Coming up on Market to Market - Wildfires leave
more than burned timber and towns in their wake.
Government scientists search for foodborne
illnesses at the molecular level.
And a journey from field crops to vineyards through
the bottling of hopes and dreams.
Those stories and market analysis with Naomi Blohm,
next.
Funding for Market to Market is provided by
Grinnell Mutual.
You think differently about a customer when you
stand in the middle of his dreams.
We work to make sure you get covered right.
Grinnell Mutual -- a policy of working
together.
Information on finding an agent near you is
available at grinnellmutual.com.
And by Sukup Manufacturing Company.
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Manufacturing is on a mission to protect and
preserve your crop and the tools that produce it.
This is the Friday, August 21 edition of Market to
Market, the Weekly Journal of Rural America.
Hello, I'm Mike Pearson.
Next month the federal government could run out
of money and the Federal Reserve might raise
interest rates.
But this week the stock market stole the show
despite positive economic indicators.
According to the Commerce Department, housing starts
rose 0.2 percent in August - the strongest showing in
more than 7 years.
Data released by the Labor Department revealed the
Consumer Price Index rose 0.1 percent in July.
When volatile factors like food and energy prices are
removed, Core CPI matched the increase.
But low inflation and declining foreign markets
may sidetrack efforts by the Fed to raise interest
rates.
Even with positive economic news, plunging
overseas markets pushed Wall Street dramatically
lower.
The Dow Jones Industrial Average and the S&P 500
had their worst finishes since October of 2014 with
the Dow sinking 528 points at Friday's close.
While the market appears to be cooling off, the
west continues to burn.
To date, this fire season has charred more acres
than any year in the past decade.
The U.S.
Forest Service has been spending $150 million a
week on the task and will likely devour its entire
firefighting budget by the end of the month.
Bone dry conditions present a clear and
present danger.
And this week, a few who "walk where the devil
dances" lost their own battle in this year's epic
war to protect towns and timber.
The battle against the western wildfires took a
deadly turn this week as three firefighters died
after a vehicle crash trapped them in what was
described as a "hellstorm" of flames.
This brings the death toll to 13 for the year.
The trio were members of the U.S.
Forest Service.
Four other firefighters were injured near the
north-central Washington town of Twisp.
Local officials have urged people in the
outdoor-recreation area to evacuate as wildfires
advanced through the region.
Tinder-dry conditions, high temperatures and
winds combined to fuel the inferno in the Evergreen
State.
One of the biggest fires is near the scenic Cascade
Mountain town of Chelan.
More than 155 square miles in central Washington have
been charred.
Nearly 3,000 people were ordered to evacuate the
area this week.
A major fruit-packer's warehouse in Chelan was
destroyed by fire which contained nearly 2 million
pounds of apples.
Washington is by far the nation's biggest apple
producer.
The amount of fires across the West is taxing crews
as the U.S.
military is being sent in to assist.
Rob Allen, Deputy Incident Commander: "Nationally,
the system is pretty tapped, there is a lot of
fires going on not only here, but in Washington,
in Oregon, Northern California still burning
up.
And things have started to pick up in Idaho, Montana
and Colorado.
Nationally we are at planning level 5.
Everything is being used right now, so competition
for resources is fierce." And the 29,000 fire
fighters in the west could get help from other
countries as they work to contain the nearly 1,000
fires ...
Cooler and calmer weather has given firefighters a
break in California and Idaho.
The massive 443-square mile Soda fire near the
Oregon/Idaho border is nearly contained.
At one point this week, almost 900 firefighters
were battling the blaze over.
Much of the scorched land was used by cattle and
sage grouse.
At least one farmer was seen herding about 200
head of cattle down the road to safety.
The U.S.
has the most abundant and affordable food supply on
earth.
Between the field and the table, the USDA has put
rules in place to protect that bounty.
Occasionally, that supply gets contaminated with
unwanted pathogens that make people ill.
The Centers for Disease Control and Prevention are
responsible for notifying the public when tainted
products make it to grocery store shelves.
According to the CDC, foodborne illness costs
the U.S.
economy nearly $16 billion annually.
But agency scientists are always on the lookout for
new weapons to prevent, find and reduce the size
of the outbreaks.
The nation's top disease detectives are betting
genetic clues could help combat food poisoning
outbreaks.
The Centers for Disease Control says of the
roughly 48 million Americans infected every
year, about three-thousand die of foodborne
illnesses.
Jill Pollack/Silver Spring, Maryland: "I'm
normally very confident in the safety of the food I
am buying.
