 I'd like to welcome everyone to the June 2023 edition of NDSU Extension Agri-Businesses, Agricultural Market Situation ALEC webinar series. Same format as has been for a few years now. We'll have a series of presentations followed by Q&A. We ask that you use the Q&A tool to ask questions or the chat if you'd prefer. With that, I'll turn it right over to Brian Parman. All right, I'm gonna share my screen. All righty. So today's, I got two topics. Essentially, I'm gonna cover one kind of briefly and then the other one, I guess kind of briefly as well, but just two that I wanna go through. I'm gonna talk about interest rates and the Fed real quick who have met this week and then some of the highlights from the farm business management records data that we put together recently. All right, so starting with the Fed. First of all, the Bureau of Labor Statistics put these charts out every month and these charts are referenced the previous month. So this is for May, but it comes out in June so that we can see what the price changes are. And this May report showed that inflation, overall inflation was down from 4.9 to 4% with food prices up 6.7%. And the biggest driver of overall inflation dropping from 4.9 to 4% was this 11.5 or 11.7% drop in energy costs. But the Fed tends to focus on this core inflation number which is 5.3% and that was a month ago was 5.6 and now it's 5.3. And the reason they do that is because of the volatility of food prices and energy prices, how those can move and the core inflation tends to in some opinions reflect better how prices are moving. That isn't to say that energy and food costs do not matter. It's just that when they're gauging inflation they like to focus on the core inflation number because the belief being that it's less volatile it's a better reflection on our prices actually increasing or in deflationary cases decreasing and not just some swings in food and energy prices which do you do that? But that was the report that came and it was again inflation being at 4% is the lowest it's been and well over a year, year and a half for annualized and then core inflation at 5.3. The other information that came out is unemployment still remains well below 4% is around 3.7. The target's kind of been four and a half and it stayed low and I put this chart up here just to show that basically unemployment despite the Fed's rate hikes you look here at January of 2022 they began hiking rates last year in the spring and really has not had much of an impact on the unemployment rate or at least as this one's tracked at all. The big spike in the middle was the pandemic shutdowns and you look at unemployment essentially held steady at where it was prior to the pandemic actually occurring. I bring this up because this is a major metric that the Federal Reserve uses in determining is the economy slowing down are the rate hikes working along with the actual inflation number is what's going on with unemployment. Here's the rate hikes that began happening back in March of 2022, a quarter of a percent half, three quarters, three quarters all the way up at the top is the most recent meeting and you can see it pretty much every meeting there were rate hikes until June 14th this most recent meeting they decided to hold steady. So no rate increase at this most recent meeting that came out, but the Fed these are the biggest thing with this one is looking at the Fed's comments, okay? So they did not increase rates this time and the Fed's comments and I kind of paraphrase some of this sees progress on inflation but not fast enough their words, core inflation remains stubbornly high another comment there and then this was a direct quote basically from Jerome Powell is that the labor market is surprisingly resilient or surprisingly strong, okay? And I put that in bold letters and underlined it because that is again a metric that they use and rely on along with the inflation numbers that come out every single month as to what they're gonna do with interest rates they project core inflation to be three to 3.5% by the end of the year and a strong possibility this was mentioned what they said for two more rate hikes this year given what the data says right now and so the projections by Fed board members is for like I said, I didn't finish it out of my apologies for about a 5.6% federal funds rate by the end of the year and that would require at least a couple of quarter maybe a half and a quarter point increase in the federal funds rate and I just put this chart on here to show that median where they, because they vote on this about 5.6% by the end of the year which again, we're at five and a quarter so you would need at least a couple of quarter point rate hikes to get to that and so that's kind of what came out of it that they're holding steady right now to wait and see what the data shows for June and what they've done already how that's kind of percolating through the economy but more than just a real possibility that they're gonna be a couple more rate hikes coming in the future as they see that core inflation number sticking there. All right, so real quick on the farm business management record highlights, I put $2012 in here for 2022 so I adjusted for inflation with this chart and the reason I did that was so that we could compare and show that net farm income in 2022 was the highest step. 2020 was the previous record you'd have to go back to the early 80s like 1980 to see a number that high and 2022 beat even that it beat 2021 as well last year which was a strong year despite coming in with those high costs to the year net farm income last year was the highest on record and so one of the things we do is we use the farm financial scorecard as a benchmark for the financial ratios to see how farms are performing in all these different areas liquidity, solvency, profitability as well as these others repayment capacity and financial efficiency and this is the first time I've ever put this together where I had this many categories in the green. So this is for the non red river valley and green is good, yellow is dependent on how close to green or red you are could be okay or looking weak and then of course red is vulnerable and you look through this and you can just see that basically across the board we've got strong ratios for everything in liquidity everything pretty much in solvency, profitability I mean this is almost 4.4, almost 45% or that would have been green too for the non valley. Repayment capacity numbers I know total debt and term debt coverage ratios or something that like lenders look at pretty strongly and this is more than 100% higher than even the benchmark. One and a half is considered as a strong total debt coverage ratio and this is four for the non valley term that's 1.75 and again this is over four financial efficiency, operating expense ratio just barely in the yellow but pretty close you want it to be below 60% it pretty much is a 60% depreciation not bad interest expense that hasn't been a factor for years but I think that's gonna change here in the next year