 Good afternoon and welcome to the July 2023 edition of the NDSU Extension Agri-Business Agricultural Market Situation Outlook webinar. I'm Dave Ripplinger, Bioenergy and Bio Products Economic Specialist with NDSU Extension and I'll be moderating today's webinar. Following our traditional format, we'll have a series of presentations made by NDSU Extension Agri-Business Specialists. Today we'll have presentations by Brian Parman, Frank Olson, Tim Petrie and myself. We will have a question and answer period at the end of the presentations. Please use either the Q&A or the chat feature to do that. The webinar is being recorded and will be archived and placed with other previously recorded webinars at the webinar webpage. Just so you do know, it might take a day or two to get everything processed and edited so it's able to be posted. A bit of an update due to an existing commitment, Brian will be answering questions immediately after his presentation. So as he's talking, get those down and get those into the Q&A or chat feature right away so we can answer those. And of course too, you're welcome to contact him independently if you'd like, just like it is with any of the rest of the specialists. Also, if you do have any technical questions, feel free to contact me directly using the chat feature or you can also send me an email at davidreplanger at ndsu.edu and I'll do my best to address your concerns. But with that, I'll turn the webinar over to Brian. All right, thanks, Dave. And before I get started, I just want to mention to everyone, if you don't know, we have a monthly newsletter called Ag by the numbers that comes out. Our last issue came out around the 1st of July. There will be another issue coming out around the 1st of August. We try to get it out in the first week. And the authors of it include myself, Dave, Tim, John, Frayn, Ron. And it's more like it's a current event articles are typically what's in there. They're not awfully long. We try to keep them around 750 words or so, so it's a quick read on current events. So I just want to take this time to plug that real quick. So today's topics, I want to talk about a few key production cost items and interest rates. The one I'm not going to talk about is land values. I'll do a presentation on that in a month or two, even though it's one of the key production costs, obviously. So the key production costs I want to talk about is kind of where we're at on fertilizer prices and equipment costs. And we started last, not this most recent production year, but 2022. That's the green line on these charts which are provided by DTN. And these are phosphorus prices, both DAP and MAP, selling for north of $1,000 a ton in the spring of 2022. You see that April, May period in time. And the red line is where we're at right now in 2023. And you can see that they've come down just below $850 a ton for both products, obviously considerably off the high before. But if you look at the purple line right to the left, you can see kind of where we started in 2021, which was below $550 a ton for each. DAP was around $500 a ton in January of 2021, and MAP was around $550. And so we're still right now currently well above kind of that long run average for these products. But they have come down and you can see pretty much this entire year since January. Those have been mostly just moving sideways. That's kind of what's happened. I've heard said that there's some phosphorus, you know, it's mined and some new phosphorus deposits found that's going to supply a good chunk of the world in agriculture. So it's really not a shortage or anything coming about. But that's kind of what's going on now. There's a chance that we see this coming down some more this fall, which would be good. But I don't think we're going to approach that $500 a ton number for at least for phosphorus products for some time. Then we look at potash and urea. And we get most of our potash from Canada. It's like 75 percent of it. We import almost all of it, but 75 percent of what we do import comes from Canada. And potash prices in 22 peaked around $900 almost $900 a ton in the spring. And that's come down considerably nowhere near the $375 a ton we were going through in 2021, but down closer to $600 a ton for potash. So down about 33 percent. And then urea prices, which, you know, that's the primary nitrogen fertilizer we're using in North Dakota, well below the $1,000 a ton high water mark seen in 2022. But again, when we started 2021, we were less than $400 a ton urea costs as spring planting moved along. We got to around $500 a ton. And we're about $100 a ton above that. So and that goes for pretty much all the nitrogen fertilizers have really come down in the last six, eight months, which is helping out a lot. I know as we've seen commodity prices slide this year, some, you know, one of the concerns being, well, are some of these production costs going to come down with it. And fertilizer so far, at least urea and potash have phosphorus is off the highs, but it's been moving sideways so far to date. So we'll see what happens typically if we're thinking about the cycle of fertilizer prices. Usually they're the least expensive they're going to be in a 12 month period in the fall. But, you know, this was a unique circumstance that kind of led to these prices spiking as high as they were. And so it may be the case, you know, we'll have more information in the coming months, but it may be the case that the fertilizer prices continue to slide all the way through to January of next year. So it's something that I'll be watching and talking about and trying to figure out, you know, what's going on as we approach October and November and if it's a good idea to, you know, pre-price some of this stuff and purchase it in the fall or should we wait until spring. Moving on to equipment prices real quick. So this chart comes from the St. Louis Federal Reserve. I create them myself in there, but using their data, but they kind of print them out like this. Machinery prices really, really started moving up there in April of 2021. The blue line is for parts, and then the red line is an index price for the actual machinery. And just an upward shot from April of 2021 to April of 2022, actually all the way on new equipment, all the way through October of 2022. But by and large, it's been moving sideways. New equipment and equipment parts have been just kind of moving sideways really since that period, maybe increasing slightly so far. And in a lot of the talks I said, new equipment prices are not going to come down. If you go back and look at the data, they just don't. Now they may, and they're starting to show it, stop increasing at the rate that they had been, but it's unlikely that you'll ever see very unlikely that you'll see new equipment parts and new equipment itself, the machinery actually decline in price. It just will move sideways for a period of time, if anything at all. On the other hand, used equipment can decline and has in the past and is already declining so