring, it appears to be a very fast start to the corn planting for 2009. There seems to be kind of a softening this week in the commodity world. We watch what happens with the futures markets for oil and seeing a little bit of pressure there. What is your take on energy as we go forward? There has been obviously speculation as the world economy picks up that oil prices could pick up too.
Pfitzenmaier: Well, I think crude is sort of the thing everybody looks at to judge that and I suspect we're going to be in a trading range here with that mid 50s on the high side and the mid 40s on the low side and until things get really rolling here crude oil can't go up. You've got a huge carrying charge in the market. Every time you have a carrying charge market they're renting and leasing every ship and filling up with oil they can, sell those deferred contracts and sitting on it so there's this huge inventory of oil sitting around the world just bobbing around waiting for things to get better and as long as that situation exists crude oil can't go up much. You can have a trading range and you can move to the high end of the trading range and to the lower end but you're not going to break out until that carrying charge, Contango they call it, goes out of the crude oil market.
Pearson: So, with that being the case what are your global thoughts in general? Are we starting to see the world economy start to recover some?
Pfitzenmaier: That's what everybody is trying to say. I guess I'm not convinced that that's the case yet. We've had a dead cat bounce off the bottom where it looks like maybe things are going to get going but there's a lot of bad news to get worked through here. GM announced this week they're going to shut down for the summer. That's not good for the overall economy in the United States. So, there's some problems here that need to get worked through and I'm not convinced that we're going to go shooting straight up out of here.
Pearson: Let's talk about our commodity markets, let's start first with the wheat market and the food fiber as we look at what's happening worldwide. We looked at what's happening with the United States and we've had some real challenges for the U.S. crop, certainly the dry weather and then the freeze and I was just down in Oklahoma and I just heard it over and over again from people this is one of the worst that they've seen at this stage but still plenty of wheat around the world.
Pfitzenmaier: There's plenty of wheat and not a lot of people wanting to buy ours so that is a problem. There's problems around the world but we're not selling and so I think the upside on wheat is fairly limited, maybe 30, 40 cents. I feel for those guys in Oklahoma and the problems they have got but in terms of the big picture I'm not sure it's that big a deal.
Pearson: In terms of making sales, Tomm, is this the chance to be doing that in here?
Pfitzenmaier: Yes, again I don't know that I'd jump right in now, some of the technicals have turned higher and it looks like maybe we're going to have a little updraft here for a while, 30, 40 cents up at that point you'd want to start making some sales.
Pearson: That's on old crop and new crop?
Pfitzenmaier: Yes, absolutely.
Pearson: Let's talk about the corn market. I mentioned at the start of the show that it's going in the ground pretty fast in the western Corn Belt, slower for our viewers over in the eastern Corn Belt where they've had some challenging weather but they're talking this could be one of the fastest weeks of corn planting in history. That bodes well for getting corn produced and doesn't bode quite as well for seeing much of a shift to soybeans.
Pfitzenmaier: No, west of the Mississippi it's going to be really interesting Monday afternoon to see the planting progress because it has got to have been huge. Now, east of the Mississippi you hear all kinds of stories about not much going on so it's going to be a case of haves and have nots. The trade is looking for a planting progress number in the 20% to 25%. I wouldn't be surprised to see it 30% plus the way things got planned. Now, whether that report doesn't include all the days we've had so maybe it won't pick it all up but we really have planted a lot of corn this week.
Pearson: What is that going to tell you for making sales right now and for making new crop sales for '09?
Pfitzenmaier: Well, you always have that spring seasonal rally, a lot of times that is generated by concerns about planting progress so everybody is a little apprehensive here. Yes, a lot got planted in the west but no it didn't in the east, there's rain forecast in the east so if they get delayed for a couple of weeks then the overall progress isn't going to be that great. So, I think if you can catch rallies generated by weather that can take December corn up in that $4.25, $4.40, $4.39, somewhere up in there then I think you have to make sales. If you slip under $4.00 then I guess I wouldn't get too excited about it and kind of wait for some kind of a recovery.
