hello. i'm mike pearson. consumer prices rosemodestly last month as motorists endured higher prices at the pump.the government reported this week that its consumer price index -- a key barometer ofinflation -- rose 0.3 percent in june. food costs inched up 0.1 percent, in theirsmallest gain since january. but energy prices increased by 1.6 percent, driven largely bya 3.3 percent spike in the cost of gasoline. and stripping out the volatile food and energysectors, so-called, “core prices†rose just 0.1 percent.one place where prices are definitely not rising is in the grain markets. and the freefallcontinued again this week after the agriculture department reported that america’s dominantrow crops are in the best shape in decades.â
in its latest crop progress report, usda rated76 percent of the u.s. corn crop in good to excellent condition. that’s the highestrating for this time in july since 1994, when 86 percent garnered those lofty ratings.heading into the critical pollination phase, 56 percent of the crop is silking… up morethan 20 points from the previous week. and with extended weather forecasts calling forfavorable conditions to continue, usda is calling for a record average yield in excessof 165 bushels per acre. similar conditions abound in america’s soybeanfields where 73 percent of the crop is rated in the good to excellent range. sixty percentof the nation’s soybeans are blooming, as they too are off to their best start in 20years.
with three-fourths of the nation’s winterwheat already in the bin, the government reports 84 percent of the spring variety is headedand 70 percent of the crop is in good to excellent condition.bumper grain harvests – and lower feed costs -- are a favorable development for livestockproducers, but the price of forage is on the rise in some areas – especially out west.nearly half of america’s haying and grazing areas are in rough shape, with the worst beingin california where 90 percent of the pasture and rangeland is rated fair to very poor.and with 38 percent of nation’s cotton setting bolls, more than half of the crop (52%) israted in good to excellent condition.â with record grain production seemingly becomingmore likely with each passing day, corn prices
are approaching a five-year low and the pressureis on producers to manage their price risk effectively.for those who had the insight – and good fortune – to forward contract a portionof their grain earlier this year, or hedge at least some of it in the futures markets,the blow won’t be quite as bad. but selling off the combine this fall in the cash marketwill likely be a recipe for some of the lowest prices of the year.make no mistake: commodity marketing is a complex affair with significant risks forboth buyers and sellers. but entrepreneurs are working to demystify the process. and,as david miller explains, an innovative program called grainbridge has become a popular on-linetool for agricultural educators and students
of the trade.â mtm 3948/ grainbridge balancing risk against reward on the farmis a way of life. gone are the days of making decisions based on a shoebox full of receipts.and passing on the techniques of how to maintain that delicate balance to the next generationusually occurs after family members become business partners.but two nebraska entrepreneurs weren’t satisfied with the way information was being gatheredfor producers. pat kroese, vice president of marketing, grainbridge:...andwe just decided ... there's got to be a better way to help our businesses and the producermanage risk and bring all these components together, from crop insurance to your brokerageto your cash grain management to the planning,
it seemed like it's all in different excelspreadsheets and file cabinets. and so we just decided with the technology that is outthere we've got to bring it all together.†pat kroese and his best friend mark franktook their more than 40 years of combined experience in agricultural financial planningand risk management and applied it to the problem.the pair enlisted the aid of chafik barbar, a computer programmer with banking experienceand the three partners launched grainbridge in 2007. after two years of development thefirst software went out the door. the heart of the program allows producersto consider risk factors like input costs and balance them against the potential rewardsof cash marketing and futures trading in a
real-time environment.while it’s not the only program of its kind, grainbridge was one of the first in the marketplace,and its list of clients includes independent bankers, consultants and commodity brokers.one of the company’s first customers was farm credit services of america, a farm lenderwith more than $21 billion in assets. in 2010, fcsamerica began offering the innovative productto some of its 52,000 stockholder-owners. but the omaha, nebraska based agriculturallender had a different application for the software.carl horne, young beginning & small program & outreach manager: “and we said, you know,one of our focuses is on the future of agriculture and so we said, ‘when they're starting totalk about marketing and risk management in
