 Hello everyone, usually it's Dave Ripplinger given the welcome to our monthly agricultural situation and outlook webinar that we the Aggiecon department extension has been putting on now since since COVID began and it's changed a little bit and we're doing it monthly right now on current topics and events and we have today we as our presenters we have myself Brian Parman as well as Dr. Frane Olson, Tim Petrie, and Ron Halgan. So with that I'm going to go ahead and get started. Typically my presentation winds up being first anyway so we didn't we decided not to mess with the order. So today I'm going to present a little bit on some of the information from our farm business management record state averages that we put out. We got the state averages done a few weeks ago and some interesting information that comes from that and in conjunction with working with our farm business management instructors across the state. And so we look at we got the 2020 info in and you can see net farm incomes excluding the Red River Valley so for North Dakota outside of the valley net farm incomes up considerably in 2020 and I'm going to show the biggest reason for that you know one of the worst years being 2015 but 2020 we got to go back to almost 2012 we actually do have to go back to 2012 before we did a number that high so really the largest in the last seven or eight years or so is net farm incomes across the state. But the rate of return on assets and equity per farm even though 2020 had a fairly strong net farm income you can see the rate of return on assets and equity really not all that impressive especially compared to 2012 11 10 8 and 7 I mean pretty comparable to 2013 and a big reason for that actually is a lot of that has to do with the price of those assets. So you your rate of return has to do with the the amount of money you're making and then and then you have your asset value or your the value of your equity. And so if the if the cost for instance on farm equipment goes way up even though incomes are higher like your gross revenues are much higher you know those costs are a lot higher so the rate of return on those assets or the rate of return on that equity stays fairly low even though these gross returns may be increasing and the same and then the other one would be land values you know if those are staying pretty sticky or they're trending upwards even though you're making more money and gross the rate of return on those assets looks worse or about the same simply because the value of those assets are increasing. So if we look at net farm income excluding government payments you can see 2020 is a pretty dismal and actually 2019 would have been negative without government payments and government payments include if you recall in 2019 that would be your second round of MFP and then in 2020 it would be the CFAP payments. So we go back to net farm income with government payments and insurance and here's without government payments this is what net farm incomes would have been this last year and then how about net farm incomes without insurance or government payments. Now I know that's a little bit strange to say because you know insurance is something that we we typically buy and have and to count on during drought or prevent plant and a big one in 2020 was that prevent plant number you know if you'll recall we had a lot of prevent plant last year but a big negative number in 2020 if it wasn't for government payments and insurance I mean on average it would have been about negative $80,000 per farm so you could see how important that was to carrying us through the last year. So if we look at the crop insurance and government payments state averages yeah 2020 pretty much dwarfs everything. Except for 2011 insurance 2020 is quite a bit higher it is higher than 2011 but not not dramatically but those government payments in 2020 if you take out the CFAP years of 2018 and 2019 there's no three or four years combined that compared to 2020 for the amount of government assistance that was offered so I mean just a huge amount of money coming from government programs ad hoc programs and then and then a substantial sum as well coming from insurance and then one thing I found interesting here money borrowed and principal paid per farm if you look at money borrowed most years in fact just about every year since 2007 money borrowed has been higher than the principal paid so we're borrowing more money than we've been paying in principal in other words debt's been increasing except last year last year is about even you know for the first time that principal paid and money borrowed number was about even so it looks like in this case there weren't a lot of folks ready to go out on a limb and take on a whole bunch more debt despite the fact that there was there was a big influx of working capital from ad hoc government program payments and then I just I track land values as you folks know the some of my work on on that and so I just kind of like to track this and we got this sale of farmland versus purchase of farmland among actual farmers and you know the purchase of farmland despite 2020 being a stronger financial year than 2019 actually went down a sale of farmland stayed about the same not a lot of sales coming out of the actual producers but the purchase of farmland actually declining you know in 2020 so this actually has nothing to do with the last few slides that I was talking about but a big report came out this morning that everybody's been discussing and that's the inflation report for May and I thought I'd hit on it real quick it showed five percent inflation for May sorry that should have been capitalized with the M and then are about 3.8 percent core inflation which is you know excluding like food and energy and those kind of things and that's the highest since 2009 for a month so so it's annualized it wasn't five percent for the month it was that's an annualized number but that's it's still a very high number for inflation if you can imagine five percent for the year but the thing is excuse me many analysts are thinking that an economist who who really are in the macro world they're thinking it's mostly transitory that now that a lot of the covid restrictions are being lifted in states the bigger states that that you know had some of the more strict lockdown rules or the mask mandates and social distancing and and rest of building capacity things now that a lot of those have come off their demand is basically outpacing supply of a lot of things and you know part of it is also we have like for instance food and meats and stuff that have been a lot higher in the in recently in in terms of prices and so some a lot of analysts are thinking that this is just a two or three month maybe even four month period of inflation as as things reopen and folks work on getting back to normal and those who've been kind of locked up for a while go out and and do a little bit of spending but they think that it's just transitory and the implication of that is that the Fed really isn't going to change course with these low interest rates that they're not going to hike them which is what they typically do to combat inflation is hike interest rates the that this is going to taper off and by mid-summer when we fall the inflation will be back in line with what what we've seen previously so with that i'd like to go ahead and turn it over to dr frane olson and i'll