 Okay, well, good evening everybody, and we hadn't checked this with each other Can you still see it? Carl, can you still see my slides? Yes, I can. Oh, okay I'm not getting them here We can certainly see them out here, and we can actually see your face and Carl's shoulder too So as long as you can see it there, Tim, by all means, please go ahead Well, I can't see my I can't see my soul Okay, now we're back. Okay. Well, good afternoon everybody and good evening and I'm really not gonna have much different than John We didn't to get together and talk about these before but What I have to say and my prices and so on really coincide quite closely with John So I don't know if that was quick, so it's a what but it came out. So Move along here just a couple of housekeeping details before we go on I do Have this presentation on my website. You see my website there This one I am not going to change but I do have a cattle situation and outlook on my website So most of the charts you see here tonight if you go just to the cattle situation outlook You can find updates in upcoming weeks, but this particular one will not be Changed I did update a couple of slides. I'll try to remember when we get to them. I did update a couple Just because of the down market today and so on and what like I said I'll try that you might having your hand out if you made a copy because I did so Again John mentioned this, but all beef and cattle market classes have broken records for the last several years so record high prices are not unusual and In fact last week we set all kinds of records The both the life cattle and feeder cattle futures were record high last week on Wednesday Now they did back off Thursday and Friday back up yesterday and down again today So that's that volatility that John mentioned and that is just going to be with us But they were record high Less than a week ago all-time record high and life of contract high the cash fed cattle market I've got a chart to show you was record high last week and the feeder cattle Again were record high last week and unlike the futures that Stumble a little bit today in Oklahoma City the cash market there today was that was up again on calves and Just some more on that in a little while too. So, you know down there at the bottom What could derail price as well from a fundamental supply and demand standpoint were in good shape and and into? 2015 there We could set a record again next year for sure the first part of 2015 We're going to be above 2014 because we went up the entire year, but by the end of the year Next year we expect prices to be Similar to where they are now There's a chance and then when you look at the fed cattle futures that they could even be a little lower But we could break an annual record We will be higher in the first part of the year and have to see what happens in the second part of the year with Corning and particularly for the feeder cattle. So I like to show charts I don't like to have word slides, but if I only had to show you one slide tonight It would be this one because it simply highlights The conditions and why we have record high prices and what's going on there, you know Only two things affect prices and that's supply and demand. It's just that there are a lot of factors under Demand and a lot of factors under supply But what we have of course in here all aware of this is we have an extremely short supply of cattle Demand is good. It's getting better and probably next year will be better But you know on the supply side our feeder cattle supply is very very tight I've got a chart to show you on that plus we're keeping more heifers back. So the supply is available for Feeding or a lot less our beef production is going to be done It has been down six percent so far this year and it's likely done six percent for the entire year Steer slaughter down three heifer slaughter down nine beef cows slaughter down 18 percent dairy cows slaughter 10 percent So I mean our slaughter is way down and our birds have been liquidated and we're trying to rebuild then We take our slaughter done on the demand side again Kind of surprising to a lot of people is how strong our exports have been our quantity so far And we're about a month and a half to two months always behind on getting the final data Even with record high prices and the dollar increase in quite substantially to many other currencies We're actually still one percent higher on Quantity and of course with the record high prices our value of our exports are up 13 percent Biproduct value again is due to the export market because we export a lot of our byproducts including our hides and Tongues livers everything else is record high about right now $16.50 per hundred weight on a live fed steer is due to the byproduct value alone That's up a couple dollars from last year on the domestic economy our economy is improving slowly and It's probably will you know keep improving slowly North Dakota is the exception or we're booming But you know the Detroit's and LA's in New York City You know more people are working unemployment is falling slowly so those are good signs for peddling meat Particularly at the high prices and then of course another unexpected thing that happened this year on the demand side Is we had lower pork and poultry production than we originally had bought? PED and hogs and then some genetic problems and poultry that will and is Turning around for 2015 so that's kind of a concern for the second half of next year Particular unfit catalyst that we're going to have a lot more meat there So with those words and we'll just look at the charts Again John mentioned price volatility in this slide I just kind of like to use because it shows over a longer time here during the ethanol era and so on How volatile prices have been but you know the run-up in cattle and And this is just nearby corn and feeder cattle futures has just been phenomenal Because I don't know if that's my pen here or not He's going to try to find my pen so he could do a little bit of writing. Yeah Forget it. I'll just kind of use I'll just use me. Yeah, okay I'll just use my cursor anyway in 2010 feeder cattle futures were $90 and now they're 130 that blue line there So, you know just in the last four years just a phenomenal run-up and of course corn has been all over the board We've had $8 corn and now today the nearby is 357 was up 11 cents to get it up to 357 so Just a lot of volatility. There is a kind of an opposite relationship there that I'll show you next between corn and feeder cattle, so You know, we don't know what the corn crop is going to be next year for sure We know we're going to have fewer acres of corn, but we don't know what weather is going to be and the change in corn prices and the opposite change in feeder cattle can be quick like it was back in 2012 and you know when we had a $664 the black line here is cattle just think of that we have a lot of black cattle and the green line is Corn that's when it's growing. It's Yellow now and so that's the difference But you know in one month we adjusted from 164 feeder cattle down to 140 and corn went from $5 up to You know way up to $8 in just a month there So, you know things can happen fast that could happen next year I'm not saying that it will happen, but it's a concern and you know something to be aware of and this year then come down to A much more gradual change. We dropped corn That you know was up about five dollars a bushel corn just went down from me all the way through now