 My name is Frane Olson. I'm the crop economist and marketing specialist with NDSU Extension. Welcome to the Agricultural Market Situation and Outlook. This is the session for March 10th. I also want to just kind of denote everybody that we're going to do things a little bit differently today. We're actually going to have each of the presenters share their own screen, so we'll have a small transition from one person to the next. But as we're going through, if you do have questions that you'd like to try and ask, you can use the chat function or the Q&A feature. I'll be trying to monitor both of those to ask questions because you're automatically muted as well as your camera's turned off as you enter the webinar here. So again, if you have any questions, please feel free to type those in. I know Dr. Parman does have another commitment, so he'll be going first and we'll ask any kind of questions or things of him as he finishes. After that, then I'll begin again and we'll try and wrap up with the Q&A at the very end. All right. Hello, everyone. Today I just want to do kind of a short presentation, like we do in every one of these in series. But I want to take and talk about a couple of things, inflation and fertilizer prices mainly because things have changed around the world since our last discussion in some ways. So I think it's important to hit on those right now. So the BLS Bureau of Labor Statistics came out with their inflationary numbers from February 21 to February 22, the month that just ended not so long ago. And all items came out at 7.9%, which is you have to go back to the very early 80s to see a number that high. It was just slightly above the market expectations or the experts expected inflation rate of 7.8%. So just barely above that. So the market had that expected it. And yet again, energy prices being the big driver. You look at the all items, less food and energy, so core inflation, closer to just over 6%. But you add in that food and energy price increase and 7.9%, which again is the highest since the very early 80s. And where that ranks then on a timeline as far as highest, where it is in all time, or at least since we've been tracking it, you got to go back to about 1981 to have seen inflation that high, where it was roughly equivalent. So again, this isn't a record at 7.9%, but you can see down in here the last 10, 20 years before this last year inflation was typically around two to two and a half percent, which is the Federal Reserve's target. And now this 7.9% definitely has their attention. And the big question on everyone's mind as far as the Fed goes, not if, but how fast they are going to begin tapering off, rolling over their notes. In other words, how fast are they going to increase the federal funds rate? Is it going to be half a point per month, three quarters of a point? Because a lot of speculation is that its federal funds rate could hit about two and a half percent, which is zero right now by December. And if it gets up that high, how fast are they going to go ahead and do it? That's the big question everyone has. So not if, but how fast and how high will they push it? And these are those monthly inflation rates. And these are in the nominal terms, not annually adjusted. So February was a 0.8% of a percent, which is substantially higher than any month in the last 10 years at a 10% percent. Last month was the highest January in 10 years. And every one of these highlighted boxes are the highest for that month, or as higher the highest for that month in the last 10 years. So prices are increasing, inflation does not seem to be slowing down at all. So again, expect the Federal Reserve to act. And how much and how fast is really the only question. Now, switching to some other production costs outside of fertilizer, off-road diesel price volatility, I was pulling numbers and looking at the charts. And yesterday, Fargo off-road diesel price was about $4.32, $4.32 and a half cents, which was up 44 and a half cents from the day before. And then I pulled the same number, same chart today. And it was down 72 cents from yesterday, down to $3.60. So just massive volatility right now in the off-road diesel market, at least across North Dakota as well as, you know, Watertown, South Dakota and Alexandria. And here's a chart showing, you know, where diesel prices were off-road, that is, from December 2nd, December 19th, January 4th of this year. And they'd been climbing, but then you see the war between Ukraine and Russia happens and off-road diesel prices just skyrocketed in the subsequent weeks. But again, a lot of volatility, this 4.3247 was from yesterday. So it'd be, you know, the number down here around $3.60. But still, even at $3.60, which is right here, substantially higher than a few months ago. So here's a question. And I've done these presentations quite a bit where I've shown you what fertilizer prices are. We're all well aware they're up, you know, thousands of dollars a ton for an hydris and, you know, almost a thousand dollars a ton for most other products. But will they continue to go higher is the question. And they had been trending sideways. So prior to the Russian invasion of Ukraine, most fertilizer products outside of 1034.0 had been moving sideways really since the start of the year. And they remained that way at least up to the end of last week. But things have changed and things continue to change dramatically. So how are fertilizer prices going to be impacted by the conflict? Well, let's start with potash, which is up over 100% of where it was a year ago. US imports almost all of the potash it uses about 93% is imported. And depending on the year you look at the amount, about 75% of that comes from Canada, or all US potash comes from Canada. So the percentage of the 93% would be slightly higher. So we get most of our imported potash from Canada. And historically, we had gotten about 10% from Russia and 8% from Belarus. Well, that market is pretty much gone that the Russian and Belarus market due to Russian restrictions on exported fertilizers. So we're probably going to have to get more from Canada than we have historically, which, you know, stands to reason that and especially other countries who get their potash from Russia, Belarus, those areas, they're going to have to go to the same window, potentially Canada as we do, which is going to drive prices up. How are they going to fill in for the for the Russian and Belarus potash that they don't get? Well, that moves prices higher. Phosphates, US produces 9% of the world's phosphates, Russia about 11, China 26, and India 12. Those are the biggest ones. The rest are smaller than the single digits. And but the US produces nearly all the phosphates it needs. In many years, only around 2% is actually imported, sometimes higher, sometimes maybe approaching double digits. But for the most part, we produce most of the phosphate fertilizers that we need. And so it's, while it will impact price, it's probably the availability of it, at least from the from the United States standpoint, in the short run, it is going to be there. Or at least it's not going to be impacted dramatically by the by the conflict price. Yes, impacted the availability, maybe not at all. And then finally, nitrogen, China produces 26% of the world's supply, Russia 11 US 9% India 8. So those are the biggest producers. But the US only imports about 12% of its annual ammonia consumed and current plant capacity is at 84% production, which could be increased, albeit at a cost. So the US is pretty close to being entirely self sufficient, almost entirely self sufficient on ammonia nitrogen. So phosphates pretty close to self sufficient, if not self sufficient, same thing with nitrogen, potash on the other hand, almost entirely depending on imports. So that's the one if there was going to be an availability issue, that would be the one most likely to candidate for it, especially if we have to go elsewhere outside of Canada to get it, and the cost that we're going to be facing if we have to do something like that. So this little table, I know it's a little bit blurry and apologize for that, but I thought it was really interesting. It