be there at the end to answer any questions so thank you very much all right good afternoon everybody i'm frane olson i'm the crop economist and marketing specialist with ndsc extension i thought i would provide a brief update on what the information we got a couple hours ago at about 11 o'clock today we got the june was your report go ahead that's okay brian perfect so i want to i want to look at the old crop numbers as well as the new crop numbers so right now at this kind of this stage of the year we're really usda is updating two balance sheets at the same time supply demand balance sheets we're looking at the old crop the amount of grain that we have left in the bin but they're also trying to project and look into the future on what the new crop numbers might look like so let's zero in on the old crop numbers first so this is for the the current marketing year which is actually 2020 21 marketing year so that's the crop that's in the bin right now um and i like before i tried to to to give you an understanding that when we get this report the market it's really not the number that came out now in june relative to let's say the main number it's really what is the june report what did the usda numbers say relative to what the market analysts and traders were expecting to see okay so let's compare the bottom line in red with the top line in dark in the dark black the highlighted black so if we compare the average trade estimate with this is for ending stocks so this is the forecast for how much grain we're going to have left in the bin just before the harvest season of the next year now most of the changes for both corn soybeans and wheat that were made in this report were in the old crop numbers they were in the old crop numbers the new crop numbers that the forecast going into for the crop that were we we just completed planting really didn't change that much so let's just focus on this for the wheat column a couple changes they did increase their forecast for total wheat exports now the interesting thing to me was in the may report they reduced it by about 20 million bushels this month they returned that they added the 20 million bushels back in again so we're kind of waffling back and forth on these kind of this bubble on what the what the wheat exports will be so if you look at what the trade is expecting versus what we actually got from usda a slight reduction a slightly lower number than than what the trade trade analysts were expecting on the new crop side they also made some adjustments which i'll talk about in just a minute which in in today's market response wheat was down just a little bit on the corn side this is really the corn was the surprising numbers if there is a surprise in this report we would focus on corn for the old crop corn usda did increase their forecast for ethanol consumption or ethanol usage the amount of corn going to the ethanol sector by about 75 million bushels they also increased exports by about 75 million bushels so if you compare what the trade was expecting versus the number we actually got you know there was a little bit of bigger difference in fact it was if you look at the lowest trade estimate we're below the lowest trade estimate again some positive news for the corn market on soybeans again some small tweaks some small adjustments there was about a five 15 million bushel reduction in crushing so to put this in perspective usda up until this point had been forecasting record crushing levels and it even with the new number it's still a record crushing level but not as aggressive as what they were thinking earlier in the season and and part of that of course is because the the relative price adjustments and the crush margins are starting to soften now a little bit for for the the crushing sector right now so not any major surprises other than in corn it was us that was the old crop corn numbers now are starting to get a little bit tired tighter our reserves are starting to get a little bit smaller as we move through the rest of the summer months on my next slide highlighted in blue is the new crop numbers this is for the crop that's growing right now now the other thing i want to mention is the the ending stocks numbers that we just saw from old crop get carried forward into the new crop numbers so one of the supply side one of the inflows of grain we have in in these in these numbers is actually how much inventory do we think we have left over from last year so any changes that are made in old crop numbers automatically carry forward and flow through to the new crop numbers so this the the the shifts that we're seeing in what the trade was expecting versus the numbers we got out of us da are going to be very similar just because of most of the adjustments being made on old crop now for wheat again we did take the the the ending stocks of wheat down a little bit from last month it was lower than what the trade was expecting but it wasn't as big an adjustment as it was on the old crop primarily because us da did increase their their projection for national average wheat yield they increased it by 0.7 bushels and that's primarily because of the hard red winter wheat crop if you've been listening to the news and you hear the the the yield estimates coming out of the kansas wheat tour very very strong numbers coming out of the kansas wheat tour and i think uh some of that now is reflected in some of the us da forecasts so even though old crop exports were increased a little bit the new crop feed numbers were increased a little bit part of that was offset because we had an increase in yields or yield expectations now for corn and soybeans when you look at both production and consumption there was no change they made no adjustments in the new crop numbers relative to what we had last month so all of the change that we see in what the trade was expecting which is the top row versus what we actually got in the us da reports today is because of the adjustments in the old crop next slide please now the next major piece of news that we're going to get from us da will be on june 30th and please make sure you mark your calendars for this because on june 30th we're going to get the acreage report there's been a lot of debate and discussion about how many acres of corn and soybeans in particular actually got seeded was there some shifting that went on after we got the survey the farmer survey information in march so this june report the acreage report is the updated survey they reconduct the survey of farmers to say well what did you actually plant the survey is going on right now and will be released on june 30th at 11 o'clock so there's a again it's a re-survey of about 71,000 farmers across the US so the market will be watching this very very closely to say well did we get some adjustments in our planted acreage so please also note right now we are in a full-blown weather market so a lot of the market movement that you see is based off of weather weather forecasts precipitation kind of soil moistures what all is going on with growing conditions in the was your report as of right now as of june the the forecast for yields with the exception of of wheat the forecast for corn and soybean and spring wheat are based off of the 30-year trend line so they're using a trend line yield that's been adjusted up or down a little bit based off of kind of how quickly did we get the crop planted obviously if we put