Market to Market - August 5, 2022

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Coming up on Market to Market --

Kentucky starts the recovery process after devastating floods.

The federal government allocates billions to

fight climate change.

Container ships get a new port of call in the Great

Lakes.

And market analysis with Shawn Hackett, next.

♪♪

What's the most complex industry on Earth?

It's not genetics, or meteorology, or logistics.

It's a business that involves them all.

It's farming.

Thank you, farmers, from Pioneer.

Sukup Manufacturing Company -- providing

equipment and buildings to store and condition grain

to help farmers adjust to market swings.

We build drying, moving and storage equipment

designed to preserve the quality of their crops.

Sukup Manufacturing -- store now, profit later.

♪♪

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.

♪♪

This is the Friday, August 5 edition

of Market to Market, the Weekly Journal of Rural

America.

♪♪

Hello. I'm Paul Yeager.

The job market refuses to cooperate with

conventional wisdom or talking points about a

looming recession.

It was another robust month for adding jobs.

In July, 528,000 new positions were created.

The unemployment rate moved down to 3.5 percent,

the lowest since the pandemic struck in early

2020 which matched a mark set half a century ago.

The Commerce Department said the trade deficit

decreased 6.2 percent in June on record high

exports of American natural gas, aircraft and

foods sent abroad.

Now to the story of extremes.

The White House announced this week a plan to combat

climate change on many fronts.

Hot and dry weather baking much of the Grain Belt is

not news in August, but 14 inches of rain in 12 hours

in Newton, Illinois drew some attention.

In Kentucky, the site of last week's major rain

that has been compounded with more this week,

recovery is just beginning.

Peter Tubbs leads off our coverage.

Cleanup continues in Eastern Kentucky, where

flooding killed 37 people last week.

Over 1,300 people have been rescued by various

agencies, with over 400 being rescued by aircraft.

Several thousand residents are still waiting for

power and drinking water to be restored.

Between eight and 10 inches of rain fell on the

region in a 24-hour period as a series of training

thunderstorms - storms that follow rapidly one

after another - passed over the region.

Another four inches fell on July 31st.

The National Weather Service in Jackson,

Kentucky reported its wettest July on record,

with a total of over 14 inches of rain in the

month.

Water systems in multiple towns were destroyed, and

multiple roads and bridges will need expensive

repairs.

Thirteen counties in Eastern Kentucky were

declared disaster areas by the Federal Government.

State officials are utilizing lessons learned

when a series of tornadoes struck Western Kentucky in

December of 2021.

Climate scientists suggest that heavy rain events are

becoming more common as the earth's atmosphere

warms, increasing its capacity to hold moisture.

For Market to Market, I'm Peter Tubbs and I'm Josh

Buettner.

This week, the Biden Administration detailed

efforts to respond to the kinds of flooding

disasters in Kentucky and wildfires currently raging

in states like California - which officials claim

have been exacerbated by climate change.

Vice-President Kamala Harris: “Today, our

administration is investing more than $1

billion through FEMA to fund climate resilient

projects in 343 cities, towns and counties around

our nation.” Along with $160 million for flood

mitigation assistance, the move doubles spending on

the Building Resilient Infrastructure and

Communities, or BRIC, program announced by the

president last month as part of $2.3 billion in

funding to support state, local and tribal projects

which reduce climate-related hazards

said to help spur extreme weather.

Drought has gripped a majority of the American

West throughout the spring and summer of 2022, but

biologists say decades of arid conditions and

overuse have depleted the Rio Grande - one of North

America's longest rivers.

The U.S.

Fish and Wildlife Service has been relocating

silvery minnows, whose habitat is literally

shrinking, from shallow pools of water adjacent to

the drying waterway.

The government has stocked the endangered species in

the past, but researchers say natural ecosystems are

trending toward collapse.

John Fleck/Water Policy Researcher/University of

New Mexico: “Climate change is coming at us so

fast right now that it's outstripping those tools

that we have developed over the last few

decades.” Biden also declared a federal

emergency last month after the U.S.

Virgin Islands warned of unusually high amounts of

sargassum, an invasive brown algae the United

Nations attributes to rising water temperatures,

nitrogen fertilizer and sewage runoff.

The seaweed has plagued a desalination plant there

struggling to meet demand amid drought, can kill

wildlife and has dented the Caribbean tourism

industry.

So far, Jacksonville, Florida and Miami-Dade

County have both received federal funds to alleviate

flooding and beef-up infrastructure near areas

which generate significant economic activity.

Vice-President Kamala Harris: “We can build a

more resilient future.

That's within our sights.

