THIS WEEK ON U.S. FARM REPORT
SEPTEMBR 24-25, 2011
JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I'm John Phipps. Well, we got to try out those new daily trading limits for corn this week, and it was certainly exciting. I'm sure our market experts will have much more to say about the market gyrations, but if there was any disbelief about how interlinked commodity and other global markets are, they should be dispelled now. The flow of money of this magnitude is a relatively new phenomenon for farmers and investors as well, but I was surprised how quickly most of us have adjusted to the breathtaking volatility. While we now know we can't predict when outside forces will overcome fundamentals in our markets, we are beginning to develop defenses. Time now for the headlines.....here's Al Pell.
DIRECT PAYMENTS: Thank you John. President Barack Obama is proposing to end "direct payment" subsidies to farmers as part of his larger effort to reduce the federal budget deficit. The White House says the subsidy is "unnecessary". It totals about five billion dollars a year. Opponents of the direct payments say they help bankroll large operators who out-bid smaller producers. Supporters say the payments help stabilize the farm sector. Cutting the direct payments would save about 30 billion dollars over a decade. The President is also suggesting cuts to some conservation programs.
TEXAS HERD: A large number of ranchers in Texas have reduced their cattle herds because of the drought. But that does not mean they're getting out of the business. The Texas and Southwestern Cattle Raisers Association conducted a survey of its members to see how their operations changed as result of the drought. 84% have reduced their herd size. The average herd size is down by 38%. According to the survey, 8% of respondents indicate they will no longer own cattle in 2012, but that's temporary. No respondents indicated they plan to permanently exit the cattle business.
OKLAHOMA CATTLE: In Oklahoma, there's also a sharp reduction. Oklahoma State livestock specialists expect a 13% plunge in the beef cow herd in that state. Further, they see replacement heifers dropping by a third.
DERRELL PEEL: Peel says farmers and ranchers in other parts of the country may be expanding their beef herds, taking advantage of cattle sales in dry areas. But he says that expansion would not make-up for the big losses in Texas and Oklahoma.
CROP PROGRESS: Dryness in the central and southern plains is causing delays of winter wheat planting. The USDA report shows 14% is seeded, six points behind average. Oklahoma planting is at 4% and Texas at 8% completed, which is about a dozen points behind. The soybean crop took a beating in the upper Midwest and plains due to frost. 53% is good to excellent, down three points from the previous week. State by state, we saw ten point declines in the condition rating of soybean fields of the Dakotas and Minnesota.
ROUNDTABLE: Welcome. The first thing I'm going to do, you know the markets are down this week. Well, we have had a pretty tough week in the markets to say the least. Corn was down somewhat in the nature of 50-60 cents, beans were down around 80-90 cents, and wheat was down about $0.50 for the week. But the one that's most publicized, problems in Europe. Here that they are union made with all of the capital problems with the banks, so that has people rushing out of the euro into the dollar which props to power up. Nobody feels good about the global economy so that is pretty weighed on the market. The other was that the fed was coming in here this week to make some moves. And they were talking about changing it up and how things were working, and they basically buttoned the yield curve. And if you looked at the field in the last couple months, you realize that they don't want to own houses out very bad or take any risks on loans, so that they are able to borrow at 0%, they don't feel to make any risk. You done a good job explaining this, but you didn't say anything about the agriculture markets except they were down. What happened in agriculture? Very little. It had very little to do with agriculture or yields in the field and it was all monies flow. It is all about how much exposure these banks and hedge funds have and it was 80, get me out, attitude. These markets hit very hard as well. Immediately we raise the limit on trading corn. And i bet that's part of it. Does not have anything to do at all with that but….Well actually this week the bigger limit on corn was the better thing because we traded 30 plus lower on like Thursday, and that would have been the limit and we could have been end of good situation. But the bonus was having the 40- cent limit, people were able to get out of the positions and it put us in this scenario would lock them down into the market push on them extra hard and take another the next day. They were able to call the bluff, so that was the good thing as far as the expanded momentum. That is actually an opportunity to clear itself out. You think, there has to be on that at some point, although some markets have no limit. Well, I would say that when it's been $0.40, it helped out like gold for example, no limits. It helps ease the motion may be short-term but the market will trade where it's going to trade anyway via options synthetically. So the limits are assigned at the time. Seven dollars plus court costs were up 40-cent limit. Well I suppose the more its worth, it would be of better profit. But, then it doubled again and that was the problem. Well enough than the problem at two or two and half weeks. I will save this for when we come back, but I'm going to talk about exactly that when we come back. But what I want to talk about now is where we are going to go with the European economy and all these other fun things. Will that be with us --I only have one minute to talk about that right now but will that be with us forever, quick. I think we are overdoing it on the downside for grades, we are going below fair value. You are giving the end-users the chance to buy things here that outside forces are knocking prices down. So you're saying that to the cattle producers? Buy it aggressively, soybeans especially. Do you agree? Quick. We have eight big