high schools wouldn't it be nice if we couldprovide this tool to those classrooms and give them some experiential learning. youknow, if we have the best product through grainbridge, let's get that into the highschool level.’ †kroese, frank and barbar always had an educationalcomponent in mind but there just weren’t enough hours in the day to bring the ideafrom concept to completion. fcsamerica agreed to act as the distributor for grainbridgeand in 2012 began giving the program to a limited number of vocational agriculture teachersand ffa advisors free of charge. the beta group included 35 instructors in iowa, nebraskaand south dakota. initial feedback was positive but almost toa person, the request was made for a curriculum
to help guide instructors on the best useof the program. grainbridge responded by hiring kim kidder, a teacher with more than 15 yearsof classroom experience, to help design an educational component.the curriculum, released in the summer of 2013 explains the finer details of risk managementincluding more advanced concepts like futures and options trading.students learn terminology and teachers can measure performance with worksheets and computerbased projects. the program can be interfaced with data from the cme group or the instructorcan act as an elevator operator for the entire class.so far, fcsamerica has distributed grainbridge to more than 200 classrooms in iowa, nebraska,south dakota and wyoming and the company continues
to absorb all the costs for the academic useof the software. micah weber, a vocational agriculture teacherin rock valley, iowa was one of the early adopters. in nearly 15 years of teaching weberhas used several different models to show his students how to manage risk.micah weber, vocag instructor, rock valley high school: “the part that really kindof took my interest was that it was a real world application that farmers are actuallyusing out there, not that there aren't other things that farmers are using, but this waskind of a newer one. i think some of the other type of programs that are out there kind ofjust have a little bit of an older look to it and that doesn't really appeal to kids.and so the user interface was very user friendly
for the kids and i think it was really easyfor them to catch on and to use. the hard part about this year was that the curriculumcame out and i sat right next to the kids and we learned together.â€some of weber’s students use actual data from their family operations to gain skillswith grainbridge that go beyond agriculture. jerod hansen lives on a row crop operationnear rock valley. jerod hansen, senior - rock valley, iowa:“this is kind of new to me. there's a lot of ways to manage your risk, which i'm notall 100% sure about, but i'm just getting to learn about them here in ag class so thisis probably the first time i've heard about them, like futures and options and stuff likethat...and it's not just good for ag, it's
good for a lot of things. you should be budgeting,keeping track of your money.. “ and jill petersen, a first year teacher, alsohas enjoyed success with grainbridge in her blair, nebraska classroom.jill petersen, vocag instructor, blair high school: “initially i was just excited. abouthalf of my ag business and marketing class comes from a production background and theother half has no concept. and so to bring agriculture to students in a real, as muchof a real life way as you can numbers wise, was huge. i also really liked that it hadcurriculum with it and so they not only provided me a real time system that real producersare using right now but they connected it to the education world, which sometimes doesn'thappen.â€
emily bledsoe grew up in rural nebraska, whereher parents grow pumpkins and operate a corn maize during harvest season. bledsoe got anew perspective on risk management when petersen started using the software in class.emily bledsoe, blair, nebraska: (00;02;37;10) “it was absolutely crazy and then she pulledup this grainbridge software and i had no idea what she was talking about and then we'vebeen doing this for weeks and weeks and weeks now and it's really interesting.â€for the grainbridge staff, development is a never ending activity. as suggestions comein from those using the program improvements are made to the software. and kroese remainsupbeat about helping the next generation of farmers and educators develop effective riskmanagement strategies.
