USFR Weekly Recap - October 29-30, 2011

November 1, 2011 09:09 AM
 

THIS WEEK ON U.S. FARM REPORT
EPISODE #1994
OCTOBER 29-30, 2011

JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I'm John Phipps. Even as poorly hidden "secret" farm bill negotiations frantically try to beat the November deadline for the Super-Committee, familiar divisions within the ranks of the farm lobby are complicating agreement. Most questionable is the image of sacrifice being represented by the lobbyists. By saying "farmers are doing their part" farm-state lawmakers are implying that the current scheme of payments is justified and reasonable. But what if our farm program is just another $900 Defense Department hammer, or more bluntly a total taxpayer rip-off? Shouldn't unnecessary programs be cut more than ones that actually help? Stay tuned. Time now for the headlines.....here's Al Pell.

BEEF OUTLOOK: Thank you John. Severe drought in the southern plains has economists estimating a smaller national cattle herd come January first 2012. Purdue economist Chris Hurt says going back to 2007, beef cow numbers have fallen by 12% while heifers and replacements are down 5%. With exports nearly 20% higher than a year ago--that's setting up the industry for strong prices. In Oklahoma, state economists say while it's normally a busy cattle selling season, drought has hurried things along. Peel says cow slaughter in region six--which includes the drought affected areas--is up nearly 25% this year. Although it is slowing down.

RURAL ECONOMY: New analysis of the rural economy continues to show growth. Creighton University released the results of its monthly "health check" of main-street America. It's based on surveys from bank CEO's in a ten state region, in the nation's mid-section. The bankers are in communities with an average population of 1,300 people. Creighton economist Ernie Goss says the rural economy is growing, but at an anemic pace. However, he says companies linked to ag continue to experience healthy growth. As far as cash rents in 2012, the bankers showed an average increase of about 8%. However, 20% of bankers expect cash rents to surge 16%.

JOHNS HARVEST: Crop watch this week begins in Chrisman, Illinois at the Phipps Farm. Aaron reports yields are "better than expected, but less than hoped for". He drives the combine, while I'm relegated to the grain cart. But I have to tell you that the grain cart is clearly the most important job...that's why I'm at the wheel.

CROP WATCH: Near Lincoln, Nebraska, a grower tells AgWeb that his soybean yields ranged from 44-to-63 bushels an acre, depending on fertility. And corn harvest is moving fast. He says they've only had to deal with rain one time during this harvest season. In Malhuer County, Oregon, we're told weather is unseasonably warm. Corn harvest is 40% finished, yields are off by a third this year. And in Tipton County, Tennessee, a grower says cotton harvest is 90% complete, yields have been average to slightly above average.