dichotomy, early yield expectations are better than expected, and if you take the next step and ask the question how it compares to the year ago, there is still that. Fundamentally I think that to do with what it's all done the result that they are pretty close on corn, I think of partial or so high on beans, but good value area. When we come back we are going to talk about the other issue. We are back with the Blue Great Agriculture Marketing Organization. Chip, he brought something up that we were talking about and I had to ask him, I have said what do producers need to know now? And you said, they need to know what to do. So I will ask you, what should they do? Quick. First and foremost, don't panic. It's very hard not to do, but it's almost better as we are in the market, let this financial marketing clear itself and, we are in areas where we are seeing a lot of commercial interest and even foreign countries, stepping up and making some purchases. So, we are out of value area and basis have come back in the eastern corn belt even for the first half of October. There is our real need for this grain, and I think it would be along the micron time to panic. I think if you came and reloaded on paper, some sort of ownership you need to maintain for what should be a normal postharvest type balance. You sound like you are remarking on the balance. I think we are going to be okay. Barring potential banks going under, which we don't know about, we have a pretty big buy signal at the jack right now, and beans are kind of fun because they perform horribly as of late, and one of the reasons is China will be out of the market because their banks are closed for the week. So you don't see the end-user by another market, but as we go through next week I think our lows will be put in November the 30th crop report, and there's pretty heavy seasonal waiting for beans to drop, and, I would buy corn on the break. I think it's pretty good value here, especially after we have seen the snapshot of how low the yields are, I think they are between 141 and 145 for the national average. And I think once China comes back and it's open, there are lots of soybeans. I think it will be okay. I think we will harvest less than without blue harvest this year but those are just guessed numbers and we won't know until we get to harvest.
We need to know whether we will have its supply or demand too much one way or the other. I would suggest right now that supplies would be in short order relative to demand. October should have some revised estimates on the harvested acreage and I agree with Andy, I think contrary to what some people were talking about, I don't see the yields going back up in corn from where they are at currently. If they could easily be 143 or 145 range, and they are decent compared to how dry we were but they are still way under what they were a year ago, so I have a hard time believing that we are better than the year ago. We have about a minute talking about what we should do for next year. The only thing you have to know what your cost is going to be an lock them in, but as the prices going down it is not the time to sell next year's crop, but it's also not what your cost and without doing it. I think in the case of corn, we have a long time frame, long marketing season ahead of us. Unlike selling bounces back up over 650, I think beans far too early, and, once we get more detail on that, they will start making some sales on rallies in the new crop next year. I think we have put our market together again now that all the end-users got healthy and I thought we were going to be of peek and see this thing got wrecked. But I think we have delayed another rally. So i feel like you could consider the spring where I didn't feel like you could before. I would be careful about walking in your input, because it may not have caught the break yet. Thank you very much. We will be back with more U.S. Farm Report in just the moment.
JOHN’S WORLD: During the days of the Roman Empire a historian named Juvenal coined the phrase "rare as a black swan". Since no one had ever seen a swan that was not white, it became a metaphor for something that did not exist. Writers of all kinds used the idea of the black swan to illustrate impossibility. Then in 1770 Captain James Cook bumped into Australia where later explorers found, among other exotic wildlife, black swans. It was a sensation in Europe and the popular catch phrase became a joke. A few years ago, a new definition emerged for a black swan - an unpredictable, highly unlikely event with disproportionate results. 9/11, Lehman Brothers, and the Egyptian revolt are examples. Some have speculated our high speed, interlinked economy and global culture have made black swan events more possible by developing systems to rapidly adjust to more likely economic events. Whatever the reason, "where did that come from?" is becoming the catch phrase for our times. Black swans are not necessarily all bad news. I think much of agriculture is living in a fortunate black swan event that defied prediction. Imagine telling your banker in 2006 your plan was to sell corn for 7 dollars five years later. Or that the $4000 ground you just overpaid for would be worth triple then. As extreme events become more common, it is crucial to maintain some core principles to ground your responses. Especially because it looks like the swans are arriving in flocks. Let us know what you think.... Send emails to email@example.com or call and leave us a voice mail.
JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I'm John Phipps. Supper is no longer just about what happens to be in the fridge or what your second-grader will eat. Concerns about cost, nutrition, health and environmental impact are showing up on our plates. This will play out in government policies around the globe as officials try to respond to voter perceptions. But the mixture of worries could produce strange results. Is food cost the paramount problem in the current economic situation? Should efforts center on shifting consumers to healthier food choices? Or should market action alone decide what we grow and eat? Like so many other issues, there are few simple answers. Let's get started with the headlines and Al Pell...
