Market to Market (July 7, 2018)

Jul 6, 2018  | 27 min  | Ep4346

Coming up on Market to Market -- The tariff bill comes due and agriculture may be stuck with the check. Wildfires burn from California to Colorado while rain dampens the Corn Belt. And keeping an aging shipping system together with new concepts. And market analysis with Angie Setzer, next.

Wherever your operation takes you, or who you share it with, we'll be where we've been all along, with you from the word go. Proud sponsor of Market to Market. Tomorrow. For over 100 years we have worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today. Accu-Steel, offering fabric covered buildings specifically designed for the cattle industry since 2001. The next generation of cattle buildings. Information at

This is the Friday, July 6 edition of Market to Market, the Weekly Journal of Rural America.

Hello, I’m Delaney Howell.

The embattled head of the Environmental Protection Agency resigned Thursday citing unrelenting personal attacks. Administrator Scott Pruitt gained few Corn Belt allies during his tenure with the EPA.

But the president did get some positive economic news Friday. ---

U.S. employers added 213,000 new jobs in June, extending the 9-year fiscal expansion.

However, the unemployment rate ticked up to 4 percent - according to the Labor Department.

The Mid-America Business Conditions Index moved above growth neutral for the 19th straight month - led by manufacturing growth. 

An updated USDA report cites slowing global demand and large inventories for keeping a lid on farm sector net cash income. The forecast calls for 2018 profits below the 40 year average. ---

All those reports came out before the White House officially levied tariffs against the self-proclaimed “developing nation” of China.

Trump’s move is aimed at protecting the U.S. technology sector but has exposed American exports of soybeans, orange juice and bourbon to retaliation.

Peter Tubbs leads off our coverage.

President Donald Trump: “The war was lost on trade many years ago. You know when they're saying, not a free trader, I said no. The war was lost, but now we're going to win it and because we have all the cards."

The United States and China escalated their trade war this week, with both sides adding tariffs on each other’s exports, launching what Beijing called “The biggest trade war in economic history.”

The U.S. targeted $34 billion in Chinese products,

while the Chinese retaliated with new tariffs on mostly agricultural goods. If the trade tiff continues, the Trump Administration has threatened tariffs on ninety percent of the goods China exports to the United States.

Erlend Ek, a Beijing-based analyst who tracks Chinese policies, sees risk if the global supply chains of other countries or trading blocs are disrupted.

Erlend Ek, Trade and Agriculture Research Manager at China Policy: "If a total global trade war breaks out, if the EU gets included and we see a lot of tit-for-tat, the Chinese have concluded that it might drop global trade worth 70 percent, and that will affect not only the economy but it will also affect national security. Because China needs energy, they need food, and they're doing domestic reforms now to become more dependent on global markets.

China, the world’s second largest economy, purchases vast amounts of raw materials on world markets to feed its industrial base. But the country’s consumption of raw materials limits its leverage in a short term trade war.      

Yu Zhi, Professor of Economics at the Shanghai University of Finance and Economics: “The US can impose tariffs on more Chinese products than China can do on the US products. Therefore, if the trade war really starts and is broadened, China will not have enough capacity to resist the pressure."

China’s stock market has dropped twelve percent in recent weeks, and the Yuan has lost 3 percent against the dollar since April.

Increased tariffs have darkened the balance sheets of American farmers. The 19% percent sell off in soybeans over the last five weeks has pulled $100 per acre out of potential revenues for the coming crop.

For Market to Market, I’m Peter Tubbs.

A California legislative committee advanced a bill to the General Assembly calling for 100 percent carbon-free energy generation.

Other high-stakes measures are moving forward as lawmakers wrestle implications to the Golden State’s power grid.

Not far from the state capital, a different battle was being waged against wildfires.

Josh Buettner reports on the struggles across the West and beyond.

By Independence Day, firefighters had 30-percent contained an 86,000 acre inferno in Northern California’s Yolo and Napa Counties that forced evacuations as nearly 1000 homes were put at risk.  But forecasts of record-breaking heat and wind could re-ignite threats northwest of Sacramento this weekend.

