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Coming up on Market to Market -- Merger mania
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prompts a summons from Washington.
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The Secretary spends a little time in the hot
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seat.
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And heavy rain stops harvest in its tracks.
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Those stories and market analysis with Sue Martin,
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next.
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available at grinnellmutual.com.
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This is the Friday, September 23 edition of
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Market to Market, the Weekly Journal of Rural
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America.
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Hello, I'm Mike Pearson.
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Harvest machinery has been temporarily sidelined in
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some parts of the grain belt but financial
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planning for next season has already begun.
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Like predictions of record crops, rural America waits
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for economic answers in a money lending season of
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uncertainty.
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-- With housing starts down 5.8 percent in August
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- and the inflation rate languishing below 2
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percent - the Federal Reserve Board declined to
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raise lending rates.
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The result leaves many speculating what the near
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future holds.
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No change was seen as good news by Wall Street as the
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Dow Jones Industrial Average finished the week
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on an up-tick.
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Placing the anticipated shake-up over lending
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rates on hold shifted attention to fallout from
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agricultural mergers.
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Recently, the Canadian companies Potash
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Corporation and Agrium announced they were
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combining forces to create the largest fertilizer
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company in the world.
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That marriage only amplified concerns over
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consolidation and was among the reasons several
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Titans of Agriculture were requested to appear before
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the Senate Judiciary Committee.
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Paul Yeager reports.
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Representatives from five of the six biggest
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agriculture companies appeared together on
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Capitol Hill this week.
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The leaders were asked about the big topics of
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competition, jobs, and innovation.
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The "Big Six" of biotech seed would become the "Big
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4" if regulators approve Bayer's $66 billion buyout
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of Monsanto, China National Chemical or Chem
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China's $43 billion purchase of Syngenta and a
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$59 billion deal between Dow and DuPont Pioneer.
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James C.
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Collins: "Bringing together the innovative
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engines of DuPont and Dow into one company, fully
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focused on agriculture, allows us to expand the
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choices and the competitive price values
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that farmers demand."
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Robb Fraley: "We're witnessing a new era in
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agriculture that's a result of the advances in
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biology and data science.
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Silicon Valley is digitizing farming around
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the world, and breakthroughs like gene
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editing are opening up a whole new world of
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possibilities in plant biology."
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Tim Hassinger: "Combing our R and D capabilities
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will enhance our ability to innovate and create
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values for farmers.
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An innovation driven company creates
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competition."
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Jim Blome: "We expect to advance our digital
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farming capabilities and strengthen our focus on
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new product development across seeds, traits and
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crop protection."
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Critics contend the biggest three remaining
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companies would control 80 percent of the corn seed
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sales and 70 percent of the global pesticide
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market.
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Roger Johnson: "The damaging consolidation is
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occurring at a time when farmers are struggling
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with depressed profitability after seeing
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an approximate 50% decline in most commodity prices
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over the past three years.
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Clearly the nation's anti-trust enforcement has
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failed farmers and consumers."
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Diana Moss: "Any claims that the deal will simply
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package complimentary assets should be viewed
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with some skepticism.
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The companies own documents indicate their
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own R and D pipelines compete head to head with
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overlaps in R and D for traits, seeds and crop
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protection.
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Much like in pharmaceuticals,
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maintaining competition in standalone parallel R and
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D ensures strong incentives to continue to
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innovate."
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Sen.
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Grassley: "To me, it looks like this consolidation
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wave has become a tsunami."
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Iowa Senator and committee chair Charles Grassley
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cited data from Iowa State University revealing
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collective cost of seed, chemicals and fertilizer
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for an acre of soybeans has gone up 94 percent
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over the last 20 years.
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Grassley, also a farmer, said the collective
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industry has produced greater innovations and
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yields, but questioned the cost.
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Sen.
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Charles Grassley: "However, when does the
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size of companies and concentration in the
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market reach the tipping point, so much that a
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market becomes anti-competitive?"
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Cotton farmers also could be faced with steep price
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increases on seed if a recent Texas A&M study
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holds true.
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The research revealed a possible 18 percent hike
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if the mergers move forward while corn and
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soybean seed prices would increase around 2 percent.
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For Market to Market, I'm Paul Yeager.
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Secretary of Agriculture Tom Vilsack met with the
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Senate Agriculture Committee this week for an
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annual checkup of sorts.
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The topics discussed ranged from budgets to
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water quality.
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Colleen Bradford Krantz explains.
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Secretary of Agriculture Tom Vilsack, wrapping up
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what is expected to be his final months of an 8-year
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stretch on the Obama administration cabinet,
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urged Senate leaders this week to do a better job of
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studying the needs of the nation's shrinking pool of
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farmers before fixating on budget cuts.