was put together by Dr. Greg Ivan doll at Kansas State University, Department of Agriculture Economics there in a presentation he gave the other day on where fertilizer prices may go. And it's based on the price of corn and the price of oil per barrel. And you look at like an hydrous at $7 corn and $150 oil, that's a $1734 a ton map, for instance, almost $1500 a ton under the same scenario and potash around almost $1400 per ton. And it's interesting and many of these and I don't know exactly the nuts and bolts of this model, I don't work with it, but a lot of them are dependent upon, you know, correlation and relationships between these obviously these two variables. But a big question mark in this case is the fact that we have, you know, political export restrictions put in place. And so sometimes those relationships can break down causing prices to be maybe a lot higher than a model might have projected because you're essentially we take a bunch of product that's expected to be there off the market at any price of oil or corn. And so that throws a big curveball at some of these and being able to predict. But the bottom line there is there's just probably no scenario where the issues going on in Ukraine and Russia do not drive and already extremely high fertilizer price possibly even higher, at least in the short run, higher than they would have been with the world, you know, sitting standing pat as it was a month ago or even a few short weeks ago. So the bottom line is, I guess with all of this, that, you know, we're kind of sitting wait and see on fertilizer prices, they've been moving sideways, albeit at a very high number, dollar value per ton, but at least they'd stopped going up. And that this may prompt them to probably will prompt them to climb even higher inflation numbers for February were, you know, the higher than even January, which is probably going to prompt the Federal Reserve to act. And the only question is, how fast are they going to react in order to try to rein in some of the some of the inflation pressure that we're seeing right now. So again, my name is Fray Nielsen. I'm the crop economist and marketing specialist. Here's my contact information. Once again, don't don't hesitate to reach out to me if you do have any questions or things that you think about later on. So the first thing I'd like to go through is talk a little bit about the WASDE report, the World Agricultural Supply Demand Estimates. Just to put this in frame in the right frame and context, the USDA did announce that they were trying to make some adjustments in their forecasting based on the current developments in Russia and Ukraine, although based on the results that I see, I think those adjustments were relatively small. But again, it's this is a developing story. And so anytime you're doing forecasting or projections, again, you want to be very careful about making those adjustments. So I do think as we move forward in time, we learn more about kind of what's happening as far as trade restrictions and kind of the developments as this unfolds, that we will start to see USDA make their adjustments as well. So this is a forecast for ending stocks. This would be for old crop of wheat, corn and soybeans. The very top row shows the average trade estimate. So usually about a week or so before the USDA releases their forecasts, some of the large news agencies do a poll of some of the major forecasting companies, the big commodity groups that try and put together their own information. They say, well, what number are you expecting USDA to come out with? What are your expectations coming in? So the top row is the average of those 20 to 25 firms. You can see the highest trade estimate, the lowest trade estimate, the number we got last month versus the red number on the very bottom, which is the actual number that we got yesterday. So what I usually like to do is compare the blue row to the red row, the top one versus the bottom one, just to say this is what the market was expecting versus what we actually got. So if you look at all wheat, again, that's all wheat classes blended together, the forecast for ending stocks, it didn't drop as much as people had expected. In fact, it actually increased a little bit. And I think that was the surprises to the market to some degree. USDA actually cut their forecast for US wheat exports slightly. Again, I think some of that is playing catch up from some pretty slow export pace that we've had in wheat since about the first of the year. So if you look at January, February statistics and numbers on not only new export sales, but also shipments, we're really actually behind the curve a little bit. So I think that had an impact on their forecasts. Now, again, looking forward, I do think the expectation is we'll start to see a recovery or rebound in some of those at that export pace. Going to the corn number, if we look at the top blue number versus the bottom red number, we were expecting a decrease from last month. We got that decrease. The main reason was an increase in the forecast for ethanol production as well as an increase for exports. And then the soybean, a very similar story. We did expect a reduction in our ending stocks, but the reduction wasn't quite as much as what the trade was expecting. Again, there was a small adjustment in the exports number. The other thing that I know it's been kind of overwhelmed by all this activity coming out of the Black Sea region, but we are still trying to follow the information coming out of South America and how large is the South American crop in particular for soybeans, but now also for corn because Ukraine is a major corn exporter and that supply chain now has been disrupted. So again, I'm going to look at the top row, which is the blue, which is the average trade estimate versus what the red row on the very bottom, which is what we got released yesterday. Again, very similar numbers. We saw some small adjustments. USDA did take the forecast for both Argentine corn and soybeans down a bit. I think the trade was expecting a little bit larger reduction. There are some private forecasts that have come out for both Argentina and Brazil that have some much heavier cuts than USDA does. Again, we'll have to wait to see how that plays out, but I do expect over time that the USDA numbers will continue to drop. On the Brazil side for both corn and soybeans, once again, the USDA didn't change the corn number, which I think was a little bit surprising to people. We were expecting a small decrease. We did get a decrease in the soybean forecast from about 134 down to 127, which is a pretty large adjustment based on kind of historically what we see coming out of USDA. However, to put that in context, as of yesterday, Conab, which is the Brazilian version of the USDA came out with their updated forecast for both corn and soybean production. Conab right now is looking at about a 122 to 123 million metric ton crop for soybeans and about 112 million metric ton for corn. There's a lot of the private forecasters as well as even some of the folks in Brazil are looking at the potential for much smaller production. We will watch this. The soybean market is watching it very closely, but as I said earlier, really all the activity and the shock from the US-Russian war have really kind of overshadowed a lot of what's happening in South America. Let's dive into some of the current news that we have. Again, this is news specifically related to the grains, not so much the energy complex. I know Dave Riblinger is going to talk a bit about what's happening in the energy side. I'm going to focus in my comments primarily on the grains. Earlier on, when the war first occurred, Ukraine suspended operations of all their port facilities. They have now recently announced that they're not going to reopen those until the Russian invasion ends. As a sidebar, if you're listening to the news and they talk about the city of Maripole, Maripole is one of the larger export facilities for grains coming out of Ukraine. The fact that that city is now being bombed pretty heavily, we don't know or don't have any really good indications of what's happening to the export