 I'd like to welcome everyone to the October 2022 edition of NDSU extension agribusinesses agricultural market situation outlook webinar, a lot going on really exciting times almost as always it seems since we ever kicked this thing off. For those of you who might be new, we will be happy to answer questions at the end we encourage questions. But we'll have a series of presentations followed by that q&a you can enter any questions you might have during the talks using we prefer the chat that the q&a tool which can also use the chat. And with that I'd like to kick it over to Brian Parman egg finance specialist. Thanks Dave. So, I think in my last talk we talked about land values this one fresh inflation report and some economic numbers came out this morning and yesterday. And so I kind of want to go over that and some of the federal reserves response since they'll be meeting here in a few weeks again to discuss their policies and the actions that they're going to take regarding the federal funds rate and eventually impacting interest rates and so forth. So, and this is pretty much for September but we're kind of ending the third quarter here and rolling into the fourth. So I wanted to cover that today. So here are the headlines this morning. The numbers for the consumer price index or consumer inflation came out this morning. The producer or the kind of wholesale and intermediate inflationary numbers came out yesterday. And these are some of the headlines I just picked off really fast. They were gaining a lot of attention and a lot of reads and essentially what happened was the expectation was for inflation to be considerably above 8% coming out of September. It turns out that it was a bit higher. So the month of September's inflation was expected to be 3%, which is fairly high, but it turned out to be or three tenths of a percent point three just for the month turned out to be point four. And so that kind of it was expected that it was going to be high but it was actually high even higher than that still. So that triggered some actions in some of the markets, including the stock market and interest rates. Now wholesale inflation, these are going to be kind of your intermediate goods, things that companies are going to use perhaps to turn into final goods that the consumers actually purchase raw materials and so forth. Wholesale inflation in September was up, which was pretty much double what the expected wholesale inflation was going to be. And the yearly producer price index inflationary number was 8.5%, which was again a big kind of an eye opener. And August year over year inflation was 8.7. So it's actually been down off the highs in July for both consumer and producer prices, but not coming down anywhere near as fast as anyone thought it would. And in fact, it's kind of staying persistently above that 8% mark for the last several months, which is something they're really looking at. So if we look at the yearly producer price inflation for final goods, so these are goods that producers are making and that are selling them to consumers. So the price of inputs that they would take and then go ahead and sell. And this is a total. So the total is the green line and then goods, goods less food and energy, which are more volatile. And that number again has been, you know, just just stacked pretty high over the last year, including, you know, it kind of it was the highest over the last year, but it hasn't come down nearly as fast as folks thought it would. And typically, when we talk about inflation, what the Federal Reserve likes to see in the governing bodies is around 2%. That's kind of a benchmark that they set. And since January of, you know, May of 21, it started to creep up last fall and peaked again in the summer so far. And I'll talk about it in a minute, but some folks are starting to think that inflation may have peaked and is starting to have lower, even though the report was higher than expected, that perhaps the Federal Reserve's actions are working and there's a reduction taking place. So here's for intermediate goods. Again, these would be goods that producers are using, whether they're making steel or something like that, they're going to take in raw materials, make an intermediate good. And then that would go to somebody who makes a final good that consumers actually buy. An intermediate good might be something like a microchip that goes into a TV, and the TV's the final good, or into a computer, which is the final good. And that inflationary number, again, peaked earlier last year and has been kind of coming down. It resurged again in the summer, but still remaining fairly high as well. So here is the 12 month percentage change for consumer prices. And the lines are kind of similar in color, I understand. But the all items, less food and energy, that's what they call core inflation. That's staying up, getting closer to 6% and overall inflation, which does include food and energy. And energy being a big driver and food, both of those are well above the core inflation number has shown to stay in that 8.2, 8.3% range for the month of September. And again, I wanted to just show this, this is the year over year for the major items that go into the inflationary number. So you got all items on the left, that's in the red, food is blue, and so it's been up over 10% year over year. But energy is the big one, and all energy is approaching has kind of stayed around 20%. Some other, and when you drill down, you can get to like fuels and fuel oil, natural gas. Some of those have been a bit mixed, some are 30% year over year, some are less than that. But energy as a whole around 20%. And then here's that core inflation number again, around 5.5%. So one of the things that's happened this year too is investors and folks in the market have been kind of spooked by these inflationary numbers that the Federal Reserve was going to have to eventually start taking aggressive action, increasing the federal funds rate, thereby reducing the stock market's growth, or actually reducing the value of the stock market overall. Because a lot of what's built into any stock purchase price is the potential for growth. And if interest rates are too high, borrowing becomes prohibitive, cost prohibitive, can't grow as fast, therefore that value comes down and the overall value of the market falls. And the high was reached, the record was January 4th of this last year, 2022, and it was almost 36,800 nearly. And this morning it opened below 30,000. But interestingly, this is what happened on the day. Despite this hotter than