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Coming up on Market to Market -
A slew of economic reports
indicate winter's thaw could be
warming up the economy.
The wealth divide has some in
the middle class seeking an
elusive light at the end of the
tunnel.
And aging farmers ponder the
transition to the next
generation, but some growers are
in no hurry to retire.
Those stories and market
analysis with Jamey Kohake,
next.
This is the Friday, March 14
edition of Market to Market, the
Weekly Journal of Rural America.
Hello.
I'm Mike Pearson.
The long, cold winter may be
finally thawing in the Corn Belt
and in economic news.
U.S.
retail sales rebounded in
February and new applications
for unemployment benefits hit a
three-month low, suggesting some
strength in the economy after
the harsh winter weather slowed
the progress reported in late
fall.
The Commerce Department said
this week retail sales rose 0.3
percent, lifted by receipts in
most categories.
And when you take out the more
volatile sectors of autos,
gasoline and building supplies,
retail sales rose 0.3% in
February.
However, U.S.
producer prices fell last month,
supporting the view that minimal
inflation pressure could keep
the lid on interest rates for
quite some time.
The Labor Department reported
Friday its seasonally adjusted
producer price index, which
includes services and
construction, fell 0.1 percent
in February.
Removing the volatile food and
energy sectors, the core PPI
declined 0.2 percent last month.
Wall Street had its worst day in
six weeks on Thursday, and ended
the week on a down note.
But there was some good news for
those working on Wall Street.
A report this week from the New
York State Comptroller's office
claims that bonuses for
employees of the Big Apple's
financial services industry are
at their highest level since
before the worldwide financial
crisis sent markets reeling back
in 2007.
The average bonus of $164,000
for Wall Street bankers in 2013
offers a glimpse at the two
contrasting tracks to fiscal
recovery many Americans find
themselves on.
Census bureau statistics reveal
a wealth divide as incomes for
the top 5 percent of earners now
slightly exceed pre-Great
Recession levels.
Meanwhile, the middle class,
whose spending is a key driver
of the U.S.
economy, has seen its prospects
erode.
In recent years the average
inflation-adjusted income for
the bottom 40 percent of
households has declined 9
percent, leaving economic
growth, for many, stagnant at
best.
A sluggish economy over the last
4½ years has left Americans
stuck in entry level jobs with
little chance of advancement.
Richard Wilson, Wal-Mart
employee, Chicago "I just find
myself like many other Americans
out there that did the right
thing, that did what we were
supposed to do only to find out
that the jobs we were promised
were not there." The
Congressional Budget Office or
CBO foresees growth through 2016
but unfavorable job reports so
far this year have raised doubts
about predictions that 2014
could see breakout growth.
So far the prospects of an
economic rebound seem to be
fading which is not good news
for people looking for jobs or
those hoping to advance.
Janet Sparks, Wal-Mart customer
service manager: "I should have
enough money to afford gas to
drive two miles to work and two
miles back." Since 2007,
household incomes have declined
nearly 9 percent for the bottom
40 percent of wage earners.
While a stronger economy could
lead to more and better paying
jobs, the nation's largest
civilian employer, with 2.2
million employees, believes more
and better jobs could lead to a
stronger economy.
David Tovar, Wal-Mart Vice
President: "We have about 140
million customers that shop in
our stores each week, and if
those people are getting more
opportunities and are earning
higher incomes and there's a
vibrant middle class, that's
going to lead to more disposable
income in people's wallets and
pocket books and we'll get our
fair share." The agriculture
sector is also seeing an erosion
of the middle class.
USDA's Economic Research Service
projects national net farm
income, a key indicator of U.S.
farm well-being, will be 27%
lower than last year's record
$130.5 billion.
Following up on recent Census of
Agriculture Data, USDA Secretary
Tom Vilsack says the agency is
adjusting policies,
strengthening programs and
intensifying outreach to meet
the needs of small and mid-sized
producers.
Vilsack announced the
initiatives this week at the
National Farmers Union National
Convention.
The aim is to connect more small
and mid-sized farmers with USDA
resources that would allow them
to boost sales and expand
operations.
