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What little difference a century can make

By Staff | Nov 6, 2019

If China agreed to purchase “$40 to $50 billion” of U.S. farm goods in “the next two years,” as President Donald J. Trump announced Oct. 11, the futures market-where market reality is quickly sorted from political talk-literally wasn’t buying it.

In fact, November soybean futures, the nearby contract, opened Monday, Oct. 14 at $9.405 per bu. and closed at $9.405, an almost unheard of result given that U.S. farmers are in the middle of their annual soybean season and the White House is in the middle of another monthly China tariff fight.

The December corn futures were even less impressed. Traders opened corn at $4.01 per bu. that day and finished the session nearly four cents per bu. lower. Prices then drained lower for the next two weeks.

And hogs? Every U.S. market player knows African Swine Flu continues to decimate the Chinese hog herd-some guesses put pig losses at a staggering 45 percent nationwide. So the President’s Oct. 11 announcement of “substantial” ag exports to China propelled December hog futures through the roof, right?

Not even close. Indeed, two weeks after the White House’s ag-exports talk, December hog futures were $5 per hundredweight, or more than seven percent, lower than the day of the announcement.

Traders had a good reason for their cold reception to the President’s red-hot news. Most have been burned by fiery White House talk before so few were buying a pound of anything-witness soybean futures’ remarkably flat day-until they got confirmation.

Not only did it not come, news the next day proved the traders’ worries to be correct; China openly downplayed the White House’s giddy enthusiasm for any $50 billion ag deal and claimed no such agreement had been put to paper.

The market’s overall sustained, lower reaction, however, is pointing to other, more ominous problems between China and the U.S. than just ag.

For example, the problem that started this trade war-the thorny, unresolved issue of China’s required technology transfer by U.S. firms to do business there-is rarely mentioned by either side.

But it’s more than just technology transfers. If the U.S. and China agree to any interim ag deal in the coming month, reported Reuters Oct. 25, that deal still “will not cover U.S. allegations of Chinese hacking into U.S. companies and government agencies, state subsidies, [or] Beijing’s alleged dumping of lower-priced products on global markets”

How can any U.S.-Chinese ag deal-an increased likelihood-stay above water with all that weight hanging around its neck? The market appears to be betting that it won’t.

Another reason to worry is the sudden stern tone U.S. leaders have taken on China in speeches both there and in the U.S. The first to grumble was Terry Branstad, the former Iowa governor who now serves as U.S. ambassador to China.

On Oct. 21, Branstad publicly offered some “unusually pointed remarks [that] turn on a catchphrase-reciprocity-that U.S. officials have invoked to justify a tougher approach toward China on issues including commerce and diplomacy,” explained the Washington Post.

Branstad was speaking on behalf of the White House and proof came three days later when Vice President Mike Pence, reported the New York Times, “denounced American companies that he said had compromised American values like free speech to appease the Chinese Communist Party.”

China didn’t take either slap lightly. A day after the Pence speech, a Chinese government spokeswoman said the Vice President’s speech “‘exuded sheer arrogance and hypocrisy, and was packed with political prejudice and lies'”

The American directness and the equally curt Chinese reply do not sound like two nations nearing agreement on anything. In fact, the unusually tough, undiplomatic talk sounds more like two nations preparing for a cold war rather tha two nations preparing to end a trade war.

If that’s the case-and who knows given this mercurial White House-then the futures traders’ bet soon will pay off yet again.

The Farm and Food File is published weekly through the U.S. and Canada. Past columns, events and contact information are posted at www.farmandfoodfile.com.

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What little difference a century can make

By Staff | Nov 6, 2019

Part 1 of 3

I have been fascinated by moments in history when something material took place of note that for whatever reason, disappeared so that almost no one today is cognoscente that it had existed. Few people have ever heard of a Winchester Store. They know of Winchester guns and ammo but in the 1920’s Winchester built and operated a franchise hardware store system that reached 6,400 hardware stores before they filed bankruptcy in January 1930, a commercial failure of the Great Depression.