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Tom Vilsack: "If you look at every hot spot in the
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world today, I think most, if not all of them, do not
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have a functioning agricultural economy and
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have a lot of hungry people.
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So if we are serious about protecting our own people,
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if we are serious about making sure the world is a
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safer and better place for our kids and grandkids,
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then we have to understand the role agriculture in
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this country and agriculture around the
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world will play in providing that level of
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security."
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Several senators, while praising Vilsack's tenure,
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said the nation's farmers are growing increasingly
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leery of governmental involvement in their
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lives, particularly when it comes to the
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Environmental Protection Agency.
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Sen.
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Thom Tillis: "The issue that comes up every single
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time I meet with these farmers is the uncertainty
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created by regulation - either the burden by
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existing regulations or the threat of other
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regulations that could be very harmful to the
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industry."
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Senator Pat Roberts, the chair of the Senate
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Agriculture Committee, said new EPA rules
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defining the "waters of the U.S."
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under the Clean Water Act had an exemption for
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"common farming practices" but the sentence was
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followed by 88 pages of exceptions, explanations
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and definitions.
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Sen.
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Pat Roberts: "That's why a lot of folks that I
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represent feel ruled not governed.
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And they get really upset."
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While Vilsack said he won't speak on behalf of
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the EPA, he has encouraged the agency to meet the
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farmers whose livelihoods may be affected by their
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rules.
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Tom Vilsack: "We don't define the problem before
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we define the solution, and we don't educate
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people about what we are trying to do before we do
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it.
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So there is a natural reaction."
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For Market to Market, I'm Colleen Bradford Krantz.
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Harvest is underway in earnest across the
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Midwest.
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Most states are on track to bring-in the projected
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record 15.1 billion bushels of corn and 4.2
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billion bushels of soybeans.
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However, field work in some regions of the upper
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Midwest was stopped in its tracks.
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It's a soggy start to fall for several Midwestern
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states, where heavy rain has flooded homes, closed
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major highways and stranded motorists in
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Minnesota, Wisconsin and Iowa after nearly a foot
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of rain fell in several location of the Tri-State
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area.
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The rains couldn't have come at a more inopportune
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time.
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Combines will be delayed in several dozen upper
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grain belt counties as farmers had just begun
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what is expected to be a record large crop.
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A state of emergency was declared by Gov.
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Scott Walker for 13 western Wisconsin counties
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that have been drenched by torrential rains since
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Wednesday.
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The Wisconsin National Guard is providing
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assistance to those affected by the disaster
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which has caused widespread flooding and
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mudslides in the region, including one death.
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Volunteer crews in several southern Minnesota towns
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were building sandbag walls to hold back rising
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floodwaters.
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Residents in Saint Clair received 14 inches of rain
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in 48 hours.
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Sections of several area roads were washed away in
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the deluge.
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And some of the residents in the northeast Iowa town
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of Greene were ordered to leave as the nearby Shell
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Rock River roared out of its banks.
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About 60 homes in the northeast Iowa town took
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on waist-deep flood waters.
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Interview: The weekend forecast is for more rain
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in the region, so fields that escaped the first
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round of moisture may find themselves moist by
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Monday.
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For Market to Market, I'm Peter Tubbs Next, the
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Market to Market report.
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Inclement weather across all of the Americas and a
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weaker dollar laid the groundwork for volatility
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in the commodity markets.
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For the week, December wheat was flat and the
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nearby corn contract, despite a midweek move
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higher, also finished flat.
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Strong soybean sales, strong export sales were
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not enough to outweigh higher yields as the
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October soybean contract lost 11 cents.
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October meal declined $10.40 per ton.
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In the softs, December cotton added $2.79 per
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hundredweight.
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Over in the dairy parlor, October Class III milk
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futures lost 50 cents.
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The livestock sector was under pressure as the
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October cattle contract fell 60 cents.
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October feeders lost 57 cents.
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And the October lean hog contract dropped $1.48.
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In the currency markets, the U.S.
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Dollar Index lost 66 cents.
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Crude oil advanced 86 cents per barrel.
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Gold rose $31.50 per ounce.
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And the Goldman Sachs Commodity Index gained
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more than 2 points to finish the week at 351.20.
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Pearson: Here now to lend us her insight on these
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and other trends is one of our regular market
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analysts, Sue Martin.
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Sue, welcome back.
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Martin: Thank you, Mike.
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Pearson: This has been a week of stability in the
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wheat markets.
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We saw some export news come out.
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Can you talk about where you see this wheat market
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headed?
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Martin: Well, I think the wheat market is very
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oversold, very cheap, it may still move sideways
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for a little bit longer but all in all the funds
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are heavy short, near record short and so what I