facilities and if those facilities have been damaged. The other thing that was announced shortly after the war began was that Russia had suspended commercial vessel movement out of the Azov Sea, which is just kind of connected to a very close to the Black Sea area. Both Russia and Ukraine have a couple ports that are in the Azov Sea that again flow back into the Black Sea. So those ports have been closed, but the Black Sea ports remain open, especially on the Russian side of the sea itself. Now, ocean shipping companies have announced they really don't want to send their vessels into the Black Sea area just due to the risk that those ships will get damaged. However, this morning, and this is literally this morning, there was an announcement that about 30 vessels from Russia exited the Black Sea and they're going to be allowed to leave. So the quote was they were carrying sunflower oil grains and feed. Those were industry sources that said that. So again, these are grains that had or shipments that had already been booked. So they had the contracts were in place. The question and uncertainty was would there be delivery on those contracts? So even though there's no new contracts or very few contracts being tendered right now, there are some of the older shipments. So those that were purchased earlier that are now being delivered. Next thing, Ukrainian farmers, can they get their crop planted? And I think everybody's agreeing that there's going to have some problems sourcing the inputs they need. Seed for fertilizer chemicals, in particular, in my opinion, fuel and labor will obviously be some major issues for them, especially as we go into the growing season. Again, will they be able to get all their fieldwork done in a timely manner? I think most people are thinking that there will be some disruptions. But if you look at where the current active fighting is going on, it is around the outer edge of this of the country. So the middle portion of the country has been has hasn't been as heavily impacted. But this will be an ongoing story. I guess if I were a farmer in Ukraine, they don't have a very good crop insurance system. So I would be doing everything I could to try and get my crop planted to do the best job I could in farming this summer. But that's obviously going to be a challenge, given all the conflict that's going on. On the Russian side of the line, Russian farmers, there have been some ports saying that they may have some trouble sourcing the financing for their operating expenses. And again, given the major drop in the Russian ruble, their currency as well as the kind of the limited supply of financing that's available, both internally and externally for Russia as a country. Those are very legitimate concerns. Now, again, yesterday or this morning, Russia did announce that they were going to release about 160 billion rubles. Well, based on today's math and conversion tables, that's about one point, call it $1.2 billion of US in US currency to offer some short term loans for the planting season. So even though there might not be commercial banks available that are willing to be able to loan Russian farmers money for the upcoming planting season, the Russian government has said that they were going to try and backfill or backstop some of those. So again, we'll have to wait to see how much funding is available. And again, the supply chain for some of their inputs probably won't be as impacted as heavily as the Ukrainian farmers. But it is something that we're going to be paying attention to and watching as we move forward. The other thing I want to comment because I get some questions on it periodically is, will there be direct sanctions on US agricultural products? And that's very unlikely given humanitarian concerns because there are some countries that are relatively low income countries that do buy a lot of wheat, feed barley as well as some corn, oil seeds from both Russian Ukraine, countries like Egypt, Iran, Iraq, Bangladesh, some North African countries as well as Turkey. So some of these countries are in particular, for example, Egypt are really going to struggle because of the higher cost of imports to be able to get the volumes of source that they really need. So it's unlikely that we'll see major trade sanctions against Russian agricultural products, but it is possible. Again, I just think it's a low probability. So what are the impacts then on ag and ag pricing? And this is where I want you to start thinking about as we move forward, we learn more about what's happening. We've had this initial spike, the shock value that's in the marketplace. We've had a lot of speculative activity come back into the markets. Outside money come into the grains as well as the energy markets, the commodity complex. And so we've seen this rapid upsurge in pricing. Part of that is obviously because of supply and demand, but part of it is because this flow of money. And I do think we're starting to see a bit of that money flow start to retract, especially in the wheat complex. We're seeing some retracement now in wheat prices, but I really don't expect that to go down very far because the underlying supply-demand conditions are also having obviously a big impact. So the commodities that are the most impacted really have been wheat. And I want to say specifically hard red winter wheat. So the hard red winter wheat complex has been impacted much more than the spring wheat complex. When you look back before the war started, there was spring wheat was trading at about a $1.30 premium on the futures market over winter wheat. Today, actually winter wheat is slightly above spring wheat. So there's been this massive shift. So most of the price increases come in hard red winter wheat, which is really the class of wheat that Ukraine and Russia primarily exports. The corn market has also been impacted because of Ukraine being the fourth largest corn exporter. And again, some countries rely very heavily on those corn supplies. Those are not going to be available for at least several months. We'll have to wait to see. As a very close substitute, of course, barley, both Ukraine and Russia are major barley exporters, primarily feed barley. So in the US, we raise primarily malting barley, or the malting type varieties. They can be used for feed, but we really don't export much barley from the US anymore. Many years ago, we did, but not so much currently. The vegetable oil complex has been kind of one of those indirect things. Whereas a farmer or a lender, you may not have noticed what's happening to vegetable oil prices. And again, this is primarily globally. Palm oil is the largest volume of trading for vegetable oils globally by quite a ways. And then it's soybeans, which drops off fairly quickly, but surprisingly, canola and sunflower as far as a vegetable oil are very similar in volumes to soybean oil. Now again, in the United States, we use most of our oil domestically. We don't export a lot. We import basically nothing. But on the global stage, there are countries that do import vegetable oils. And Ukraine is a major exporter of sunflower oil. Russia is also a major exporter of sunflower oil. So it's after it's been processed. So this is now starting to have some impacts globally on vegetable oil prices, including soybean oil, which again has some spillover effects back into the US, both domestically as well as for the crushing margins. And of course, Brian just talked a little bit about the fertilizer. And of course, fertilizer prices have also increased pretty dramatically. A lot of that increase was before the war, but I really don't see fertilizer prices dropping very quickly either. So as prices go high, I just want to remind everybody because again, I get a little a lot of feedback from this that as they say in the markets, the cure for high prices is high prices. So when we get high prices, people change their behavior. And that's the reason we have higher prices. These prices continue to go up to increase until people change their behavior to start rationing use. So what are some of the things that high prices cause people to do? What are some of those fallback positions that can be used