 My name is Frank Olson, I'm the crop economist and marketing specialist with NDSU Extension. We are recording this, so we will be sending out, be working with TESS. As soon as the meeting is done, we'll try and get things organized on our end and make sure that you have a link that you can go to to click on it and watch the recording later on if you wish. So first good morning, everybody. Thank you for joining us today. I want this to be fairly informal as best we can on a remote or a virtual meeting. Here's my contact information. If you do have any questions later on, feel free to contact me either by email or by telephone. My preference would be the cell phone because that's given today's issues. I'm not always in the office, so cell phone probably works a little bit better. If you have other questions, certainly you can go through TESS or the folks at United Quality and they'd be happy to contact me as well or you can go through county extension office and they know how to get a hold of me also. So with that, my goal today is to provide a kind of a brief overview of the current market conditions. I'll be focusing primarily on some of the old crop issues, but I will be talking some about new crop and new crop planted acreage for 2021. I'm going to go through corn, soybeans, and wheat in that order. After each one of those crops, I'm going to take a short break for questions. So I'll spend probably 10 minutes or so talking about wheat, I mean, excuse me, talking about corn, then we'll take a short break for Q and A. I'll try and answer whatever questions you have. Then we'll jump into soybeans. We'll take a short break and then round out with wheat and the wheat discussion. I know given where you are and kind of your typical cropping conditions, you may not have a lot of corn or corn acres in the region, but what happens in the corn market and the soybean market also has a huge impact on what goes on in the wheat market. And right now, at least for old crop wheat, the old crop we've really been tracking pretty closely with what's happening in the corn market. So I do have to explain that so you can understand the connections. So with that, I'll just jump right in. I wanted to give a brief overview of here are really the big forces right now, short term, that are impacting the grain markets. The one that you've probably been hearing the most about and will dive into in a little bit more detail in a few moments is the Chinese purchases of US ag products. It's really been the driving force. And when I say ag products, it's not only soybeans, which traditionally we think of the Chinese market as a dominant soybean destination for US beans, but now more recently corn and corn exports into the Chinese market has been incredible. There's really been phenomenal export pace. But I also don't want to minimize the amount of pork as well as poultry and sorghum as well as cotton that's going into the Chinese marketplace. So it's one of these rising tide lifts all boats. So the fact that we've been able to ship more agricultural products in a broader sense into the Chinese market is really helping all of these underlying agricultural individual agricultural markets. So what's really driving this? And I get quite a few questions about the impact of the phase one agreement versus just this underlying feed demand. And in my assessment, and I think most assessment from the private traders and the private analysts, is that the feed demand is really the driving force. The phase one agreement is helping. Think of it as the lubrication that we need to make things move a lot smoother and easier, but the real driving force is the feed demand. And it's much stronger than anybody expected. I mean, I was expecting once the phase one agreement was signed and once we began our U.S. harvest, I was anticipating China would come in and start buying some U.S. soybeans, they'd start buying some U.S. corn. But I don't think anybody expected the volumes of purchases and now shipments that are hitting the marketplace. This has really been some pretty incredible numbers. And again, I'll go through based on history, based on historical perspective. So I'll be going through some of that in more detail. The other thing I get question about is the impact of phase one agreement. Just in a quick summary, there's really two chapters in that phase one agreement that has an impact on agriculture or a direct impact on ag. The one that everybody was talking about was China's promise to increase their purchases, the dollar volumes of purchases in U.S. ag commodities. And they have done that. The base reference point was 2017's before the trade war started. They said, all right, we'll use 2017 as the base. We'll increase our purchases to a targeted level of. Well, when we look at the numbers now, and that was for a calendar year, it was in dollars, not a marketing year in bushels, which is what I'm going to be talking about. However, when we total things up, in a couple days, we'll get the official numbers and I'll have more information. They did exceed the 2017 levels. So China in a dollar terms did purchase more ag products in calendar year 2020 than they did in 2017. However, they fell short of what the targets were. And so there's some uncertainty about what does all that mean? What kind of enforcement mechanisms do we have within the phase one agreement? Where do we go from here? And that's still being debated. And I can comment on that if there are questions. In my opinion, actually the more important one was the one we don't spend a lot of time talking about. And that was the chapter specifically on agriculture that either lowered or removed what they call a non-tariff trade barrier. So these are rules or regulations or requirements that act as a barrier to prevent US ag products from entering China. And the one I'm going to bring up because it's important for corn is if you remember back a few years ago, we had that Singenta trade, the MIR 162. Singenta released this trade into the US seed supply before China had authorized or accepted that trade. And they essentially used that as a trade barrier to limit the amount of corn that US corn that could enter China. Well, phase one agreement negotiated that trade or that trade barrier to zero saying, OK, we will accept this MIR 162 trade will also be much, much more timely and being able to accept new traits as they come on the marketplace. And that now has opened the door to a lot more, more intensive purchases by China of US corn. So in pork and poultry were also some examples that we use for these barriers. OK, I don't want to get into the weeds on it. That's probably more than you ever wanted to know. But just recognize that the phase one agreement is has been successful in removing or eliminating, reducing those barriers. But it hasn't been as successful at it follow through with the volumes of purchases that the Chinese had agreed to another major driving force. We're still talking about South American weather. And I'm going to I'm going to just give you a heads up. The South America weather is having an impact, especially on soybeans. But also on the corn market and we'll talk about that more detail in just a moment. The manage hedge funds. So these are the the the financial investment community that comes into the ag markets periodically and starts buying or selling or trading futures markets, futures market positions, the long positions, you know, again, the strategy they're using is by low sell high. So as as as soybean and corn prices have come come up, they've been buying their contracts. They've been holding these contracts as the prices go up. And the concern is as they build these long positions, they start buying and buying and buying and holding more positions. At what point will they start selling those off and actually taking the profits or recognizing the profits? That's been happening in the soybean market for quite some time. We are seeing some of those long positions now decreasing. OK, the couple of weeks ago when we had the big sell off in soybeans, we took out some of that profit. Some of those folks that have been holding these long positions in soybeans, reverse those positions. And there's still a pretty substantial long holding position from the manage hedge funds, but it's not as large as it was before. And if there's a lot of, you know, some specific interest, I can show you some charts on that. What I am watching, though, is that we're starting to see the same thing happening in the corn market. So we look at the number of long positions, the contracts that have been purchased, but not offset yet in the corn market that are being held by these managed hedge funds. It's getting to be some pretty significant levels. And what that signals to me is we might have a price bubble and corn starting to form. I'm not, you know, we'll have to wait and see. But I am getting a little bit concerned because these managed hedge funds can reverse their positions very, very quickly. And obviously, if you have a whole bunch of sellers and very few buyers, prices start to drop and drop pretty quickly. For twenty twenty twenty one planted acreage. We're starting to have that discussions. I'm getting more and more questions on, you know, what's going to happen in North Dakota? And these are questions coming from, again, traders or analysts in Chicago. They're coming from some of the larger companies that are contracting for some of the small market or especially crops. We grow in North Dakota. A lot of concerns starting to build about what this acreage balance or the battle for acres, if you will, what that's going to look like in twenty twenty one. So just a quick recap. I don't want to spend a lot of time going through the numbers on the supply demand tables. So again, this is the information that USDA prepares every month. They update it every month on what their forecast and projections are for total supply as well as total usage. And they break it down by corn, soybeans and wheat, as well as some of the other major crops. The point I'm bringing up, I just want to remind everybody, these are the January numbers next Tuesday, February 9th. USDA is going to update these numbers. The top half of this table on the production side is known that we're not going to see any more changes in the production numbers. January was the last time that they adjusted the production numbers. From now on, the adjustments will come in consumption. How quickly are we moving through or burning through the available supplies? The numbers on the far right hand side, at least on the bottom half of the table, are all forecast. They're forecast for the twelve month, the full twelve month period of the marketing year. Now, for corn and soybeans, we're not even quite halfway through that marketing season. So half of the numbers we have in these forecasts are real numbers and about the other half are continued forecasts. So we do expect to see some changes, especially in the corn supply demand table. As of yesterday, the survey of private analysts and forecasters came out on what do they expect? So big news agencies like Reuters and Dow Jones and Bloomberg do a survey of the major companies that do forecasting. And they say, well, what do you expect the numbers to be for the January or the February report? So they survey these folks, they come out with the the