 My name is Dave Ripplinger. Economics Extension Specialist with NDSU Extension. We're primarily Bioenergy, kind of MC, the monthly webinar series that we started just at the beginning of COVID. This is our July edition. A lot of exciting things happening in agricultural markets and the economy in general. Just for those of you who aren't familiar, we do have questions at the end. So if you could use either the Q&A tool which you prefer or the chat tool, we'll get to those at the time whenever I'm done with my presentation, which will be last. But with that, I'd like to hand it over to Brian Parman who's going to be talking about inflation and the economy. Hey, thanks, Dave. So I think probably most folks paying attention heard the latest inflation numbers that came out just a couple of days ago. And this chart here comes from the Bureau of Labor statistics or BLS. And inflation hit a 40 year high, not seen since 1981 of 9.1% on all items. So it actually was a few tenths of a percent higher than most of the industry estimates or market estimates were between 8.6 and 8.8%. So coming in at 9.1, a good bit higher than they actually thought it was going to be. And a big driver on that is obviously energy with its inflation number over the year, well over 40% more expensive and food over 10% more expensive. Now, again, I always try to mention this when they talk about the core inflation, they use that phrase. They're talking about all items except for food and energy and it came in at 5.9%, which again was a bit surprising. They thought most of those in the market thought it'd be a bit lower than that. And that core inflation number approaching 6% per the year basically indicates that, yeah, this isn't due to the more volatile items like food and energy solely, non-food commodities, non-food and energy commodities like things like timber and steel and everything else, they're trending upwards as well. So that was a bit higher than the industry expected. And so this is the inflation numbers month by month as a percentage, okay? So most of the time, you look back since about 2012, that's what this chart goes to. You'll have months that have positive inflationary numbers and then maybe some deflation numbers depending on the season and everything. And this big drop here, this was COVID, this big dip where we had pretty high deflation for a couple of months or so. But since then, especially into beginning the parts of 2022, inflation's been below or just above 1% per month, which is leading to these high inflationary numbers that we're seeing this year. So that was 1.8 to 1%, that's a monthly inflation rate. So prices at the end of the month are 1% higher, for instance, than they were when the month began. So I just wanted to show what food prices have done during this inflation period. And this is just a few major food items. And Tim's not here today, but I think he has some slides he's sharing. But you look at things like chicken, just fresh whole chicken per pound, that's actually, it's gone up and is approaching $2 where a few years ago it was closer to a buck, a buck and a half. Big increases in milk prices. Ground beef, especially 100% ground beef, that's moved upwards considerably over the last year, up to $5 a pound, so 25%. And then eggs, eggs up dramatically. Part of that's the avian influenza concerns, but again, another part of that's the inflationary numbers. So as I was telling our other panelists before we kick this off, as I talk about the Fed with these inflationary numbers, the current target rate for the Federal Reserve, for the Federal Funds Rate is 150 to 175 basis points. That's 1.5 to 1.75% if you wanna think of it that way. And what the market does in the CME Group tracks this is you can basically get an indication of where participants in a lot of these markets believe that the Fed is going to, how they're going to react at their next meeting. Are they gonna increase the Federal Funds Rate? Or are they gonna decrease it and buy how much? And before the 9.1% inflationary number came out, this was basically reversed. We had a three-quarter point increase in June. And before that, the Fed had said they were gonna try to stick to half a percent or less. Well, inflation ran pretty hot, so they increased it to three quarters of a point. And then this is the expectation by the market for where they think the Fed is going to increase rates for July. And before that announcement, these were reversed. About 80%, 81% thought it'd be a three-quarter point hike, which would get you to two and a quarter to two and a half percent, and then about 15 to 20% thought it'd be a full one percentage point increase from 150 to 175 basis points to 250 to 275. Well, that's flipped. And now the vast majority of the markets think they're gonna have to do a full one point hike in July. Okay, so if that holds true, in the last two months, June and July, we'll have a one and three-quarters percent increase in the federal funds rate. And that's the highest pace that they've increased rates essentially since, I believe, the early 90s. And I may be wrong on that. Definitely in the 80s they increased at that pace, but I think they made some increases of that level in the early 90s. So here's the probabilities according to markets on where they think interest rates are going to be by pretty much the last meeting of the year. That's in December, 14 December, 2022 will be the final 2022 meeting of the Federal Reserve. And these numbers changed as well when the 9.1% inflationary number came out. And the largest group of people, 41%, think that the federal funds rate will be around three and three-quarters to 4%, that three and three-quarter to 4% range at the end of the year. Another large share, I think it'll be three and a half to three and three-quarters. And then you got some folks on the periphery thinking it'll be lower and higher. Now, again, this could change pretty remarkably depending on what July's numbers come out to be in August numbers, et cetera. If the inflation keeps running hot, you know, high eights, low nine percentage range for the year, you can probably expect this number to keep the expectations keep shifting to the right, maybe approaching 4.5% or so on that federal funds rate. So how is that impacting mortgage rates? Well, since