so the net farm income ratio again strong and that's for the non valley you look at the Red River Valley and they've strong as well pretty much across the board good numbers for all of these categories liquidity, solvency, profitability, repayment capacity and financial efficiency and so I made this little table here for these ratios and there used to be 21 of these FFSC ratios then they shrunk it down to 17 now that are used instead of the 21 and what they got rid of was a lot of the nominal categories where you would just say working capital or those kind of numbers what the net farm income actually is because it's you can't compare farm to farm with those numbers a big farm is gonna have a lot of working capital a small farm would obviously need less and depending on what kind of industry you're in livestock feeding obviously needs a lot more working capital than perhaps the crop operation does but you can see the Red River actually the non valley performed very similar if not slightly better a bit better than the Red River Valley did but still we're kind of splitting hairs there both off the valley and in the Red River Valley of a very strong year in 2022 and I put this into show that while some of it did come from government payments and crop insurance in 2022 not nearly as much as in 2021 especially on the insurance side and not as much on government payments as well especially compared to like 2020 which was high a lot of it coming from like a CFAP but still significantly higher than the previous year that we had essentially net farm incomes coming in close to that which was 2012 and you see there it actually had a very little coming in the way of crop insurance and government payments almost all of it was from production and strong prices so still some coming in 2022 but such a strong year that government payments and crop insurance while a factor definitely a factor not the major cause of the high incomes and I think that this is interesting to look at is the rate of return on assets and equity per farm so you look at 2012 which would be the previous year or period where we were having strong net farm incomes in North Dakota and these rates of return on assets and equity or especially on equity was significantly higher in 2012 compared to 2022 even though the net farm income was higher in 2022 the reason why asset costs the value of equity has just gone up so much in the last couple of years especially we've got land prices that have gone up double digits couple of years in a row we've got equipment costs that have gone up dramatically well into the double digits and expected to continue to increase at least in the near term causing this rate of return on equity and assets to decline even though we've had strong net farm incomes you increase the value of those units you have to make a lot more money off of them to get this to get these rates of returns higher and we have made a lot more there's been a lot of income generated in farming but the costs of these assets the major assets in production have just gone up so much that these rates of returns on equity and assets have declined and I just show this to show purchases of machinery and equipment in buildings based on this data I mean it's obviously a massive record and I do think some of it is the purchase of obviously the purchase of new equipment because we've had additional income but I think a lot of it is just because equipment costs have gone up this is in dollars not in number of new pieces of equipment bought and since it's in dollars this big increase here could a lot of it I think has explained in just the high cost of farm equipment and overall equipment prices so by and large a great year in 2022 one of the best ever even though the rates of returns are a little less than we'd like to see and so now we're looking toward next year and trying to decide okay frame's gonna come on soon and talk about crop prices but at the end of the day our production costs from last year versus this year we're projected to be about the same very similar with an increase in interest rates obviously a decrease in fertilizer to an extent but an increase in equipment costs so we're kind of balancing out those increases and decreases and overall the projection on production costs was about to be the same last year versus this year so then the big question will be what happens with our crop yields what prices are able to be secured to evaluate and we'll take a look at it and see where we wind up overall given those factors and then my last comment on the Fed thing again take away saying that there's probably gonna be a couple more rate heights in the future it's gonna depend on the data coming in but right now it looks like that cornflation numbers remaining pretty sticky and the labor market remains pretty tight and as long as that continues to be the case they're saying that there's probably gonna be a couple more rate heights maybe finishing out the year around 5.6% on the federal funds rate which would probably roughly translate to 7.75% interest rates a little higher than they are now so with that I will go ahead and stop my screen sharing and I believe Frayn Olson Dr. Olson will be your next speaker All right thank you Brian let me share my screen now and we'll get rolling so I'm gonna provide so my name again Frayn Olson I'm the crop economist marketing specialist with NDSU extension here's my contact information so if you do think of something later on that you wanna visit about I'd be happy to do that we will have some time at the end of this session for some Q&A and hopefully I'll make some statements to try and stimulate some discussion as well so I'm gonna take a real quick review of the most recent information we got out of the USDA as well as an update on some of the things that are market forces now that are creating quite a rally today and I'll talk about that in a bit more detail so first what are the current key issues and right now the eastern corp melt in particular is becoming dry one of the main reasons we saw this pop in the market today is that the US drought monitor maps got updated and came out that there was an increase in the area primarily for corn and soybean country that is now in some level of drought even though it's pretty minimal level it's still showing up as drier conditions and I'll talk more about that in just a moment the other thing is we are export sales in particular for wheat and corn even though seasonally we don't have really great export sales at this time of year when we look at what's happening in the global markets right now both US wheat and US corn is relatively high compared to other exporting countries and so we are having some export sales but they have really really slowed down given the relative value of US products in the global market versus the United versus other countries and so there's some counterfactual things going on here that are also I guess causing some concerns at least from my perspective longer term but right now the weather is really kind of trumping everything