information from that survey. It came out last night, especially from the Reuters news service. So if we look at what the average industry estimate, what what is the average guess or forecast for the number that USDA is going to give us next Tuesday? They are looking for a slight reduction or cutback in the ending stocks, the amount of grain that we're going to have in reserve just before harvest and next year. Those ending stocks numbers are forecasted to come down. The interesting thing to me is look at how wide that range is. So even though the average is we're we're going from one point five billion bushels down to about one point four, taking 100 million bushels out. But look at the pretty wide range that we have. There's a few forecasters are looking at some pretty substantial cuts. And some of that is is not only in the feed and ethanol, but also more importantly in the exports. So why is that important? Why is that number important? Well, I want to focus on those blue bars on the bottom. That's the stocks to use ratio. So we're taking that ending stocks number divided by total use. So think of it as a percentage. And what it's really represents is what percentage of our total needs, our total consumption, are we going to have in reserve as we move into that 2020 marketing year? OK, as we move into the 2020 crop, what do how much, how big is our reserves really going to be, but it's on a percentage basis. So we can look at it more uniformly over time. So let's look at the red bar on the far right hand side relative to the blue bars. And as that stocks to use ratio gets smaller, as it gets gets lower and lower, two things happen. Number one, average prices get higher. And number two, prices become more volatile. They get a lot more sensitive to any kind of new information. So think about it this way, if we have really large reserves, we've got large carryover stocks, if the bins are full at the end of of the marketing years, we move into the 2021 season. You know, nobody's really concerned because if we have some problems or if there's some issues that show up, yeah, we got plenty in the bin just in case. OK, but as those stocks get tight, now, all of a sudden, everybody starts to get nervous. Now, what I've noticed is I've looked at this over time and trying to kind of analyze this historical relationship is that for corn, as the 10 percent carryover stocks tends to be or seems to be that tipping point, it seems to be that point where if carryover stocks are below 10 percent, the market corn market starts to get pretty nervous. We see higher prices, we see some more price volatility appearing. If it's more than 10 percent, the corn market is pretty comfortable. We tend to get lower prices, not a lot of price volatility. It becomes a lot harder to try and see some some rallies coming to be able to have some pricing opportunities. So we're currently on the January numbers. We're currently almost exactly at 10 percent. If the private analysts are correct and we do start to see some lower numbers for ending stocks that and we get below 10 percent. And I think we're seeing that now. We're seeing a lot more price volatility in the corn market. So let's talk about usage. Let's again, focusing on old crop. How quickly we're burning through the available supplies we have. All right, the blue bar to put this in historical perspective, the blue line on top is the amount of corn that goes into the feed livestock sector. Now, technically, it's feed and residual. Think about residual as kind of spoilage and wastage. OK, but the vast majority of that goes into the feed channels. The blue bars, blue line on the top is feed. The red line is the amount of corn going into the ethanol industry. The black line is the amount of corn exported and the green green line is kind of everything else. It's all of those other non food and or industrial uses. The dotted lines on the far right hand edge represent the current USDA forecast. You can say the current forecast relative to the history. Notice a couple of things. Number one, feed and ethanol are the two largest consumers of corn by far. So there's more corn that goes into livestock sector domestically and into the ethanol sector domestically. Then we do on the export market. If you notice that the forecast for total feed consumption is down a little bit. I think part of that is because of some adjustments in residual. But we've also seen over the last couple of years a reduction in the amount of corn going into ethanol sector. And that is right now forecast to be relatively stable about that. About flat. And I'll talk about ethanol more in a second. So the surprise of the market, though, has been the exports. So even though exports are a smaller volume amount, they are the most difficult to predict. They're most the most difficult to forecast. And we're seeing USDA is currently forecasting a record large export volume for the 12 month period. And based on our exports so far, I think and I think a lot of other private forecasters are expecting that number will grow. It's going to increase as we move through time. So this will be a very, very strong export season, primarily because of China. So let's shift back a little bit to ethanol. One of the fortunately Department of Energy does track the barrels of ethanol produced every week. And this is a graphic of that weekly ethanol production number. Now, from that production number, we can kind of back calculate and have a pretty good estimate of how much corn is going into the ethanol sector and how quickly are they using that up. I want to point out the massive drop that we had in ethanol production in the first part in basically in that March time frame this 2020 in 2020. That was because the stay at home orders, we shut down the economy. Miles driven just dropped incredibly because nobody was going to work. We were all working from home. Now, we did see a pretty quick rebound after we opened up the economy, after we, you know, we're trying to figure out how do we manage this coronavirus infections? But notice that the amount of ethanol we're producing post COVID is much lower than we did pre COVID. So we are we are driving, we are consuming gasoline. We are increasing the miles driven, but it's at much lower level than we saw before coronavirus hit. Now, as I listen to those folks that really follow the energy sector very closely, they're really not expecting those miles driven, the amount of ethanol consumed. Therefore, the amount of ethanol that we need to produce to increase again until probably mid to late fall. And that's assuming that we have, you know, good vaccines scenario where we're able to roll that out. People become more comfortable. We start driving for vacations. We start doing things that we more normally again after after the this this COVID issue. So the point is we've seen this rapid drop where the rebound is come, but we're not at the higher levels that we saw previously. Shifting to exports. And again, I don't want to get into too much of the weeds here. But traditionally, Mexico and Japan have been our number one export destinations for US corn. OK. So to put this in perspective, all of the numbers on this table with the exception of the far right hand column, all the other numbers are 12 months totals. So how many bushels in this case metric ton of corn did we export to these other countries? And Mexico, Japan have historically been our number one customers. If you look at that numbers on the far right hand side, those are and I updated them this morning. Those are export commitments. So these are not only bushels that have been purchased and delivered, but also purchased but not delivered yet. So if we add up all of the sales, whether it's delivered or not delivered, that's the number we have on the far right hand side. OK. Now notice, you know, the when we look at export purchases by Mexico and Japan, they're pretty much right on pace. They're buying about the normal quantities of volumes that we would typically see this time of year. However, if you look at this corn number into China, that is an incredibly large number relative to history, relative to what we normally see. If we go back in time and we start looking at, well, what, how much has have we normally sold or typically sold to China? We get some pretty small numbers. And again, recognizing this 2015, 16, 17, that's when the limitation or that restriction on on US corn export sales to China because of that mere 162 trade. To put this 17.7 million metric ton into perspective, the previous record sales of US corn to China was 5.17 5.17 back in 2012. Last week, China purchased more than that amount in one week. Last week's corn export sales to China were incredible. So we went from about 11 to 17 in one week. OK, so this is this is more than five, the more than three times our previous record that that's the number that's got the corn market excited. If we drop to the very bottom, how much corn have we sold to date relative to history? You know, we're just about at our historical high. 2017 was the historical high for total corn exports. OK, we've almost reached that, and we're not even six months into the marketing year. Our corn sales and corn exports don't have a large seasonal pattern like they do in soybeans. So this could get very, very interesting, depending upon not only what China does, but also what other countries do are other other export destinations. Are they going to continue to buy at a regular pace? Before I forget, I also want to mention one of the concerns I have with corn. As corn prices go higher, what does that do to the ethanol industry? So I'm going to I'm going to go back. Let me go back to this graphic as corn prices go higher. As corn prices go higher, what does that do to the profitability of ethanol? And right now, ethanol profit margins are very, very tight. As corn prices have come up, ethanol futures have also come up to try and maintain some profitability in the industry, but it's been really, really difficult. And so one of the concerns I have is at what point does corn get so expensive that we see some more of these ethanol plants either scaling back, reducing their weekly consumption or mothballing or shutting down temporarily. So as we move forward in time, please be watching for that as a signal, because if we start to see the ethanol plants either throttling back or going to hot idle, what they call hot idle, where they're still running, but they're at minimum quantities. In my opinion, that's going to be at least the top of the market short term. So even though there's a lot of excitement about what's happening in China, I do want to put a word of caution in to what the top might be for corn and corn sales. I don't want to spend a lot of time on this graphic, but I do get questions. So the difference between the table I showed you and the table right now, this one is export shipments and it's cumulative export shipments. So for every time we load a vessel and that vessel leaves the US, we add it to the pile of shipments. And so far our shipments have been pretty much on normal pace. However, when you look at the math, about 64% of the total sales have not been shipped yet. So and most of those again to China. So they've purchased the corn, but they haven't been shipped yet. The reason I bring this up is this could potentially have an impact on local basis