Certainly if I hear about something in the news I
might be more aware about a particular outbreak."
In the wake of last spring's bacterial
contamination of Blue Bell Creameries ice cream in
Texas, the CDC is expanding a pilot program
to ten states that fights back against potentially
deadly bacteria and viruses by decoding their
DNA.
Listeria, the third-leading cause of
death by food poisoning, and the culprit in the
Lone Star State contamination, is now a
top target in germ fighters' crosshairs.
Dr. Robert Tauxe/Deputy Director - Division of
Foodborne, Waterborne, and Environmental Diseases -
Centers For Disease Control and Prevention:
"By testing the DNA of the bacteria from people all
over the country we may find that people in
totally different places are infected with exactly
the same bacteria.
If we can figure out what it is that they have in
common, and show that yes that was the source of the
infection, we can find an outbreak even when it's
very small."
Armed with $30 million from Congress, the CDC is
taking advantage of faster and cheaper genome
sequencing technology.
In the future, government scientists hope to use the
game-changing approach across the nation to fight
more common bacteria like Salmonella and E.
Coli.
By identifying pathogens early, officials will be
able to warn consumers before widespread
outbreaks develop.
Those suffering under the drought in the West may
receive a reprieve if the predicted El Nino weather
system comes to pass.
And despite the fact that fruit and vegetable
producers continue to worry about where their
next drops of water will come from California wine
grape growers worry a little less.
Production of the specialty crop has been a
source of income since the ancient Greek's began
fermenting grapes.
Today, California vintners produce $24 billion of
product annually.
But Midwestern growers, once a powerhouse of
production, have been getting back into the act.
For some producers, the journey to the vineyard
has been a long one that has its roots in other
commodities.
Delaney Howell explains.
Headquartered just south of Sacramento, California,
is Lange Twins Family Winery and Vineyard.
Dating back 4 generations, the original vineyard was
planted just prior to the beginning of Prohibition,
in 1917.
The first generation of these Central Valley
vintners began with Lange's great-grandfather
who actually started with 135 acres of watermelons
in the Lodi area.
After success in the watermelon industry the
Lange family purchased a ranch nearby that came
with grapevines.
The decision was made to try both crops.
For many years, the family planted watermelons in
between the rows of grapes as they worked on
mastering the art of viticulture.
Since then, the farm has grown to approximately
8,000 acres of wine grapes.
The 4.5 million vines produce 55,000 tons of
grapes annually.
Brad Lange, Co-Owner of LangeTwins: "So it is a
family run enterprise.
We were wine grape growers right up to about 2005,
2006.
We made a decision to build our winery and so
it's a relatively new winery built over the last
nine years, by vertically integrating we are
ensuring, with that success, a
multi-generational farm family."
LangeTwins has three vineyards stretched across
two Central Valley counties.
The diverse locations have helped them in their four
year battle against the drought.
Brad Lange, Co-Owner of LangeTwins: "...the last
few years, three years, we have not had those heavy
spring rains that we typically have so there
isn't as much available rain water for the vine to
grow.
And so in the springtime, depending on the rainfall,
we just have to sit back and wait for the vine to
start running out of water.
Then we can start spoon feeding it with our drip
irrigation system.
So in that respect, we have an opportunity to
bring that vine into balance more quickly than
in a rainy year, like 1998, to where it was
raining heavily in June.
And so we have the opportunity to really
control the water that, the amount of water that
the vine will give.
So in that respect, the drought actually helps
us."
According to a study by the University of
California-Davis, the drought has already
rung-up $2.7 billion in damages due to lost crops,
livestock deaths, and increased payments for
pumping groundwater.
The whitepaper reveals an estimated 565,000 acres of
farmland will be fallowed due to severe drought, but
many viticulturists are thriving despite the harsh
conditions.
The Golden State ranks 1st in the nation for grape
production and 4th in the world for wine production,
behind Italy, France, and Spain.
But in the past few decades, California
winemakers have begun to see vintners in other
states bring out their own award winning vintages.
In the early 19th & 20th centuries many Midwestern
states dominated the grape industry with Iowa ranking
6th in production.
The soaring success of wine production in the
Midwest was quickly stifled with the onset of
prohibition.
Farmers turned to growing grains and oil seeds to
make ends meet, leaving California the stand alone
source for grape growing.
Ardon Creek Vineyard and Winery located in Letts,
Iowa sprang from old family roots as well, but
like LangeTwins, this endeavor started with
different origins.