that's out there right now the other thing is a reminder on June 30 USDA will release their acreage report which is an update to the prospective planting report that we got in March again this is a farmer based survey of the acreage that actually did get planted so we'll be able to cross check what the planting intentions were versus what actually got seeded right now my expectation is we're not going to have any major or substantial shifts or adjustments but of course until we get the numbers we don't know so with that I'm going to pretend to be my do my best imitation of a crop economist here we'll talk a little bit about what came out in the reports this is for old crop these are ending stocks numbers for old crop we've got all wheat corn and soybeans just as a refresher course on the very top row and highlighted in blue is the average trade estimate this is what the private analysts and traders were expecting to see towards the bottom the highlighted in black was the numbers we got last month and of course on the very bottom highlighted in red are the numbers that we got in the June report so when we compare there's two different ways of comparing this one what happened this time relative to the last month and in my case probably the more important is what happened this month relative to what the trade was expecting to see so I'm really going to compare the blue row and the red row not any major for old crop there wasn't really any major adjustments there wasn't any big surprises really for the only adjustments that USDA made the all wheat numbers were identical for both production and consumption again this is old crop we're getting very close to the end of the marketing year now so those numbers should become final soon for corn and soybeans the two things that were adjusted downward was both corn export sales total forecast for the year as well as soybeans the exact same thing so when we look at the blue row versus the red row those adjustments that were made was all because of reductions or slippage in the usage the amount of total exports that we expect to see out of the United States but again the trade was expecting a lot of that so if you compare the red to the blue the trade was expecting to see some lower numbers we got those lower numbers actually they were a little bit more more of a reduction than the trade was expecting now again not bigger earth shattering changes but tweaks and adjustments along the way basically confirming that the USDA forecasts are confirming what we have seen happening in the marketplace moving into new crop now this is if you notice before it was old crop this would be the new crop ending stock so this is the crop that's currently growing again we want to compare the green line the very top row with the bottom line which is red very similar numbers so the USDA's numbers that were actually reported were very close to what the trade was expecting again the reason that the ending stocks for in particular corn and soybeans went up is because the ending stocks from last year roll into this year's numbers so for the corn and soybean yield as well as consumption numbers they really didn't change from the previous month for wheat the only reason we got a slight increase in ending stocks for all wheat is because there were some small adjustments in the expectation for yields or in particular yields in the very southern winter wheat belt the other thing that we did get out of the report last Friday was updates on production forecasts for the wheat complex specifically the winter wheat complex so again I want to focus on the different classes we've got hard red winter wheat in the middle on the far right hand side we've got soft red winter wheat and then the white winter so I really want to focus on those numbers specifically and talk a little bit about where did the where were the changes occurring so when we can when we compare what we saw during the May report versus the June report there was a slight increase in total production in particular for hard red winter wheat the main reason was because there was a slight increase in the yield forecast coming out of Texas and Oklahoma so again not major changes if you notice the the blue row on the very top versus the red row on the bottom very similar to what the trade was expecting to see so no big shock value basically confirmation of what we were expecting to see from those reports now again at the end of the month we're going to have an update on planted acreage and we will like we will see those planted acreage numbers adjusted then in the July report one more comment before I move on just for everybody's as a reminder for everyone USDA will not adjust the yield numbers their yield forecasts for corn and soybeans until the August report so even though we're starting to see some drier conditions in the winter wheat excuse me in the in the corn belt show up which I'll show you in just a moment USDA is not going to adjust their yield forecast for for corn and for soybeans until the August report when they do a farmer-based survey they take a combination of farmer-based survey plus satellite imagery and they try and do their updates to their forecasting models so you're probably going to hear some private analysts really bash USDA during the July report that they haven't adjusted their yield forecasts the point is they don't adjust their yield forecasts in July that's not part of their process that's not the methodology they use so there's going to be a lot of debate and discussion about what again like every year what kind of what yields are we going to be getting into so I was going to say this before but I'm going to do my best imitation of a weather forecaster here and talk a little bit about not only soil moisture conditions but more importantly what is the weather going to look like as we move forward because it right now this is the topic this is the story that everybody is is focusing on so the drought monitor map got updated this morning this is the updated map notice that as you get into the core eastern corn belt in particular notice there's that huge red spot in eastern Nebraska moving into Iowa and even into Missouri those some of those dry conditions we had seen before but they have now extended into the northern half of Illinois so we get into the Illinois area we get into southern Wisconsin, Indiana, Ohio this region in this central corn belt central and eastern corn belt is really where a lot of the concern and issues are starting to show now I'm going to show you a kind of a sequence of other maps that will basically tell you the same story but in a little bit different way now the drought monitor map is trying to measure or get an estimate of how deep within the soil profile is this dry layer starting to move so the yellow areas typically represents that the crop is showing some stress it's abnormally dry that's the yellow the crop might be showing some stress but it's not that that that soil moisture or the lack of soil moisture has gone really deep into the soil profile by the time you