A major component will be to
make it easier make it easier
for small and midsized farmers
to qualify for loans that allow
them to build or upgrade farm
storage and handling facilities.
It includes an increase in
limits in the microloan program
for smaller, nontraditional,
from $35,000 to $50,000.
Since its inception last year
nearly 5,000 loans have provided
$97 million in credit.
The 2012 Census of Agriculture
revealed something just about
everyone in rural America
suspected: America's farmers are
getting older.
According to the Agriculture
Department, the average U.S.
farmer is 58.3 years old and the
number of operators 75 and older
grew by 6 percent in the most
recent study.
The trend isn't likely to
reverse anytime soon.
But ask an older grower when
they plan to retire, and chances
are they'll say, "someday -
maybe -- but not right now..."
It's easy to understand.
These folks have worked hard for
decades.
But hard work is no guarantee of
success in a risky business like
farming.
Most endured significant
hardship at some point, and
agriculture hasn't always been
this profitable.
But time marches on.
By some estimates, more than
half of America's farmland will
change hands over the next
generation.
And as Harvest Public Media's
Grant Gerlock explains, many
farmers and ranchers are well
beyond typical retirement age,
but some are in no hurry to
quit.
Bob Hawthorn, Castana, Iowa:
"The farm was first purchased by
my great-grandfather....He
farmed it.
His son farmed it after him.
Then my dad, then me.... I'm
kind of the last guy on the
chain."
Bob Hawthorn farms 2,000 acres
of corn and soybeans in the
Loess Hills of western Iowa.
He's been doing it 60 years, and
at the age of 84 he has no plans
to slow down.
It runs in the family.
His father, Fred Hawthorn,
stayed active on the farm into
his 90s and lived to be 98.
So Bob feels like he's still got
plenty of time left to work.
Bob Hawthorn Castana, Iowa: "I'd
be bored not having anything to
do.
I've also noticed that farmers,
when they retire buy a house in
town, move into town, they die
of a heart attack about in the
next year....It seems like
farmers have to keep going
active or they just fade away."
Hawthorn is part of a growing
group of farmers.
In fact, farmers over 65 years
old have been the fastest
growing group of farmers in the
country.
Working beyond retirement is a
national trend.
In 2012, 5 percent of the U.S.
workforce was old enough to
retire.
But a quarter of all farm
operators were over 65.
When it comes down to it, it's
just easier for farmers to work
longer.
Mike Duffy, Iowa State
University: "It's not quite as
backbreaking a task as it used
to be.
Well, it isn't.
It's more you use your mind
rather than your back, so you
can go longer."
And thanks to higher yields at
today's high grain prices,
farming is more lucrative now
than just about any time since
Bob Hawthorn came back to the
farm in 1955.
But in surveys of Iowa farmers,
Mike Duffy has learned
regardless of the money or new
technology, some farmers will
just never quit.
Mike Duffy, Iowa State
University: "Farmers are
farmers.
And that's who they are.
And that's who they identify
themselves as and so they don't
- that's like retiring from who
you are....They'll leave
horizontal and that's just, you
know, and that's who farmers
are.
Dr. Mike Rosmann, AgriWellness,
Inc.: "I think what keeps older
farmers going is the fear that
if I don't keep going there's
nothing left for me to make me
feel like I'm contributing and
am a valuable person....That
keeps a lot of farmers
continuing even perhaps when
their bodies say, we should quit
this."
Psychologist Mike Rosmann calls
it the "agrarian imperative."
It's something he knows
personally as a retired farmer
himself.
It's the kind of determination
to keep farming that causes Bob
Hawthorn to push back when
neighbors ask about retirement.
Bob Hawthorn, Castana, Iowa:
"They keep bugging me.
They say, when are you gonna
quit?
I think I'd tell 'em I won't
quit farming till all hell
freezes over.
Something like that."
But even as farmers take the
long view on their careers,
there may be some things they
don't see coming.
Dr. Mike Rosmann, AgriWellness,
Inc.: "We know the incidences of
injuries and occupation related
illnesses is higher for
agriculture than almost any
other occupation...