expected inflation report, and despite inflation staying persistent, the Dow actually rallied 800 points since the time I started looked at it this morning and this presentation. So you're getting up to the minute info, up to the, or as close as I can get. And the belief with that is that folks in the market are starting to think, at least this was the explanation that the best explanation I could find was that a lot of people are thinking that inflation's peaked, that we're possibly on the backside of it. And that these aggressive Federal Reserve actions aren't going to have to continue too much longer. And how long that is as anyone's guess, but optimism that that inflation is going to start coming down. That's what that's what today's rally is. But these markets are extremely volatile as frame can attest and folks in ag can attest in the commodities market. You get one piece of news, you get this massive rally. The news turns out to be or the sentiment or the idea becomes not true. And then all of a sudden you get a massive crash. That that seems to happen all the time. So this was the reaction here and that's I guess folks tended to take a silver lining to the report that came out and therefore we had a big rally. Now just moving on to the Federal Reserve discussion, which is the last part here real quick. So the Fed is actually, if you read the minutes from their meetings and kind of gives you an idea what they're thinking, they've taken more of a what they call a hawkish tone towards slowing inflation, which you can think of it as an aggressive tone to slowing inflation or a stern tone if you will. So the neutral federal funds rate just to give a little history on it is believed to be about two and a half percent. We've been below that we had been below that for quite a long time but that's supposed to be that's neither restrictive nor accommodative in terms of the market that that rate makes it so that it's not promoting or stimulating growth but it's also not slowing it either with with rates that are prohibitively high. So this year what's basically happened we started off the year at about a quarter of a percent. That's where it was in March while inflation was was increasing into that six and seven percent range. So in the March meeting the Fed increased the rate from a quarter of a point to from from 0.25 to 0.5%. Then the May increase was inflation continued to not only persist but increase went up a half a percentage point to 1%. So still accommodative and still below the neutral rate but but increasing. Then in June we started seeing this big in these big inflation numbers high eight approaching 9% federal funds the Fed decided to increase rates of three quarters of a point so we went to 1.75. Then again in July another three quarter of a point increase to two and a half percent and then in September another three quarter of a point increase and this is where we sit now at this 3.25% which is considered to be restrictive or more hawkish. And then the expectations for the November meeting right now and this change dramatically there's kind of a split on when they if they would increase it in a few weeks three quarters of a point or half a point. And if you do the three quarter of a point increase it goes up to four. And so this is the percentages based on the market expectations of what the Fed's going to do. In 97% of people believe that that deal with this all the time and are watching this in the financial sectors that they're going to do a three quarter of a point increase in the next meeting is especially given the most recent inflationary number. And so it's going to drive it up to about 4% and a small minority think that maybe they'll do even more like an entire percentage point. Now looking forward and this is the challenge with it. It's it's not that the market is is unsure what the Fed will do. It's that the markets unsure what the inflationary number is going to be for the next over the next few months how high inflation is going or how long it's going to persistently stay where it is. And they kind of expect the reaction to be that three quarters of a point increase if it stays high so that's why you get these percentages so this is for February. And before this morning's numbers came out 5, 5% to 5.2 5% wasn't even on the table. And a minority thought that it would be 4.75 to 5% by February. Now that's become a majority and then all of a sudden this became a real possibility to some some in the market that it's going to be over over five and a quarter. And it seems like I if you probably don't track this as often as I do and look at it before these numbers come out. But it's really interesting to watch how this has shifted to the right if you go back and look at the same chart in the summer, there was zero chance. I mean that it would even be four and a half to 4.75%. I mean, the likelihoods were in the threes for February 3, 3.5%. But as this inflation is persisted month over month over month, the expectation for the federal funds rate has just continued to shift higher and higher and higher as the year progresses. So then what does that really mean? Well, right now we're looking at about a 7% interest rate for 30 year mortgages. And I use those as a proxy for, you know, what farmers might get on farmland. I know it's not exactly a one for one deal, but as they're increasing, other interest rates tend to increase with it as well. And the 30 year is something that's tracked a lot more heavily than some of the ag loans. But 7% is just about where it's at right now for a 30 year, a 15 year, around six and then a 5.1 arm around 5.8. And the relationship continues is pretty strong between what the Fed does the 10 year note, especially in 10 year yields actually crested 4% for the first time in 14 years this morning when this inflationary number came out. And so if those Fed actions tend to be true that I showed before, if the market is correct on it, we're probably going to see that number continue to increase up to perhaps even a 7.5%, 8% interest rate on 30 year mortgages for most borrowers. So that's that's something to watch, especially as we head into next year, we're talking about operating notes, we're talking about new equipment purchases, land purchases, you know, big ticket items that you're going to pay over time. That's going to have an impact and it's been quite a long time since anyone has had to worry about interest as a real cost in terms of expansion and borrowing. But if we get into that eight, nine and 10% range and all of a sudden it starts chewing up a