Markets | Field 2 Field

April 16, 2020April 16, 2020

Hog farmers are hurting and asking for help

Hog farmers are hurting.

COVID-19 has put a serious crimp in the U.S. economy and nowhere is that more evident than in agriculture. More specifically, American hog farmers are struggling to stay on farms because they’re having trouble getting their hogs to market. Big trouble, in fact. Hogs are so far backed up on the farm that producers may have a tough decision to make in the not-too-distant future.

Those of us in the agricultural media don’t often hear the word “euthanize” in press conferences. Unfortunately, it came up multiple times during a press conference hosted by the National Pork Producers Council. As prices for hogs have plummeted, Howard ‘A.V.’ Roth, NPPC President, says things are as bad as they’ve ever been after several years of a depressed farm economy.

“We are now an ag sector in dire crisis,” Roth said to reporters. “Farmers are already exiting the business and the damage will only intensify without direct intervention from the federal government.”

Speaking as a hog producer himself, Roth says the pork industry has a list of several things it needs in order to help keep as many farmers in operation as possible. The first item on their wish list would clear out a tremendous amount of stored pork supplies as quickly as possible, plus it would get food into the hands of people who need it.

“Over $1 billion in pork purchases by USDA to clear out a backed-up meat supply, while supplementing food bank programs around the country facing increased demand for food as unemployment continues to rise,” Roth said. “These purchases should come from packaged pork that was intended for restaurants and other segments of the foodservice market.”

In all the years I’ve covered agriculture, I can tell you from firsthand experience that farmers want to make their living from the markets, not government handouts. How desperate are pork farmers to stay in business?

“We need direct payments to producers without eligibility restrictions,” Roth says.

They’re also hoping to see China remove retaliatory tariffs on U.S. pork that are still in place despite the Phase One trade agreement between the two countries. Roth points out that it’s no secret China needs a reliable source of affordable pork after their herds were decimated by the African Swine Fever virus.

“Removing those damaging tariffs would get us back on a level playing field with our international competitors,” Roth says. “Dr. Dermot Hayes, an economist with Iowa State University, says removing those tariffs would allow U.S. exports to China to more than double their current volume.”

How badly does China need pork, one of the most preferred proteins in the Asian diet? Let’s just say that Chinese pork producers, who can’t ever hope to meet their country’s domestic demand, are enjoying some pretty high prices for their products right now.

“While Chinese producers are enjoying record pork values, U.S. producers are facing a dire decision on our farms,” Roth said. “Sadly, it’s true. Without significant assistance, euthanizing is a question that’s going to begin coming up on our farms.

“Let me be the first to say, as a pork producer, we care about our animals,” he added. “The last thing we ever want to do is euthanize even one animal. We’re going to do everything in our power to make sure that doesn’t happen.”

Producers may be able to at least push that decision back somewhat, thanks to a recent decision by the Environmental Protection Agency. Michael Formica, Assistant Vice President of Domestic Affairs and Counsel at NPPC, says hog housing restrictions have been temporarily relaxed.

“We reached out to EPA to ensure that if we were ever in a situation like the one we face now, producers would have an option to hold animals on their farm,” Formica said. “All of the farms are permitted to hold a certain number of animals. If they exceed those numbers, they have to go through new permitting.

“We asked EPA for a temporary waiver of the thresholds during the crisis we’re facing,” Formica said, “and thankfully, they granted that request a couple of weeks ago. That’s a tool that many farmers can use to hold animals on their farms while additional animals come through the pipeline.”

He says it’s important to point out that’s an advantage for farmers only if they have adequate additional space. If the backup continues indefinitely, they will run out of space and that’s when they have to start culling otherwise healthy animals from their herds, simply because there won’t be enough space to take care of them.

Why is it all piling up on hog farmers so quickly? Nick Giordano, Vice President of Global Government Affairs and Counsel for NPPC, says hog producers were the first to be hit hard by the trade war with China.

“Hog farmers were there at the tip of the Chinese retaliation spear,” he said. “Trade retaliation from two key markets, Mexico and China, in 2018 and 2019, took $20 off the prices that producers received for every hog.

‘Unlike a lot of the other segments in our economy that came into the COVID-19 outbreak with record profits and a full head of steam, our producers were already hurting. This has made a bad financial situation infinitely worse.”