Aging farmers are losing their
friends sometimes they're losing
health and they're more prone to
depression and even in some
cases suicide from what we know
from the data."
Access to care is a problem in
many rural areas.
The Nebraska Rural Response
Hotline has been helping farmers
and their families find
counseling since the farm crisis
of the 1980s.
But many don't get the help they
need.
Studies have found the risk of
suicide is 60 percent higher for
farmers than the rest of the
population.
Studies also show a surprising
number of farmers work late into
their careers without a plan for
how it will eventually end.
Dr. Mike Rosmann, AgriWellness,
Inc.: "Over half of aging
farmers don't have a will or an
estate plan and I think it
reflects what you and I are
discussing and that is, perhaps
a denial of the fact that
somebody's got to take over and
I need to have a plan for that."
The plans older farmers make
have larger implications because
more often than not, they own
the land they're working.
That means farmers like Bob
Hawthorn hold a big piece to the
future of farming.
Mike Duffy describes the trend
in Iowa.
Mike Duffy, Iowa State
University: "In the early 80s
about 10 percent, 12 percent of
the land was owned by people
over 75."
Now nearly a third of Iowa
farmland belongs to people over
75.
But those landowners know their
neighbors are watching and
waiting.
Mike Duffy, Iowa State
University: "Where you see
tensions is in communities,
people trying to bid for land
and outbid each other and going
to retirement homes and going to
funerals and asking widows if,
you know, offering to rent their
land and you know, all kinds of
nonsense like that....To some
extent, it's competition among
businesses.
But to some extent, it's very
cutthroat and it leaves bad
feelings."
Bob Hawthorn does wonder what
will happen to his family's
farm.
He knows one thing: after four
generations the Hawthorn family
farm ends here.
He has no children of his own.
He never married.
What will happen?
It's a big question, and not one
he seems ready to answer.
Not just yet.
Bob Hawthorn, Castana, Iowa:
"When I look overhead, I see a
lot of vultures circling and
descending on me.
They can't wait until I retire,
I die, or become physically or
mentally incompetent to run the
farm so they get their greedy
hands on my farmland....Every
farmer wants to grab more land
because he's not big enough.
I never heard of any farm that
wants to sell some land because
he got too much."
For Market to Market, I'm Grant
Gerlock.
Next, the Market to Market
report.
Further unrest in Ukraine is
driving some sales of wheat and
corn.
But it is the growing concern
over the world's number two
economy that is eroding soybean
prices.
For the week, May wheat gained
33 cents, while the nearby corn
contract dipped 3 cents.
Fear of economic instability in
China and its cancelled
contracts with Brazil, plus
continued weather concerns in
South America, are creating a
volatile soybean market.
The May contract fell almost 70
cents, while nearby meal traded
down $13.80 per ton.
In the softs, cotton continued
its upward trend as the May
contract rose 92 cents per
hundred weight.
In the dairy market, April Class
III milk gained $1.16, while the
deferred contract was up more
than 50 cents per hundred weight
higher.
Another bullish week in
livestock as the April cattle
contract was up $2.00, nearby
feeders gained $3.77 and the PED
Virus continued to pressure
April lean hogs higher as it
added $6.30 to last week's close
setting another all-time
contract record.
In the financials, the Euro
gained nearly 4 basis points
against the dollar, crude oil
fell be $3.47 per barrel, Comex
Gold had a huge gain of $42.40
per ounce and the Goldman Sachs
Commodity Index declined almost
8 points to settle at 645.25.
Pearson: Here now to lend us his
insight on these and other
trends is one of our regular
market analysts, Jamey Kohake.
Jamey, welcome back.
Kohake: Thank you, Mike.
Pearson: Big week again in wheat
as we continue to watch this
situation with the Ukraine and
Russia unfold.
Where is this market headed?
Kohake: I still think there's a
little more upside in the wheat
market.
But, like you're saying, this
support right now is coming from
Ukraine, their Crimea region
especially.
They're only roughly about 5%
planted right now and they're
about completely halted.
Farmers can't get fuel and it's
pretty much a standstill over
there.
