Skeptical Senators Tangle with Obama Administration
An affirmation the recession is losing steam was seen in the most recent Conference Board report. For the third month in a row, seven of ten indicators made it into positive territory pushing the Index higher.
One of those indicators -- unemployment claims -- helped give the Index a boost despite a record 9.5 percent unemployment rate. According to the Labor Department, the fewest number of jobless claims were filed this week since the beginning of the year.
And in the face of petroleum analysts saying oil prices should be on the decline, the value of a barrel of oil hovers above $65.
These elements helped drive the Dow Jones Industrial Average up 200 points this week to finish over the 9000 mark for the first time since January.
And Friday marked the final increase of the minimum wage for most U.S. hourly employees. The 70-cent hike moves the bar from $6.55 per hour to $7.25 per hour - an amount set during stronger economic times
As the economy shows signs of recovery, thoughts turn to the creation of new jobs. If the Obama Administration has its way, one of those job generators will be an environmental cap-and-trade law. One version of the controversial measure passed through the House last month and members of the Senate Agriculture Committee set to work on their edition of the bill.
While much of Washington was knee-deep in health care talks this week, members of the Senate Agriculture Committee still found time to debate the affects of cap-and-trade legislation on American agriculture. Senators spent much of the day-long hearings at odds with USDA Secretary Tom Vilsack and EPA Administrator Lisa Jackson.
Sen. Mike Johanns, R-Nebraska: "What’s going out of production? Because the important thing about that is that affects the pork producer, the cattle guy and it beats the living daylights out of them.”
Some Senators raised concern the lack of support from industrialized nations like India and China could render a U.S. cap-and-trade measure “useless.” Vilsack and Jackson disputed those claims.
Sec. Tom Vilsack, USDA: "In visiting with international leaders, with foreign leaders, with dignitaries on this issue...I got the sense that they are waiting for the United States. They wanted to see action they wanted to see leadership from the United States. My view of this is that the world is waiting for us. I really expect them to be participating in some form or another."
Sen. Saxby Chambliss, R-Georgia: "But the fact is Mr. Secretary this week they have told Secretary Clinton ‘we can do whatever we want to’."
Lisa Jackson, EPA Administrator: "I recognize that we need others to join but I'll tell you here that we don't have to do it all at the same time."
Sen. Mike Johanns, R-Nebraska: "Here's the problem... poor Tom Vilsack has to go out there with that testimony and try to convince farmers on a hope and a prayer that somehow this is going to work out."
Vilsack and Jackson told skeptical Senators that carbon offsets could dramatically alter the cost structure for farmers and ranchers. USDA analysis released this week claims farmers could earn an additional $75 to $100 million dollars in the coming years by practicing no-till agriculture, capturing methane gas, and planting trees.
Obama Administration officials said land owners could receive payments from a federal carbon offset program by planting trees on marginal lands which might cause a rise in commodity prices and boost farm income. But neither official offered precise predictions.
Lisa Jackson, EPA Administrator: "An offsets program that includes some incentives for forestation could have the impact of taking some acreage out of production and into forest production. But we do not have a number."
Johanns: "It is no consolation to stand with one foot in the campfire and one foot in the ice bucket and say on average I'm in good shape. It is no consolation to say to farmers and ranchers you are going to be in good shape on average if you don't know the regional differences, if you don’t know the crop differences and you can’t tell them how much land is going out of production. And yet we have a House bill that is passed and I find that shocking."
During the hearing, Senate Agriculture Chairman Tom Harkin also took issue with the long expected EPA ruling on higher ethanol blends. The Environmental Protection Agency and Department of Energy have extensively tested the affects of ethanol-to-gasoline blends above E10. Harkin, an Iowa Democrat and biofuels supporter, took issue with what he called “bias” at EPA.
Jackson did not directly refute or defend the claims of an EPA bias but did pledge to have an official ruling by early December. Harkin recently mentioned an E15 mandate could be applied to the Senate’s version of the climate measure.
The full Senate is expected to take up cap-and-trade legislation in early September.
Preserving Pennsylvania's Barns
Though threatened by urban sprawl, decay, and changes in farming practices, thousands of barns still remain.
And as an incentive to preserve the symbols of agricultures past, a federal income tax program allows a credit equal to 20 percent of the amount spent rehabilitating a historic barn.
As producer Laurel Bower Burgmaier discovered last fall in Pennsylvania, a growing number of “barn huggers” is working to preserve the iconic structures.
Robert Ensminger, Barn Historian: “I’m prejudice. I’m a Pennsylvania German, I can’t help it. They’re some of the largest and most magnificent structures, using medieval timber framing. They’re very interesting from a technological point of view and they reflect the traditions of the European regions in which the settlers came. So they bring all these things over here replicating European barn landscape in Pennsylvania, and it spreads right across country. It’s a neat story.”