And in the process, yes, we will create millions of

good jobs in the clean energy economy.” The first

grain tanker left a Ukrainian port in six

months this week - signaling progress in

easing a global food crisis.

Then Friday three more ships left with corn bound

for Ireland, the UK and Turkey.

American ports have been pivoting in an attempt to

relieve backlogs.

Some of those new thoughts and methods for delivering

goods have come to the Great Lakes region.

Colleen Bradford Krantz reports in our Cover

Story.

Chippewa Valley Bean Company, the world's

largest processor and exporter of dark red

kidney beans, initially didn't worry too much

about the transportation disruptions tied to the

COVID pandemic.

Company executives assumed it would be a short-term

problem.

But when a year had passed and their

75,000-square-foot Menomonie, Wisconsin

warehouse was almost overflowing with

Midwest-grown kidney beans they couldn't ship to

their customers, they became increasingly

concerned.

Josh Bronstad, Chippewa Valley Bean Company: ““We

have probably 20 loads to bag yet, but I'm out of

pallets so I have to ship out before we can bag

those.” Traditionally, the company's main export

route was trucks to the Twin Cities, railcars to

the Port of Montreal, and, ships to final

destinations in Europe and other points around the

globe.

Delays during the pandemic's first year were

caused by labor strikes and work slowdowns at the

Montreal port, by a shortage of shipping

containers, and, after Chippewa Valley Bean tried

to get product out of East Coast U.S.

ports, by a months-long backlog in Chicago's

already overwhelmed container rail depot.

By the time two years had passed, the situation had

gotten worse.

The fall 2021 crop of dark red, light red and white

kidney beans was arriving from the fields of

Wisconsin, North Dakota and Minnesota, threatening

to flood an already full warehouse.

Cindy Brown, President, Chippewa Valley Bean

Company: “Now the container shortage is just

really, really bad.

We cannot locate containers at all.

So we had a freight forwarder that worked with

us and we just started bringing containers outta

Chicago ourselves...Chippewa paid

for that out of our own pocket.

Okay.

We're loading containers.

Now we think we've got that problem

solved...Wrong.

CP Rail, because there weren't enough loaded

containers coming into Minneapolis, they weren't

taking containers back out.” Brown says they

assumed the limits on containers leaving the

Twin Cities on Canadian Pacific Railway, which

began around Thanksgiving 2021, would ease after the

holiday rush.

Cindy Brown, President, Chippewa Valley Bean

Company: “They didn't.

It just slowed down.

It slowed down through the first of the year.

And it got to the point where CP was only taking

100 containers a week, 20 containers a day, out of

the entire Minneapolis area.

You know, that's everybody in North Dakota, that's

Minnesota, that's western Wisconsin, that's Iowa.

I'm like, ‘Come on, folks.

What are you thinking?

We can't live like this.'” Finally, this summer,

Chippewa Valley Bean found a stop-gap solution that

may provide long-term relief for other Midwest

companies facing similar shipping barriers .

That solution came in the form of the Port of

Duluth-Superior.

A place not previously known as a significant

container-exporting location.

Jonathan Lamb, president, Duluth Cargo Connect: “The

Chippewa Valley Bean shipment was our first

export container move.

We've certainly exported other commodities, but not

containerized before.” The Duluth Seaway Port

Authority, a public entity working with a private

warehousing company under the shared name Duluth

Cargo Connect, had already spent about five years and

$35 million on infrastructure

improvements that would mean better rail-to-water

service.

They saw an opportunity to leverage those

improvements by seeking federal approval to handle

larger dedicated container ships for importing and

exporting.

Jonathan Lamb, president, Duluth Cargo Connect:

“Cleveland...had already been grandfathered in

because they were doing a unique container program

over there.

No other port on the Great Lake side of the U.S.

was set up for that so we went ahead and completed

that regulatory step and added an inspection

station here at our facility with U.S.

Customs.

That approved Duluth to be the second port on the

Great Lakes to handle containers....A few years

ago, it didn't matter as much because the supply

chain was pretty smooth in the world, right?

.

.

.

.

But it's significant because we can offer an

alternative to the coastal ports.” A company called

Nexyst had already been working on the development

of field-to-customer shipping containers that

will control humidity and temperature while

tracking location. Nexyst accelerated its

modified container preparations once

company founder Dennis Pap realized they might be

able to help solve Chippewa's shipping

problems using the Duluth port.

Jonathan Lamb, president, Duluth Cargo Connect:

“Between him and then you take a Chippewa Bean that

was really willing to try something new in their

supply chain, you couple them with what we did to

get set up regulatory-wise, it was

the perfect recipe of everybody working together

to create something new and different.”