pat kroese, vice president of marketing, grainbridge:“you know, it has been exciting. the reaction we've gotten in the field has been overwhelming.the interest, everybody wants the tools, nobody says no. it's just a matter of when do weget to it and how do we implement it. for market to market, i’m david millergrain prices were mixed this week, as a rally on friday pushed wheat back into the black,while nearby corn prices fell again on notions of record production.for the week, september wheat gained 6 cents, while the nearby corn contract moved 6 centslower. soybeans received some support from favorableexport numbers, but not enough to … as the august contract gave up 19 cents. nearby mealprices followed suit with a loss of $7.50
per ton.in the softs, cotton declined for the fourth consecutive week as the december contractlost 38 cents per hundredweight. in the dairy market, august class iii milkgained 17 cents, while the deferred contract moved 71 cents higher.over in livestock, cattle prices moved back into record territory as the august contractgained $2.50, nearby feeders advanced by $6.60 to settle at an all-time high, but the declinein hog prices continued as the august contract lost nearly $3.50.in the financials, the euro declined by 10 basis points against the dollar. crude oiladvanced by 14 cents per barrel. comex gold lost $6 per ounce. and the goldman sachs commodityindex gained 3-and-a-half points to settle
at 634-even.pearson: here now to lend us his insight on these and other trends is one of our regularmarket analysts dan hueber. dan, welcome back. hueber: thank you very much for having. pearson: well, we are excited to have you.we have got - we saw wheat market stage a bit of a rally. we are up a nickel this week.have we hit the bottom? does it look like we are going to see some support from hereon out? hueber: we have had about two weeks now ofactually pretty stable trade which is encouraging. i mean and it just stands to reason a markethas to quit going down before it can go back up. so that said the grains particularly cornand wheat when they do bottom they tend to
get an extended, sideways patterns. it lookslike we could be into the beginning stages of that and there was absolutely was no positivenews out there in the market this week. the export side of it, the black sea owns theworld trade at this point. the crop data coming out of the dakotas on the equality tour reallyshows very substantial yields in the spring wheat up there. so, it is not like it hadgood news to turn it around yet we stayed stable. we always think that a good sign isif you receive bearish news and you don't react to it you know it probably says themarket has heard enough of the bad and at least wants to start fishing for somethingnew or something a little more positive at this point.
pearson: maybe we are finding a little bitof resiliency at these prices. hueber: correct. correct and certainly weare not seeing it in big export numbers. the export sales this week were modest at best.they certainly were not disappointing but nothing to get anybody excited about either.but that said, like i say we have heard this. we have heard the story now for several months.the market i think is just a little bit tired of playing the bear. the crops technicallyare not going to get significantly larger than it has already. so, we have to factorthat into the price value. a few weeks of stabilization and we could maybe then starttalking about a corrective rally to the upside. pearson: so, advice for producers as you mentionedwe have seen fairly decent yields coming out
of the crop tours on the spring wheat so far.for producers in that situation just hold on and wait and see if we get that littlerally. hueber: for wheat - that is one market i thinkit is probably ok to hold the physical without having a price. i think we could turn aroundwith a nice corrective rally during the month of august maybe up into labor day or something.i would -- that. i don't think we are going to see any market get carried away to theupside. the europeans are a little slow on their harvest but the quality is such it isgoing to be mostly feed wheat but great yields. i think the russian crop is going to be threeto four million metric ton higher than initially thought. so, it is pretty difficult to thinkwe are going to get carried away on the upside
but that is certainly not to say you couldn'tsee ten percent rallies. so, 50/60 cents and then --. pearson: keep close to that six dollar mark. hueber: correct. pearson: pull the trigger. hueber: exactly. pearson: well now let's jump down into thecorn market. it looks like it is going to be a big crop. that is the topic all overthe place. how big are you thinking? what is the trade anticipating as far as size goes?