How far have things fallen across the industry? Iowa State’s Dr. Hayes says in just one month, from March 10 to April 10, the pork industry has lost $5 billion in value. Something has to change.

March 19, 2020March 19, 2020

H-2A Workers Help from USDA/Dept. of Labor

H-2A workers have been hard to find consistently in agriculture as long as I’ve been covering it, which is the better part of my adult life. I don’t have enough day-to-day experience dealing with this to know why on Earth we can’t seem to figure this out? Any ideas? Please leave a comment and let me know the whole story? And does this news from the USDA and Department of Labor actually help?

U.S. Secretary of Agriculture Sonny Perdue today announced a partnership between the U.S. Department of Agriculture (USDA) and the U.S. Department of Labor (DOL) to help facilitate the identification of foreign and domestic H-2A workers that may be available and eligible to transfer to other U.S. agricultural sector employers to fulfill critical workforce needs within the U.S. under existing regulatory authority during the COVID-19 pandemic.

For as long as I can remember, we’ve been struggling to get enough H-2A workers into the country consistently enough to make sure all our farmers can get their work done. Why can’t we figure this out? (Photo from agnetwest.com)

“Ensuring minimal disruption for our agricultural workforce during these uncertain times is a top priority for this administration,” Secretary Perdue said. “President Trump knows that these H-2A workers are critical to maintaining our food supply and our farmers and ranchers are counting on their ability to work. We will continue to work to make sure our supply chain is impacted as minimally as possible.”

“American farmers and ranchers are at the frontlines of maintaining the nation’s food supply,” Secretary Scalia said. “In these unprecedented times, it is critical for them to have the workforce they need. This new partnership between USDA and DOL will help support our farmers, ranchers, and American families.”

Background:USDA and DOL have identified nearly 20,000 H-2A and H-2B certified positions that have expiring contracts in the coming weeks. There will be workers leaving these positions who could be available to transfer to a different employer’s labor certification. The data, available on www.farmers.gov/manage/h2a, includes the number of certified worker positions, the current employer name and contact, attorney/agent name and contact, and the worksite address. This information will be a resource to H-2A employers whose workforce has been delayed because of travel restrictions or visa processing limitations. Employers should be aware that all statutory and regulatory requirements continue to apply. Employers are encouraged to monitor www.travel.state.gov for the latest information and should monitor the relevant Embassy/Consular websites for specific operational information.

March 10, 2020March 10, 2020

Coronavirus headlines disrupt commodities

Here’s the complete conversation with Arlan Suderman of INTL FCStone on the commodity markets reaction to the coronavirus outbreak.

Coronavirus headlines and the commodity markets. It’s been a while since we’ve seen the commodity markets this reactive to news headlines on an almost daily basis. While it’s not unheard of, one commodity expert says it’s been over a decade since the markets have been hit this hard by the news. Arlan Suderman is the Chief Commodities Analyst for INTL FCStone, talks about why the news coronavirus headlines seem to be playing havoc in the commodity markets.

“I think that’s a question a lot of people have these days,” Suderman says. “It’s a valid point to discuss.

“I was initially downplaying the market reaction in January,” he recalled, “before doing some research at the end of that month. This is the type of virus that’s going to trigger a lot of fear in people. When you have that much fear, the fear of the coronavirus headlines will be worse than the threat of the virus itself.”

He points out that when people get afraid, they stay home, they don’t travel, and they don’t go out in public as much. That’s been the case in China as everywhere the disease has hotspot outbreaks, everybody stays home.

“Shanghai, a city of millions of people, is now a ghost town,” Suderman said. “Now we’re seeing pictures of that in lots of other places, including Italy.

“When people stay home and don’t go out, they tend to consume less food,” he added. “That includes consuming less meat and a lot more starches. Overall, it does tend to change consumption patterns a lot.”

People also consume less energy in these situations as they aren’t driving a lot while airlines are also canceling flights as people don’t want to travel. Less consumption in the energy markets hurts the biofuels markets as well.

Even things like shipping commodities get much more complicated as people are staying home, thanks to the coronavirus headlines. That’s been the case in China and is becoming prevalent in other countries too.

“People didn’t show up to work,” he said. “Ports become congested, ships don’t get unloaded, and shipping slows way down. That’s lost demand you likely don’t get back. You may get some of it back, but not all.