the seed in the ground earlier a little bit longer growing season there's higher yield potential but essentially USDA is using a long-term average yield that's been adjusted for technology okay so the yield numbers we have right now are just kind of considered average and that's why when we look at the weather forecast everybody's saying well are we are we looking at an average production nationwide are we looking at an above average or below average so on my next slide i want to give you a comparison now excuse me of where does USDA or excuse me backup where do the market traders and analysts get information about how the crop is progressing and and even though there's a lot of different sources the one that is commonly cited and and whether we agree with it or not well we think it's a good measure or not is irrelevant the market traders and analysts watch this information in the weekly progress report so the crop progress report is released every monday morning or monday afternoon excuse me it provides a subjective analysis a subjective opinion about what the crop looks like across the country they have the major producing states and then they do kind of an average of those major producing states so for corn this is the first slide i just want to drop down to the bottom line excuse me back up a little bit brian thank you for corn if you look at the the good excellent rating those columns on the far right hand side we've got about 14 percent of the acres or the crop is considered to be excellent about 58 percent is considered to be good based off of this report on june 6th they also list on the very bottom the previous week as well as this time last year so you've got two comparisons saying well if you get 14 percent and 58 percent is that good or bad or how does that sit well we can compare to what's happening last week and this is one of the things the market watches closely is is the condition of the crop improving or or dropping okay and then the second would be well how do we compare this year versus the same time last year now i i also want to caution everybody these are subjective ratings you know good excellent fair poor very poor so there are there are people every week that drive around a particular circuit they give an idea of what's happening in their region it goes into the usda and in dc and they compile all the information so this is a subjective analysis so there's we don't you know i there's a lot of people put in my opinion more pressure on these numbers and probably should be but it does impact psychology it impacts people's viewpoint of what they think the future will be so this the analysis then is on corn you know we've got a corn right now the corn condition is pretty similar to what we had last year at this time it looks like it slipped just a little bit from last week but again that's probably within the margin for error now the next slide is the same information for soybeans now last week we didn't have a soybean report so we don't have a weekly comparison but we do have the information from last year so if you look at a big picture sense looking at what's happening in the soybean crop around the us the numbers we're seeing today are very similar to what we saw about this time last year okay and then the final one the next slide shows the same information for spring wheat now this is spring wheat specifically notice we only have six states that are reporting and obviously if you compare the numbers this week versus this time last year they are dramatically different as well as notice the difference between this week's number and last week's number we're seeing a deterioration and most of that deterioration is here in North Dakota okay and this is the information again that influences people's viewpoint of what yield and yield potential may be okay so my next slide I wanted to show you a comparison of the drought monitor maps so I'm going to compare the one on the left hand side which is the one that came out this morning versus the one on the right hand side is a week ago and there's four states that I want you to zero in on there's a lot of information here but there's four states that I want you to focus your eyeballs on as we move through the next several slides I want you to look at the change from this week to last week for North Dakota South Dakota Minnesota and Iowa now there's some interesting things starting to go on in Wisconsin as well but I just want to focus on those four states kind of what's going on here regionally so very quickly just compare North Dakota this week versus last week South Dakota this week last week Minnesota and Iowa and start recognizing some of the differences so notice in southern south southern Minnesota some of those areas became a little drier in the middle of North Dakota in the southwest and the southeast they actually improved a little bit so my next slide is from Indon which is North Dakota Weather Network and these are actual weather stations that are recording actual rainfall so this isn't necessarily a radar image where they've tried to estimate rainfall this is actual rainfall at different locations now this is the rainfall over the last 30 days and notice you'll notice on the drought monitor map those areas that started getting some slight improvement were they also the areas that got a lot of rainfall so I want to remind everybody the drought monitor map one of the ways to interpret the drought monitor map is how deep into the soil profile has that dry condition gotten so this isn't if it's dark red or maroon this is not just a surface moisture thing it's that the soil moisture at the deeper levels are very very dry as well so in those areas southwest and southeast we did get enough rain to start rebuilding a little bit of recharge in the soil moisture so it's not just surface but it's also soil moisture uh subsoil moisture the other areas in blue I just want to highlight this there are still parts of the state that are very very dry okay so this is a 30 day total and the next slide is the last seven days and everybody knows over the last week or so it's been exceptionally hot evapotranspiration rates have been very high there's a lot of crop stress going on in particular in those area of the state that got very little rainfall over the last week now if you happen to live in those areas where you did get a lot of rain you know sometimes a little too much at least it did relieve some of this drought stress let's next slide is the same photo the same kind of radar imagery over the entire United States and this is for the again that same seven day period this is actually from National Weather Service this is where I want you to remember what's going on in North Dakota, South Dakota, Minnesota and Iowa so over the last seven days yes there are parts of North Dakota that got some rain little patches in South Dakota but Minnesota and Iowa have been very dry they really haven't had much precipitation over the last seven days even though they've been experiencing these hot weather conditions like we have in here in North Dakota thus the reason that some of that drought condition or the drought monitor map started reflecting a little bit deterioration in the soil moisture conditions on the next slide this is and I always get a little careful and in or uneasy about presenting this but I do want to talk about what is the estimates for soil moisture and I'm still trying