USFR Weekly Recap - September 23-24, 2017

FEDERAL RESERVE COULD HIKE INTEREST RATES
NOW FOR THE MARKET RELATED NEWS, THE FEDERAL RESERVE PAINTING AN OPTIMISTIC OUTLOOK OF THE OVERALL ECONOMY THIS WEEK, GIVING SIGNS OF ANOTHER POSSIBLE RATE HIKE THIS YEAR. AFTER NEALRY A DECADE OF THE FEDERAL RESERVE TRYING TO RESTORE A COLLAPSOING ECONOMY, THE FED CHANGING ITS TUNE. ON WEDNESDAY, THE CENTRAL BANK SAID IT WILL START WITHDRAWING A PORTION OF THE TRILLIONS OF DOLLARS IT INVESTED AFTER THE 2008 FINANCIAL CRISIS, A SIGN THE FED IS CONFIDENT THE ECONOMY IS GROWING. THE FED SAYS DESPITE THE PLAN OF ATTACK, INTERST RATES ARE ON HOLD FOR NOW, BUT EXPECTING TO RAISE RATES ONE MORE TIME THIS YEAR. THE FED HAS WHAT’S REFERRED TO AS A DUAL MANDATE, WHICH IS TO BALANCE ON ONE SIDE ECONOMIC GROWTH BUT ON THE OTHER SIDE PRICE STABILITY. WE HAVE STARTED TO SEE ECONOMIC GROWTH PICK UP AND THERE APPEARS TO BE SOME MOMENTUM, AND I THINK THAT’S PART OF THE REASON WHY WE HAVE SEEN SEVERAL INCREASES IN INTEREST RATES OVER THE LAST COUPLE OF YEARS.> KAUFFMAN SAYS ON TEH PRICE STABILITY SIDE OF THE EQUATION, THE FED HAS AN INFLATION GOAL OF 2 PERCENT, WITH INFLATION RUNNING BELOW THAT THIS YEAR. AN ONGOING INVESTIGATION IS STILL UNDER WAY REGARDING ALLEGED INNTELLUCTUAL PROPERTY VIOLATIONS BY CHINA.

CROP PROGRESS
MOTHER NATURE TURNING ON TEH HEAT THIS WEEK... WHICH COULD HELP PUSH THE IMMATURE CORN CROP TO THE FINISH LINE. HERE’S A MAP OF ALL THE STATES THAT ARE CURRENTLY BEHIND IN CORN MATURITY. USDA’S LATEST REPORT SHOWING ILLINOIS IS 20 POINTS BEHIND, MINNESOTA 22 POINTS BEHIND NORMAL. THE ONLY STATE NOT LAGGING NORMAL IS KANSAS, AND THAT STATE IS RIGHT ON PACE WITH AVERAGE WITH 61 PERCENT OF HTE CROP MATURE. THE LACK OF MATURITY ALSO MEANS HARVEST IS RUNNING BEHIND. R USDA SHOWS CORN HARVEST IS 7 PERCENT COMPLETE-- 4 POINTS BEHIND 5 YEAR AVERAGE. BUT ONLY A POINT BEHIND LAST YEAR. NORTH CAROLINA IS THE FURTHEST ALONG, WITH 68 PERCENT OF THE CRPO HARVEST. FOLLOWED BY TEXAS, WEHRE 67 PERCENT OF THAT CROP IS OUT OF THE FIELD. AND ITS THE FIRST WEEK FOR USDA TO REPORT SOYBEAN HARVEST. THE AGENCY SAYS 4 PERCENT IS ALREADY HAVESTED- A POINT BEHIND AVERAGE.

MILK PRODUCTION, PROTEIN EXPORTS
MILK PRODUCTION CONTINUES ON ITS IMPRESSIVE GROWTH PACE. USDA’S LATEST NUMBERS SHOW PRODUCTION FOR AUGUST TOTALED 18 POINT 1 BILLION POUNDS, A 2 PERCENT INCREASE FROM 2016. PRODUCTION PER COW HITTING THE HIGHEST SINCE REPORTING STARTED IN 2003, AT 1 THOUSAND 948 POUNDS. A 26 POUND INCREASE FROM LAST AUGUST. NEW NUMBERS SHOW FEEDYARDS SEEING 44 STRAIGHT WEEKS OF POSITIVE MARGINS, BUT THERE’S A LARGE DISPARITY BETWEEN FEEDYARD AND PACKER PRICES. THE STERLING PROFIT TRACKER SAYS FEEDYARD CLOSEOUTS AVERAGED 25 DOLLARS PER HEAD LAST WEEK, A 10 DOLLAR DROP FROM THE PREVIOUS WEEK, AND BEEF PACKERS BROUGHT HOME 180 DOLLARS PER HEAD LAST WEEK, A DECLINE OF 15 DOLLARS, BUT STILL 29 DOLLAR ABOVE YEAR AGO LEVELS.

WEATHER
THOSE ARE THE HEADLINES...METEOROLOGIST MIKE HOFFMAN JOINS US NOW WITH WEATHER. MIKE, I DON’T KNOW ABOUT OTHER VIEWERS, BUT IN NORTHERN INDIANA, IT FELT MORE LIKE JULY THIS WEEK THAN IT DID IN JULY. NO DOUBT TYNE, IT WAS HOT AND HUMID ACROSS MOST OF THE MIDWEST EXCEPT THE FAR NORTHERN PLAINS. IT IS GOING TO CHANGE. IT IS THAT TIME OF YEAR YOU EXPECT IT TO. LET’S TAKE A LOOK AT THE DROUGHT MONITOR AND SEE WE’VE EXPANDED THE DRYING AREAS ACROSS MUCH OF THE CENTRAL PLAINS CENTRAL MISSISSIPPI VALLEY INTO PARTS OF THE GREAT LAKES IT’S STILL VERY DRY BUT NOT AS DRY IN WESTERN DAKOTAS AND INTO EASTERN MONTANA YOU CAN SEE A MONTH AGO IT WAS ALREADY GETTING VERY DRY AND WITH EXTREME EXCEPTIONAL DROUGHT ACROSS MUCH OF EASTERN MONTANA OR WESTERN DAKOTAS. THAT HAS SHRUNK UP A LITTLE BIT BUT WE STILL HAVE A WAYS TO GO IT TAKES A WHILE TO GET OUT OF A DROUGHT SITUATION LIKE THAT SO LET’S GO DAY BY DAY THIS WEEK. THERE’S THE HEAT HUMIDITY GOING TO CONTINUE. HUGE DOME OF HIGH PRESSURE SITTING OVER THE TENNESSEE AND A HIGHER RIVER VALLEYS AS WE START THE WEEK. I DO WANT TO POINT OUT WE’LL HAVE TO WATCH MARIA ALONG THE EAST COAST. THINGS CAN CHANGE WITH THE FORECAST AS OF NOW THOUGH IT LOOKS LIKE MOST OF THAT WILL BE OFF SHORE. SHOWERS AND THUNDERSTORMS ON MONDAY UP AND DOWN THE PLAINS STATES WESTERN PLAINS STATES. BY WEDNESDAY THAT FIRST FRONT COMING INTO THE GREAT LAKES CENTRAL MISSISSIPPI VALLEY BACK INTO TEXAS WITH SOME SCATTERED SHOWERS AND THUNDERSTORMS. SECONDARY FRONT COMING INTO THE NORTHERN PLAINS AND THEN BY FRIDAY THAT SECONDARY FRONT MOVING THROUGH THE GREAT LAKES WITH SOME RAIN SHOWERS BEHIND IT. AND YEAH THERE WILL BE SOME SNOW IN THE COLDER SECTIONS BEHIND THAT SYSTEM THERE BUT MILD TEMPERATURES MORE TYPICAL FOR THIS TIME OF THE YEAR ACROSS MOST OF THE LOWER 48. NEXT FRONT OUT IN THE NORTHWEST COULD BE A WET ONE AS WELL. WE’LL TALK MORE ABOUT OUR LONGER RANGE FORECAST IN OUR NEXT HALF HOUR.

