Market to Market (January 4, 2019)

Jan 4, 2019  | 27 min  | Ep4420

Coming up on Market to Market -- The reality of a government shutdown begins to show. Trade wars and treaties dominate 2018. Those stories and market analysis with Sue Martin, next.

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This is the Friday, January 4 edition of Market to Market, the Weekly Journal of Rural America.”

Hello, I’m Delaney Howell.

The burdens of the U.S.- Chinese trade war are being shouldered by sectors of the economy other than agriculture. --

The ISM Manufacturing Index moved lower in December as the battle put a dent in U.S. manufacturing.

The new data added pressure to the Dow that was already in a tailspin over tech stocks. News of 312,000 jobs being created last month stopped the slide.

The prospect of getting a job put more people on the hunt for work pushing the unemployment rate up 0.2 of a point to 3.9 percent.

The market rebound also was fueled by Fed Chair Jerome Powell -- who said he will watch economic indicators closely before touching interest rates.---

The battle over federal funding remains at an impasse.  Congressional leaders are standing their ground - waiting for the other side to blink.

Portions of the USDA remain closed. Those in rural America, who benefit from services provided by the Department of Agriculture, are forced to sit on the sidelines and wait for the deadlock to be broken.

John Torpy has more.

As the 115th Congress convenes, the war of words along Pennsylvania Avenue over the partial government shutdown is focused on provocation rather than progress.

Sarah Huckabee Sanders, White House Press Secretary: “Look, the President has been willing to negotiate from the beginning, but he’s not going to put our national security and the safety of the American people at risk.”

Senator Nancy Pelosi, D – CA: “The President cannot hold public employees hostage because he wants to have a wall that is not effective, not effective in terms of its purpose, not cost effective in terms of the opportunity cost it is of Federal dollars to spend, and the President has said that Mexico is going to pay for this. Come on, let’s anchor ourselves into reality. Mexico is not going to pay for this wall. So no.”

While discussions of returning the federal government to full service remain stalled over the building of a wall along the southern U.S. border, portions of the Department of Agriculture remain at work. Inspectors monitoring meat, poultry and egg operations, along with grain and commodity inspections remain on the job.

Import and export inspections continue as normal, as well as research related infrastructure maintenance which will allow projects to resume once the budget impasse is cleared.

Market Facilitation Payments to farmers that have already been certified will be completed during the shutdown.

Demand side-subsidies, including SNAP, will receive funding through January. School lunch subsidies will continue with the funds already distributed to individual states until all of the money has been consumed.  

Among the divisions of the USDA that remain shuttered are Farm Service Agency county offices, the offices that generate agricultural statistics, and the recreational sites that are part of the US Forest Service.

As of Friday, the partial shutdown will have been in place for two weeks. There are 380,000 federal employees on furlough and an additional 420,000 working without pay.

For Market to Market, I’m Peter Tubbs.

In an Associated Press/N-O-R-C poll, taken just before the partial government shutdown, the economy, healthcare and immigration were among the big concerns for U.S. citizens in 2019.

A year ago, the trade war was heating up and nobody knew where we would end.  

Paul Yeager takes a look at 2018 in this week’s Cover Story.

Trade dominated the discussion in 2018 for those involved in agriculture. From reworking NAFTA to China, farmers were caught in the middle.

President Donald Trump: "I view them as a friend. I have tremendous respect for President Xi. We have a great relationship.”

Despite the kind words, President Trump signed a memorandum aimed at cutting the $375 billion dollar trade deficit with China by levying billions in tariffs.

The National Corn Growers Association and the Iowa Soybean Association agreed there were no winners in a trade war.

Kirk Leeds, CEO, Iowa Soybean Association: “I that there are ways to resolve it but it’s gonna have to be in a way that saves face for the Chinese, as they would call it, and it’s gonna have to give the President some win. Let’s hope they find that solution.”

The U.S. threw the first punch to protect intellectual property and technology theft with a $50 billion haymaker.

China countered and the trade war was on before much of spring planting had begun.

In April, Larry Kudlow, the newly minted head of the White House’s National Economic Council, cautioned against panic and said the president wanted to grow the American economy, not to hurt any of its sectors.

Larry Kudlow, White House National Economic Council: “this should not be viewed as strictly mano-mano, punitive, damages, you know, that kind of thing. This has gotta be viewed in the context of economic growth, which is what this administration is all about. And that’s the end game.”

Soybeans producers saw a major export market almost disappear as the tension escalated between the U.S. and China.

Pork producers gathered for their annual World Pork Expo in June as industry leaders made their case for U.S. producers to compete on the world stage.

Neil Dierks, CEO, NPPC: “The issue for us is access. If we can get into compete, we’ll compete with anybody. When you talk about trade agreements, we’re looking at duties and non-scientific barriers that allow us to come to market and compete.”

The pressure on other industries started to intensify by late June as President Trump levied tariffs on the equivalent to 90 percent of the goods that China shipped to the U.S. last year.

Wilbur Ross, Secretary of Commerce: "The tariff actions taken by the president are necessary to revive America's essential steel and aluminum industries. They have been harmed by imports to the point that allowing imports to continue unchecked threatens to impair our national security."

Meanwhile, NAFTA talks between Canada, Mexico and the U.S. hit high tide near Labor Day as all three countries faced several deadlines – most of them political.

Chrystia Freeland, Foreign Affairs Minister, Canada: “Rules of origin in cars is an incredibly complicated issue. But, we had reached a high level agreement with the U.S. in the spring and we are encouraged by the progress that they made with Mexico this summer.”


The new USMCA was signed by leaders of the three countries in late November.

President Donald Trump: "As part of our agreement, the United States will be able to lock in our market access to Canada and Mexico, and greatly expand our agricultural exports - something we've been wanting to do for many years. This is an amazing deal for our farmers and also allows them to use cutting edge biotechnology and eliminates non-scientific barriers.”

The landmark agreement has yet to be ratified by the Mexican Congress of the Union, Parliament of Canada, or the U.S. Congress.

USDA Secretary Sonny Perdue spent much of 2018 pledging to help producers stung by the sharp drop-off in trade with China.  Those efforts later became a short-term relief package worth up to $12 billion.

Sec. Sonny Perdue, USDA: “While it is very painful in the meantime, we know that a fair and free trade environment is going to be better for farmers in the long-term.”

Congress was well into their work on the 2018 Farm Bill when the trade story shifted.

The legislation stalled over work requirements involved with adults covered by the Supplemental Nutrition Assistance Program.

Rep. Jim McGovern, D – Massachusetts: “As I find myself saying far too often these days, a bad process produces bad policy. And this Farm Bill is a bad policy plain and simple.”

Rep. Rob Woodall, R – Georgia: “We’re talking about a bill that’s going to take a major step forward in lifting folks out of poverty. A major step forward in putting people back to work. A major step forward in making sure that folks that receive federal benefits are those who need federal benefits.”

“On this vote, the yeas are 198 and the nays 213, the bill does not pass.”  

Democrats gained 30 Republican votes to defeat the bill.

Changes would be made and the Farm Bill finally emerged in a lame duck session of Congress.

Language to assist in forest management also made a late appearance at the talks as wildfires raged through the West. More than 8.5 million acres were burned in 2018 by nearly 56,000 fires. The number of acres devastated was higher than the 10-year average.

The Environmental Protection Agency came under fire when it was revealed hardship waivers were being granted that circumvented ethanol blending requirements in the Renewable Fuel Standard.

Scott Pruitt, EPA Administrator: “I can’t emphasize enough that the granting of these small refinery exemptions is objectively determined. It’s not policy, it’s not subjective.”

Scott Pruitt would resign from EPA in early July.

President Donald Trump: “Today. We are unleashing the power of E15 to fuel our country all year long. Not 8 months, all year long.”

The president rallied supporters in farm states over an increase in ethanol blends. His maneuver in the lead up to the mid-term elections asked the EPA to grant a waiver allowing the nationwide use of E15 during the summer months.

The November election proved fruitful for Democrats as they would win the majority in the House of Representatives. Republicans added seats to their hold on the Senate.

The president looks to move his policy agenda down the road in 2019 which was ramping up under the shadows of a government shutdown, the third of 2018.

For Market to Market, I’m Paul Yeager.

Next, the Market to Market report.

News about China, the weather in South America and funds looking for a place to put their money moved the commodity markets higher. For the week, March wheat gained six cents and the nearby corn contract rose 8 cents. The trade lacked export sales numbers due to the partial government shutdown so news of a Chinese trade delegation traveling to Washington, renewed sales to China, and hot weather in Brazil moved the March soybean contract 26 cents higher. March meal added $6 per ton. March cotton expanded 33 cents per hundredweight. Over in the dairy parlor, February Class III milk futures increased 7 cents. The livestock market remained mixed. February cattle shed $2.25. March feeders cut $4.05. And the February lean hog contract put on $1.30. In the currency markets, the U.S. Dollar index lost 22 ticks. February crude oil bumped up $2.63 per barrel. COMEX Gold added $2.80 per ounce. And the Goldman Sachs Commodity Index pushed nearly 12 points higher to finish at 387.40. Joining us now to offer insight on these and other trends is one of our regular market analysts, Sue Martin. Sue, welcome back.

Martin: Thank you, Delaney. Nice to be here.

Howell: Great to have you back, Sue. We're here at the beginning of the New Year. I want to start here before we jump into wheat, we got news today that the USDA is not going to do January 11th reports including the WASDE, the quarterly grain stocks, amongst others. What impact is that going to have on our grains markets in particular?

Martin: Well, I think what it does, because usually these January reports are market movers, and we're not going to have that until they get the shutdown over with and they still will need some time to go back and do all of their bean counting or whatever you want to call it and get lined up. So we'll probably see some revisions down the road, that will come into play, once the government is back and working. However, I think that what will happen is talk of yields and what the final yield is going to be and stuff like that, those fundamentals will get shoved to the back corner for now. And the market will focus on the weather in Brazil and on the Chinese and U.S. trade delegation talks and also acres. And I think that's where we're going ot have our focus now as we go on in through February into March.

Howell: Absolutely. And those are things we all definitely need to touch on today. But let's start talking about the wheat market. Chicago wheat slipped to its lowest level in almost a month this week. What is it going to take for us to see some moves higher? We did see some strength here at the end of the week.

Martin: Well, I think that we're looking at a wheat market that has tended to be kind of a backseat player for the whole fourth quarter of last year. And I think coming now, what rallies we get, I think we can see some rallies. U.S. wheat is the cheapest in the world now so we're competitive. The export market globally has been pretty quiet for the past week or so and about the only one that is really standing out there is Morocco coming in, they're looking for 345,000 metric tons of milling, I should say Durham wheat and they were in for 400,000 metric tons of wheat besides that. So I think the U.S. stands to get that business and they'll be in next week to do that 345,000 metric tons. So I think the U.S. has finally got to where we have hope that the demand will start to pick up and push. The one thing, it's too early to worry about all the weather in hard red winter wheat areas mainly because we need to see the wheat come back out of dormancy and we're having warm weather right now and if that weather stays warm it pulls the snow cover off and then as we get into another shot of really cold weather, yes there could be talk of winter kill. But you really won't know that and the damage that is done until you get into dormancy breaking and that is more into March. And so I think what we're looking is a market that can get some rallies here in January, maybe even February, but it's a little premature to worry about that weather just yet. I think we're more of a late March/April market then and that's when our best times will be.

Howell: Okay. Sue, I want to slide this question. We were talking a little bit before the program about rice and we've seen China now buy some U.S. rice or opening up their markets to U.S. rice. What do you see that doing for the wheat market and also impacting the soybean market?

Martin: Well, first off, it's the first order of rice that we've had going to China since I can remember. And so that is a plus. What it does more for me is it really comes back into play not only on global stocks but in domestic stocks of the U.S. where we are tightening our wheat stocks as we believe and then globally wheat stocks are coming down.

Howell: Tightening them enough though to make a difference? I know we have a lot of wheat.

Martin: Not yet. But what happens is when you have corn stocks tightening globally and then you've got wheat stocks tightening and now rice, the last one to throw in because coarse grains and corn and wheat are in that, but you throw in now rice, rice is interchangeable for wheat globally for food and so all of a sudden now you've got all of them tightening, now you've got a story that puts an underpinning under the breaks in the market.

Howell: Absolutely. Let's save the rest of that for Market Plus to get people to tune into that. Sue, I want to talk about corn. If producers are sitting on old crop corn at this point, they've got it in the bins or commercial storage, what should they be looking to do here as we head into the New Year?

Martin: Well, I think that when I look at the corn market it looks to me like we've been coiling for some time. And when I look at corn this market has been in a sideways, lower, but more of a basing type affair since 2013. So we're now moving into year six. Usually years five and six tend to be the start of a turn of the market. And as we move forward demand is good for corn not only for feed usage, ethanol is taking a backseat because of values not being so profitable, but on the same token there is hope that China will take corn. But I don't think that has been priced into the market. So if we get some announcements here maybe through these talks that would be one that would throw us a curve or be a surprise, a pleasant surprise. I think that would send the corn market pushing. You now have December corn maybe 4 cents, within 4 cents of what it has been for a high here in the past quarter or close to that. And you have March corn trying to push back towards that $3.85 area, which I think it can get to. I think it's possible we could push March corn back up towards $3.90 and producers might want to take a look if they need to be moving something to start moving it. They want to watch their basis levels too because we're starting to hear basis levels are really starting to firm for commercials all the way through March.

Howell: Absolutely. Sue, let's talk about weather both as it relates to the corn markets and the soybean markets. We've got a great question here on social media. It came in this week from Bill in Amenia, North Dakota, @CrystalCoBill on Twitter. He said, how serious is the drought in Brazil? And I want to expand on that and say how is that impacting both our corn markets and our soybean markets at this point?