get into these really dark reds and maroons like you see in in Kansas or even in eastern Nebraska the the dry layers move so deep in the soil that your soil profile that now you're starting to get wells that are going dry stock ponds are drying up you have much deeper or more dramatic not only agricultural but just other consequences for the dry weather so please think about this as as how how deep into the soil profile is that dry layer moving now the next map I'm going to show you this is from if you notice the dates this is from June 12th this is information that's put together by a joint venture between NASA as well as USDA and then what they're trying to do is measure in this map if you notice on the right hand side this is soil moisture so we're looking at volumetric soil moisture so we're taking the ratio of water volume in the soil relative to the soil volume so if you look at the scaling on the right hand side think of those as percentages so in the green area we're looking at about 35% of that soil profile is water now this is for the top six inches so we're we're really trying to look at that very top kind of top soil layer all right now notice if we get into these areas in central Nebraska you get into areas for example in parts of Iowa and northern Illinois you get into Wisconsin even up here in North Dakota in particular you get into western North Dakota northeastern Montana this soil layer this top six inches of soil is very dry I want to caution everybody one really good rain shower if we have an inch or an inch and a half rain shower that comes through that first six inches are going to be replenished you know obviously plants will have a reprieve from some of the some of the drier conditions another way of measuring this and this is also at the six inch depth and these are all computer generated models they're using this is using information over many many years so here what we're looking at is the deviation from average so when we look at typical soil moisture versus what we're seeing right now what does that look like so there are areas obviously within the corn belt that get a lot more moisture than we do up here in the northern plains and so they typically have a lot more soil moisture available so let's not only look at what the absolute levels are but more importantly how does this current soil moisture compare to a longer term average now again NASA and USDA have been doing this for quite a few years they're going back to 2015 as the baseline so going 2015 through 2022 as that reference point for average or historical and they're comparing today's numbers with what you would normally see at this time of year once again when you start looking at what's going on in particular and Brian was just talking about this earlier before we came on you get into western Nebraska southwest Nebraska where he's from you know over the last several weeks they've had a lot of rainfall and and is really at least on the surface moisture replenished a lot of the surface moisture area the really deep subsoil layers have not been replenished yet but at least on the surface they have been now let's shift over into well let's look at North Dakota in particular Northwest North Dakota and Northeast North Dakota there are areas up here relative to normal we're well behind our normal pace or our normal rainfall and soil moisture conditions we look at again this starting with about the eastern half of Iowa going particularly into the northern half of Illinois and a little bit into into Michigan and Indiana this area right here is the area that the pocket that everybody's really starting to worry about the reason I'm bringing this up again is I have a real big problem with people using social media photos to demonstrate how bad things are the last time I checked I have I have yet to see a Facebook post or a Twitter post of a photo of a field that is absolutely picture perfect every time you see a picture it's going to be the picture of the worst field in the worst corner you're going to see so I will tell you right now you're going to hear stories and see photos that are showing up I've already seen a couple show up in the last couple of days and there's the photos are coming from this pocket up here in northern Illinois and yes we have a problem there there's going to be some issues but this is not representative of the entire eastern corn belt so we have to be very careful about thinking about this logically and not getting too caught up in the emotional issues so again this is at the six inch depth so one or two really good rain showers coming through all of this is going to clear up and we're going to get back to more of an average map setting when we get into the deeper soil levels and I do want to bring this up now we're back to this volumetric measure so what percentage of the total soil profile is made up of water versus actual soil again notice that the deeper greens are starting to show up again so now we're trying to measure the amount of water in the top three feet okay so now you get a little bit different picture about what's going on and this is where this map is going to differ a bit from what you see within the drought monitor map so again we got to be careful about how deep within the soil profile are we going so if we think about this top three feet is kind of the the maximum depth for the root zone we do have some moisture later on or or within that deeper soil layer that the crop can tap into now again that the crop has to develop enough has to get enough growing degree days enough heat units enough daylight hours to be able to tap into that but there is some some soil moisture underneath this to be able to to sustain the crop even though it looks like we're going into a drier period one more way of representing this and I do want to point out the date this was taken on June 11th this actually comes out of the same offices that put together the drought monitor maps so what they're trying to do here is the vegetative drought response index so basically they're using again satellite imagery and NDVI the the vegetative health to be able to look at how green is the crop today relative to what we normally see at this time of year okay so this includes what what they call complete so there's a way you can filter out for just crop land acres or just pasture land acres or the complete picture and so I chose the complete picture to try and give you a better idea kind of geographically of where we're looking at at this and there are areas and pockets for example parts of the golden triangle up here in in Montana that are actually in very very good shape if not even a little wet but then we get into this pocket in in Nebraska we get some of these drier conditions going on in Iowa Illinois Indiana Ohio again this is vegetative health so we're comparing it's the relative health so we're comparing the the greenest of the crop today versus what we would normally see so we're looking at that and saying you know what there is some drought conditions starting to show up there's some