 My name is Dave Ripplinger, a Bioenergy Economic Specialist with NDSU Extension. This is our monthly agricultural market situation outlook webinar. I'd like to thank you all for joining us. Again, we'll have some talks from extension specialists on a variety of topics related to agricultural markets. We will have a Q&A at the end of the session. And you're welcome to ask questions using the Q&A tool or if you're more comfortable with it, with the chat feature. And we'll get to those questions at the end. And again, we'd encourage you to take advantage in case you do have any questions today. And of course, if you have any questions in the future, you can definitely reach out to us as well. To start, we have Brian Parman. I was going to talk about employment costs and inflation. Thanks, Dave. So in a lot of these talks, we all are trying to stay current with the current events and what's going on and try to make our topics as timely as possible. And this one, one of the big reports that's come out lately, and a lot of them come out monthly, but some of them are more impactful than others are like the jobs report, things about inflation, consumer prices, and producer prices. And so this one garnered a lot of traction here in the last few days, this employment, the jobs report and the inflation report and production cost reports. So I'm sure most folks have seen that in the news or some snippet about it and how it's impacting markets. So I just kind of wanted to go through some of the, what I think are key points about what's going on in that situation, just so everyone's kind of informed with maybe dispel some myths or rumors with why the inflation is existing in the first place and how strong it is and some of the, what folks are thinking about going forward. And so my first slide, I just wanted to cover some of the key employment statistics from the September 2021 report. And a lot of times they benchmarked this to a year ago, which obviously would have been September 20. And so what you look on this slide here, I've got a little bit of a comparison of last year versus this year, the numbers to the left are this year, the number to the right is, or I'm sorry, yeah, is the number to the right is this year, the number to the left is last year. So the civilian labor force participation rate in 2020, for instance, was 160 million. So it's up about 1.3 million people. Then the labor force participation rate, that's how much of the labor force or how much of the population in the United States is actually in the actual labor force actually engaged in working or looking for work. And that's actually increased slightly from a year ago from 61.4% to 61.6 down a little bit from a few months ago, which was 61.7, but not much. So we're kind of holding around that 61.5% mark. And the unemployment rate over the last year has dropped from 7.8% to 4.8%. And part of that, though, is also we have had a little bit of a drop in some cases in the labor force participation, but there has been a really strong pull to employment. As we've looked around, even places here like Fargo, where we've got a lot of the hospitality and food service sector struggling for work, and I tell this story, but it's true. Not too long ago, I tried to just go through the McDonald's at about 6.30 PM on a Monday night, and they were closing at 6 every day because they just weren't able to find labor. So a little bit of an anecdote there, but it's true. And then the duration of unemployment, I found this kind of interesting that about two and a quarter million people, 2.24 have been unemployed for less than five weeks. And if you look, and back to a year ago, that was about 2.55 million or two and a half. But compared to last year, the 15 to 26 week unemployed, that was almost five million people, and now that's down to 990,000. And then the five to 14 week duration of unemployment down from 2.75 to 1.87. And what you kind of see with this, just on the duration of unemployment on the right, those numbers are this year. And really, there's most of the folks are either very short term unemployed, so the less than five weeks, or very long term unemployed over half a year, over six months, 27 weeks or more. So that's down to that 2.68 million down there at the bottom. So you've got basically weighted very heavy at both ends of the spectrum, short and long and kind of not too many people in the middle. And so some of that's, we've had some layoffs and some businesses have to have to shut down due to probably not being able to staff it and find labor or other financial issues that you're less than five week group. And then your 27 or more weeks, that's your longer term unemployed. All right, so my next slide, I just wanted to show what's kind of gone on with wages. And this also alludes to some of the issues that employers have not only had with hiring, and finding individuals. And I don't have time in this talk to go over all the different sectors, but the leisure and hospitality, especially, there is a lot of job openings in the food service in that industry. But pretty much across the board, wages have increased in the last year from September 2020 to September 2021. And this is from the Bureau of Labor Statistics, you know, four, five, and in some cases, leisure and hospitality at the bottom, hourly rate wages have increased almost 11% in that sector. So this is just a really strong desire by employers to hire and they're offering higher wages and have compared to a year ago. And you can see the actual numbers here on the left, September 2020 versus the projection for 2021. And even since August, a lot of these hourly rates have increased. So another big statistic from that data from the last report is what's called the job quit rate. And that's how many folks left their job voluntarily. Basically, they weren't laid off, they weren't fired, they weren't, you know, hours reduced, they literally just quit. And this is the highest that has ever been recorded since this data has even been kept, which is right around 2000. And it's substantially higher, I mean, approaching 2.9% on actual people walking off the job in the month of September. So that is something. And I'm going to kind of, I think that you can see with the wages, the strong wages that folks just feel comfortable that A, they're going to be able to find another job and B, they might be finding another job that pays better. So that's kind of what's going on. There's a draw for folks to switch jobs due to the strength and the fact that they know that they're probably going to be able to find another one. And so that's kind of what's happening with that. And then so with my next slide, the next section of this, I kind of want to touch on this whole inflation. And one of the big headline grabbers was that inflation for September was the highest in 13 years at 5.4%. So that's an annualized inflation rate. Prices didn't increase in September 5.4% over the, in one month. If you took the inflation rate in September and annualized it over 12 months, it would come out to 5.4%. It's what they mean there. But the last time monthly inflation, annualized monthly inflation was at or near 5.4% was July and August of, and I didn't put the year in there, July and August of 2013. Okay, that's the last time it was that high. And it was only briefly that high, just for a couple of months. And then inflation actually by the next year had actually gone negative into deflation because that was kicking off the financial crisis, the latter part of 2008 and then moving into 2009. But we can see here on this graph on the left, it's put together by the BLS, where the inflation rate is for last month, all items 5.4% and a big increase in energy prices. Okay, they'll have two metrics, one with and without food and energy. And you can see with all items, the inflation rate there over just over 5%, food just under 5%, but energy, a big, big inflationary number for the last month. And as we know, gasoline prices have been high, they're worried about heating costs for the wintertime. So why are we having a lot of this inflation as the question? Is it bottlenecks? Is it price gouging supposedly or something like that? Why is it why what things are affecting the consumer? And I kind of want to show some producer price indices, which kind of reflect the inflation rate for what these folks who make a lot of our goods and are into manufacturing are