Mike Furlong, Owner of Ardon Creek: When I was
younger my father raised tomatoes for Heinz's when
they made Heinz's 57 Ketchup.
And so this farm was alive with people in the summer
and I just thought that was pretty neat.
And so, wine is an interesting endeavor and I
thought this is a little bit different than row
crop you know the proverbial corn and
soybeans, which are important certainly to the
Midwest but grapes were unique in wine making so
that's the road we followed.
Mike and Diane Furlong, majority owners of Ardon
Creek, planted their first set of vines back in 2004.
The couple finally finished their 4.1 acres
in 2008 and opened their winery doors in 2009.
This smaller scale operation reigns on the
160 year old family farm that has been in Mike's
family for 5 generations.
Both Furlongs worked off the farm for years prior
to their interest in the wine industry taking root.
Ardon Creek has expanded into retail outlets
throughout Iowa and is licensed to ship product
to more than 20 states.
But no matter how successful, competition is
always present.
With approximately 100 wineries in Iowa alone,
competition can be a concern to owners.
To compete with wineries both state and nationwide,
wine producers such as Ardon Creek often enter
various competitions to gain credentials for their
wines.
Mike Furlong, Owner of Ardon Creek: "We won best
dry red in Ankeny, Iowa at the Mid-America wine
contest and even though we sell a lot of sweet to
people in Iowa, it's sort've the holy grail is
to have a good dry red and we won best.
And there were 80 wineries and 12 states involved in
that.
But I think it's important and it helps our wine
maker get feedback from professional judges and
we're very pleased with the direction we're going
and some of the results we're finding."
In addition to competition both nationally and
statewide, Iowa vintners are constantly fighting
misconceptions and stereotypes about what
their flavors produce.
Mike Furlong, Owner of Ardon Creek: "25 years ago
I was a wine snob, I got over it.
I though you needed to drink merlot, cabernet
sauvignon, or Chardonnay, and there are some people
you'll never dissuade from that position and that's
ok.
However, if you're a little bit more open
minded there are some great dry reds, dry whites
and certainly some sweet wines that are very
drinkable, you just gotta realize it doesn't taste
like a Malbec, Merlot, or Cabernet Sauvignon."
And as the heartland continues to move at full
steam, vintners like Lange are more than welcoming
towards Midwest competition.
Brad Lange, LangeTwins Winery: "We see them
introducing wine to people that never have had wine
before.
And over time they're just helping not only
themselves, but they're us.
So we embrace the development of the wine
industry throughout the states and we absolutely
don't see them as competitors but as
enhancing and enabling us to have success in the
marketplace.
For Market to Market, I'm Delaney Howell.
Next, the Market to Market report.
Worries over a stronger dollar, a weakening
Chinese market and cheap energy resulted in mostly
lower prices.
For the week, September wheat lost 7 cents.
The nearby corn contract was only a penny higher.
Soybean prices were volatile again this week
adding to the strong market reaction from the
August WASDE report.
The nearby soybean contract was 20 cents
lower.
December meal prices went sideways gaining only 40
cents per ton.
In the softs, December cotton continued its rally
rising nearly $1 per hundred weight.
Over in the dairy parlor, September Class III milk
futures gained 31 cents.
The livestock sector fell back this week with the
October cattle contract declining $3.
October feeders dropped $10.05.
And the October lean hog contract lost $2.52.
In the currency markets, the U.S.
Dollar Index fell more than 1.5%.
Oil slumped $2.66 for the week ending the trading
session at a six and a half year low.
COMEX Gold gained $46.90 per ounce.
And the Goldman Sachs Commodity Index lost
nearly 18 points to settle at 348.35.
Pearson: Here now to lend us her insight on these
and other trends is one of regular market analysts,
Naomi Blohm.
Naomi, welcome back.
Blohm: Hi.
Thanks, Mike.
Pearson: It was a very volatile week both in the
commodities and the equity markets.
When we see a 1,000 point drop like we've seen so
far in August in the Dow Jones, is that an
indication to you that maybe money would come out
of that and move into some of these other
commodities?
Or what does that tell you about the commodity
markets?
Blohm: We are hoping that the money that is coming
out of the stock market goes to the commodities.
If you look at how that Goldman Sachs Index had
been trading, it was inverse to the stock
market for the past year.
So now with the money coming out of stocks
usually it does come to the commodities and then
we'll hopefully see things at least maybe start to
materialize and hold firm and then as soon as we get
some friendly news maybe we'll really get some
market momentum behind it.
Pearson: Once we can get a story going maybe get some
of this money on the buy side.
Blohm: Right.