ROUND TABLE: Our round table guests, Mike Florez from Florez Trading, Chip Nellinger from Blue Roof Agri-Marketing. Mike, I want to go to you first. I talk to producers they say nothing is happening in the grain market. As a tech trader there is always something happening. We are trading range in corn. Probably about a 30% range and have been there going on two weeks, we have gone through a lot of negative on the stock market and that didn't break it to the downside and that didn't break it. We are just kind of stuck here. There are too many positives to knock it down heavy duty but there are enough head winds to keep a cap on it. For the near term future, I think we will be chopping around a bit. When you look at them you look at what happens in Europe makes more of a difference, is it supply demand affects them or is it history or --. It's all kind of linked together. I don't know what's leading what but the markets are just kind of in a funk, not only the grain markets but various other futures markets, stock market, nothing is making that much headway. It's just --if you have a big move up you can't trust it'll keep going and a big move down there is no follow through there. The market is more of a day trade market. As opposed to a long term type market. Are you still positive? Yes but you don't have to be in it all the time. I think that --I don't think there is enough grain in the world to knock the market down and keep it down. I think the likelihood of a big move is to the up. Not the down. Right now I think it'll be chopping. He said that --he didn't think there was enough grain in the world. Do you think we are that short? If you look at most locations across the Corn Belt through harvest, basis is around as much as 20-cents in some places, 40-cents over average. Basis levels would have you believe that from the commercial side either the crop isn't there, or a combination of the demand is better than what the USDA is letting on. What about the farmers putting it in the bin holding out for the eight dollar corn. Is that happening? I think in some cases that's happening, we are coming off the hangover from seven and a half dollar corn and almost eight dollars. There is maybe some of that let's store this away and hold out for seven dollars again. But, that normally you see that every year no matter what, farmers tucking away, even if it's on at the elevator and on farms. That cash basis level is something you have to pay attention to and it's telling you like Mike said demand is good, the crop isn't there. Some combination, so it's locally because basis is really local. It's all transportation. Depending where you are, it's best in the eastern corn belt but it's better than average in the western corn belt. You know here in the east, Illinois, Indiana, Ohio, two years running where crops are below average. Property senses, the ethanol people really want corn right now and they have been all through harvest. Are you going to continue this basis thing? It's profitable to produce livestock, ethanol so yeah, the demand, those sectors will be solid and every time the corn market dips China shows up. I think you have a real solid demand base and that's why it's like it is and I think that's just going to continue. We’ve been talking about corn, is the same true about soybeans? Somebody said hold and made the argument that soybeans are better obviously than most people thought because they thought they weren't going it be good but we are raising more than we thought this year. Lot of cases its expectations verses what the reality was. It was so hot and dry for so long. People's expectations were way down. As it's turning out bean harvest in most cases beat expectations, I don't know if we are up to average or what people are thinking on that -- on average I would agree that bean yields, are better than what was expected. Will China be able to buy all the beans we grow? I don't know. I would have no idea but they have been buying a lot of them for a long time so I don't know why they would stop. They are in the process of trying to better everybody's diet. I don't think the conditions have changed. They have money, they want their population to do better so I think it'll continue. And also buying cheese, that's a thing a lot aren't really concerned about because that cheese is what's left over after they get done taking the ethanol out but it's a product they are selling overseas. We will be back with more in just a moment. Our guests Mike and Chip. Chip, I want to ask you because last week was a big deal in Europe, now let me say every week for the last six months seems like it’s been a big deal in Europe but have they solved that problem yet? They have put a Band-Aid on it and let the financial markets kind of take a sigh of relief but I think longer term you have so many moving parts that need to agree on one full plan it could unravel in the weeks ahead. We talked about how it just seems like grains are kind of stuck in a range but if you get a worsening in that situation in Europe and I have every reason to believe it’s like putting a Band-Aid on a shark bite that there is more pain to come. It could affect us longer term. As I understand it there is more to it --they do purchase a lot and we are good traders, fact that the money isn't available for the funds and the people that were investing in the markets, is that really what is concerning at this point in time? Yeah. Yes because we went --that was the reason why the markets went down in September. The moneys that farms were holding --they were liquidated. Now in corn and beans you have the lowest open interest since July of 2010 meaning all the moneys have been flushed out of the market. They went to cash. Most markets came down. A lot of things came down. That was the reason behind it. Whatever happens over there does affect our markets and all the way to the farm. Something like $15 billion came out of the markets in that 30 day period. Something else I want to talk about and let you talk about because --three or four guys that have talked to me just today and say have you heard of MF Global? What's happening to that? They are a big trading organization that worked on the Chicago board of trade and that sort of thing and I know that one point in time you worked -- for a predecessor. If you are involved with them is your money, your individual accounts are safe. It's all segregated, it's not mingled with the company money. You don't have to be worried about that aspect because their tends to be a run on the company, that's what happened before, everybody wants their money back. I'm sure that MF Global is probably not going to make it, someone will take them over but I don't think have you to worry about your money. So to make it clear if you are a trader and you are trading with MF Global and you have accounts there don't worry. That's what it's supposed to be. By law. That it worked out okay. I don't know. Maybe they did something they weren't supposed to by law that's how it's supposed to be. Who you trade with? I think the global. Basis. On the MF Global, you know really it's just the tip of the iceberg and the European issue. It's the story because most of their losses --its rumored through the news would have come from exposure to Europe and debt issues there. That is really the big picture in the grain market and Mike said just how fast that can happen, that would be just a small portion if you compare that to other investment banks and large trading houses across the world. Everything mingled, the debt issues, if you get a situation where that debt crisis gets worse or there is more down grading, by the ratings agency of debt over there, that means the margin requirements go up because some of the bonds are leveraged that can get a massive wash out. We can have tight grain stock and it may take a while to play out. It could be a pain. If that happens. I think the MF Global thing is a good example of just how quickly things could change. Quick question, what is going to happen to the grain prices in the future. I think short term we could wiggle on down, long term higher. I guess I would take a little alternative, I think short run maybe have more upside, 30 to 40-cents in corn, 50 to 60 in beans, the risk is there you have to start managing that and lock in profits. Now is the time to start planning for next year. We will be back with more in a moment.