drought stress starting to show up in the area so looking forward this is from National Weather Service I pulled this this morning this is a forecast that they made as of yesterday for the precipitation outlook you know it looks like we in our area may get some reprieve we may have some rain showers coming through hopefully being able to recharge some of that initial topsoil moisture give us some at least some timeframe to be able to continue to get that crop developed but when you look at this northern Illinois eastern Iowa and into Indiana and Ohio this pocket in and again southern Wisconsin which is also very heavy in the crops area this pocket in here is kind of the bull's eye to say look it looks it doesn't look like that region which is now suffering the most is going to get much of a reprieve they're not going to get those rain showers to come through and re recharge that the soil moisture in that root zone now the other thing that's going to happen if again if you ask if the National Weather Service is correct is we're also looking at average to slightly above average excuse me temperatures i.e hot and dry now in our region again if we can get those rain showers the higher temperatures you know for those later planted crops will be help us to be able to catch up a little bit on crop development but again we need the moisture to be able to have that growth spurt but again you go move into this southern Minnesota Iowa Wisconsin Illinois region this pocket right here over the next several weeks you're going to be hearing a lot of discussions about what does the crop look like what's the crop health what does this mean for potential yields and yield forecast coming out of the eastern corn belt so even though last year the big big issue was in the western corn belt eastern corn belt had a fantastic year it looks like some of that those weather patterns are shifting and it looks like this eastern corn belt is going to have some more problems so the rally we have going on right now we are now at market close November soybeans were up 52 cents today December corn was up 25 cents today and September spring wheat was up also about 26 cents today so this weather forecast right now we're getting this this weather rally you know weather rallies tend to be very short-lived and with a lot of spikes so if you do have some both old crop and or possibly some new crop I think we're getting to those ranges where you're going to be looking at some additional sales so with that I'll be quiet and I'll hand things over to Tim Petrie for his report on the livestock sector good afternoon everybody Tim Petrie extension livestock marketing economists just kind of talk about the cattle situation today the news last week but I think it's getting kind of repeat news is that we set another all-time record high for fed cattle prices last week up there just over 182 on a live basis and just a hair under 300 on a dressed basis and had cattle up to here in the northern plains up to 303 all-time record high prices and again maybe just the color code here because all the rest of my charts are the same way as the red line is always what they're doing now and then if there's a futures market the red squares are this year's futures and the gold are next year's futures so anyway the cattle keep marching along and two things we always say as economists that affect prices are supply and demand and so on the supply side again we've decreased the beef cow herd for four street years and so that's showing up in cattle and feed and cattle marketed and lower calf crops and so on so that has been really supporting prices and so our previous record high was back in 2014 and just under 154 so you see we're well above that and we'll set not only are we setting weekly records but we'll set a record for the year as well and then usually we do have some seasonal weakness into the mid-summer into this you see the June futures there and August futures down a little bit but still well up in the mid-60s there back up to almost 180 by the end of the year so things are are still looking good there and you know from a supply standpoint I'll talk about beef production a minute but then the other thing that I want to talk about going to the bottom part of the chart is that demand for beef has held very strong stronger than some people expected in a minute we'll look at some the competing meats that aren't holding quite as strong I just had a conference call on Tuesday with a couple of my counterparts around the the U.S. and then with the U.S. defaults that help put out the the WASDE that frame just got through talking about and you know that's something everybody's discussing now is why is beef holding so well on the demand side and maybe some of the competing meats aren't but you know when you look at the cutout value and that's just all the wholesale cuts added up and we'll see a few wholesale cuts in a minute as well again the paralleling fed-steer prices parallel the boxed beef cutout because the boxed beef cutout is what the packers can sell the wholesale meat for and that is an indication of how meat is moving at the retail level as long as it's moving at the retail level and really strong prices are going up so that's just exactly what's happening on the cutout the cutout last week at just at a rate 325 there just under 325 was not a record high it's it's very much a historical high but back in 2020 remember back in COVID when all the packing plants shut down and everything in the shelves were bare we did spike up for one week up there to 459 and then by two weeks later was back down to 200 so we aren't at all time record high but you could essentially say we're at historic highs outside of that COVID thing and this week the the cutout keeps moving along actually this morning's cutout report showed 34185 for this morning so it looks like the cutout will be up again this week so just very very strong beef demand and and and continuing on so on the top left hand side then is beef production and yes we know they see the red line there compared to the lighter blue line last year and here on some of these charts the purple line is the 2017 to 21 average rather than on the livestock I go back just on a yearly basis four years but you see the our beef production so far this year is running about 5 percent less than last year and closer to average and USDA actually is predicting 5 percent lower beef production this year and then probably another five to six percent reduction in beef production next year which all would be supporting the prices so that's part of the reason why we have the higher prices now is that we do have lower production but anyway then all kind of interesting all the different individual wholesale cuts and make up the cutout are all it's just we're not going to go through the numbers here in the interest of time but let's just look at the red line compared to the blue line of last year all cuts of beef are trading in some cases quite a bit higher than last year again a strong indication of the robust demand that we have on