 Okay, good evening everybody a pleasure to be here yeah Carl gave me this title probably the longest title that I've ever had so I'm not sure that I can live up to it when you see all those words there and this I always put my website on this first page and for some reason it didn't get put on there I'm not sure why but anyway if you want to copy of this later if you don't have a paper copy just go to my website the easiest way is just Google India shoe livestock economics and then go to presentations and our server was down today so my secretary didn't get it on I'm not sure if it's on yet but it'll be on the Mars sir sir as our is as it comes up so I also have a cattle outlook and some others on there but I've just got a few slides to show today and try to cover very quickly just this long topic we did have a government shutdown obviously and as Carl said it had a huge impact on the information available on cattle markets and also affecting price risk management a lot thankfully the government shutdown stopped and they started the government started up today so we're going to by next week then we'll see more and more stuff when I put this slide together here a couple days ago we didn't know when that was going to happen but anyway the the cash market has not been reported in the month of October yet again we have USD market reporters in North Dakota periodically at West Fargo and then at Napoleon Kiss and Mandan and Stockman so we haven't got an official report I was watching Napoleon a day like Carl was to and and doing other anecdotal looking at prices and and more on that when we look at the chart but they they have been inching up but unfortunately we don't know officially what prices have been doing either on the feeder cattle side or on the fed cattle side but next week that'll all be remedied the CME feeder cattle index that I'm going to talk about some today is an average of USD AMS prices all over the country including our markets here in North Dakota it's used to settle the feeder cattle futures market and we haven't had a obviously a CME the cattle index since September 30th either either because it's the average of all these AMS prices so we're wondering if it continued what's going to happen when we get to the end of the month the last Thursday which this year is October 31st is when the October feeder cattle futures contract matters but that's all taken care of it's also of course used to settle LRP contracts and and so LRP has been shut down all this month too since prices are going up I think they're probably higher than any LRP contracts that would have been locked in and so there wasn't a payout anyway if there was now they'll get at that here in the next week and the last reported index on September 30th was 159.89 now this is an average price of all 650 to 850 medium and large frame one cattle sold at all those markets AMS reports that was record high on that date and so on you know unfortunately we haven't had it since then we do think the market has moved up and again we have to wait till next week to find that out and so already mentioned LRP insurance and Carl mentioned has not been available and however that'll I'm not sure if they'll start up tomorrow or not but probably will also there's supposed to be a USDA cattle and feed report out tomorrow and you know those surveys go out at the end of the month and so that says it would have been of eyes of October 1st obviously that did not get done and so there's no report tomorrow just heard today that again the end of the month well they're going to do the surveys now and actually put it out the end of the month because NASA is back at work now so we're back to getting information and things will be moving along smoothly as we near the con end of the contract and we'll know what cash prices are next week it just we're kind of in avoid now a little more on that later as well of course the big driving thing on feeder cattle prices the last several years has been corn prices another thing that really comes into play on on feeder cattle prices can be fed cattle prices but we've had a very very stable fed cattle market if I have time here I'll just show you that those that slide in a minute but it's corn changing corn prices been the big driver and feeder cattle just take you back to last year and again we were up here at 164 in in June on feeder cattle and we were down at 520 on corn and then last year we had the drought and corn soared from 520 up to 820 and feeder cattle crashed in one month from 164 down to fire down to 142 or so so when we're talking about price risk management I think this is something to really keep in mind because the market adjusts very quickly to fundamentals and it can and it can catch us off guard so just another reason why we might look at price risk protection of course this year it's a tale of two worlds and it's just the opposite here's the same thing November feeder cattle in December corn this year I've got the entire year here to show you you know that opposite effect when corn goes up feeder cattle goes down in the different direction but again just go back here I can get this cursor to work just go back here to June 15th which would be the same time period on my previous slide and we've had basically the opposite situation corn fell from up there 570 or so down to the current 440 1443 today and feeder cattle have responded nicely contra-seasonally and you know we went up then from 150 up to the current about 167 on that November feeder cattle contract and so again last year cattle prices down because corn going up and this year corn going down and feeder cattle going up so you know high prices are here for high prices and low prices are here for low prices and that's absolutely what went on in the cattle industry then this year is reaping the rewards from that look at the 556 weight calf prices and I have a number of lines on here this line on the bottom if I don't know what your projector might show but it's kind of an aqua line is the 2011 average then the green dashed line is 2011 then this high point here at the first of the year was last year this purple line and and