JOHN’S WORLD: One persistent theme of the renewable energy industry is the frankly xenophobic comparison of homegrown fuel to oil coming from evil foreign suppliers. This questionable argument may be about to unravel a little. To begin with, the majority of our imported oil comes from Canada and Mexico. Not only are they reliable suppliers, but they are also good neighbors. So constantly depicting a sheik on a camel is misleading at best. But even more interesting is what might happen if the current Arab spring movement replaces other Mideastern dictators with more democratic governments about as corrupt and inept as our own. After all, Saddam is gone. Now Ghadafy is out. Syria's Assad is teetering and even the kingdom of Saudi Arabia is nervously inching toward reform. While we still have Chavez in Venezuela, few have suggested he is exporting terror. There is still Iran, of course. But they are a relatively small supplier. Iraq is a question mark, but it's one of our own making. Nigeria is a mess, but not a threat. In short, what if the bad guys of oil disappear? Who would we hate on at the PUMP? Disconnecting energy policy from jingoistic pseudo-patriotism would leave us with mere economics to make our choices. The idea of carbon-taxing of some sort might be something alternative energy backers will now consider more seriously. As more policy-makers mull this idea for revenue purposes, political surprises in the Mideast could make it attractive.

2ND HALF:
JOHN’S OPEN:
Hello and welcome to U.S. Farm Report, I'm John Phipps. To some mild surprise, the economic picture may be getting a teensy bit brighter. Consumers seem to be more interested in buying and the European economic soap opera is currently on an uptick. Progress is never fast enough, of course, but more of us are lowering our expectations of when things will return to normal and even what that normal might look like. The ancient virtue of patience may be something we have to adopt whether we want to or not. The absence of bad news is no substitute for good news of course, but I'm beginning to count it as a win these days. Let's get started with the headlines and Al Pell...

FARM BILL: Thank you John. Agriculture Secretary Tom Vilsack laid out USDA's priorities for the 2012 farm bill this week. In light of the current budget crunch in Washington, he acknowledges his department will have to do more with less. Every five years congress goes thru the legislative process to create the farm bill. From the perspective of production agriculture, the bill dictates farm policy such as direct payments, disaster assistance, and land conservation programs. But despite the name, 75% of that money does not go directly to agriculture. Instead it goes to federal nutrition programs. Vilsack says safety net programs for farmers must be made more efficient. He said conservation program funding must remain part of the farm bill. He also wants the next farm bill to contain funding that would expand the production of bio-fuels beyond corn-based ethanol. Vilsack made his comments during a tour of a John Deere factory in Des Moines, Iowa.

BUTTER LAW: In Wisconsin, there's a legislative flap over government's role in protecting the dairy industry. And it stems from the use of margarine. In September a lawmaker introduced a bill to rescind a law that requires butter receives preferential treatment in restaurants, schools and even state prisons. Some legislators want to get rid of the preferential treatment. But butter advocates say the repeal would undermine and insult Wisconsin’s dairy farmers. Repeal advocates say the state could also save money by serving less expensive margarine to prisoners. The law has been around for decades. It was an attempt to protect the state's very important dairy industry. Violating Wisconsin's butter law carries a fine of 100 to 500-dollars. But Wisconsin’s department of agriculture says no restaurant has been cited in recent memory.

PUMPKIN SEEDS: In many communities, trick-or-treaters will be knocking at your door this weekend. As Halloween draws near, no doubt many of you are taking time to gut a pumpkin for this year's jack o'lantern. Well the pumpkin lobby says don't just throw those seeds away. Pumpkins seeds make a healthy nutritional snack. The 'innards' are full of minerals like iron and zinc. They're also a good source of protein. While pumpkin seeds are most commonly roasted to a crispy brown, roasting does remove some of the nutritional value.