TEASE
HOW COULD THE FED RAISING RATES AGAIN IMPACT THE MACRO ECONOMIC PICTURE? TOMMY GRISAFI AND BRIAN SPLITT JOIN ME NEXT.

ROUNDTABLE 1
BACK NOW ON U.S. FARM REPORT THIS WEEK BRIAN SPLITT AND TOMMY GRISAFI. I MEAN THIS WEATHER THIS WEEK HAS BEEN AMAZING. IT FELT MORE LIKE JULY THIS WEEK THAN IT ACTUALLY DID IN JULY. AROUND HERE ANYWAY BRIAN CAUGHT A SUNBURN. LOOK AT THIS THING. YOU KNOW IT’S JUST I DON’T I WONDER WHAT EFFECT THE BEANS. YOU KNOW I TALKED TO SOME GROWERS AND THERE’S ALL THESE BEANS ESPECIALLY COMING HERE, THEY’RE STILL GREEN OUT THERE SOME OF THESE BEANS. BUT THEN THERE’S OTHER GROWERS WHO JUST COME IN A LITTLE SMALL THE BEANS ARE A LITTLE SMALL HARVEST AND MAYBE THAT’S SOMETHING THAT’S FUELING THE MARKET. YOU KNOW WE NEED THIS KIND OF PUSH SOME OF THE CROP ALONG RIGHT. WE KNOW THAT IS CORN CROP IS PRETTY IMMATURE. BUT AS WE’RE HEARING SOME OF THESE EARLY HARVEST RESULTS WHAT ARE BOTH OF YOU HEARING BRIAN YOU HAVE CUSTOMERS YOU KNOW ALL ACROSS THE U.S. WHAT ARE YOU HEARING. WELL I THINK THE GENERAL THEME SO FAR HAS BEEN BETTER THAN EXPECTED. AND TYNE, MIGHT I SAY THAT TODAY YOU LOOK BETTER THAN EXPECTED. BUT YOU KNOW THE THING IS RIGHT NOW BETTER THAN EXPECTED AS COMPARED TO WHAT THAT IS COMPARED TO WHAT THE PRODUCER HAS BEEN EXPECTING OUT OF HIS OWN CROP. BUT THE USDA FOR THE LAST SEVERAL MONTHS HAS BEEN TELLING US THAT OUR EXPECTATIONS ARE NOT CORRECT ACCORDING TO WHAT THEY ARE SEEING. SO IS BETTER THAN EXPECTED PRICED INTO THE MARKET BECAUSE WE’VE ALREADY SEEN BETTER THAN EXPECTED FROM THE REST IN THE LAST TWO REPORTS. YEAH I MEAN EXACTLY RIGHT. BETTER THAN EXPECTED IS IS ALL THAT I’M HEARING OUT THERE. SO DOES THE TRADE YOU KNOW IS THAT BETTER THAN WHAT THE TRADE EXPECTS BETTER THAN WHAT THE PRODUCER EXPECTS. YOU KNOW HOW ARE THESE PRICES REACTING RIGHT NOW TOMMY. WELL THE I THINK IT COULD AFFECT BEANS MORE THAN CORN. SO IF THE FINAL USDA NUMBERS 171 ARE 169 OR 168 WE HAVE SOME STATISTICS HERE. YOU KNOW WE’VE HAD THAT BEARISH AUGUST NUMBER, BEARISH SEPTEMBER NUMBER. I DON’T KNOW THAT IT MATTERS AT THIS POINT. BUT IF BEING YIELDS WERE 1 OR 2 BUSHELS LOWER THEN YOU HAVE A FLYER THEN YOU HAVE A MARKET. BRIAN MENTIONED THE 9.80 LEVEL WHICH HAS SOME STATISTICS ON THAT HOW WE’VE PIVOTED AROUND THAT LEVEL BUT IT’S GOING TO TAKE AN INCREDIBLE AMOUNT OF ENERGY TO GET CORN TO STAY UP AT A LEVEL THAT THE GROWERS ARE HAPPY WITH. BEANS ARE DIFFERENT DIFFERENT STORY AND BEANS. YES SO LET’S DIVE INTO BEANS. I MEAN WE SAW SOME IMPRESSIVE PRICE ACTION ON THE CHARTS ON FRIDAY. WHAT HAPPENED FRIDAY AND WHAT SIGN DOES THAT GIVE US. WELL TOMMY HAD MENTIONED AND WE HAD TALKED ABOUT 19 A LITTLE BIT BEFORE THE SHOW AND THAT NINE ENTRY LEVEL BECAME REALLY IMPORTANT AT THE VERY BEGINNING OF THE YEAR. 981 AND A QUARTER WAS A LOW BACK IN JANUARY AND WE DIDN’T TAKE THAT LEVEL OUT UNTIL RIGHT IN FRONT OF THE MARCH PLANTING INTENTIONS AND THAT ALSO ALIGN WITH THE 200 DAY MOVING AVERAGE. WE’VE TESTED 980 BOTH WHEN THE MARKET WAS IN A BULL MARKET BACK IN JULY, WHEN WE TURNED INTO A BEAR MARKET IN AUGUST. AND SO NOW WE’RE BACK ABOVE 980, BACK ABOVE THE 200 DAY MOVING AVERAGE AND SO WHAT I’M HOPING IS THAT PROPELS US, TECHNICALLY WE’RE GOING TO SEE SOME MORE SHORT COVERING SOME TECHNICAL BUYING PROJECTS POSSIBLY UP TOWARDS A 10 17 10 20 AREA. I MEAN WHO WOULD HAVE THOUGHT WHEN THE USDA COMES OUT WITH SOME OF THESE THESE RECENT REPORTS AND WE SEE SOME PRICE ACTION LIKE WE DID AND NOW YOU’RE TALKING IN THE $10 RANGE FOR BEANS. I MEAN DO YOU THINK THIS MOMENTUM CONTINUES TOMMY. I DO BECAUSE THERE’S A MONSTER. CHINA IS JUST A MONSTER IN MEXICO CAME IN FOR BEANS THIS WEEK AND IT’S A LOT EASIER TO PUT A $910 BUSHEL OF SOMETHING IN A BOAT THAN IT IS TO $275 BUSHELS OF CORN. AND SO ALL THE THINGS YOU COULD DO WITH A BEAM TO BRING IT BACK TO YOUR HOME COUNTRY AND FEED AN ANIMAL. THE NUMBERS MAKE MORE SENSE TO IMPORT A BEAN. THERE’S PLENTY OF WHEAT IN THE WORLD AS A FEED. THERE’S PLENTY OF CORN AROUND. THERE’S A STORY IN BEANS. ANALYSTS HAVE BEEN WRONG FOR YEARS ABOUT HEY WE’RE GOING TO HAVE THIS BIG CARRY OUT. SIX HUNDRED MILLION FIVE HUNDRED MILLION. AND THEN YOU GET TOWARDS THE END OF THE YEAR AND WE’RE ONLY 400 MILLION THEN MAYBE THE BUSHELS COME IN ONE BUSHEL LOWER AND WE’RE 300 MILLION AND THEN SOMETHING HAPPENS IN SOUTH AMERICA AND WE’RE OUT OF BEANS, AND YOU KNOW WE’RE DEFINITELY NOT RUNNING OUT OF ANYTHING. BUT I DO REMEMBER ABOUT FOUR OR FIVE YEARS AGO WHERE CLAYPOOLE INDIANA WENT $5 OVER BID FOR BEANS THREE DAYS BEFORE HARVEST. WELL WE DON’T HAVE THAT ENVIRONMENT RIGHT NOW. SO THE BASIS IN BEANS IS PRETTY WIDE. THE FUTURES ARE RALLYING. BUT I NOTICE WITH MY CLIENTS FOR EVERY DAY FUTURES GO UP 15 YOU GO CHECK YOUR CASH MARKET IT ONLY WENT UP 10. OH YEAH, I’VE HEARD A LOT ABOUT BASIS THIS FALL. WHEN YOU LOOK AT CHINA YOU KNOW U.S. TRADE REPRESENTATIVE THIS WEEK KIND OF TALKING ABOUT HIS SIGHTS ARE SET ON CHINA, LOOKED AT CHINA AS KIND OF A HURDLE FOR THE U.S.. YOU KNOW THERE’S KIND OF SOME NEGATIVE RHETORIC AROUND CHINA RIGHT NOW. DO YOU THINK THAT ANY OF THAT WILL HAVE A RIPPLE EFFECT INTO OUR SOYBEAN EXPORTS TO CHINA OR DO THEY JUST NEED BEANS RIGHT NOW. YOU KNOW I DON’T THINK CHINA CAN AFFORD TO NOT BUY U.S. SOYBEANS. THEY CONSUME SO MANY SOYBEANS THAT THE REST OF THE WORLD CANNOT PRODUCE ENOUGH BEANS WITHOUT OUR PRODUCTION INVOLVED. NOW THAT MAY AFFECT SOME OF THE TIMING OF THEIR PURCHASES SO THEIR IMPORT PROGRAM YOU KNOW WILL VARY BETWEEN NORTH AND SOUTH AMERICA. BUT RIGHT NOW WE’VE GOT CONCERNS ABOUT PLANTING AND BRAZIL AND THE LATER THEIR PLANNING GOES THE LATER THEIR HARVEST IS GOING TO GET AND THAT MAY PUSH MORE EXPORT DEMAND INTO OUR BOOKS. ALL RIGHT. WE TOOK A DEEP DIVE IN SOYBEANS. WE NEEDED TO TAKE A QUICK BREAK BUT WHEN WE COME BACK WE’LL KIND OF DO THE SAME WITH THE CORN MARKET SO DON’T GO ANYWHERE.