to compensate for this really high price? Well, the first of course is to draw down some of the stored reserves. So if you have some stocks that have been built up, you can start to bring those stocks down and sell some of those inventories. Use those either domestically or also try and hit the export market. The other thing obviously as prices go higher, you start to reduce consumption. You just don't use as much. And we're starting to see that now in the energy markets with gasoline that people are really reconsidering some of the trips they're taking. So some of those discretionary chips going to going to work as one thing, but some of the discretionary trips, they're taking a second look at saying, well, maybe I don't really need to make that trip. So we are seeing some reduction in consumption in the ag products as well. The other thing is looking for substitutes if possible. And that's obviously the connection between corn and feed barley. As corn prices go higher or as feed barley prices go higher, there's a substitution in the feed markets. So that may not always be possible, but if it is, that is one of the things that people look at. And of course, over time, we will get some increased production. And I know for countries outside of the Black Sea region, and now it's too late to be planting obviously a winter wheat, but there is the opportunity in some parts of the world to be able to plant spring wheat. Obviously here in North Dakota, and in the Northern Plains, into Canada, we also have parts of Europe, in particular near the, in Poland, and more importantly, in Germany, they have some spring wheat. We might see some of that increase in plantings there. Very soon we'll start to see the plantings for winter wheat down in Argentina. Again, I suspect that we'll see an increase in plantings there. It will obviously take several months for those bushels to become available in the global market, but there is this compensation that will go on. And then obviously what we're seeing right now short-term trade flows are changing very rapidly and adjusting instead of getting sourcing things out of the Black Sea exports, we're sourcing them out of other areas. So I just wanted to show you an idea of what's happening currently in the global market for wheat. The green line on top is hard red winter wheat loaded onto a vessel in the U.S. Gulf. So all of these prices that you see are FOBE, meaning that they've been loaded onto a vessel. They're ready to transport anywhere in the world. We have not included the transportation costs, but just to give you an idea of primarily those hard red winter wheat classes, those substitutes for Ukrainian wheat and Russian wheat, you can see long term, there tends to be some pretty strong correlations and that U.S. Gulf, which is the green line, the U.S. Gulf 11% hard red winter wheat tends to be kind of at the top of the market. We tend to be a bit more higher priced than a lot of the other wheat sources globally. Now on the very right hand side, you can see that we had this rapid spike up. This is as of this morning. So I pulled some world global prices as of this morning. You can see some of that is starting to retrace now. And if you look at the green line versus the pink line, which is Germany, or the orange line, which is France, the European wheats, we're now beginning a little bit more competitive with some of the European wheats. And again, these would be for old crop deliveries is before the supplies that we currently have not for new crop deliveries. But you can see that we're starting to equalize now and some of that premium for U.S. Gulf is starting to be eroded. We have to be competitive in the global market. So again, I just wanted to show you that prices do change and they can change very rapidly. The other thing you'll notice if you look very carefully is that the red line and the brown line, which represent Russian Ukraine, their price quotes have been pulled. So the exporters, if you wanted right now to purchase anything out of Russia or Ukraine from a wheat standpoint, there isn't even a price being offered. So they are literally out of the market. The only thing that we have to worry about now is the wheat that's been already ordered, but has not been delivered. So my final comments here just to wrap things up. So what do I see? This is kind of my opinion and I usually don't offer too many opinions about what I think is going to happen in the future. But I do want to set the stage and hopefully open up some discussion. These are my opinions regarding U.S. export volumes. So will we, with these higher prices and the fact that there's going to be a reshuffling of all of this demand base and who's going to be buying and selling to whom in the global markets, will the U.S. be able to pick up some more of these export volumes, these export sales? So I kind of started to think this through and I just wanted to propose this for discussion. When we look at hard red winter wheat and I tried to break up old crop versus new crop, for old crop, I really don't see that we in the U.S. are going to be able to export a lot of additional old crop wheat. There might be a slight increase, but really the old crop wheat is pretty much already in the pipeline and right now with global prices, I don't know how competitive we're going to be or how many additional sales we're going to pick up. Now for new crop, as we get into that July-August timeframe for hard red winter wheat, I do think we'll have the opportunity to pick up some additional sales, but as you saw in that chart earlier, the U.S. hard red winter wheat tends to be towards the upper end of the prices on the global market. For hard red spring wheat, I really don't see any change for old crop. Old crop prices have been high enough now both in the U.S. and out of Canada. We've essentially choked off any kind of new export sales for old crop. We are starting to get some new crop sales. The Philippines came in, I believe it was yesterday, and purchased a pretty significant amount of 2022 spring wheat from the United States, Philippines being our largest spring wheat buyer. So I do think we'll start to see an increase in some of our spring wheat sales, but I also depend, in my opinion, we'll also depend on protein levels. If we have a crop that's very, very high protein where we start to see the protein premiums return, I think we might have a little bit more difficult time being a really strong export destination or export source. But if we have an average protein level or even maybe a slightly below average protein level, then we can be price-wise a little bit more competitive with winter wheat and we might be able to pick up some of those export sales. For corn, again, old crop corn, I do think there's the opportunity to increase old crop corn sales because realistically it's going to be until October, November until we have new crop available. The feed grain supply globally is now getting exceptionally tight. I do think we're going to be seeing some more export sales of corn, not only to our traditional customers, but possibly to some of those that used to be buying from the Ukraine. New crop, again, I do think that increase, the demand base for feed grains in particular corn and feed barley globally will stay strong, so I do think that will spill over into new crop export sales. For soybeans, again, more directly tied to what's going on in South America, old crop, maybe a slight increase. We've already seen a little bit of the Chinese buying return for both old crop and new crop soybeans, mainly because of the tighter supplies down in South America. For new crop, I do think we'll see a moderate increase. Once our new crop soybeans come, we will become the destination. I think we're going to see some additional shifting. The last comment, and again, we'll probably cover this during the Q&A session, I just want to caution everybody or recognize, point out very specifically that most of the cash market buyers, the local elevators, the processors, the ethanol plants, etc., have all moved to pricing the product off of the July futures. This time of year, normally in March, we're using the May futures