to find a good kind of good reference point that I feel comfortable with now this is again out of some some satellite imagery that NASA has put together they work with the National Weather Service to try and compile this they've been doing this for a long time so this is the relative soil moisture so how does the current soil conditions compare to typical or average okay now this is for the zero to ten centimeter depth so this is about zero to four inches so this would be like the very top root zone root zone for for soil for crop emergence as well as if the crop is really young the root system hasn't had a chance to go very deep yet yes if you notice what's going on in North Dakota there are areas that are showing up a little bit green and some of those pockets are the areas we got that heavier rainfall but I also want you to zero in on what's happening in in eastern South Dakota Southern Minnesota and Iowa okay so those regions are also starting now to be on the low end of what you normally see for soil moisture at this time of year the next slide is the same map but for a different different soil depth so this is from 10 to 40 centimeters so this would be about from four inches to about 16 inches in the soil so this would be a little bit deeper in the soil zone notice in North Dakota we have some areas where that that deeper root zone are still very very dry there are parts that have got some recharge but not very much once again what's going on in eastern South Dakota which is heavy corn and soybean country southern Minnesota and Iowa so as we move forward these regions in my opinion this what they call western corn belt eastern South Dakota Minnesota southern Minnesota Iowa are going to get a lot of attention over the next uh next couple weeks and what's happening with rainfall what's happening to temperature and what does that mean for the stress of the crop because those are some very hardcore corn and soybean producing regions all right so what does the forecast look like next next slide please this is national weather service forecast for the precipitation for the next five days so we're looking forward now and saying well what is the what does the forecast look like for precip over the next five days let's let's zero in here a little bit I want you to focus on what's happening in Saskatchewan and Manitoba those two areas are also very very dry their forecast to get some really nice rain showers over the next five days which will take some pressure off of spring wheat Durham and Canola yields okay those areas in North Dakota that are that are looking very dry right now that at least the current forecast is those guys will probably get some rain how much that is we don't know South Dakota eastern South Dakota will get some rain what happens in southern Minnesota and Iowa again if you look at the scaling on the far left hand side you know those are that's like a tenth to a quarter inch well you know when you get a hot day in Iowa a tenth of an inch doesn't go very far so this is some of the stuff that we're going to be looking at in the what the markets of committee watching very closely the final slide that I have is for the forecast for the next three to seven days on the maximum temperature how hot is this going to be okay so it's above average below average and this is just for the maximum daytime maximum temperatures and again notice that North Dakota South Dakota Minnesota and Iowa are all expected to be above average temperatures from anywhere to 10 to 15 degrees above average so we're going into a week where it looks like part of our the region will get some extra rainfall which is great but it also looks like it's going to be relatively warm now I'm not trying to pretend to be a weather forecaster that's Daryl Richardson's job and I don't want to take over his job but this information does influence the markets and market perception about yield and yield forecast so please be it be paying attention and if there's some really good pricing opportunities try and take advantage of them and with that I'll hand it over to Tim Petrie good afternoon everybody Kim Petrie extension livestock marketing economist you see my website in the middle of the page there and sometimes I do say I'm going to show you a lot of charts and if you want updates of these charts just go to my website but the NDSU Extension Service now is undergoing a major change in our websites and so you can still go to my website but it won't be updated during the month of June so everything in there was in there in May and we won't have any updates until next month and also probably when the new information comes out next month my website may not work it may be obsolete and we may be going to a whole new thing so just aware of that in our next webinar we'll be able to update you on that so move ahead to my first slide there many of you heard this before but back in 2012 Donald Runsfeldt was giving a briefing on the Iraq whether there were weapons of mass destruction in Iraq and so on so he had these statements here that have been quoted many many times and I think are very very apropos for what's going on in the livestock market what has happened in the last couple years what's going on now and and we'll be kind of the focus of my talk as we go through here so he started off saying there are known knowns there are things that we know that we know and so the example I'll show you here in a minute is we know the beef cow herd has declined the last two years and I'm confident it's going to decline again this year so that means from a supply standpoint cattle numbers are going down and we'll have a smaller calf crop this fall and again next fall so obviously that's positive for prices then he went on to say there are known unknowns that is to say there are things that we now know we don't know and that would be typical of what Frank just got through talking about the corn market we know the corn market is volatile we know it's going to be affected by weather we know prices could go up or we know prices could go down it's just that we don't know how much so that's an unknown but we know it's going to be volatile and we'll talk more about that how it's affecting the cattle market in a minute then he went on to say but there are also unknown unknowns there are things we do not know we do not know and so if we go down then to my words on below that you know markets do not like unknown unknowns because all of a sudden they pop it's markets don't like uncertainty and so a lot of volatility occurs and we'll see some examples of that in a minute like back in go back in history a 9-11 a BSE cow in 2003 and most recently last year COVID-19 all unpredictable and and it seems like in the livestock side we've had many lately and and too many and it's just one after another we are so optimistic to begin years and then they come along and we've been calling these or the trade has been calling them not unknown unknowns but black swan events the definition of a black swan event is simply it's an unpredictable event typically within extreme results and so those previous three would be good examples of that so go to the next slide i just want to talk about cattle numbers and again substantiate where we are supply-wise and maybe what could have been or what should have could have been and also kind of talking about the drought that frame mentioned and and certainly hope that it