Winchester Stores had fully stocked consumer goods, sporting goods, tools, paints…everything else you would think of sold in a hardware store, marketed under the Winchester Store brand. I have collected Winchester Store brand items for over three decades and a few years ago recreated a vintage Winchester Hardware store inside of a building on my residence property in Spirit Lake. Private tours are available by request. There was a Winchester Store in Spirit Lake on the Main Street owned by proprietors, Hill and Sperbeck. I chose 1928 as my target year.

I can take this in several directions but the focus of this report today is on Successful Farming magazine. I thought that a hardware store back then would have had a magazine rack so I created one, stocked with vintage issues. I have both Successful Farming and Farm Journals from 1928. My oldest Successful Farming magazine is actually September 1919. It was published by E.T. Meredith and claimed 800,000 circulation costing 5 cents copy…50 cents for two years or $1 for a four-year subscription. It was a bargain. It was 148 pages and frankly, had much more information in it than a current issue of the magazine. It had many in depth articles in small print and would have required the reader to do a lot of study to glean the issue from cover to cover.

It had a full-page Winchester Arms ad in it. Winchester Stores came about after WW1, built from the profits of selling 900 million rounds of ammo to Europe for the war. My favorite model Winchester is the 1895. The reason I like it was that there was just 450,000 made in musket, rifle and carbine forms. Fewer guns make it more collectible. 300,000 of them were sold to the Tsar of Russia in 1914 in musket form, 7.62 caliber with bayonets. I own the Winchester prototype for the contract. The other 150,000 were made, mostly for the civilian market, although many 1895 carbines showed up with the Rough Riders in the Spanish American war in Cuba. Theodore Roosevelt took the 405-caliber rifle with him to Africa where he bagged animals for the Smithsonian.

A new reference book on the 1895 model was recently published and I was surprised to find that the Russian contract was delivered to Latvia where Russian troops took possession. They published pictures from the Latvian National Museum of the troops and their new Winchester muskets. I was surprised because I am going to Latvia next August as part of our biannual trip with our German friends. I will be sure to visit the museum when in Riga, Latvia.

Circling back to Successful Farming Magazine. I also have an original issue from October 1928. It was still 5 cents copy which was a good indicator of deflation while circulation had risen to 1,000,000. There were only 120.5 million people in the U.S. in that year so this was a major publication. The magazine had gotten a little smaller at 104 pages. The issue had articles like: “What Are Corn Stalks Worth?” “How to Speed up Tractor Plowing,”…It gave advice on education, building a home, health care, fashion and etiquette. An article was entitled “When We Can See By Radio,” which explained that television was slowly being developed.

It advertised Western ammunition. Western bought Winchester out of bankruptcy the following year for $8,000,000. The issue gave market advice from E.A. Stokdyk from Kansas Agricultural College on “The Present Position of the Sheep Industry.” He noted that in 1900 we consumed 300 million pounds of wool. By 1926, wool consumption had risen to 600 million pounds. In 1900 we produced about 300 million pounds of wool and by 1926 produced only slightly more. Imports had filled the demand for wool in the U.S. which had taken the price of wool sharply lower even before the Great Depression hit. These imports were part of the reason for support then for the Smoot Hawley Tariff Act of 1930. Lamb prices had recovered in 1928 to near pre-war price levels so that Mr. Stokdyk declared that the industry “was one of the few farm industries that was quite prosperous.”

The U.S. obviously imported wool but not much lamb. That makes sense before refrigeration. My Winchester Store sold iceboxes. The issue was full of advertisements just like today, some in color. They even promoted buying farmland in Canada…Richer land, Higher yields, Higher prices…Lower taxes. Canadian subscribers should tell me how that worked out. Not all of it was true. There was also editorial opinion and featured political cartoons.

What I got out of it was that this magazine was designed to appeal to a pretty sophisticated rural reader and didn’t dumb down to them. If Successful Farming magazine was not enough reading there was competition in Farm Journal. I also have an October 1928 issue of that magazine in my Winchester Store magazine rack that I will share in next week’s column of “what little difference a century can make.”

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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