By mid-week over 100 homes were engulfed by wildfire near Fort Garland, Colorado - 200 miles southwest of Denver.  Traced to an illegal campfire, the blaze, labeled the Spring Fire, is one of six large wildfires currently raging in the Rocky Mountain state.

One couple described the ‘sickening feeling’ of watching their cabin succumb to flames via surveillance video from their primary residence in neighboring Nebraska.

According to the National Interagency Fire Center, roughly 60 large fires are currently active across the West – including New Mexico and Utah – where nearly 50 square miles have combusted southeast of Salt Lake City, driving authorities to evacuate hundreds of homes near a popular fishing reservoir. 

Governor Gary Herbert/R-Utah: “Ninety-two percent of the fires we have in Utah are man-caused.  To this date, 92 percent.  And that means they’re all preventable.”

In addition to the tinder-dry west, areas of the High Plains and Missouri continue to endure severe drought, while Corn Belt states like Iowa and Minnesota have logged a deluge of precipitation and flash flooding in recent weeks.

For Market to Market, I’m Josh Buettner.

Forecasters have downgraded predictions – calling for a less active 2018 hurricane season.

Fewer storms would likely mean less damage to coastal regions in what seems like a perpetual cycle of recovery.

Louisiana officials could use the respite to implement long overdue navigation updates to coincide with advances in shipping technology.

John Torpy has our Cover Story.

For industries making a home along one of the nation’s inland waterways, the search for streamlined operations can be hard to find on such an unpredictable road. However, an idea putting two transportation technology together is gathering some attention.

A practice dubbed container-on-barge, puts two transportation streams together in an effort to move goods more efficiently and cost effectively.

Michael Tarpey, Army Corps of Engineers, “Is container on barge in our future? It would definitely relieve some of the strain on our transportation system if those goods that come in from overseas could come up River to Kansas City to Chicago to St. Paul to Pittsburgh.”

Trucking companies have moved goods from dock to warehouse, making sure to minimize costs by trying to never move an empty load. Getting commodities down river by barge to southern ports for global export is a mainstay of the nation’s business mix. However, for years, empty barges made a return trip high in the water.

Starting in 2007, inland waterway organizations started experimenting with maximizing the cost of a return load by putting containers on barges travelling to ports up river.

Michael Tarpey, Army Corps of Engineers: “So we have our goods coming in that way that are never on, currently on road or rail. They come up the river. And then outbound, we have grains, we have on some of the exports. It would be a tremendous improvement in benefit to the economy and our environment because we've taken goods to the most economic, efficient mode of transportation.”

The Inland Ports Rivers and Terminals Association touts an environmental benefit to this newer navigation technique. If fully implemented, officials say container-on-barge shipping has the potential to reduce greenhouse gas emissions by reducing traffic on the nation’s interstate system by as much as 875 semi-trucks per lane, per day.

Container-on-barge carriage has received a warm reception in the Port of New Orleans. Grants, subsidies, and Department of Transportation funds have flowed into one busiest ports in the country to support startup operations for the young shipping method.

Bob Landry, V.P., Chief Commercial Officer, Port of New Orleans: “We are an unusual port in that we're not married to one commodity or one type of shipping. So we have containers. We have break bulk, we have some bulk commodities as well…We're a multi-purpose landlord port as we like to say. And for the last year or so business has been picking up. We've seen increases in our container volume, we've seen increases in are imported break bulk cargos, so overall it's pretty good.”

Both the ports of New Orleans and Greater Baton Rouge were deemed attractive testing grounds for the innovative shipping method due to the diverse list of commodities that move through each day. Officials at both ports think the new style of moving goods will be attractive to business owners searching for new ways to streamline the cost of doing business.

Bob Landry, V.P., Chief Commercial Officer, Port of New Orleans: “A lot of major retailers and a lot of major shippers are very concerned about their environmental impact…Barge transportation uses a lot less fuel it keeps trucks off of the highway there's no idling time so to speak so it's much more environmentally friendly.”

While moving more goods on the river and less over the road is attractive to some businesses, there are others who point out a less than predictable timetable as a major deterrent for container-on-barge shipping.