gets over soon but how a long extended drought could affect us so the yellow squares here in the line is simply January 1st beef cow numbers that USDA does a survey on and puts out as of January 1st each year and so I really want to focus right where that green arc line starts which is back in 2010 there we had by 2010 we had decreased the beef cow herd for four street years that would be a typical liquidation phase and prices as well we'll look at prices in a minute but prices should have been high enough in 2010 that that would have ended the liquidation and then we should have kind of increased like that green line shows and you know by 2019 probably been right back where we were and you know not that much different than where we are now but what happened was instead of going down four years we ended up going down eight years so another four more years in 2010 there we were at 31.4 million we went to by 2014 down to 29 million that's a 2.4 million additional loss in cows that we hadn't expected kind of to put that into perspective North Dakota has about a million beef cows Texas alone lost a million and a half beef cows in that time period which they so they lost all of North Dakota and and and and half again North Dakota so it was quite dramatic that's one of the reasons why when we get there and see the prices the prices were so high in 2014 so just kind of and then to turn around after it started raining in the southern plains obviously they wanted to rebuild their herds and and get in on some of those high prices that they had missed out on the 2014 and 15 so we had the most dramatic increase in beef cow numbers up 2.7 million head up to the peak there in 2019 at 31.7 million head and that rapid increase by the time we got up there that did negatively impact prices and so then the last couple years we went down cyclical and like I said I'm expecting that to occur to occur again so if we go to the next slide here are what prices have done back since 1992 again most of you're aware you see those typical very high prices in 2014 into 2015 but what I've done is brought that same green arc over here to show you if we wouldn't have had that extended drought in the southern plains basically what what would have happened and so you know we would have had just a gradual increase we wouldn't have that additional decline in in cow numbers and would have you know been much more moderate there that top blue line is five to six hundred pound steer calves you see that ended up on that blue line averaging there about 160 or so last year the lowest 2020 there at about 155 but they would have been up closer to now 180 190 the last several years so I think just about all cow calf producers particularly in the southern plains but even up here would have much preferred giving up those two to $150 prices in 2014 for a more gradual in a 190 180 calves and I think the lenders would agree with that but it happened I'm not saying the drought is going to happen again and be extended but it does have severe ramifications if it doesn't then at the end of the chart you see we are predicting 2020 to be the cyclical low for prices to be higher this year and we'll talk about some of the reasons for that and even higher in 2022 and if things go right again with our lower cow herd they should keep on going into 2023 so go into the next slide again Frane showed you the drought current drought monitor so we are very very dry and like he mentioned particular up in north central North Dakota and the northern plains and in the bottom chart unlike his was last week I brought in a year ago so just to show you the how different it was a year ago till now and you know North Dakota western North Dakota was already getting dry last year by this time and then it's just continued to get worse and worse and worse and you know throw in South Dakota there and and the other places they talked about Montana Wyoming and so on and then the southwestern us is very very dry as well but you know where it was dry last year a little bit in those southern plains Texas Oklahoma Kansas up in there they've actually improved in very little drought in the southern plains from mid-debraska down into to Texas so but still very dry in a lot of places so go to the next slide on the top there i'm talking about the beef cow slaughter and again one of the things here is i'm just showing you some of those black swan events and how they can impact the the market but the the dotted dark line there is last year and so you see how beef cow slaughter was higher than it was you know the average of 2015 to 19 because 2015 to 19 we were in a rebuilding rapid rebuilding phase of cattle and so we slaughtered less cows and then by the time we got to last year we started peeling down the color a little bit so had high slaughter except COVID interrupted us there for a couple of months but got back to higher and this year again we were doing about the same as the blue line as last year again kind of another example of events that come along is that winter storm urie that happened there in march and went you know with that snow at the real grand in texas which is unheard of and so that shut down all slaughter plants and and truck movement down in texas and so on so slaughter dropped off dramatically but you know that melts fast down there when it hurries up and gets to 70 degrees so that bounced back and now the big issue of course you see we're slaughtering cows now at kind of last year's fall rate which is high and that's due to the drought up here in the northern plains as well and in southwestern us and and so uh just another reason why quite likely the cow herd is going to go down again this year may may not have went down as much as if we would be like the southern plains but from a price standpoint below and you see that right now that red line is where we are here last week and and prices have held in there there's a really good demand for cows we're importing a lot less beef australia uh you know got the drought improved and so they're rebuilding the herd and and china's buying a lot from them and some others and instead ascending to to us and a very good demand as well a retail demand for for hamburger so you know cows are moving but uh you know that hasn't the drought hasn't at least as yet depressed price as much so go to the next slide uh some questions we've had about you know the jbs hack and so on so that was cow slaughter there that for the jbs wasn't affected as much because they don't have a lot of cow plants but again uh there's the winters this is all cattle slaughter and there's the winter storm urie that was kind of temporary the jbs packing of companies do about or packing plants do 20 to 25 percent of the daily kill on cattle and so that was a disruption as you can see there and throw in uh memorial day as well would have added a little bit into that this is always a couple weeks behind so they're back in business now and we're back up to that uh black line and so it'll be a v similar to that urie storm but again just showing you how these unexpected events come along and disrupt the market so go to the next slide uh another thing then that i do want to visit with and and and frame talk to you about corn and so here's august feeder cattle futures in the black and july corn in the green and another thing then that we're really watching from a fall calf standpoint again i've said many