pretty big chunk of anyone's budget who's actually looking to expand or trade off equipment. But again, it's going to depend on what the numbers coming out of October or October and then November and December. If these numbers stay in the 8% range above eight and even continue to be higher than what market participants are expecting. I wouldn't expect the Fed to slow down at all based on the comments that they've made on this topic. So I know that was a kind of a down and dirty there on what's happened and kind of the expectations going forward but as always, I'll be on later at the end. I don't have a chat to answer any questions that I can on this topic of inflation and federal funds rates. It's a complex topic in a lot of ways and so it's sometimes tough to cover in about 15 minutes but hopefully that give you some insight on what's happening. And with that, I believe our next speaker is Dr. Olson, who will be giving us a crops update. So let me stop the sharing. All right. So good afternoon everybody. Frank Olson I'm the crop economist marketing specialist with NDSU extension. I'm going to give you a brief update on the was your report report we got yesterday some of the information there, as well as some other things going on in particular and transportation logistics so some of the things we might be facing is as we move through the rest of harvest. So just an update on production estimates. So, the row on the top highlighted in blue is what the trade was expecting to see so there's always a survey done before the USDA releases their information of private analysts and private forecasters on what do you expect the numbers to be. So, to be honest with you those are the numbers that are currently in the marketplace. So we really need to compare the blue line versus the red line on the very bottom which is the actual numbers we got out of USDA. So blue line this is what the trade was expecting to see red line is what we actually got. I did highlight in black the report we had last month just again as it as another reference point. So, when we look at corn for both the yield per acre national average yield as well as the production numbers. They came in very, very close to what the pre report estimates what the trades expecting to see. So we were expecting to see a slight cutback in national average yield and we got that. Now again just as a reminder for everybody the October and November. Excuse me these the yes the October September October November production estimates are used three sources of information, farmer surveys, as well as what they call remote sensing or satellite imagery, as well as objective yield estimates so they actually USDA sends hires people they send them out to randomly chosen fields to actually do yield counts just like a crop crop insurance adjuster would do. So we'll find that information by state as well at the national level to try and come up with these national estimates for both production and yields. So we'll have one more round of this where we have all three sources of information before we take a break and wait until after harvest is completed and then there's some more follow up survey work that's done in December and early January. On the corn side, the production numbers were pretty much what they what the, the trade was expecting on the soybean ledger. Again, very similar what we were expecting to see there was a slight reduction I guess in the production number and and there were some adjust just some small adjustments that were made there but the moral of the story is the numbers that came in from the production side of the ledger very very close to what what the trace is expecting to see and well within the trading range. There were some surprises however on the forecast for ending stocks we're looking at, we take all the production subtract out all of our intended uses USDA forecasts how much do we believe we're going to have in the bins or in the in the system just for harvest of next year so there's a lot of forecasting that's done, in particular on the consumption or usage side at this stage of the game. Now, since the September report and then now this October report, we got some more information so on September 30 we got two important reports. First the small grains report which provides the final numbers for production and yields for all the wheat classes the small grains wheat oats barley. We also got an updated survey of available supplies or stocks grain stocks on September one. The important thing about grain stocks on September one that survey is those numbers now become the ending stocks numbers for last year's crop. So moral the story we do one more survey of how much is left in the bin just before harvest that becomes the ending stocks for last year and becomes the beginning stocks for this coming year so we take beginning stocks add in production add in our imports we start subtracting out our use to get these bottom line numbers. So the moral the story is there were quite a few adjustments that were made based off of those reports we got on September 30. So let's compare the blue line on top the group excuse me the blue row on top versus the red row on the very bottom. So on the wheat side that the trade was expecting a decrease from last month a decrease in ending stocks, the forecasted ending stocks, primarily because the total production numbers for wheat all classes of wheat came in smaller than expected. Okay, so the in the the the inventories we knew but the production numbers for 2022 came in lower than we expected well with that expectation then we knew that USDA was going to adjust some of their usage numbers the consumption based on lower supplies. Now, the adjustments in consumption were not as large the reductions in consumption were really not as large as what the trade was expecting. So on the wheat side, the small grains report said we were not going to grow as much wheat as we thought. But as a result, USDA reduced their forecast for wheat exports, more than what the trade was expecting they actually took the exports number out and much down a lot heavier, a lot more aggressively than I think most of the traders were expecting or, excuse me flip that around, they did not reduce the exports as much as they had expected. Okay, so the moral of the story is bottom line, we have right now projected more ending stocks and we first expected therefore this report yesterday came out was a slightly negative for the wheat complex, shifting to corn. On the corn side if you look at the blue number versus red line. But our ending stocks