levels because local basis levels is trying to regulate the flow of grain. If some of these purchases now need to be shipped in the short term, you're going to see the local basis level rise to try and get those bushels move through the system more quickly. OK, now we don't we have record of the amount that has been purchased, but we don't have record on when those bushels have to be shipped. So we do have to watch the market. And again, I'm looking at those basis levels as a signal about when are those shipments need to be fulfilled? So we have a large volume of grain that has been purchased, but has not been shipped yet. So when we look at who do we compete against in the global market? You know, if you're China and you're looking for large volumes of corn, you do not have to come to the US, even though we are the largest export of corn globally, we're the largest producer of corn globally. China is the second largest producer of corn globally. They just don't export much. When we look at exports and our exporter competitors, Brazil and Argentina are number two and three. OK, so they do export. They produce in particular. Brazil produces and exports a lot of corn as well as Argentina. Ukraine also produces and exports more corn than they have in the past. They're starting to shift some of their wheat acres into corn. So we're not the only game in town anymore. And and as we start to see higher corn prices, how does that? How do we compete in the global market versus these other competitors? So what I did, this is as of yesterday. These are the bids, the forward bids as of yesterday. So I'll explain this graphic really quick. Just like the folks at United Quality will post prices for for sale and delivery in the future. The same thing happens in the global markets. So this is the price. These are the bids for the sale and delivery of corn to North Asia. North Asia would include China, Japan and Korea. For delivery in the future. So if I'm looking for corn and I say, well, we're going to get a really good deal on corn for delivery in April or May. These are the kind of bids that you'll see. And these are average bids by port, so they're not company bids, but they're average by region. So the black line represents the the cost of grain loaded onto a vessel and delivered the ocean freight to North Asia. So it's both the grain and the ocean freight doesn't include insurance. So the black line is delivered out of your crane into North Asia. The red line is delivered out of Brazil to North Asia. The green is the Gulf and US Gulf and the blue is USP and W. The reason I want to show this is these are the these are the prices that are in the marketplace as of yesterday. So if I'm looking for corn delivered sometime in February, March or April, yeah, the US is the place to come. But the time we get into May and into June, all of a sudden, Brazil becomes a better buy. So what I'm what I'm cautioning people about is, yes, we've had very aggressive export sales. We were having some pretty aggressive export deliveries right now. But how many more additional sales can we book before we become uncompetitive in the global market? And right now today, based on everything I see, I think we're going to be competitive for about a three, probably three more months. And then as the Brazilian corn harvest starts to come online, Brazil has, you know, produces a lot of corn. They're going to be able to to with with new crop sales. With the harvest hot, they're going to be able to be under bid us. OK, so again, I'm trying to be cautious. I'm I'm optimistic, but I'm trying to be cautious. So let's stop for for questions. And again, I'll I'll try and monitor the the chat box Q&A. So I got one one question that came in. Do you feel the corn purchases that are still outstanding will be fulfilled or will they either back out of contracts or try to sell the contracts off? That's a great question. So here's my this is an opinion, right? Nobody knows for sure. My opinion is I do think a vast majority of those corn sales will be delivered, they will be fulfilled. And it comes back to what's driving these corn purchases. And the simple fact is China has a huge feed demand. They're having a hard time. Their corn crop domestically was OK, but not fantastic. They're importing globally. They're importing feedstocks, not only corn, but sorghum and feed barley. And they also have a trade dispute now with with Australia. And Australia ships them quite a bit of feed barley. They're buying up feed. And so to me, as I read the marketplace and what they're actually doing, not what they're saying, but what they're actually doing, they need the corn. So you'll probably hear of some contracts that have been canceled or some contracts that have been resold or diverted. But in my opinion, those are going to be relatively small. There's there, you know, it always happens. You always have a few of that, a little bit of that happening globally, even even in a normal year. But I don't see them being a large volume of cancellations. I just I think the vast majority of what we sold will be delivered. OK, has it been talks on a phase two deal with China? Also, has the new administration said if they are going to honor phase one of the trade deal or edit, change any of it? OK, great question. And I've been trying really hard to to kind of filter that out and and and, you know, find out what is going on and what's the plan. And the early indications are this. And again, they can change politics as politics. The early indications are that the Biden administration is going to going to follow through and try and push the phase one agreement. They they they have publicly announced they're not going to reduce or eliminate that current import tariffs on Chinese products. OK, so remember, President Trump put on the import tariffs on Chinese products. That's when China retaliated with their purchases of with their import tariffs on U.S. soybeans. The phase one agreement eliminated those tariffs and China has been buying U.S. ag products. But the U.S. has not changed those import tariffs on the Chinese side. So my understanding is the Biden administration is going to follow through with the phase one agreement or at least push for continuation of the phase one agreement. They're not going to limit or reduce the tariffs. I do believe my personal opinion is I do believe they will start negotiating a phase two agreement. They're going to try to do that with China. But we have a lot of kind of unknowns even in phase one. There was a lot of very fuzzy soft language in the phase one agreement. The other thing that that I've been following is Robert Lighthizer was the head of the U.S. Trade Representative's Office during the Trump administration. There's a new new person now that's going to be head of that office for the Biden administration. I forget her name off the top of my head, but she is she's actually was born in China. She's a U.S. citizen now, but so she's fluent in Mandarin. Chinese so she understands the Chinese market very, very well, understands the trade issues very, very well. She's been part of the U.S. Trade Representative's Office for a long time. The the word I'm getting on the street is that she's going to be pretty tough on China as well. Now, that's a good thing and a bad thing. What I'm worried about, what I do get concerned about is obviously President Trump, when we when we look at our U.S. relations, U.S.-China relations, President Trump put a lot of weight and a lot of emphasis on the trade issues as well as the the trade deficit. Now, those issues are important to Biden administration, but not as important as some other issues like sovereignty for Taiwan. Some of the issues going on with with the political crackdowns going on in Hong Kong, there's been some new military tensions starting to build between mainland China and Taiwan because mainland China does not recognize Taiwan's independence. The U.S. is an ally of Taiwan. There's also obviously the human rights issues, the climate issues. So the the political tensions between the United States and China are still there. They have not gone away. The trade tensions between the United States and China have not gone away, even with phase one. And I do get a little bit concerned about if those tensions continue to escalate. What does that mean long term for agricultural trade between the U.S. and China? And so these I mean, I'm watching this really, really closely. And obviously, if we have any kind of inkling that tensions are getting worse or that somehow China may retaliate again, just hang on to your hats because that would have a huge negative impact on grain prices. So I do think to answer the question, I do think they'll start working and negotiating on a phase two. I think they're going to try and push for fulfillment to the phase one. Long answer to a pretty short question. Sorry. Any other questions? OK, that took a little longer to cover corn than I than I was hoping, but the rest of this hopefully will go relatively smooth. So let me keep going on on the next slide. I'll shift into soybeans. Same basic layout. We're going to talk about the supply demand tables for soybeans drop down to the bottom line, even as of January, USDA is forecasting some very, very, very tight soybean supplies. OK, so again, this is a forecast of how many soybeans are going to be left in the bin just before harvest of 2021. That's a really small number. When we look at what the trade estimates, what do we, what are the traders think USDA is going to come out with on Tuesday? They're looking for an additional cut. So the average trade guess is that 140 is now going to get down to 123, which is exceptionally tight. The range is from 105 to 140. We'll wait to see what USDA's forecasts are, but given the crushing pace and giving the pace of exports, we're looking at some, some lower numbers. The question is how much lower. OK, so graphically, and these are going back now to the, the January numbers. If you look at that stocks to use ratio on the far right hand side, the one in red, that's not a record low, but it's very close to the record low we saw in 2012, 2013. OK, so we are looking at some exceptionally tight soybean supplies, which is the reason we're having the higher soybean prices and we're seeing a lot of volatility in the soybean market. Those two go together as prices get higher. We tend to see volatility also increase. So folks, as we move into spring planting, as we move into the growing season, hang on to your hats. Soybeans is going to be very, very volatile, volatile both on the upside and potentially on the downside. And I'll show you some graphics here in a little bit to try and kind of emphasize that and bring it home. How do we use up soybeans? Again, I just want to remind everybody the blue line is crushing. It's domestic crush. We bring it to a process where they crush it in oil and meal. About 25% of our meal is exported, but about 30% of our soybean oil also goes into biodiesel or biofuels. So some of the issues that are showing up in the ethanol industry are also raising a few concerns on the biodiesel side. Now biodiesel is a little bit smaller. It's more stable market than the ethanol side, but we do have some of those concerns about miles driven and how many gallons of diesel for your, we're only going to consume. The other little nuance thing, of