Market to Market (November 22, 2019)

Coming up on Market to
Market — As harvest nears the finish line, Congress
does a credit check. Biofuel proponents take
their comments to the top. After his release from
prison, a cattle producer is again in trouble
with the law. And market analysis
with Mark Gold, next. ♪♪ 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 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. ♪♪ This is the Friday,
November 22 edition of Market to Market, the
Weekly Journal of Rural America. ♪♪ Hello, I’m Delaney Howell. The early arrival of
winter has done little to slow one sector of the
construction industry. The Commerce
Department reports new home building increased 2
percent in October fueled by lower interest rates
and a healthy job market. The same factors are
boosting the sale of existing homes. However, a shortage of
available properties are keeping a lid on even
more transactions. The 10-state snapshot in
mostly middle American states hit its
highest mark of 2019. Creighton’s Rural
Mainstreet Index topped growth neutral for the
fourth time in five months. The survey’s author
says federal agricultural crop support payments
and somewhat higher grain prices have
boosted the survey. And as Peter Tubbs found
out, some members of Congress received an
update on another vital aspect of the economy
– farm credit. Multiple years of losses
on the farm have stressed farm balance sheets, but
have been slow to injure the farm credit
system as a whole. Glen Smith, CEO
of the Farm Credit Administration, testified
before the House Agriculture Committee
this week that while the absolute number of farm
bankruptcies is still small, there is concern
in their growth. Glen Smith, CEO, Farm
Credit Administration: “You’ve heard of
foreclosures being up, percentage wise, and
percentages, the numbers aren’t alarming, but the
percentage increases are. Foreclosure should be a
last resort.” When asked if the current financial
crisis on the farm is similar to the situation
in the 1980’s, Smith sees parallels to that
difficult decade. Glen Smith, CEO, Farm
Credit Administration: “Which part of the 80’s? When we got to the
mid-80’s and the late 80’s, we were in a
crisis situation. But I made the comment
that I think we’re at a level that’s comparable
to the early 80’s. Decreasing farm incomes,
decreasing margins, eroding current ratios. And at that time in the
Midwest, we’d lost 15-20 percent of our
land values. Guess what? Today we’ve lost 15-20
percent of our land values in the Midwest. The late 70’s and early
80’s were also typified by trade wars, right? At that time it was the
Soviet Union with the grain embargo. So I think we’ve learned
from the 80’s.” Farmers have taken on an
additional $41 billion in farm debt in the last 3
years, matching a record high set in the
late 1970’s. Despite a trend of low
farm net income, low interest rates have
allowed producers to stay current on loans. The percentage of
delinquent agricultural loans rose in the second
quarter of 2019 from 1.7 to 1.9 percent, a rate two
and a half times higher than their low in 2014. The delinquency rate for
farm loans in 1987 was over 8 percent. While current conditions
pale to those 30 years ago, the still FCA sees
a creep of deteriorating financial quality
in rural America. For Market to Market,
I’m Peter Tubbs. One the nation’s largest
ethanol companies has announced the production
stoppage of cellulosic biofuels. Project Liberty in
Emmetsburg, Iowa will now switch focus to research
and development. The plant’s operator POET,
cited EPA challenges with the implementation of the
Renewable Fuels Standard as the reason
for the change. The president registered
his comments on the topic this week in a meeting
that included at least one farm state lawmaker. Paul Yeager reports. During the final days
of the biofuels policy comment period by the
Environmental Protection Agency, Iowa Senator
Charles Grassley aired his thoughts on the proposal
directly to the EPA from the Oval Office. Sen. Charles Grassley, R- Iowa:
“I expect to be carried out what we agreed to
in the Oval Office on September the 12th. He can adjust his rules,
according to the public comment, and I hope he
gets thousands of farmers in Iowa and biofuel people
and anybody else that wants to comment that
we expect September 12 agreement in the Oval
Office to be carried out in spirit as well as in
word in the new regulation going out.” Grassley says
the president echoed the support for biofuels to
EPA Administrator Andrew Wheeler. Sen. Charles Grassley, R- Iowa:
“I had a chance to tell him that EPA’s had trouble
even before he became director under Pruitt,
and then under the EPA directors of the Obama
administration, that they don’t have credibility