numbers were a little bit larger than what the trade was expecting notice that we have a very wide range if you look at the highest trade estimate and lowest trade estimate that's a pretty wide range we're still well within the range. But we're we're a little bit higher than what the trade average trade was expecting. Now we did take the the yield down a little bit on corn, not much from from the previous month. We took carrion so the inventory from last month coming forward from last year excuse me coming forward into this year was a little bit lower than expected. But USDA also cut the exports numbers so they cut export forecast for both wheat and for corn. Okay, now because they cut the exports forecast for corn, we ended up with a little bit more ending stocks than we expected. I guess I think most analysts and traders looked at the number that USDA gave us and saying well, we are taking our inventories down. You know we're getting to that point where markets are getting a little bit nervous, but the cut wasn't quite as aggressive as we thought so I will consider that in my opinion kind of neutral news. And then we had the soybean number and the soybeans number from yesterday was really I think the surprise value. So we did take the yield down just a smidge, just a little bit again primarily from last month to this month we did reduce the yield, but very close to what the trade was expecting. Now, the other thing that happened though was that we had carrion. So again the carrion numbers from last last year into this year were actually higher. Okay, so kind of the trade off we had was we had more carry over from last year but we brought the yields down. And again that yield drop was the compensating factor. So when we wash this all through and get to the bottom line number, the trade was expecting to see a slight increase or a little bit more flexibility or ending stocks in soybeans, but we didn't get that. So the 200 million bushels is actually a very tight number on soybeans. So the soybean stocks and soybean projected inventories this time next year are still expected to be very, very thin and that was the surprise to the marketplace. We did put some money back about 20 cents or so 25 cents back into the soybean market yesterday. So this is kind of we now hit the reset button on where we think we're at. We'll watch what's going on in the marketplace as we move forward and of course about this time next month, we'll get another update on primarily not only the yield numbers and I expect some minor adjustments on yields but then more importantly some of the production consumption numbers excuse me the consumption numbers. So what does this mean for the markets and what the market expectation is so this is the December corn futures. I pulled this charted about eight o'clock ish this morning, because I had some meetings leading up until this program I've always had to try to get some more current information but we were off a little bit this morning but I do think the corn market is relatively stable we've developed this trading range kind of between that about 660 and 7706 number. 7706 a few days ago actually the end of last week. So we're kind of in this trading range and obviously we're starting to get some harvest pressure now. So the fact that the corn market is stabilizing and we're still within this trading range I view that as positive. I know there's still a lot of uncertainty in the grain markets right now and all the things going on geopolitically on the on the international stage so I do think that that's that's also driving some of the market behavior. But the fact that we're we are holding prices right now as harvest comes online. We're starting to get some of that harvest selling pressure I think I consider that to be a positive kind of mentality or viewpoint in the marketplace. As we as we as we started to look at what is happening in the soybean market, we have had a slight retracement from September. I know there were some concerns and in particular about the kind of flowering and pollination and pod set in the kind of the western corn belt and those kind of some of those concerns are still with us. So we're going to get narrow in a little bit better on what our yield and yield potential is again we are within a trading range anywhere from that 1350 to about 1440. We're kind of right in the middle of that range right now. The thing I'm going to remind everybody on soybeans is that because our ending stocks are so incredibly tight right now. It really wouldn't take a lot of news either positive or negative to get us kicked out of that trading range fairly quickly. Moving into the kind of the key harvest time period here the fact that it's holding within that trading range. Again I consider relatively positive. On the wheat side again we've got a lot more information about wheat and wheat yields about the quality profile we're dealing with. We've got a little bit wider trading range obviously on the wheat from, you know, just before harvest started in mid August until we see right now. We're dealing with the volatility we are in a general uptrend if you notice that we have when we use my cursor here, we are in a general uptrend in the in the wheat market, and a lot of that, again has to be driven by some of the concerns and issues going on in the war between Russian Ukraine so we have to watch in the wheat we have to watch that situation very closely. Let's take gears a little bit now and talk about what's happening logistically and some of our supply chain issues if you will within the grain flows. I've been watching this for a while I think I commented it on some some previous presentations I have done. One of the concerns we have now is the that the water levels in the Mississippi River in particular, the lower part of the just north of New Orleans is is really at very very low levels we're not at record low but we're getting there very quickly. And so these near record low water levels. Again the emphasis is on the lower Mississippi so this is below where the Missouri below St. Louis where the Missouri enters. There's a that's a high traffic flow region for for grain as well as fertilizer products. So the fact that we're having these low water levels and we're starting to some backup of barge and barge traffic. As we enter into the peak of our harvest season is really raising some concerns and I wanted to I want to show you some numbers in just a minute minute to try and emphasize that point. So these lower water levels they're causing some problems for barge traffic the National