for old crop deliveries. Almost all of the elevators that I've looked at, the processing plants are now using the July futures, and there's two big reasons for that. We can talk about later. I don't want to take up too much time, but I just want you to recognize when you listen to the, for example, the market close on the radio, or if you're listening to reading some things in the press, when they talk about the nearby future, the nearby futures contract right now is the May contract, but most of the elevators are pricing off of the July contract. You may see a limit up or limit down move in the nearby, meaning the May, but that July contract is not going to be as volatile. Please understand that you might see some separation. When you hear something on the radio, you call the elevator. The elevator might quote you a slightly different price. With that, I will stop sharing and I will move on to Mr. Tim Petrie so that he can cover the livestock portion. Good afternoon, everybody. Tim Petrie here, Extension Livestock Marketing Economist. Like the others, I just want to kind of show you the impact that the Russian invasion is having on livestock prices. First of all, just kind of a little overview here. Russia and Ukraine are very small players in global beef production and meat production and exports and imports. Compared to the US, in the US, we're the leading producer of beef and pork or beef and chicken and second in pork. Then on the export side, you see, except that on those charts, that Russia has imported some beef on the left-hand side. Recently, it's fallen off dramatically and then looking at Ukraine and they're very, very small players and somewhat kind of the same thing on the pork side. And then on the export side, the US, we're the leading exporter of beef and pork and second and chicken only to Brazil. So we're a major player and these countries aren't. So there likely is very little impact on our livestock prices due to trade. Just a little bit more there on Russia and the green line there. At one time, it looked like Russia was going to be a major customer force for both beef and pork. And in fact, in 2012 and 13, Russia was our sixth best beef customer and increasing. Putin was going to be nice to his people and get meat to them. And then he invaded Crimea there in 2014. So we shut off all exports of meat products to Russia. And so they still do import a little bit of beef from Brazil and really no pork. So what they've done in Russia is just Putin has subsidized the chicken industry. And so they've increased chicken production dramatically and feed their people chicken and not much beef. So move along. That doesn't mean then even though they're very minor players in trade and production, it doesn't mean that it hasn't impacted our prices here because it has. On the fed cattle side, we're very dependent on the domestic and export market. And Brian's already talked about inflation and meat prices are high and gas prices already been mentioned. And David is going to talk more about that or sky high when people go to, on their way home from work and stop and fill up their tank of gas and it's way higher, maybe double in a year ago. And then they stopped by the grocery store to buy something for supper way less likely that they'll buy steaks or expensive meat and and will downsize their meat purchases. And so, you know, from the expensive, more expensive steak roast standpoint, certainly that isn't good. On the other hand, when we look at cow prices, we'll see, you know, hamburger is actually being a beneficiary and the higher priced beef and cattle prices or not. So first of all, just kind of an overview here, you've seen this chart about every time I talked years, fed steer prices. And by looking at this chart, it looks like there hasn't been much of an impact, which I'll get to in a minute. You know, we're the, you know, fed cattle last week were 141 compared to 113 last year that purple line, maybe I should explain all my charts, the purple line is going to be 2020 or or a five year average, then the blue line is 2021. And the red lines will always be 2022. And and then the red squares will be futures. And for the most part, those orange squares will be 2023 futures, but I have made a possible acceptance. So yeah, we brought fed cattle down from a couple weeks ago were 143 and brought them now down to 141. So that doesn't look like much of an impact. And still, when you look at the futures out the April futures and and compared to a year ago and and all the way through the futures are higher, we're back up almost to this is your yesterday's closes. Now we're knocked them down another 85 cents or so today. But you know, up there close to 150 and then going into 2023 quite a bit higher prices. So, you know, everything looks better and our supplies are going to be lower and all that. But back now to our basic question in hand, has the market been impacted? So this is the same chart I showed you before, except those orange squares at the top, if you go back down to the bottom and look at the key, that's what the futures prices were on February 15. That's right before, you know, we were still thinking maybe we could do some diplomatic negotiations and so on and maybe Putin wouldn't invade. And so that was pre war. And so you see then there has been an impact since he did invade. So those are 2015 prices up there where, you know, we had February futures have closed now, but back on on February 15. The February futures were up there at one 43 and the cash market ended up to be 141. But then go to April futures there. April futures were 14690 back on February 15. And yesterday they were 137 58. So that's almost a $10 decline. You know, and that's all due to all the problems and uncertainty with the war gas prices in particular, going up in the expectation that that's going to affect beef demand and so on, carry that out into July and so on. You know, the longer term we go out, hopefully things get settled. And so you see, by the end of the year, there wasn't a big change in the these futures, but certainly now as it shows there, you can give a $10 bill on fed cattle prices for the next month or so to to Putin. And then the other part of the picture then for feeder cattle have also been impacted. And that's mainly what frame talked about on the corn side that corn has increased dramatically. And again, remember that to change corn 10 cents and change feeder cattle, a dollar in the opposite direction. And that's as long as we hold fed cattle steady that those futures are also falling. So you know, here's the this chart starting with the bottom green line there is corn. And you see that opposite relationship. I'm not going to go back in history because we have to move along in terms of time. But, you know, just since February 15, then corn prices have ratcheted up there were 640 and then went up to 750. And, you know, then they backed off a little bit. But, you know, up again today, 30 cents, 28, 30 cents the last I saw today. So it'll be higher than that on that green line and feeder cattle have responded downward or 770 or 75, 75, whatever. And, you know, they crashed down to 156, 7 and came back up to about 160 yesterday. But they're off sharply April off again, $3 or so today, the last I look so there's as corn is up 30 cents. There's that opposite relationship. So as long as corn stays volatile, keeps changing, feeder cattle are going keep changing. This is just another corn chart. I don't want to dwell on corn a lot because, you know, Frane mentioned that. But again, here's Omaha corn prices. And, and here, you see that they've been increasing, as Frane said, and then the orange line is what they were on on February 15. Those orange dots there is what the futures were on February 15. And the red is where they are now. So you see up a buck higher. So that's why feeder cattle are $10 or are more lower now. So let's go into the steer calf prices. There again, you know, looking from on a year to year basis, we're doing a lot better than we have the last several years again, due to supplies, we've reduced the beef card three straight years now and we have lower supplies. So