February 21, 2020February 21, 2020

Grain bin safety hits home in South Dakota

Grain Bin safety. I know you as farmers get tired of the topic. We hit it hard once a year during National Grain Bin Safety Week. But, there’s a reason we in the farm media hit the topic hard. People still get hurt or killed every year, no matter how long they’ve been in the business of farming. Farming is a dangerous profession; the most dangerous in America.

Really, it only takes a moment for tragedy to happen. I can’t imagine what it’s like to know that a family member died by being crushed under a mountain of grain and not being able to breathe. But I know of someone who lived through the nightmare. She’s the current governor of South Dakota.

National Grain Bin Safety week is February 16-22 this year. National Grain Bin Safety Week is a subject that hits home for South Dakota Governor Kristi Noem, who grew up on a farm in Hamlin County and lost her father in a grain bin accident…tape

She says farmers and ranchers work with dangerous equipment every day…tape

While you may not think you have time to slow down, Noem reminds producers theirs aren’t the only lives affected if something tragic happens…tape

Noem encourages producers to evaluate safety procedures and equipment on their farms and ranches and to make adjustments when needed.

Older farmers aren’t the only ones hurt in accidents. Twitter was recently ablaze with sadness over the loss of a young man who’d barely lived around twenty years. It only takes a second for life to change forever. It’s worth taking a few extra minutes to be safe. I know how the grind of farming wears on patience. It’s worth it to your family members to have you come home a few minutes later, especially if it’s the difference between life and death, which it certainly can be.

February 2, 2020February 2, 2020

Coronavirus and Possible Effects on Commodity Markets

Coronavirus. As it continues to make headlines, commodity experts are wondering what kind of effect the spread of the virus will have on markets. Joe Vaclavik, President of Standard Grains in Chicago, says the outbreak will have some effect, but it’s hard to tell what kind or for how long.

“It’s not a positive. I don’t know that it’s the biggest negative in the world. It could be, and that’s why you’re seeing liquidation in some of these markets, like the stock market, and that’s why you’re seeing the grain markets soften up. Nobody wants to be long in this stuff. The Coronavirus probably goes the way of SARS, or some of these other similar types of outbreaks that we’ve last a month, maybe two months, maybe the better part of a year. Then, it probably makes its way out of the headline.”

He says the possibility of a significant impact on markets has likely grown over the past couple of weeks.

“There’s always that risk that it turns into something much bigger. It could eventually disrupt the flow of trade. Maybe there’s a country out there that decides to throw up trade barriers and says ‘hey, we don’t want corn from the U.S. because they’ve got too much of that virus going around. There’s always that sort of risk on the table.”

Mike Zuzolo, President of Global Commodity Analytics in Kansas, says the virus will likely have a significant impact on China’s poultry flocks. Separate reports have millions of chickens “on the edge of death.” But they aren’t necessarily sick with Coronavirus.

“Animal feed suppliers cannot get their shipments through, raw materials can’t get through, and this also corresponds with another article from the South China Morning Post that said hedging is not being done, soy meal is not being hedged, so soybeans are not being bought. I think what you’re looking at is probably pent-up demand for the livestock industry and that 300-million chickens die because of not being fed because of Coronavirus. That number of pounds of protein, you’re going to have to replace, eventually.”

There is a long-term buying potential for commodities, but only if the virus outbreak doesn’t last longer than reports are suggesting.

“If China and the scientists are correct and we see a peak in the maximum pressure of this virus, outbreaks of this virus, and, in the next 7-10 days, the price action we’re seeing right now will not last. It will set up a long-term buying potential for commodities.”

Again, that’s Mike Zuzolo of Global Commodity Analytics, as well as Joe Vaclavik of Standard Grains.

January 4, 2020January 4, 2020

Grain Markets put 2019 in the rearview mirror

Here’s the full conversation with Joe Vaclavik of Standard Grain in Chicago. You can download it on your computer by clicking on the three dots on the right side of the player. Play it here on your mobile device.

Grain Markets officially bid 2019 a not-so-fond adieu. Like most other segments of American agriculture, grain farmers are more than happy to put 2019 in the past. Joe Vaclavik, founder and president of Standard Grains in Chicago, says last year didn’t start off well in the grain markets and it just kept going for the next 12 months.

