Post on 12-Jun-2020
transcript
“Coming up on Market to Market…
Heavy rains and flooding strike
fertile fields in the Midwest …
Fire scorches more acres across the
West…
A lucrative export commodity with
deep roots in rural America…
And market analysis with Darin
Newsom, Next!”
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produce it.
Hello, I’m Delaney Howell.
It’s a contrast of emotions for
American job holders. On one hand you
have what economists call “good job
growth”, on the other hand, wages are
struggling to keep up. --
Unemployment held steady at 3.9
percent as 201,000 jobs were created last
month.
Wages are 2.9 percent higher than a
year ago but inflation has eaten up the
increase.
The Creighton Mid-American Index
continued its seven-month rally. Bankers
remain worried about the strong downward
pull of tariffs on farm income.
Tariffs have had little impact on
reducing the trade gap as imports have
outrun exports so far this year. The
running total is a record $261.2 billion.
Large portions of the Golden State
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are on fire. Property damage has topped
$1 billion.
Those living in the nation’s
midsection have seen the exact opposite
of California’s tinder dry conditions.
Paul Yeager kicks-off our coverage.
The Corn Belt could be renamed the
Rain Belt this week as inclement weather
settled in from Michigan to Kansas --
leaving behind nearly a foot of water
over a several day period.
Standing water was found easily in
Sunflower State fields. Soybeans were
already considered 77 percent fair to
good and the rain only helped the pods in
Kansas.
In Iowa, larger amounts of rain fell
across more acres. Corn and soybean
fields entering the home stretch of
maturity were flooded as reports of 12
inch weekly totals were common.
The nearly-8 inches of rain that
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inundated in the northeastern Iowa town
of Waterloo is already the tenth highest
on record for the entire month.
Chicago experienced its rainiest
Labor Day since 1912.
This Intellicast weekly
precipitation map illustrates the area
affected. The darker green regions
translate as 4 inches of rainfall.
Similar amounts of precip were seen
in the Gulf Coast as Hurricane Gordon
made landfall midweek in Florida, Alabama
and Mississippi.
Thousands were without power from
the storm. As the hurricane weakens and
moves inland, more farm fields in
Louisiana, Arkansas and Missouri are
forecast to receive substantial rainfall.
Most of those same areas are currently in
drought.
August set a record for heat in Las
Vegas. The 94.4 degree average of highs
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and lows are the highest since record
keeping began.
Farther west, explosive wildfires
shut down dozens of miles on Interstate 5
near the California/Oregon border. The
Delta Fire forced some drivers to abandon
their rigs as the flames roared up the
mountainsides.
Currently fire crews are working on
97 large blazes that have burned 1.9
million acres across 12 states. The
nationwide total for the year is just shy
of 7 million acres burned by 46,000 fires
in all of 2018.
For Market to Market, I’m Paul
Yeager.
Before the current trade war with
China, some sectors of agriculture were
already suffering tariff fatigue from the
Asian giant. This includes U.S. pork
exports which are operating under a 62
percent duty. According to the U.S. Meat
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Export Federation, exports have declined
22 percent so far this year.
Another niche market with strong
roots in China was among those laboring
under existing trade tariffs.
Josh Buettner has more in our Cover
Story.
Will Hsu/Hsu’s Ginseng – Wausau,
Wisconsin: “History has shown times where
trade to China has been shut down…this
industry was dead. The demand, as income
levels rise in Asia, is really coming
from there. So to help farmers in Central
Wisconsin, the best thing we can have is
access to those export markets.”
Will Hsu is a second generation
ginseng producer near Wausau, Wisconsin.
According to USDA, over ninety-five
percent of the plant’s domestic
cultivated origin is sprinkled across the
Badger State – with Marathon County as
the hub. Wisconsin officials estimate
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one million raw pounds are produced there
annually – with a yearly output valued at
over $50 million.
But 15 percent retaliatory tariffs
from President Trump’s trade war with
China have been tacked onto pre-existing
duties and value-added taxes ahead of
this year’s harvest. The move could leave
growers feeling a pinch on an export-
dependent, multi-year premium crop.
Will Hsu/Hsu’s Ginseng – Wausau,
Wisconsin: “Very similar to France and
Italy, which are known as the old world
regions for growing wine…the taste and
flavor of Wisconsin ginseng has been
ingrained in people for the last 100
years.”
Overharvested in China after use as
a pancea for millennia, a cousin root was
unearthed in North America three
centuries ago.
Will Hsu/Hsu’s Ginseng – Wausau,
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Wisconsin: “You don’t always find four
prongs.”