times change uh corn 10 cents a bushel change fall cap prices of dollar in the opposite direction and so particularly you see since frane mentioned those march 31st planning intentions report right there on that green arrow in the middle since they came out we've had you know corn grow from 520 up to right now it's uh seven dollars of bushel trading today so quite a increase kind of interesting i just went back and looked at what uh july 2021 corn was a year ago today and it was 326 so you know i don't think many of you a year ago would have bet that we'd have had seven dollar corn uh now but it happened and that's where it is and so you see particularly since march 31st that opposite relationship when corn went from 520 up to seven and feeder cattle were at really good levels for uh august they're up at 163 so that was kind of our expectations but then uh went down that 10 cents to a dollar and got back down to 142 and then as corn fell there uh in um in for a while there during may till mid-may and almost to the end of may then feeder cattle futures came back but now in the last couple three weeks corn has went back up and again i think i was up about 10 cents today so then feeder cattle struggle so all i'm saying there is volatile prices are going to continue this is a known unknown we're going to have volatile prices as frane said and you got to watch all those things that frane mentioned and see what kind of a corn crop we might end up for fall uh feeder cattle prices so go to the next slide uh talking here some slaughter steer prices and again trying to end more on an optimistic note here uh i know there's a lot of pessimism out there and i think a lot of people think that the cattle market is in the daldrums and looking at slaughter steer is kind of interesting there's that red line of where we're doing with actually you know increased seasonally like we usually do up into april and then kind of usually decline in the mid-summer but we've held pretty steady there at 120 and right now fed cattle prices are higher than they've been for the last three years and those red squares there are the futures market closes from yesterday and so you see the expectation are for fed cattle to stay higher than they were the last three years and by the end of the year by december get up there to about 130 which is high as they've been since back in 2016 and then the orange squares on top are the are the 2022 fed cattle futures all above 130 so a lot of optimism going on there again you know i've talked about the supply side and we're going to have fewer cattle each year so that's positive and and then on the demand side go to the next slide uh brian has been talking about this but you know when we had low unemployment to start 2020 and then covid hit and a lot of turmoil there but that unemployment rate is coming down and you know just one block from where i am in barry hall we have a cast station right up across the street from us they've got a hiring sign and across the road is taco john and help wanted and so on and so the economy is improving there and down below is the dow jones industrial average is uh as on may 7th it was record high up there and and close to that now so a lot of optimism is helping funnel the cattle market go to the next slide then if we that so that that's the domestic demand here's the export demand the was the report that just came out today that i didn't bring all the numbers but uh USDA is predicting record exports for 2021 for beef we would have had record exports in 2019 but we ran into some trade negotiations with our top customers japan korea mexico and canada but they've all been solved so we are expecting record exports in 2020 but they didn't materialize because of covid but now in 2021 expecting record exports and the was the predicted record again for 2022 here and in today's report so that's positive for prices and you see it in the bottom there's the monthly the last couple years but we started off that dark dotted line 2020 with record exports and into march but then by april and so on dropped off with covid but by the end of the year we were back up to record levels but didn't do a record level for the year but you know march and april record levels and that's what we expect which again obviously positive for prices and why fed cattle futures are up where they were so go to the next slide uh yeah and the other thing then would be competing meats how that would affect cattle prices and beef prices and positive news there too on the hog side on the upper right hand side you last year hog prices affected very much by covid that that dotted line there last year we had $50 hogs in july and right now the uh lean hog futures are a buck 20 so go from 50 to a buck 20 so hog prices are high again based on the chinese demand is kind of a uh unknown unknown we know china is buying but how long are they going to keep buying pork and and are you know they've still got uh problems over there with they're heard and so some unknowns there but the hog market looks very good and down a little again in 2022 but still above what it was on the broiler side again they've rebounded up to average prices and so that's positive for beef prices and lamb so all all those factors enter what's leading into positivity into the future for prices so go to the next slide just end up saying you know there are better cattle prices ahead i know there's a lot of pessimism out there and we're dealing with a severe drought in a lot of cattle country and a lot of hard decisions being made there but you know there are better times ahead for prices so i think if you can at least hold on for you know you cattle and and sheep guys with a base number there'll be better times ahead and so rather than saying if you know things are going to be like they've been the last couple years maybe i just should get out i think that you know we'll see uh better and so you know do what you have to do i know you're going to have to do some downsizing and feed is expensive and some tough decisions but hopefully like we send the bottom some of these uh black swan events or get out of the way and we can get back to a more stable market so with that ron's going to talk a little bit more about some of the drought issues for livestock yeah well good afternoon thank you tim um i was going to talk about uh some tax consequences if you have to sell your livestock but before i get into that i was going to just touch briefly on the on the livestock forage program that i that i talked about last webinar and this is just the same slide it just had for your reference it'll it it tells you at what point uh that that the various counties will qualify for certain certain monthly payments uh based on the drought index so i wanted to show you the next slide shows you the map of north dakota that was about a month ago and and basically the whole state was eligible for four of these four payments they calculate a monthly payment but it's basically the the the more severe the drought the the more number of payments you you're eligible for and the maximum you can get is five so you can see at a month ago there's there was five counties that were not eligible at all and there was a few that had three now the next map i will show you about a week ago and you can see that things have changed so the almost the whole state is eligible for four payments two of those zeros actually turned to