Pearson: Maybe some kind of a summer weather rally, is that where it's going to come from?
Pfitzenmaier: Yes, and then you've got a lot of farmers pent up selling sitting out here too. You had some good sales when we bounced up against $4.00 on the cash market and then we kind of fall away, planting started, everybody quit thinking about it. Now when they get the crop planted if we bounce back up I assume you're going to start to see farmers selling and that $4.00 level is really going to be a cap on prices.
Pearson: It's been pretty magical so far.
Pfitzenmaier: It has been and I think it's going to continue to be. We still have a $1.7 billion bushel carryout expected and that's plenty of corn.
Pearson: Plenty of corn, the USDA their production number they have been dialing back the ethanol demand and we've had this report out of California, that came out on Friday that it's a billion gallon ethanol market for U.S. producers so there's a lot of concern out there on the ethanol front as well as with inexpensive crude oil.
Pfitzenmaier: You've got the government mandate so that's going to provide a pretty good floor, so to speak, for the demand for ethanol. On the other side of the coin we've had really, really good exports and so there is an expectation that the USDA's next adjustment on our supply and demand report we're probably going to have to boost up export sales and maybe offset that by reducing ethanol so who uses it is going to get shifted a little bit.
Pearson: Tomm, talk about soybeans and what you see happening on that front. Again, it doesn't look like we're going to have that slippage, at least in the western Corn Belt to soybeans, so some people are feeling a little more friendly towards the bean market but if we look at normal carryout, I think last time you were on, normal production, again, unless these huge export demand continues from China we could be looking at substantial soybean carryout going into 2010.
Pfitzenmaier: It could be huge. The other thing that's kind of flying around here is we have that seven million acres that really didn’t get accounted for because the USDA said I guess it wasn't worth planting which is beyond me. If you have $9.00 plus beans the fringe area is supposedly where we're not getting planted, you've got that kind of a price for beans and probably fairly low cash rents in those areas, who wouldn't take a stab at throwing some beans out there. So, I think there's going to be some adjustments are going to have to be made in that regard too. So, I talked to people in Iowa that got started planting soybeans this week so they're going to go in the ground a lot of them in pretty good shape too here. You have any kind of a crop this summer and you're going to be awash in beans by fall. Now, you're right, old crop is tight, it's probably going to get tighter, exports have been excellent, we had a new crop sale that was really good this week, almost all that is China, they were trying to build up that reserve, they announced this week they're going to make that reserve a little bit bigger but as soon as that gets filled up then what happens. The other thing we have to take into consideration is granted Argentina's crop was poor, really poor but they also had a lot of beans carried over for next year and at some point they are going to run out of money and have to move some beans so we're going to bang up against that here at some point too. So, all we need is one extra bushel to make it through the summer and then we've got plenty of beans into the fall.
Pearson: So, with that in mind what's your strategy for making soybean sales?
Pfitzenmaier: On the old crop beans I think if you go up and retest those highs in that $10.70, $10.75 area maybe we can work up to a little over $11.00. Anywhere up in there I think you have to finish up your old crop sales and get that stuff moved out. In terms of new crop sales anywhere in that $9.40 to if some weather concern or some scare comes along that gets us up to $10.00, $9.90, somewhere up in there I think you have to start scaling up, maybe not using futures, maybe use options, some sort of a strategy that starts establishing a floor price of close to $9.00.
Pearson: Cotton continues to ratchet up, now granted it's coming from a pretty discounted level, but it has continued to rally.
Pfitzenmaier: Oh yes, very nicely. We had some dry weather in west Texas, that has kind of gotten them a little excited, we've got a lot of cotton in the traditional cotton areas being switched probably to bean acres, exports have been excellent. China, again, the big factor there. Domestic usage of cotton is as low as we've ever seen it, it's terrible. The millers just have no interest in it. But export sales are very good, a few weather problems with reduced acreage and all of a sudden we've got December cotton up in the mid 55 area. Going beyond that is probably going to be difficult but if there's some problems and the dry weather persists in west Texas and they don't get their crop -- dry weather isn't unusual out there so you don't want to get too excited about that -- but there's a little upside potential here for cotton.