An overdue shipment of 194 Nexyst containers of

kidney beans went out of Duluth on the

453-foot-long Nunalik in May this year.

Jonathan Lamb, president, Duluth Cargo Connect:

“Everybody was busy, but, at the same time, there

was quite a bit of pride in seeing that happen.

No doubt about it.” Chippewa expects a repeat

shipment out of Duluth or Cleveland this fall.

Going forward, Lamb says they don't expect to

compete at a scale with the much-larger coastal

ports, especially considering that the

St. Lawrence Seaway's winter ice means the route

to the ocean is closed two to three months each year.

But officials with the ports of Duluth and

Cleveland hope to serve regional customers like

Chippewa Valley Bean when they are faced with a

warehouse full of product with nowhere to go.

Jonathan Lamb, president, Duluth Cargo Connect:

“We're not gonna be an LA/Long Beach, you know.

We're just not.

We're not gonna be a Seattle/Tacoma, and that's

okay.

I think our feeling is we have a unique niche

service that we can offer here that's probably a

higher-end service, more customer friendly than

you'd get through a bigger coastal port...

We don't expect anybody or want anybody to take all

their eggs, all their product moving and put ‘em

in one basket with us with us, but we can be a relief

valve.” Cindy Brown, President, Chippewa Valley

Bean Company: “I think our Great Lakes are not being

utilized as much as they might be able to...Whether

it's Cleveland being able to ship out of that area

to go into Europe or it's the Port of Duluth, I'm

hopeful that will continue on because...

we've got this whole pressure cooker of

transportation issues and it's one more viable route

that relieves some of that pressure.” For Market to

Market, I'm Colleen Bradford Krantz.

Next, the Market to Market report.

First it was the heat, then it was the Chinese

influencing the trade this week.

For the week, the nearby wheat contract lost 32

cents, while the September corn contract sold-off 6

cents.

Soybean meal led a late week bull parade that

failed to off-seat early losses in the soy complex

as the nearby soybean contract dropped 24 cents.

September meal shed $4.90 per ton.

December cotton shrank 61 cents per hundredweight.

Over in the dairy parlor, September Class III milk

futures declined $1.06.

The livestock market was higher.

October cattle added $1.65.

September feeders improved $1.88.

And the October lean hog contract put on $1.17.

In the currency markets, the U.S.

Dollar index strengthened 65 ticks.

September crude oil dropped $10.14 or ten

percent.

COMEX Gold rallied by $9.10 per ounce.

And the Goldman Sachs Commodity Index tumbled by

more than 38 points to finish at 654.90.

Yeager: Joining us now to provide some insight is

Shawn Hackett.

Mr. Hackett, hello sir.

Hackett: Hey, Paul.

Always, always a blast to be on this show in Iowa

talking agriculture, weather and prices.

Yeager: Ah, the weather.

We could talk about the weather all day.

Let's talk about the harvest in the wheat

market first and then we'll get to the weather

in the other markets.

We're about 81% complete according to USDA on

Monday.

Is this harvest pressure on the markets when it

comes to wheat?

Hackett: I think it's more harvest pressure from the

Russian harvest because that's the record crop

that is coming, that is where the big exports are

starting to kick in.

Of course, Ukraine starting to make some

shipments, psychologically it doesn't help the

market.

I think we're done with the harvest pressure

domestically.

I think it's really overseas that we need to

get through a little more of that before we can see

that back off.

Yeager: So is wheat the biggest, not going to say

benefactor because that's not what you're saying,

the loss is going to be impacted the most by these

ships starting to leave Ukraine?

Hackett: I think it has been impacted.

Remember, we came from $14 all the way down to under

$8 so when you look at a percentage decline wheat

has been the biggest one that has been hurt by

these psychological shipments that may get

larger.

We're trying to figure that out, no doubt.

But that is old news now priced into the market.

We always need to look ahead.

Yeager: So, looking ahead, where are we headed?

Hackett: I believe the grain markets as a whole

including wheat are carving a bottom here in

August.

We think most of the bearish news on strong

dollar, bearish macro, bearish picture overseas

has all been factored into this big decline and we

think we're getting to a point where the market is

going to start to price in some less bearish news

ahead.

Yeager: Is it double digit news ahead?

Are we going to be back over $10?

Hackett: Well, when I look at the wheat market I look

at the drought that is in the winter wheat areas and

I look at what planting is going to be coming up here

in September and October and I'm really, really

worried we're not going to be able to get that crop

planted the way that we need and that could be the

next major catalyst that takes this market and puts

some weather premium back in.

Yeager: You've had a chance to survey some of

the corn market here in Iowa this week.

Those that live it see it out their back door.