then the red line is this year and so you know a couple of comments we were record high on these calf prices a year ago during the spring a lot of things going for us good grazing conditions and obviously a short supply and other things and then we got to the drought here and you know again we see that very rapid ratcheting down of prices as the grazing conditions went poor and in the corn crop all of a sudden went to the conditions got very bad now you know in this year then we struggled the first part of the year on calf prices simply because we had record high corn prices and it was very dry it was very dry in North Dakota until the end of May and and you know then when when a lot of the conditions improved throughout the country I know we had dry spots in North Dakota the rest of the year or two and down through the south central and from Carrington on down but we've had this nice seasonal contra seasonal I should say pick up and in calf prices they are record high for this time of the year they're not all-time record high however you see that occurred back in the spring of 2012 but we've inched up and again in October here I've got a couple of just dots here the market has went up we really don't know how much I'm you know like Carl said we're at a hundred and seventy four hundred and seventy five and we'll get a lot more information next week to analyze that but anywhere we're at record high prices you know corn you know got a record corn crop coming on looks like it's going to materialize and if we can get a little bit of fed cattle have been going up and get a little more spark on them probably won't see the seasonal weakness that we usually do although we probably see a little when the big runs hit but anyway we're going to end out the year quite likely at record high prices and then when we go to next spring we could mirror again 2012 as long as it rains and we have good raising conditions in I didn't bring the drought monitor map along but we have the best conditions now in the US it's try out in California and stuff but even Texas Oklahoma down there have gotten a lot better so you know it looks like quite a bit higher prices like 2012 next spring and they could even be higher next fall because we're going to have really short supply but again that's a long way out and it depends on corn go to these heavier weight yearlings then and kind of the same thing I won't go through all the different years and so on because they're kind of parallel to what I talked about on calves but we've had this green line is this year compared to last year the aqua line we've had this nice contra seasonal increase and we are at all-time record highs on these heavier weight cattle that are even above what they were in the back in the spring of 2012 there so they're you know up there hundred and sixty dollars was the last that the end of September and again we think they've moved up to around 165 since then the other thing on this chart are the futures here's the October futures and November futures and then next year's futures is the blue line on top but kind of notice I'm going to mention this in a minute but kind of notice how even there one is of course predicting the futures market at least the same record high prices throughout next year but very little volatility just straight across on those futures which typically does not happen we see seasonal price changes and as much as $10 difference and this is all the same which really affects put premiums and LRP premiums that I'll talk about in a minute so again we're there at record high levels I know we're just talking about backgrounding day and not necessarily stodder steer prices but I throw these in because again that's the other variable that gives us feeder cattle prices and if we can get fed cattle prices higher that supportive to feeder cattle prices and and the fed cattle market has been moving up and again in October it looks like we're up there you know 128 or so 129 look we're going to do this week and the next week then again we'll start getting the reports in and the futures the darker blue or aqua are the futures this year moving on up to above 130 by December and then for next spring showing one up around 135 or whatever there's some caution there because a year ago this time when I was talking to you we had fed cattle futures up there and they never did materialize you see here's the aqua line is the actual cash market was 125 to 126 7 all spring and then much of the middle part of the year here we've been 120 to 125 so the fed cattle futures way under the market way underperformed what the futures was saying last year but the futures again are back up there at 135 so that's kind of a caution too so here's that CME feeder cattle index and I kind of moving more into price protection kind to show you this again this is the average price of all 650 to 850 weight steers it's not heifers but all steers sold in the US and typically we had this seasonal price pattern where from if you go up from September 1st of September here this nine every year five six that is the high for the year and then going down we see that seasonal decline in the March go with the threes here 3106 07 we see about that 20% decline price and now we still backgrounded cattle in and we could background cattle just fine and just we had to be aware that the seasonal price pattern was downward and maybe some price protection was warranted then when we move on to the 2000 2010 and 11 and 2011 and 12 actually were really really good backgrounding years because prices went up and so we actually we ended up getting more for the cattle that we priced in the more dollars per pound and and we had price went up last year's John you know we had kind of even from September 1st in to March as John said wasn't as good a year last year all depended though when you priced your cattle in and out backgrounding if you priced cattle in about an hour before now 550 weights at 150 to 155 and priced them out in January at 750 at at the price then about 140 145 you made money if you didn't price the 550s in till end of November particularly in December they'd went up to 160 