ROUNDTABLE 2
WELCOME BACK WELL BEFORE THE BREAK WE TALKED ABOUT THE MARKETS WE KIND OF JOKE ABOUT THIS BETTER THAN EXPECTED RHETORIC THAT WE’RE HEARING BECAUSE THAT’S REALLY WHAT’S COMING OUT OF FIELDS RIGHT NOW, BUT WITH CORN I MEAN I AM HEARING A LOT OF PRODUCERS SAY IT’S NOT LAST YEAR’S YIELD BUT IT’S BETTER THAN WHAT I EXPECTED THIS YEAR. SO WITH THIS CORN MARKET, HOW MUCH DO WE REALLY NEED TO SHAVE OFF OF THAT BEFORE WE COULD SEE A POSITIVE REACTION IN PRICE. WELL I KNOW A LOT OF TIMES AND THEY SHOWED TIME AND BRIAN WE ALWAYS TALK ABOUT THE GROWER, BUT YOU’VE GOT TO FLIP THAT HAT AROUND AND PUT YOUR END USER HAT ON. AND RIGHT NOW IS THE OPPORTUNITY FOR THE END USER TO BUY AS MUCH CORN AS THEY CAN. WHEN YOU LOOK AT CORN OUT WITH THE CARRY IT GETS A LOT MORE EXPENSIVE AND SO IF YOU’RE AN END USER AND YOU NEED CORN, IT’S ON SALE. AND AS THE MONTHS GO ON YOU KNOW AS AN END USER, EVERY MONTH THAT GOES BY YOU’RE GOING TO PAY MORE FOR CORN. AND SO UNFORTUNATELY WHAT I SEE HAPPENING IN CORN IS THAT WEAK HANDS ARE SELLING IT TO THE STOCK STRONG HANDS. BUT WHEN YOU LOOK AT D.C. AND CORN AT $4 AND THEN PROBABLY NO. 18 BEANS AT $10. THE STRUCTURE OF THE GRAIN MARKET WITH LOWER FERTILIZER PRICES AND THE CHANCE TO GET LOWER CASH RENTS,DOESN’T LOOK THAT BAD FOR NEXT YEAR. IF YOU TAKE ACTION BUT YOU HAVE TO TAKE ACTION. BUT FROM A PRODUCER STANDPOINT. WE DON’T LIKE THOSE PRICES BEING ON SALE. RIGHT IF IT’S GOOD FOR THE END USER IT’S NOT GOOD FOR THE PRODUCER. SO WHAT NEEDS TO HAPPEN IN ORDER FOR US TO SEE BETTER PRICES FOR THE PRODUCER, WHAT NEEDS TO CHANGE IN THIS CORN MARKET? WELL EFFORTS FOR CORN THIS STORY MAY NOT BE DIRECTLY CORN. YOU KNOW RIGHT NOW WE’VE GOT WHEAT PRICES ARE COMPETITIVE AND WHEAT HAS BEEN MAKING NEW HIGHS FOR THIS PARTICULAR MOVE. WE’VE BOTTOMED OUT TWO DAYS BEFORE CORN AND AS FAR AS THE LOWS WERE MADE. SO AS WHEAT CLIMBS HIGHER SOYBEANS ARE MAKING NEW HIGHS FOR THE MOVE. SO YOU KNOW AS TOMMY AND MENTIONED YOU KNOW WE HAVE TO THINK FORWARD AND LOOK AT ACREAGE ALLOCATIONS AND IF FOR THE OTHER TWO MARKETS CONTINUE TO GO HIGHER ON THEIR OWN STORY THAT MIGHT DRAG CORN A LITTLE BIT HIGHER AS WELL. AND YOU GET A LITTLE TECHNICAL STORY IN HERE. IF IF CORN CAN GET OVER 362 BUSHEL RIGHT NOW THAT’S A MAJOR WE’D BE HIGH. I THINK YOU HAVE SOME SHORT COVERING AND POTENTIALLY THAT COULD PROJECT CORN UP NEAR 380. I THINK IF WE DO SEE THAT AND YOU’RE GOING TO HAVE TO TAKE A LOOK AT THE CARRY IF YOU HAVE CORN IN YOUR BIN THAT’S GOING TO GIVE YOU MOST LIKELY OVER $4 BASIS THE JULY CONTRACT AND YOU HAVE TO TAKE SOME ACTION THERE. SWITCHING GEARS THE MACRO PICTURE THE FED THIS WEEK COMING OUT TALKING ABOUT THAT THE OVERALL ECONOMY IS IN GOOD HEALTH AND LOOKING AT KIND OF RESTRUCTURINGS AND THINGS IF WE DO SEE THE FED RAISE RATES AGAIN THIS YEAR WHAT TYPE OF EFFECT WILL THAT HAVE DOWN THE LINE. I THINK IT’S GOOD TO GET BACK TO A NORMAL INTEREST RATE BUT THE TOOLS THAT USUALLY WHEN YOU HAVE RISING INTEREST RATES BECAUSE THERE’S WAGE INFLATION AND WE DON’T HAVE A LOT OF WAGE INFLATION WE HAVE A HARD TIME FINDING PEOPLE WANT TO WORK BUT THINGS SEEM TO BE BALANCE AND WHAT’S HAPPENING WITH THESE HURRICANES ACTUALLY AS WE’VE NOTICED SOME OF OUR ECONOMIC DATA COME DOWN FROM ALL THAT LACK OF SHOPPING AND SPENDING ALL THAT MONEY THAT WASN’T SPENT. I THINK OUR ECONOMY COMES OUT OF THE BOX NEXT YEAR JUST WRONG AND WE HAVE TO REBUILD HALF THE STATE OF FLORIDA A CHUNK OF TEXAS. THERE’S JUST IF YOU WANT A JOB IN AMERICA YOU CAN GET ONE. INFLATE RATES HAVE TIME BEEN ARTIFICIALLY HELD DOWN FOR SEVEN EIGHT YEARS. AND AT ONE POINT THAT WAS HELPING THE FARMER IT’S NOW SINCE HURTING THE FARMER. THEY CAN GO BORROW A BUNCH OF MONEY THEY CAN GO BORROW A MILLION DOLLARS PRODUCE 900000 DOLLARS WORTH OF STUFF AND GET A LOAN TO DO IT AGAIN NEXT YEAR. SO THERE’S CHEAP MONEY OUT THERE. BUT AS WE KNOW FROM PEOPLE WHO BUY TOO MUCH GREEN EQUIPMENT OR EQUIPMENT OR WHATEVER YOUR FAVORITE EQUIPMENT IS YOU CAN GET IN TROUBLE BUYING STUFF AT LOW INTEREST RATES. WHEN WE LOOK AT THE DOLLAR YOU KNOW AND I’VE TALKED TO SEVERAL ECONOMISTS THAT WANT TO FOCUS ON THE WEAKER U.S. DOLLAR AND HOW THAT COULD POSSIBLY IMPROVE EXPORTS IN THE NEW YEAR WHAT DO YOU SEE HAPPEN WITH THE U.S. DOLLAR. WELL I MEAN RIGHT NOW THE DOLLAR HAS BEEN IN A REALLY AGGRESSIVE DOWN TREND AND SOMETHING THAT WE HAVE NOT SEEN THAT WE’VE SEEN IN PREVIOUS YEARS IS THAT TIME WHERE A WEAK DOLLAR MEANS STRONGER COMMODITIES. NOW YOU KNOW RELATIONSHIPS AND MARKETS DO CHANGE. AND IT’S NOT THAT EASY ANYMORE WHERE THE DOLLAR DOWN MEANS IT MEANS STRONG COMMODITIES. BUT MORE RECENTLY IN LET’S SAY THE LAST 12 MONTHS WE’VE ACTUALLY SEEN STRONGER GRAIN PRICES TIED TO A STRONGER DOLLAR. SO I DON’T KNOW IF THAT MEANS YOU KNOW THE BUYERS ARE CONCERNED THE DOLLAR CONTINUES TO GO UP THAT THEIR PURCHASING POWER STARTS TO DECREASE. BUT YOU KNOW WE’LL SEE HOW IT GOES. LESS THAN A MINUTE LEFT. REAL QUICK. WHEN WE LOOK AT THESE MARKETS KIND OF STAGNANT PRICES VOLATILITY CREATES OPPORTUNITY BUT WE HAVEN’T SEEN A LOT OF THAT LATELY SO WHAT’S THE BIGGEST MISTAKE YOU SEE PRODUCERS MAKE WITH THE MARKETS RIGHT NOW. REAL QUICK IF THEY DO HAVE A FUTURES AND OPTIONS ACCOUNT WHEN VOLATILITY WHICH WE’RE LIKE A 10 11 YEAR LOW RIGHT NOW AND SOME OF THE OPTIONS CONTRACTS SELLING VOLATILITY AT RECORD LOW VOLATILITY CAN GET YOU IN TROUBLE. WE’VE SEEN THAT HAPPEN A FEW YEARS AGO WITH FOLKS IN BEANS. BRIAN YOU KNOW I THINK YOUR ATTITUDE CAN BE THE DIFFERENCE BETWEEN BEING IN AN ORDEAL AND BEING ON AN ADVENTURE. AND I THINK WE SHOULD ALL MAKE SURE WE’RE STAYING ON AN ADVENTURE TOGETHER AND NOT BEING IN AN ORDEAL RIGHT NOW. YEAH GOOD POINT. ALL RIGHT. WHEN WE COME BACK WE’LL GET THEIR CLOSING THOUGHTS ON THE SHOW DON’T GO ANYWHERE.