ones um there is no two for some reason the way the calculations are it goes from zero and then one three four and five um so the next one is the most current map based on what we the drought monitor that came out today and um so those there's 17 counties there in the reddish color and those officially turned to to five payments um the rest of the state is four there's one county there town or county that is still at four but if there's one more week in the d four category of the drought monitor that will also change to five so this is the most current current map for the lfp payments at this point so i just wanted to bring that to your to your attention so my main topic today then the next slide i'm going to talk about forced livestock sales and there's two irs provisions they're two separate totally separate parts of the code but um and so you could do either of these you can't do both of them for the same livestock but you can kind of pick and choose and i'll get into that in a little bit the first irs code is an internal revenue code is 1033 subsection e and the other one is a 451 subsection g so first of all we'll next slide we'll talk about the um the uh the the 1031 e and it's actually under the invalid involuntary conversion and that is only for draft breeding or dairy animals okay just keep that in mind so if you're working with your tax uh professional and trying to decide which one you want to elect remember that this is just for draft breeding and uh dairy the animals must be replaced within two years um uh and uh what you replace them with must be used for identical purposes um this applies to numbers of animals sold in excess of your normal selling okay and and that's and you're probably selling more now because you're running out of hay or there's dry conditions so you need to document that the declaration uh there is not a requirement that your county needs to be deck uh have a declaration for a disaster but you still need to show that it would and have document that it is a dry area and the drought monitor would be a very good source if your county does have a federal declaration either from the secretary of ag or the president um then the replacement period goes to four years also the secretary of the treasury can extend it further if it is if it is a three year drought or more and so there's counties in oklahoma that that probably they wouldn't technically have to replace their livestock for almost 11 years now because it's kind of been somewhat of a continuous drought so and the irs does publish all the various counties in in the country that are that qualify for this um and then when you do replace that the livestock the basis you have in the ones that you gave up whatever whether they be purchased or whatever the basis is it's just like you plopped in these this other replacement livestock and then they take that basis okay and for tax purposes um now if you do not replace the animals uh and uh or you replace them for something less uh then you need to you will have to pay tax on that gain and you'll have to file an amended return and uh you may be subject to a penalty or tax and interest on that now remember now it's a dollar for dollar replacement looking at dollars not head number of head for number of head okay so the next slide shows you the uh the uh the the next slide shows you the um the uh what should I I should say the the election could you advance at one time there we go the election for this 1033 e and it just here that here are the requirements of course you need your name and address you need to file this with your return uh during a declaration of the election the evidence uh as much documentation as possible explanation of of the sale okay uh the number of livestock and the number sold in excess of normal uh and then the game that you're that you are postponing and so the next slide I'm going to talk about the section 451 451 g now that is a whole different animal that is for any qualified livestock okay not just draft or breeding or dairy um and you have to be on the cash method and um also you must have a in the area that is federally recognized uh as a declaration okay a declaration of disaster okay um and is it is not necessary for the animal most to be raised or sold in the declared area you could sell them in another area that doesn't matter uh but the the weather event is is you have to document that that's what's caused you to sell it and there again it's only the livestock sales are in excess of the normal practice um the animals are not replaced in this in this scenario um in this section you just elect to simply put off the game for one year so there's a lot of strategy that may go on on what section what uh code section to use if you sell a cow calf air um you probably could use if you really have to document this the cattle the cows would be the breeding and then the and then the calves would would maybe fall into this 451 category okay so talk it over with your tax professional the next slide just shows you how do you how to elect the 451 g and it basically just uh just declare that you're choosing the 451 uh document the evidence uh and also that it is in a federal disaster area document the kinds of livestock and the number and then uh how much uh income is being deferred so with that the next slide I just uh have the uh some information there that that publication 225 farmers tax guide uh very very good examples in there if you want to research this and with any tax uh decision please contact your tax professional so with that I guess we this concludes our webinar and we can entertain any questions for any of our topics and any of our presenters today so we would appreciate it if you would put it in the q and a box right brian and uh and if you if we have any questions at all yep that's right please go ahead and use that q and a feature and we'll uh stay on to answer any questions that you guys might have about any of the topics you heard today or anything else that kind of pops up on the top of your head back to what ron was saying uh all counties in north dakota except richland are either in a secretarial disaster declaration or contiguous which counts so richland is the only county right wouldn't qualify for ron's and you don't even have to be in it for the one election anyway yeah right i'll give it a minute or so in case somebody's typing there we go we got one here uh this one's for ron just a question on the income tax side either program 1033 or 451 allows you to defer the income tax well actually you're actually not really deferring the well in effect you are deferring the income tax but you're deferring the income and then and then to us to a certain year and then in that year then you will eventually have to pay the tax i guess so anything else i guess i i have one more comment that i didn't mention earlier because i wasn't sure i was i was running a little longer than i wanted but one more update that we did get out of the wiser report today was that usda did lower the forecast for brazilian corn production they went from 102 million metric ton down to 98.5 which was a pretty substantial drop to be real honest especially in one month the but the 98.5 million metric ton is very close to kind of what the average or typical industry estimate is right now so also adding some support to the the the corn market is the fact that some of our international competition i.e