with the farmers because they think their tools of
Big Oil, and that’s what the suspicion
is behind this. So even though Wheeler
and the president are very sincere, that they’re
going to deliver the 15 billion gallons as the law
requires instead of cut back by refinery waivers,
they gotta write their rules that say
exactly that. And they haven’t done
that.” For Market to Market, I’m Paul Yeager. In 2018, a Missouri
livestock producer spoke to this program about
his time behind bars for defrauding the government
over cattle sales. Less than a year after his
interview, the subject of our story is again in
trouble with the law – this time at the center
of a double murder investigation. You can find more on the
topic in a special section of our website — slash justice. Colleen Bradford Krantz
continues our series with part three of “Justice
in Agriculture.” Missouri cattle producer Garland
“Joey” Nelson said he knew he was violating his
Farm Service Agency loan agreement when, in 2013
and 2014, he sold cattle that were collateral
without notifying government officials. According to court
documents, Nelson, then 20, also hid some of the
profits in a friend’s bank account, later moving it
to his own, and he used alternate versions of his
name to avoid detection. During an interview last
year, Nelson toldMarketto Marketthat he had
gotten in over his head financially while trying
to build a commercial cattle feeding operation. He ultimately pled
guilty to fraud charges. But after spending more
than a year in the U.S. Penitentiary at
Leavenworth, Kansas, Nelson was released in
March of 2018, hoping to make a fresh start on
his family’s farm near Braymer. Later in 2018, he told
Market to Market
that he’d learned some hard lessons
about farm management. Joey Nelson, Braymer,
Missouri: “I can tell you all the things you don’t
want to do when it comes to feeding cattle that
way or loaning money from them, getting entirely
too deep with somebody. I mean, it was a bad
experience but I learned from it. I learned who you can
trust and who you can’t trust, and just how far to
go before things get too bad.” Within nine months
of making that comment, Nelson would, again,
be under investigation. This time, for the July
21 disappearance of two Wisconsin cattle
producers. Caldwell County, Missouri
officials announced that human remains found
on Nelson’s farm were believed to be, based on
DNA tests, those of the missing men, Nicholas
and Justin Diemel. On October 23, 2019
Nelson, now 25, was charged with, among other
crimes, two counts of first-degree murder
in connection with the brothers’ deaths. Sheriff Jerry Galloway,
Caldwell County, Missouri: “Charges of murder are
Class A felonies, which carry a range of
punishment of life in prison, or death.”
The Wisconsin men had previously sent cattle to
Nelson to feed and sell on their behalf. Court documents say the
father of the Diemels told officials the brothers had
traveled in late July to Nelson’s Missouri farm to
pick up a $250,000 check. They were not
heard from again. Those documents also say
that Nelson acknowledged taking a rental truck
used by the Diemels, and disposing of two bodies he
said he found on his farm. In addition, a used rifle
cartridge was found in Nelson’s clothes. He told officials he had
been hunting small game. Nelson is being held
in the Caldwell County Detention Center,
pending a trial. Dr. Michael Rosmann, an
Iowa-based psychologist interviewed long before
the men disappeared, said he should not comment on
the Nelson case, never having met the young man. But, typically, in other,
less-serious cases, producers who get in
trouble often make decisions that were
intended to keep their farm or ranch
financially viable. Dr. Michael Rosmann,
farmer psychologist “I think there are some farm
people who will resort to illegal activities to get
ahead because they feel compelled to do whatever
it takes to hang onto the land and resources
needed to farm. And their motives aren’t
always to hurt anybody but they end up hurting people
anyhow.” Occasionally, farmers who cheat federal
programs or mislead consumers are accused
of using the profits for purchases the government
describe as being for “personal enjoyment
and pleasure.” In 2016, for example, an Idaho
farmer was sentenced to three years in prison for
selling regular alfalfa seed as organic. Court documents say he
used the profits to buy an RV and a boat. Dr. Michael Rosmann,
farmer psychologist: “People will do things
that they normally wouldn’t do just because
their livelihood is under threat. And they’ll do what they
think they have to in order to maintain the
quality of farm operation that they’re
accustomed to. Doesn’t make it right. It is just a factor that
contributes to why this phenomenon occurs.”