A 15-tow barge navigating down the Mississippi River from the Midwest can expect the trip to last around 13 days. Once the goods are loaded onto ships, up to 30 additional days are added to the schedule for the goods to reach their global destination, bringing the travel time to over 40 days. If the same products are loaded on a train and sent to the west coast for export, the trip to the port can take up to six days, greatly reducing travel time and improving efficiency for shippers.

Michael Steenhoek, Executive Director, Soy Transportation Coalition: “Containerized shipping for agriculture - it's something that's growing. The Inland Waterway system is something that should be utilized more. It's not a congested system it's not a very-- but the problem is it's not a reliable system… Barge transportation is good at moving heavy product long distances at an economical price point but it's not very good at quick turnaround at transit time. At having a real Rapid Transit time.”

The experiment has gained some traction. As of 2015, the U.S. Department of Agriculture calculated eight percent of all waterborne grain exports were shipped in containers.

Another aspect holding the practice back from becoming more common is the drag put on shipping due to an aging infrastructure along the nation’s inland waterways. For several years, environmental groups, the navigation industry, and agriculture advocacy groups have been raising red flags to Congress over the dilapidated state of the nation’s lock and dam system. The unlikely bedfellows hope to get politicians inside the beltway to shake loose appropriate funding before a catastrophic failure occurs with a devastating economic outcome.

Michael Steenhoek, Soy Transportation Coalition:”…for agriculture other stakeholder groups, we don't think it's an effective strategy to wait for a catastrophe and then pounce upon that to try to get something done…So I think we can we can do a good job of portraying the importance of it, but then also conveying what the consequences would be if we still have this inaction from Washington D.C..”

While the details are sorted out on infrastructure improvements, shippers and retailers wait for the right confluence of cash and containers before moving further ahead with the new shipping strategy.

For Market to Market, I’m John Torpy.

Next, the Market to Market report.

The trade appears to be counting on big yields and a trade war as mostly weather moved the commodity markets. For the week, September wheat gained 14 cents, while the nearby corn contract increased a penny. A big Friday rally helped the soy complex avoid another losing week as the August soybean contract expanded 14 cents. August meal improved $7.10 per ton. In the softs, December cotton stretched 53 cents per hundred weight. Over in the dairy parlor, July Class III milk futures lost 39 cents. A mixed week in the livestock sector, as the August cattle contract shed 35 cents. August feeders put on 87 cents. And the August lean hog contract dropped $1.02. In the currency markets, the U.S. Dollar index lost 58 ticks. Crude oil declined 35 cents per barrel. COMEX Gold improved $1.30 per ounce. And the Goldman Sachs Commodity Index fell 6 points to settle at 480.80. Joining us now to offer insight on these and other trends is one of our regular market analysts, Angie Setzer. Angie, welcome back.

Setzer: Thanks for having me.

Howell: I think the big question we have to ask right off the top here as the tariffs went into effect at 12:01a.m. on Friday morning is, is the tariff story put to bed yet?

Setzer: Well, it's definitely not put to bed yet. We have a long way to go before that comes into play, the whole putting it to bed, because once we solve our China issue we have to worry about the EU and then we have to look at what's going to happen with the NAFTA countries. But I think we're kind of generally recognizing that world demand for soybeans did not change last night at 12:01a.m. We saw in this morning's report that China have cancelled some old crop purchases as we had expected, but all of those had been picked up by other countries and I think that's an important thing to keep in mind and something that I've been talking about since the initial talk of tariffs was introduced that global demand is there. And even if China is going to look to source all of their beans from Brazil, which they can't possibly do, other countries are going to need soybeans as well. The growth in global demand for protein continues to be exponential, just looking at developing countries alone, and they will turn. Obviously right now soybeans are a blue light special unfortunately for the farmers that have to sell them, but for the countries that are looking to buy them they will look to purchase. And we saw China last week make moves where it had been talked about prior to the whole tariff issue arising, but China had made moves in order to take some tariff free imports from other countries surrounding them, which happened to show up on these weekly export sales, these other countries are the buyers of these beans that China had in fact cancelled. So we have a long way to go before the tariff issue is put to bed. But I think maybe the market is coming to the realization that you can't push beans to zero because global demand will remain in play as we move ahead.