Pearson: Well, now speaking of getting a
story going, it seems like we've been waiting for
quite some time to get an export story going in this
wheat market.
Is one starting to develop?
Blohm: Not really yet.
We just haven't had the news to justify it by any
means.
The bigger thing with wheat right now is that
the spring wheat harvest is coming along just fine,
it's ahead of schedule, not any big quality issues
there.
And then also around the world still not any big
stories yet.
What we are keeping an eye on though is in Argentina.
They had a really wet planting season and so
their crop is expected to be a little lower.
And then of course we're keeping an eye on El Nino,
which continues to develop and be strong.
So maybe later in the year it makes a story for dry
conditions in Australia or India.
However, there's just nothing to talk about.
And because of that, the Chicago market might see
the price range, at the lowest my opinion would be
$4.75 and then to $5 but I think we start to see the
market just slowly trudge a little lower and we sit
and wait for some news.
Pearson: So generally a tight range that we're
pretty close to the top of here at $4.99 and change.
Blohm: Right.
Pearson: Okay.
Now as we jump down into the corn market, we did
see some stability this week.
We've had two weeks now of relative stability.
What does that tell you about the corn market?
What should producers be looking for?
Blohm: Corn has done a great job of saying we
don't believe what the USDA is telling us as far
as the yield goes and it showed that this week.
The one bit of caution would be that today on the
market charts it posted a bearish reversal and so to
me it means that prices might work a little bit
lower here.
I would say in the next two to three weeks we see
the corn price for December futures stay
between $3.60 and $3.75, real quiet, tight range.
Pro Farmer did come out though with their final
numbers and they put that corn yield at 164.3, which
is lower than that USDA number of 168 and I think
more realistic.
And just keep in mind that with corn when that market
price hit $4.50 on the December futures earlier
in the summer that is when the market was trading 163
yield.
So I feel really strongly that the market is going
to probably just trade sideways, a little bit
lower, sometimes it grinds lower throughout
September.
But there still is enough unknown out there that
we're going to probably see it not fall too much
lower.
Pearson: Until we start to see what the combines are
bringing in, do you think there's opportunity
post-harvest for some sales at hopefully a
little better pricing?
Blohm: I do.
I'm still optimistic.
Earlier this spring I thought we would see that
market bounce.
Now we're at the point where we had the
opportunity and now it's going to take a little bit
of time again but I think it's coming.
Something to keep in mind though with corn is that
the exports are really behind as far as the new
crop goes.
We're only at 12% and we should be at 25% for this
time of year.
So if we don't see that pick up at harvest then
that's one thing where the USDA might be comfortable
saying, oh you're right, the yield is lower but now
we have this export demand out there and keeps the
ending stocks at a wash.
Pearson: Okay.
Now let's jump into the soybean market, second big
down week in a row, 20 cents this week.
Are we getting close to a bottom?
Blohm: No.
No.
It's kind of unfortunate.
Pro Farmer did confirm the USDA yields that that 46
number is probably accurate.
The one silver lining that might come out of this is
that the planted acres, as far as the prevent plant
and all of that, probably still does need to come
down.
But, as we know, the USDA it might take them a year
to admit it.
So, with that in mind, with the market closing
below $9 support levels the shorter-term downtrend
I'd say the next two weeks maybe $8.75.
You could argue $8.50 but, again, it's just a little
too premature for the market to really crash.
We've got harvest coming up pretty soon in the
southern states so we'll want to wait and see what
that does before the market price really
tumbles, but probably see it just a little bit
negative over the next couple of weeks.
Pearson: With the downside risk that really sounds
like is apparent here to listen to you, should
producers be out in front of this thing making some
sales up in here close to $9 if they can get it?
Blohm: I would say so now, just again because the Pro
Farmer Tour did confirm that the yields are likely
there and we haven't had a lot of weather stress to
justify it or signify otherwise.
So I think I would, especially if you're in a
position where you need the cash flow and you
can't store it, I think I would use this as an
opportunity to sell.
Pearson: Okay.
Well now as our native Wisconsonian here with us
I'd like to take the chance to discuss the
dairy markets.
We did see a little bit of an upside, 31 cents to the
upside in Class III milk.
What is causing that to buck the bearish trend?
Are we getting some good news?
Blohm: Yes, finally.
This week we had good news from the global dairy
trade auction and they increased their index
number by 14.9 percentage points, which was the
first increase that they had shown since March.
And that's a big deal because finally they were
able to say that demand had picked up for the
powder market, for the cheddar markets, the
butter markets and so that is what pushed the market
price higher.