hueber: you know what the trade has reallyfactored in at this point is probably maybe even a little conservative from some of thenumbers you hearing. lanworth who is a satellite technology company did put out an estimatethis week of 172.8. i think most in the trade have been thinking we will probably b closerto 170 on this report but that number certainly did not shock anyone. so, it is a, you knowto banter around 170/172 is not a shock to anybody in the trade. didn't really producea negative reaction per sea when it came out not that the market performed well anyway.we were still under pressure throughout the entire week. i think difficult thing lookingahead, there is just no threat out there. i mean here we are going to have probablyalmost a 100 percent of this corn crop pollinate
under zero stress and generally that translatesinto large yields. this crop - in trader's minds and in reality probably gets biggerpretty much every week at this point. pearson: and to that effect as we watch thiscrop grow larger and larger until we see what is actually happening we had a question fromone of our facebook viewers, paul kronberg in wisconsin is curious with the prices underpressure as they are will china and other buy up and build their reserves with theseprices or is china pretty well tapped out? hueber: china is in a situation they havean ample reserve of corn. probably a little excess corn. they had a very strong crop thisyear. some of the maneuvers that they have put into place in concerns with the gmos probablywere in as much response to having excess
amount of bushels, a difficult time managingthe bushels they have at this point in time, they will - everybody buys at a certain pricebut by no means will they be a major buyer. one of the last nails in the coffin, i guessyou might say, this week was the - yesterday they announced that they would no longer acceptany ddgs from this country that were not certified free of the mir gene by the usda. so, in essencethey are not going to take any ddgs. so again just another indication they have more thanample stocks at this point in time. they can choose to be a little bit picky about whatis going to come into the country at this point in time. pearson: as we look out on the countrysidethere are still a lot of producers out there
with 13/14 crops sitting in the bin. as weapproach harvest, approach a record harvest, potentially we are going to need all thatbin space. what is the best advice for getting that out of your hands and into the market? hueber: i don't know if i would call it bestadvice at this point maybe the only advice i am afraid we were on a slippery slope here.you know not that - there is kind of a seasonal type pattern in big years where by the timeyou get to august 1, sometimes you will see the market stabilize but you know we knowwe have this large crop coming. we know the transportation system is going to become taxedwhich means basis levels will probably deteriorate if we move closer to harvest. so, i thinkthe best move at this point is to just get
the bids cleaned out, have that room for newcrop. the new crop prices are offering very ample carry. if you want to put it in thebin and try to carry it out until the spring or summer months, but unfortunately i thinkif you still have old crop product around there is not much you can do other than justto convert it into cash. pearson: i do believe that july '15 tradearound four dollars. hueber: exactly. just under four dollars.about a 30 cent premium to the current december futures. so, you know for those with bin spaceit should provide a nice return to that bin space. pearson: all right. now let's jump over tothe soybean market. we are beginning to see
that diversion. we are seeing that tightnessin the old crop versus another potentially record crop in the new crop. for producersout there with some being still in the bin, do you continue to hold and ride this recentrally on old crop beans? hueber: to push it much more than a few weeks,i think you are living in dangerous territory. you are not that far from the south whereyou could see some early beans come in. so, it is - and you know the trade is very wellaware of that. sure the processor is going to try and grab whatever -- he can yet. imean there is still good money crushing beans but that said they know within 30 days thereis going to be ample supply out there. so, again i think if you saw a 30 cent/40 centrally any time in the near term here. boy,
it is just time to reward it and have thosebeans move down the road. pearson: thoughts on new crop? we are hearingyield reports close to usda's number. pearson: which would be a very, very largesoybean crop. hueber: it is still a very large crop andwhat is really impressive about that is when you consider that kind of acreage or thatkind of yield number on the record acreage. this week and you covered it earlier in thereport the ratings on soybeans have only been better in 1994 and 1992, and i went back andlooked at those years and in each of those years we set new records for bean yields.so, the potential is there but of course compared to let's say in 1994 we have got seven millionmore acres in production which would tend
to dilute the yield a little bit. so if wedo come out of that 45.2 which is the current usda number that is also what lanworth cameup from their satellite data, that would actually be very substantial considering there is 84million acres or over 84 million acres planted and granted we know in beans, in the monthof august, everybody keys in august. you know strange things could still happen. most ofthe weather forecast that i have seen are pretty pleasant. nobody is calling for anymajor stress. if we do get moved through there without seeing any reduction in yield it isgoing to be pretty tough to, i mean i think we do at this 10.80/11 dollar area which westand in the new crop beans, i think there is a certain amount of risk premium builtinto that already. so, it wouldn't take much
to erase that if they don't see any threatduring the month of august here. pearson: certainly and certainly if the yielddata should change in the august report maybe go ahead and make some sales today to putsome money in your pocket. hueber: absolutely. pearson: well, let’s jump down - let's lookat the livestock numbers. it has been a compelling story. we have talked about it again and again,record prices, it is almost like we are talking about the stock market when we are talkingcattle. pearson: up 750 this week on the fat cattleside what changed? why the turnaround from last week to this week? why the big spike?