Pearson: Not in a big hurry to make sales at this point?
Pfitzenmaier: No, but you get in the upper 50s and you'd have to look at it because, again, demand isn't that good, China has a little cotton reserve that they were trying to build up, again, same as beans when that's done their demand could fall apart at any moment on us.
Pearson: Demand for beef certainly at the hotel and restaurant, institution level dropped off sharply in the last quarter of 2008, it's been slow to rebuild itself. Tomm, the smallest cow herd since 1950 and all these cattlemen are scratching their heads, is it going to get better the second half of the year?
Pfitzenmaier: I've been harping all winter that the supply is not the problem, it's the demand and if you've got pork loins as cheap as they are against beef you can't rally the price of beef and get the consumer to buy it very much. Maybe there's some upside potential, we tried to be a little firmer this week but when you've got those competitive meats, chicken too, fairly cheap relative to the beef we're going to have a tough time moving the beef. Now, the cash market is above the futures relatively speaking so there's no sense in getting in a big hurry hedging anything, there's no opportunity there, you're going to have to have a pretty good rally up into the 86, 89 area basis the June contract before you want to get too excited about hedging anything. But it's going to be tough for that beef market to go much higher unless the economy turns and people really come back -- we're excited now because we think that grilling season has started and that's going to generate a lot of buying and that is yet to be determined I think.
Pearson: We've had this choice select issue that's been going for a while and obviously hamburger demand has been good and we've had dairy culling so there's not a lot of wind at our back here.
Pfitzenmaier: And that dairy culling has kind of backed off, it's going to pick up again here in another week or so, so you're going to have that problem kind of cropping up here. So, here's the other issue, the feeder cattle market traditionally you tend to work higher from now on into the fall but we've got some things working against that. If beef fat prices don't work higher, if corn prices stay well supported in here can people really afford to pay more and more and more for feeder cattle going through summer and into the fall. It's going to be difficult.
Pearson: I want you to talk further about this calf market and, again, as you say it's not about the supply but a relatively light supply of feeder cattle, we've seen a little bit of improvement in February and then we flatten back out again. You were thinking unless things improve dramatically that's where we're going to stay.
Pfitzenmaier: You're in the traditional time where if we're going to go up this is -- we had been going up some but, again, it's topped out, maybe not topped out but leveled off and I think it remains to be seen whether cattlemen are going to pay up for those feeder calves. If they can't make any money at some point they're going to back away from them or at least not continue to pay higher and higher prices for them.
Pearson: I want to talk about hogs for a minute. A bad week on the hog futures. We heard about reduced farrowings and we've heard about what should be some positive things but still a lot of pork out there?
Pfitzenmaier: There's a lot of pork out there, it's moved fairly well but there's been some bad news there too, the Russians have kind of backed away from us a little bit. Again, pork is the same issue, the numbers have backed off and that's been good but we've got to sell the stuff and get it moved and we're having trouble getting that done. So, we've got a situation sitting here in pork where you've got the cash market, the cash index down around $60, $61, you've got the futures up there in the $70s and everybody is sitting here being complacent saying I'm not going to do anything because the futures are at $70 but the two may come down and meet. If you're looking for a hedging opportunity when you've got a spread like that, almost as wide as $15, make a sale, sell those hogs up there in the mid $70s, assure yourself that that's the price instead of sitting around waiting to see if it's going to show up for you.
Pearson: Tomm Pfitzenmaier, well said. Thank you so much. We appreciate your passion. That wraps up this edition of Market to Market. But if you'd like more information from Tomm on where these markets just may be headed visit the Market Plus page at our Web site where you'll find streaming video of our program. By the way, you can download audio podcasts of our Market Analysis and Market Plus segments free at our Web site. And be sure to join us again next week when we'll examine a controversial decision in California mandating a 10% reduction in carbon content of all fuels by 2020. Until next time, thanks for watching. I'm Mark Pearson. Have a great week.
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