Around the dawn of the 20th century,
the wild root moved from forest to farm
in Wisconsin, cementing trade
partnerships in Asia and earning a gold
standard reputation.
Paul Hsu/Founder - Hsu’s Ginseng –
Wausau, Wisconsin: “Well, I’m the farmer.
He’s the brains, so works out as a team
very good….Each notch is one year old.”
Originally from Taiwan, Will’s
father - Paul Hsu - founded the core of
the family business over 40 years ago
after discovering unmet demand for the
niche product in Asian-American
communities.
Enduring production challenges –
including five years from seed to harvest
and the need to secure new land for each
crop because the root can never be grown
twice in the same location - the Hsu’s
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bought into the supply chain. Their
enterprise now includes several hundred
acres under production and nearly 1,000
employees across the globe.
Paul Hsu/Founder - Hsu’s Ginseng –
Wausau, Wisconsin: “Chinese…real warm.
It’s hot – yang, and American ginseng –
yin. So there’s two different functions.
Two species…”
Traditionally used in Asian cooking
and medicine, American ginseng has even
drawn accolades from the Mayo Clinic
where a 2012 study revealed high doses
can curb fatigue among cancer patients in
chemotherapy. And while farmed root has
averaged $30-55 per pound, wild ginseng
commands a much higher price.
Paul Hsu/Founder - Hsu’s Ginseng –
Wausau, Wisconsin: “Depending on what
location, how good they are – 500, 600,
700 dollars a pound.”
The older the root, the more
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ginsenosides – active compounds within
the plant that impart its elixir-like
prestige – the higher the price. By state
law, the original wild, woods-grown
ginseng must be at least 10-years old
before being extracted for sale.
Private landowners like the Hsu’s
recognize the importance of conservation
and have developed their own ‘wild
simulated’ strain, as part of the state’s
multi-pronged approach to viability.
Will Hsu/Hsu’s Ginseng – Wausau,
Wisconsin: “So this is kind of that in-
between space, not quite wild, not quite
farm-raised, that you see a lot of
agriculture moving into. So you can take
any patch of woods, if you take care of
it and do a good job of it, and turn it
into this. And in the wild, some of the
best roots are 15-30 years old.”
Paul Hsu says he’s been paying
diggers top dollar for over three decades
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to break the soil at certain times and
only for certain root sizes.
Paul Hsu/Founder - Hsu’s Ginseng –
Wausau, Wisconsin: “Very seldom do you
have 60 year old roots, maybe on in 100
to 1,000.”
Over the years, the Hsus have worked
to vertically integrate and navigate
volatile market waters. But for smaller
producers laboring with razor-thin
margins, staring down the barrel of a
trade war can trigger a battle with
anxiety.
Bob Kaldunsky/President - Ginseng
Board of Wisconsin: “Eighty-five percent
of our market is China. So yeah, it’s
tied in. It’s hard-wired.”
Bob Kaldunsky heads up the state’s
ginseng board, a quasi-governmental
promotion group of active producers,
funded through shade assessment – a tax
on the farm structures that help mimic
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woods-like conditions for the fickle
herb.
Despite strong demand, Kaldunsky
says the number of ginseng growers in
Wisconsin has declined over the past 20
years from over 1,000 to nearly 180.
Bob Kaldunsky/President - Ginseng
Board of Wisconsin: “There’s 5 producers
that produce 75 percent of the crop. And
the balance, then, that’s about 175,
produce the other 25 percent.”
As Ginseng growers weigh whether or
not to plant, harvest, or rent, some fear
ongoing trade tensions could lead buyers
to cheaper sources in Asia and Canada.
President Donald Trump: “It’s going
to be very hard for them to that. We’re
putting a lot of safeguards in.”
Trump’s announced $12 billion aid
program for farmers affected by tariffs
doesn’t sit well with producers like Will
Hsu…
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Will Hsu/Hsu’s Ginseng – Wausau,
Wisconsin: “Especially for something so
valuable.”
…who say for the long term, free
trade is the right model. Value-added
products, infusing ginseng into all kinds
of food and drink combinations – which
are taxed and treated differently - could
be one future path for the industry.
There are no forward contracts or
futures markets for ginseng, and Hsu says
within the last year returns have neared
the cost of production.
President Donald Trump: “Family
farmers are the backbone of America.”
So as he and other growers adapt to
new rules brought on by the White House,
all must assess how long farmers who
export 90 percent of their crop to China
can weather the political storm.
For Market to Market, I’m Josh
Buettner.