And then we actually had confirmation of increased
cash sales for the butter and for the powder and
then the futures markets in those rallied as well.
So market to me is now done going lower and we
see milk stabilize between $16.50 and $17.50 for a
little while.
But we did have another report with milk this
week.
The July production numbers came out and said
that production is up 1.2% from a year ago.
So even though the California production is
lower, Michigan and other states made up for it, so
we have, again, no supply issue but finally demand
is picking up.
Pearson: U.S.
producers are still making those cows milk,
gangbusters.
Blohm: Yes they are.
Pearson: Well now let's jump into the livestock
markets.
We saw a pretty broad step back here on both live and
feeder cattle futures.
Let's talk this live market first.
Are we getting close to finding a bottom?
Or is this another grind lower situation?
Blohm: I think we're at the bottom now.
October futures have really solid support at
$143 and the perception, I think we've traded, we
were importing so much more and the exports are
down, I think that is old news.
So going forward though we're looking for an
increase in demand heading into fourth quarter.
So that's probably going to keep that
October/December contract firm overall.
And the cattle on feed report today was actually
neutral, so not any big issues one way or the
other as expected and just need to make sure that we
can see the demand pick up like we're anticipating.
I would say though if we have rallies it probably
is an opportunity to be making sales.
Pearson: And would you, again, be a pretty far out
in the deferred month's seller?
Blohm: I think I would just again because that
longer term perception is changing.
So this is your equivalent of the $8 corn, $7 corn
slide and make sure you capitalize on it.
Pearson: Okay.
Now same question as we look at the feeder cattle
market.
$10 selloff this week.
What does this look like in the short-term?
Blohm: Still negative actually.
And the perception there too is that with the live
cattle being lower, the feeder cattle are going to
grind lower and that there's going to be
increases in supply coming.
So obviously we know it's a slow increase.
But, again, that perception is all that
matters.
Technically speaking in the past two weeks the
feeder cattle futures broke their short-term
uptrend and then they were sitting on that like 200
even support level which failed.
So now technically the downside is $180 but that
is the long-term uptrend.
I do though think that we'll probably see that
market drift lower in the coming months.
Nothing quick but just a slow grind lower because
the fundamentals have just shifted enough.
Pearson: Okay.
A lot of calves being held back, a lot of cows being
retained.
Blohm: Mm-hmm.
Pearson: Now, as we jump into the hog market, we
ended the week down $2.52 and livestock slaughter
said July was the highest pork production month in
history.
So we clearly have growing numbers.
Where can this market find some stability?
Blohm: I think it is actually finding the
stability now.
Earlier in August we had some strong demand and
that was evident in the cutouts and that's why
that August contract was so strong.
But now the October market and the December
contracts, they were appropriately holding back
on the perception that fourth quarter production
was going to be increasing.
And so it is already priced into the market.
Seasonally also demand starts to pick up a little
bit too.
And what we have to really watch for with the hogs
right now for the October/December contract,
we need to make sure that that market can stay over
60 and what we have to watch is the hams and how
the ham movement goes.
That is the bigger factor right now.
And this afternoon's cold storage report showed that
the ham inventories were actually large.
So it wasn't quite the information we were hoping
for.
However, we still have a lot of time to work that
through the pipeline and system.
I'm kind of curious with turkeys being so expensive
this year maybe people won't' do as much for
Thanksgiving and do some other proteins.
So something to keep in mind.
Pearson: Well, great.
Naomi Blohm, thank you so much.
Blohm: Thank you.
Pearson: That wraps up this edition of Market to
Market.
But Naomi and I will continue our discussion
and answer some of your questions in our Market
Plus segment available on our website.
You'll also find audio podcasts of our discussion
as well as streaming video of our program exclusively
at that Market to Market website.
You can also interact with us through our Twitter and
Facebook feeds.
And join us again when we'll check in on a
growing industry that's all up in the air.
So until next time, thanks for watching.
I'm Mike Pearson.
Have a great week.
♪♪
Market to Market is a production of Iowa
Public Television which is solely responsible for its
content.
Funding for Market to Market is provided by
Grinnell Mutual.
You think differently about a customer when you
stand in the middle of his dreams.
We work to make sure you get covered right.
Grinnell Mutual -- a policy of working
together.
Information on finding an agent near you is
available at grinnellmutual.com.
And by Sukup Manufacturing Company.
Offering a full line of grain drying and storage
equipment and steel buildings, Sukup
Manufacturing is on a mission to protect and
preserve your crop and the tools that produce it.