November of 2021, the average had run up from about, let's say on 30 year fixed rate mortgages in November, averaging nationwide around three and a half or so 3%, ticking up to, you know, almost six, now into 5.3. Then here's your 15 year rates and your 5.1 arm. But this was about a week old on this data. So I pulled information as of this morning from some major lenders and you can see that the rate basically for the 30 year has jumped almost a percentage point due to this high inflation number and then the expected reaction of the Federal Reserve here in the coming days as they meet and decide what they're going to do and the likelihood of a full percentage point increase. So a big jump there and then this is kind of where they sit and then a 15 year fix is approaching 5%. But one thing to keep in mind, and I try to always say this when I'm covering these rates and we're looking at what looks like these pretty dramatic increases and they are, it's just that the long run 30 year fixed mortgage rate is around 7.5%. I think it might be it's between 7.25 and 7.75 and some of that depends on do you use monthly yearly annualized data or whatever. But so even at 6.39% by historical standards is still lower than average. It's much higher than they've been in many years. But and folks have gotten used to these lower rates and started making financial decisions based on the rates we've seen for the last decade or so. But to keep in mind in historical perspective, 6.4, 6.5% is still below the long run average. So then there's been talk about recession, okay? And one of the things with recession is the discussion, I think most when they're talking about it kind of in horror or really concerned, they think about the great recession, 0809. And then we had the big recession here. And you see from this chart, quarter one and quarter two of 2020, that was COVID. And actually quarter two of 2020 was the single worst quarter in US history since it's been being tracked. But that was a recession and it was two consecutive months of negative growth. And then we had the big rebound in quarter three and then things have progressed along at a pretty good pace. Already quarter one, and this has been revised three times had negative growth. And this is a good time I think to mention to anyone who isn't aware that by definition of how it's defined, a recession is two consecutive quarters of negative growth. And the end of a recession is marked by positive growth. So we've already had, according to the information here by the Bureau of Economic Analysis, negative growth in quarter one. If it's true and we won't know until well after quarter, quarter two actually happens and the data comes in, it takes a little while, it's not immediate. Negative growth in quarter two, then we will already be in a recession right now. The thing to remember though is recessions have different durations, okay? They can last years, for instance, or they can simply last two quarters. And then the magnitude, okay? So the 2020 recession due to COVID was short. I mean, it's as short as a recession can be and still be called a recession two quarters. But the magnitude was tremendous. I mean, that was the worst single quarter of all time but then they bounced back in quarter three. Other recessions have been a lot smaller, maybe even long, they can be longer but the magnitude can be much smaller to where a lot of folks might not necessarily notice a lot of changes in their day-to-day goings on in their business and we are in a recession. And one of the things that's also happened due to these interest rates increasing and the cost of raw materials for building, new residential, new housing starts. We've got permits and starts have declined quite a bit since May of 2021. They were trending upwards and over the last few months have shot down fairly dramatically. Completions remain about the same. So that's one of the indicators too on are you in or heading into recession or new construction, call it new housing starts and those have declined over the last few months. So one of the big, the conversations around a recession is always kind of runs towards unemployment. So this is from the St. Louis Federal Reserve and it's a graph since 1948. In every gray bar, you'll see these vertical gray bars, those are recessions. The wider that gray bar is, the wider, the longer that recession was. You look over here to 2020, it's a real thin gray bar. That was a very short recession as I indicated before, that was only two quarters. It was very deep and you can see it from the unemployment rate, which is the blue line, shot up dramatically hitting a record of over 14%. Other recessions on the other hand here, you see one in the early 2000s, the unemployment rate increased during and just following the recession but only moving up a couple of percentage points. And the longer on average, since 1948 unemployment rate in the US is five and three quarter percent, 5.75. So in some of these recessions, they move up, unemployment moves up above that longer on average and then following the recession during the recovery, it turns down. And then you look at like the great recession, it was a pretty deep recession too, but it was much longer as one of the longer ones compared to like the one that we had two quarters in 2020. So the current unemployment rate though, and this is the same graph as before, this graph just zoomed in on the last four years or so instead of all the way since 1948, we've stayed outside of the year and a half of COVID recovery, COVID and then the recovery. We've basically stayed below this five and three quarter percent unemployment rate and been there since July of 21. And then prior to the COVID outbreak all the way through, basically March of 2020. And so I just wanted to show you where we were so that should the recession start occurring or that we're already in it, we're actually starting from a very low unemployment rate relative to other recessions that we've had in the past. You know, for instance here, this was closer to four, three and a half, four percent before the recession. 