“We had a pretty comfortable, if not burdensome supply situation entering the calendar year, so, the calendar year kind of began similar to what we’ve seen the last two, three, four years, a comfortable supply-demand situation, not anything terribly tight. Low prices, farmers not making a ton of money, you got the trade war going on, a lot of overall negative factors I would say to start the year.”

He says the spring is when things began to get “interesting.”

“Both in the markets and the weather. We basically sold the markets off until about that May time frame, that I think traders started to realize that we had some serious weather problems. Wet weather, cold weather, planting delays continued, and typically we are always told the crop’s always going to be planted, and planting delays are not a cause for concern.”

However, as the spring continued, things turned more serious in the markets.

“Planting delays turned into a major concern. There was a point in time in late May into maybe the mid part of June where we just had no clue what type of production was possible, and out of that, we had a very significant crop scare rally in the corn market and in the soybean market, to a lesser extent.”

Farmers continued to plant corn long past what would be a normal planting date. Vaclavik says the market was rallying as farmers continued to plant, even into early July in a few locations. He says the market peaked in June because it bought a “whole bunch of corn acres” that wouldn’t have been there otherwise.

Vaclavik says farmers faced challenges from a weather standpoint, logistics, and from a demand standpoint with trade challenges in 2019. With all that stacked against them, the question is how much grain U.S. farmers produced last year. Vaclavik says the answer depends on who you ask.

“A lot of people think that the numbers USDA has put out are just not achievable given the late planting, the wet spring, the late harvest, so there’s still some debate out there. I’m not one to tell you with any degree of certainty that we know for sure what the crop is, and we’ve got this big report on January 10, which is the final crop production report, and I suppose if USDA is going to make any sort of sweeping adjustment, it probably comes on that date.”

Again, Joe Vaclavik is the president of Standard Grains in Chicago.

December 28, 2019December 28, 2019

Meat Sector Looking for 2020 Rebound

Here’s the complete podcast with Mike Zuzolo. You can play it here or download it by clicking on the three dots on the right side of the player.

“Meat, the redder, the better.” Words of wisdom from the grill master (me). However, those folks who raise that red meat (which includes all types of the protein products in the meat case at your local grocery store), for the most part, had a difficult year.

The U.S. ag sector has to be happy to see the end of the calendar year 2019. It was rough, which might be the understatement of the century so far. I’ve been doing a series of interviews for the National Association of Farm Broadcasting News Service (I’m the assistant editor/reporter) that looks back at 2019 and peeks ahead to next year. I caught up with Mike Zuzolo, President of Global Commodity Analytics in Atchison, Kansas.

2019 was not good for most sectors of the U.S. ag economy, including the protein sector. “No, it wasn’t,” Zuzolo says. “Given the packer break-evens being in the hundreds of dollars for much of the year in cattle, and given the cash prices of hogs struggling to get above $50 live prices, as well as seeing that African Swine Fever was decimating half of the world’s hog herd, I’d say 2019 was a very big disappointment to the cattle and hog industry.”

He said the challenges didn’t just include the trade troubles that dominated headlines throughout the year, they also included a major fire at a Cargill plant in Holcomb, Kansas. Zuzolo said that shot cattle prices sharply lower.

“Prices went below break-evens and they didn’t recover for several weeks,” he recalled. “In my opinion as a livestock analyst, it really shouldn’t have hit the markets quite that hard. The market saw cash prices for cattle collapse from around $120 to $100 for several weeks. At the same time, ground beef and boxed beef prices shot sharply higher because of expectations for tighter supplies.”

Cattle producers took a major hit at that time. The good news is I want to leave you is that Zuzolo sees potential for several bright spots ahead for the protein sector in 2020.

You can find Mike’s website at https://globalanalytics.wpcomstaging.com/

October 30, 2019October 30, 2019

Hemp Production Rules in Place for U.S. farming

The U.S. Department of Agriculture hosted a press conference to announce the rollout of the U.S. Domestic Hemp Production Program. As long as farmers aren’t working in states that prohibit hemp farming by law, officials will work with farmers to help them establish an approved plan to produce industrial hemp on their operations.