brazil is not going to have as good a crop as at least for their second crop sofrina corn crop is not going to be as largely expected so just another further update all right i have a question from randy on inflation well part of the economy should we watch to see if inflation is starting to decrease well when they talk about like core inflation they tend to leave out like food and energy uh because they consider those volatile commodities as it is and those can move up and down dramatically and they and they figure that even though yes those are real costs the consumers incur they move so dramatically that that they're just not something that they want to include in inflation um i think one of the things that you're going to start i i would start looking at are some of the other commodities uh like like you know one of the things that they've been talking about is like timber prices and things like that and see if that levels out as people are going to buy homes uh what i guess what i would what i would say in general is we we kind of have to take the mentality that the analysts are taking and give it some time i mean we've literally in a lot of states i know north dakotas not we haven't been that restricted we compared to states like california and new york and those others we just haven't been that restricted but we don't have any people i mean you're lifting restrictions on you know south dakota and north dakota that's that's like a suburb of la not i mean not even so you know it's hard for us to kind of imagine how restricted things have been there so the one when they finally opened it up uh you had tens of millions of people all hitting the all hitting the market all being consumers all spending and that haven't done it in the last year so that's what they're that's what they're waiting on so typically uh randy they they they look at all sectors of the economy outside of uh food and energy i mean that you know they kind of divvy it out and then see which ones are moving and which ones aren't so you know with that i i guess i don't have any one sector that you would want to watch you're just going to want to keep an eye on you know in general prices in general across the board and uh see if they kind of level out all right so that one was answered live next one uh would be for frane will the drought in iowa and southern minnesota have more of an impact on corn or or the soybean market yes it's going to impact both of them i i think probably um given the ending stocks on soybeans are so incredibly tight if you look at a percentage our stocks to use basis um and and at what point do the do the markets get really really nervous about carryover stocks um i my first my gut reaction would probably see say soybeans uh but with saying that the corn market is also going to be very sensitive because uh especially as we get into late july in august if it stays hot and dry especially during pollination we can take a lot of the top end yield off a corn and you start reducing that corn number by 10 or 20 bushels an acre on average and boy your bottom line gets exceptionally tight on corn as well and another one there for frame uh do you expect uh do you i think that's supposed to be expect corn and soybean acres will be increased on uh June 30th on the June 30th acreage report yeah i don't know the exact numbers but most of the trade analysts and kind of forecasters are expecting to see an increase in both corn and soybean plantings relative to that march perspective plantings report um i i do think the current thought processes will see a larger increase in corn plantings then we will see an increase in soybean plantings uh kind of the the numbers a lot of people are throwing around is we'll probably see a million acre increase in soybeans and about a two million acre increase in corn then the last one here on c-fap a for contract feeders do you think it'll get paid out or is it still under deliberation yes if they haven't received their money yet uh it's still under deliberation for livestock producers it was based on the c-fap one inventory it was pretty automatic so it went out there still deliberations uh i know the poultry industry in particular is lobbying congress and usda to do something there but under deliberations if you haven't received the money tim what is happening with opening up crp for hanging and grazing yeah crp is open for grazing and uh in all those counties that are d2 and just go to your local office see you can graze crp at 50 percent of the care 50 percent 50 percent of the carrying capacity it's been open actually since the draw started and so you can get the grazing uh you the the haying uh is more dependent on the on the nesting season which is april 1st to august 1st and uh as of now uh we had a webinar earlier in the week and and fsa wasn't real optimistic that we would have early uh haying allowed haying is allowed in the normal situation or in an emergency situation after august 1st will it be open before that that is a a question that we can't answer i will say that back in 2017 they did open haying on july 16th which which was before august 1st but i'm not saying that's going to happen again there is some presence there the our congressional delegation is lobbying for some early uh haying but uh i think uh you know not a good chance but it may but grazing is open now then they were uh there was a follow-up to that are you aware of anything about crp in minnesota well i guess i've been kind of off my radar i guess i i'm assuming that that it's been it's open in minnesota for the for the d2 counties it's a national national thing right yes it automatically triggers if you're d2 so but i don't know the status of some of the counties in minnesota i'm assuming there's some d2s there and but keep in mind the contiguous counties do not work for for the for the these programs for lfp or for this yeah it's got to be your county some place in your county has to be at those different d levels and for emergency haying of crp you have to be in d2 you know so just on a sidebar i just looked up the um see if i can share my screen here um am i which one am i sharing i'm going to stop share hang on a sec drought monitor probably yeah i was just going to pull up the drought monitor here and and um let me do this really quick so here's the map for as of today for minnesota and so you got to be in d2 or better which is only down here in the very southern uh longest way up in the tip in the north way up the tip right way up here yep in kits and county it just has to touch the county the whole county's eligible once it once it touches so we had a question from carl if you do early emergency crp grazing and don't have the fsa paperwork done yet how long can you graze it 90 days or are we restricted to august first when late emergency grazing starts well he was 90 days right him yes yeah yeah you can only graze for 90 days emergency yep yeah all right well i'm not seeing any more questions any panelists have anything else they want to add no let's just hope for rain yeah let's hope for rain and let's hope for less heat how about that too for sure so thanks everyone for attending this this month's webinar uh we have another one scheduled for july and i believe dave ripplinger will be back running the show so i won't have so many technical difficulties that are my fault thanks again everyone for attending and have a good weekend