Weather Service is forecasting these water levels to continue to drop for at least another two weeks. So we have not hit the worst of the water levels yet. We'll wait to see on rainfall and how quickly we might be able to get some water flow to increase those levels. But we're getting very close to the record lows that were said in October of 1988 and if any of you online remember 1988 and I unfortunately do remember 88 very well. That was some exceptionally dry conditions not only up here in the northern plains where we're at, but also across the nation. Now, to try and the biggest challenge with the lower water levels is some of the sandbars. You know there's a lot of sediment and silt that ends up. It makes navigating the river a lot more complex when you when the water levels drop, and all of a sudden these these sandbars and things start to show up. Obviously you don't want to ground one of your run one of your your barges a ground. So they are dredging the Mississippi River at least in those port in those portions that have the greatest threat and great greatest risk of stoppages dredging takes a while they do open things up. There are two points right now that are kind of the choke points that the greatest concern one is near Memphis Tennessee. The other one is near Stack Island Mississippi. And there tends to be some curves in the in the rivers at that point again, those are some areas where we start to see some more sediment building up. So they are dredging those are trying to open things up to try and regain some of the throughput and the capacity along the river. This is of a couple days ago this is the most recent information I could find there were 22 tow boats that were stranded. There was about 392 barges so again each, each boat or each tugboat will be able to transport a certain number of barges. So this is these are not huge numbers they're lower than they were about a week prior previously there was almost 100 toes that were either stalled or grounded. So the barge with a lot more of the of the barges being being having trouble so it is getting better but the fluidity and the and the flow is not as good as we'd like to see. The other thing that's happening is the barge companies are putting on draft restrictions actually the Corps of Engineers are putting on some draft restrictions. So that has two components to it. It's how heavily can you load each one of the barges. So right now, most of the barges are reduced by about 20% so they're only running at about 80% capacity to try and lessen the draft, so you can float the barges in less water levels. The other thing that's happening because of these of these is obstructions that are showing up some of the sandbars that are showing up. They're shortening the toes, meaning that one one tow boat tugboat can only push about 25 barges 20 to 25 barges, instead of the normal 30 to 40 barges per tug. So what that means is by the time you add up both of those. We're running at about 50% capacity so the fact that the water levels are lower, even if we can get grain transported without any kind of obstructions. There just isn't the volume being able to pass through on the Mississippi River that we would normally see in particular at this time of year when we get into the peak of corn and soybean harvest. So to give you an idea of what that means for pricing. Now this is the average price for a tow, a barge tow between Cairo, Illinois and Memphis, Tennessee. So there's a stretch of the river. And again I picked kind of that southern Illinois region as as where a lot of the green corn and soybeans would flow to that point. And this would be the cost to move it from those that mid Mississippi River range into the Gulf of Mexico into one of the ports at New Orleans. Now this is an index and it's kind of a weird thing how they, how they quote these prices, but let's just look at the absolute levels and not to worry so much about what this means dollars per ton. So typically what we've seen over the last now this is a weekly average and it's again the average for several different locations along the river so it's kind of an average of an average. So back into July and we look at kind of the rates that would normally be charged for grain movement during that time period where anywhere from typically about 350 $400 or an index of 300 to 400, all the way up to possibly 800. And as of last week this is last week not this week. It was 2430 about 2428. So we've had seen a massive increase in the cost of river transportation. What does that mean what's the alternative if you can't send grain by barge. You have to send it by rail. So this is a map of the Mississippi River let's just point this out here's the Mississippi River right here. Here's Memphis Tennessee just this is the lower part of the Mississippi, right down here's New Orleans. Over here is Houston and Galveston as alternative shipping points. So a lot of the product that goes by barge both grain going down as well as fertilizer coming back up. The is in this what we call the lower Mississippi. So if we can't get it by barge here's the alternative rail routes. So I've tried these are color coded based on the information this is actually information I got from us we dissociates they have a really nice interactive mapping system where you can start to trace some of this stuff out. So to to get you to think about these alternative routes so if you can't do it by barge. So if you have a vessel that's being the notion vessel that's going to arrive nobody wants to pay to merge charges on an ocean vessel. You're looking at what can we do. Well, the quickest way of it's going to be a lot more expensive but the quickest way to get grain is obviously by rail. So the blue lines, especially here in the western portion in Texas. That's the bnsf lines. So it'd be the green lines like running through Arkansas and Louisiana. That would be Kansas City Southern rail line. The pink would be up or Union Pacific. The gray which is over here would be Norfolk Southern, and then the purple is see in our Canadian national. So this would be the purple line right here. I just want to give you an idea there are a few rail lines that go directly into New Orleans and can go along the river. To be able to load vessels, but we don't have the rail delivery capacity in New Orleans that we do say out of PNW, or even out of Houston so I know there are. There's talk right now some of those ocean vessels being diverted from New Orleans into one of the Houston ports to get loaded. But again there's a cost doing all of this. The reason I'm bringing this up is it's this blue one. If we start to see a lot of grain movement from let's say from the Iowa or Nebraska or Oklahoma into the New Orleans ports using the bnsf rail lines. That raises some concerns about what's that going to do to the freight rates up here in the northern plains. Now so far we have not seen any major adjustments and basis levels. We've not seen any major adjustments in secondary rail markets as of yet, which is a good thing for us up here in the north. But if this barge disruption continues for much longer, we may start to see some of those rates adjusting. The biggest limitation and talking to some of the people from bnsf is that they have plenty of cars. They've got extra capacity when it comes to locomotives, but they are very constrained and short of crews, at least crews that have been trained and certified to be able to operate as engineers. So right now the constraint is the number of people that are available to work. And obviously depending upon relative freight rates. If there's more money to be made in this in particular for moving trains into the secondary market down here in the south that may pull some of our transportation away from the northern plains. We will have to wait to see if that's if that's going to happen. It is something that I'm trying to watch very closely. So last slide, and I just also want to bring you up to speed on where we are with the railroad in the union agreement. So, late last week. We got some new information so if you remember back to September 15. There was a tentative agreement between the railroads, and there was five different railroads, and there was nine or 10 different unions, the railroads work with. It came to a tentative agreement but all of those things had to be ratified those that tentative agreement had to be ratified by each of the unions and the union members. Well, as of last week the brotherhood of maintenance of way employees rejected the agreement. They rejected it by about 5100 versus 6600. So they rejected that now so far four of the unions have approved the agreement. This one has rejected it. And there's seven more unions that are scheduled to vote somewhere in in this October, all the way through mid November time period. So what's happening now. Two things we have, we have extended the cooling off period which we don't have a formal deadline on right now it wasn't announced. But there's still time for this, the union that I just mentioned the maintenance and way employees to be able to renegotiate and come to terms before the deadline. This does not mean that there's going to be a strike that's imminent. There are still other unions that have to vote on this, these issues but this is going to be an ongoing story for a while. I want to point that I want to remind everybody once again if we start to have slow down and barge traffic increased demands on the rail system, and now all of a sudden we have some additional employee concerns or union concerns with the, with these negotiations. So watching and listening and talking very carefully to people within the industry say how is our performance, what kind of rail performance are we getting out of here in the northern plains and I and I'm not the only one watching this obviously there's a lot of people viewing this with with great detail and trying to figure out what's coming next. So, very brief update and what's happening. Again, I'll be available for questions in a few minutes. With that, I will stop sharing my screen, and I will hand things off to Mr. Tim Petrie. I'm Tim Petrie here, extension livestock marketing economist. I'd like to give you a quick update on the cattle market and the lamb market, and a lot of things going on again like I said last time I could talk to you about an hour. I'm going to start off with fed steers, again more interested in feeder cattle up here I suspect but the two biggest things that affect feeder cattle are fed steers and then corn and frame covered the corn that were kind of in a trading range there instead of going up up which you know is positive for feeder cattle. But anyway, you know, always good news and bad news with the market. The news on the cattle side is that we're higher than last year by about $20 and have inched up throughout the year maybe not as much as originally thought on and what the futures said a while ago but all the things that Brian talked about are part of that although we again are higher than last year expecting to go higher than next year so doing about $20 higher and in fact we're up the highest there was just in mid August for the year when we're up at 14688 and last week we were 14623 so we're right at the yearly high and those actually go back to 2015 was the previous point they were that high and expect them to go higher and you know the feeder cattle big thing is looking at futures for next year is when those feeder cattle being sold now will finish and so on the top of the chart there are those gold squares there that are next year's futures which again we're up another $1012 and our nearing record levels on fed cattle in last record high in 2014 was one average for the year monthly average for the year was 15384 I think it was and if you average those six futures contracts across there comes right out to 155 so that would be a record year for fed cattle next year if everything comes through but a lot of things affecting the market. What's supporting the market is in spite of our domestic economy that's somewhat struggling beef is still selling pretty well and then on the export market we're doing gangbusters we are going to set a record all time high both in volume and value this year for beef exports and just the latest data is for August we set an all-time record there there's some headwinds there although as well you know Japan and Korea are best customers but China has just came on like mad as you see the goal line there and actually last month China moved up past Korea second place and it's just a hair under Japan for the top export market for beef which is kind of phenomenal but again a lot of headwinds there we haven't discussed it before in the talk here today but you know there are issues with China and Taiwan and geopolitical issues and so on there so that market could decline and something we have to very much watch because we need these record exports in order to keep fed cattle futures up there where they are at record levels for next year to support feeder cattle. So let's go to the calf market again good news and bad news there the good news is we're