MARKETS NOW
WELCOME BACK. TIME NOW FOR CLOSING THOUGHTS BRIAN. YOU KNOW THE MARKET HAS DEALT WITH A LOT OF BAD NEWS RECENTLY. WE’VE HAD BEAN YIELDS INCREASING TWO REPORTS IN A ROW, A AND YET WE HAVEN’T BEEN ABLE TO TAKE OUT AUGUST LOWS MUCH LESS THE JUNE LOWS THAT WERE MADE PRIOR TO SUMMER. WE’VE HAD YIELD INCREASE IN CORN, AND YET THESE MARKETS ARE HOLDING THESE LOWS AND WE’RE STARTING TO SEE SOME BUYING INTEREST COMING IN. SO I DON’T THINK WE WANT TO GET TOO DOWN ON OURSELVES RIGHT NOW. YOU KNOW LET’S KEEP AN EYE ON THINGS IF YOU HAVE A CONCERN ABOUT DOWNSIDE MAYBE USE SOME CHEAP OPTIONS TOMYM HAD MENTIONED THAT VOLATILITY IS LOW WHICH MEANS OPTIONS AREN’T CHEAP. ALL RIGHT. TOMMY YOU KNOW I HAVE A CUSTOMERS NAMES TIM AND HE’S SUFFERING HIS 40TH MASSIVE PRODUCTION LOSS EVER. BUT THE TRUTH IS HE GROWS A CROP EVERY YEAR AND HE JUST BOUGHT A NEW PICKUP SO HE’S HAVING A 40TH CONSECUTIVE PRODUCTION FAILURE. ONE OF THE BIGGEST MISTAKES SOME SEE IN MARKETING BUSHELS IS IT’S HARD FOR US TO DO OUR JOB WHEN WE CAN’T GET THE FACTS RIGHT FROM THE CUSTOMER. AND SO WHERE PEOPLE ARE GETTING THEIR NEWS FROM SOMETIMES THERE’S A LOT OF FREE NEWS ON THE INTERNET AND SOMETIMES FREE IS JUST TOO EXPENSIVE. GOOD POINT. THANKS TOMMY. THANKS BRIAN FOR BEING HERE STAY WITH US. WE’LL BE BACK WITH MORE U.S. FARM REPORT IN A MOMENT.