Howell: Absolutely. And I'm sure that will be sprinkled into the rest of our discussion. But I want to move on and go ahead and talk about wheat. Angie, we got two pages of questions this week from social media, which folks you can find us on Facebook and Twitter and Instagram, of course if you want to send in your commodity questions. But I want to start with one here from a wheat perspective. Baloo said, just to give some context, looking ahead to the July wheat '19 contract, it looks like there is a little money to be made considering what we've seen in soybeans and corn. Do you expect to see some shifts in acreage back to wheat or have the wheat acres pretty much stabilized with folks this year and next year and continuing forward?

Setzer: No, we'll see a shift back. We had the opportunity above $6 futures for a lot of folks in the Chicago wheat market, Kansas City wheat was equally strong, Minneapolis may have been a little bit more beleaguered here that we've seen for the past year just with the idea of spring wheat acres increasing and what you have going on from an overall supply and demand structure in that market. But I have a lot of customers that locked in quite a bit of wheat looking ahead into next year because they know $6 futures work. A lot of folks in the Southern Plains will say, I'm still not making money at that. And I understand their yields are nowhere near what we can expect in the soft red wheat belt a lot of times. My Michigan producers are looking at 80 to 100 bushel per acre of wheat yield. And so at $6 if basis stays even or even firms up a little bit more, which we've seen here recently, they're able to make some money. So some folks have locked that in. Of course Mother Nature will be the final determining factor when it comes to increases in wheat acres. But I wouldn't be surprised to see with the strength in the wheat market some folks return to wheat plantings. You just, once you grow wheat you can't get away from it. It's like Hotel California of commodities.

Howell: Hotel California of commodities, all right, I like that. Let's talk about weather markets. When we look at it from a corn perspective we're getting into the hot and dry, typically hot and dry season here moving forward. What are you hearing from your customers about germination or how their crop is looking?

Setzer: I traveled back to Michigan this past week and was very sad to see what I saw in my trade territory specifically. We've been really dry. If you look back, Michigan suffered through a pretty wet May. We had some delayed plantings, we had a lot of replant, we had some compaction issues and so we've had some heat and the corn was already rolled up pretty tight here. We're not used to 90 degrees in Michigan. Lake Michigan is in the mid-70s already, that's quite high temperature wise for July. But when you get out into other areas of course right now we're driving through I-80, once we got into Waterloo out of Algona coming south and heading out to Michigan and got away from some of the water issues it was really, it looks great. But I will say that the agronomists that I talk to, I basically will delegate to them on what we're looking at from an overall crop production outlook and the agronomists that I talk to are saying that there are some issues that are developing. The crop can look great from the road but once you get out into it you start to realize that there are issues and I won't even try to get into details because I will make myself sound terrible.

Howell: Absolutely, but with all that being said, what are we expecting or what is the market factoring in for yield this year?

Setzer: Oh gosh, I think the market is factoring in a record crop. I think well above 180 right now is, if you talk to anyone about the corn crop they'll tell you how fantastic it looks. And I can tell you on I-80 yeah, it looks really great. But I can also tell you that in Kossuth County and other areas in the northern two-thirds of Iowa it doesn't look so hot in a lot of those areas, southern Minnesota, parts of South Dakota. You can draw an oval in areas that are not looking as great as what those areas in Illinois are looking. So I think the market is really factoring in that garden area, parts of Indiana look great and I think we're kind of forgetting what warm overnight temperatures can do. We had a very warm overnight stretch throughout June, it looks like the first half of July is going to be exceptionally warm as well. When you have those wetter soils it's not as easy to get cooler in the evening, which we need in order to really maximize that production. And so I think there's a lot of issues there, not to mention the fact that once you tassle, once you pollinate you've got 60 days. And so last year we pollinated towards the tail end of July and had a very cool and wet August. At my house in Kossuth County we had over 7 inches of rain throughout the month of August and we had temperatures that I don't think broke much about 85 if at all. And so I think there's some real issues that could develop from the fact that we have the second fastest pace of silking that we've seen, the first fastest was 2012. So I think there's some issues there I think the market is really factoring in the crop has made it in the bin and we're a long, long way away from that.