There's roughly 50 million
bushel of wheat in that area
that could be short now on the
world market.
So we've seen that spill over
into the U.S.
markets and also we've seen in
the southern wheat belt
situations that look like the
dirty '30's again, 30 to 40 mile
an hour wind, a dust bowl down
south this week and everybody
was caught short, getting
flushed out, the market is
turning higher.
I like selling the new crop
December up around $7.30.
This market has been a big
rally, $1.30 roughly from the
recent lows.
So I think you have to reward
this rally with some sales.
Pearson: But you'd let it run
another 25 cents or so before
starting to make some sales?
Kohake: I think there is some
more upside.
The big upcoming date this
Sunday, there's a referendum
vote in Ukraine, see what
happens with that and there
could be some fireworks Sunday
night which I think would be
bullish for wheat.
That should be laid into with
some fresh sales.
Pearson: Now, if come that vote
and the Crimea decides to side
with Russia or stay with the
Ukraine, whatever should happen,
will that provide enough
certainty for the market that we
could see a selloff?
Kohake: I think it is
short-lived myself.
I think we need more than just a
little bit of unrest in the
Ukraine right now or Crimea.
But I think you should be
selling to a big, big rally.
Lost some uncertainty yet with
our crop so there's plenty of
time to re-own and get long.
But I think after $1.30 rally
and this news that is already in
the market is should be
rewarded.
Pearson: Alright.
Well, now let's take a look at
the corn market.
We saw corn rising last week on
the back of the Ukraine
conflict.
This week we didn't see a whole
lot of movement, trading
relatively sideways.
Is that trend going to continue?
Kohake: Short-term I think so.
Wheat has been the leader then
that spilled over into corn real
lightly at times but not much.
I'm a seller here in rallies
too.
I like $4.90 December.
That's a 200 daily simple moving
average and I think you get up
in there you have to make sales
before the big March 31st
acreage report.
But same as old crop, $4.95 I
think you have to lay some off
for sure, or sell your last
batch.
But corn has been a follower of
wheat right now and with the
normal growing season there's
plenty of downside I think so
I'm looking to get hedged up
before the acreage report.
Pearson: Now, with this recent
rally in corn and until this
week the rally in soybeans, are
traders, is the market expecting
any significant change in the
perspective planting report?
Are we seeing one buying acres
from the other?
Kohake: Well, we've seen a rally
in corn so I think we have
bought some acres.
I'm right around 91.5, 92
million corn acres for the
report.
We could see record bean acres,
82 area, maybe more up to 84.
But yeah, we have seen some
acres being bought off this
rally.
The only kind of nuisance there
is, is guys have low risk
tolerance, futures and/or
options is pretty much the only
play.
Basis levels are very, very wide
right now and it's not in your
advantage to sell into the
basis, it's more lucrative to
use futures or options.
Pearson: Alright.
Well, now let's move and look at
the soybeans.
This week, tough week for
soybean producers after that
rally we saw last week and into
this week.
Are we still on the downturn?
Kohake: Short-term I think there
is some morel liquidation yet to
be seen.
But the bean market has been all
spreads this week, old crop
versus new crop.
We saw it blow out up over $2.30
difference, $1.90 was a38%
retracement.
I think we go on down $1.76
area, that's a 50% retracement.
But all of this just uncertainty
with China, Brazil and China has
already washed out on 20 cargos
with Brazil, there's rumors that
they might have washed out
another 20 on top of that.
So a lot of uncertainty.
Brazil's crop seems to be
getting smaller though.
But that seems to be in the
market.
But a lot of spread action.
This week here as well with new
crop I think you have to sell
rallies here before the end of
the month.
I like $11.90 to $12.00, same
technical area up against a 200
daily moving average.
We have been teeter-tottering
all week long, up one day, down
below the next but that $11.90
to $12.00 I think is a great
area to make some early sales.
Pearson: Get in there and take
some cash off the table.
Kohake: Yeah.
Pearson: Alright.
Well, now let's take a look over
at the livestock market.
On the fat cattle side we saw
another run up this week,
another $2.00 in fat cattle.
Where is this support coming
from?