Martin: Well, it really is having an impact because everybody was putting the best in at first because of the fact that the crop went in early. And going in early gave them thoughts that early in is early out and that will mean that's a safrinha crop which is two-thirds of the Brazilian crop and it is also the exportable one basically would go in earlier as well. However, you have dry conditions now and originally I think the USDA the last estimate was at 122 million metric tons. We've got CONAB sitting around 120. Solaris is the optimus and they are as high as 126. But all of these will start to trickle down and we will have a CONAB estimate on Brazil's production both in corn and beans and also Argentina on I think it's the 10th of January this month. So we'll get that. But the good news is, is that if they're starting to have weather issues the bloom of that high yield is starting to come off and so that is changing psychology a little bit. Now you're hearing lots of talk around 116 to possible 117, 118 million metric tons and so you're starting to shuffle it backwards. Corn likewise if you start getting these beans into dry, and see we would say probably by the last half of the month we're going to have over a third of the country in dry conditions. There is rain in the forecast for the weekend but those rains appear to be very light in the areas that really need them like Mato Grosso, Mato Grosso do Sul, Minas Gerais. Those areas do need rain but the rains that they're going to get I think might be disappointing. The heavier rains, four to five, nine inches is forecast for the very far south of Brazil and so that is probably a little bit too much of a good thing. So it's dry in coffee areas, it's dry in the bean areas, it'll take in, like I said, a good third plus of the soybean production areas. And, by the way, Mato Grosso is the largest producing province. So it is an important thing. And of course when you start having weather influence and of course they're going to be harvesting now through the rest of January, all of February into March, what happens if all of a sudden they were to turn really wet and couldn't get the crop out? It might send China to us.

Howell: Sue, yes or no because we're going to save the rest of this for Market Plus, has this weather been priced into the soybean markets yet? Yes or no?

Martin: We've been working at it, we're adding some I would say weather risk in for South America.

Howell: Okay, let's save the rest of that for Market Plus so we can encourage people to check us out there. Let's talk about the live cattle market. Cash has already started this ahead of time here, shortened week, we've seen the shortened week but we're seeing packers, they started early. I was surprised to see Wednesday, Thursday packers coming online. Do they need the cattle?

Martin: Well, I think that we've gone through the holidays and we thought that maybe for as aggressive as they had been we thought that possibly the pipelines were fairly empty but from what we're hearing the pipelines aren't as empty and you had the December contract go off the board higher than the Feb.

Howell: Right. What does that tell you about the live cattle market?

Martin: Well, I think what it did was I think that was more weather related to some degree. But we're of the component that, or the proponent that we believe the cattle market, actually I think cattle is probably your best market or one of the best markets in agriculture for 2019. But I do think that we have a break in here first and I think it's healthy that we get it. Our indicators that we follow, we have three that we absolutely love and put a lot of faith in, are turning negative and those, one of them is a weekly, on the weekly timeframes and so that is going to take some time to get those to be fully cleaned out. Once we get them cleaned out I think we're going to be on a mission starting for the April contract maybe in March and then moving higher into April. I love the summer months. And I will say this, and I know this sounds crazy, but a year ending in a 9 on cattle, I went back to 1959, I took cash markets for 1959 and 1969 and both of those years showed a higher closing at the end of the year than the year before. From 1979 on through 2009 every one of them closed higher than the year before on the futures. So I think underground that says you've got support under the market.

Howell: Interesting. Let's talk briefly here about feeders before we wrap up the show for today. We're going to save hogs for Market Plus, folks. Lots of great content coming in Market Plus so do check it out at Sue, let's talk about feeders. With June through December cattle deeply discounted to the cash should we be expecting a lighter cattle trade here for the month of January?

Martin: Yes. I think what we've got is the basis has changed. Probably maybe say by the 19th of December our February contract was running around $4.60 or something like that over the price of the December and over the cash market. Now you have the two neck to neck and what this is going to do, we continue to believe that the cash basis is going to see the cash go higher than the futures. Now this is great for the person who is hedged because he wins-wins, he wins on his short position and he's got a better deal in the cash. But it's also going to continue to try to get the producer to pull cattle ahead just to keep them moving with the higher price in the cash market.

Howell: All right, Sue Martin, we're going to save the rest of this discussion for Market Plus. Thank you so much.

Martin: Thank you.

Howell: That wraps up the broadcast portion of Market to Market. But we will keep this conversation going on Market Plus where we’ll answer more of your questions. You can find it on our website at Join us for another M-to-M podcast. This week we go behind the scenes for a look at what producers of this show saw as the top trends in 2018. Check it out at Join us again next week when we’ll explore how one group of farmers are growing crops without sunlight. 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.

Pioneer Hi-Bred International is a 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


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