the upper right hand are the lines up you know look at the blue line up significant go to the the bottom left hand the brown prices again significantly higher than last year usually they peak out before now and just at historic highs go to the bottom right hand is boneless beef that goes into hamburger hamburgers are selling very well as and again significantly above last year so you know that's that's all positive feeds back into fed cattle prices and the two things that affect feeder cattle the most are fed cattle prices and corn prices that Frank just got through talking about and I will mention in a minute so positive there on the other hand when we go to the competing meat again the same color here you see the pork cut out there on the top is quite a bit below what it was last year and below even the average you go to the to the right hand side there the pork line remember beef loins that they're quite a bit higher than last year pork loins lower and and but then both the average and the and last year down to the bottom left broiler prices again that's chickens they're down from where they were last year and look at chicken breasts are just not selling that well and so again beef is just moving very very well and that's funneling into fed cattle prices while the other some you know indications are that the the economy even those these are cheap is affecting the volume there oh let's get into the individual feeder cattle for here and so here's our five hundred fifty six hundred pound steers in North Dakota and again just have been you know we've been inching up the last cyclical price low was in 2020 and it's come very much affected by COVID and then we did inch them up in the purple line there 2021 last year again always the blue line we saw improvement but huge improvement this year were the last couple weeks we've been up there around 280 average some of them even bouncing at the high high selling ones up to even $300 so up at that historic high levels are $80 a hundred weight above last year so a significant improvement there again usually you know that we do see some weakness into the fall when the marketing season that light blue arrow down at the bottom right hand of the chart usually October 15th is a little over there so we are expecting some weakness in fall and and you know I'll mention corn prices in a minute that's going to be the big thing to watch because we change corn 10 cents a bushel change fall cap places a buck in the opposite direction so that's the big thing for us to watch for you know as as the corn season progresses as Frank said but anyway even with the seasonal decline and see what happens to corn we're still expecting much better prices here this fall go to the heavier weight yearling prices kind of the very same story here we're trading about $80 more than we did last year there's the futures and you know the futures were off four hours or so yesterday and off another two dollars a day again I'll kind of pick that up with my next slide that follows up on what brain had to say but anyway the red futures there the august september october november futures showing us that you know that we're up there and you know 245 to 40 to 250 significantly higher than last year and and so again we have to wait and see what corn is but we're just following fed cattle again two biggest things that affect feeder cattle prices are our corn and and fed cattle so we see these high prices and I don't want people to get lured to sleep here and throw risk management out to the wind just because prices are high and Eric at least expected to see that stay better than they have been although there's seasonal weakness in the fall so you know uh cattle price price risk management during the increasing phase of the cattle cycle is different than in the decreasing phase when prices are going down it's good to get something locked in so always when prices are high and at levels like there now there's always a lot of volatility in both the futures market and the cash market the futures market again you know the funds get in and they're just long and long and long and prices are going up but then they start taking some profits and bail and so prices can be very volatile layer now and there's always risk for lower prices look at the competing meats and we have the economy and so on and and um and brian mentioned some of those things and we have also the geopolitical things going on and so in the middle there the best marketing strategy during the increasing phase of the price cycle is to lock in a floor price and then leave the top side open and again how much you lock in on the floor side really depends on your ability to take risk new beginning farmers you know probably need to get pretty well priced up but if you know you're a high equity producer have everything paid for and so on maybe not so much but that's the best marketing strategy the two ways to do that would be the where you can do a floor price but leave the top side open would be with livestock risk protection insurance or futures market options but just to go back to you know the volatility and want to follow up with corn we you know brian did a good job of talking about corn and it's getting dry in the corn belt the 57 percent of the corn belt is in some kind of drought and so we just see what's happened here in the last week and a half you know feeder cattle are off there about ten dollars and you brian talked about corn so i don't want to be redundant of that but we've seen the spike in corn prices here in the last week and a half are so up about 40 cents and then today just go back to that change corn 10 cents change feeder cattle a buck in the opposite direction corn up to over 20 cents today and feeder cattle or last I look about two dollars so there is risk and certainly I think looking at some kind of floor price would be recommended with that then I think I'm finished and we'll turn it over to Ron for some talk about U.S.T. First of all my name is Ron Haugen you most of you probably have heard me before I'm an extension farm management here at NDSU I'm going to talk today about a couple of farm programs that I've mentioned before in our talks the ERP program plus the PARP P-A-R-P a lot of acronyms first of all the ERP program the phase two program that was supposed to be done June 2 has been extended and I kind of thought this they would extend this because farmers were in the field and busy and so they extended it to July 14 now the phase two of the ERP that's where you try to fill gaps of people that missed it out when you got the ERP phase one payment and this is where you need to take gross revenue from your tax returns basically how that works you pick your benchmark year and you pick your disaster years and then if you are a beginning farmer or a veteran you get a little more payment we still do not have any information on ERP two for livestock we're still waiting on that just wanted to mention that now on the pandemic assistance revenue program there again it's been extended from June 2 to July 14 and this