You drive by it at 80 miles an hour it looks the

same everywhere.

As I said to you before we taped, the lawns are the

only thing that is different.

What is really out there right now in corn?

Hackett: My impression of the crop, and it's always

based upon temperature because temperature is the

most important factor in determining whether yields

can make trend or not, we've been too warm this

summer yet again, over two degrees above normal.

That means trendline yield crops are not possible,

still okay, not the worst crop ever, but not a

trendline yield crop, something in the mid-170s

but that's not enough to put big ending stocks back

into the U.S.

supplies and put that buffer stock that we've

been lacking for the last couple of years.

That means to me, once again like wheat, the corn

market is going to be carving itself a low here

as we move to the other side of this.

Yeager: Carving a low.

How much more low do we have before we hit the

scalpel's edge?

Hackett: I think that mass liquidation event that we

had, that big macro where all the speculators were

selling and everything was crashing and we got corn

in that mid-$5, $5.60 area on December corn, I really

feel that mid-$5 area is going to be very, very

hard to find a reason for the market to spend much

time below that.

Yeager: Are we going to be able to get back up to $7

on corn on new crop?

Hackett: I think there's a really good chance that we

will.

With the lack of building stocks here in the U.S.,

La Nina is still with us, it's hanging on, we know

it has not been kind to South America crops the

last two years.

We're going to have some of those tentacles coming

in there in the first growing season.

The market is going to worry about all of that

like it has and I think that puts some weather

premium back in and provides a reason for that

kind of a price level to be had.

Yeager: We have a question that came in, Shawn, via

social media.

Greg wrote to us via Twitter -- and you're

always welcome to do it @MarketToMarket.

Shawn, he wants to know, for those of us with a few

gambling bushels left, should we close our eyes

and just sell it or be ready to pile new crop on

top of it?

Hackett: Well, as you know, Paul, the last time

I was on the show on April 29th I was a bear and I'm

usually more optimistic about things and I said

the time to really make sales and get the job done

was in May.

I don't believe the time to make aggressive sales

is now unless you absolutely positively have

to do it.

What your question is telling me is someone who

doesn't actually have to sell, he can hold off for

a while and wait for some better times.

I don't believe selling here in August is going to

prove to be a good time to monetize farm income.

Yeager: So you could be telling those that did

sell everything and had nothing left to sell, you

probably made the right decision?

Hackett: Everyone who has sold at higher levels,

you've done very, very well and I think you made

the right move.

But if you still have some, and farmers always

have some, they didn't know the crop size or that

sort of thing, I think you're going to get a

better opportunity in the fall to do something

smarter.

Yeager: The Chinese were interested in U.S.

grain.

The bean market jumped dramatically on Thursday

but we had dug ourselves a pretty big hole earlier in

the week.

Why?

Hackett: Well, we had all this heat that was

supposed to come in, we talked about this before

the show, 105, 110 degrees and then all of a sudden

the weather models backtracked and said nah,

mid-90s.

And the difference between a mid-90 temperature and

105 temperature for soybean during pod filling

in August is dramatic.

That took a lot of that excitement off the table.

At the same time, when we talk about what is going

with Taiwan, Pelosi's visit, the geopolitical

things that are going on there, if they are

ultimately going to go into Taiwan, and let's say

that's what they're ultimately going to do, I

would think they're going to want to get their

inventories up really high before they do.

Yeager: But why does that rumor come out?

The Speaker had barely been gone from Taiwan and

all of a sudden there's these whispers of China is

buying.

That is an actions word thing there that was

confusing to me.

Hackett: We always say, I always say don't listen to

what the Chinese say, always watch what they do.

They said a lot of things on TV but what they did

was they bought U.S.

grain.

I think that says a lot about where they're really

at.

Yeager: Okay, so they bought it but normally if

they say they're going to buy the market rallies.

But if they're trying to buy, they don't want to

buy a rally, they're trying to say we're not

interested.

Hackett: I think they're aware that U.S.

crops are not going to be as good as they should

have been.

And I think they are aware of their intentions.

They probably have a much better idea what they're

going to do with Taiwan than I do.

And if they are looking at longer term and thinking

we're way off from the highs, Paul, these are

some of the best prices we've seen since last

year, why not starting making some bids now while

the getting is good?

Yeager: All right, so are you seeing a rally coming

in our future here for new crop beans?

Hackett: I do.

Yeager: How big?

Hackett: Look, I think the soybean market can rally I

think a couple of dollars here from where we are.

We already had almost a $2 rally on the hot and dry

weather.

We could tell quickly this market was willing to

respond to anything going wrong.