Howell: We absolutely are. Let's talk about soybeans. We had a huge rally here on Friday, I think 38 cents in the new crop contract. What's going on there? Some optimism?

Setzer: I think it's optimism, I think we've been selling the rumor and unfortunately we have to buy the fact with the tariff issue. I think perhaps folks are realizing that we've really kind of beat that dead horse beyond recognition at this point. There's a lot of talk in outside markets that in order to protect perhaps your equity longs you needed to short beans because if the tariff came about and we had some issues in equities then of course soybeans would also move lower because of that. So there's conversation on Twitter as well that funds move in herds. And so once we started triggering back up to the upside I think we saw that and I think if you were to really take a tour around the Corn Belt, corn isn't struggling nears as much in northern Iowa, southern Minnesota, those areas, as soybeans are. They look terrible. I'm trying to remind myself that out here folks tend to spray a pretty strong herbicide around this time and it can look worse and they usually bounce back. But right now they look pretty bad. And as you move east they also look pretty bad. So I think we're a long way from having that soybean crop made. And I think if we continue to see heat and struggling with beans and their wet feet we could get some production conversation coming in because I think the market was factoring in above 50 there as well and so there's just a lot of moves that we've made that have seemed pretty premature to me when it seems to thinking that the crop is made or in the bin.

Howell: Absolutely. There's still a lot of time weather wise. Let's talk about cattle. We've been seeing exports up 13% for the year in cattle. Can we sustain these levels? And if we don't what does that mean for our increased supply and production that we're sitting on?

Setzer: You know, my friend Naomi said it best, there's no replacement for beef, right. So once you start entering, putting beef into your diet it's very difficult to pull it out. I've said that a thousand times over, we don't celebrate life's accomplishments with chicken breasts, sorry poultry guys, but we don't. And so I think the demand for beef is there and pretty solid. I think it is helping to eat into that wall of cattle that we keep waiting for. Obviously we have a reasonably strong supply but we have very, very strong demand. If we can work through some of these trade hiccups as well, that's in the face of trade uncertainty that we're seeing, if we can work through some of those trade concerns and continue on I think we'll see the beef demand stay pretty strong. And we're going to have this ebb and flow. Seasonally we do tend to start to look towards the end of grilling season they say as we work our way ahead so it is possible that we could start to see a little bit of that demand kind of creep back. So it's something to keep in mind. But I think we'll just continue, the cattle market seems very, it's in love with a range, it will establish a range and we'll see it go from low to high and back and forth all over again.

Howell: Really quick here, your 15 second thoughts on the feeder cattle market. We've closed about $150. Where do we go from here?

Setzer: Oh gosh, the sky could be the limit, it could back off. It's really one of those things that we'll have to see what happens when the buyers come back in. This week has really been a funky week of lack of interest.

Howell: Absolutely. Angie Setzer, thank you so much. We'll continue this discussion in Market Plus.

Setzer: Thank you.

Howell: That wraps up the broadcast portion of Market to Market. But we will keep the conversation going on Market Plus where we'll answer more of your questions. You can find it on our website at Our Facebook page was full of pictures from you out standing in your fields, showing us your high, showing us how high your corn was on Independence Day. See those images and other dispatches on our Facebook page of IPTV Market. Join us again next week when we begin our profile of a family starting a new life by returning to their roots. So until then, thanks for watching. I'm Delaney Howell. Have a great week.


Market to Market is a production of Iowa Public Television which is solely responsible for its content.

Wherever your operation takes you, or who you share it with, we'll be where we've been all along, with you from the word go. Proud sponsor of Market to Market. Tomorrow. For over 100 years we have worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today. Accu-Steel, offering fabric covered buildings specifically designed for the cattle industry since 2001. The next generation of cattle buildings. Information at


Grinnell Mutual Insurance