program is for not just crop producers but crop and livestock producers the ERP was only for crops so what that does you compare your 18 or 19 calendar year to 2020 that the COVID year and you see if you have a drop in gross income now there's been two webinars at least that FSA has done one on a national level and one extension tax people helped out and they're very good webinars to watch if you're wondering how to apply for these two programs if you haven't already one program requires certain things off your tax return and the other one requires other things off your tax return mainly just dealing with your gross farm income and it's very specific on what you numbers that you enter all needed to be taken from your tax return and you need to have your 1099s from FSA certain government payments must be taken out or added in depending on the rules and there's very good fact sheets that show this on farmers.gov no just recently there was announcement of the 2022 emergency relief program and now we don't really know too much about that but this is ERP 2022 phase one now okay so we're assuming now that it's going to be similar to the ERP phase one where you really didn't have to do anything it just took a percentage of your crop of your crop insurance payment okay and it was very streamlined basically just got your payment for those that did not have crop insurance then it was a little more more of a procedure you had to figure out your AGR your allowable gross income we don't know what years are going to be the reference years will it be the higher of 18 or 19 will it refer to 20 or 21 for the 22 ERP program a lot of unknowns but they did announce they were doing this program they all also the ERP for livestock 2022 phase one that was a very simple process all you needed to do was to be in a county that had LFP and they paid you a part of the payment that you got now in 2022 I believe this is right Tim you can correct me if I'm wrong I believe there's only five counties in 2022 that qualified for this so the way I read this probably most livestock producers wouldn't be eligible then but we'll wait and see on the details they're coming so as always at the end we'll entertain questions and I was going to say always contact your FSA office for any of these questions as well the FSA the North Dakota State FSA is having training all week but once they get done with that I'm sure they'll know some more information so I think I am the last speaker so with that we will entertain questions for myself for anybody else great thanks Ron and one of the unfortunate things I guess today with me not having a talk is that I have questions for people unless people from the audience would like to submit some using the Q&A tool of the chat my first one's for Frain I have two questions are kind of related updates related to the war in Ukraine and then also a question about how does USDA, WASDE consider that think about those numbers as they put things together okay so update on the war and more specifically the grain coror or the Ukraine's ability to be able to move product through the Black Sea so Ukraine does have a couple choices in their shipping routes the most efficient the one that has the largest volumes is loading it on by ocean vessel loading it at typically right now at Odessa because that's about the only port they have left open that actually can handle ocean going vessels or the larger capacity vessels the other two that they had have been bombed to a point where they're not usable the grain corridor which was really it's an agreement between Russia, Ukraine, United Nations and Turkey to allow Ukrainian grain to be loaded in Odessa and then traveling through the Black Sea unmolested because of the war efforts being inspected in Istanbul before it leaves and enters the global markets now as everybody remembers that agreement was made the original one was for six months it was extended for six months now it's been extended for two months right now it's looking like that will not be extended again the Russians are being very very adamant about the fact that they gave some concessions or they were expecting some concessions from the global community to be able to to be able to make their products move both agricultural products both fertilizers as well as grains move more smoothly through the global system in their view that has not happened there's more and more statements now coming out that they are not going to renew that agreement when it comes up in about a month or so and in fact grain shipments out of Ukraine through the port of Odessa have slowed significantly it's not that they've gone to zero but they've slowed significantly kind of I think in anticipation of this the problem that Ukraine has is they do have two other alternatives they can try and rail it through another port in I forget the name of the country but it's Konstana is the name of the port but it's a very small port it doesn't have the loading capacity that you would have in Odessa the only other alternative is to try and rail it use the rail system moving through Ukraine you hit the border of Poland and all of a sudden the track size changes and so you literally have to offload the grain from a train in Ukraine reloaded onto a grain in Poland that grain has to be reinspected and then it can travel into the Eastern European regions so major major heartburn for everybody there are some countries not necessarily the countries that we sail to out of the United States but there are some countries in particular in North Africa and the Middle East that are very dependent upon both Russian grain as well as Ukrainian grain as their primary source now even though we don't compete head to head with Russian Ukraine into a lot of those markets the fact that they're not able to ship or that the volumes are starting to drop have also lifted or supported global prices so it is something that we need to watch so it's kind of an indirect effect for prices here in the U.S. but I do expect that as we move forward over the next month or so we're going to hear more about it and likely we'll not get another extension which means Ukraine now is going to have a much larger problem trying to get rid of actually their shipping volumes of corn have been larger than their shipping volumes of wheat so it'll impact the corn market it'll impact the wheat market globally to some degree it'll impact barley and some of the oil seeds but those exports so far have been relatively small how does USDA try and adjust for those my smart smart alec answer is very carefully that's always a very difficult thing they have been trying to adjust their forecasting models to compensate for the extra costs and the constrained shipping volumes coming out of the Black Sea regions I think from what I can tell they have been reasonably close in their forecasts so far at least their annual forecasts in fact when I first saw them I thought they were a bit aggressive I thought they were they were being very optimistic at what Ukraine could actually ship but as it turns out