In rare cases, some psychologists believe,
those farmers who were charged have committed
suicide to avoid either serving time in prison or
facing the public shame. Rosmann says the data
shows a shift away from older producers
taking their lives. Dr. Michael Rosmann,
farmer psychologist:“Now, we’re seeing younger
farmers from age 45 up to their late 60s as the most
vulnerable for self-harm, and we’re trying to figure
out why that is…Possibly it has something to do
with a sense that I only have a few more years to
succeed and it’s make or break time.” During his
Market to Market
interview a year ago, Nelson
described feeling badly for another farmer who was
in prison because of the impact it had on his
wife and children. Joey Nelson, Braymer,
Missouri: “He farmed and he was there for his kids
every day of their life until that point, and you
know his wife still has to farm…. She’s got to
do it all by herself. They don’t think about
that stuff.” Nick Diemel, a 34-year-old from
Navarino, Wisconsin, left behind a wife and
four children. Justin Diemel, of Pulaski,
Wisconsin, was 24. In his interview, Joey
Nelson described how he felt the day he was
released in 2018 after spending 13 months
in Leavenworth’s minimum-security satellite
facility on fraud charges. Joey Nelson, Braymer,
Missouri: “You get nervous about everything you do
from that point forward. Everything you go to do,
you are like, ‘Okay, now can this be twisted or
turned around where I might get in
trouble for it?’ ” For Market to Market,
I’m Colleen Bradford Krantz. Next, the Market
to Market report. Deteriorating weather
conditions for harvesting remaining acres coupled
with export reports helped boost the grain markets. For the week, March wheat
increased 13 cents, while the nearby corn
contract gained 7 cents. Headline trading
between the U.S. and China did little to
improve the market as the January contract
fell 21 cents. January meal
declined $8 per ton. March cotton weakened
$1.84 per hundredweight. Over in the dairy parlor,
December Class III milk futures expanded 21 cents. The livestock sector
finished another week down as the February cattle
contract lost $1.13 and January feeders shed $5. The February lean hog
contract plummeted $4.35. In the currency
markets, the U.S. Dollar index
gained 31 ticks. January crude oil expanded
8 cents per barrel. COMEX Gold fell
$3.90 per ounce. And the Goldman Sachs
Commodity Index improved almost a point to
finish at 421.40. Joining us now to offer
insight on these and other trends is one of our
regular market analysts, Mark Gold. Mark, welcome back. Gold: Thanks, Delaney. Nice to be here. I want to wish all of your
listeners out there a very Happy Thanksgiving. I know many of us have an
awful lot to be thankful for this year. I just want to pass
on those greetings. Howell: Well, thank you. That we do, Mark. We’ve got a shortened
trade week next week, but there still was some stuff
happening this week I think our viewers would
like to be filled in on starting off with
the wheat market. They had an exciting week
for wheat markets as they go. Export sales were
high, prices were high. What is going on there? Gold: Well, the export
sales were a little bit better than what they have
been but still not a good number, a lot of
competition certainly from the Eastern
European countries. Chicago has now not only
traded 90 cents over Kansas City but it’s
putting a dime or 13 cents higher than Minneapolis,
which we never see. I don’t know what in the
40 years I’ve been around the business that
we’ve ever seen that. But at any rate it
continues to be strong. It’s ignoring what is
happening in the corn and the beans and keeps
chugging its way higher. Nobody really knows
what the deal is. Is it because we’re
planning the lowest number of acres in 10 years? That may be part of it. But when you look at these
huge world carryouts and the lack of real demand
out there what’s going on? I’ve tried to sell that
Chicago/Kansas City spread a couple of times in the
last month thinking that once we got into September
it wouldn’t last. Well September came and
went, the spreads are still that high, it’s
telling us something is going on that most of us
just don’t see whatever that is. Howell: It’s a little
bit of an anomaly here it seems like in the
wheat markets. Gold: But you don’t want
to stand in front of the freight train and it has
certainly had its own strength in the Chicago
contract and it just doesn’t want to quit. When it does quit it
will really give it up. But that might not be for
a while because we don’t know what the
problem is out there. Who is paying up
for this wheat? Is it that the wheat
isn’t out there? I don’t think
that’s the case. But we’ll see where we go. Maybe people are
anticipating just a lower harvest with the weather
that we’re having, the lower acres, and maybe
that’s enough to push it higher. Howell: All right, Mark,
let’s talk about the corn markets because they had a
little bit of a different story this week it seemed. Weekly gains over last
week but still just an interesting
trading session. Is corn due to bottom out
here at end of November, beginning of December? Gold: I would think so. You look at the basis. You’ve got basis normally
around harvest time we’re looking at 60 to 90
under in a lot of places. Now we’re looking at 10
under to 30 or 40 over. I heard one place
was 90 over briefly. That’s unheard of. Why would there be so much
basis being built into this market? One bright trader I know
made the point that the USDA way overestimated
the 2018 crop. It’s not out there. Elevators, ethanol plants
have to bid up to get this corn and that is why we’re
seeing this strong basis. It’s a field day for
anybody doing any marketing. If you’ve got some puts on
you’re making money on the puts and in the case
you’ve got a bin keeps making more money. So it has been a double
edged sword on the good side for the American
farmer for a change. My point would be they
need to take advantage of it, this basis may not
last all that much longer. Howell: Well and that’s
perfect, you set us up here quite nicely for
our social media question coming to us from
Chad in Maynard, Iowa. He said, a corn basis
contract decision needs to be made this week. Do you bite the bullet