facing. So on the next slide, here's the producer price index for all commodities. So if you're making anything, this is what the price increase has looked like for manufacturers or anyone creating really anything in the country. And you can see their input costs, that's what this producer price index represents, its input costs have just increased dramatically since they hit that low there right at the end of the recession in 2020. They have just streaked upward pretty remarkably. And I just want to show a couple of examples of some of these raw materials and the prices they're facing. So my next slide shows like steel and strip steel. And you see right there that sharp increase where it right out kind of the beginning of the end of 2020 and into 2021, you can see what steel prices have done. And I could have put iron in here iron and steel stainless steel, it really doesn't matter. The chart looks exactly like this. So when you think about products that are being created with steel and steel products, you get a high price increase that's passed on to the consumer. And then my next one there is chemical manufacturing is being shown there. So the cost of inputs for chemical manufacturing has just increased dramatically since the last recession there. And you think about all kinds of things that go in chemicals. And I'll show some specifics of that in a second. The next one, how about trucking and freight, which is my next slide. And you can see the price of what's happened to distance trucking and freight costs. So anybody producing anything who's paying to ship in commodities or goods are having to pay these astronomically high distance trucking and freight costs. So of course, that's going to get passed on. And then my next slide, how about phosphate fertilizer materials. This is what the materials that go into making phosphorus type fertilizer, what those costs have actually done over the last few quarters or year or so, just streaked upward pretty remarkably. And then my final one that I'm showing here is components that go into making synthetic ammonia and compounds, which can include like urea, nitric acid, etc. And that has increased remarkably over the last several months. So you can see that some of what we talk about with inflation and what's going on is coming actually from the production cost side that these costs are going way up really fast. And some of that cost increase has to be recuperated by those that are making or selling this stuff. And so we see price increases at the consumer level. And I could have chosen a hundred of these different Fred graphs, the St. Louis Federal Reserve graphs to illustrate my point, everything from used car costs to chemicals to just about anything except for timber and wood, which actually went down because we had a big spike before due to the pandemic. But to make this point that there's just this strong production cost increase. And that's what's being a lot of our producers are dealing with here. All right, so just kind of the situation and summary here that I want to talk about just in summation of what's happened. We've had a big increase in wages, okay, so wages have increased. And as a result, I think part of the reason that we have a lot of job openings, so employers are having to entice folks into their into their business with higher wages. And then we have this high quit rate because folks are confident that they're going to be able to find another job with higher wages. And the other part about it is with that quit rate that they brought up is we may have a lot of folks who are nervous about the Delta variant of COVID dealing with childcare issues. And they're just saying that look, they're walking off the job worried about dealing with that. The cost of materials or other goods and manufacturing has increased, and the cost of energy has dramatically increased. And so as a result, you get this highest inflation rate in 13 years when as these production costs and wages and everything else has gone up. So finally, kind of the last thing was that the Fed posted their minutes from the their last meeting recently. And with this information in hand, you know, because they typically schedule these after this comes out. But the meeting minutes basically said that the Fed, the Federal Reserve may begin tapering its bond buying as early as November, which would some have said it was going to be that early, but might be a little earlier than than most folks thought. And basically easing, easing all their bond buying and tapering it down. And the initial cut would likely be about $15 billion in the first month. And then slowly reducing it from $120 billion per month to zero. And then the target date to end the purchases that's been thrown around is summer of 2022, whether it's June, July or August, but somewhere in that timeframe, depending on how they quick they do it, says sign. But that word's supposed to be some members of the FOMC, the Federal Open Markets Committee, they want it to the tapering to be more aggressive. And there's sort of breaking ranks here on this, basically thinking that some of this inflation is not transitory, that it's real and price increases are increased, that some of the quantitative easing is that they've been doing is adding to this inflation. And then the other thing is that they want to discuss the ability to raise rates if they have to, to deal with this. Now one last point I want to make, and that has having to do with inflation and what most folks think about, so inflation is a rate of increase, right? We say 5% increase, that means the prices month over month are increasing by 5%. Inflation could absolutely stop, okay, and go to zero. But that doesn't necessarily mean that the prices are going to go down, it just means that they're not increasing anymore. So some of these high prices may be in fact here to stay, and inflation could absolutely go to zero, but the high prices stay there. If they go down, that's actually deflation, is what that's called. And deflation does in fact happen. But that's one thing to keep in mind is that I could come out and say, well, I think inflation is going to cease or slow down and then eventually stop. Well, that happens, but the price of steel and chemicals and all these other things doesn't actually go down at all. It stays right where it was, it's just the rate of increase, or there is no rate of increase anymore. So that's something that I want folks to keep in mind as they talk about inflation and inflation rates. It doesn't mean the prices are going to go down when inflation stops, just that the increases is smaller or not existing. All right, so with that, I'd like to go ahead and turn it over to Dr. Olson, I believe is next. So thank you guys for tuning in and I'll be online when this is over to answer any questions. Thank you. All right, thank you, Brian. Oh, I got to get this going. There we go. So my name is Trayn Olson. I'm the crop economist and marketing specialist here with NDSU Extension. Again, here's my contact information. If you do have anything that comes up later on that you think about and you want to have a discussion about or you have questions about, I'd be happy to try and answer that. So let me start. We had a WASI report or an update on the world supply demand estimates as well as an update in the production reports on Tuesday. So I'm going to give you a brief overview of what we found. I think most of you that follow the grain markets realized by now that they were negative for corn and soybeans. The primary reason for that was because we had a slight increase in the yield expectations. So again, what USDA in both the September, October, excuse me, yes, September, October, and then eventually in the November report USDA when they're doing their yield reports has a combination of a farmer survey. They're using satellite imagery or what they call remote sensing as well as actual field surveys. So they send enumerators out into selected fields to try and actually do actual yield estimates. So as we get into this in particular October, November timeframe, the yield numbers start to solidify. So if you look at the very top row of this particular graph or table, you see the average trade estimates. So that was the average estimate for the professional traders and analysts, those larger companies that do their own forecasting, that do their own set out their own forecast and expectations