1960s had one here and then in the early 70s, it was closer to five percent running all the way up to seven and a half. So I guess the point with all that is when we're starting from such a low federal funds rate and therefore 30 year mortgage rates or long-term lending rates and such a low unemployment rate, the Federal Reserve has quite a bit of runway, it seems, to be able to increase rates and try to get ahead of inflation as much as they can without pushing unemployment numbers and interest rates into the historically high zones or even a whole lot above average right now. That's the one bright spot with the tools that they have and probably is going to go a long way into how aggressively they act. And when we look at initial jobless claims, again, starting from a really low point, this is April of 2022, initial jobless claims for that week close to 165,000 or so in the year before in August, they were well over 400,000. So again, even the last few months, even if we are heading into that recession, if quarter two turns out to be negative, which indicates that we're already in one, initial jobless claims have not necessarily surged yet. So with that, that's sort of what's going on in a nutshell and it's a lot of wait and see, simply because we have to figure, the Federal Reserve's kind of waiting on the data to come in to try to decide their next course of action is what they've already done, starting to slow inflation yet or do they have to get more aggressive? And I think that that's only time will tell. I don't think anyone can definitively say where they're gonna go, only that if inflation numbers stay high, we're probably going to see some more aggressive rate hikes from the Federal Reserve, probably an increase in the unemployment numbers, again starting from a very low number and we'll probably see those mortgage rates rise. But one thing I do wanna add, increasing of the Federal funds rate does have a limitation on what happens with consumer lending and the interest rates that we see when we go to the bank. And a big reason for that is that once you hike rates high enough and essentially price people out of the market for borrowing, then you can increase rates as high as you want and it isn't gonna make any difference. You know, if just for instance, if you're already at let's say 20% and the vast majority of the population is avoiding any kind of borrowing whatsoever because rates are prohibitively high, increasing those to 30% isn't gonna make much difference. Only on folks who have existing debt at variable rates and a lot of those have protections for how fast they can increase. But again, a new borrowing then will probably not be affected dramatically. So you see this muted effect of how the Federal funds rate interacts with consumer loans. You know, there's a window in there where it has a pretty strong effect. And on the low ends and on the high ends, you know, basically on the tails, if you will of this curve, it has somewhat of a muted effect. So we'll have question and answer at the end of the presentations and I'll be on if anyone has any questions on any of this stuff, something I've covered and something that I have not. But with that, I'd like to go ahead and turn it over to Dr. Frane Olson. Thank you. All right, thank you, Brian. So here's my, once again, I usually start with my contact information. So if anybody does have any questions later on, please feel free to contact me. We'll have some time at the end of the program to be able to answer some Q&A. But if you think of something later on, please feel free to either email or call and we can certainly visit about it. So today I'd like to, again, provide a little bit of an update on the WASDE report, which is the USDA's World Agricultural Supply and Demand Estimates. So every month USDA updates their forecast for production, consumption and ending stocks, both at the US level as well as at the international level for the major grains and meat products that we have here in the US. So once again, I try and provide a real quick summary of what did the private analysts and professional traders, what are they expecting to see out of the report versus what was actually reported? So the top row, this is average trade estimates in blue, that was the average of the trade guests. This is again be the professional traders, the industry analysts saying, what do you expect USDA to report? The red row on the very bottom is the numbers we actually got out of the report and then the black ones that are highlighted are the numbers from last month. So you can kind of see the change in. Now, usually what I remind everybody is we really wanna compare the blue versus the red. Just because for example, on wheat, the ending stocks went up from last month, that's not necessarily the number that everybody needs to be looking at. It's well, if the trade was expecting an increase and we got an increase, that's fine. But if we expected an increase, then it was not as large as we expected. Prices can actually go up even though the ending stocks went up as well. So I know that seems kind of counterintuitive but what we really need to do then is look at the red row versus the blue row. For all wheat, now this would be all classes of wheat blended together. Again, the trade numbers were very, very close to what USDA came out with, very minor adjustments from the previous June report. So there was really no surprise or shock value there. For corn, we did see that the ending stocks number was a little bit higher than what the trade was expecting, meaning that we're gonna have a little bit more inventory at least forecasted for just before harvest of next year. Now, most of that was because of some changes in the old crop numbers. So for wheat, we've closed out the old crop supply and demand. We're only looking at new crop because that starts on June one. But for corn and soybeans, the September one is the beginning of the marketing year. So right now we're still keeping track of some of the old crop numbers. These are the new crop numbers. So this would be for the crop that's being planted and harvested now in 2022. The moral of the story is there was some slight changes that we had from the old crop numbers, some small adjustments. And we also included, the USDA included the updated information from the June 30 perspective plant, or excuse me, June 30 acreage report. So we did have a slight increase in corn plantings relative to what the perspective plantings report was