and price it or roll it? Gold: I would
bite the bullet. You could roll it. If you roll it and you’ve
got the corn in the bin you’ve got to keep a
put underneath you. Both have been working. But I would be inclined
to take the money and run. Take some of that money,
spend 10, 15 cents, buy back a call option because
I really do believe, I don’t know if it’s going
to be the 1st of December or the 1st of January,
but when we get into that WASDE report in January I
really think it’s going to show that we’ve got more
problems out there than anybody wants to admit to. The fact that as of last
week we still had 24% of the corn unharvested, 3
billion bushels and the market just kind of turned
up its nose at that. Well not only do we still
not have the corn all in but the condition of that
corn is getting worse every day. So it keeps me pretty
friendly corn, beans and wheat for next year. But the timing has
got to be right. And I really don’t think
that is until after the 1st of the year. Howell: Mark, what is the
story when you look at the soybean market? They were sub-$9 this week
which is the first time in quite some time that we’ve
seen that trade below that. Gold: Well, what is
happening is the oil has taken over the leadership
role in the beans. That is never a positive
sign in the beans in my opinion and the meal has
been taking it on the chin. The soy oil has been so
strong because of what is happening in Malaysia,
there is talk about the Malaysians adding palm oil
into their biodiesel type situation and the
Malaysian palm oil has gone through the roof. That has dragged the U.S. soy oil market up with it. So as the spreaders
are buying oil, they’re selling meal. The meal is the bigger
share of the bean complex so the beans have
been moving lower. The other obvious part
of that is the Chinese. There’s no deal. They keep pushing whatever
deal was going to be done by the end of the month
now it’s maybe next year. The President is going to
delay maybe putting new tariffs on. But we have no deal. Until we actually get a
deal I think the markets are going to be a little
bit on the defensive. But again, after we turn
the page in the next year and we’re looking at
a political year, an election year, does the
President want to lose the farm vote? No way. So I think he will be
compelled to do something positive for the American
farmers out here. Howell: Mark, turning our
attention to the protein markets there was just
kind of a dumpster fire this week in the live
cattle and feeder cattle complex, especially on
Friday’s trading session. What happened? Gold: Well, I think
everybody was getting set for the cattle
on feed report. They were talking about
112% on the placements which would have been the
highest on any October number in years. Howell: And that was such
a large trading range. Gold: And the Feb cattle
hung in there, the December cattle hung in
there, until Friday it was really looking
pretty positive. We’ve had a $20 rally. But then today the feeder
cattle gave it up $4 at one point in the feeder
cattle, that dragged the fats down with it. I think that was all
in anticipation of this report. The report came in 110%
rather than 112% so it’s still a big number but
it’s not as bad as people had been thinking and
certainly some of the early estimates were
even quite a bit higher. So are people going to
look at it and say well it’s not as bad and we
can rally it from here? Or are they going to say
it’s still a big number, we’ve got a lot of
cattle coming in? I don’t know the
answer to that. I do know if we start
closing the nearby cattle over $121 it’s a
very positive sign. As a risk manager would I
be spending $3 on a put on a $21 rally out here? You bet I would just to
protect the downside. Today it worked, gave you
a little bit of an edge, but long one can we
break this $5 or $10? I think we could
in a hurry. Howell: Okay. Mark, finally we’ve got to
talk about what is going on in the lean
hog markets. $63 for so long, they’ve
been trading underneath. This week they touched $60
and potentially I think they might have
touched $59 there too. Why is there still such
a discrepancy between the cash and the
deferred contracts? Gold: Well, it’s all
really about China. When we don’t have a deal
with China it makes it very tough. The Chinese bought a
lot of Danish pork, that really kind of put a
kibosh on the hog market. I’m still convinced, maybe
I’m way off base on this, but I think one of the
things the Chinese will buy is the hog market. They have depleted their
supplies 50%, they need the protein, they want
the protein and I think they’re itching to get
something done to get more pork. And I think it will be
American pork they come for. Howell: So it’s really
just the deferred is built in, there’s some premium
built into the deferred because we’re still
banking on being able to export U.S. pork? Gold: And I think that is
going to happen one way or the other. The world needs it and in
particular China and if there is a trade deal to
be made I think the hogs will be a big
beneficiary of that. Howell: Mark, how much
upside potential will get added into those deferred
contracts if and when we see that agreement? Gold: I would think
$20 fairly quickly. If you’ve sold hogs out
here, would I be buying some call options back
to keep the upside open through April and maybe
early June, something in that nature? I would because again
after the 1st of the year I think this thing
can turn higher. We’ve done a lot of damage
in that hog market and people say well the
Chinese are going to be ramping up their hog
production as well. I agree with that. They want to ramp it up. But what is that
going to take? It’s going to take a lot
of meal and a lot of corn to do it. Howell: Mark, we’ll
continue this discussion in Market Plus. Thanks so much. Gold: 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 We have some exclusive
content with our Justice in Agriculture series. Search ce to see more. Join us again next week
when we’ll crack open a wild North American crop. 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 ♪♪ 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.

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