for what they not only they believe the number will be but also what they expect USDA to come out with. So what I really like you to do is compare that top row versus the bottom row. So the top row is what the trade was expecting to see. The bottom row was the numbers we actually received. And again, the primary reason for the increase in the corn, corn yields was because the Iowa got higher average yields or the increase was primarily in the Iowa growing regions. So you increase the yields in the major corn belt, guess what happens to total production, it also increases. Now I wanted to emphasize that the corn crop we're looking at it just over 15 billion bushels is the second largest corn crop in history in the United States. So even though there's been some production issues in the Northern Plains, in parts of Minnesota, South Dakota, even parts of Iowa did not have a very good corn year relative to what they normally would. Nationally, this is still going to be the second largest corn crop and we're very, very close to having the largest corn crop. So the difference between number one and number two is very, very close. Shifting over to soybeans, very similar story. We were looking at for a small increase in the soybean yield. That was kind of the expectation. We got a bigger increase than first anticipated. Now when we look at that total production number for soybean, that is a new record. Again, not by much, but it just slightly beat the previous record we saw in, I believe, is 2016-17. So we're looking at the second largest corn crop in history and the largest soybean crop in history from this 2021 production year. Again, that now has changed the mentality. He's kind of put more of a, taken a lot of this risk premium, a lot of the concerns about are we going to have enough bushels available out of the marketplace. Now that was the production side. That was the supply side. We also have the demand side. Now I don't go through the details of the demand. We don't have time in this session, but let's just drop to the bottom line and say, what do we expect to have in inventory just before the harvest of next year? And again, this ending stocks number becomes a pretty good proxy for what prices are going to be. And again, as the stocks get very, very tight, we tend to have higher price levels and a lot more volatility. Once again, the top row, the one highlighted in black is what the trade is expecting to see. The bottom row is the numbers that USDA actually gave us. So again, small adjustments on the usage side. There's a little bit of adjustment on the corn, a slight reduction in the feed numbers. There was a slight increase in soybeans in the crushing numbers, a few small tweaks on the wheat side. So let's just drop to the bottom line. What are we looking at? Well, the wheat number came out very close to what the trade was expecting. Again, not much shock value to the wheat. The increase in the bottom line for corn, primarily driven by the increase in production. Again, a little bit, it was within the trade range, but a little bit higher on the higher end of that range. Again, probably the more shocking number to everybody was the soybean number. Again, not much of a change on the usage side, but the increase on the production side and all of a sudden our ending stocks start to grow. So these are the absolute bushel amounts. The next graphic is looking at percentage terms. So if you look at the red line on top, that's total consumption of corn. The green line on top is the total production of corn that's scored on the left hand side in billions of bushels. The right hand side is a ratio or a percentage that's the stocks use ratio. So we're taking the ending stocks number we just looked at divided by total use. So now we're converting that ending stocks into a percentage instead of an absolute bushel amount. And by using a percentage, we can compare back historically on an equalized basis. So let's compare the red bar, which is the current forecast versus the one right next to it, the red hash with the blue outline. So that's the old crop and the new crop corner we've been talking about. Now compare these numbers were that kind of that golden age that people talk about now in that 2011, 2012, 2013 timeframe. And for most of the summer, our forecasted ending stocks for the 2021 year, the one we're currently in, we're kind of at those relatively low levels. So we saw corn prices very similar to what we saw back in that timeframe. Now as we start getting a larger and larger corn crop, we end up with larger and larger reserves, we got a little bit larger margin for error. Some of that risk premium, some of that big concern that the market had on, are we going to have enough bushels available has been eased. I typically say kind of that 10% carryover stocks number in corn tends to be the kind of the tipping point in prices. If we have 10% or less, if we have less than 10% carryover stocks, we tend to have a lot of volatility in corn, pretty high average prices, the market gets really nervous. If we look at more than 10%, the market gets a little more comfortable. They're not, we can take a hit or there can be some unexpected shocks to the system. And it's not going to cause a major upheaval in the marketplace. So we're right kind of in that transition zone. So I'm not saying that there won't be some more volatility in corn prices moving forward. It's just those that volatility is going to be a little bit more muted. It's going to take a bigger problem in the supply demand estimates to get prices to move. Looking at soybeans, kind of a similar thing, but we're still at relatively tight supplies for soybeans. Now, again, our stocks to use on soybeans did increase because we have more production available and our ending stocks will go up. And we're still kind of in a sensitive spot when it comes to soybean stocks to use ratios. When we get down into those really low numbers below about 4%, the market is very, very jittery. And again, where that's where we've been for most of the summer, we're now closer to six or six and a half percent carryover stocks. We're not like super comfortable, but it's to the point where we're not as concerned as we were before. So once again, there's still plenty of room for volatility. There's both up and down. And when I say volatility, it's both directions, but it's going to take a little bit more of an event or more of a change or a shift get the marketplace to get really, really super excited. On the wheat side, we're finally again taking, this is all wheat classes blended together. We're finally taking those ending stocks numbers down to a point where we're starting to see more market volatility. We're starting to see some more market sensitivity, not only in the US, but also nationally. So what I typically say is normal range for carryover stocks in wheat is between 30% and 35%. We're now below 30% on all wheat. And so we're starting now to get some more, a little bit more price activity in the wheat market. If you look specifically at hard red spring wheat, and we've talked about this for a while, not a big shock. Our ending stocks of hard red spring wheat are much lower than they have been for many, many years, not as low as what we saw in 2007 and eight when we had that big spike. But we're now getting down to the point again, where the spring wheat market is getting very, very sensitive to new information. We're starting to get some final harvest numbers and yield numbers out of Canada. It seems like they're coming in a little bit lower than what Statistics Canada had originally projected. I also want to then provide kind of an update on China. So we're now in this funny place in our marketing year where we're still focused in looking at what's happening on the production side, but we're starting to transition more to focusing on the demand side, the usage side. And China is the big story. They're a huge, huge buyer of US agricultural products across the board. So I thought I'd give a brief update on some of the most current news going on in China. So first, the livestock expansion that's been going on for the last several years and in particular, after the African swine fever hit and they've been rebuilding their hog herd is now starting to stall out or kind of peek out. We're starting to level out a bit and especially in the hog number standpoint. So they essentially have rebuilt