course, is that soybean oil as a fuel additive has a little bit different carbon footprint than the ethanol does. So there are some nuance things going on there, but that's details you probably don't know. Don't need to know. The point, look at the exports. That's the red line. We had some very, very strong export pace up until we had the trade war with U.S. and China. It dropped off very significantly. We're seeing now we're rebound. If USDA, even in January, USDA is forecasting a record soybean export levels. So let's talk about export pace. Based on the forecast, what's actually been happening. So like before, all of the numbers on this table with the exception of the column and the far right-hand side are 12 months totals. So the 12 month totals versus the far right-hand column is not even, it's like five months totals. It's through the end of January. China has always been our number one customer. We always have exported more into the Chinese market, at least within modern history, recent history than any other country. Number two country, our region is the EU, and then finally Mexico. So I just want to remind everybody, guys, because I get really frustrated at the time, even during the peak of the trade war between the United States and China, China was still our number one soybean destination. Because there was this discussion going around saying, well, if we don't sell soybeans to China, we'll just sell them to somebody else. And the problem with that logic is, when you're exporting whole soybeans, you have to export it to a country that has crushing capacity. Because it's got to be crushed into oil and meal before it can be used versus corn. I mean, you can have a shipment of corn arrive. It can get offloaded onto a truck and be in the stomach of an animal later on that afternoon. There's no processing required. So the movement of corn in the global market is very different from the movement of soybeans. All right, I'll get off my soapbox. Let's move into what's currently happening. So as of the report we got this morning, as of the end of January, China had purchased, some of it's been delivered, not all of it. They purchased 35.3 million metric ton of soybeans. The record high purchases was 36.1 in 2016. Now, you're looking at saying, man, this freight train is going to keep running. I want to be cautious because the export season for soybeans is very, very seasonal. And we're getting to the end of the season for our U.S. soybeans exports, new export commitments, as well as deliveries. Now, we do sell grains throughout the year. We do sell soybeans throughout the year, but the pace drops off significantly as we get into this February, March timeframe. Now, if you look at total sales, if you drop down to the bottom, not just China, but all exports to all countries, this is now a record year because the previous record for total soybean exports was 2016-17. So we have now broken our previous record, which for soybean prices is a good thing. So let's talk about China specifically. Again, these are export commitments. So this is not only what's been delivered, but what has been, you know, it's all sales. Some has been delivered, some not. I'll get into the how much has not been delivered in a moment. The green line is that 2016-17 export pay or a commitment pace, our sales pace. So again, every time when we have a sale, we add it to the pile of sales. They started out fairly aggressively in this marketing year. They've been very aggressive the rest of the year. The question that we have is, will this red line, the current year, continue to stay above the green line or will it start to drop off and merge into the green line? We don't know. My suspicion right now is, yeah, I do think China will have record soybean purchases from the U.S. So let's look at the seasonality. Now these are shipments. This is the amount of grain loaded onto a vessel and leaving the country. And notice this very seasonal pattern, right? It happened with the exception of the trade war years. This happens every year. By the time we get into this February, March timeframe, our export shipments start to drop off fairly quickly. So I did the math on it. Okay. Of all the stuff that we have sold globally, there's about 20% of it has not been delivered yet. So about 20% of all of our sales have not been delivered yet. So we will continue to see these shipments going on, but the rate, the pace is going to start to drop off. And again, the reason this is important is because that pace, the rate at which we export influences your local basis levels. And I think on the soybean side, you've seen local basis levels going to drop back down to something that would be more seasonal or typical at this time of year. And this is the main reason is, you know, where we've had a really good export sales season. Most of those have already been delivered. We're not getting a lot of new sales commitments on the books. When you look at China specifically, China only, again, the red line is the current shipping season. We see that normal pattern. Well, when I do the number crunching on it, there's only about 5% of all of the sales to China have not been delivered yet. So I would expect my, I mean, based on the numbers and based on the seasonal pattern, I would expect the shipments and the sales to China to drop off pretty dramatically as we move into this February, March timeframe. Okay. So who's our big competitor? Who sells soybeans in the global market? Number one producer and number one exporter of soybeans in the globe is Brazil. They passed the U.S. several years ago in both production as well as shipments or exports. Now, one of the reasons that Brazil's exports are so much larger in volume, the United States is, Brazil doesn't have quite as large a domestic crushing industry. They produce more soybeans, but their crushing industry isn't quite as large as the U.S. So as a result, they have larger exports. Okay. But Argentina is on the opposite end of that. Look at the Argentine. Now this is exports of whole soy, the whole soybean. They produce quite a bit of, they're the third largest producer of soybeans globally, but they process almost all of their soybeans before they export it. So Argentina is the largest exporter of soybean meal and soybean oil. So they don't export a lot of whole soy or whole bean. They process it first. So when you look at China and the Chinese market, who do they buy from? It's either the United States or it's Brazil. So let's talk about what is the trade expecting for the size of the soybean crop in Brazil, which is the far right-hand column over here. So we got Argentina and Brazil. We got both corn and soybeans. This is the most recent survey results. So this is what the trade is expecting to see out of USDA next Tuesday. Okay. So in January, USDA was forecasting 133 million metric ton. To put that in perspective, last year they estimated the crop at 126 million metric ton. Last year was a record production year for Brazilian soybeans. So they're going to blow the old record out of the water. And the reason that increase is because they increased planted acreage. This is not because they are expecting this huge yield, which we'll talk about in a minute. They increase their planted acreage. Okay. So the acres are there. It's just a matter of, okay, plus or minus what's the yield going to be. And when you look at the average trade guests versus what USDA is saying, you know what? It's pretty darn close. Now the other thing I want to point out is look at the range. We still have a pretty wide range in what they think total production, because of yield uncertainty, total production is going to be coming out of Brazil. The moral of the story, even if they're at the low end of the range, Brazil's going to have more soybean production than they did last year. Okay. So yes, Brazil's had some production issues. They've had some weather issues, but it's really doesn't look like it's going to translate into yield loss. So let's talk about that a little quick, quickly and in more detail. Here's a map of where do, where does Brazil produce soybeans? The darker the green, the more soybean bushels are produced or tons are produced. Notice Mata Grosso, that's about 27, about 30% give or take of the soybeans produced in Brazil is in this Mata Grosso region. Now realize geographically, that's a really big area. That's almost the size, not quite, but almost the size of Iowa, Illinois and Indiana combined. So it's a huge growing region. The other thing to put this in perspective to see how big Brazil as a country is, if you were to drive from the northern part of Mata Grosso down to the southern tip here in Rio Grande do Sul, that would be about like driving from Fargo down to Frisco. So this is a huge production zone. Now they're just starting to harvest in Mata Grosso. The harvest is just beginning. It's been a little bit slow because it was so dry this last spring. Their planting pace was also very slow. Yes, the early yield reports coming out of northern Mata Grosso have been less than they were hoping for, less than they were expecting. But we really haven't gotten into this core producing region and southern Brazil is going to have a really good yield. Usually northern Brazil has better yields than southern Brazil, but this year because of the weather and rainfall is going to flip. So yeah, the total yields or the yields coming out of Mata Grosso may not be really great, but they're going to be very good in southern part of the state or part of the nation. Okay, so southern Brazil is down here. Here's Argentina just for reference. So I'm going to flip my map. Here's southern Brazil and Argentina. So Argentina is different in a lot of senses that their production zone is much smaller and very, very concentrated. So if Argentina has a good year, good weather, they're going to have some really great yields across the whole area. If they have a poor year, their national average yields are also going to drop. So they tend to have a little bit more variability. And if you notice going back, let me go back really quickly, Argentina's soybean production is going to be average or slightly below average. So Argentina is going to have an okay year, but not a great year when it comes to soybeans. And there are some folks that originally were thinking the soybean production in Argentina was going to be much lower, but they recently got some rainfall. So let's talk about crop development. Northern Brazil, they're harvesting southern Brazil It's in a pod setting and pod filling. So the southern Brazil still has some growing season left. Same with Argentina. The crop is now in that pod setting and pod filling stage. Flowering is just kind of finished. So rain showers and good weather at this point can add a lot of bushels under their crop. This is like August in North Dakota. And you guys know that if you have a kind of a marginal year, but you catch that right kind of rains in August, you can still have a really, really good soybean yield. And that's kind of what's happening. The psychology in the market is starting to shift. When we look at soil moisture, and this is a computer generated maps. This is out of NASA. And this is the, you know, how wet is the soil in that root zone? So it's the top meter of soil, the top three feet. And yes, this is computer generated, but it gives us a kind of a reference point. Notice in northern part of Brazil, yes, it's been very dry. Their yields are going to be, you know, not so hot. But look what happens as you get into central and southern Brazil. Their soil moisture conditions are actually pretty good shape. Because they've been getting rains over the last week or so. When you look at Argentina, kind of the same thing. If we were to look at these maps a month ago or two months ago, they would be very dark red. They were kind of on the, on the verge. They did not have a good season coming, but more recently they've gotten some rain showers. They've recharged the soil moisture. And it looks as though they're going to have a pretty good soybean year. Not fantastic, but pretty good. I pulled this off a DTN this morning when we look at rainfall over the last 48 hours. Again, look what's happening in this southern regions. They're beginning some rain showers. If I were to show some maps earlier this week, they recently had two to three inch rains in this southern growing region. As we look forward in time, what does the precip look like? Are we going to have so much rain that southern Brazil has flooding or has some production problems or root disease? Well, it doesn't look like it. It looks like they're going to start to dry out now. This is the extended forecast, the six to 10 day forecast. So they got rains. They were able to recharge. You know, it looks like they're going to have an okay year. Let's look at prices globally. So this is the same thing that I showed you before for corn, but this is now for soybeans. If I'm, if I'm in China or Japan or Korea and I want to buy some soybeans off the global market, what kind of bids am I looking for? Looking at for different delivery time periods. Argentina is the black line. Brazil is the red line. The US is the green line. This is US Gulf. We do have a few months of PNW bids. Okay. So when we start talking about this difference between about $585 a ton versus about $550 a ton. So if we did $35 a ton, let me do the math really quick. That's about 95 cents of bushel difference. Okay. So how many more additional sales are we going to have moving forward? Because now the Brazilian crop is starting to hit the marketplace. Our soybean supplies are very, very tight. Domestic prices are trying to ration use. It's happening. So when we go back to the totals we just saw for total US soybean exports, I don't know how much more we're going to add. I don't know how many more bushels we're going to be able to sell into that China market. I think the window is closing very, very, very quickly. Brazil now is going to become the dominant source of soybeans as we move into the summer months. Questions? Okay. So we've had a couple come in. Let me see. Does the soybean export get counted when it's purchased or when it's delivered? Both. So when, when, what USDA does is they, when, when there's an export sale, when there's a contract for delivery that signed between a US company and an international company, because this is company company to company transactions, the company selling it has to record it. And if it's more than one million metric ton one, you have to report that sale within 24 hours. If it's less than that, you don't have to sell to report it right away, but you do have to report it so that it can buy Friday so that it can be, be scored. Okay. So by the weekend, you have to deliver, have to report the smaller sales. So it gets, it gets monitored when it gets sold. It gets monitored if or accounted if it's inspected, if it's inspected by USDA and not all of the exports are inspected by USDA, but if it's inspected, it gets, it gets counted. And it also gets counted when it, when the vessel, whether it's suspected by USDA or not, when the vessel leaves port. So the numbers I showed you are for two time periods, how many sales and how many deliveries have we had when, when the vessel leaves port, we counted the second time. Okay. Early planting reports for US, US soybeans are showing a substantial increase in soybean acres with the supply potentially going up. Do you see or do you feel we will see a price decrease in new crop season versus what we have been seeing on the nearby? Okay. Let me, I will answer that question. Let me go through wheat and then I want to shift into what's what I think is going to happen new crop. So I will answer that question. I just want to go through a few more things before I get to that, to that question. Okay. So just bear with me a little bit. All right. Let me move down. Not soybean related or overall markets, but with Britain leaving the EU, will the USC more exports to Britain now or will, will them being a smaller country, will it not affect us much? So yes, Britain now officially has exited. They have an agreement even though it's a little fuzzy between the European Union and Britain on how they're going to handle their trade. Now, because Britain isn't now an independent country from, from a trading standpoint, they are beginning to sign trade agreements with other countries, separate agreements. So far, the biggest impact that the Britain, the Brexit part of it, Britain exiting has been in the pulse market. I know in talking to some of the, the Navy bean handlers, we've been selling a lot of Navy beans into Britain, more than we normally would at this time of year. So trade flows for Navy beans into Britain have increased pretty substantially. I have heard some sales of some minor oil seeds going into Britain. Now Britain historically has not been a big buyer. They bought some US corn, they bought some US wheat. In fact, I do think we'll be able to get our US wheat into Britain better than we did before because of some of the EU trade restrictions. Britain itself has bought some US soybeans, but not huge amounts because their crushing industry is really set up to crush rapeseed or canola, not set up to handle soybeans. So I do think we will see more US agricultural trade, but it may not be in the grains. I think we'll see more meat products. I think we'll see some more fruits and vegetables going into Britain and possibly some more pulses. Okay, are you kind of saying basis is about as good as it's going to get? So let me, the basis talk, let me, let me, let me comment on that. For old crop soybeans, unless there's some surprise in the marketplace, unless they're, because there's some discussions about a trucker strike, not only in Argentina, but in Brazil that might disrupt some trade flows. You know, if there's something politically that happens or economically that happens in Brazil and Argentina that disrupts trade flows, you know, we might see some emergency purchases. And of course that would be an exception. That would be an unusual case. But if that happens, you'll see US, the basis levels narrow significantly get lots, the negative numbers get much smaller. But as I see it now today for old crop basis levels, I really don't think that they're going to improve much with the exception of possibly some emergency purchases. So for old crop, yeah, I think we've seen the best basis, best basis levels we're going to get for new crop. It's a little bit different. That one's harder. So the basis levels that are being set right now by local elevators. That's really based off of history. So as a local elevator, there is very difficult right now today, at this time of year, to get an export company or major exporter to put a basis level on November soybeans. So the basis levels you're seeing right now today are being set by the local market. And usually they're going to use kind of a historical average. They're going to use a typical average basis at this time of year. Now, as we get into summer, as we get into the summer months and those export companies, as well as domestic crushers, start bidding for harvest delivery. And that usually happens kind of in that June, July timeframe. I would not be surprised to see those basis levels for harvest delivery get less negative. Again, this is assuming that trade relations with China stay strong. Because I do think the Chinese market is very large. They're going to buy US soybeans in 2021 very aggressively. They're going to want to have some of those sales booked before harvest. But we won't know those volumes. We won't know how aggressive until we get into the mid-summer months. So old crop basis levels barring some kind of weird thing that happens. I think they'll stay at these levels or start to soften even worse. New crop, I think they'll stay at the current levels for several months until we get into mid-summer. And once the local elevator start to get those bids from private export companies, from domestic crushers, that's when I think we'll start to see them tighten up and become less negative. Good questions. My opinion for what it's worth. Let's move on to wheat. Now wheat is a completely different story. Now this is the table for all wheat, all classes of wheat blended together. So it's spring wheat, winter wheat, white wheat, Durham, soft red, hard red, winter. When we look at the bottom line, our balance sheet is starting to tighten up, but those are still some very healthy carryover stock numbers. We're not sure to wheat. We've got plenty of old crop wheat inventories, both spring wheat and hard red winter wheat. Nobody's worried about running out. When we look at adjustments, what might we see in the February report? You know, not much. Rounding errors, some tweaking. Okay, so the price volatility, I want to say this one more time, the price volatility we're seeing in the wheat market is much more driven by what's happening in the corn market than what's happening in the wheat market all by itself. So if you look at supply demand conditions in wheat only, it's hard to defend and explain why we're seeing the price recovery. But if you include the bigger market picture, now it makes a lot more sense. Okay, so graphically, when we look at percent carryover stocks, yeah, we're finally getting our carryover stocks a wheat down, but we're not to low levels yet. I usually say long-term average stocks to use is between typical, is between 30 and 35% carryover. We're right now at about 40, just under 40. We were at 50 as of a couple of years ago. So we're not in the danger zone for wheat carryover stocks yet. How do we use up wheat? And this is part of the story and why we're having a harder time getting rid of our wheat. Two big uses for wheat. The blue line is domestic milling. USDA calls it food, but it's domestic milling industry. The red line is exports. The black line is feed usage. And again, the little dots on the far right-hand side of the current USDA forecast. So let me talk about feed first. Let me talk about the linkage between corn and wheat for feed, which you guys obviously know and understand. I don't know if this is a record level, but in recent history, the record level for feed consumption was in 2012, simply because we had such tight supplies of corn. Now, when you look at the volume, the volume of feed corn going into the feed sector, it's 5.1 billion bushels with a B. The record level here is 400 million with an M. Wheat feeding is rounding error in the corn market. However, what I'm saying is if wheat prices don't stay at a premium to corn, we can see huge volumes of wheat going into that feed sector. And that's what's happening right now. When corn prices are low, wheat kind of has its own supply demand. But when corn prices start to rise, if wheat doesn't stay above corn by a margin, we'll dump all kinds of nice high quality milling wheat into the feed market. And I know that the transition on the beef side is slow because it's a ruminant. You got to transition from corn to wheat on a kind of a slow basis. That is not the case for the poultry sector. Poultry is a monogastric. You can switch from corn to sorghum to wheat overnight. You don't have to transition it. So the area where you'll likely see the most wheat feeding will be in the broiler sector, the broiler industry, and they can switch very quickly. So right now, main driver is what's happening in the corn. So let's talk about why has our wheat inventories been so large? Why is it we're having such a hard time bringing those down? The simple fact is domestic milling stays relatively stable. We use about the same amount every month, every year. The variability has been in exports and look what's happened to the volatility, that variability of exports over time. It's starting to stabilize, isn't it? Back here in the mid 2000s, the early 2000s, we had this big bouncing around and all of a sudden it started to stabilize and flatten out. The reason for that is when we had big wheat inventories, we had a big wheat year, wheat prices dropped, we would normally be able to get rid of our extra wheat, that extra supplies of wheat into Egypt, North Africa, and the Middle East. That region, Egypt in particular, but also North Africa and the Middle East, are very sensitive price sensitive buyers. So they're looking, their quality is important, but it's all about price. So they're looking for basically the lowest price grain wheat they can get. Well, what's happened now as Russia and Ukraine have increased production and more importantly, exports of wheat, they are the lowest bidder in that region. Part of its logistics, they just live really close. Southern Russia is very close to Egypt, but it's also, they've got large volumes and they're willing to sell it relatively cheap compared to the US. So those markets that we would normally be able to sell due to kind of clean out our inventories, we've lost market share. We're not price competitive going into that Middle East and North Africa market. So what that means is we're left with our traditional, very stable, very reliable buyers of US wheat. And that's what's happening. You're starting to see this variability start to flatten out because we're selling into our traditional customers. We're having a hard time on the margin being selling into other markets. I'll show you some numbers in just a moment. So who do we sell wheat to? Again, this is all wheat, not by class. Mexico is our number one wheat customer and has been for several years, followed very closely by the Philippines. And about half of the Filipino purchases have been spring wheat. I'll show you a chart or a graphic in just a minute. Japan, very solid customer, both spring wheat and winter wheat. Look at the numbers we have in the right-hand side. Now, this is from June 1 until the end of January. So it's a little bit longer timeframe. But again, this pace, the rate that we're selling is very much right in line with normal. I mean, they bought normally what they buy, but nothing more. Yes, China coming down to China, they have bought some US wheat. It's more than they bought. It's not a record level. It's more than they bought in the last several years. And right now, they're the number four wheat buyer from the US. Most of that has been winter wheat. Most of those purchases have been hard red winter wheat. But that's not a dramatic level. And will they continue to buy? My guess is, yeah, I think they'll continue to buy some wheat and US wheat. In fact, what I'm expecting to see, and I'll just jump ahead a little bit, after they get past the Chinese New Year, the Chinese New Year is just starting. And this is one of the reasons I think they bought so much corn. It's because they're going to have a big holiday, week-long holiday for New Year's. I think once they get back, mid-February, once they get back from their New Year's celebration, I do think they will come in and start buying a little bit more US spring wheat. This is just a gut feeling. I don't have anything to confirm this other than my suspicions. I haven't talked to any trade folks that are inkling that at all, but it's just something that I think will start to happen. They have been buying winter wheat. I think they'll continue to do that, but not at record paces. We're pretty much right on normal. It's good sales, but not fantastic. When we look at shipments, the amount that's actually left the country, again, shipments have been right on track. I think you're seeing basis levels that are pretty typical for this time of year. About 28% of all of our sales have not been delivered yet, and I think those are spread out from an export standpoint, spread out pretty evenly over time based on what we normally historically see. Who do we compete with in the global market for wheat? Now, I'm talking about all wheat. Russia is the largest exporter of wheat. It used to be the United States, but a few years ago, Russia surpassed us and they haven't looked back. You add in their neighbors, next door, maybe neighbors in Ukraine, those are some big, big export numbers. Now, the European Union, that's all 28 countries. They do import a lot of wheat. The exports about the same amount of wheat as the import. I had to list them because it does influence prices. France and Germany are the biggest exporters out of that region. In particular, France, but Germany also exports some. And then you have the United States. Now, most of the wheat, not 100%, but most of the wheat that Russia exports and that the Ukraine exports is something very similar to or a substitute for our hard red winter wheat. So the kind of wheat they're exporting is really a hard red winter wheat, not a spring wheat. Canada is a big spring wheat exporter. The United States is a big spring wheat exporter. Argentina, I mean, Australia has some white queets that have a high protein content like our spring wheat does. But when we think about Ukraine and Russia, think hard red winter wheat. So let's look at prices. Let's look at relative prices. And this is again delivered, loaded onto a vessel at the ports listed and shipped into North Asia, which again would be China, Japan, Korea. Black line is Ukraine for an 11 and a half protein winter wheat. Red line is Russian 11 and a half protein winter wheat. The green line is US Gulf 11 protein hard red winter wheat. Then we got Australian white prime, which would be like a 12 protein winter wheat. And you got Argentina, which is about a 12. So look at where we are in the US, US Gulf versus Russia. Now, some interesting things in Russia, and if there's questions, I'll try and answer it. But the point is the domestic price of wheat, the price internal in Russia is going up and they're worried about food price inflation. And so President Putin has talked to his agriculture ministry and they're putting on export tariffs to try and slow the rate of wheat exports. There was an announcement this morning that starting in April, they've already got tariffs in place for one rate at one rate of tariffs for February, another rate of tariffs for March, April, May. There was an announcement this morning that starting on April one that they're going to recalculate that tariff rate. They're going to put in a formula that they're going to use so that as the international price of wheat goes up, their tariff rates start to go up. So these bids as of yesterday do not reflect that announcement. So I suspect in a few days, we're going to see this June, this June, July, August timeframe, those prices come up. Now, it will likely not come up as high as the price you see in the green for the United States. And the reason is by the time we get into June and July, both Russia, Southern Russia and Ukraine are starting to harvest. And they have a harder time storing grain long-term than we do. So farmers tend to sell very aggressively right off the combine. And when you look at this price spread at, well, let me do the math on it really, particularly 335 minus about, let's call it 280. That's about $1.50 a bushel. So the price spread between for February, March and April is about $1.50 a bushel higher out of the US than it is out of, let me see, no, no, out of US right here versus June, July. So guys, we have some really stiff competition coming out of that Russian area. When we look specifically at spring wheat, again, very strong supplies. Canada has some very strong carryover stocks of wheat. For old crop wheat, we're not worried about running out. Quality is good. Exports have been normal. So when you look at export pace, how quickly are we selling it? Philippines still our number one customer. They're buying at the normal pace. Japan number two customer, they're buying at the normal pace. Taiwan, traditional customer bars, buying at the normal pace. Notice down here, China has not bought much. They bought a little bit. They're dipping their toe in the water, seeing how it works. I think they will, my personal opinion is I do think they'll increase, likely not enough to make a huge impact on prices. I've been surprised before. It's really hard to predict what the Chinese are going to do. I just don't see them coming in buying big, big volumes of US spring wheat. I think they'll buy more, but I don't think they'll be big purchases. When we look at shipments, kind of that export pace, we're about 30% of all our sales have already been, or have not been shipped yet. Again, that pace is very, very normal. I suspect the red line will start to follow the green line fairly closely as we move forward in time. So let's stop with that and then I'll jump into 2021. Let me check my Q&A here to see if there's anything that's come on. Any questions on wheat? Now I do think, and I want to be careful how I say this, but I do think as we move into spring, I do think which spring wheat prices have some potential upside, but it's going to be driven not by supply demand, it's going to be driven by 2021 planting. So I'll shift into 2021 planting season here pretty quick. Any questions? All right, seeing none, I'll keep going. So I only have a couple more slides left, and then we can open it up to whatever you want to talk about. So let me talk about 2021 acreage. So let me skip past, I should have reordered these. My assessment, the battle for acres is back. Given what I just showed you in the corn and soybean market, the competition for acres is back. But here's the but, the battle is really between corn and beans. Okay, now that spillover, when the elephants start fighting, everybody else has to pay attention, and that's really what's going on right now. The two elephants in the room are fighting back and forth, and everybody else is watching really closely, just don't want to get stepped on. Okay, so let me talk about wheat, and how does wheat play a role in this? The winter wheat has already been seeded. Winter wheat conditions are, you know, I guess the reports are kind of okay, but not great. So if you look at a drought monitor maps, or if you look at crop condition ratings coming out of Kansas and Colorado and Oklahoma and Texas, you know, it's not looking fantastic. But, here's my but, winter wheat has nine lives. I mean, as we move into, as we start breaking dormancy, you know, as spring starts to come, if those guys get some rain showers, rain showers coming through western Kansas, eastern Colorado, things are going to green up really well, and we still have the potential for a very, very good winter wheat crop. The other thing, it's dry enough right now, I really don't see, unless they have a lot of rains this spring, I really don't see the winter wheat getting ripped up and planted to corn or soybeans or sorghum, Milo. I don't see a lot of shifting in those winter wheat acres. So abandonment, what we call abandonment, or switching out winter kill, you know, I think that'll be normal. Winter wheat's in the ground, spring wheat is not. Spring wheat is not. Okay, and it's spring wheat not only in the United States, but it's spring wheat in Canada. So let me talk about U.S. first, and then I'll shift into what I think is going to happen in Canada. So domestic spring wheat, we can afford to lose some acres. When you look at the total spring wheat producing region, given the carryover stocks we have, you know, we can, the spring wheat acres can, we can have a little bit of slippage, but not a lot. Okay, we can't tighten up that balance sheet too much. We can't have a massive exodus of spring wheat acres. Okay. I do expect North Dakota numbers to be down, especially spring wheat plantings in the Northeast, in the Northeast corner of the state. And please understand, I know you guys in Central and West, acreage wise plant a lot of wheat, especially spring wheat, but the guys in the East have higher yields. So a lost acreage in the Northeast is actually going to have a bigger impact on bushels produced than if we had it in the Central or Western part of the state. And I don't mean that to sound critical. I'm not trying to be sarcastic about it. It's just, that's the way it is. So I do think the acres in the Northeast part of the state are going to drop for spring wheat because they're going to look at more soybean. They're going to look at more canola. The math just doesn't work for spring rate. The oil seeds are kicking everybody's butt right now. But that also means if we lose too many, we can bring those, those production numbers for spring wheat down pretty quickly. And that's why I'm saying the spring wheat market has to be careful. So let's shift into what's happening in Canada. Again, you look at the budgets for 2021 and you look, plug in today's prices. Canola is a slam dunk. We're going to see a lot more canola acres in Canada this year. The demand base is there. Canola prices are following soybean prices. Carryover stocks for canola in Canada are expected to be pretty tight. So right now canola is the winner. I do think we're going to see a cutback in spring wheat, probably a little bit of cutback in duramakers in Canada. Because of, again, the relative prices. So once again, spring wheat has to be careful. We can, we can afford to have some slippage. We can afford to lose some acres to these other crops, but not many. Now for what I call the small market crops or the small market crops, especially crops, the ones that have pre plant contracts like malt barley or some degree field peaks, sunflower. You know, those, those guys are having a hard time right now. I talked to quite a few of the industry people and they're really, really, really worried about what kind of contract price do we have to offer to hold acres? You know, where do we need to be to hold the acres we have last year? Because as you guys know, flipping acres can take a lot out of some of these minor crops, these smaller market crops. When it comes to pulse, when we come, when we look at field pea and lentil, you know, yeah, we've had a little bit of a rebound in the, in the field pea prices, but lentils have still been, you know, they've been okay, but not fantastic. There is been interest actually on the Canadian side, the Canadians have been selling some field peas into China. Those purchases have really helped support and prop up field pea prices, but you know, the question is how long will that last? Okay, so let me take a step back and look at the next slide. Let me talk about the big ones, the elephants in the room. You've probably heard about something in the marketplace or if you read some of the market advisory services, this corn soybean ratio. When you look at the futures market price of November soybeans divided by the December price for corn, futures price for corn, you get this ratio and that ratio is the market, the futures market, trying to signal to farmers how many corn acres versus soybean acres do we want? How many acres do we need? Okay, so what I did was I went back in time and looked at, at and created this graph. Okay, so let me explain this really quick. The red line and I pulled this about nine o'clock this morning. So these are the, these are some pretty recent numbers. The red line is that ratio as of this morning. So, so when we look at November 2021 soybeans divided by December 21, 21 corn futures and we go back until September one, that red line is that ratio. Okay, now these other colors is that same ratio going back historically. So what happens to read this is if we're in the top half and we're in the top portion of that, that ratio like we are right now, it's saying soybeans, the futures market is saying plant more beans. And right now when you look at that ratio, the future futures markets pretty much screaming at farmers in the US saying plant more soybeans, less corn. Now, if you get to the bottom of it, if you get to the bottom end is saying, man, we got plenty of soybeans around. We want you to plant more corn acres or more corn on corn acres if you're in the corn belt. Now, so a couple of things I want you to notice. Number one, those that those lines historically tend to be relatively packed compact. They tight within a range until we get to the end of March. So what happens at the end of March that suddenly causes that relationship to kind of kind of spread out as we move through the rest of the season? The simple answer is that's the March 31 planting intentions report. So a couple morals of the story. Number one, yes, right now the soybean market is screaming plant more beans. And I think farmers will plant more beans. Okay. So, but once we get that March 31 planting intentions report, once we get an idea of what farmers are actually planning to do knowing that they can flip some acres yet as we get into spring's work, things adjust. And after that, this price ratio is irrelevant. After we get that report, it's basically, you know, we're now going to look at supply demand conditions and saying corn and beans can go their own direction. So this ratio works really well, especially as the signaling mechanism in this January, February, March timeframe. Beyond that, I wouldn't spend a lot of time worrying about it because it'll do its own thing. So what does that mean for pricing? What does that mean for new crop pricing? What I'm really concerned about and we'll wait to see what happens. What I'm really concerned about is we're going to have some good aggressive bidding for November soybeans through March. Okay. And once, and I suspect my guess right now is that March 31 planting intentions report is going to tell us, yeah, we're going to have this huge increase in soybean acres. So what does that mean for November futures after March 31? I think some of that's going to slip. I think we're going to see that ratio adjust. And we're going to see corn prices come up relative to soybean. So I think right now the soybean ratio, soybeans is a lot higher than corn. I think March 31, when we get those numbers, I think it's going to narrow up. We'll see a drop in soybean relative to an increase in corn. So here's my point. If you're thinking about planting soybeans or planting more soybeans, make sure that you're trying to forward price some of those beans. Cause what I would hate to see is you make the decision based off of some really good November bids, not do anything, put the seed in the ground. And then we have this monster crop of soybeans and soybean prices take a tank as we go through the rest of the summer. Okay. Now the caveat. I know there's two things that's going through your mind right now. You're going to say, yeah, but. And the first, yeah, but is we don't have very good soil moisture. And we're going to be living rain shower to rain shower most of the summer. I get that you don't want to be really, really aggressive in pre pricing when you don't know how many bushels you're going to get. My comeback to that is yeah, but don't let that stop you from doing some forward pricing. It's a matter of how much, how aggressive do you want to be? So don't use as an excuse not to do anything. I would still encourage you to do some forward pricing, especially for soybeans. The second, yeah, but is going to be well. If it's, if the soybean stocks are that tight, doesn't that mean that we're going to have a really volatile prices moving into the summer months, depending upon, you know, if we have a dry conditions in summer in, in the corn belt, soybean prices can go absolutely berserk. I agree with that. Okay. But what you're gambling on is we're going to have dry weather in the corn belt. Okay. And if you're willing to gamble and do that, I'm fine. I don't have a problem with that. It's just understand what you're gambling on. Okay. So with that, any more Q&A questions that came in. So hopefully that answered the question about soybean acres. So let me give you my best guess right now on kind of nationally. Um, I think we're going to have, you know, about, you know, give or take about 90 million acres of corn, a little bit increased from last year. I think we're going to have 90 to 91 million acres of soybeans, which is a pretty substantial increase from the, what is it, 86 million acres we had this year. Um, winter wheat acres. We already know from the winter wheat seedings report that winter wheat acres are up just a little bit. Most of that is soft red winter wheat. Not the Kansas wheat, not the Kansas winter wheat. That was, that was about flat, but the soft red winter wheat, which is in Southern Illinois, Kentucky, parts of Missouri, parts of Wisconsin and Michigan. And soft red winter, if you notice the Chicago border trade spring wheat price is much higher than it would normally be. And that's part of the driving force behind that. When we look at spring wheat acres, I think we can lose some spring wheat acres, but the spring wheat markets got to be careful. They cannot afford to lose too many questions. Let me stop sharing for right now. So are there any other questions either? Oh, there's one that came in the chat box. Um, will federal crop loss papers showing their discounts for quality loss, satisfy loss for FSA program? Or does it have to be elevator showing discounts? Um, you know, that's a great question. Um, what I would suggest, uh, is to visit with Ron Haugen. Uh, cause Ron Haugen, uh, who's a colleague of mine in the farm management with extension, uh, he and the state FSA department, uh, office are going to have a webinar to talk about some of this quality loss stuff coming up. And I don't remember the exact dates. Uh, Dave, do you, do you know what the dates and times are for that webinar? I should, I should know that, but I don't. Yeah. It's February 10th at 11 a.m. Okay. 11 a.m. February 10th. That'd be Monday. No, Wednesday. Excuse me. That'd be Wednesday. Yep. So I would, I would try and sign up for that webinar cause I know they'll be going through all of this quality loss stuff. So let me, I want to show you if I can, I want to show you one, one more picture here. I want to share my screen for just a sec. I want to show one more thing. I'm going to X out of my, so let me show you a graphic cause I get this question. Some. Okay. There we go. Um, so what this is, this is a long-term price chart. This is called a continuation chart. Um, it's, it's the, it's all of the nearby futures prices going back way in time. So if you notice on the far bottom left hand corner, this goes back to 2004. The number on the far right hand side in blue here on the right, that's the current futures market. This is live trade. So whenever we see a new price adjustments, it'll show up on that, on that blue bar. I've been having some questions about, especially old crop soybeans and potentially new crop beans saying, oh, you know, when are we going to see $17 soybeans again? And so I want to talk about that for just a minute. Um, we haven't seen, so this, again, this is nearby futures. So, you know, we're coming off of three years because of trade war. You know, the average futures market price was about 875. We're now at 1375. I mean, that's a $5 increase. Okay. So for those of you that already have sold your soybeans, you did the right thing. We just didn't know how high this was actually going to go because of that Chinese demand. However, let's look back long-term historical and we usually point to, I'm going to ignore right now 2008 because there's some weird things that happen in 2008. But let's look at 2011, 2012 and 2013 because that was the last time. If you remember back to my stocks to use ratio, those are the last time we had really, really tight soybean supplies. That stocks to use ratio and soybeans was very tight. So two things, notice average prices were high and look at the price volatility we had. But the kind of the average range, if you kind of pick a midpoint for that 2011, 12, 13 timeframe was at about 14 bucks on the futures. Yes, we had the price spike back here in 2012. But the normal range, the typical range was everywhere from about 12 to about 15 and a half with 14 being the midpoint. Guys, we're kind of right in the middle of that range right now. So let's go back to what happened or what created or caused that price spike in the middle of 2012 to 17 bucks. So if we look at the timing, this drop, this timing, this was when we started planting in, well, making the decision April, May. So from April until the first part of June, from April to the first part of June, we had a price drop. We started seeing a price recovery into June, but prices didn't spike until July. This price run up was from July, about July 2nd, all the way to the first week in August. So what happened? The weather turned hot and dry in the corn belt. So we had really tight stocks, really tight supplies. We got hot, dry weather in Iowa, Illinois, Nebraska. And then what happened? Why did it spike and then drop down again back into this range of 14 to 15? Because in the first part of August, the rains came. We had a break in the weather system. We had a shift in the weather pattern. Average temperatures came down. The rain started to hit in the corn belt and soybean prices dropped and they dropped quickly. Now, we had an okay year yield wise in 2012. It wasn't great, but it was horrible for corn because that dry weather that we had earlier in the season really hammered the corn. But if you guys have been raising soybeans, you know that August rain makes or breaks the soybean crop. And that's what happened even in the corn belt. The rains came through. It was just in time to save the majority of the crop. So when I get this question, and I've got it over the last couple of about the last month or so, farmers either emailing or texting or contacting me saying, hey, when are we going to price spike? When are prices going to hit 17 bucks again? I'm saying, I don't know if they will. It's going to take more than just strong soybean demand from China to do that. Could we get to that $17 range again? Yeah. My best guess what I know today, it will likely take a major weather problem in the corn belt for that to happen. So again, when you're putting your marketing plan together, when you're thinking about what should I do and when should I sell? I just want to be a little careful that we don't have false expectations or if you are banking on that or betting on that, that you know what you're betting on. Oh, it looks like we got some questions coming in. Ooh, Durham Outlook. So it's been a while since I took a look at Durham, and I'll be really honest with you. But the last time I did take a look at it, you know, similar to spring wheat, we had an okay Durham year last year. Quality was pretty good, bushels were pretty good, both in the US as well as in Canada. The Canadians did increase their Durham acreage last year, which didn't help us any. So there's definitely adequate supplies in the supply chain. I do know in reading some of the market reports out of Canada for some of their number two and number three Durham that they usually try and sell into North Africa for couscous and bread to flower products instead of pasta. You know, that's been hit and miss. And so I do think part of the reason that our Durham prices have been here in the States have been a bit flat is because of that the Canadians trying to get rid of their mid-grade Durham, the stuff that doesn't make the high quality market for pasta. Now, on the flip side, as we get into 2021 planting, understanding that almost all the Durham and Canada is produced in Saskatchewan, and Saskatchewan plants a lot of canola. I do expect to see a slippage in, again, both spring wheat as well as Durham plantings in Canada. I don't think looking at our Durham producing region, we don't have a lot of overlap on the canola side. We don't have a lot of direct competition. But in the Canadian side, they do. When you get into that, that as you stretch north into Saskatchewan, you look at the maps of where's Durham produced and where's the canola produced. There's some overlap there. I do think that we will see lower, lower Durham plantings, which again will help both old crop and new crop Durham prices. So just like spring wheat, the Durham market can afford to see some slippage, but they can't afford to see a lot because then the Durham market gets into some pretty serious trouble. Okay, let me explain it this way and I'm going to, I'm going to get, get a little academic on you, but so the Durham market is a really good example of what we call an inelastic market. It means that we only we need there's a range of the quantity of Durham we need. I mean, there's, there's, we don't need a lot of extra Durham but if we come up short of Durham, there isn't good substitutes. So, especially for high quality pasta, you need high quality Durham. So the amount of Durham we need domestically is in a pretty tight range. What that means is if we have a lot of extra Durham, we have really fantastic year supplies increase. We have a hard time finding a home for that extra Durham. So prices usually drop and drop dramatically because we don't have a lot of good alternative sources. So you put it in a bin, you weld the door shut, you wait. Okay, now when we have really tight Durham supplies, we also don't have very good substitutes. Okay, so all of a sudden the bidding for those those bushels that are available gets to be really, really aggressive. Okay, so we, if we tend to see big price volatility from year to year to year in the Durham market, because of that, that fact that the amount of Durham we need is within a pretty tight range. So what I'm saying is we can go from a surplus to a shortage pretty quickly. And that's that was an old saying in the potato market, you know, when you when you if you're raised fresh potatoes table stock potatoes. One too many potatoes called a surplus one too few potatoes called a shortage. And a similar thing kind of happens in the Durham market. Okay, any protein premiums expected. So let me just really quick on protein. There's there's a common belief and when we talk about protein premium is I just want to be very clear what we're talking about. There are two levels of protein premiums one is that price differential between spring wheat and winter wheat. And usually if the winter wheat crop is really low protein, lower than average protein, we see that price spread between spring wheat and winter wheat, widen out. And that's the first layer of protein premiums. The second layer of protein premiums is that premium or discount for for spring wheat is it a 12 pro a 13 pro a 14 pro a 15 pro or 16 pro spring wheat. Okay, so the price the premium between winter wheat and spring wheat as a base wheat shows up primarily in the futures market. I don't expect right now that premium to change much. Again, we've got very good supplies of hard red winter wheat, like I showed you, we're having a hard time getting rid of our hard red winter wheat in the export market. We've got really strong supplies of spring wheat, our export pace for spring wheat is pretty much right on track. Okay, so unless we have a huge shift out of or away from spring wheat that would suddenly widen that out. You know, I don't think that that's going to change much. Now the premium or discount for spring wheat, a 12 versus a 13 versus a 14 versus a 15 or 16. That is determined by the protein content in the spring wheat market. So that depends upon your protein levels. So if the spring wheat crop has a lot of really low protein wheat, if the eastern portion of the state has really big yields, low average proteins, or if you guys have really good yields below average proteins, you're going to see those spreads widen. If we have a protein year, if we have a spring wheat crop that has typical or average proteins, that's when it narrows up. And I'll just tell you right now for the rest of this marketing year, until we get harvest a new crop 2021 spring wheat, those protein scales 14, 15, 16 aren't going to change because we know what the protein spread is we know what the range or distribution of proteins are for spring wheat today. Again, a long answer to a short question. Okay, it looks like another one came in. Do you have any insight to whether farmers should enroll an arc or PLC for the next farm program. No, I haven't. Unfortunately, I've been so tied up with the grain marketing side I really haven't had a chance to grind the numbers on arc versus PLC. I do know that the that again Ron Haugen is kind of the the farm management specialist now that's taken over and updating all of that information. I do know that the new arc and PLC calculator that spreadsheet that we put together has been updated with the yield information. You still have to put in some forecast for prices what you think the marketing average year prices and I have some forecasts you can use if you want but there's others available. The calculator is there I would just highly recommend that you put in your own numbers and kind of see where the math plays out.