Robert Ensminger is an internationally renowned barn historian and is considered the foremost expert on the Keystone state’s iconic structures. He literally wrote the book on “The Pennsylvania Barn,” which has been described as the first comprehensive study of an important piece of American vernacular architecture –the forebay bank barn, better known as the Pennsylvania German barn.
Market to Market tagged along as Ensminger toured Pennsylvania’s picturesque Oley Valley, showcasing some of his state’s architectural treasures –many still in use today.
Bob Ensminger, Barn Historian: “The first barn, grundscheier, the Hopus Barn, was built by a Casper Maul who was a Hessian from the North Central part of Germany. He brought his barn style with him and he stayed here after the revolution. His farm was only 50 acres. So, it didn't require a real big barn. So even though they were building two level bank barns at that time, he chose to build a typical ground level grundscheier barn for his small farm in Oley Valley.”
Barns in this region typically are classified as either banked or ground, with the latter variety having no basement.
Pennsylvania is one of few states that has a style of barn architecture that bears its name. The traditional Pennsylvania barn is a type of banked structure built in the U.S. from about 1820 to 1900. The most distinguishing feature is the presence of a forebay, an area where the barn overshoots its foundation. These barns were banked or set into the hillside to ensure easy access to both the basement and the level above.
Bob Ensminger, Barn Historian: “The barn we're at now was the next generation of a true Pennsylvania barn which has a bank plus the diagnostic forebay. Since it's two levels it was much bigger. You could house cattle and animals in the basement stable. You could store hay and straw in the upper level. You could thresh on the threshing floor. So, it was a versatile multiple purpose barn which became the model then for the barns that developed beyond it larger and built, being built of different materials as time went on.”
Today, many of these symbols of America’s agricultural past are threatened by demolition. Too often, the weather-worn structures are razed to make way for “progress” and part of Pennsylvania’s heritage is lost forever.
Bob Ensminger, Barn Expert: “They preserve the past in terms of the traditional building forms. They show how technology was used in farming in the good old days and although its changed, the amazing thing about these Pennsylvania barns is that they’re still versatile enough to serve farmers today…We know those people were building out of tradition more than from plan. It shows their European origins, the style of barn they had. It shows that they were hard working industrious people. They had to be to survive on a farm in those days.”
Along with Ensminger, an enthusiastic group of people is working to preserve and protect these historical icons. A few years ago, the Historic Barn and Farm Foundation of Pennsylvania, or HBFF, was created.
Sheila Miller, Historic Barn and Farm Foundation of PA: “Our purpose and goal is to do as much as we can to make these barns remain standing here in the state of Pennsylvania. Unfortunately because of a lot of urban pressure and neglect, we’re losing historic barns at a very rapid pace. We are here to try and slow that down, even if it means retro-fitting these barns to other uses. We want to keep as many of them standing where they were erected in the first place, and if not, at least move to a place where they can be preserved.”
The HBFF works with many local, state and national organizations to record and save historic barns. In 2007, its board of directors developed a standard survey to help owners share information on their individual barns. They wanted an inventory of the kind of barns that remain on the Pennsylvania landscape, their locations, and reasons farmers keep them as integral parts of their farming operations.
Sheila Miller, Historic Barn and Farm Foundation of PA: “The foundation is also going to be working very closely with our congressional delegation. To get them to put the money where their mouth is I guess is the best way to say it.”
Miller served in the Pennsylvania House of Representatives for 14 years and was chairman of the Center for Rural Pennsylvania. She hopes her background will benefit the foundation.
Sheila Miller, Historic Barn and Farm Foundation of PA: “”Both the 2002 and the 2007 Farm Bills, they put language in for historic barn preservation grants. The funding never materialized and we’re hoping 2009 Congress will actually go ahead and put money towards that grant program.”
A familiar site on many Pennsylvania farms, barn architecture is as varied as the heritage of the farmers who settled the state’s early frontier. The timbers and stones taken from the land combined with hard labor resulted in long-standing storage buildings that provided a safe haven for harvested crops and livestock.
Bob Ensminger, Barn Expert: “There are two barns on the property. One is 1787 with a date 1837 with another date. One's an early Switzer Barn was stone construction, a classic stone Switzer. The other is a typical standard Pennsylvania Barn of the earlier 1800s and they're they're built one against the other.”
Last June, the HBFF welcomed the National Barn Alliance to Pennsylvania for its annual conference. For the first time, these two non-profit associations brought together enthusiasts from seven states and the District of Columbia.