We get anything going wrong in South America at

all with a short soybean crop here in the U.S., it

wouldn't take much to think we could put that

premium right back on.

Yeager: All right, we're in a bearish trend in the

cotton market.

Is that going to continue?

Hackett: The U.S.

crop looks so bad and the Indian crop is looking not

as good.

I just don't see how this market, even with the

worries over end user demand because of the

economy and all of the slowing down, all that

stuff, I just don't see how this market is going

to find a way to go below 85 cents where it has

already been.

I think we're going to find that the demand will

be good enough there to handle the lower demand

that is coming.

So, hurricane season is coming, lots of times we

get weather spikes during hurricane season.

It's been quiet so far.

But August 15th to October fires things up, it

wouldn't surprise me if we could get some of that

volatility to the upside here.

Yeager: We'll get your dairy take in Market Plus.

I want to move to the cattle market.

Is this a seasonal rut that we're in?

Or is this only responsive to grain?

Hackett: Well, certainly the feeder cattle market

obviously clearly reacting to lower corn prices that

we've seen.

But when you look at the chart of the fats we

actually broke over at $149 in that December

contract, which was really an important benchmark for

us on the charts.

It looks to me like we might be shifting finally

from this herd liquidation cycle that we've been in

forever to maybe moving into this herd rebuilding

cycle that takes these animals off the market

while demand is looking for it and maybe, just

maybe the cattle producer is going to get the upper

hand against the packers.

Yeager: Did you just review your April comments

and say -- because you said, if I remember

correctly, Shawn, August you see a rally in

livestock and here we are, we've had a rally in

livestock.

What is the rally -- which one is going to have a

bigger rally, the feeder market or the live cattle

market?

Hackett: The feeder cattle market always has the

bigger rally at the beginning of a major move

in the cattle complex when you're going through herd

rebuilding cycle and it has outperformed and I

think that will continue to be the case.

The second half of a move in the cattle complex, the

fats take over the leading edge.

So I still think if we're looking at performance,

the feeders are still going to be the super

charger here for a while.

Yeager: What about these sales of hogs to China and

Mexico?

What does that mean for the hog market?

Hackett: Well it's good news.

We looked at the hog price in China, I think we

mentioned this last time, and it has been continuing

to strengthen.

We looked at copper prices in China strengthening,

lumber prices in China strengthening.

So although we've been worrying about demand from

all the shutting down of these 500 million people,

the domestic prices, they say demand is coming back

like we should expect to see a resurgence of demand

for things like pork, meat proteins and chicken.

And I think that getting that Chinese demand back

when we still have very low animal feeding units

based upon the last numbers from the USDA

spells a good tailwind for higher prices heading into

the fall and into the fourth quarter.

Yeager: So we have the story about the trade

deficit reducing.

Food was a big part of it, foodstuff what we produce

in grain country, but also what we produce in the

livestock country.

Global exports you say higher.

What about the domestic demand?

Because let's talk about the chicken wing, that has

fallen in half.

You mentioned lumber, that has fallen dramatically.

What is our domestic demand in 30 seconds going

to do here in the rest of 2022?

Hackett: The market has already priced in a much

weaker U.S.

demand story.

I believe that is the past.

When I look ahead and I look at what I'm seeing

from leading indicators like copper, like the

inverted yield curve and what we heard from the

Federal Reserve that they're going to now be on

more of a data focus, I think we're looking at a

better looking outlook for demand going forward than

we currently priced in.

Yeager: Shawn Hackett, thank you so much.

Hackett: Thank you, Paul.

Yeager: Appreciate the time.

I'm going to put a pause on him for just a moment

because we're going to keep this analysis going

and talk to Shawn and answer more of your

questions, it's right over here, that you submitted

for our Market Plus segment.

You can find that on our website of

MarketToMarket.org in both podcast form and also on

YouTube.

By the way, all of these resources, they're free.

And speaking of podcasts, because that's what you do

in them, you speak, we have three for you to

consume, follow and share, the Market Analysis,

Market Plus and the MtoM provide new episodes each

week.

And next week, we're going to look at the fight over

water rights in the high plains.

Thanks for watching.

See you later.

♪♪

♪♪

Market to Market is a production of Iowa

PBS which is solely responsible for its

content.

What's the most complex industry on Earth?

It's not genetics, or meteorology, or logistics.

It's a business that involves them all.

It's farming.

Thank you, farmers, from Pioneer.

Sukup Manufacturing Company -- providing

equipment and buildings to store and condition grain

to help farmers adjust to market swings.

We build drying, moving and storage equipment

designed to preserve the quality of their crops.

Sukup Manufacturing -- store now, profit later.

♪♪

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.

♪♪