FOOD DIALOGUES: Thank you John. The nation is now having a "dialogue" when it comes to how our food is raised and grown under modern agriculture practices. An organization called the "U.S. Farmers and Ranchers Alliance" conducted a town hall meeting across the country this week, called "The Food Dialogues." The panelists faced a wide array of questions about the food supply, such as genetically modified crops and the use of antibiotics on livestock. The conversation included leaders in farming, food service, policy and education. There were four inter-connected sites - Washington DC, New York, California and Fair Oaks Farms in Indiana. Fair Oaks milks 32,000 cows. The CEO says educating the public is just as important. In advance of Thursday's panel discussion, U.S. Farmers and Ranchers Alliance commissioned a study. They interviewed about 2,400 consumers and about a thousand farmers. One of their statistics show 72% of the consumers know nothing or very little about farming or ranching.
MY PLATE: There's another new "design" that's intended to help you fill your plate in a healthy way. And no, it's not the USDA version which replaced the pyramid earlier this summer. Harvard School of Public Health created what it calls a "better version" than USDA’s. Take a look at this side-by-side comparison. They both include fruits and vegetables, but Harvard's version is more specific saying "whole grains" and "healthy protein". But there's something else. The glass on the USDA version says "dairy". But the Harvard version says "water". In fact, there is no visible image to encourage consumption of any dairy products. In the text it says "limit milk and dairy, one-to-two servings a day". Harvard School of Public Health says their visual guide addresses what they call "Deficiencies in USDA’s my-plate" icon. The university is critical of USDA for not telling consumers that whole grains are better than refined grains. It also challenges USDA for not specifically laying-out differences in protein. As far as dairy products, the Harvard plate recommends dairy at every meal. Although it says high intake can be harmful.
HEARTLAND: While tornadoes are most active in spring and summer, they do occur in the fall. And the damage is just as devastating. But behind the destruction, there is science and efforts to protect people and their homes. Meteorologist Mike Hoffman shows us how engineers are trying to make you safer. Whether it's wood, broken glass or a child's toy, they all can become a missile in a tornado. Very interesting. Thanks Mike.
BAXTER BLACK: Many of us have pets that are considered "part of the family". But for Baxter Black, a border collie is much more than that. We'll check in with Baxter in two weeks ...until then, check out his work online at www.baxterblack.com. When we come back, tractor tales and our country church salute...please stay with us.
TRACTOR TALES: Al re-joins us now for tractor tales. I guess for some folks, a tractor is more than a tool. You're right. At the farm progress show, I met a young fella with a family heirloom. This 1946 Oliver Crawler tractor started out with a family that made sure it stayed close to home. Don't forget, if you would like to watch tractor tales, be sure to head to our website www.usfarmreport.com. And now you can download these segments as podcasts from i-tunes. Just go to the i-tunes store and search tractor tales.
CHURCH SALUTE: Today's country church salute goes to Zion Lutheran Church in Litchfield, Illinois. It's celebrating 125 years of ministry. The church was founded in 1886. Two years later, they added a school. They moved to its present location in 1942.
They've been celebrating all month long with guest preachers who once served the church. Congratulations to Zion Lutheran Church. And our second salute goes to the parish family of Saint Stephen Church in Caldwell, Ohio and Corpus Christi Church in Belle Valley, Ohio. Both are celebrating 100 years of ministry this year. A single pastor started both churches in the early 1900's. The churches are about five miles apart from each other in southeast Ohio. Father Wayne Morris says 'though life in the valley is hard, and the average age is getting older, the 400 families of the two parishes still come and worship god, under one pastor." Thanks for sharing the message. 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....A climate change skeptic, Timothy Brandt, challenges my reports about the arctic: "You don't do your viewers any service by making reports on poorly researched subjects. You've undoubtedly missed it, but the solar scientists and oceanographers all agree that we're headed for very cold weather over the next 30 yrs..." Thanks for writing, Timothy. Your assertion that the story was a bogus report can easily be answered by the links I provided. The navy is making plans to patrol the Arctic, and the Chinese are buying land in Iceland. Moreover, there is an enormous diplomatic battle right now for drilling rights between nations bordering the Arctic Ocean. Your ice age prediction, similarly is not widely shared. In fact, your claims help illustrate a remarkable phenomenon about the climate change debate - namely that it is a public debate - not a scientific one. Measured by two careful polls by Yale that asked, "What proportion of climate scientists think global warming is happening?", only about a third of Americans thought even a majority of climatologists agree. The actual number is 98% of climate experts. As always I will post my sources. The media effort to seem fair to all viewpoints, even flat-earth-type outliers, distorts the reality of scientific consensus, I believe. This obfuscation is obvious in other issues like vaccinations. But there is a penalty for ignoring the truth. As always, we want to hear from you, send comments to firstname.lastname@example.org or leave us a voice mail at 800-792-4329.