the hog herd to a point where consumer prices in particular for pork and pork products are starting to soften. And at the same time, we're starting to see at least within China much, much higher feed costs. And that's putting a lot of pressure on profit, farm level profit margins. You know, they're starting to be a little bit more liquidation of some of the pork that's in the pipeline. One of the reasons we're seeing the higher feed prices is because of some energy costs or energy issues going on in China. I don't know if you picked up on it recently, but there have been over the last several months, the Chinese government has been purposely reducing the amount of coal that's being used to generate electricity, trying to encourage some switching over from the coal power plants to natural gas fired power plants. But in that process, it's kind of a lumpy or bumpy system. And so the as the temperature start getting cooler now in the fall, especially in Northern China, they're starting to have some electrical outages. There's actually shortages of electricity because the coal supplies are so tight. They're having a hard time generating a lot of enough electricity for not only consumers, but also for the processing sector. So there was a story out recently that about 50% of the soy crushing plants, just in kind of that Northern part of China, which is again a large crushing region, were temporarily closed because of these electrical shortages. Now, the Chinese government has changed their policies a bit. So they are allowing for increased mining of coal to be able to increase electrical generation. That electricity is the priorities going to be given to consumers over some of the processing sectors. So we'll wait to see a little bit on how quickly some of these soybean crushing plants can come back online. The other thing that happened just recently now, basically at the end of last week, there was some really heavy storms that came through Northern China. Again, a major corn and soybean producing region primarily for corn and wheat actually, in that Northern tier of China. They had some very, very heavy rains. There's been some crop damages just like in the US. This is kind of the beginning of their harvest season. So the concern is with these really high rainfall amounts and some flooding in the fields, that there's going to be some quality loss in the corn that's harvested in that Northern part of China. Now the Chinese corn acres did increase last year. They were looking at a very large crop coming into this storm event. It doesn't seem like there's going to be a reduction in the total bushels available. There's going to be a lot of lodging or anything. But there is some concern about the quality profile of the Northern growing corn. So again, this is causing some increase in feed cost internally in China. The question is how will all this change or potentially modify their purchases of corn and soybeans from the United States? Again, we'll just have to wait to see, kind of monitor this situation to find out exactly how large and how deep this is going to be. The other thing, a really quick update on Brazil. I'm primarily for soybean because the soybean production, excuse me, soybean planting is now beginning in particular in the Northern part of Brazil. This is just a map of kind of typical production regions for soybeans by state. You'll notice Mata Grosso. If you look at an average production between 2017 and 2019, about 25% of the soybeans produced in Brazil came from that Mata Grosso region. But notice soybeans are grown throughout the whole country. And I want to clarify one thing because I've had some questions about this recently. As the soybean acreage and corn acreage in Brazil is expanding, the expansion is typically not northward. Because if you move north from Mata Grosso, you really get into the heavy parts of the Amazon jungle. Most of the expansion has been to the east, into that Goyos area. So if you go east from Mata Grosso, the expansion has been eastward because that's more very similar to our plains area. So it's a lot of grassland. It's a lot of savanna area. And it's much, much easier to clear grasslands and bring that back into production. It is to try and clear Amazon jungle. So understand the current expectation is that Brazil will increase their soybean seedings by about two and a half percent. And their corn plantings by the last number I saw approximately 3%. So this expansion is in the eastern part of that northern region. If we look at current soil moisture conditions, and we're going to be getting into this weather market in Brazil pretty quickly here, there are some areas in that kind of eastern growing region that are on the dry side. Mata Grosso itself is in pretty good shape. You get a little bit south of Mata Grosso. There are some spots, as you can see on this map that are showing up a little bit red. This is scaled for the top meter of soils. This is about the top three feet of soil, kind of that typical root zone. So you'll notice that in most areas of Brazil, they're in pretty good shape right now. If you glance down towards kind of the middle or bottom of it, you look more in the Argentina area. Argentina has got some serious issues. They had a very severe drought last year. That's continued now throughout their winter months. And as they get into their spring season, even though it's a little bit late early to start planting, but as they come into their spring planting season, Argentina is in some kind of pretty precarious positions right now. The last thing I just thought for trivia, I would show some photos. I get periodically some questions about what's going on at ocean freight and ocean freight rates. The bulk shipments, the primary reason we send method that we send grain, corn, soybean, sweet internationally is through bulk shipping, not through containers. We do have out of North Dakota, some of the food-grade soybean, people do ship a lot of their product internationally in containers. But most of the stuff that we ship for large bulk volume grain shipments are in bulk vessels. This is for container because there's the container shipments, the cost of containers, the backlog that's going on in some of the ports has been a really big press item in the last several weeks. So I just thought I'd give you some photos, some images to try and give you an idea of what this looks like. So each one of those blue dots on this particular map shows a container vessel. It's a vessel moving throughout the ocean carrying containers. Now I took this screenshot this morning, so this is live. I mean this is real-time information on where the vessels are. So this just gives you a really quick snapshot of where all the container ships across the U.S. Now I didn't show Europe or the Middle East and the Suez Canal. I mean there's a lot of container shipments that go through the European channels as well. I just want to focus on what's going on in the U.S. and China right now. So each of those blue dots right there are a container vessel. And again I screened it to just have container shipping basically consumer products. If we look at the vessel backup in the port of Los Angeles. So if it's a little square it means the vessel is there and anchored. It's just waiting. If there's a little arrow it shows the direction of movement. So is it the direction of movement inward or outward from the port. So this is the port of Los Angeles. You can see and there's been a lot of talk and discussion in the major press areas about the backlog of container vessels sitting on the port of Los Angeles to be able to get either primarily unloaded but then also reloaded with empty containers. So let's jump across the ocean really quick and let's look at the port of Hong Kong. So that little cluster in the kind of the bottom center portion of the map here is the port of Hong Kong. The island off to the right-hand side is Taiwan just for scale. So you'll notice the port of Hong Kong which is again one of the major loading and unloading ports for container vessels. There's a lot of congestion. You see a lot of those square boxes where the vessels are waiting to either be loaded or unloaded as well as a lot of movement. The ones with the arrows again are ships that are underway. If you go to that southern China if you go more to northern China and Shanghai which is also another major loading and unloading zone for container vessels you see kind of the same congestion going on. Now there's always a lot of movement of containers in these areas but you don't tend to see as many of those little square boxes where they're just sitting anchored waiting to be again loaded or unloaded. So just for trivia I thought I'd provide some of that just you have a visual representation of what's going on in the container business and guys it really is causing a lot of heartburn within the supply chains we have here in the US. So with that I'll hand things over to Tim Petrie. Good afternoon everybody. Tim Petrie extension livestock marketing economist. If we go to my first slide I had a lot of questions been at several meetings lately there we go where you know the futures market has been discussed to maybe even a custom so some rumors out there that I kind of wanted to spell and give you a little maybe for some of you this is more information than you really wanted but you know one of the things I want to talk about this is this is already over I'm going back in history there so we can use hindsight to try to explain this but this is the September feeder cattle futures contract that closed there on September 30th so it's already over and that's the bars there the black line and then the CME feeder cattle index is the green solid line on the chart and in the feeder cattle futures there is no delivery the futures contracts any open futures contracts at the end of trading there on 930 would have been closed with that CME cash settlement price and so you know the first thing I want to talk about is that you know I have particularly producers or others saying well the the cash market has to come to the futures market and so that's what's causing all our volatility and that's the reason the cash market is going down or up or whatever and that is not the case the futures come to cash particularly at the end because it's no longer the future and the cash market is there and it's being traded and so what that CME feeder cattle index is again it's what the the futures close out and then they do come together uh exactly there you know on 930 the the futures closing price was 158 78 and then let's go over to the right hand side it's all transparent there's nothing hidden here on the CME website every day they show the cash markets that they total up to come up with that CME cash settlement price and they do this every day and so the CME cash settlement price is based on just all the cash market feeder cattle markets where we have a USDA market reporter and in North Dakota that's Napoleon Mandan and Dickinson and go on down into South Dakota over to Montana and all the way down to Texas and around there a whole bunch of markets and so on the 30th there on the right hand side it just shows that on that particular day there are 17 markets quoted by USDA highlighted there is Dickinson Napoleon uh did not have enough to have the market reporter there on on the 30th of September so just shows you all the numbers of of of cattle sold at the markets and and this is would be all seven to eight ninety nine weight medium and large frame one and two cattle that's that sell at those markets and so first of all you see let's go back there to the left hand side on the chart there back go up to August 23rd August 24th up there at that high in the chart you see the futures market was up there at 169 and the cash settlement price was down about 159 so the futures were ten dollars higher than the the cash market both markets had been going up the cash market was was going up and the futures market was quite optimistic that the cash market was going to continue to go up but you know seasonally what happens at September is sometimes it does go down so the cash market started going down you had that ten dollar difference there and so again by the 30th of September the two had to be together and so the futures market really you see all that volatility crashed straight down to get to the cash market so a lot you know that just shows the futures do come to cash in maturity because it's no longer the the future and the other thing that a lot of people have been talking about us why particularly on the futures market is there all the volatility the sharp v's they call it or the upside down v you know go up from May there you see the you know up and in March it had been into April high and then crashed into May and then turned around and abruptly went up and down and see the same thing there in August and we've talked about corn before corn market and frame just mentioned it was kind of volatile this summer so that added into it but you know just looking more theoretical and and and some of the things one of the reasons that we have the volatility and and you might say you know fundamentals can they change that quick all of a sudden you know shouldn't there be more stability there and so one of the things we have in the feeder cattle futures market is it's it's it's a relatively low traded market the total open interest today in feeder cattle futures is about 30 000 contracts so that's all the contracts traded about 30 000 compared to corn for instance is 1.4 million contract open contracts today in corn so you know kind of a thin market and then you know if we go to our nearby october now trading this is this is the end september's over the nearby october contract about 2200 open contracts compared on the the corn side over 600 000 so you know talk a little bit about fund trading then you know that the funds just a fund or two trying to get out of some feeder cattle contracts is way more volume or you know there than it would be on the corn side and so that's just kind of another thing that that adds to the volatility is the is the relatively thin market but anyway another thing producers are wondering is about how do north dakota prices compared to the cash settlement price or to the futures price and again if you've heard me before talk say we have about a zero basis for 800 pound steers so talk a little bit more about that again go back over to the right hand side that's the spreadsheet on the cme website for the last day of trading there on the september contract and so the cash settlement price again down there it was 153 72 actually the cash settlement price is a seven-day average and so at the bottom there the the cash the total all the markets of 17 markets that traded throughout the uh that day uh you know averaged out at 152 91 but then we take the previous seven days of all the markets that trade throughout the week and that gives us that 153 72 cash settlement price go up to uh dickinson then the average price there up there at uh well at uh you know a little over 156 there was a little bit better than the cash settlement price again this is all uh starting at seven all the way up to just under 900 pounds and again we would expect 800 pounders on the average to have about a zero basis so down below then was the usda uh report for that the reporter did for stockman's in dickinson on september 30th number 36 had you see up in the top spreadsheet at uh dickinson and uh and and go down to the bottom then those 36 had there were 24 of them we'd 749 their average price was 159 and there were uh 12 head of the heavy weight towards the top of the range to get reported again 899 would be the top at 875 there 150 150 so again 800 pounders kind of in the middle there they would likely have been really close to that 153 72 cash settlement price with the heavier ones a little bit below and the lighter weight ones there the 749 shown there above the cash settlement price so you know that's kind of our basis again at 800 pounders and then there's a range in prices that that usually occur too so uh that gives you just kind of an idea of the of the cash market but back again looking at that chart on the left hand side you know yeah sometimes the trading runs the market up a little bit too high on the top side and maybe from fun you know from fundamentals and run it down a little bit too low but that does offer some opportunities for pricing whether you're buying or selling or or whatever kind of interesting a loyal listener of this program a cow calf producer up in central north dakota uh was looking at this chart back when it was uh happening and and actually uh he sells his cattle in march and so that's what i'm going to get to in a minute but you know the market kind of peeked out there in middle of august and came down so the september contract this had closed uh there but he looked on uh on august 31st and said you know back then the market was up there at about 162 and i haven't sold my cattle for a long time at that he's been wanting to do a l lrp contract for quite a few years and he's been to several educational events that i provide and has a lot of questions but he just couldn't pull the trigger for a variety of reasons so let's go to the next slide then he uh he finally he did decide then on august 31st again he's looking out to march selling his cattle the end of march and so he actually pulled the trigger and bought a lrp contract for his cattle uh he bought a 168 coverage price the highest coverage price that day cost him five dollars a hundred weight and again he said a couple things really caused him to pull the trigger one is that rma made a bunch of changes in the lrp contract late last year used to be subsidized at 13 and they increased the subsidy for these higher level endorsements here up to a minimum of 35 even if you buy a lower price contract all the way up to 55 premium but his premium was subsidized now 35 so it cost him five dollars instead of seven seven and then the other thing is rma now is not requiring payment till the end of the contract instead of at the beginning is what it always was up until the end of last year so he doesn't have to pay until the end of march there when his contract mature so he said go ahead let's use this as a case study for your education and so we're gonna on this webinar we're gonna follow this all the way through and and see how it does come out but uh anyway uh you up there just go up from uh kind of that 16902 go up to the expected ending value that rma had was 6902 where did they get that well the march feeder cattle futures on on august 31st closed at 16902 interestingly enough that identical is where they got it but they only off the highest that they offered that day was 168 so that's what he purchased back then again there's that cash index was 158 but they were offering 169 again march is a long way out the current index to yesterday was 154 26 and so uh that's what he gets closed out at when march 29th gets here is whatever the cash settlement price is and so as of right now he's almost $14 1374 in the money but again march is a long way off he's hoping and we're hoping that the market goes up and maybe is 180 or whatever but anyway uh and then he then he wouldn't get paid but he's got can sleep at night because he's got protections it's going to be interesting to follow this through let's go on to the next slide then uh talking about what the current market for calves are doing and uh you know seasonally they usually do go down at this time we're still $10 above what we've been the last couple of years they're up at 164 so I'll show you the price in a minute just a little bit below uh what we were back in 2018 uh I think you know we're going to kind of stabilize the market one of the things that's caused some weakness here it was very dry down in the winter wheat belt in Oklahoma I just talked to my counterpart down there this morning we were on a zoom call and now it's raining like it is here raining in Oklahoma and the winter wheat that was planted in dust is really really looking good now so there's going to be winter wheat pasture and again this week at Oklahoma City the price for calves did spark back up and with the demand for calves to put on the winter wheat so I think that'll help to put a uh a floor on prices here too with with that demand down there so I think we'll remain above for where we were the last couple of years similar to those 2018 prices in fact at Kiss yesterday in Mandan their 550 weight calves here were averaged 169 up about four or five dollars from what they were last week so probably see that red line come back up similar to that uh blue 2018 uh line as well and you know corn is kind of stabilized and like frame mentioned you know yields are about no now and less unknowns there and and so uh I think we can likely follow that blue line and so just go to the next slide is the actual market report from last week kind of interesting you know steers are on the left and heifers are on the right these these are the you know again the the North Dakota weekly summary which is all the markets reported in uh North Dakota but kind of some interesting prices there in purple you see you know the five to five fifties and 178 average but we get to 550 to six is the next one down a big drop off to 164 but even higher than with the six to six fifties back up to 165 so this is kind of a quality kind of an issue there of of of the different weight groups probably the 550s could have been higher than that with some quality and in fact again this week they are back up and we'll see how they all do you know and go on down not much different those 750s to eight weights 211 head down there at 163 26 not much different than 550 some other issues too going on the lighter weight calves of course haven't been weaned yet and they're balling calves while we get up into those heavier weights are weaned and and would be worth more and and so on but but not a lot of difference there so uh go to the next slide here I got to move along again just kind of mentioned the lamb market the lamb market has been fairly stable at quite a bit higher prices than last year that were affected by COVID feeder lamb prices averaging in the northern plains here around two dollars and forty cents in fact on in the bottom right hand side is bowman sale on monday you know a lot of 80 those 80 pound 80 83 pound lambs bringing 140 and then the lighter you know the 60 pound lambs are so bringing more than that but then you get up to the 90 pound lamb some but you know very good lamb prices strong demand for lamb at the retail level we've got fewer lambs to sell this year the lamb crop was down and they're going to market earlier down in the in the southwest really really dry so the slaughter lamb prices are 235 not much different than feeder lambs 240 on feeder lambs and 235 and slaughter lambs one of the reasons sometimes they're whiter than that but this year of course the higher corn prices are coming into play with that feeder lamb prices not as much higher than than slaughter lamb prices as they might be at some time but still anyway quite acceptable uh prices at least look at the slaughter lambs compared to last year and covid was affecting us and so some some good prices for for lambs there go on to the next slide then unfortunately i talked about lrp for feeder cattle and we were really using lrp in the past years a lot for lambs but unfortunately lamb lrp is no longer available and we've had some issues with you know mountain states packing plant closed last year a little later than now and there's problems getting prices for lambs and so the sheep venture company that was you know a subsidiary the american sheep industry has to be actually sound and there just isn't now a good a number of a good lamb series for them to use to be confident in providing price forecasts ahead and so on so unfortunately at least for now there's uh interest in lamb lrp and setting up program and trying to find some lamb series other lrps we have for fed cattle and hogs and feeder cattle there's a futures market that we can go buy of course none for lamb so you know there probably is going to be no lamb lrp for a year or two which is unfortunate because it was really getting on some wide use there so with that i'm going to quit and and turn it over to uh dave ripplinger uh bio products bioenergy economic specialist i'm going to talk at the pretty high level of a lot of disruptions that are going on in global energy markets i'm definitely bringing some of that back home to markets here in north dakota so we're seeing a lot of a lot of disruptions caused primarily by shortages friend had already mentioned uh what was going on with with china and some power generation due to shortages of coal i'm sure you've heard the news about europe being short on natural gas and probably the thing that gets closest to home in in terms of the united states and agriculture is nitrogen fertilizer prices and so this is uh all of these markets are interconnected to some extent in many cases you know extremely closely uh and a lot of the causes are are shared so one of the big thing that's happened in the last year is we've seen this rapid increase in demand basically a full recovery to those pre-covid levels and expectation that the economies are going to continue to grow so that's really in general you know positive news but what's happened especially with that that kind of extended period of low prices and actually for the case of of crude in the united states where the prices are actually too low before covid to really continue uh exploration and development you know that's really kind of kind of come to a head so throughout that whole period of covid up until very recently we've seen a lack of investment in in new production and so you we don't even have the capacity uh that ready capacity to increase production so there's going to be this leg before a lot of these these issues can be resolved and some of this uh it actually goes back to frame alluded to this too a lot of it is due to impacts of the energy transition as we see more natural gas and renewables you know that some of these these energy systems at the national or or regional level are really struggling and so for example in the case of china as frame mentioned you know they're really trying to support increased natural gas used for power which really stymied interest in investment by the by the by the coal industry to do what they needed to do um just jumping and looking really quickly at european natural gas a couple of things are really causing this so europe really doesn't have and so this is western europe uh central europe europe x russia um you know they really don't have the natural gas production capacity that they've had that they had for decades right now almost all their natural gas is either piped in from russia or they have invested in liquefied natural gas but they're they're they're dependent on other markets on other suppliers so we saw last winter was a long cold winter in europe so that used up in a lot of natural gas obviously a a heating fuel and kind of going along with that too there's there hasn't been much investment in toward in terms of uh other infrastructure um again because folks are thinking you know if there's going to be uh no future for fossil fuels a lot of the investments that need to be made just aren't being made anymore um and this is coming to a head here in the last few weeks right now the price of natural gas is about 25 per thousand cubic feet um or or million btus is the same measure and that's about five times what it was last year so a year ago in europe and if you can see from that chart which is from the wall street journal uh you know it's significantly higher than it is here in the united states and that actually has really big implications for fertilizer exports in the united states which are really uh really going to start hitting home as as we look to uh get nutrients on on for the 2022 season uh interestingly so you know again most of europe is dependent on russia for natural gas gas prom is their their large national oil company or sudo national uh gas company uh they're they're meeting their contractual obligations you know they have sold some forward gas they're making those deliveries but even with this rapid increase in prices they have not sold any additional gas into europe uh you know does that fly in the face of economic theory would say when prices go up that folks would respond yes but are there other reasons for this including political ones in the putin government regime possibly but again this is putting europe in quite a spot we've seen a lot of unique things happen uh they're turning back on coal fired power plants because they do have a little bit of coal in europe which again kind of is an antithetical to the idea that they're going to try to decarbonize we've also seen incentivizing of of a cf uh ammonia plant in the in the united kingdom because they needed ammonia as a refrigerant refrigerant and as for a as a to add to meat packaging so you get to consumers so again there's a lot of things that are really starting starting to give one thing that isn't mentioned here and i'll come back to it again yara which is the extremely large nor region uh energy fertilizer company uh they stopped production of natural of ammonia from natural gas a few weeks ago and that's led to continued disruptions in europe uh already talked about coal a little bit again it really driven by just this increased amount of electricity china's economy is booming uh more or less or was as it starts to hit snags like this uh and as as it's growing they need more power and most of that power has been coming from thermal coal which is great unfortunately because production has stayed flat the inventories have been massively depleted they've also i've gotten to a few entanglements with some of their trade partners specifically australia uh who who used to supply and was looking to supply large amounts of coal to china in the future we already talked a little bit about this slow move to natural gas looking at kind of what the implications are uh you know going to the bottom you know we really saw and if this has continued on through over the last week so through the first part of this week you know they were five gigawatts short of power consistently so they're basically short enough power to uh power three and a half million us home so that's a large amount of of electricity that isn't being generated again as as these coal fired power plants were stuck between having to bin up coal to get it to their facility but then in in china up until yesterday uh you know electricity prices were fixed so they'd have to pay more for coal sell at a fixed price at a loss and so they decided it was just easier for them to shut down uh you know as frame mentioned you know they prior prioritize consumers residential customers uh which i think you know naturally makes sense because there's a more urgent need uh at the same time the shut down of different uh industrial plants uh is going to have longer term impacts you know thinking about soybean crush and what that means to to food and food security can't be overlooked either uh finally coming back to us natural gas a lot of this you know what's going on in the us natural gas market is really us just being part of the global uh natural gas market so you know the price of natural gas in europe and asia has exploded as as was shown on that that slide previously from wall street journal um and again it's us dealing with the idea that there are some very very desperate global buyers you know 25 dollars uh per thousand cubic feet is is a the price that you know we've never seen here in united states um but again that's that's pulling our natural gas to external buyers um and also does have some some you know direct impacts uh here as well i'll talk about that about fertilizer in just a second but one of the issues too for ethanol and this is similar for many manufacturers they actually use about 30 cubic feet of natural gas per gallon so that one dollar increase in natural gas is an extra three cents in production costs and you know when when prices were flat it you know the issue is kind of moot but when prices are going up one dollar two dollar three dollars or more you know you're suddenly talking about increased costs of 10 cents or more per gallon which ends up being a huge impact on margins uh for for all of the corn ethanol plants which is almost all the corn ethanol plants that use natural gas for process heat um finally looking at nitrogen fertilizer brian had uh some similar information earlier again what we're seeing is these high natural gas prices are driving up fertilizer prices but in much of europe they basically shut down nitrogen production uh and what they're doing and then we just heard of sales earlier this week is we're now exporting a lot of ammonia to europe because they have needs you know consistent needs as well uh and that's you know starting to bid up these prices uh not exactly sure you know what the spring is going to look like what the late fall is going to look like but there are certainly concerns about where prices may go and even going so far about there being availability for all farmers who are looking for different you know specific products uh you know one of the recommendations that have for for most growers would be to talk to their input suppliers i just to at least see what the lay of the land is and we're definitely seeing some folks lock in prices even at these extremely high levels some you know just some uh some amount of their their actual need in case things get worse uh looking at some of the quick math so it takes uh 33 and a half thousand cubic feet to make a ton of ammonia so if we see those and if and if uh natural gas is $2,500 a ton the the cost of feedstock in europe to make ammonia is $837 and so that's about what the price is here so you can see you know what's pulling these prices higher uh and and not really quite sure how far they can go um and again it's having definite impacts on on farmers who are looking to secure supplies to make sure that the 2020 2022 crop has adequate nutrition um again bigger term implications and some of this is really similar to what you train had shown with uh with with container shipments it's going to take a long time for these markets to stabilize um you know many months at the least you know it's probably going to be at least into you know early spring next summer before some of these markets really stabilize to some extent and it does raise some questions of longer term concerns first about energy security uh you know and and this is for all you know all of the nations involved it does impact china you know they have you know they have a shortage of power you know that is impacting their ability initially it was to actually you know get electricity to homes now it's impacting their food supply um you know those are things you want to avoid uh same thing in europe you know where they're they're you know the the concerns that some people had uh regarding being dependent on russian gas is really coming to a head it also has implications for the energy transition and uh esg investing so you know there's this general push globally to decarbonize to add renewables possibly add natural gas to provide the ability to have peaking power um it also brings questions about esg investing which is really shun fossil fuels uh to to make a sit back and ask you know you know what's actually reasonable in this space you know people do need power and some of it might be for convenience or you know or a bit of a luxury to provide those types of goods uh but once you talk about people not being able to heat their own homes or to have the power that they need for employment or for their own homes it becomes a really interesting question to see how strong and how long that esg investing idea takes place i'd even step back and look at parallels from 15 years ago you know there was a lot of interest in environmental issues in the early 2000s and that pretty much died uh you know when natural gas and oil got expensive in in 2006 2007 2008 uh people you know prioritized uh you know that cherry at home idea you know making sure that they were able to have good paying jobs and put food on the table uh then environmental issues came after that and you know it really put a stop to all sorts of uh activities that were were starting to gain some traction uh one of the questions i have too even more broadly is what does this mean for inflation um you know we're seeing increased prices which which is certainly an issue energy is is needed for so many the the products and services rely on but there's also this issue of uncertainty you know we're not really quite sure what this winter is going to look like we don't know what 2022 is going to look like in terms of energy and if i'm a if i'm a business that has serious energy requirements wow i'm sitting there looking at how do i price uh my products you know how do i look at the the other inputs that i need and try and plan with that and i think it's a really difficult situation so those were the end of my uh remarks uh in the the end of everyone's comments for the webinar right now we're happy to take uh answer any questions that you might have uh on any of the the topics that we talked about or if you have any other related questions or or questions about agricultural agriculture and agricultural markets in general uh here's your opportunity and i will step back and ask everyone if they have anything they'd like to add to their comments or some thoughts that they might have had when other presenters were speaking or are we all ready for winter uh one thing i bring up just so you know is that our next webinar will actually be held on a wednesday uh because the thursday following the wasry report is veterans day so it'll be uh on wednesday the 10th uh at the same place and we'll we'll send some notifications building up to that uh so so you you'll keep that on your radar well um and there here's a comment uh from southwest north dakota uh ammonia is being pre-bought this week at 1350 a ton there you go yeah and it's interesting because there's no there's no immediate short-term solution and i actually go back to it's the same thing with with selling as it is with buying of thinking strategically about you know locking in some prices you know if if other prices are high and you can still cash flow make some money even at these high prices do you still just do some of that um hoping that prices go down otherwise it's really really a tough time well if there's not any other questions i'd want to thank all of you for joining us thank the panelists for their presentations uh we'll have the recording uploaded uh as well as the powerpoint we do have another uh question here uh as you know if the infrastructure bill in dc passes passes will we see a continued push on energy and inflation um so it depends what the bill looks like and if it does pass um there's there was a lot more discussion of more proactive climate and energy energy transition things when they were at the three and a half trillion dollar mark than there are now um additional spending right now where it seems like we're we're we're flush with demand so if we think the government comes in and wants to buy more things or they give money to consumers who have a propensity to buy i mean that that certainly isn't deflationary um so there's you know i i'd be you know concerned about both and and and again so much of it depends on exactly what passes and what that bill might look like i don't know if anybody else has any other comments i know brian's more of a political science guy than i am i guess i have one comment too along that vein though dave with with its impact on inflation a lot of that will depend upon the timing uh you know when we look at inflation and inflation rates just like brian was saying you know that's the rate of growth or rate of increase in in pricing and that rate of increase will be heavily influenced by the timing of any kind of potential rollouts for government changes or government policy incentives so i agree with dave that we really don't have a very good read yet on what those policies might be and i just want to add the dimension that the timing of the rollout of those policies will have also have a pretty big impact yeah and i think uh just like dave was saying it really depends on what's in it and kind of how it's spent how it's how it's being allocated um you know three and a half trillions far different than what's being proposed right now and you know as i said the fed's going to start doing a tapering um taking some tapering actions as far as their bond buying goes and i i mean one of the things that they were really concerned is they could more abruptly uh end that tapering for one thing and uh the other thing that they can do which they haven't done in quite a long time is uh you know basically taking the other stance on it and removing money from the money supply so there's quite a bit that could be done to stem um not not i don't know that they will or won't i'm just saying that there's the flip side to that action that they can take to also stem inflation and it looks like they're willing to do that and going to take that on and one the last thing i'd add to that is it's been a it's been a long time since the fed has taken any kind of really aggressive or moderately aggressive measure to stem inflation in a very long time uh i guess the 80s would be the be the really the last time they aggressively were trying to get out in front of inflation and they did that with extremely high interest rates so you know it can be done but but it's awful painful are there any last questions uh if not again i'd like to thank everybody for joining us today and we'll have uh this the power point in the recording up shortly thanks