in March. So again, that was reflected in these numbers. And USDA did not adjust any of the yield numbers for corn or soybeans. They did for wheat, they made some adjustments and updates on the wheat yield forecast, but not on for corn and soybeans. The corn and soybean yield forecast will actually begin in August. So August will be kind of an important report, especially for corn and beans because USDA will then provide their first official forecasts for this crop year. Up until this point, it basically been using a trend line yield. On the soybean side, again, we were expecting the soybean ending stocks to drop to become smaller, mainly because of the planted acreage. So again, the planted acreage number for soybeans in the June report was a little bit lower than it was in the March report, which then lower production usually leads to lower ending stocks. Now, that number didn't come down as much as what the trade had expected, but again, well within the range. So again, not any major surprises. Next slide, please. So these are the same basic information, but now this is for production estimates for wheat by class. So we have technically six different classes of wheat in the United States. The white wheat complex is kind of blended together. So we have on the far left-hand side, all wheat. Then it would be all winter wheat, both hard red winter as well, soft red winter as well as white winter. And then it breaks it down by hard red, soft red, white. And then we have other spring, which would technically, the vast majority of that is hard red spring. There's a little bit of soft white spring wheat grown, but a very, very tiny amount, and then Durham. So once again, we want to compare the blue row on the very top versus the red row on the very bottom, which is what we expected to see. And I guess, again, no major surprises, no major shifts and changes, other than we did get some new information for our spring planted wheats like hard red spring wheat in Durham. Now, a little bit of a surprise was the size of the projected spring wheat crop, that spring wheat crop projection. And notice that the range between the high end of the range and low end of the professional estimates was quite wide. We did reach kind of that midpoint in between there. But I know there was a little bit of surprise, especially from some of the farmers and some of the industry people here in the Northern Plains, because when you look at what USDA is forecasting for an average yield for the North Dakota, if we look just at, look in some of the details and saying, well, what was the forecast for North Dakota spring wheat yields? They were at about 51 bushels per acre. So if we look back longer term, if we look back to what happened in 2020 and 2019, we were about 49 bushels per acre in actual production in 2019 and 20, which would be more of a typical spring wheat yield. So right now USDA is forecasting basically an average yield wheat yield. Now, for some people that's gonna come as a surprise, I guess in my sense, I think it does make some sense given the information we have today. The challenge we have as most people in this region know that we had a very wide planting window. I know some of the early planted spring wheat looks fantastic. I was out driving to Western North Dakota yesterday's and returned. It had some very, very nice looking wheat fields, but yet there was a handful of fields that were also planted very late. And of course the later planted yields, ladle planted crops won't have the yield potential. So stay tuned. I think there's gonna be a lot of debate and discussion about potential yields. For Durham, again, the Durham number came in for actual production, very similar to what we saw in 2020 for not only total production, but also for yields. The statewide average forecast as of right now is about 40 bushels per acre for Durham. Again, very, very similar to what we saw in 2019 and 2020. So the current estimates are we're gonna have about an average wheat crop here in the Northern Plains. Next slide please. I do wanna kick into some of the things that will be talked about over the next several weeks. And it's really gonna hinge on weather and weather forecasts. And so I don't pretend to be a weatherman. That's Daryl Richardson specialty area. I don't wanna steal any thunder from them, but we are gonna have to talk a little bit about the weather and some of the information that's now hitting the marketplace. So as everybody knows, every week, the U.S. Derealth Monitor Index is updated. This is a composite put together from the University of Nebraska. Now, as I mentioned before, the Derealth Monitor maps show an estimate of the soil moisture in the entire soil profile. So it actually goes into the very deep subsoil layers. For example, looking almost at groundwater and groundwater levels. So the darker the reds and even the maroons mean that that dry layer in the soil is very, very deep. So we can have a drought, even though we might have a few rain showers that come through that allow enough moisture in the top root zone to be able to sustain the crops. So this is the information the market's looking at. A lot of private analysts and traders watch this closely. They often misunderstand or misinterpret what the information is. But I do wanna show it just as an idea. The areas now that we're looking at from a marketing standpoint are really in Nebraska, Iowa and Illinois, and then also into Indiana. So there's kind of that, what we call that traditional corn belt area because we're getting to the growth stages now where corn will begin pollination very soon. Soybeans will begin flowering and eventually pod set. And so over the next couple of weeks the weather and weather forecasts are gonna be pretty critical. Now, even though it's a bit dry in Nebraska, I do wanna remind everybody that a large portion of the Nebraska corn anyway is irrigated. So approximately 60% of the area, corn area is under irrigation, but that equates to about 80% of the total bushels produced. So I do wanna caution, if it gets very hot, very dry, the irrigators sometimes can't keep up, but that irrigation ability does soften or at least mitigate some of the weather concerns and the potential yield drag you'd have in a very hot, dry weather conditions. So the area we're watching right now, again, is that middle of corn belt. Next slide, please. Now, this is a little bit old. If you notice on the very bottom, it's the average of June 27th through the July 3rd. And what we're trying to do here is measure the soil moisture in the top meter, about the top three feet of soil. Again, this would be primarily the root zone. And what we're looking at is, how is the current soil moisture conditions relative to normal or average? If you notice on the bottom left-hand side, it says the deviation of the current soil moisture from the normal, which means an average since about 2015. Now, caution again, I don't wanna put too much pressure on this information, but it does give us a visualization of what's happening. This information is computer generated. It does have ground sensing verification to it. This is a joint venture between the USDA as well as NASA. They've been doing this for quite a few years where they're using satellite imagery as well as ground sensors as well as weather data to be able to try and estimate what is the soil moisture content at different time periods or different weeks during the production year. So what we're looking at here is this, is it wetter or drier than normal? And you can see in the Browns, obviously, there are parts of Northwest Iowa, parts of Southern Minnesota, as well as Northern Illinois and Indiana that are a bit on the dry side. Now, I do wanna caution everybody, there was some rain showers that came through just after the 4th of July that did help mitigate some of this or reduce some of the dryness, but there are some pockets even though the drought monitor map doesn't show that there's problems in the whole soil profile, there are some surface moisture issues starting to show up. And again, we need to keep that in mind as we move forward. Next slide, please. So again, through the same satellite imagery between the joint venture between USDA and NASA, they also have collected this NDVI information or vegetative index information. And what we're looking right now is, once again, what is the change from normal or from average? So if you notice on the far left hand, bottom left-hand corner, it says the deviation of the vegetative condition from normal, which is the average since 2020. So we're looking at what kind of vegetative index, what kind of greenness or health of the crop do we have today relative to the average since 2020? And again, if you look at those beige areas, we're pretty much at par, we're basically on average about very similar. If it gets into the more of the brown shaded areas that's in less greenness or the crop is not as healthy as it typically would be at this time of year, versus if it's green, that it's healthier than normal. So if we look at North Dakota, for example, in the eastern part of North Dakota, there are at least little brown patches starting to show up. I do think a portion of that is because of some of the late planting that had occurred and some of the fact that the crop isn't as fully developed as it would be at this time of year. If you look in the southwest corner of North Dakota, of course, very green. They had an early start to the season. Southwest corner has been also beginning some very active rainfall. So not only crop conditions, but also pasture conditions are in very good shape. Now let's focus a little bit on Nebraska, Iowa, Illinois and Indiana, kind of that core central corn belt area. So as of today, when we look at the vegetative health, when we look at the greenness of the crop, we're looking at some very similar conditions. So my point is even though there are some drier conditions that are starting to show up in the soil moisture profile, that really hasn't translated yet into crop stress. So we'll be watching this, this vegetative health as well as the weekly crop progress reports that come out every Monday on the crop condition ratings. Now that's more of a subjective rating than it is an objective rating, but it does give us a measuring stick. All right, next slide please. As we look forward in time, this is information from the National Weather Service looking at the six to 10 day forecast. If you notice the date, this is from July 19th through the 23rd. This is the forecast for temperature. So we're looking at a very high probability of above average temperatures, in particular up and down the Midwest or the Central Plain States, but also moving into at least the Western Corn Belt, primarily Iowa and Nebraska. Next slide please. We're also looking then at some both slightly below or below normal rainfall or precipitation amounts during that same time period. So again, this is from July 19th through the 23rd. Again, so the extended forecast is looking for much warmer and drier conditions than normal. And again, we're now starting to reach that stage of development where both corn and soybeans will start to either pollinate or start flowering. Again, the water moisture requirements for crops at that stage start to go up pretty dramatically. So these are some of the things that we're gonna be watching. I do think we're gonna be hitting a weather market relatively soon. And so you're gonna start to see a lot more price volatility, I think over the next couple of weeks. Next slide please. Couple of real quick comments on what's going on in Ukraine. Just some new news, two slides very quick to update you. As of yesterday, there was at least a, there's been some negotiations going on between Ukraine, Russia, Turkey and the United Nations to try and come up with a way to allow Ukrainian grain, primarily wheat, but also corn, to be able to move into the Black Sea ports areas. Cause those are the high volume shipping areas out of Ukraine. Those are the ones that have been blockaded and mined. So as I explained in last month's report, we're trying to find these alternative routes. Well, because of the supply chain issues, they have been negotiating trying to figure out, is there the way that we can bring some of that export capacity back online to allow more of the Ukrainian grain to leave the country in particular now as where the wheat harvest is beginning. So the United UN General Secretary, Antonio Gutierrez told reporters as of yesterday, they were hopeful they'd be able to find, have a final agreement sometime next week. Even though he's optimistic, there are still some details that have to be worked out. So they're cautiously optimistic. I know in the last couple of days, part of the reason we've seen some of the downward movement and downward pressure in particular in wheat and corn is because of this announcement saying, well, if we can get some more grain shipments out of Ukraine, that would help reduce some of the short-term issues that are going on in those marketplaces. However, they also interviewed today, there was an interview, follow-up interview with the chairman of MPH, which is one of the large food processing companies in Ukraine. And he was quoted as saying, we still have to ship the grains of the ports. So even though the ports might be open, there's still these questions about how we're gonna get the grain from the field into those ports, because the infrastructure has also been damaged. Two of the major ports that are still open, at least under Ukrainian control, Mikhailov, as well as Odessa, Odessa being the larger of the two, some of there, not only the city, but also some of the grain handling facilities have been hit by missiles. And in particular, some additional missiles in the last 72 hours. So even though the ports might be open, there's still some questions about getting grain to the port and having the facilities to be able to load the vessels if those channels were to be open. Next slide, please. So the current plan, this is kind of the current structure. We'll wait to see if this actually gets finalized. And more importantly, if it does get agreed upon, is it actually gonna be implemented? So the idea is that Ukraine would guide loaded vessels. So they'll bring the vessels in, they'll load them with grain into these ports. And the major ports have been mined by both the Ukrainians as well as by the Russians. So because of the threat of invasion of some kind of naval action. So the idea is the Ukrainian warships would help guide Ukrainian grain vessels or their grain vessels out through those mine ports. Russia has agreed that there would be a truce while these ship movements, these grain shipments were going through the system. Turkey as well as the UN have agreed to try and inspect those ships to make sure that at least from the Russian side, their concern was would there be some weapons smuggling going in and out and being able to get some more weapons into the Ukrainians side of the war. So to try and mitigate that or try and reduce their concerns, both Turkey and the UN will inspect these ships. And then the UN is also working with the Russians to help with their grain movements as well as fertilizer exports. So Russia is expected to have a very large wheat crop this year. They have been able to ship some grain out of their ports. Their ports haven't been damaged. But the problem is that the ocean vessels, those large vessels that you rent or lease to be able to transport your crop, the owners of those vessels have been very, very concerned about the vessels getting hit or sunk. And so the freight costs, the cost of using those vessels as well as the insurance rates have risen very, very sharply. So even though Russia has not had the problems that Ukraine has in shipping grain, it's really been cost prohibitive to move a lot of products through their port system. So this is kind of an ongoing issue. It's something that we'll continue to monitor. And with that, we'll stop and we can move on to Ron Hogan. I'll be happy to try and answer any questions. So I'm gonna talk, today I'm gonna talk about the emergency relief program, E, another acronym ERP, the phase one part of it. Some of you producers in the audience that may have already received a payment by now or at least information from the FSA on it. Just a little background here. This is part of a program that was signed a while ago back in September of 2021. There's around $6 billion for this program and it's for losses that occurred in 2020 and 2021 and it's off to offset weather events. Now this is, everybody's waiting for the whip, plus program and they didn't call it whip this time, they just called it the ERP program, ERP. And there was actually $10 billion that the president signed off on back in September, but about the $6 billion was allocated for these payments here. And a while ago, there was the ELRP, part of that money for the livestock producers came from this as well. So today I'm just gonna talk about the crop part of it on phase one. And it's basically to get the money out quick. They just use existing federal crop insurance information and NAP, the non-insured crop disaster assistant program because they have all that information they can download it from the RMA. And they're gonna try, hopefully the idea was to benefit around 220,000 producers and about 4,000 producers that had NAP insurance for the past couple of years of crop losses. First of all, talking about eligibility, it covers almost every kind of crop and crops available, but it has to be anything that has, that crop insurance and NAP was available for, okay? And the disaster events are natural disasters, including wildfires, hurricanes, floods, almost anything you could think of and drought as well. As far as the drought goes, the assistance is available for any area where the county had a rating based on the drought monitor. So it had to have been in D2 for eight weeks or D3 or higher or higher at some point. And as I mentioned to streamline the benefits, they've actually mailed these out to producers and it's pretty straightforward. It was a download from RMA. It talks about the eligibility requirements. Now, if you get one of these letters in the mail with your information, just because it's printed on there, doesn't mean it's right. There could be some errors in the download and there could be some, and you still have to be eligible to receive a payment. So just because it's printed on, there doesn't mean it's right. You are responsible for making sure that you do qualify for a payment. Here are some of the forms. I won't go through all this. If you haven't been with FSA before, you need to have all these filed to get a payment. The one that I will talk about here is the CCC860. And that's the one for, if you are a beginning farmer or a veteran, you could actually