Sheila Miller, Historic Barn and Farm Foundation of PA: “We want to make it a bit more uniform with what the National Barn Alliance is doing. We want to try and determine where throughout the Commonwealth where these barns are located and get them recorded.”
Bob Ensminger, Barn Expert: “My hope is not only to document them, this is the first step. But in the process of documenting, we get people interested enough to want to maintain them and keep them. If they’re going to be used, they’re going to stay.”
For Market to Market, I’m Laurel Bower Burgmaier.
Market Analysis: Virgil Robinson and Walt Hackney
- Download Audio (MP3)
- Subscribe to Podcast iTunes | Other
For the week, September wheat lost more than 25 cents, while the nearby corn contract was down 6 cents.
Strong export numbers, released this week, supported the soybean market. For the week, the August contract gained almost 12 cents and the nearby meal contract was up $5.70 per ton.
In the softs, cotton lost ground this week as the December contract posted a decline of $4.45.
In the dairy market, Class III Milk futures closed down nearly a nickel at $ 9.96 per hundredweight.
In livestock, August cattle were down $1.85. Nearby feeders lost $2.05. And the August lean hog contract lost just over $5.60.
In other markets of interest, the Euro gained 76 basis points against the dollar. Crude oil gained $3.47 per barrel. Comex Gold was up $15.60 per ounce. And the Goldman Sachs Commodity Index gained 18 points to close at 449.50.
Robinson: Well, my opinion is probably irrelevant but the S&P futures ...
Pearson: Not on our program it's not irrelevant, Virgil.
Robinson: In that subject matter it probably is but the S&P this week made its strongest close in the last 41 weeks being back to October so it would be kind of misleading for me to say the near-term trend in that market is down, it's not, it's up and appears to be headed higher. So, if that is a barometer of economic behaviors and/or the perception of behaviors it's pretty darn strong as we visit tonight.
Pearson: Do you feel pretty good about this crude oil price where it is?
Robinson: It's $10 off its lows and only a few dollars from recent highs. It kind of flies in the face of conventional wisdom. I guess if I were long crude oil, which I am not, I would probably protect that position with some type of strategy, most likely an option strategy. If I were in the business of acquiring or procuring crude I would probably, in fact, create some kind of a ceiling. This is a very pretentious market and one that has a personality unlike I've ever seen and certainly anything is capable of happening the balance of this calendar year.
Pearson: A little weaker dollar encouraging maybe some ag trade?
Robinson: Well, weaker dollar but you'd be hard pressed to see the results of that in the futures markets this week. Corn futures steady to a fraction lower, wheat futures lower, soybean futures mixed so perhaps there's been something of a disconnect trumped I think by the perception of what many would lead us to believe is record corn and soybean production.
Pearson: Let's talk about wheat too while I've got you here and then we're going to talk livestock and dairy with Virgil. What is your take now on wheat prices as we have pretty much come close to wrapping up the harvest?
Robinson: A couple of things, I like to try and watch rough rice futures as well, very strong behavior there of late and there is something of a correlation in my mind between rough rice futures and wheat futures. So, combining the technical breakout -- I'm going to classify it as that in rough rice, I think that market is headed higher over the balance of this calendar year, I think that will have an influence on wheat futures. That doesn't speak to the issue of the basis so what I'd ideally do here, any futures rally in the Chicago, Kansas City or Minneapolis futures contracts to the tune of 25 to 50 cents I'd sell the physical product and then replace it either with some kind of cross hedge here, which is kind of a sophisticated strategy ...
Pearson: Not over the heads of our viewers.
Robinson: ... or some type of option strategy. I like the vertical call spreads when replacing inventory.
Pearson: Real quick because I'm also interested in this too -- USDA is going to re-measure the eastern Corn Belt, several states in the eastern Corn Belt -- what is that telling you about these reports?
Robinson: Let's speak to the issue of satellite imagery for a moment which is being employed more and more by USDA in their effort to try and accurately report information of this kind. It's going to be thoroughly tested. It's not unprecedented to see a switch July to August in planted corn acreage. Our models would suggest if there is a switch here based on this re-survey it's not likely to be terribly large.
Pearson: Your take on the corn market? I've been all around the Corn Belt, you've been all around the Corn Belt, really it looks pretty good. Now, I can't see all the flooded spots over in Illinois. I quoted my dad saying that everything looked really good in Illinois and he said, well of course it does now because the corn's up and you can't see the flooded spots.
Robinson: Well, perhaps this re-survey will address that issue so let's give the department the benefit of the doubt and assume it does. We have any number of analysts of the opinion that we have a record corn crop and record soybean crop coming down the pipe here and crop conditions, even though we are late in many areas of the Corn Belt, would I think underscore that. So, let's just assume we are talking here big numbers. It will put an emphasis, in my opinion, upon storage and marketing tactics associated with on-farm storage and using that on-farm storage to enhance return. There will be opportunities in those circumstances.
Pearson: Let's talk about soybeans, the soybean market you're looking at fairly good discount, old crop to new crop but it looks like that old crop is kind of affecting some of these what we might call transitional contracts as well.
Robinson: I think you have a market awaiting here the available supply out of the southern U.S. and of late there have been some beneficial rains and it looks like the soybean crop is going to be okay. So, I think that is taking the edge off that Gulf market as we visit tonight. So, while old crop retains a premium, with all due respect, old crop inventories in the U.S. and in the world are not particularly large, they are precariously small. But, again, the anticipation here of what could be record large soybean production stares us in the face and that has trumped most other factor in this market.
Pearson: Do you want to sell corn and soybeans?
Robinson: I'm reluctant to sell either below the cost of production. I would prefer to find some type of storage opportunity or thoroughly research all those contracts that are being offered by your local vendors. There are contracts that do resemble the ability to store on-farm, for example. Make sure you understand those because this is a year where over the course of the next many months prices are likely to stabilize and I think gradually and slowly improve.
Pearson: Let's talk about the other side of this equation, half the corn and beans we grow go into livestock and Walt, I want to ask you about dairy tonight too but let's get to that in a minute. Let's talk about the fed cattle market. Cattle on feed report out this afternoon, what is your reaction?
Hackney: Before we go to my reaction I want to address this farm storage issue Virgil brought up. As I drove to Iowa Public Television today a phone call told me a grain bin dealer in a small community in western Iowa last month sold locally 50 grain bins and they expect to hire two crews to help him put them up.
Hackney: Into the cattle and feed report -- we had two reports. We had an all-cattle total inventory report today. I think it's grossly overstated. I think that they have missed the target by a minimum of two and possibly three full percent. They are calling the all-cattle inventory only down to 99% of the year prior. I don't think it's possible because of the extraordinary rate that has been put in the fall of 2008 on the ranch country, on the beef herd because of extraordinary fuel costs and feed costs. The other side of that coin are the dairy producers who have taken phenomenal losses and continue to take them with that 9.96 milk you saw today. Those liquidation of those enormous dairies are in effect as we speak and I don't think they're included in that inventory report. That be as it may the cattle on feed report actually had the on-feed numbers as of July at 95%. That's fairly accurate I expect. They had their placements at 92, that is one percent under the trade guesses which is close enough for government and then in regard to the marketing that was the one that was a surprise. They had one more day of marketing and so forth in June except they were estimating the marketing to be at 99%, it actually came out 101%. So, that should in effect create more of a bullish attitude toward the cattle on feed report. I don't know how much of it is built in, I don't know how much of it would be reactive back to the cash market, probably none. The mercantile may show some positive reaction to it Monday but that is almost irrelevant to the cash market.
Pearson: We've got a couple of minutes left, your take for fed cattle prices, now that we've got this cattle on feed report, going into 2010 and even the fourth quarter of this year, what do you think we're going to see?
Hackney: Well, people much more steadied and authoritative than I am would be quick to tell you they anticipate a 90 cent cash market in the fourth quarter and potentially 95. I think I'll subscribe to the $90 cattle market in the fourth quarter. I'm not sure that the economy at the meat counter will support $95 cash cattle. That would be the only restrictor.
Pearson: Can you give any good news to dairy producers out there once we go into 2010 for those milk prices?
Hackney: Drink more milk.
Pearson: And hogs, let's talk about the hogs here.
Hackney: The hogs are in serious trouble and have been, severe losses, a lot of liquidation, many bankruptcies. The analysts as we speak are starting to change their opinion that the extraordinarily positive climatic weather we've had the last two months have increased the weight of the hog, increased consumption, increased tonnage. As a result that hole we were hoping for in August/September probably isn't going to create itself and so we probably are going to continue killing two million hogs a week or more as we approach the fourth quarter. That isn't going to support a higher cash market.
Pearson: Walt Hackney, as usual we appreciate your insights in this livestock market and appreciate very much Virgil what you bring to us on the grain side and what's going on there. It's going to be an interesting 2009, that's for sure. That will wrap up this edition of Market to Market. If you'd like more information from Walt and Virgil on where these markets just may be headed visit the Market Plus page, it's there at our Web site. You'll find streaming video of our program and you can download audio podcasts of our Market Analysis and Market Plus segments free at our Web site. Be sure to join us again next week when we'll examine the brewing battle over raising the blend rate for ethanol. Until then, thanks for watching. I'm Mark 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 Pioneer Hi-Bred ... working to provide growers with local knowledge and support to help get the right product into each field. Pioneer ... science with service delivering success.