hueber: you know and again i think the littledip we had witnessed in the cattle market was really more of a corrective phase, andagain everybody is trying to outguess when are we going to see the number rebuild? whenare we going to see these herds start to turn around? and every time we see a report itjust hasn't quite happened yet and i think the shorts are quick to cover when that isthe case. they have been behind the 8-ball all year long and are going to be very rapidto pull that money back in. the other side of the coin and probably the more importantside of the coin is the - not just the domestic demand but the international demand. i meanthe exports of all of our meat products but certainly pork and beef just continues tosurprise everyone. domestically i think some
of the bigger shocks have come from the factthat the consumer isn't really back that way yet either. so, it is - as long as they arewilling to pay the price and maybe this is kind of the little treat when other thingsmaybe haven't been so good over the few years, but we're still going to have a nice mealout there. that has really kept demand very much in check here on the - all the meat productsreally. pearson: so in your analysis, do you see thiswaning any time soon or are we approaching a plateau? hueber: you know and again i would have tobelieve so yes. you know -- even with the rebound that we have in the cattle this weekwe are just back approaching what we were
the previous highs, flirting maybe with alittle bit of a new high. now the placement number on the cattle on feed report todaywas a little bit positive. the marketing, the number on feed was pretty much average.so, there is less of a story to continue to push it higher. that said, i personally thinkyes. i think we are stretching that rubber band extremely far. now are we going to gothrough a massive wipe out to the downside? probably not. you know like i said unlessthe consumer for whatever reason all the sudden has decided he doesn't like the taste of beefanymore. you know that seems pretty unlikely here at this point in time. now we are tailend of summer that does tend to trim demand a little bit. it could soften things as wemove into the fall months.
pearson: now let's jump over real quick andlook at feeder cattle. we have seen fat cattle continue to rise, corn continue to fall, itis get bit into feeder prices. can that continue indefinitely? hueber: you know it is - right now they havegot that double whammy particularly with the corn market continuing to move lower and lowerand you know here again too without any real strong signs that we are rebuilding herdsand again you throw in the whole situation in california and other pasture areas wherethe pastures are not improving it is, you know right now it is, i don't want to saythe sky is the limit, but i mean there is really nothing that would seem to stand inthe way of the feeder prices staying up in
the levels it is at right now. pearson: now let's take in and look at thehog market. we have seen - this is the second week we have declined we have seen in hogprices. are we starting to see the industry respond, excuse me grow? hueber: grow. you know and i think that isthe perception and i think it is correct perception. you know the - my family is very active inthe hog business and yes, they are seeing demand for people either wanting to expandherds, build new facilities but that is nothing immediate. you know i think that is more ofa psychological edge there right now. the great side is you know here as with the beefwe have not seen really any, or at least very
negligible slack in demand in face of thesehigher prices over the last 12 months, but with that said - and i think the same thingwe are going to face in the cattle at some point, you know we are - you have absorbedthe news, we know where the reductions are in the herd, you have kind of calmed downthe threat of even that second wave of the ped virus. so, yes the numbers are rebuildingand again we can turn them around a little bit faster than we can turn around cattleherds. so that does seem to be in the works at this point. are we ever going --. whenyou see a correction they can be severe, don't take me wrong, but i think one of the realitiesof what has happened now in the last 12 months is we really brought the livestock sectorback into par with so many of the other sides
of agriculture, the price of ground, the priceof grain and it is; as i mentioned earlier last week and i had the opportunity to goto the kansas city federal reserve ag symposium and very, very livestock centric there andi think most of the people that i heard present there really kind of feel this is we havemoved back to the era of the livestock producer. pearson: a lot of interest in that sector.thanks for taking the time to be with us, dan. hueber: absolutely. my pleasure. pearson: that wraps up this edition of marketto market. but dan and i will continue our discussion – and answer some of your questions– in our "market plus" segment online. you'll
also find audio podcasts and streaming videoof our program – as well as links to our twitter feed, facebook page and the rest ofour social media outlets – exclusively at the market to market web site. and be sureto join us next week when we’ll examine the market impact of the government’s latestestimates on unemployment. until then, thanks for watching. i’m mike pearson. have a greatweek.