get some more money, a 15% more. So most producers don't have to worry about this if they deal with the FSA already. The payment calculations, so if you had crop insurance and your factor is actually increased then, so if the ERP factor goes from 75 to 95% depending on the level of coverage, if you have nap insurance, 75 to 95 depending on the level of coverage, okay? So here is the crop insurance chart showing the, if you had, let's say, most producers have like 70 or 75% coverage, they would pop it up to 90% for 70 and 92.5 for 75% coverage. It's basically just enhancing your crop insurance coverage. For people that had nap, here's the chart for that. If you had 60%, it would increase it to 90%. Now, this is what I was talking about before. On that form 860, you can actually get 15% more of your calculated payment if you were a beginning or veteran farmer. Now, I am not quite sure exactly how they define a veteran farmer, but there's gotta be a lot of veteran farmers that had been in the service at some point in their life. And I believe that they're considered a veteran then. So that's something that people shouldn't miss and should be aware of. If you do get a payment under this program, you must buy crop insurance for the next two years. And if your crop does not qualify for regular crop insurance, you must get nap insurance on that as well. And it has to be for two years, you need to sign and they'll check and make sure that you are doing that. As I mentioned before, the livestock producers already got paid and this is the phase one for the crops. So both the ERP, which we're talking about now and the past ELRP program, if there's any gaps that people didn't have crop insurance or didn't get paid some way for a loss, that's where phase two will kick in and we don't know exactly how that's gonna be at this point, but it'll be kind of for people that slipped through the cracks. So once the phase one is complete, then they'll decide and make decisions on phase two. Phase one payments at this point, whatever it calculates to be, whatever your payment is, you're only gonna get 75% of that at this point. And then you're gonna see if there's any funds left over to pay you the other 25% right now, out of that roughly six billion, which was out of that 10 billion, about four billion has been paid out about two thirds. Here's a chart of what states got the money, typical North Dakota and Texas, the big disaster states, they always get the disaster money. And so they're the big ones again. The deadline is July 22nd. So you got about a week to get this application sent in. We also have the acreage reporting deadline by tomorrow and the crop insurance reporting by tomorrow. So there's a lot of deadlines here, FSA is totally swamped, totally backed up with stuff. So I think if you applied for this ERP now, you probably wouldn't be hearing from them for a while till they get caught up. Calculations are very simple. The ERP payment is your expected value. That's basically your APH times the crop insurance price times that new factor then according to the chart, minus what you actually got for the crop, minus what you got from crop insurance. And that's what the ERP payment would be. If you did have prevent planting, basically it's the same formula, except for as you know, when you get prevented planting, you get a discounted rate and it uses that and it just plugs it into the same formula. Payment limits 125 per entity, 250 per year and 900 per year and then that's 75% farmer rule. They're basically the same as other programs. Some frequently asked questions. What if you have a revenue loss and not a yield loss on your crop insurance? Some people have revenue insurance and they may not have a yield loss, but revenue losses are not ineligible loss. Also, if you get a phase one payment, can you apply for phase two? Yes, you can. They will take into account the payment that you already had though, okay? So we'll wait for the phase two information and find out more later on that. If you receive the application and will you automatically be eligible for a payment? No. As I mentioned before, you got to check that number and make sure it's actually a qualifying event and it's a qualifying loss. Otherwise you should not be signing that and sending it back. If you see that there's something missing on your application, you think there's something wrong, contact your crop insurance agent, contact the FSA office and they will try to help you out. Some crop insurance companies are sending out the loss information on the amounts that they paid you those two years so to help you in this process, we're checking it over. There's other information to look at here on the USDA website disaster assistance discovery tool, the fact sheets, farm loan discovery tool. And as always, farmers.gov is a way to go to find out almost any information and you can also call your FSA office. But I think I'd wait and call them till after Friday because they're pretty booked right now. So with that, that's the end of my presentation and I'll entertain questions after the next presentation and I'll turn it over to David Rippler. Yeah, so Dave Rippler, your bioenergy, bioeconomics specialist, just some general comments focusing primarily on corn ethanol. So what we've kind of seen in the last few weeks is a decline in prices across the board for both ethanol and distillers grains as well as for corn itself. Somewhat not moving in the same direction but not necessarily kind of significant reduction in distillers grains prices here in the Dakotas. I think as pasture becomes available, I think it's maybe not as necessary of a fee or they can shift just a little bit with that and of course corn is becoming more affordable to corn situations a little bit more clear than it was a couple of months ago. But that's the way things are going, changing everything over to a gasoline gallon equivalent. So how much revenue would you get for every gallon of ethanol you're selling? And again, if you just look at that first half of the chart corn and ethanol prices moving down ethanol a little bit more than corn then finally you can see distillers in the last couple of weeks kind of dropping off a cliff relatively so to becoming a more affordable feed. And then I think the big thing of interest right now is if we look at that simple crash. So we've had really high corn prices, distillers prices, ethanol prices and in general it's been a quite profitable time for the corn ethanol industry. That's at least for these numbers that are reported from South Dakota that's for the most part disappeared. Now in the last month, the kind of rule of thumb is it's about a $1.50 break even to cover both your other operating and your capital costs if you actually to service that debt or if you've already done it kind of considered normal economic profits. We're back to that $1.50 a gallon number. So these refineries would be breaking even on average. And so then kind of going forward, what do we expect? You know, a lot of uncertainty in transportation fuel marks the economy in general but now we've kind of returned to this point where we kind of have normal returns no significant profits within the system. Again, still with very high corn distillers grains and ethanol prices. One of the things I wanted to bring up too this is the chart of weekly gasoline supply. This is gasoline going from a refiner to that next step in the supply chain to the rack or even from the rack to the retailer. And what I wanted to bring up is kind of this really first of all, there's actually two things that go on here looking at the green line. How it obviously maybe the first thing that comes to sight is that there's a significant decline in the last week. And that's true and that's somewhat expected although it's larger than it was last year but it's also that it would have this rapid increase then up then down so a little bit of volatility. And so the reason it's down a bit is because folks were kind of priming there or filling their tanks in anticipation of the fourth of July weekend travel with that, filling back up quick. Now we're kind of in that next part where we're gonna see what happens. And I do wonder, I'm just gonna hypothesize a little bit what this could mean is that folks are starting to really think, okay, we made it through the fourth, now what? And so are we gonna actually travel less for the rest of the summer season or not, kind of remains to be seen. Again, there was a lot of volatility at the end of June through now. So it's kind of hard to tell but I think it's interesting and something to follow. And I don't know if that would really be a leading indicator or a little bit of a lagging indicator of what might be going on with the broader economy as well. Just looking at ethanol production, we actually saw just a slight increase in production last week to this week, stocks were down a bit. Some of that, again, just drawing down the supplies for the fourth of July weekend. Everything kind of in this natural zone, this is only for the last few weeks. There's certainly been variation in production and stocks, but we're kind of back to the normal level that we might expect over the last four or five years in terms of production relative to total capacity and stocks relative to use. Things have kind of stabilized in many respects considering both COVID, the recovery, overexpansion and now dealing with this kind of initial post-COVID period. In general production is down 5% from mid-June. There was a lot of opportunity a few weeks ago through Memorial Day, getting those profits down as you saw in the margins. Most of those profits now have disappeared at least from those Dakota refineries. Last note that I want to make, just to bring it up again because it continues to persist. Right now at many North Dakota gasoline retailers, fuel retailers, E15, unleaded 88 will be less expensive on an energy equivalent basis than E10 or regular. There's about 2% less energy than E15. I talked about this last month, that discount you might be seeing at retailers is 3%, 4% again, which is bigger. Does it make sense to switch? Sure, if you have a newer vehicle, it doesn't make any difference. Are you going to necessarily get exactly 2% less? Your mileage will vary, but I think it's interesting. I think it's interesting both from a consumer standpoint because it's always fun to get a deal, but I think it's also interesting from this bigger macro transportation fuel situation and even like the global energy situation where things are so out of whack, there's so much need for natural gas, for oil, for gasoline, that we're seeing this time where even with relatively high corn prices, ethanol is in the money as a fuel, not as an energy, excuse me, as a fuel additive, but as a fuel itself, which is something we don't regularly see and it's starting to look like it's a bit of a pattern at least for this summer. At E85, if you can find the right station, there are stations in the state where E85 is cost less on an energy equivalent basis than regular, but you definitely need to check. Right now, there's a station in Fargo where E85 is just under $3. That's actually right there in the money to save some money if you have an E85 vehicle and there's a few other ones in the state if you go and look. And again, I think it's interesting just again that also reinforces this difference between what ethanol usually is, which is there to provide octane versus what it is for E15 and E85 was actually there for fuel. So those are the comments that I had. We'll open it up for questions. Questions for anybody for the last hour are very, very welcome. And I didn't see Ron that you have a question about the 75% payoff on livestock. Yes, I was trying to look that up and I'm not exactly sure on this, but the way I remember the livestock payments was they calculated the livestock payments and then you got 75% of that and the veterans got 90% of that and that was it. So I'm 99% sure that those were paid out and there won't be any more, but it's for this crop side that they're paying out only 75% at this point. So I don't believe there'll be any more livestock payments but I'm not 100% sure on that. Well, there's no questions. We certainly won't keep you any longer. This is just like the end of class, right? Go, go. Yeah, I wanna thank everybody for joining us this month. We'll be back again next month in mid-August after the next Wazji report comes out. I hope you guys all have a great summer and maybe do some math at the gas station to see if you can save a buck or two. Thanks, bye.