JOHN’S WORLD
THE REALITY OF A STRUGGLING AG ECONOMY IS FORCED CONSOLIDATION... BUT WILL CONSILDATION CONSUME U-S AG? THAT’S THE TOPIC OF THIS WEEK’S JOHN’S WORLD. THE DES MOINES REGISTER WAS THE LATEST PUBLICATION TO PUT OUT AN ARTICLE WARNING OF A DECLINE IN THE NUMBER OF MID-SIZED FARMS. IT IS HARD TO ARGUE WITH THEIR ANALYSIS EXCEPT WE’VE HEARD IT TOO MANY TIMES BEFORE. THE OFTEN-PROPHESIZED CONSOLIDATION OF FARMS INTO GIGANTIC OPERATIONS HAS BEEN A STANDARD PREDICTION IN FARM MAGAZINES FOR MY ENTIRE CAREER. AND IT’S ALWAYS JUST AROUND THE CORNER. TO BE FAIR, FARMS LIKE MINE HAVE GOTTEN BIGGER, BUT NOT AS FAST AS WE HAVE PERPETUALLY FORECAST. COMPARED TO OTHER SECTORS, SUCH AS PORK OR POULTRY, GRAIN FARMING IS TAKING ITS SWEET TIME GETTING HUGE. YOU CAN READ MORE DETAILS ON MY THOUGHTS IN THE LATEST TOP PRODUCER MAGAZINE, BUT I’LL SKIP TO THE BOTTOM LINE TODAY. GRAIN FARMS REFLECT FARMLAND OWNERSHIP, MORE THAN FARM ECONOMICS. IT’S REALLY HARD TO OPERATE HUGE FARMS IN THE ABSENCE OF HUGE LANDHOLDINGS. WE HAD A RECENT EXAMPLE. A LANDOWNER WITH A MODEST FARM DIES, AND BEING WITHOUT CHILDREN, SHE LEAVES HER ACREAGE TO 5 NEPHEWS. IT TOOK EXTRAORDINARY EFFORT FROM THE ONE NEPHEW WHO WAS FARMING THE LAND TO BUY OUT OR RENT THE OTHER FOUR SHARES. THIS DISAGGREGATION OCCURS CONSTANTLY ACROSS FARM COUNTRY. MOST GRAIN FARM ACRES ARE RENTED, NOT OWNED. WHEN OWNERS CHANGE, THE OPERATOR OFTEN CHANGES TOO. SO NOT ONLY DOES OWNERSHIP FRACTURE, TENANCY IS UP FOR GRABS. ALSO, MY IMPRESSION IS BIG OPERATIONS DON’T HAVE LONGER LIFESPANS THAN SMALLER FARMS EITHER. BIG TIME OPERATORS COME AND GO. THERE IS NOT THE SLIGHTEST HINT OF BIG CORPORATIONS OR WEALTHY INDIVIDUALS AMASSING ENORMOUS LAND HOLDINGS, AND EVEN IF THEY DID, IT WOULD BE FIELD BY FIELD, NOT IN LARGE TRACTS OF CONTIGUOUS ACRES. TO GET BRAZIL-LIKE CHUNKS OF US FARMLAND WOULD TAKE NOT JUST DOLLARS BUT DECADES. THERE ARE FARMS LIKE MINE THAT HAVE NEVER BEEN UP FOR PUBLIC SALE. THE SIZE OF AMERICAN CROP FARMS WAS PROBABLY MOST STRONGLY INFLUENCED BY THE LAND GRANT ACT, 150 YEARS AGO. ONCE THE LAND HAD BEEN DICED UP IN 160 ACRE TRACTS, IT BECAME VERY DIFFICULT TO REUNITE. FOR ALL OF YOU WHO WORRY ABOUT FEW BIG OPERATIONS TAKING OVER GRAIN FARMING, TAKE COMFORT IN THE FACT OUR LAND OWNERSHIP PATTERN MAKES SUCH A FUTURE BOTH DISTANT AND UNLIKELY. THANKS, JOHN.

TEASE
STILL TO COME, AS RICE HARVEST RACES ON, RICEFARMERS HANGING THEIR HAT ON A MAJOR WIN-- OPENING TRADE TO CHINA FOR HTE FIRST TIME EVER. BUT WITH A FEW HURDLES STILL STANDING IN TEH WAY, WILL THIS YEAR’S CROP ACTUALLY MAKE IT TO CHINA? THAT’S THE FARM JOURNAL REPORT AFTER THE BREAK.