doing a lot better on calves than we did last year throughout the year we've been about $30 a hundred lead higher supported by a lower supplies we've reduced the coward now including this year will be four street years we've got a million fewer calves to sell this fall. We're certainly supporting the market but kind of you know a little bit on the bad news side we've reached our seasonal peak and this time of the year you see that purple arrow on the bottom by the time we get into mid October into the first of November. You know we tend to get down to seasonal lows there for a lot of reasons the calves tend to be unweened balling calves coming to market now this week is going to be our first major test we haven't really sold many calves until this week but you know all the markets are seeing pretty good runs this week and just to continue to expect them up now is as the weather continues to cool off and cattle are brought in off pastures and and so on so we're going to for sure see with seasonal weakness this week will probably be down over last year but again still are much improved prices Nick there's certainly support there by the time we get down to one nine year above one of the problems with that that we're having is the winter wheat crop is being seeded into dust not coming up and so there isn't winter wheat freezing which would really really support would help to support prices because they would be after these later wheat cattle to put on winter wheat and just very little interest there but then by the end of the year again we do expect them to start after going down here for the next month maybe back some improvement that as the farmer feeders get their corn hand and come back and want calves and then now they're weaned and and they've had fall shots and a bunk train and so on always helps as you see there on the right hand side to bring the market up so you know the good news is we're going to be above last year and then looking to next year there's no futures market but we expect even higher prices next year because we're going to have a lower crop next year you know again corn is the big unknown there and so we'll need another really good corn crop next year and and fed cattle like they are but it looks like better times ahead there so go to the heavyweight yearlings kind of the same story they're not quite as up as much over last year the red line again is this year and the blue line is last year but they are better than last year they're not up quite as much as calves because the corn prices are higher than they were last year and affects these heavyweight feeders, steers that go into the feedlot now rather than the calves that can wheat but anyway stronger prices than last year you see there the futures are lower there the red bars are the futures for the rest of the year the October futures are close end of October and November but you see that the cash market is higher so I've got a square around the September futures September futures closed the last week in September obviously but I just want to show you the nice positive basis that we have up here on these 800 pound steers over the futures and that's driven by a number of things one last time I talked to you about the difference between the southern plains and the northern plains and we see a big difference in prices there so up here in the northern plains we have a positive basis very dry in the southern plains selling a lot of cattle a lot of heifers coming to market there would have been replacement heifers so that's affecting their market corn prices are a buck higher down in Texas than they are up here in Nebraska up to North Dakota 75, 780 corn down there and so that affects their prices for these heavyweight yearling foods you know the cash settlement price that the futures close on yesterday was right there about a 175 but there was a wide wide range and difference in the markets that go into that cash settlement price this was Tuesday is the last one to 175 Philip South Dakota on Tuesday the average for 7 to 899 we cattle which are in the cash settlement price at Philip South Dakota they were 192 and at an auction in Texas they were 147 and so that's a $45 difference for the same weight and grade of cattle from Philip South Dakota down to auction in Texas and so the futures then settle at the average of all those markets which averaged out to 175 but we're higher up here and so I expect that to continue so when we're looking at North Dakota prices looking out at the October and November futures will should do better than that on the cash market here and then going up to next year again like a fed cattle we see a higher prices throughout the year above this year getting right up there by the October or the September futures for next year right up there at at $200 indicating again the lower supplies that we're expecting and you know that's you know keeping corn about where it is now. Well I kind of want to finish up on lamb if you've been following lamb prices been a disaster this summer lamb prices both fed lamb prices to start with and feeder lamb prices is absolutely crashed and it's about a half hour explanation that I don't have time for but just about what happened is you know on the top there that blue line last year fed lamb prices got really really high because the white table cloth restaurants opened up and their cupboards were bare so they came in and bought lamb and bought lamb and there was a good demand and people did buy lamb during COVID at retail stores and liked it so there was a good demand there but when the white table cloth restaurants got all filled up and ready to satisfy their customers then you know gas prices went up and all those inflationary things that Brian talked about happened and so then and even on particular on East Coast and place in New York City and so on they did have some more COVID problems and some restaurant problems there and so then you know the demand backed off and the feeders then the feedlots held onto some lambs thinking that the price would come back and then it just kept going down and down pretty soon we got 200 pound lambs and and they get out of condition so then and this has happened before it happened in 2009 and it's happened before and so you know lamb prices just crashed but I think they're going to come back some you know that that was kind of anomaly there are those $250 plus fed lambs and but we're going to come back and get back up to average lamb prices and and do okay into next year and so on but we're really struggling now and then back down on the feeder