that's obviously positive to prices. And, and we were up there at 203 have backed off a little in the last six bucks in the last couple of weeks down to 197. And, you know, some of that, you know, on the on these lighter weight calves would be more for grazing. And they're also being influenced by it's extremely dry in the Southern Plains. We're seeing up to D4 on the drought monitor in Western Texas and Oklahoma, usually this time of the year when the grass starts greening up Texas up to through the Western Oklahoma and up into Kansas and nice sandhills in Nebraska, Western South Dakota all the way up as it greens up that sparks lightweight calf prices to put on grass. But there we're going to struggle without corn going up because as long as it doesn't rain down there. But yeah, we've backed them off. And again, they're going to follow corn along as well as we go along. Go to the heavyweight feeder cattle then. And so yeah, again, compared to last year, we're doing a lot better. And our expectations are still that we will do better than last year. The red bars, red squares there are the futures as of yesterday's close. Again, I, you know, the last I looked, we're going to today maybe take $3 or more off from them because corn is up 30 cents. And and then those orange bars are again, orange squares are what we were back on February 15, right before the war hit. And so looking there, you know, we were about at 170 on feeder cattle. And that's where the April futures were right at 170. So our expectations were to stay there and then continue, you know, or the April futures were at 170. So expecting that and, you know, going up into May and and and so on. But we have now in the since February, since February 15, taking the March futures down about 15 bucks. And the April just a little bit less than that as we go through there. Then again, by the end of the year, looks like now about $5. But again, that's a long way out. And corn hasn't been planted in all those issues that Frayn talked about. So, you know, we've given up about 15 bucks there on these heavyweight feeder cattle to go into the feedlot because of higher corn prices and those distant fed cattle futures being down to the two big things that affect feeder cattle. So, you know, quite some impact over what we initially expected there. On the other side, actually, like we like I mentioned to begin with on the cow side, usually this time of the year, cow prices do go up. They went up the last three years as shown on the chart. And they're up this year and above the last several years as well. And again, that goes back. There's a good demand for a hamburger and people are switching from the higher cuts of beef to when they're still buying beef to buying hamburgers. So, the 90% lean hamburger wholesale market is is is spiking and is up there and that's bringing cows and again, there are some cows that sell a lot more than this. This is these are just the would be typical of broken mouth cows that had a calf on them all last year and maybe it may or may not be pregnant but are coming to market. So, this is would be the low end of the cow market. I know some of you are selling seeing cows selling for 80 cents and sort of. But the whole cow market complex is increasing because, you know, it's a it's a cheaper product at the hamburger level and a lot of hamburger movement now they'll go to the hog side. Haven't seen a big impact on hogs on the fee. I didn't bring the feeder pig charts because of the time and feeder pig prices have went down a little bit in the last couple weeks with the corn going up on them. You know, hog prices have been ratcheting up the entire year again above last year and the futures the red futures there of this year are seeing that we'll have similar prices this summer to what we did last year and compared to February 15th there was really no change in in the futures on the hog side. The were our hog our breeding herds saw herds down and we've got less pigs and so that's you know there's been a shorter supply there so hog prices been doing pretty well then on the lamb side to kind of finish up here seen on the top side fed lamb prices actually you know we're just kind of hanging in there but have seen some weakness here in the last couple of weeks as well and again lamb is the highest price and so certainly the economy with the inflation and consumers and gas prices and so on will have some impact there then down on the although lamb prices are still very good compared to the previous year and usually they do kind of continue up in the spring to Easter as you see there on that top chart there the purple line two years ago on the blue line last year and when Easter gets here they may be back off a little bit before going up but they've backed off a little early you know probably due to the the higher gas prices and inflationary effects and so on and then feeder lamb prices too have fallen off some again corn affecting that so main impact on on on livestock feeder prices in particular has just been the corn and then the impact on the the the particular the lamb and beef cattle prices that are the high end of the meat has been with the high gas prices inflation and so on so with that i'm going to stop sharing and if i can and turn it over to dr rippler so i'm actually officially supposed to be on vacation today but there's so much excitement i thought i'd come in extra so i'm just going to provide some highlights of what's going on in energy as a result of the russian-ukranian war just first of all some background so russia is the number three oil producer in the world after the united states and saudi arabia is a critical supplier they're not a huge consumer they're sizable but not huge and you can just see that that list of where the the oil goes almost half of it ends up going to china then roderdam and you can really think of water roderdam is as western europe uh you know it's essentially port that that serves uh france and surrounding countries uh germany south korea and poland and not the united states and i think that's really critically important uh we occasionally buy very small amounts of oil from russia in fact interestingly the state of hawaii made an announcement before the the president did that they were no longer going to accept russian oil in honolulu but again if you look at that 11 percent of global supply which is a lot uh you know if you think about on the margin of that disappearing that that has huge implications then also to talking about natural gas second after the united states and again another major exporter and here we see that continued liability to europe with with germany italy australia turkey france and again not the united states so what we know so far is the us has decided to ban imports of russian oil which on its own is really not a big deal we typically import very very little can be filled through other suppliers it's when it's done in combination with others both individual companies or nations where things get really interesting again for a possible future where russia is not selling oil to the west that oil is going to have to find a home we're going to have to reallocate our oil within our economies which is going to almost certainly lead to higher prices and maybe significantly higher prices historically higher prices you know in the case of russia where's their oil going to go i'd expect there to be some switching with with china taking more from russia china taking less from the middle east and kind of trading partners that way which probably doesn't have huge implications but it's all those other things on the edge you may have heard and actually going back to that so it's interesting so shell did announce on wednesday that they're going to stop buying russian oil basically a day after they bought a bunch of it at a huge discount because no one else was buying but they told us they were done doing that so we'll take the word for it longer term you were seeing all these western companies pull out which has a number of implications you know who is going to take those assets use them you know take those investments take them to the point where they're value russia's