HEADLINES
FROM THE STUDIOS OF FARM JOURNAL BROADCAST, THIS IS U.S. FARM REPORT. WELCOME BACK TO U-S FARM REPORT THIS WEEKEND. WE HAVE MUCH MORE AHEAD. RICE DEMAND IS GROWING AFTER CHINA SIGNED ADEAL MORE THAN A DECADE IN THE WORKS. THAT’S OUR FARM JOURNAL REPORT. SHE’S A HOOSIER WORKING TO CONNECT THE FARM TO CONSUMERS. AND SHE’S OUR REAL FACES OF DAIRY. IN CUSTOMER SUPPORT, JOHN LAID THE GROUND WORK LAST WEEK, NOW HE’S DISSECTING NAFTA.

RURAL MAINSTREET INDEX
NOW FOR THE HEADLINES, THE LATEST RURAL MAINSTREET INDEX SLIPPING TO THE LOWEST LEVEL SINCE DECEMBER 2016, AS THE REALITY OF LARGER THAN EXPECTED CROPS ARE STARTING TO HIT THE COMBINE. CONDUCTED BY CREIGHTON UNIVERSITY’S ERNIE GOSS, THE SURVEY EXPLORES FINANCIAL CONDITIONS IN A 10 STATE REGION. THE SEPTEMBER SURVEY SHOWING THE OVERALL INDEX REMAINED BELOW GROTH NEUTRAL. AND A PRODUCT OF FALLING FARM INCOME, 51 POINT 2 PERCENT OF BANK CEOS SAY THEY ARE RESTRUCTRING FARM LOANS. RMI ALSO FINDING A 2 POINT 1 PERCENT INCREASE IN FARM LOAN DEFAULTS. A RATE THAT GOSS DOESN’T VIEW AS ALARMING. THE BAD NEWS IS LIQUIDITY POSITIONS. THAT’S LOANS AND THE LOANS INCREASING, THE DELINQUENCIES ARE INCREASING. THE FORECLOSURES ARE INCREASING, BUT NOT AT A FAST CLIP. THERE WERE MOVING INSTEAD OF WE’RE MOVING FROM C PLUS, C MINUS MAYBE INTO THE CATEGORY NOT OFF LIKE WE ARE IN THE 1980S. > GOSS THINKS A WEAKER DOLLAR COMBINED WITH STRONG EXPORTS COULD HELP THE MARKETS OVERCOME LARGE CROP SUPPLIES, ULTIMATELY HELPING PRICES.

WASHINGTON TAX REFORM
AS TAX REFORM TAKES CENTER STAGE IN WASHINGTON, FARMERS AND AGRIBUSINESSES KEEP A CLOSE EYE. THE AMERICAN FARM BUREAU PUSHING CONGRESS TO MAKE SOME TEMPORARY PROVISIONS PERMANENT. . FARM BUREAU SAYS TAX TOOLS LIKE CASH ACCOUNTING, AND INTEREST DEDUCTIONS FOR SMALL BUSINESSES ARE VITIAL TO LONG TERM FINANCIAL PLANNING. “BECAUSE FARMERS AND RANCHERS ARE PRICE TAKERS WE NEED THE ABILITY TO HOLD OUR COMMODITIES OVER FROM YEAR TO YEAR SO WE NEED THE ABILITY TO STORE OUR CORN IN THE BINS OR HOLD OUR CALVES OVER UNTIL WE CAN ENSURE A GOOD PRICE IN THE MARKET FOR THOSE. AND BY USING CASH ACCOUNTING WE CAN DO THIS AND NOT HAVE TO PAY TAX ON THOSE ITEMS UNTIL WE RECEIVE THE MONEY FOR THEM.” SENATE FINANCE CHAIRMAN ORRIN HATCH ADMITTING THIS WEEK PASSING COMPREHENSIEV TAX REFORM WILL BE TRICKY. HE SAYS IT’S A COMPLEX TOPIC WITH MORE CHANCES FOR LEGISLATORS TO DISAGREE.

PERDUE TRAVELING
SECRETARY OF AGRICULTURE SONNY PERDUE IS TRAVELING THE STATES HARD-HIT BY HURRICANES THEPAST THREE WEEKS. ON MONDAY, HIS BOOTS HIT THE GROUND IN FLORIDA. PERDUE MET WITH FLORIDA CITRUS PRODUCERS AND TOOK AN AERIAL TOOK OF CITRUS COUNTRY. HE ALSO TALKED WITH VEGETABLE, DAIRY AND SUGAR PRODUCERS. . PERDUE SAYS USDA WILL SPEED-UP HELP AND ASK CONGRESS FOR ADDITIONAL AID.

BAYER MONSANTO MERGER
THE BAYER MONSNATO MERGER MAY NOT HAPPEN THIS YEAR LIKE ORGINICALLY PLANNED. THE COMPANIES NOW SHOOTING FOR EARLY 2018. BAYER FILING THIS WEEK AN APPLICATION TO EXTEND THE E-U REVIEW DEADLINE OF THE PROPOSED ACQUISITION. THE NEW DEADLINE TO REVIEW THE DEAL IS JANUARY 22, 2018 .

ORGANIC PRODUCE
THE PUSH TO PRODUCE MORE ORGANIC COMMODITIES IS GROWING PROUDCTION. USDA SAYS SALES OF CERTIFIED ORGANIC AG COMMODITIES GREW 23 PERCENT FROM 2015 TO 2016. SALES CAME IN AT 6 POINT 2 BILLION DOLLARS IN 2015. A YEAR LATER, SALES HIT 7 POINT 6 BILLION. CALIFORNIA CONTINUES TO LEAD THE PACK, SEEING NEARLY 3 BILLION DOLLARS IN SALES.

WEATHER
THAT’S IT FOR NEWS...METEOROLOGIST MIKE HOFFMAN NOW HAS A LONGER RANGE LOOK AT WEATHER. MIKE. THANKS, TYNE YES THAT’S RIGHT WE’VE KIND OF FLIP FLOP THE OVERALL WEATHER PATTERN OVER THE PAST WEEK WITH THE HEAT COMING INTO THE EAST AND THE CHILLY TEMPERATURES OUT WEST. LET’S SEE WHAT THE JET STREAM DOES. AND YOU’LL NOTICE THE THE RIDGE GETS BROKEN DOWN AS YOU WOULD EXPECT THIS TIME OF THE YEAR BY WEDNESDAY THE TROUGH COMING INTO THE NORTHERN PLAINS BY THURSDAY AND FRIDAY IT WILL MOVE ON TO THE EAST COAST AND THIS TROUGH WILL PROBABLY BE WHAT KEEPS MARIA OFFSHORE. BUT IF YOU LIVE ALONG THE EAST COAST YOU NEED TO PAY ATTENTION TO THAT PRETTY CLOSELY. THIS GOING TO BE A SHOT OF CHILLY AIR THOUGH INTO THE PLAINS AND EVENTUALLY GREAT LAKES AS WE HEAD INTO THIS COMING WEEKEND 30 DAY OUTLOOK FOR TEMPERATURES GOING ABOVE NORMAL FOR NEW ENGLAND THIS IS A TOUGH FORECAST. I’M JUST GOING TO TELL YOU RIGHT OFF THE BAT BECAUSE THINGS MAY FLIP FLOP BACK AND FORTH BELOW NORMAL OVER THE TENNESSEE VALLEY CENTRAL MISSISSIPPI VALLEY ABOVE NORMAL OUT WEST AND ALSO IN SOUTHERN AND CENTRAL FLORIDA 30 DAY ALACK FOR PRECIPITATION I’M GOING BELOW NORMAL FOR THE MISSISSIPPI VALLEY BASICALLY ABOVE NORMAL IN THE SOUTHEAST AND ABOVE NORMAL IN THE NORTHWEST. TYNE