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Delaney Howell: President Trump has
yet to drop the hammer on nearly $500
billion dollars in tariffs. The commodity
markets chewed on this fact in private
harvest projections. For the week
December wheat plunged thirty four cents
while the nearby corn contract rose 2
cents. Private yield estimates helped
push the November soybean market lower
during the week only to return to the
starting line by the final session.
Soybean meal went the opposite direction,
as the December contract gained $9.80 per
ton. December cotton shrank 23 cents per
hundred weight. Over in the dairy parlor,
October Class III milk futures lost 19
cents. The livestock market finished on
an upward note as the October cattle
contract rose a dollar 17. October
feeders put on three $3.82, and the
October lean hog contract added $5.22 on
news of further outbreaks of African
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swine fever. In the currency markets, the
US dollar index bumped up to 25 ticks,
crude oil fell $2.05 per barrel, Comex
gold retracted 6:30 per ounce, and the
Goldman Sachs commodity index dropped
nearly eight points to settle at 460.85.
Joining us now to offer insight on these
and other trends is one of our regular
market analysts Darin Newsom. Darin,
welcome back.
Darin Newsom: Good to be back. Thank
you, Delaney.
Delaney Howell: Let's start off here
with some wheat discussion during- you're
a big wheat guy. Were you surprised this
week when Russia did not cut their wheat
exports?
Darin Newsom: Oh no, I mean, you
never know what's going to happen on the
global wheat market. You know, there's
all kinds of stories. Nothing surprises
me anymore, you know, the fact is world
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still isn't looking, isn't still, isn't
knocking down the U.S door to buy wheat
and they're certainly not going to
anytime soon. Um, but you know, the more
interesting aspect of the wheat market to
me is probably as was talked about in the
piece earlier, the rain that we saw
across Kansas, I think that's going to
change the, you know, the possible. I
think that's going to add to the
likelihood that we see more acres planted
of hard red winter from the folks I've
been talking to. You know the price here
recently we saw, we saw July futures for
2019, rally over $6, get up to about
$6.40, something like that. There was
your opportunity to price, now you've got
the moisture. So they were planning on
putting more acres in, got the price that
they wanted. Now they've got the moisture
that they needed. I think they're going
to be there. It's going to be a very busy
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fall for planting wheat.
Delaney Howell: How many more acres
are we talking about Darren? And my
second part of that question is where
will they pull those acres from?
Darin Newsom: Most likely looking at
the prices of the other markets you could
lose. You could lose some corn acres.
Most likely you're going to lose more
soybean acres. So particularly, you know,
if we move out of the southern plains
into the northern plains, uh, and we look
at the hard red spring wheat, I think
you're going to lose more soybean acres
because it's just soybean, soybean market
is a disaster up there. You can't move
anything to the PNW right now. Uh, you've
got basis just collapsing at this point
and harvest isn't even here yet. Um, so I
think you're going to lose some soybean
acres up north. You're going to lose a
mix of corn and soybean acres in the
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southern plains.
Delaney Howell: Darren, final
question for you. Is Chicago December
closed below the 200 day moving average
since, uh, which was the first time since
July 18th I think. What's that signaling
to you for the December contract?
Darin Newsom: Absolutely nothing but
what it does, what the bigger picture of
the December Chicago contract tells me is
it wants to go lower. I mean, we're in a
down trend right now in the wheat market.
We had our, we had our spike top. We got
up into the upper percentages of its
price distribution for the last five, 10
years. Sellers hit it. It's got nowhere
to go. Still got bearish fundamentals,
you know, the market's going down.
Delaney Howell: Okay. Darin, rain is
also a big factor right now. When we look
at the corn crop, what do you think
that's going to do for this year's crop
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in particular?
Darin Newsom: $8? No, not really. I
don't think it's going to do anything.
It's going to be a little wet for awhile,
but I look at the spreads and right now
we've got a twenty six cent carry from
the December contract out through the
July and depending on what your full
commercial carry is for that time frame,
you're looking at almost at 66 percent of
full commercial carry out to over 70
percent full commercial carry, so it's
just. It's a bearish situation right now,
so I don't. I don't know what production
is going to be. I don't know what yield
is going to be. I don't know where we're
going, when we're going to get in the
fields.
Delaney Howell: No guesses on yield?
Darin Newsom: I don't care. That's
the thing I. I simply don't care and the
only thing I'm concerned about is “what
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is the market's opinion.” Corn hasn't
been able to rally, as you mentioned it,
it moved two cents this week and that's
just what it wants to do. Seasonally, it
puts in a low in early October. Spreads
are bearish basis, relatively bearish. I
don't understand why people want to get
so excited. It rained, you know, unless
it completely washed the fields away and
the corn is just not there anymore, we're
going to get in and we're going to
harvest the corn at some point.