165 and didn't bring them out till March the market had fell to about 130 by that time you see here by by the end of March and so there you lost money so it all depended now this year again we brought the index up were record high 150 992 was the September 30th price and since then we haven't had one and so you know what's the price pattern going to be this year so just a little bit here I do have a budget on my web website that you can use and again Carl mentioned calf web and a variety of places to figure your break even priced I just took my budget on my web and again used a whole different series of prices here and John mentioned those prices mine it today is 363 just the earlier in the week there was 354 and mine it washburn ethanol plant today or for corn 398 Hankinson down here 408 so we're somewhere again like John said pick your poison of corn prices of whatever suits you and and Carl also mentioned this and John I think that you know the futures now is in that 165 area so certainly you know for background in calves it looks like it's profitable at that 165 and stuff but again lower that price down and we lower profits and so that's kind of what I want to talk now a little bit about is some price protection and wrap it up again it's nearing Halloween we have the wicked witch and when it prices before for cattle have gotten record high we have all these different things that come in and cause prices to go down and and I'm not saying that they're going to happen any of those are going to happen or something that we don't know about is going to happen but it could happen and so again just a word of caution to keep in mind and why you might want to use risk protection so there are several different price risk management tools that we can use we can use a cash forward contract feedlots are really really after the heavier weight cattle and and we see that in the price and we have a lot of reasons for that we have a very limited supply and and even for the lighter weights we've got winter wheat pasture this year and again looks like fed cattle prices going up and so on so feedlots are really after cattle so they will forward contract a price you can price your calves to a to a feedlot for feeding to slaughter weight now for later delivery January February whatever we can do video internet markets we can do the futures we can do options that already was mentioned a livestock risk protection we did not have here for this you know for the last few weeks but it's going to fire up again so we'll have livestock risk protection available so it's whatever fits your marketing plan and what you're comfortable with and and understand if you're just learning I do like livestock risk protection because it's easy to understand everything is up front you can do steers or heifers you pick the number ahead while you go up to an options or futures contract it's 50,000 pounds steers only again the cash settlement price so again not enough time today to explain all these but there are quite a few tools available to us always ask which is the best and I don't have the audience in front of me but if I did I'd say how many of you think prices are going up how many of you think prices are going down how many of you don't know what prices are going to do well that's the key to what price risk management strategy is the best if you're absolutely sure that there's going to be an uptrend in prices you don't need price risk protection stay in the cash market if you're absolutely sure there's going to be a downtrend do the futures or cash forward contractor a video auction in other words price them now if you know they're going to go down if you don't know what they're going to do that's where options and LRP are good because with those you set a floor price but not a top price again with the futures cash forward contract and video you set a price and then you're locked in at that price if prices go up you don't get out the higher price but if you go down if they go down you're protected options and LRP if prices go up fine you can take advantage of the higher price in hindsight they will always be second best because you paid a premium for them and if the market goes up you should have been only in the cash market if the market goes down you should have been in the futures or forward contract in them so it'll always be second best but it'll be a close second only from different from the first by the amount of your premium so again seasonal prices do favor price protection in backgrounding because from September there prices usually do inch down into March and I'll show you the chart in a minute they did it last year 2010 and 11 2011 and 12 they did not then instead they went up and again that was ideal for backgrounding and you know so what's going to happen this year is is a good question there's all you know the future says they're going to stay pretty stable and so we'll have to follow that is it worth it then was the other question and again it all depends on your own situation actually options put in LRP premiums are low this year compared to history simply because we've got that very low implied volatility from the futures market these are a day or so old in the October futures did fall off a little today but again look at very very and I showed you on that chart very little variability for the next year so that causes that less volatility causes premiums to be lower we talked about this before and you know and at the money put there 160 168 January put about 370 an LRP 164 at $3 on September 30th again tomorrow we'll get a new one but those are all within the range that Carl talked about compare that the last year where we were locking in $150 it was costing us $2 more so it is a little cheaper again go to last year just as a caution here we are in the middle of October at around 152 we did get them higher by the end of the year and so again those cattle sold background to cattle sold early in January did not need price protection and did fine but those background at cattle coming out the longer you kept them the worse they were and and then price protection was warranted so I'm going to quit there