FARM JOURNAL REPORT
AS TRADE DEBATE COMES TO A HEAD, WITH LEADERS FROM ALL THREE NATIONS CURRENTLY COMBING THROUGH NAFTA NEGOTIATIONS, RICE CAUGHT IN THE MIDDLE. SEPTEMBER MARKS NATIONAL RICE MONTH. AND LEADERS SAY WHILE DEMAND REMAINS STEADY HERE AT HOME, IT’S KEY COUNTRIES WHERE THEY’D LIKE TO SEE APPETITIES FOR U-S RICE, GROW. THE BIGGEST MARKET IS THE DOMESTIC U.S. MARKET OVERALL. THAT’S WHERE THE BULK,, I’D SAY ABOUT 60 PERCENT OF THE RICE GROWN IN THE U.S. STAYS IN THE U.S. RICE IS GLUTEN FREE- ALSO FEATURING WHOLE GRAIN QUALITIES, BOTH TRAITS HELPING THE CROP GROW IN POPULARITY. MANY INGREDIENTS THAT ARE MADE FROM RICE ARE ALSO GLUTEN FREE FOR ADDITIVES FOR NUTRITIONAL BARS AND DIFFERENT THINGS SUCH AS THAT. ONCE THIS AMERICAN MADE RICE LEAVES THE FIELD, IT’S PROCESSED IN THE MILL AND TURNED INTO POPULAR PRODUCTS LIKE BEER. SULLIVAN SAYS IF YOU EVER CONSUME BUDWEISER OR BUD LIGHT, YOU’RE ALREADY A SUPPORTER OF HOME-GROWN RICE. ANHEUSER-BUSCH IS VIRTUALLY THE LARGEST BUYER OF RICE IN THE WORLD. THEY’RE A BIG CUSTOMER. FROM BREWS TO PUPPY FOOD, IT’S MILLED U-S RICE GROWING IN USE. EVEN PUPPY RATIONS USE A LARGE AMOUNT OF RICE NOW BECAUSE THEY FOUND THAT IT’S VERY SOOTHING TO THE PUPPY’S TUMMIES. BUT WHAT DOESN’T GET CONSUMED DOMESTICALLY, NEEDS A HOME. AND TODAY, THERE ARE A FEW COUNTRIES THAT TOP THE EXPORT LIST. MOST OF OUR RICE IS MARKETED INTO THE EXPORT MARKETS INT EH WESTN HEMISPHERE.MANY OF THE CARIBBEAN ISLAND, IN CENRAL AMERICA ARE BIG RICE EATERS. MOST OF THAT RICE IN CALIFORNIA IS CONSUMED DOMESTICALLY AND THEN ABOUT 25 PERCENT IS SHIPPED TO JAPAN. THE RICE INDUSTRY SAYS THEY’RE LOCKSTEP WITH THE REST OF AGRICULTURE ON CURRENT TRADE DEALS LIKE NAFTA, URGING THE ADMINSTRATION TO DO NO HARM IN AGRICULTURE’S SLICE OF TRADE PACTS. MARKET OR RAW MATERIAL MARKET AND THIS CANADA’S IS OUR THIRD LARGEST. ANOTHER SCRUTINIZED DEAL THAT COULD POTENTIALLY POSE FALLOUT FOR RICE-SOUTH KOREA WHILE WE DON’T NECESSARILY HAVE A SAY IN THE TECHNICAL ASPECT OF THE AGREEMENT, WE DO EXPORT A LOT RICE TO SOUTH KOREA EVERY YEAR. AND IF WE GET INTO SOME SORT OF A TRADE, THAT COULD HAVE A NEGATIVE AFFECT ON THE THE OVERALL TRADE ASPECT SO WE’RE WATCHING VERY CAREFULLY. CRUTCHIELD SAYS RICEP PRODUCERS WANT TO PROTECT CURRENT MARKETS ALREADY IN PLACE, BUT AS SOME KEY BUYERS WANE, IT’S ENCOURAGING THE INSDUSTRY TO FIND NEW MARKETS. IRAQ IS STILL PURCHASING U.S. RICE BUT AS YOU KNOW THIS RECENT HISTORY FOUR YEARS AGO WAS BUYING SEVERAL HUNDRED THOUSAND TONS OF RICE A YEAR, THIS PAST YEAR THEY BOUGHT 30000 TONS AND WITH THE LOSS OF THOSE MARKETS, YOU EITHER NEED A RESUMPTION OF TRADE THERE OR YOU NEED TO PICK UP NEW NEW MARKETS. SULLIVAN SAYS CUBA IS ONE MARKET THAT COULD COME BACK ON BOARD,, IDEALLY POSITIONED TO TAKE ON MORE EXPORTS FROM THE RICE BELT IN THE SOUTHEAST. BUT AT THE END OF THE DAY CUBA BUYS SOMEWHERE BETWEEN FIVE HUNDRED THOUSAND SIX HUNDRED THOUSAND TONS PER YEAR. THEY IMPORT THAT MUCH RICE U.S. RICE CROP U.S. PROXIMITY TO CUBA IS THE CLOSEST THAT THERE IS WHICH TAKES OUT THE LOGISTIC ISSUES. BUT AND AN EVEN BIGGER BUYER WOULD BE THE WORLD’S MOST POPULOUS COUNTRY. THE OTHER GIANT HUMONGOUS MARKET THAT YOU CANNOT IGNORE. WE’RE NOT THERE TODAY IS CHINA. YOU KNOW CHINA IS A MONSTER OF A MARKET. THE FACTS ARE BASED ON THE CONSUMPTION RATES OF RICE IN CHINA THAT IF IT GO THE SHORT VERSION IS IN A 14 DAY PERIOD THEY COULD EAT THE ENTIRE U.S. CROP. SO IT’S AN UNREAL MARKET. WELL THERE’S NO DOUBT THE CHINA NEEDS RICE, OVER THE LAST 10 YEARS HAVE GONE TO BEING A COMPETITOR OF THE U.S. AND OTHERS ON THE EXPORT STAGE TO BEING THE WORLD’S LARGEST IMPORTER OF RICE. THE ADMINSTRATION PAVING THE PATH THIS YEAR, SIGNING AN AGREEMENT IN JULY TO START EXPORTING RICE TO CHINA FOR THE FIRST TIME EVER… A DEAL MORE THAN A DECADE IN THE WORKS. ONE OF THE THINGS THAT WAS UNIQUE ABOUT THIS PHYTOSANITARY AGREEMENT WAS THIS IS FIRST TIME THE UNITED STATES GOVERNMENT HAS EVER ALLOWED A FOREIGN GOVERNMENT TO SEND INSPECTORS TO THE UNITED STATES TO REVIEW AND INSPECT POTENTIAL FACILITIES, INDIVIDUAL COMPANIES. U-S RICE INDUSTRY CALLING IT A WIN, BUT THE REALITY IS LITTLE PROGRESS HAS BEEN MADE SINE THAT FIRST STEP. TAKING 11 YEARS TO GET THE FIRST STEP BEHIND US AND BEING ABLE TO SEE HOW MANY STEPS WE HAVE IN FRONT OF US IS A LITTLE DISCONCERNING. AG SECREATARY SUNNY PERDUE RECENTLY RELEASING AN AGGRESSIVE TIMELINE, SAYING THE FIRST SHIPMENT OF U-S RICE COULD HIT IN THE NEXT THREE MONTHS. IF THEY MOVE FORWARD IN ANY KIND OF A TIMELY FASHION, WE CAN SEE THAT HAPPEN, MY MOST REALISTIC ESTIMATE WOULD BE TO SAY THAT I’M CONFIDENT WE’LL SEE SOME RICE FROM THE 2017 CROP BE EXPORTED FROM THE UNITED STATES TO CHINA. ONCE THE FIRST SHIPMENT BREAKS THROUGH, CRUTCHFIELD THINKS THE DEMAND GROWTH IS HUGE, POSSIBLY TURNING INTO A 6 FIGURE MARKET. AS THE 2017 U-S HARVEST RACES ON, IT’S THIS YEAR’S GRAIN THAT COULD BREAK THE TRADE BARRIER, WITH THE RICE INDUSTRY HOPING NEW DEMAND FLOODS IN. ARKANSAS IS THE NATION’S LEADING RICE PRODUCERS. GROWERS AROUND STUTTGART ARE SEEING YIELDS ANYWHERE FROM 15 TO 20 PERCENT ABOVE LAST YEAR. AND IN NORTHERN CALIFORNIA, THEY ARE JUST STARTING TO ROLL IN TEH FIELDS, BUT YIELDS LOOK TO BE SLIGHTLY ABOVE LAST YEAR.

TEASE
WHEN WE COME BACK, WE CONTINUE OUR TRADE TALK... JOHN PHIPPS TAKES A DEEP DIVE INTO NAFTA.

CUSTOMER SUPPORT
LAST WEEK, JOHN TALKED BROADLY ABOUT A TWO DECADE OLD TRADE PACT. THIS WEEK, HE GETS MORE INDEPTH ABOUT NAFTA. LAST WEEK WE LOOKED AT SOME THE OF ISSUES I THINK IMPORTANT DURING THE ONGOING NAFTA RENEGOTIATIONS. THIS WEEK I WANT TO ESTABLISH WHAT WE ALREADY KNOW ABOUT THIS AGREEMENT AND NEGOTIATIONS IN GENERAL. LET’S LOOK AT THE STATE OF TRADE BETWEEN THE US AND CANADA AND MEXICO. SOME THINGS TO KEEP IN MIND. FIRST, ALWAYS LOOK AT GOODS AND SERVICES. US SERVICES - LIKE TRAVEL, LICENSES FEES, FINANCIAL SERVICES, AND CONSULTANTS MAKE UP ABOUT 1/3 OF OUR EXPORTS, BUT DON’T GET ENOUGH RECOGNITION COMPARED TO CARS OR CORN. BECAUSE WE RUN SIGNIFICANT AND GROWING SURPLUS IN SERVICES TRADE IT NEEDS MORE ATTENTION. ONE BIG PROBLEM IS A WHEN IMPORTS ARE LARGER THAN EXPORTS IT IS OFTEN REFERRED TO AS A TRADE “DEFICIT”, WHICH IS OFTEN CONFUSED WITH DEBT. IN FACT, ANY SUCH DEFICIT IS FULLY PAID FOR WITH US DOLLARS. IT IS MORE ACCURATE TO SAY DOLLARS ARE ONE OF OUR BIGGEST EXPORTS. FURTHERMORE, THERE IS NO LINKAGE WITH THE BALANCE OF TRADE AND THE FEDERAL DEBT, A FACT THAT SEEMS TO BE MISUNDERSTOOD BY OUR ADMINISTRATION. THERE ARE EFFECTS ON NATIONAL SAVINGS AND INVESTMENT, BUT AS YOU CAN SEE, THERE IS NO CORRELATION BETWEEN OUR BALANCE OF TRADE AND FISCAL DEFICIT, EVEN WHEN WE RAN A BUDGET SURPLUS. NAFTA WAS AT BEST A MODEST BOOST TO OUR NATIONAL ECONOMY, ADDING ABOUT $125 BILLION DOLLARS PER YEAR TO OUR GDP. THIS IS LESS THAN ½ OF A PERCENT. SECOND, NOTICE THAT TRADE BOTH WAYS WITH OUR NAFTA PARTNERS IS GROWING. LOST IN THE RHETORIC ABOUT A TRADE DEFICIT IS THE FACT THAT TRADE OVERALL IS EXPANDING IN NORTH AMERICA. THIRD, THE BIGGEST IMBALANCE IS MEXICO, BUT THIS IS HARD TO AVOID WHEN A RICH COUNTRY TRADES WITH A POORER COUNTRY. RIGHT NOW WE HAVE A SMALL TRADE SURPLUS WITH CANADA. OVERALL THOUGH, NAFTA IS VERY GOOD FOR AG EXPORTS LIKE CORN. AND PORK. NAFTA DISRUPTED SOME PARTS OF OUR ECONOMY SIGNIFICANTLY, BUT IN THE TWENTY-PLUS YEARS SINCE IT BEGAN, ALL THREE ECONOMIES HAVE ADAPTED TO IT AND ANY CHANGES WILL REQUIRE MORE PAINFUL ADJUSTMENTS. NEXT WEEK I’LL WRAP UP HOW I THINK THE ISSUES WILL BE RESOLVED. OR NOT. THANKS, JOHN. HE’LL HAVE PART 2 NEXT WEEK, BUT IF YOU HAVE QUESTIONS OR COMMENTS BEFORE THEN, EMAIL JOHN AT MAILBAG AT U-S FARM REPORT DOT COM.

TEASE
WHEN WE COME BACK, THIS HOOSIER FARMER WEARS MANY HATS... AND USING ONE OF THEM TO CONNECT CONUMERS TO THE FARM. REAL FACES OF DAIRY IS NEXT.