lamb side the same thing and then the higher corn prices this year than last year are funding into that too just one little thing there that I want to end up with from a marketing standpoint for producers there still is optimism in the sheep industry and so particular up here where in the northern plains there's a demand for you lambs and I just picked you know in the rural South Dakota is having a sale today but last week in Nule you see circle there in purple a nice premium for the you lambs that were separated off from the weathers and sold separately $50-60 in some places better and so I think Bowman has had some premiums for you lambs and so I think producers that have lambs to sell check with wherever you sell be it Aberdeen or Bowman or or wherever it might be and see if they would recommend you starting off your you lambs from your and and trying to get a premium there so with that we'll turn it over to Dave. So just some really brief comments about some things that are going on an energy and actually kind of springboarding off of Brian's comments about the inflation reports the PPI yesterday and the CPI earlier today. First chart is just looking at motor gasoline supplied so this is leaving the refineries and making it to that that wholesale rack and what I really want to do is kind of compare last year and this year so the the red is last year's number so this is physical product moving versus this year and of course if we compare the two we can see that this year's line for most of the summer has been lower if not substantially lower than last year's and this you know Tim made it made it mention of you know we've had very high gas prices. In part because there was strong demand but also because we have somewhat limited supply. And so this is something you know that you know we would expect but the big question is what's going to happen in coming months as we may be entering recession if we're not there already as prices remain a high for gasoline. The one thing I point I want to get across and I know we talk about a pretty regularly different prices and price levels and inflation. So you know for talking about an individual price like the price of gasoline that doesn't necessarily mean you know that price goes up doesn't mean that there's necessarily inflation in the economy. The other the other thing that kind of goes along with that to is energy is a input to a lot of different things and so when energy prices rise it can lead to inflation. More quickly than other products kind of digging a little bit deeper than blinded into the inflation numbers just on on the consumer side, because I think it's interesting. We actually saw a decline in energy prices last month, driven in large part because of the decline in gasoline prices that's really because we left the summer driving season. And so that that that use those use numbers for the summer which were already weak you know are falling even more. And that's that's driving that that that that higher line energy number powers a little bit more expensive and then natural gases is even more expensive and a lot of that. And that's really kind of surprising because it is you know it's still summertime we might be you know typically be be getting ready for winter filling up some storage, but a lot of that's being driven by what's going on in Europe. And again looking at what's happened this last month versus the last year of course across the board you know energy has been one of those big drivers of inflation. You know from you know these different consumer products just energy as a whole, you know it's had this significant impact on the economy. A couple of things to follow, you know, and I think that follows naturally us da did cut 50 million bushels from ethanol for this this market year. Not really surprising question is how much further they might have to go. Right now the expectation is still for significant ethanol production for the next next bit here almost that you know almost a 12 month period. But you know if the economy really starts to dip if those gasoline numbers really, you know, continue to fall. You know that that number could be cut substantially, and we've actually seen a significant reduction in ethanol production production in in September and now into much lower than we thought we were expecting a decline, to some extent because the summer driving seasons over also because a lot of corn ethanol refineries have switched to doing maintenance and late summer, prior to harvest and the new crop being delivered. But it's even much lower than that. And so that's really kind of a cautionary tale, specifically for corn ethanol, but also for you know transportation fuels in general. The fifth OPEC is is announced it's going to start cutting production. So that should lead to higher prices. A million barrels a day which is, you know, about, you know, a little bit more than 1% of national national supply. So I mean it's pretty substantial and bullish for prices, which, you know, compounded with the you know already inflationary period that we're in really doesn't help. And then one thing really looking forward to the winter that I'm wondering about is what's going to happen with the price of natural gas, especially as it relates to home heating. I think that everybody should be ready for a really high heating bill this winter. Almost certainly the highest you've ever had unless you just moved into an extremely energy efficient home, driven in large part by what's going on in Europe. The demand for financial gas globally is historic highs. Really, we're getting into that period where deliveries are not going to make that much of a difference. There's only so much that we can do in terms of getting product to Europe as supplies from Russia are being cut. So prices are going to remain, you know, at probably near historic highs for this period of winter. And again, it's going to be, it's going to be interesting when we start getting our bills, especially if we have a cold winter. You know, we could definitely see some shocking things. This might be one of those times where you actually notice that you're paying a bill for your natural gas because it could be a significant increase, you know, you know, hundreds of dollars easily on a monthly basis. So that was the only comments that I had. No, we're coming at the two o'clock hour, but we're definitely happy to answer any questions you might have. Our next webinar is less than a month away. It's actually pretty quick on November 11, that Thursday, just prior to the Veterans Day holiday.