HEARTLAND; MISSOURI FARM TO SCHOOL: It may not be on your calendar, but October is national farm to school month. Farmers are teaming-up with schools to add locally grown fruits and vegetables to the lunch table. The program promotes healthier eating while boosting local economies. At least, that's the goal. Kent Faddis tells us how it works, in this report from the University of Missouri. Kent says the latest state figures show that 30% of Missouri's population was classified as obese, including one out of every seven high school students.

MEXICO TARIFFS: Trucks are once-again rolling in from Mexico. With the 'green-light" to operate in the united states, Mexico has now lifted a host of tariffs it levied against the U.S. Mexico imposed the tariffs in 2009 - many of them on farm products. The fight was over a refusal by the United States to allow Mexican trucks to make deliveries deep inside this country...an allowance that had been okayed as part of the North American Free Trade Agreement. American authorities agreed to allow a select number of Mexican trucks and operators if they comply with strict monitoring rules and follow u-s highway regulations. The two governments signed an agreement in July resolving the issue.

TEXAS FB IN CANADA: Implemented in 1994, NAFTA links Canada, Mexico and the U.S. Farmers from Texas are very familiar with their trading partners to the south. After all, they share a border. But they don't know as much about the other "NAFTA" partner - Canada. That's one reason why leaders of the Texas Farm Bureau headed north this summer to get a look at farming operations in Ontario and Quebec. Matt Felder has details in this report from the Farm Bureau. The United States is Canada’s largest trading partner of agricultural goods. According to government numbers, U.S. ag exports to Canada totaled 17-billion dollars in 2010. On the flip-side, imports of ag products from Canada totaled just over 16-billion dollars. Stay with us - Tractor Tales and our Country Church Salute are coming right up...

TRACTOR TALES: Al re-joins us now...I understand we have a real work-horse for this week's Tractor Tales. John, we have a classic Allis-Chalmers to share with the folks. The owners of this diesel powerhouse say it doesn't work hard. But it does do its share of the work on their operation. Don't forget, you can always view more tractor tales at www.usfarmreport.com. And now you can download these segments as pod-cats from i-tunes. Go to i-Tunes store and search "tractor tales".

CHURCH SALUTE: Today's country church salute goes to franklin grove Presbyterian Church in Lee County, Illinois. The church is celebrating its 150th year of ministry in north-central Illinois. According to a local newspaper, the founders first met on a cold new year's day in 1861 to worship and organize the membership. Robert miller is a current member of the church. He says franklin grove is a small farming community with a population of 968 people. Sixty of them go here. Congratulations to Franklin Grove Presbyterian Church. And our second salute goes to St. Cyril's Catholic Church in Bannister, Michigan, which is celebrating its 100th year of ministry this year. It was founded by Czechoslovak immigrants who had moved to the area in 1800's to farm the land. In 1911 parish members built their first church and called it St. Cyril and Methodius Catholic Church. The name has since been shortened. Their present church seats 500. In addition to the centennial, there's also a change in the pulpit. Father wolf is retiring and will be replaced by father Portelli. Our thanks to John Winkler for sharing their story. As always we want to learn about your home church as well... Salutes can be sent to the address on the screen. Stay with us - the mailbag is next.

MAILBAG: Time now for our weekly look inside the farm report mailbag....Richard Fassino is concerned about food wastage. He refers to a video we'll provide the link to.
"The folks in the (video) are basically getting their food from dumpsters outside food stores - lots of it that is just being wasted - that could go to feeding people or at least feeding pigs, etc." Richard, it is hard to look at obvious waste and not conclude our food system is horribly inefficient. But the food wastage problem like many other current issues is very complex. For example, we have been following the story of a listeria outbreak caused by contaminated cantaloupe. Incidents like this, although rare, only intensify shelf-life rules foods to satisfy a worried public. Much of what we throw out is perishable, and has exceeded the sell-by date. There is the complication of how consumers view value in food. As long as we favor getting the most calories for the least money, restaurants will be boasting of huge servings. Much to my horror, I have begun ordering senior selections not so much because they are cheaper, but for the smaller portions. It is also well-known that buffet fans overestimate and waste considerable food.
Because much of the waste is prepared food, it is nearly impossible to salvage. Ingredients have a longer shelf life and are more stable, so more cooking at home would help. Finally, the days of feeding pigs garbage have been over for decades. It's a bad idea, period. As always, we want to hear from you, send comments to mailbag@usfarmreport.com or leave us a voice mail at 800-792-4329.
 

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