announced that it may nationalize all western assets in retaliation for the activity by the west and there's also another interesting situation too thinking about the size of russia's oil industry you know they need can oil field services right they need inputs consulting equipment all of those things in order to continue to develop oil a lot of that is us based or at least based outside of russia how are they going to get those and if that ends up tying up you could see something you know really kind of akin to what happened in venezuela where there just wasn't much investment and production declined steadily finally you may have heard and jp morgan was the first one to put out a number that was very high in case these embargoes this this this self-sanctioning persists for a while you know so in the case of jp morgan till fall you're talking about oil prices of 185 dollars 185 dollars per barrel plus i've heard 200 there's obviously folks who are throwing out more than that anyways by far the highest prices we've ever seen in oil if if the west lines up and stops importing again you know we talked about this before off and on through the last year you know things were actually looking really good almost too good which led to the high oil prices before the situation in ukraine you know we had this recovery from covid you know folks are driving transportation has recovered freight movements have recovered people are driving both for for purposes and for pleasure or they were up until a few weeks ago there's also some bigger implications too now long term when we think about what these high prices might mean as well as what the economy being on on shaky legs would mean for transportation again the economy being on shaky legs is a number of things including inflation and then of course what's happening if we have higher energy prices in general just feed on itself so one of the things we're looking for if we have to find a way to wean ourselves off of russian oil in terms of western consumption you know we're we're likely going to have to go through something called the man destruction which is a permanent change in how we do things so this would be less driving different vehicles electric vehicles different fuels all of that uh not so you know somewhat in united states but you know for those who've been customers you're we're going to have to find out a way to to get by with less at a time when at least up until you know a week ago we wanted more uh you know and on the supply side this is you know coming off of covid really really shut down hard really did not come back quick again because no one expected to happen so fast uh also going along with that too it's been more difficult to finance a lot of uh oil development investments uh in the last year so some of that's that esg component that's going on in in in high finance and of course too globally we're just i'm talking primarily about oil but the same thing on the natural gas side you know talked a little bit about fertilizer uh with natural gas being a major feedstock there's issues there there's issues with fertilizer also because of coal in china you know one of the things we're thinking even longer term or what we're having to deal with now is is western europe realizing that they've mismanaged the energy transition they have not been thoughtful about their energy security and you know they are i think at least in the short term you know they're trying to find ways to bridge this gap including you know we're fortunately we're coming off of the winter entering spring where natural gas uh demand natural gas use declines uh because we don't need it for heating but again winter really is not that far away in terms of us getting things back or western europe finding supplies to give them what they need and then finally too i mean one of the big questions uh for all of this and i have i have it as a when but it really could be an if you know when will russian uh trade relations in terms of energy with the west normalized you know that's really up in the air and if it takes quite a long time it has a lot of a lot of different implications uh one thing that you should know is we're actually nowhere near record gas prices at least in in real terms uh looked it up the highest price of gasoline in north dakil these are uh numbers from uh eia similar numbers from from triple a it was may of 2013 419 a gallon adjusted for inflation especially high inflation last year that's actually 525 so you know you might have gone to the pump in the last couple of days and seen you know upper threes maybe even four dollars a gallon uh because of inflation it's actually we're not that bad yet uh but we certainly could be i mean one of the things that you have to look at in terms of where prices could go is 2013 was actually not a bad year a lot of that high price was just a a blip in the upper midwest so we saw a few weeks in the spring where there's this big run up and then the market corrected itself or addressed the situation you know if you think about all of the challenges facing energy or even oil specifically uh what could happen in ukraine what could happen with all of these other issues uh you know seeing something you know in terms of gasoline in the fives is not outside the rental possibility but again even that wouldn't be a record uh just looking a little bit too talking about north dakota oil uh you know that in general if you're in north dakota you might not like to pay for gasoline at the pump but that higher gas price probably means on net you're better off because right now there are significant amounts of tax revenue flowing into the state coffers uh how that will be allocated we don't know but it's it's a good time generally uh just looking a little bit at the response of the oil industry you know the oil industry can't respond immediately but we can actually get kind of close because we still have a lot of drilled uncompleted wells these wells that haven't been fracked yet uh in western north dakota we've actually done a pretty good job kind of taking that offline as the economy recovered you know basically made it through half of them you know we could finish up the rest bring a whole lot of supply online and again if you look at that new wells according to eia is about that new well will bring 2 000 barrels per day well if you look at those numbers boy we could bring a whole lot of supply to the market relatively quickly uh and address some of those higher prices which you know to me is is really quite it's good news uh on the consumer side that nothing for me really surprising in terms what this means for agriculture it's really bad timing as we need diesel fuel to do spring work you know to to plant uh there you know there's really no way around that you know right now our prices are clearly higher than they are usually uh you know they could change you know tremendously one way or the another from day to day i was just driving across town the price of gasoline at the station that i looked at is 20 cents lower than it was yesterday and so you can see that huge you know that huge that tremendous volatility in these prices and you know certainly not can recommend timing or anything like that but just to know that that's going to be a feature of this market uh for quite some time and even if things in the middle the excuse me in in Ukraine remain uh troubling there's all of these other things going on we're really in this this place in terms of supply and demand where there's just not much give uh that was even before the war in Ukraine and of course too we're going into the summer and the summer driving season and people even though some things are expensive gasoline is expensive uh you know a lot of consumers might feel that that squish on on their discretionary funds uh you know we're expecting folks to go drive uh there's been a lot of pent up demand for that too so what to watch for uh you know what's going to go on in in Ukraine you know nobody knows it looks like probably in it for the long run long haul uh may see it's you know historically high oil prices you know sometime this summer into the fall also too just looking