Delaney Howell: So what should
producers be doing if they're sitting on
some old crop here, not getting excited
about now a new crop, what should they be
doing with that old crop that they're
holding onto?
Darin Newsom: If they're still
holding old crop, they probably, they
probably got a problem on your hands
because basis is going to continue to
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weaken at least for the next 30, 40 days
as we presumably get started in harvest
and, and uh, you know, we still have some
decent exports going on. Seems like it
really isn't supporting basis all that
much. So I think there's going to be a
problem if rolling that old crop into new
crop, usually not a good thing. I don't
know that we're going to have a lot of
opportunities over the next, over the
first 30, 90 days in this, in this new
crop market. If they're still holding it,
they're probably waiting for something
bigger down the road,
Delaney Howell: Bigger such as-
Darin Newsom: Bigger rally. Uh, you
know, right now we've got the December
contract, say in the $3.40, $3.50 range,
if I recall, probably as cash somewhere
in the $3.10, $3.20, something like that.
Uh, I could be off on those, um, you
know, I wouldn't expect much of a rally.
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Uh, you might be able to pull futures
back up close to $4. Not anytime soon,
maybe late winter. And then depending on
if we're able to build any export
business and keep demand underneath this
market, we might be able to tighten basis
up once we shut this. Once we shut the
bin doors tight, uh, in, uh, you know, at
the end of harvest.
Delaney Howell: Darin, we did test
$3.69 this week in the December contract.
If we break through that, what's your
next upside potential target?
Darin Newsom: I think the next upside
for me, I think we're somewhere between,
we got supported around $3.50 and
resistance at $3.90. It's really until we
break through that $3.90, I just, it
doesn't, doesn't tell me anything right
now. I mean just moving sideways is what
corn likes to do, so I think if we can
get up past that $3.88, $3.90 range on
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the Dec corn contract, at that point it
would tell me it would indicate that
corns trying to move into the next wave
and the words wave three of the five wave
uptrend, which would actually look pretty
good right now because that would tell us
that, you know, maybe we finally start to
have some demand. Maybe we have some
investment buying coming back into the
market.
Delaney Howell: A little bit of
optimism there. Just maybe-
Darin Newsom: I hate to do that, but
yeah.
Delaney Howell: Darin, let's talk
about soybeans. Not so optimistic here.
We've got a good question coming in on,
on Facebook this weekend. Folks. Thank
you so much for your questions this week.
I'm going to take credit that it was
because of my birthday wish. Um, we've
got Richard in Bell Eagle, Tennessee. He
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said if storage fills up and beans
remain, what is the best strategy with,
with balance?
Darin Newsom: Yeah, if I think we
could see storage fill up this year and
if we look at, if we look at the
structures of the market themselves,
again, we just talked about how the corn
spread is upper 60s to low 70 percent a
full commercial carry. If we look at the
soybeans and we've got it out in the mid
70s to maybe getting close to 80 percent
full commercial carry, at that point,
it's do you have it? Do you have it
hedged? If you don't have it hedged, you
probably just going to have to let go of
the the the extra bushels that you've got
of soybeans, guys, basis is going to be
bad. You know the market's telling you
that there's too many soybeans on hand
with both basis in the spreads and the
way the futures market's going. So if you
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don't have room for your beans, most
likely it's going to force some sales
around harvest. Number one, it might help
find a location for some. Number two, you
just want to have to worry about them
anymore.
Delaney Howell: With all those
factors being said, do you think that the
USDA should continue cutting Chinese
demand?
Darin Newsom: I have no idea what
USDA can or will do. Ah, yes. I think
you. I think I think we're going to see
China's demand continued to get trimmed
back, but I think we're going to see
other demand in other areas pickup
because China's just going to simply buy
our soybeans from countries who is not in
a trade war with and so we're just going
to have more middlemen pop up that's not
necessarily going to help basis because
everybody's going to want their cut, but
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it is going to keep us moving some of our
soybeans, so demand still going to be
there. I just don't see it supporting the
cash market that much.
Delaney Howell: Do you still see
$5.20, $5.30, $5.40 being a realistic
cash price here if, if trade negotiations
don't get resolved?
Darin Newsom: I think so.
Delaney Howell: And, and how soon do
you think we'd see those?
Darin Newsom: Probably buy within the
next 90 days and I know we're sitting in
$7, $7 something, $7.60, $7.70 range on
the average cash price. You know, on the
soybean chart looks similar on the
soybean futures chart, it looks similar
to what we saw in corn where it's still
holding, its previous low on its weekly
chart, but on the cash we actually went
to a new low here so far in September. So
that would indicate that it wants to
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continue to go down. So can we quickly
blow through the $6? Yeah. In fact we're
hearing some stories up in the northern
plains where cash is already in that, you
know, already in the $5 range in the
upper $5. So could the market in general
go there? Yeah. If we have a 4.5 (billion
bushel) crop and we're staring at, you
know, the possibility of 5 billion
bushels of totals supplies and we don't
know where it's going. I think we've got
more room to the downside over the next
90 days.
Delaney Howell: Darin, I want to
continue soybeans and on Argentinian and
South American production during market
plus, but we're going to move on here
until the live cattle markets maybe a
little bit more of a bright spot. Um,
when you look at markets overall, does
the stronger US dollar make you nervous
about beef demand moving forward?
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Darin Newsom: You know, we're
entering that time of year where beef
demand starts to slow down any way. You
know domestic demand starts to slow down,
you know, export demand could stay firm
dollar is certainly going to come into
play. I'm not, I'm not overly impressed
with the charts right now. We've had a
nice little short term bump. I'm not, we
haven't broken out of anything yet so it
still looks like we're trying to roll
over and go lower long term. So you know,
this could be a problem. We've still got
supplies. Every time we see a, every time
we see a cattle on feed report it's still
five percent larger than the previous
year and so on and so forth. So the
supplies are still out there and I think
that's going to- when domestic demand
starts to slow down here over the fall
and winter, I think that's going to start
putting some pressure on the cash market.
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Again.
Delaney Howell: What should
producers be looking to do then in the
wake of that pressure?
Darin Newsom: If we get some bounce,
if we get some bounces in here and you
know we've had some weeks where we've
seen some rallies, you know by all means
get some October, gets some December,
maybe I'm going out to the Feb and start
to get some of those locked in on the
idea that we're going to see some
seasonal pressure in this and we still
have ample supplies of beef around.
Delaney Howell: The last thing I
wanted to touch on here, and we talked
about, you alluded to it just a little
bit there, but fourth quarter we've got a
huge supply. We're still sitting on, I
think the USDA projected a drop of 550,
million pounds heading into first
quarter, which is a huge drop. I think
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maybe the largest on record. Has this
already been factored into the market?
Darin Newsom: If it has, it didn't do
much because the monthly chart still
hasn't moved. Again, the monthly chart
looks like it's still rolling over and
may want to go down for a bit. So if this
has been built in, if anyone believes
that at all, then it really didn't have
much of an impact on the market.
Delaney Howell: Okay. Let's move on
here quickly to feeders. Reversal higher
on Tuesday. Can we follow through and
test new highs?
Darin Newsom: Oh, we certainly can,
but mostly no, but much like the live
cattle market that just doesn't have. It
just doesn't have any longterm support in
this. I mean feeders are kind of goofy
and that they'll post a lot of the post,
a lot of short term signals on daily
charts and so on, but they don't really.
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A lot of times they don't amount to much
because it's a very thinly traded market
so we'll see if we can get some follow
through over the next couple of weeks,
but I'm not looking for any huge bullish
break at this point. Now, what could help
support the feeder matter market is if
corn breaks down, instead of going up
through $3.90, if corn actually breaks
down, cash, corn breaks down, that could
provide some support to the feeder
market.
Delaney Howell: Makes those input
costs a little cheaper. Darin, your
thoughts on the African swine fever, are
they going to have an impact on the US
prices?
Darin Newsom: You know, they could,
but which way? It could be argued either
way. Number one, you know it's going to
reduce some of the supplies of Chinese
pork, so naturally you'd think, hey,
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they're going to buy from the US. Well,
we're in a trade war with them so they
may not buy more from the US. So if all
of a sudden the supplies of their pork
are going down and they're having to kill
some of their herd, the soybeans that
we're shipping to other places, that is
then finding its way to China may not
happen. So while it could be argued it's
going to be bullish, it could also be
argued it's going to be bearish and right
now being me, I'm going to take the
bearish side.
Delaney Howell: Of course, of
course. Our Darin Newsom. Thank you so
much. Always a pleasure.
Darin Newsom: Thanks Delaney.
Delaney Howell: That wraps up the
broadcast portion of Market to Market,
but we will keep the conversation going
on Market Plus where we'll answer more of
your questions. You can find it on our
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website at IPTV.org/mtom. Check out our
youtube channel. Tell everyone you've
clicked, subscribe at
Youtube.com/markettomarket. Join us again
next week when we'll explore how the
battle plans being made to fight the
opioid crisis in rural America. So until
then, thanks for watching. I'm Delaney
Howell. Have a great week.
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