far. Now I don't have a chart to describe what's going on with used equipment, but in reading some of the articles, folks that follow this more closely and what's happening at the auctions, list price for tractors and combines used, that is, have been coming down the last four months or so. And then the number of used models on the market is actually growing. People are being, are more able now to get the new equipment trades that they wanted. And so you're seeing more and more trade ends coming and hitting the market used equipment. And the expectation from a lot of these trade journals on this topic is that the big reset for the used equipment market is kind of likely to occur this fall. That's when you see a lot of these auctions take place and that's when we'll really see where the used equipment market actually stands. And then the other thing is finally the number of buyers in the used equipment market is expected to shrink as interest rates where they are, and I'm going to talk about that in a minute, strain the borrowing power of many of the potential used equipment buyers. Now moving on to interest rates and inflation. So the inflation report from June just came out yesterday and overall inflation slowed to 3.1%, mostly due to energy cost declines. If you look at this chart that the, for the consumer price index that the Bureau of Labor Statistics puts out, energy in headline inflation, that's the overall inflation or headline inflation. We saw prices for food increase, all other items mostly increased, but it's almost a 17% drop in energy costs month over month, which cause or annualized, which caused inflation, headline inflation to drop to 3.1%. It's still well above or above, I should say, what the Fed has targeted is 2%, but then we move to the number that the Fed focuses more on, which is that core inflation number, which removes food and energy because of how volatile those specific things can be. Not that they don't matter, it's just that, energy can decline based on what countries overseas do, decisions that are made on drilling and politics and then food has some ebbs and flows, food costs, depending on what's going on, so that the core inflation are more of those goods that tend to be slow to increase in price or slower and then slower to decline. And that core inflation number at 4.8% is still well above the 2% mark than they want to see, almost 5%. And so while the overall number is good and some folks have fixated on that, more and more the market is looking at that core inflation number and trying to determine what the Fed is going to do. So this is what the inflation has been over the last year. So these are annualized numbers. And you can see last June was actually the highest, the highest inflation rate that we saw. And as the Fed has increased interest rates, headline inflation has continued to drop, drop, drop. And then this latest report at 3%. So every month down either slightly or maybe a percent or so since they started hiking rates. And then this core inflation number has been dropping too, but obviously not as fast. It also didn't increase quite as fast and hit the highs of headline inflation. And again, that's the number that the Fed's looking at. So 30-year mortgage rate for the week ending July 7th was at 6.8%. The high during this inflationary interest rate hiking period was right around the end of last October, October 2022, it peaked at just over 7%. And then it's been kind of bounded between that 7% and 6% mark. And right now it's approaching 7% again. And a lot of the reason that it peaked here, even though the Fed's hiked rates since then and it's come down is the expectation by the market on how much and how fast the Federal Reserve is going to continue hiking interest rates. And it slowed down a little there as we saw inflation come down. So some of the interest rate that's going on there can be speculated too. And the other thing that I want to tie into, so the Fed does look at that core inflation number, headline inflation as well as core inflation. But the other thing they look at is unemployment rates. So they want to know as we're hiking rates is the economy slowing, not just as inflation coming down, but our actions having a big drag on the economy. And of course they're having somewhat of a drag, but one of the other numbers that they look at very closely is unemployment. And unemployment just remains near historic lows at around 3.7% for the last month. This chart comes from the Fed. You see the big spike in the middle of unemployment, that was COVID when everything shut down and we had unemployment spike. But then since about January, December of 21, January of 22, inflation's gotten below that 4% mark, inflation. I meant to say unemployment has gotten below that 4% mark and just remained there and just continues to remain there despite credit tightening and hiking of interest rates. This typically isn't the case. Typically, as they increase interest rates, you see businesses having a harder time borrowing, can't expand, hirings decline and hirings are declining. But the gap between the number of job openings and people actually looking for work is so big that even if businesses start slowing, some business is shuttering and laying off employees, there's such a big wide pool of open positions that they're easily absorbing. The people that are laid off are being absorbed by companies looking to hire. And you can see it right here. This is the duration of unemployment. You got less than five weeks, five to 14 weeks, 27 weeks and over. I mean, people, the long-term unemployed, the 15 to 26 weeks and 27 weeks and over are as low as they've been for over a decade. I mean, so people aren't being unemployed very long. And then you look at the shorter term unemployed, the less than five weeks. I mean, that number is about as low as it can get. Some have even said the natural rate, which is kind of the overall rate of unemployment that you expect to have when we have what's called full employment is down around 3.5%. When I was going to school, it was five, because you're always going to have some unemployed people, somebody getting laid off, looking for a new job with hundreds of millions of people in the labor force. Some people are always going to be in transition. And that number is a really, really low number right now and actually historically low. So the bottom line with that, all that point is, is that things are clipping along so well. And do keep in mind, the Fed's job, they don't view their position as concerned with what the stock market is doing. There's a few numbers that they look at, and it's not that it doesn't matter at all. It's just that keeping the stock market elevated is not the Fed's overall objective. It's stable prices, full employment. And right now, they're getting closer to the stable prices, not there yet and full employment, well, they're already there. So to them, their actions are not causing as big an economic strain as some people would lead you to believe is going on. So there is a Fed meeting this month, the end of the month, July 26. The market right now thinks that there's a 92.5% chance they're going to hike rates a quarter of a percent, which would take them from, I always use the higher number, five and a quarter to five and a half percent for the federal funds rate. They did say at their last meeting, they expect possibly as many as two more rate hikes. That was back in May when they did not increase rates at all. Here, the market's thinking that they will, mainly because unemployment is staying very low. And that core inflation number is still at five percent, which is more than double the target inflation rate that they'd like, which is closer to two. So that's kind of what's going on here. I would expect then we might see interest rates slide upwards. Some continue probably pushing over that seven percent mark. I'd said in the past that if there are indeed two more rate hikes, I think that we'll probably see the average long-term loan probably pushing that seven and a half percent mark, which is what I thought before. That's what we'll go to. And right now, being 6.8, that's not that far off. So with that, I do have an appointment. I have to go to it too. So I can take any questions that anyone might have right now regarding anything I just discussed or anything else here in the meantime. Give you a second. And remember, we use the chat function, I believe. And otherwise, the next presenter will be Dr. Frank Olson, who is going to tell you what the weather is going to be over the next month, because I know that that is a key feature for what he would like to discuss. Yeah, I'm imitating Darryl Richardson here. I'm doing my best imitation. So let me, we'll hang out for just a second here if there are any questions. You can use the Q&A or the chat function and we'll see if we can address those. All right. Well, I guess I don't see anything coming in. Seeing none. I will go ahead and sign off then. If you do have a question, feel free to email me. Pretty easy to find NDSU extension agribusiness, Brian Parman. You can Google it as they say. All right. All right. Thanks a lot, Brian. Let me share my screen and just double check that everybody can see that. Is that coming through okay for everybody? Yeah. Yes, you're good. All right. Fantastic. So again, good afternoon, everybody. Thank you for joining us today. My name is Frayn Olson. I'm a crop economist and marketing specialist with NDSU extension. Just as Brian said, this is my contact information. So there's something that you have questions on later or want to visit with. I'd be happy to do that, both my office number, my cell number, as well as my email address. We've had a little bit of excitement in the world today. We're in my opinion in a full blown weather market right now. We are reaching some really key reproductive stages for both corn and soybeans. And again, the market is watching the corn and soybean market a lot closer than they would be for the wheat market, although that's not irrelevant. It's just the dominant news is in the corn and soybean regions right now. So they have been relatively dry. They've been getting spotty rains, depending upon where you are. I'll show you some graphics in a little bit to try and help understand better what's going on. So there's not the huge concern there was about yields a few weeks ago, but it's not dissipated that much either. So we are watching the weather forecast very closely. The other thing just to keep your eyes on, not only for the corn market, but also for the wheat market is the Black Sea grain corridor agreement, that agreement between Russia, Ukraine, Turkey and the United Nations. The third round of that is now expected to end on Monday, July 17th. There have been pretty hard negotiations going on to try and extend that. Everything we have had up to this date is signaling that Russia is not expected to extend the agreement. The last I read this morning was that there was some, I guess, trying to make some concessions to allow at least a division of one of the major Russian banks to get back into what they call the SWIFT system, which is that special system that allows interbank transfers of money and documents internationally. Russia has been excluded from that since they invaded Ukraine. They want back in simply because it is the inability to be able to transfer information to international documents as well as the financial information required for international trade is really starting to hamper and cause some problems. So we'll have to wait and see. There's no guarantees. We'll see what happens over the weekend. But as of right now, the expectation is that Russia will not extend that agreement, which essentially will shut down Ukrainian exports, corn, soybean, excuse me, corn, wheat, barley as well as some of the oil seeds like sunflower oil from the ports around Odessa. That's really right now the only port system that Ukraine has left. There are some alternative routes that are being talked about, but they are not as efficient. They're going to be more costly. The volumes of shipping are also going to decrease. So again, that'll be something that the market will be watching. And I will talk a little bit more about this. On June 30th, we had the acreage report. So the information we had coming out of the WASDE report yesterday is really embedded. The information from the acreage report is embedded in that. And so there was a bit of a disruption because we had a pretty significant increase in corn plantings, a pretty significant decrease in soybean plantings, at least much wider. That shift was much larger than had first been expected. So just to show you kind of what the numbers were. So this is old crop inventories. Now the wheat inventory, excuse me, the wheat marketing year ended on June 1, while June 1 is the beginning of the new year. So it had been in the end of April, May. At the end of May is the ending of the marketing year. And so the June report still had some estimates in it. We needed to have that June 30 inventory report to be able to kind of close out the books on the 2022-23 wheat marketing year. So the numbers in red on the very bottom, at least for wheat, that 0.58 billion bushels is the final ending stocks number. So that will be the number that we're going to be using from here on forward. We have not closed out the marketing year for old crop corn or old crop soybeans yet. So we are still trying to make some additional tweaks, some additional adjustments. Most of that is coming in the number for feed, for corn, as well as exports and primarily exports for the soybean numbers. So the blue line on top, just to remind everybody, was what the trade was expecting. That's kind of the average trade estimate before the reports came out. The black hard bolded line on the bottom when black was last month's report. And of course, the one on the very bottom highlighted in red is this month's report. What I usually recommend is you compare the blue row on the very top with the red row on the very bottom because that's really what the trade was expecting to see versus what we actually got. So old crop inventories actually tightened up a bit. They increased the feed utilization numbers, they cut exports a little bit. But again, that inventory number that we got on June 30th was a big factor in making some of the adjustments on the old crop estimates. For soybeans, there was a slight increase in the soybean ending stocks. So this is the amount of grain we expect to have in the bin just before harvest of this year. That went up just a little bit mainly because of a reduction in exports. So as we get to the end of the export season now, our exports have been dropping off actually a little bit more than we had expected. Although there was an announcement this morning, thus the reason the soybeans were up 40 cents today, that Mexico did come in and buy some additional new crop soybeans. So it will be very interesting to watch as we switch from this old crop into the new crop mentality. When we look at the new crop numbers, so again, this would be the harvest that is coming up now, the one that we'll have here in a few months. We also got an update on wheat production numbers, and I'll show you those numbers in just a moment. So the wheat numbers did change quite a bit. If you look at the green line on the very top, which was what the trade is expecting versus the red line on the very bottom, which is what we actually got from the reports, the wheat was ending inventories was a bit higher. And some of that, most of that was because of slight increases we got in the winter wheat crop. And I'll talk about that more in just a minute on the production side. For the corn came in very, very close to what the trade was expecting. But again, we got that information on the increased acreage of corn on June 30th, which meant that we had a couple of weeks to be able to redo the math and redo our forecasts and projections. So actually, the trade is coming in very similar to what the USDA report came out as on the soybean side, there was a little bit of a surprise. And again, I think it's put a little bit of a, not a negative bias, but not quite as optimistic a bias into the soybean market. The trade was expecting a bit more of a cut in ending stocks than we actually got. There was a reduction from last month into this month, but that reduction was not quite as large as people had at first expected. Just a little bit of a recap, we do have now production estimates for the spring planted crops for spring wheat, as well as Durham, as well as an update on what we expect from the yield estimates for the winter wheat classes. So if you look at this table, we I showed you some of this a couple of weeks, about a month ago, we have now updated and add the spring wheat and the Durham numbers. So once again, comparing the blue row on top with the red row on the bottom, all wheat production estimates did go up. Most of that was because of an increase in the winter wheat production numbers. So for hard red winter wheat, the average yield went up slightly. But because of the acreage numbers, hard red winter wheat is kind of one of the larger classes of wheat that we need to follow. The soft red winter wheat actually increased again. The looks as though the soft red winter wheat crop is going to be pretty good. We don't know what the quality is going to be, but the bushels will be there. The white wheat, the winter wheat came in about what we expected, slightly less. The spring wheat numbers, actually the trade estimates were pretty much right on with what the USDA numbers were showing. And then a slightly lower number for Durham than what most of the trade estimates had been at. So kind of a brief update on what's going on in the wheat complex. I do want to zero in a little bit on what's going on with the S&D supply and demand tables. Now this is laid out a little bit differently than I normally present. So let me go through this very quickly. The column highlighted in green on the far left hand side is old crop. So that's the old crop numbers, those ending stocks numbers that I just showed you. The difference is the blue column in the middle is for new crop, if you notice the dates on the top is 2324, but that was from June report. So from last month's report is highlighted in blue for new crop. The current numbers for the July report also for new crop is highlighted in red. So really what I'm trying to do is compare the column in blue versus the column in red, which is what was changed from last month to this month. Now there's a lot of discussion and kind of angst in the marketplace about the increased in planted acreage. So if you notice at the very top, we were originally expecting about 92 million acres of plantings. We actually in the June acreage report came out with 94.1. That really sent a negative shock into the marketplace. We got a little bit of a recovery from that because this isn't totally unusual, but it's a bit unusual to see some significant changes for yield estimates from the June report into July. So 181 was the trend line yield. They did take that trend line yield down just a little bit because of the drier conditions. Now it won't be until the August report that we get farmer-based survey estimates for what yields are going to be. So they're going to combine farmer surveys as well as some satellite imagery to try and refine the yield estimates. So typically we don't see much of an adjustment from the June to the July reports for yields. That usually comes in the August report. But because of the drier conditions in particular in the heart of the corn belt, USDA has started taking that national yield estimate for corn down. The net result interestingly enough was a slight decrease and I think to maybe many people surprised, excuse me, a slight increase in total production. There's only about 55 million bushels out of a 15 billion bushel potential crop that is an increase. But percentage-wise that's relatively small. So essentially the increased acreage was offset by this reduction in yield and yield potential. And as a result, our bottom line really didn't change that much from last month into this month, even though we had a pretty significant shift in acreage. Now most of that decrease or that shift was due to a reduction in what we call the beginning stocks, i.e. the amount of inventory we have from last year that we're going to bring into the new cropping year. So these changes were I guess in my mind relatively modest given all of the potential changes that could have occurred. So again, we'll start to see monitoring of this as we move forward. On the soybean side, again, the June report for acreage was the big shocker for us. We were expecting 87.5 million acres. It actually dropped down to about 83.5 million. Now the yield estimates did not change for soybeans, which I guess in my cases, in my view is a little bit surprising because they did take the corn yields down. But if we look at what happened to total production, there was a pretty substantial decrease in production. And again, all of that in essence was because of the reduction in acreage. We did have a slight increase in the inventories from last year pulling into this year. But the net was about 210 million, million bushel decrease, which is for soybeans, a pretty significant shift. However, when we drop to the bottom line, we say, well, what exactly happened? How much grain do we expect to have an inventory at the end of the year, about this time next year? There was only about a 50 million bushel decrease. So what happened? Why was there's big reduction in production, but there wasn't a corresponding increase in ending stocks, excuse me, reduction in ending stocks. The rationale, and it's relatively simple as well, if we have lower production, prices tend to go higher with higher prices that tends to ration usage consumption. And so there was a pretty significant reduction, if you notice, in the decrease, if you will, in the amount of exports coming from the United States. In fact, about 125 million bushel decrease in the forecast for exports. So again, a bit of a surprise, not unexpected. I guess the degree of shift was what surprised me a little bit. The crushing numbers, again, to me, make some sense, simply because we are getting some additional crushing capacity coming online. And usually domestic buyers will be able to outbid international customers for our supplies. So the reduction in exports does make some sense. I guess I was just a little bit concerned about how much of a decrease they're forecasting for right now. Shifting back into the weather markets. Now, personally, I don't like to use the drought monitor maps that much. It is an indicator. It's a very nice visual representation of what's happening. But in my mind, the relationship between what the drought monitor is telling us and what's actually happening in the field, especially when we have these spotty rain showers, can be a bit misleading. But I do want to show where are those problem areas. This is a map that's watched very, very closely by traders, kind of the speculators and the traders that are there in the markets on a daily basis. They do use this as a reference point. So we can't ignore the information contained in these maps. Notice that basically in the heart of the Corn Belt, when you look at Iowa, especially northern Illinois, parts of Missouri, eastern Nebraska, and now as we get into, in particular, Wisconsin, even into parts of Minnesota, which again is a very, very heavy corn and soybean producing region, those are the areas that are starting to set up as being relatively dry or exceptionally dry, depending upon how you want to view this. So what's happening with the weather forecast? Again, I'm going to rely on the National Weather Service because I'm not a weather meteorologist nor the weather forecasters. I'm going to rely on the information that I have. So if we look into the next week or so in the six to 10 day forecast, fortunately in our region, it looks like we're going to have some showers coming through. So there's an above the probability of getting some above average rainfalls or the odds that we're going to have more rainfall than normal is actually pretty good, which will help that Nebraska, South Dakota, North Dakota region. But if you also know, there's kind of equal odds that Corn Belt region, there's not really a bias towards the dry side nor bias towards the wet side. They're basically right now predicting that we're going to have typical rain showers or typical precipitation for this time of year in that core Corn Belt region. So I think from a marketing perspective, this seems to be relatively neutral. When we move to the temperature forecasts, this gets to be a little bit trickier. Now, when we look at our region specifically, and especially in Northern Iowa, parts of Minnesota, Wisconsin, you know, we're going to have basically average summertime temperatures. But as you get further south, you get into those Southern Illinois, Missouri, into parts of Nebraska, those temperatures are expected to be above average or above normal. And so in particular is then as you move into into Texas and on into Mexico, the temperatures are expected to be exceptionally warm. So what does that mean for crop stress? What does that mean for pollination? What does that mean for flowering as we move into those stages of development? Because again, as we get into the southern parts of the US, their planting progress has been a little bit earlier, a little bit more aggressive than it has been up here. So we do have corn and soybeans that are starting that process that pollination and flowering in particular as we get into the Mississippi River Valley region, kind of in that southern Mississippi area, or that southern Missouri area. So we will be watching this moving forward. It looks like the the core corn belt might be a little bit on the warmer side, the normal than average or typical, but there are still calling for average or typical kinds of rain showers. So hang on to your hats, or this is going to be very interesting few weeks as we move into the July, late July and August timeframe. One more thing before I hand things over to Tim Petrie to talk about the livestock side is that August 11. So please circle your calendars on August 11. We're going to get an update for the production numbers, which will be survey based and satellite based. So everybody's going to be hanging on what does that yield forecast look like. And then we're also getting a as a result then an update on our both production and consumption numbers to the WASDE report. So August 11 will be the next really big day for USDA reports. So with that, I will stop sharing and I will hand things over to Tim Petrie. Thank you. Good afternoon, everybody. Tim Petrie, Extension Livestock Marketing Economist. Give you a quick update on the cattle situation. Start off with fed cattle, two things again, as I always say it affect feeder cattle, the most are fed cattle prices and corn prices. And, you know, Frank gave the corn situation very well, but we'll just look at some prices and the impact on feeder cattle and so on in a minute. But start off with fed cattle here, keep marching along. Again, we were at record high prices there the first week in in June up at 188.75 and it backed off a little bit from the record high, all time record high, but we're still at very high levels, $38 above where they were last year, 182 last week. And the red squares there are hard to see up in the upper right hand corner of the chart because they're the same as the gold squares, which are next year's futures. But you can see a little bit the bottom there of August futures there closed really about unchanged today there right at 177 and then go up to 180 and then by the end up to 183. So again, at very respectable levels, very supportive to feeder cattle prices because of these high prices. Again, we reduced the cow herd four straight years are you know our cattle on feed is down and then demand holds very well to our our choice cutout value up there at $320 is significantly higher than it was last year. So you know we do have beef production down by 6% but but the prices are holding very well there. So that's supporting the feeder cattle. Just you know talking about the optimism in the market on the top I've got the August live cattle futures yesterday set all time record high of the August futures a contract hike for this August in an all time record I they backed off a little bit today when I took put this chart on with about 10 o'clock but now they move back up to about unchanged with yesterday there at right at one actually 17690 I think they closed at the end feeder cattle the same way there's the August feeder cattle futures on the bottom marched up throughout the year started at 205 and up to 250 yesterday again record high contract high and they have backed off a couple dollars with corn July corn was up 43 closed in September up 17 you have that opposite relationship that we're going to talk about a minute but still the futures market as of yesterday was at record high levels. So a little bit more on corn and feeder cattle and and and why the markets have been volatile on corn you know corn that brain talked about is right in there but you know starting in the left-hand side of the chart this year you know corn was up there at 620 and and and the feeder cattle down there about 205 and as corn went down into mid-May a feeder cattle responded upwards as well as you know the futures for fed cattle is just the futures when the cattle finished marched up as well so the feeder cattle market just went up but you see that opposite relationship there and and June and Frayden you know talked about the reports coming out and so on so you know corn spiked up there by mid-June but then the feeder cattle lost some ground there about you know 250 there down to 230 but then has corn crashed again at the end of June here until recently and he talked about the reasons for that feeder cattle went back up but you know even today then uh this was again about 10 o'clock you see on the bottom there corn went up and and feeder cattle down so we see that opposite relationship so that's something we really got to watch uh you know that prop guys are watching weather and everything else affecting corn and and that's going to affect feeder cattle because if corn makes a significant change it's going to change feeder cattle we'll go to these lightweight 550 to 600 pound steers north dakota and again uh up here in the northern plains we're at a lull and marketing very few selling we are last year's calf crop is gone and and we're and we really know it drought induced selling up here as it might be some years and so right up there about 280 and uh you know uh significantly higher 80 dollars higher than last year 200 dollars that they were last year so with the lower cap crop and strong feeder you know fed cattle futures and and and corn kind of moderating from last year you see those high prices so i've got a you know a question mark there what will fall calf prices be and uh you know certainly it looks like now they're going to be higher but we have to watch uh corn uh you see if you go to just uh to the right hand's lower right hand side of the chart uh middle october is usually actually the last five years uh the middle of october october 15th have been the lows uh for the year and that's just a seasonal thing that's when you know balling calves hit the market they're unwamed and and so on and then we see some improvement that's why we keep a lot of calves beyond october 15th and in north dakota and background them but you know for 35 45 days or whatever and even in january is actually our biggest marketing because we do some improvement we're going to be higher than last year and uh again we've got to watch corn very closely i to look at some indication of what they might be uh the superior video market is holding sales this week and this is yesterday's market for our region up here and we don't know if any of these calves were actually uh originated north dakota but uh this is for our north central region which includes colorado iowa montana i have north dakota up there in yellow so that would include us Nebraska south dakota Wyoming so it's in our area up here and so here i just pulled off the calves that were uh put on the market for november that sold for november delivery and there i circled about 900 head of 550 to to six weight calves uh you know the range in prices that received yesterday was 279 up to 310 which would be actually a normal range for a single market come fall in north dakota we usually do see a 30 dollar range in prices from the the low price calves to the high price calves but anyway uh the average error over 290 so that's what uh buyers are willing to pay for november delivery calves now based on what the corn market is now and based on what the uh the uh the fed cattle futures are at now and again things can change until fall and when you look at those states up there in Nebraska and south dakota tend to have higher prices than north dakota montana about the same Wyoming a little bit off and maybe Iowa the same bill a little bit off so again these are average prices over over that that area there but uh as of now fundamentals are good we're certainly going to have fewer calves to sell for sure because of the lower calf crops and that that is supportive to prices but given those high prices and i've been talking about this before i don't want to lull you to sleep and say oh boy prices are going to be higher and tim says prices are going to be higher and because when we're at these very high price levels as we've seen the volatility exist and and the feeder cattle futures in particular have been volatile there's always a risk for lower prices what's corn going to do and and uh with the weather and rain showed you what the weather is in the corn belt so even though that usd estimate for that production is far from in the bend yet so uh we're in the increasing phase of the price cycle for sure as shown but you know i'm still saying that again depends on your risk exposure and so on but i still might want to consider some price risk management the best strategy when we're in the upward part of the price cycle is to use some kind of a price floor put on a price floor but leave the top side open because again we're in cases here at record high levels and and and may go higher and so a couple ways to do that would be livestock risk protection insurance or uh futures market options interestingly enough a lot of interest in livestock risk protection uh and the the year for crop insurance for for lrp for livestock insurance goes from uh from july 1st to june 30th so we just ended the crop year on june 30th a 2023 lrp year and starting a new one but so we got a couple different calf crops involved there and actually you know the same set of calves could be lrp twice if you do an lrp on calves and then then decide not to sell them and then background them and do another one but anyway last year uh lots of interest in lrp in north dakota actually covered about a fourth of our calf crop in north dakota with lrp last year way way above any previous year so there is a lot of interest in lrp uh just uh that frayne mentioned the upcoming report for crops and so i just wanted to mention a big report coming out next friday from nas and you can get that reported at two o'clock next friday be a cattle on feed report out at the same time but that's going to be uh overshadowed i think by this uh semi-annual inventory report and uh we're expecting numbers to be down again this year and uh just i've got beef cattle beef cows there the arrow to cross there this is the lm ic estimate for what the report will say the lm ic is made out is a consortium of all the western uh states including north dakota i'm the technical advisor committee member for north dakota so respecting um beef cow numbers hot beef cow slaughter was high last year i've as i talked about before to be down again this would be the fifth straight year down and um so uh if that is and it could be more than that it's it's uh and and could be down one and a half percent or even more just have to wait and see what the survey say but anyway that would be at a 29,850,000 that would be uh uh just really close to what it was in 2014 i'll show you that chart in a minute but all categories of cattle and a percentage change is going to be down on the bottom our 2023 estimate for the cap crop again a down one and a half percent so for sure fewer calves that's what's been supporting prices and we'll continue to support prices in the future and since we'll have fewer beef cows likely to have next year the same thing next year so that's where that future support is coming from so here's just the July 1st inventory and so you see there we've declined already as of last year declined four years if we go down to that uh that 28,850 or so we'll be right down close to where we were in the last sickly cullow in 2014 back when we had record high prices before and so kind of not surprising on prices so uh with that i'm going to stop sharing and uh and uh turn it over to uh Dave so uh Dave Ripplinger bioproducts biology specialist uh just a few things going on at biofuels uh i did not give a talk last week because i was expecting uh EPA to have already announced certain things but they did it just a few days after our webinar last month uh so what EPA did so every year uh US EPA is responsible for setting numbers which are called the renewable volume obligation and so that's basically every uh blender and refiner in the country has certain numbers that they have to hit in order to be in compliance with their renewable fuel standard and so uh EPA beginning when the RFS was passed almost 20 years ago uh had numbers set in statute and they could adjust those a little bit and now uh that it's after 2022 they have basically complete flexibility in changing those numbers as they see as appropriate as guided by the law um i use the term each year and on the the slide i have it in quotes because for basically the last decade they have not done it in the the timely fashion that was outlined in the law but have gotten it done sooner or later oftentimes later uh so they have to set this number it's supposed to be uh announced about this time of year then finalized in November uh what we actually have for this go around was numbers announced in late 2022 which are finalized now in June and the numbers are actually for this year as well as 2024 and 2025 so again they're setting these numbers for minimum biofuel use for this year and the two years subsequent um really important not only because these numbers are what we're gonna have to do but they also just kind of set a tone for what EPA is thinking uh and and they also won't be coming back to this uh for another two years barring a lawsuit um two of the big things that happened the first was that they decided to not allow electric vehicles to participate uh in the RFS and it's important to know too these would be EVs that would have been powered by uh renewable energy from biofuels so in at some point there would have been power generation with uh some sort of biomass uh they decided at this time they're really uh not open to doing that uh and that will likely be revisiting in the future the bigger more important news was the numbers that they set uh for those RVOs and the numbers themselves might not mean much uh but their implications are very important to all of agriculture so they set numbers uh the final numbers in June so just a few weeks ago just a little bit higher what they've been recently and that's probably the biggest takeaway uh they also actually reduced the numbers from their initial proposal to June uh for next year in the year after actually reduced the amount that was obligated to be blended and so this is really important because the numbers are the same if not lower at a time when we know biofuel production and use is increasing dramatically primarily because of renewable diesel and so EPA has acknowledged as they said that we know that we know what biomass based diesel use has done uh for the first part of the year it's up 400 million gallons which is significant that's uh just under 10 percent um so a significant growth and then we're expecting this again next year in the year after but the mandated level is still low so we're going to have production and use far above that mandated level and so really what that means is we're going to have an excess of biofuel use uh and an excess of renewable identification numbers which means that the price of those is going to go down it's going to be much easier for these obligated parties to satisfy the mandate and so from the biofuels industry perspective this is really uh negative news uh much worse than they were expecting again because they now do have this new opportunity with renewable diesel which you know it is being taken advantage of but as that is growing and driven by state level policies uh the federal policy is essentially becoming weaker and so that's that's a concern another important thing to note too is renewable diesel has more energy uh per gallon than ethanol or biodiesel so it actually produces more rins so for every gallon of renewable diesel i get 1.6 or 1.7 rins if i have biodiesel i get one and a half with ethanol i get one and again these these levels are set in rins in different buckets and essentially those buckets are not going to grow but we know there's going to be a lot more biomass based diesel primarily renewable diesel uh in the coming years uh talking just a little bit i know brian spoke about this more at length but it is interesting and he had the nice chart from the announcement about inflation numbers from this week and i think what's really interesting is you know he had that huge negative number for energy and again this is consumer level energy so it's really you know dominated by three things so gasoline power and that heat and what we've seen across the board in all of those is a dramatic decline over the last year um and you can see those numbers in that second that second sentence you know falling by around a third or a fifth for natural gas you know those were the biggest sources of decline and actually this last month or during the month of june gasoline electricity were the really the only things that were staying positive at a significant level and really the reason i want to bring this up is because it's those prices coming off this low we saw this decline and they've come up a little bit but you know from month to month it's a small increase but from year to year it's a significant decrease and you know if we expect those numbers to hold uh cannot see a tremendous increase in energy prices uh in coming months we kind of have that same viewpoint of inflation not increasing a bunch again part of that increase is it is summertime so we're using more gas so the man for gasoline has risen you know that's going to continue for a couple months and then fall naturally seasonally uh you know into the fall and winter and we'll see how everything else plays out but it's really providing additional or more detailed understanding of of where inflation's at and how it really is much weaker than it was a month ago and of course even more so than a year ago i want to talk about a couple of things so the regarding ethanol itself and that's the blend rates what we've seen in the last year we saw that dramatic decline in gasoline prices ethanol prices have not declined as much and really what this has done is we're no longer using high uh blends of ethanol so that e15 sale that we had last year we're not getting this year and so the the blend rate so that's the amount of ethanol uh per gallon of gasoline gasoline is finished so it includes ethanol in it as it's blended you know it's falling from being typically above that 10 percent level or or 0.1 uh ratio dot two below that and and we'll see how long that persists but again if gasoline prices stay low and ethanol's prices stay relatively higher we'll expect this to continue and again that doesn't say in any given market at any given time at any given station it might make sense to buy a higher blend of ethanol where you're actually using that higher blend that ethanol for a fuel as opposed to just a fuel additive kind of going along with that too as we've seen production lag this year again because that that demand for ethanol as we can gasoline uh demand has actually been stable or it's slightly growing ethanol use is actually lag a bit um a couple of really quick notes from the renewable diesel again so this is biomass based fat oil in Greece turned into a product that is the the equivalent of diesel it means the diesel specification for for fuel and there's a couple of neat pieces of news the first one we've actually been importing large quantities of used cooking oil from China and I do have it in focus on purpose because a lot of folks are wondering if this is actually used cooking oil I use cooking oil has a very small carbon footprint because it was going to be thrown away it was waste as opposed to other oil so it was you know other veg oil you know that would have a much bigger carbon footprint but we've seen this half of half excuse me yeah half a million barrels which is which is a bit just in the first month of 2023 so I mean it's a lot of material that's coming from from China to meet this need and again it kind of goes back to the this mantra of where can I find oil anywhere on earth we want it here in the united states to make renewable diesel another piece of recent news is marathon and erc which is a research group at the university of North Dakota have received some funding from doe to design carbon capture and sequestration capabilities at marathon Dickinson so that's marathons renewable diesel plant in state and again if they can capture carbon off the refinery and store it below ground they can shrink their carbon footprint to even more kind of exciting and then another piece of news that's been going around a little bit 45z is a section of of the the tax code it goes back to the inflation reduction act from last fall late summer and it's for clean fuel production significant amount of funds for producing clean fuel in the united states so notice it's it's production not use and it's in the united states and so the question is how much canola oil is going to be used for biofuel production in the united states because we have this high subsidy versus in canada and we've already talked a little bit about you know are we going to see additional canola production in canada there's an announcement of a number of crushed plants there but most of what might be crushed there and used for biofuels actually going to come to the us first and then go back into canada also raises a question to of of transportation and geographies how much of that might come to north dakota because we have a good rail access into the prairie provinces where that's going to be produced anyways a really interesting question really being driven on the canadian side is they're kind of trying to figure out what's going to happen but could have big implications for us agriculture energy and north dakota that's what i had for my presentation so with that we'll open it up for questions yeah there was a question in the pad about a fourth of the calves being covered by lrp and again like i said that the lrp year starts july 1st and ends july 30th so uh that's really you know two different calf crops being covered and so on and what percentage but it is a year or so but anyway if you just assume a year there and the number of calves we had that would be and again we can double count some calves are covered could be covered twice even even with lrp for fed cattle even three times because if you don't sell them and keep them but anyway in general yeah that was my statement of a four what tim was that national or within north dakota that is north dakota only okay okay thank you i i don't know what the national is it's less than that but north dakota south dakota nebraska are usually the largest states for lrp contracts and so that was north dakota being that there's no more questions and it's still a beautiful day outside uh we want to thank our presenters for joining us today and all of you for attending this month's webinar again it will be posted online hopefully the next day or two i think we've got another question come up here quick uh don't know if that's going to be more on frame side uh regarding erp 2022 disaster payments and actually ron isn't on today you might have knowledge of that as well um yeah that that's really a ron hogan question but to my knowledge there hasn't been any any updates yet so uh we're still waiting for some clarification but ron is really the one that's this tracking that the closest that's right all right well with that i want to thank everybody for joining us today and we'll see you next month thanks