at inflation you know inflation is is is a really uh tough thing because it you know you don't know exactly where prices were are going other than higher and you know that can damage the economy can impact a lot of people in different ways and different businesses and it's really quite concerning and that that the macro economy and how it performs is really important for energy demand I mean the one the one nice kicker we have in the U.S. you know now being you know the top producer of oil is these high prices are going to lead a lot of economic activity but that economic activity is going to be a pull at a time where we already have tremendous demand across all parts of the economy we have all of these problems with supply chain and they could just add to some of the pain of course as I mentioned before energy prices and demand destruction you know it's going to take quite a bit of time before folks you know are looking at those prices and say gosh I'm getting a more fuel efficient vehicle or a vehicle that uses a different power system but it's certainly possible you know we saw that in in in in 13 and 14 when the price declined we saw within a few months how SUV sales just soared we could see the opposite of that you know almost immediately and of course too you know I'm really kind of watching and we get updates you know quite regularly in terms of of wealth completions you know that could come on really really fast and if we put on a million barrels of oil in the next three to six months you know we'll be sitting in a much better spot but again nowhere near having you know prices that we would have expected outside of the the war in Ukraine and some of these other issues so those were my comments and I think that puts us at the end of the webinar I actually don't have the the the ending slides but it's open for for comment for question as well as for us if we have any other thoughts about remarks made by others so Dave there was a couple questions that came in there's about three questions that came in for me and they're all interrelated so if I can take about two minutes and explain this it all revolved around my last comment about why some of the elevators have shifted the month the futures market months that they use for pricing current deliveries so without going into the gory detail of it we are seeing a lot of investment capital moving into the commodities and usually we talk about a bundle of commodities including grains the livestock sector but a big chunk of that in these commodity indexes because it's an index made up of a lot of different products is the energy stocks so energy is considered a commodity along with the grains and the meats as well as precious metals so there's in kind of a flight to some security or there's some opportunity to try and profit from price volatility and the grain complex is part of that when these index funds come in and start managing or managing their portfolio they normally use the nearby months so the month the closest to today's date which in today's world is the may contract well the may contract then is the one that has seen the most extreme volatility the most high highest bouncing around because of the inflow and outflow of these monies now if you're a hedger if you're a grain elevator you're buying grain from a farmer and you're trying to hedge you're trying to protect price or reduce your risk exposure the cash market has been bouncing around up and down but the futures market's been bouncing a lot more more rapidly so we're seeing changes but the cash market is more muted than it is in the futures months so what that means is if i'm hedging in the nearby month it means i'm not reducing my risk exposure as much as i normally would okay so first the deferred months the months that are further away into the future are like an echo they do go up and down but not as rapidly as the front months do the other reason that they're using and shifting to these deferred months or these these months further into the future is as a hedger what you want to do is you want to choose the contract month that is closest to the date when you're going to offset the transaction so if i'm an elevator i'm buying let's say wheat from a farmer today and i need to resell in the future what i'm looking for is let's contract with or use the futures market for i'm going to resell the grain as that contract month for my hedging well if i'm buying grain today in particular spring wheat today i really not sure when i'm going to be able to resell that because the the international buyers some of the domestic millers they're not looking at today's high prices saying boy i'm really eager to buy up a bunch of grain right now so if they're buying from a farmer right now i don't know exactly when i'm going to be able to resell that so to use the july month the july futures month or even as some suggested the september futures month for for the hedging position it makes it gives you more time and more flexibility to be able to manage not only a risk in the hedge but then also to match up that delivery point so you don't have to roll from one month to the next so it's these combination of those two things that are occurring where most of the elevators the processors those buyers of grain from the farmer have now moved to the primarily the july month but as some of the comments came in i did check some of the the elevators in the western north dakota at least for spring wheat have moved to the september month the ones in the east are still using the july month and the reason for that is the western north dakota tends to be much more dominant and tied to the export market out of the pnw versus the eastern uh eastern uh north dakota as well as western minnesota tends to be more come to balance they can go west if the prices are right but they also tend to send some of the spring wheat east into the us domestic mills as i said in my comments the international market right now especially for spring wheat has been exceptionally quiet so if i'm buying spring wheat from a farmer right now there really is no no strong export demand out of the pnw for the spring wheat i'm buying today and so again to give themselves some protection to give themselves some time to be able to move these grains and move the volume later on they're using that september months to give some flexibility kind of a long answer to a really short question um so another question if you had existing corn hedges still off the may at this point would you would your plan be at this point to exit it depends upon the reason you took the may futures if you priced off of the may futures uh was that for old crop was that to try and price some old crop grain that you would deliver at a different point in time or was this more of a speculative position i'm assuming it's going to be a hedge position in that case i do still think there's opportunities but i would be fairly cautious if possible i would try and roll out of that may into the june or july months excuse me just again to give yourself a little bit more time and a little bit more protection but as as with this volatility part it's going to be a bit challenging to do that so be you have to be a bit strategic about it again work with a broker to try and help you accomplish that but my suggestion my recommendation would be yeah my preference would be to roll into the july months i did have one thought tim when you'd mention the consumer who sees high meat prices and walks by uh my thought is we don't know how things are going to go eat steak you know i don't know how many meals we have left they might be cheat no so i guess i don't see any more questions that have come in as i said when i first started if there are some things later on that you think of don't hesitate to contact us we'd be trying happy to try and follow up again thank you for your attendance today this has been recorded so for shortly after this is done we'll get the recording all prepared we'll make sure that we have a copy of the power points all compiled and that'll be available to you at at a future date so again thank you very much for attending today i hope you had a good day and stay safe