they came out pretty close so they are watching it closely they are trying to model it they're doing the best they can obviously nobody knows exactly how this is going to work but I have personally been surprised at how accurate their forecast have been to date thanks friend I have a question for Brian if he's hidden there in the darkness and come back online just regarding interest rates you know actions by the Federal Reserve you know looking into what might happen you know through the rest of the calendar year and what that might mean for profitability not this year necessarily but in 2024 as those rates go up what that might mean to farmers who are borrowing well as far as things like land purchases and so forth I don't think it'll have as big of an impact so I'll go through a few things I don't think it'll have a huge impact higher rates in the short run at all with land prices moving as much as they are is going to be more of a factor than rates are and a lot of the purchases are being made via cash or a lot of the purchase percentage wise is coming from cash so with that being the case I'm not sure it'll tremendously move the needle there I do think it's going to start having some impact on operating notes this year especially when we look at that compared to last year I mean they're double or more than double and so that's going to that's going to make a difference and I think it's going to have an impact on equipment purchases as well because while people may you know buying things like land that's there's some discretion right on whether or not you buy farmland you don't necessarily need to if it comes up and you have the opportunity you can do it but trading off equipment and needing to purchase new equipment on top so you take equipment prices going up 13 15 percent for the last couple of years year over year and they're probably going to continue to go up and then tack a seven eight percent interest rate on there which is more than double a year ago I think that that's going to cause some strain those two factors combined to make things things a lot more difficult so I think that look the fact is prices and yields are going to have more of an impact on profitability than than interest rates do and that's almost always the case but it is going to make for some decisions to have to be made on and but I do think the other area and this is the one I talked about at the lender school on Tuesday is what's going to happen with rents though and I think a sustained higher rate and I showed it in that dot chart that I had in my presentation but I didn't really say anything about it the long run that they're talking about now for a federal funds rates around three and a half to four percent that's like the indefinite long run interest rate so we're talking about five point six percent federal funds rate which I said would translate around seven seven and a half around the end of the year well you drop it down to like four or so we probably are talking about maybe a five to five and a half percent interest rate in the long run right down all the way for the foreseeable future and I made the comment the other day they're not going to drop rates just to drop them it's not going to be a deal where they say oh well you know things are moving humming right along so we're going to go ahead and cut them from five and a half let's say at the end of the year five point seven five percent down to three that is not going to happen there's going to have to be something that causes them or to react and actually drop rates so if things continue to hum along and they get an inflation under control I don't think they're going to suddenly just oops my camera fell off I don't think they're going to suddenly just stop or drop rates down and that's why you saw that long run rate around for the federal funds rate around four percent which would be five and a half or so maybe maybe as high as six percent on consumer lending rates and that's the foreseeable future so if that happens in those relationships I've talked about where the cap rate on farmland typically tracks a percent or so below or a hundred basis points below the interest rate that would in the cap rate when I just calculated it from last year was about two point six five percent ish depending on what you use so you effectively have to double you can either double cash rents or cut land prices in half to get to five percent well I don't we're not going to cut land prices I'm not saying that but I do see as interest rates and this is you asked the question about rates what one thing they could do is start forcing those rental rates up year over year maybe six seven eight nine ten percent something like that every single year for the next six seven years until it falls more in line with that being the case so back to the original question how will it affect production costs I see equipment the cost of buying equipment the thing that frame will talk about cost of carrying grain I mean interest rates haven't been much of a factor so he in his presentations and I've seen a lot of them we didn't really talk about that very much because when they're two and a half three percent whatever but you start getting at six seven eight percent all of a sudden that starts mattering quite a bit so you talk about implicit costs if you will or costs of of holding grain is going to go up and if you want to hit on that for me real quick with the interest rate thing frame on the cost of holding grain because of it well I yeah I'll comment really quick so I I in fact I'm working on an article now that'll that'll show up in the next egg by the numbers series to talk about that specifically and how important interest rates are in the cost of carry the cost of storage both on farm as well as commercial and it is going to change the movement of grain even though grain prices have come down interest rates have gone up more and so the cost of carry has actually gone up about 30 to 35 percent over last year's numbers and when you think about it in a percentage terms and and the cost of keeping a grain of grain bit of of a bin of grain on the farm that has gone up substantially and and people are going to have to think about that as they're putting the marketing plans together as they think about their strategies and and obviously part of the decision in grain marketing is not just how do we get the highest price but it's also well I've got my my bills to meet and I've got bills to pay and making sure that you have the cash flow at the time that you need it and so we're going to have to rethink and kind of relearn some tools that we haven't had to use in a long time thanks guys I don't see any other questions in the queue and I'll give Ron and Tim this month off although I had questions that were over I think I think we're good with that I'd like to thank the presenters for today as well as everyone who joined us we'll be meeting again next month it'll be the 13th of July Thursday the 13th not Friday Thursday the 13th but until then I hope you guys have a great summer thanks