Here’s the complete press conference audio from this week:

The U.S. Department of Agriculture officially announced the establishment of the Domestic Hemp Production Program. The program is designed to create a consistent regulatory framework involving hemp farming across the country. USDA Undersecretary for Marketing and Regulatory Programs Greg Ibach says the agency will work with states and tribes to help producers establish federally approved hemp production plans, as long as hemp production isn’t outlawed by their states.

The interim rule also calls for a public comment period so USDA can take input on the final rule before it’s enacted. Ibach says the 2020 growing season will be a “test drive” so USDA can make any needed corrections before publishing the final rule. He talks about some of the key provisions in the interim final rule.

There will be a 30-day waiting period for USDA to license farmers who want to grow hemp in states or tribes that don’t submit plans for federal approval. Ibach says they’ve gotten a lot of questions during the development process surrounding hemp testing for THC.

USDA Undersecretary for Farm Production and Conservation Bill Northey says once state and tribal plans are in place, hemp growers will be eligible for various government programs in 2020…tape

If you have any more question, contact your local Farm Service Agency office. They can point you in the right direction. You can also find more information online at farmers.gov/hemp.

October 22, 2019October 22, 2019

Renewable Fuels Debate Continues Unabated

Here’s the complete podcast with Scott Irwin of the University of Minnesota, talking about his solution to the squabble between ethanol and the oil industry over the Renewable Fuels Standard. You can download and listen to it later or play it here.

Renewable Fuels seem like such a good idea to me. After all, fossil fuels are a finite resource, right? We grow lots of corn and other biofuel feedstocks. Why can’t we use some of them to stretch our fuel supply even further into the future? That’s rhetorical, of course. Big Oil has lots of money. One University of Illinois Professor says that money has put Big Oil squarely in the driver’s seat with the Environmental Protection Agency.

The clash between the ethanol and oil industries over the Renewable Fuels Standard is continuing with no end in sight. Scott Irwin of the Agricultural and Consumer Economics Department at the University of Illinois says there may not be a “win-win” deal in a debate like this.

Irwin wrote an article on the University of Illinois’ farm doc daily website called “Clearing the Logjam on the RFS and SREs: A Simple Proposal.” His idea would divide the refiners into large and small operations, while the ethanol proponents are treated as one group.

By doing it that way, the Environmental Protection Agency won’t be waiving any future volumes of ethanol. He realizes that the large refiners won’t be happy with his proposal, which Irwin says restores what the RFS was originally designed to do.

Irwin says his solution would satisfy two-thirds of the people and groups involved in the debate, which might be the best we can do. By way of comparison, the current situation is a mess.

Again, Scott Irwin is with the University of Illinois. Follow the link here if you’d like to read his full report on the Farm Doc Daily website.

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August 12, 2019August 12, 2019

Trade dispute puts U.S. agriculture right in the middle

Trade is important to agriculture. There, I said it. American agriculture is the best in the world. When you produce goods at the rate we do, there has to be somewhere to sell it overseas. However, thanks to the trade dispute with China, as well as recent disputes with some of our top trading partners, trade isn’t happening with the regularity it needs to.

In turn, when trade doesn’t happen the way it should, prices drop and farmers can’t make a living. I wanted to find out more about the trade dispute and what’s really going on. When you want to learn something like that, you find someone with skin in the game that can teach you the ins and outs.

Dan Ujczo (YOOT-zoh) is an international trade lawyer with the Dickinson-Wright Law Firm of Columbus, Ohio. I’ve known him for over a year now, ever since the dispute began. In typical Chad Smith fashion, my first question is “what the hell is going on here?” How’s that for direct and to the point?

“There was never going to be a deal in which things would go back to the way they were prior to January of 2017, when President Trump was inaugurated,” Ujczo said. “When Trump met with President Xi last December, they both thought we’d have a deal inside of 90 days. Then we heard they would make a deal in May.

“We never thought there would be a deal in which tariffs were completely rolled back,” he said. “Certainly not on the items from List One and List Two, which were an initial 25 percent duty on $50 billion worth of goods.”

When it comes to the items on List One and List Two, Ujczo says the U.S. government talked with industry and looked at the future of manufacturing, deciding then that these are the items we don’t want China taking the lead on. “Tariffs probably weren’t ever coming off those items,” he said.

Here’s the full conversation: