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Transcript for December 29, 2018

Transcript to come.

It's time once again for our yearly roundtable discussion for 2018. Join us as we discuss the year with Extension specialists and look forward to 2019.


(upbeat music) 

>>> Hello, everyone, and welcome to SUNUP.

I'm Lyndall Stout.

As we wind down the year, it is the perfect time

to take a look back at 2018

and take a look ahead at what the new year may bring.

Joining us now for the annual SUNUP round table

are Derrell Peel, our livestock marketing specialist,

Amy Hagerman, our Ag. policy specialist,

and Kim Anderson, our crop marketing specialist.

Thanks so much for being here today guys.

>>> You bet.

>>> Thank you.

>>> Let's start with kinda looking back at 2018.

It's always interesting to pause at the end of the year

and reflect.

And there's always some interesting conversation.

But in terms of markets, let's start with livestock,

and Derrell, kinda your take on things.

>>> Well, actually, I'm gonna jump back quickly

(clears throat) even farther.

We've been, the cattle industry

has been in expansion since 2014.

2018, we're waiting for the final numbers,

but I'm quite sure it's gonna show that we had

the limited expansion again for the fifth year.

Beef production started growing from a low in 2015.

It grew in 2016, '17, and '18.

So we've had increased beef production this year.

And 2017, we described as a pleasant surprise.

Demand was good in spite of that increase production.

2018 is really more of the same in many ways.

I've been describing it for many months now

as sort of so far so good in that

we know there are things that could be a challenge,

but so far demand has been good.

And as long as that continues,

we're in pretty good shape at this point.

>>> Kim, your take on 2018, in general.

I know it's hard to sum that up in a couple of minutes,

but just kinda the takeaway.

>>> Well there's a lot going on

not just in the United States or Oklahoma.

Oklahoma, we've had some changes in our allocation

over crop acres.

We've had wheat acres down significantly,

almost a million acres if you'll go back a couple years.

Corn, sorghum, soy bean.

Corn and sorghum about level on the acres

planted and harvested.

Soy beans up a couple hundred thousand.

A big increase in cotton acres.

Around 400,000 acre increase there.

And canola's been up and down.

Then we've had the political situation.

You've got the Brexits.

You've got China.

You've got what's going on with our soy beans in Brazil,

and bring in China again there.

So there's been a lot going on in the wheat and the crops.

Wheat prices, better this year than last year.

You've got the corn prices down just a little bit.

Bean prices down just a little bit.

Canola prices about the same.

So a lot going on in the world in political situation

and a lot of adjustments going on

in where the products are being produced,

where they're being imported,

and where they're being exported.

Changes going on there.

>>> And in terms of politics, of course,

what an interesting year.

A lot on people's minds, especially in agriculture.

Some ups and downs.

An interesting year as policy is being shaped.

Amy, your take as we kinda weigh in

on a farm bill in that process.

>>> Yeah, 2018 has been an exciting year

in terms of the movement that has happened in policy.

There's been a lot going on, as you just said.

The Bipartisan Budget Act happened early in 2018.

It included changes for seed cotton and for dairy.

Big changes for agriculture heading into the farm bill.

And then we've had pretty fast movement

on a farm bill this year.

First introduced in the house in April.

Versions of the farm bill passed in the House

and the Senate in June.

Moved into conference where it's been since September 5th.

And just recently the report

actually came out of the conference committee,

and it's going up for a vote in the House and the Senate.

>>> So, a lot to digest, and we'll kinda pause right now,

but we wanna kinda pick up on

the farm bill in just a moment.

But first, we wanna hear from our friends at the Mesonet.

(upbeat music)


>>> Hello.

Wesley here with a 2018 Mesonet weather report summary.

2018 is almost in the books,

so I thought we would look at the weather year in review

and focus on some record breaking highlights.

Let's start with rainfall.

The year-long map through the middle of December

shows, not surprisingly, Broken Bow in the far Southeast

had received the most at 66.3 inches,

and Kenton in the panhandle the least at 14.7 inches.

There is a truthful saying that it's not

how much rainfall you get, but when you get it.

The Panhandle spent over half a year in severe drought

that didn't end until late spring rains came.

As of February 25th, the entire Panhandle

had been 142 days or more without receiving

an event with 1/10th of an inch of rainfall.

Kenton topped that list with 148 days.

In September, we had a Mesonet rainfall record shattered.

Fittstown, in southern Pontotoc County,

received the highest daily rainfall

ever recorded with 14.2 inches.

It also set the highest ever 24-hour rainfall period

with 14.48 inches from 10:00 a.m. Friday

to 10:00 a.m. Saturday.

Switching over to temperature shows

it was an interesting year as well.

This departure from average temperature graph

shows that we started and ended the year very cool,

but had a very warm period in between.

April turned out to be

the second coolest April ever recorded.

Average temperature for the month was 54.1 degrees.

This was 5.2 degrees below normal for the month,

much cooler than that if you ruled out

the Panhandle stations.

April also recorded one of the most dramatic

temperature swings in our history.

Alva went from a high of 101 to a low of 33 degrees

in a matter of hours.

May was the total opposite.

It came in as the number one warmest May on record.

Average statewide temperature was 74.6 degrees.

This was 6.4 degrees above normal.

The northwest had temperatures up to

nine degrees above normal.

Probably the biggest weather-related event for the year

was the wildfires in western Oklahoma during April.

Dry conditions, low humidity, and exceptionally high winds

contributed to nearly 400,000 acres burning in April.

The biggest fire, the Rhea fire,

burned 286,000 acres.

It was so large it was easily recorded from space.

In August, Mesonet had its fourth station hit by a tornado.

The Inola site, on the Rogers/Mayes County line

suffered slight damage from an F1 tornado.

Winds were recorded at 84 miles per hour

as it passed nearby.

2018 was certainly an interesting weather year.

I want to wish you a happy New Year,

and hope that 2019 brings you the perfect

weather conditions you need

for your farming and ranching endeavors.

See you next year on the Mesonet Weather Report.


>>> We're continuing our annual Sunup Year in Review

with our Ag economists, and Amy, before we

heard from our friends at the Mesonet,

we were kinda just starting to talk about the Farm Bill.

Let's dive right in.

>>> Sure, so we're gonna have a lot of movement

in the Farm Bill in the next year, of course.

We'll be coming into a new round of sign ups.

There are some changes that will be there, but not a lot.

It's gonna be something that's very similar

to the 2014 Farm Bill that people are familiar with.

There will still be the crop insurance program.

There will still be sign ups for

the different aspects of that

in both crops and livestock.

There will be some changes around pasture

and base acreage.

There will also be sign ups for ARC and PLC,

which are two safety net programs

for producers to sign up for,

and that means that anticipation on prices is gonna be

really important as well as yields in the next year.

>>> And when it comes to prices,

we really don't know what prices are gonna do.

I think we've seen the established bottom as we go out.

You know, our prices were down $3.50.

We can talk about what caused them when they were $3.50.

It wasn't policy, it was the quality of our product.

I think if you look at the markets,

our bottoms are probably somewhere around that

$4.00, $4.50 level, and then of course,

our tops up are seven and nine,

and what they're gonna do over time is just,

we're gonna have to see what happens with the policy.

I'd like to, you know, you was talking about crop insurance,

and I think that crop insurance is

one of the most important factors with producers,

and so any changes there?

>>> Not a lot of changes in crop insurance,

and in fact, in the listening sessions

coming into the Farm Bill, crop insurance,

they said that's the one thing we want protected.

We want to make sure that our

crop insurance options are still there.

It's something that's used very heavily.

So a lot of the options were very heavily protected,

and so we expect to see crop insurance

that's very similar to what we saw in 2014.

>>> And what we normally tell people with crop insurance,

you can use the crop insurance to protect prices.

However, I think when you're looking at production,

when you're looking at the markets,

you want to divorce yourself from the crop insurance,

and your policy, you know, your sign up bills,

that's totally separate from, I think,

your production, managing your costs,

looking forward at prices.

And as we look at prices going in

where we are right now, we're a good dollar,

a dollar and 30 or 40 cents above

where we were this time last year,

and I think the reason we have higher prices in wheat

is because we've got a better quality.

Our average protein for Oklahoma around 12.6,

our test weight above 60 pounds.

The last couple years when we didn't have the protein

and test weight, we had that $4.00 and below prices.

We got quality, good milling wheat,

we've got the higher price.

As you look at corn, we've built up stocks,

they're coming back down a little bit.

Corn prices are really just 50 or 60 cents

below what they were in the past.

As the stocks change or as production changes,

that corn price may change.

Soybean prices, of course we've got China, we've got Brazil.

We could talk a lot about what's going on there,

but our soybean prices will probably come up

and be higher than they are right now

as you look into the next year,

but soybean prices are in the tank,

and my concern with soybean prices right now

is when the US and China come to their trade agreement,

that then we're gonna have a rush of product on the market

and our prices may even go lower for awhile.

>>> Darrell, kinda your thoughts on

what they've talked about, and then where we are

in the livestock markets as we wind down the year.

>>> You know, we're gonna end up 2018

with record beef production.

I talked about that increase a little bit,

and so we've had the supply potential for problems.

Not only that, we have record pork and poultry production,

so we're setting new records for

total meat production in 2018.

Again, the focus has been on demand,

and that's really where we end the year

looking at demand, both domestic demand has been good,

particularly from a beef perspective.

Even when you look at beef retail prices

relative to pork and especially poultry,

beef has held up very well in spite of the fact

that there's a lot of product on the market

in all of those meats.

One of the keys to this has been the fact that

trade has helped support these markets very, very well,

again, across all the meats, but particularly in beef.

We're gonna see something around a 12%

year over year increase in beef exports in 2018,

so we're finishing the year with very strong demand.

That's been the key, again, really for the last two years.

It's held prices relatively steady

in spite of the fact that we've got more cattle

still out there, and certainly more beef production,

and that's gonna be our focus as we look ahead.

>>> Also helping your beef prices, your entire

livestock area is the low crop prices.

You've got the low corn prices,

you've got the extremely low protein and soybean prices,

and so that's getting a lot of help with

the profit situation in your livestock industry.

>>> Yeah, absolutely.

It is supporting production, but it's supporting

cost of production as well for producers,

and I haven't had to talk a lot about feed markets

in terms of doing market outlook

for cattle or for livestock in general

because we're kinda taking it for granted.

There is a lot of potential out there

for things to change going forward.

There's certainly some big factors out there,

but right now feed is not one of those major concerns

that's central on our radar screen right now.

>>> And we'll be good unless Amy's policy comes in here

and messes it all up. (laughter)

>>> Well, that's one of several things

that could potentially change things.

>>> Well, lots of great discussion.

We want to continue this in just a moment,

including looking at your analysis and forecast

for the year ahead, so more in just a moment.

(light music)


>>> And every year, as part of the discussion,

we always try to catch up with Larry Sanders,

and Larry, overall, how has the economy looked in 2018?

>>> Well, we've had a very strong economy.

It's pumping right along, you know.

Unemployment's about as low as it's been in awhile.

The economic growth is doing very well,

although it's started to slow down a bit,

and I think if you look back 10 years

to where we had the worst recession that we've ever had

since the Great Depression, we have

gone through something horrible

and come out on the other end

about as strong as we ever could have expected.

>>> As we look forward into 2019,

what do you think lies ahead for us

on the federal and the state level?

>>> I think we're gonna see more of the same

for at least the first half of the year.

There, things begin to get kind of murky.

The optimists begin to turn into pessimists,

if you will, or at least raise some questions.

Economic growth with economists always turn into

recessions at some point in time,

and we've had one of the longest running economic

growth spurts that we've had, and some are saying

that we're gonna see a recession as early as mid-2019.

Some say it's gonna be in the latter term of 2019,

maybe early 2020.

I think we'll probably ride out 2019.

What's gonna happen toward the end there

is you're gonna begin to see on the federal level

some arguments in the capital about having another

tax cut to push some economic growth into the economy.

It'll be an election year in 2020, so there'll be

some reason to do that, to get that stimulus going.

In the long run, that's probably not gonna be

a healthy thing for the economy, but in the short term

it'll probably be a plus.

>>> How could that impact the agricultural industry

across the US?

>>> Well, we have, as you know, seen the net farm income

drop by half in the last five to seven years,

and there's some real structural issues there.

And with the trade wars that have been precipitated

in part by President Trump trying to get China

to treat us fairly, that's not gonna go away any time soon.

And the trade wars and foreign economic growth,

those two things are gonna be the wildcards

that are gonna cause us to go into a recession

sooner or later.

If he can find a way to get us out of those trade wars

fairly quickly, we may begin to hold off a recession

for a while, and it may help us get agriculture back

on the mend.

But we've got soybeans rotting in the fields right now,

livestock is not gonna be selling like it should overseas,

and if we can get rid of those tariffs,

get out of the trade war situation,

help those foreign economies out,

we'll be better off for agriculture

sooner rather than later.


>>> Thanks a lot, Larry.

It is now almost the new year, so we want to

spend the next few minutes looking ahead

at what 2019 may bring.

Derrell, let's start with you.

>>> Well, you know, cattle numbers, I think are probably

close to a peak going into 2019.

We have to wait and see what the numbers are,

but really we're kind of plateauing here.

Beef production, however, will continue to grow in 2019

coming out of the larger numbers

and bigger calf crop in 2018.

So we're gonna continue to see that supply pressure

in 2019, and not only for beef,

again, another record we're projecting at this point

for beef production, but also for pork and poultry.

So again, we have that large meat supply out there,

so we'll be watching demand very carefully,

both US demand, as well as the foreign demand

in terms of the trade picture.

So again, the so-far-so-good kind of thing

really hinges on demand.

As we go forward we'll be watching that.

There's no reason for things to change, necessarily,

but there's certainly lots of things out there

that could shake it up.

We've got a lot of trade uncertainty still out there

to be resolved, there's some uncertainty regarding

the macroeconomy that could factor in at some point

in time more than it has.

So that's gonna be kind of the situation as we go forward.

I don't see major changes in anything at this point in time,

but again, we're gonna continue with the same kind of idea.

>>> Amy, your thoughts in terms of where we're headed

farm bill-wise, policy-wise for the year ahead?

>>> So we're gonna be waiting on a lot of guidance

early in 2019.

As the farm bill comes out the guidance from USDA

will come out on exactly how those different programs

will be implemented.

And that's when we'll have the opportunity

to make decisions on ARC and PLC signups,

and crop insurance signups just to see

how those different changes that have been proposed

will be implemented in the year.

>>> Kim, your thoughts?

And I know there's gonna be a lot of them.

>>> Oh, yeah. 

>>> That's okay.

>>> Let's start out with what the market's offering

for the 2019 harvest.

You've got wheat, right now you can

forward contract for $4.91,

corn at $3.53, that's for '19 corn.

Sorghum at $3.50, soybeans at $8.54.

Cotton at $0.71, and canola probably

somewhere around $6.30.

And then you've got sesame and some other crops

coming on there.

However, one thing we know right now is

those prices will not be the prices we have.

We've got Derrell and his livestock,

and how much are we gonna graze out rather than harvest

on the wheat?

We've got Amy, and you and your policy stuff,

you've got the crop insurance,

you've got the price protection, you've got those things

that's gonna impact the decisions,

gonna impact can I get insurance for corn, or beans,

or whatever on those insurance things.

There's just a tremendous amount of things

that can happen in the crop markets

and the farmers have gotta consider

in doing this land allocation, and determine

whether we're gonna go with cattle,

what we're gonna do on the policy issues.

You might want to address some of that.

>>> Well, I don't expect to see a lot of changes

in land use in 2019 because of the timing of these policies.

So they'll do the guidance in 2019, really 2020

is when we could start seeing changes in land use

based on this farm bill that's being discussed right now.

But there is a lot of uncertainty in this year, right?

Because you're waiting for the guidance to come out

on the farm bill, and what is that gonna mean

for crop and livestock producers in 2019

as they're waiting to find out what's gonna be

available to them in terms of disaster protection,

in terms of regular price loss protection.

We're gonna be waiting to see what happens

on the trade situation, and how that trade policy

sorts out, as well.

>>> Yeah, and Derrell you're grazing my wheat out

by your cattle?

>>> Well, that's right. 

>>> Or haying it?

>>> You know locally or regionally here we've got those issues

of how we're gonna use that wheat.

Are we gonna graze it out?

We've got lots of cattle out on wheat this winter,

but what we will do next spring will certainly

be an issue.

You know, another factor that I didn't mention earlier

is in terms of what will be important in 2019 is

what happens in China with this African swine fever stuff.

How big of a deal is that?

Right now, because of the trade disputes that we have,

they're not importing as much pork, nor soybeans,

and other things, but they may have to come to the table

if, in fact, this thing winds up being a bigger deal.

And that could have implications back in the US,

again, in terms of how much of that total meat supply

we move offshore.

And what happens with pork will impact the beef market,

or potentially sure can.

So we have to keep an eye on those things.

>>> And that kind of reminds me of what's going on in Brazil

with the new land being cleared and being brought

into crop production.

Also, you look at at the former Soviet, you know,

Ukraine, Russia, they're talking about increasing

corn production, increasing soybean production,

allocating land resources to that.

That's gonna impact our prices here in the US

and, I think, are we gonna take some of this cropland

out of cropland and take it back to pasture?

We brought it into cropland, what, 15, 20 years ago.

Will we see something like that?

>>> Again, all of these dynamics, particularly these

global dynamics, things don't sit still

while we're in the midst of all this.

Producers around the world are gonna respond to that

and we're gonna see those, it's gonna be

a different situation when we conclude some of

these political issues, trade issues,

and pick it up again, then it's gonna be

a different situation than it was going into it.

>>> And Amy, not to interrupt you there,

but are we gonna get some trade issues there

from the policy side and will policy impact

some of maybe land going back into pasture?

>>> I think there's several things that could impact

whether or not land goes back into pasture.

Certainly trade and the impact that's gonna have

on commodity prices is gonna be part of it.

Then also there were some changes in this farm bill

that affect pasture production.

For example, the base acres that are on pastureland,

they're gonna stay as base acres, but they're not

gonna receive payments if that land is in pasture.

And that's a pretty sizeable change

for some of our producers who have been used to

receiving commodity payments.

>>> A lot to think about, lots of terrific discussion.

As we wind it down, just a final few thoughts

from each of you.

I like to end this way every year.

Takeaways for Oklahoma producers to set them up

for success in 2019.


>>> I'll go with my usual you're gonna make a profit

by managing cost.

I think we've got some new production practices

on nitrogen application, especially for wheat.

You've gotta produce a quality product

that the market wants to buy.

We've experienced that over the last couple years

with wheat where we had poor quality wheat

and an unacceptable price.

Once we have a quality product,

and I think keeping costs down with timing

nitrogen and fertilizer application,

and managing our costs.

I think that's where it's at.

>>> Amy?

>>> Lot of information is gonna be out there

in the next year regarding the farm bill

and also trade policy, so just keep an eye on the news,

keep informed, and keep in touch with your FSA agent

and your county extension agent.

>>> And Derrell?

>>> Yeah, you know, I don't expect prices to change a lot.

We've been kind of on a plateau here,

so I tell producers continue with your plans.

Don't change your plans.

I think within the cattle industry we're kind of,

you know, we're okay right now.

We're kinda in balance, supply and demand,

in a broad sense of the word.

Those external factors could be important,

as Amy just mentioned, so you gotta keep an eye

on those, and you might think about what you might

have to do if those change.

But I wouldn't change your plans at this point.

Prices are at a level where if you do manage costs,

as Kim advises, from a livestock production standpoint

there is profit potential for most producers.

>>> Okay, terrific.

Great discussion.

Thank you all so much for your time,

and for your assistance, and guidance on SUNUP

throughout the year.

We really, really appreciate it.

And that will do it for us,

and thanks so much for joining us.

And we also want to say a special thank you to our

colleagues and friends at Oklahoma Foundation Seed Stocks

for letting us spend a little time in the warehouse today.

It's been great.

And to all of our viewers, from us at SUNUP

happy new year, and we'll see you again soon.

>>> Happy new year, everybody.

(cheerful music)


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