Kohake: It's still demand
outstripping supplies right now.
It was a little bit sluggish
early in the week and we did
catch a late rally here on
Friday.
$1.50 cash created in Nebraska
was a big stimulus but I'm in a
hedge mode here as well but for
the deferred cattle I did some
August, October, December up
near $138 to $140 on those.
I think the cash market could
drop off $10 to $13 come early
spring.
But nearby contracts I think are
safe right now and look for it
to play around the $146 to $148
area.
Pearson: Now, do you see the
cash in the nearby, excuse me,
in the deferreds dropping off
just as demand begins to fall,
as consumers react to these high
prices?
What makes you a little more
bearish long-term?
Kohake: Yeah, demand.
We've seen boxes rip just
consistently $2.00, $2.50 a day
the last two weeks.
I think we've already seen a
little bit of resistance at the
counters right now off of that
and I think we'll have a little
bit better supply situation too
this fall.
But I just see boxes backing
off, don't see this demand
staying up here where it should
be.
Weekly exports though were very,
very good for cattle this week,
the beef market, but I think
that's a short-lived type trade
too.
Pearson: Okay.
Well, now let's take a look at
the feeder cattle market.
Even with this rally that we've
seen in the corn we have seen
feeders get stronger week over
week, up another nearly $4.00
this week.
Kohake: Yeah.
Very, very impressive trade
there.
I still like this longer term
more than I do the live cattle
just based on the supply side
and also it's a normal grain
season, corn trends lower, back
near $4.00 maybe, that keeps
feeders supported too.
I know this is quite a bit below
the market but I like buying
August where I spec play down
around $173.50.
It's sharply lower but if you
did see some liquidation coming
a month in I would look to get
long there.
But I think the feeders are fine
and not doing much there right
now at all.
Pearson: What have we heard on
herd regrowth?
Does it look like this herd is
growing as we see $3,000 bred
heifers out there?
Is that enticing some folks to
retain feeder cattle as breeding
animals?
Kohake: We are but it's going to
be slow and long.
It's not flip the switch on next
spring and we're back to record
herd size.
We're the smallest since the
'50s yet right now and I think
it's a two to four year deal.
I don't think we're going to be
fine again next summer.
Pearson: Alright.
Well, now let's take a look at
the hog market.
April lean hogs up another $6.30
this week.
All PED related?
Kohake: Mostly.
Same situation here as kind of
the box beef trade.
We've seen the index over 33, 34
days in a row new highs, just
consistently day after day after
day.
News today down in Arizona now
but it's overbought obviously.
We've been on a tear with no
setback at all.
It's hard to judge this market
obviously too.
I mean, $130 is a round number
now.
I like to call the look left
indicator, look at a chart and
see what's left, there's
nothing, roll open air so just
draw out even numbers.
Pearson: And you're looking at
$130 in the deferreds here over
the summer months?
Kohake: June, it could be,
that's just a round number just
because there's nothing chart
wise to go off of pretty much.
But exports were very soft this
week for pork.
Beef was strong, pork was weak.
I don't know if that's a sign
that rationing has started, will
be starting, I think you'll just
see back to back weeks in a row
you'll see exports back off.
But it's the same situation as
the beef market, it's going to
be hard to sustain this demand
up in here.
I know we've lost upwards of 5
million pigs maybe but the
demand is the wild card and I'm
not buying into it, I'm waiting
on a setback to see what happens
here eventually.
Pearson: Alright, Jamey, before
we let you go, we saw crude oil
take a little dip this week.
Where do you see that market
headed?
Kohake: Still $1.00 down around
$96 in May.
We've seen a $7.00 setback here
the last couple of weeks and
look for more downside.
But this is a global kind of
issue right now.
We've seen a stock market
setback late this week, the S&P
was on a 150 point rally, we had
our 5-year anniversary this week
of the bull run since Lehman
collapsed.
But this all weakness from China
spilling over into our markets.
Pearson: Alright.
Well, thank you so much, Jamey,
appreciate you being with us.
That wraps up this edition of
Market to Market.
But you can find expanded market
analysis as well as streaming
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