And Then on the other side Feeder cat, you know as corn went down every day feeder cattle went up every day So we went from 180 up to 240 and now we've backed off to 230, but anyway We have to keep corn in the back of our minds In moving into into the next year's outlook that I'll give you in a minute. So again a little bit on Feeder cattle supplies, of course are Lower than they have been for many many years. I just go back to 1984 here last year's mission he missing because Just remember that We didn't do a July cattle inventory report last year because of budget Concerns and so but it would have been kind of right in between here Here's our feeder cattle supply outside of feedlots on July 1st And that's the reason we have record high feeder cattle prices is just because we Have such a small supply of them and on the replacement heifer side This is actually January 1st, but we've been increasing replacement heifers that takes calves out of the you know feedlot Sector there and Coming up January 1st That feeder cattle supply is probably even going to be lower because we had a lower calf crop this year and we're this replacement heifer category is going to be higher and so Again on the feeder cattle side available for feedlots. We're going to be very very Short there on you know, I didn't bring the slide, but on North Dakota here on the replacements We have quite an opposite situation if I showed you the North Dakota slide actually North Dakota replacements the last several years here have been the highest in fact 2013 was the Was the third highest ever number of replacements we had all the way back to 1920 So be a much different slide here because we have been expanding in North Dakota Go to these calf pricing again John talked about that But we just had a phenomenal run this year as you're well aware of last year We were talking at this time about calf prices There in 2013 at you know about a dollar seventy four or something now or you know by the end of October Approaching 180 now there 280 so we had a hundred dollar change in calf prices in a year So yeah, John's right there expensive again With this rapid run-up everybody's asking how much further can they go or are they going to go down and the answer to how much Further they can they go is all based on corn And so what we've been saying all along is as long as corn keeps going down feeder cattle are going to keep going up but Corn now has stabilized in fact corn prices are up 37 Cents in October alone. They went down all the way through September But in October here just in the two weeks in October. They went up 37 cents So corn is pretty well stabilized probably not going to go any more And that means that that's going to put the lid on feeder cattle But at record high levels and again volatility maybe I'll talk about Just a little bit more at the end, but and and we did see the three dollar down on futures today That was for a variety of reasons One is corn went up 11 cents today Fed cattle backed off some today Even though the cutout value was up today fed cattle were off some and it's you know We're ramping up pork and poultry production and that's starting to show up And so at least from the futures market standpoint, that's a concern The other thing is you know if you watch throughout the day on the futures today They were actually up a little bit there until 10 o'clock between 10 and 10 15 They fell a dollar then they stabilized and then about noon They fell the other two dollars just in about five minutes That is the funds are we're bailing out of the market the funds like Bull markets and so they have pulled out drastically out of the grain market Because it went down down down and again they're hedging against inflation and so they like to be go long And so they have went to other things although the last remaining place for the ones that do like to have some commodities has been The hog market earlier that then changed and now the cattle market and it's just today And you know when they watch charts very closely and some reversal on the charts And so it was the funds bailing out, but now On the futures market side Actually the cash market the nearby cash market the CME cash settlement and and cash prices are Just for the nearby October feeder cattle futures are the cash market of several dollars above the futures and Again the October closes here the last Thursday of the month only a couple weeks away And so they have to be the same on that date. So that's going to put you know somewhat a floor on We're not going to see futures just down three dollars down the limiter Continuing down at a drastic pace, but but anyway in the longer term I'll look out here in these calf prices We've stabilized them here at these levels. There is a Winter wheat is really the best winter wheat. We've had in the south for quite a number of years I just talked to my counterparts in Oklahoma and Texas Colorado today on we had a conference call and there's a really good demand for winter wheat calves because the cheap gain it's gonna gonna dry up anyway, and So that's you know helping to spark these lightweight calves down in that country that we haven't seen too But again Stabilizing here, maybe could even back off when the heavy runs start here a few dollars by the end Next year again, then we'll be above that you know up in that to 60 plus area for the Next year and again depends on whether it rains and then how many corn acres does look we're gonna get and so on But by the end of the year Where we are next year likely to be you know in this Similar category we're not going to see another hundred dollar increase in prices if that's what you're hoping for But you know still at good levels here switch to the heavier weight Faddle in again about $80 above where they were last year We've got the futures on there. We're right around 240 now and these futures are a couple days old and But again the nearby October futures now today are 239 and Going to the November futures the next one there at 237 Back them off a little bit more than that into the January and it is not today's at 231 in the March at 229 so anyway that then the futures kind of says the same thing I said on calves is it the market is kind of leveled off will be above next Next year will be above forward this year at the beginning of the year But you know closer to where we are now at the end of the year and we don't You know it's not impossible, but further large increases are just not expected there John kind of mentioned Some Prices here, and this is last week's weekly summary I just want you to kind of concentrate on this fight, you know like he said AMS is usually reporting for markets in North Dakota now They're only in the last few weeks owner reporting one or two because the calves aren't coming to market yet Because still harvest going on as well out there. There's grass But on these 550 to six weight calves at the two markets are only a hundred of them But look at the range in price there the range in price there is is you know from from 265 to 290 an average of 281 So there's a wide range in calf prices that range when the heavy-running hits is probably even going to be wider than that Because of all the different factors that affect calves, but when we get to a budget and I'm going to show you again 265 works better than 290 and so that's all part of the equation If you're buying calves and pricing your own calves there And here's the heifers John mentioned heifers that are being discounted So you go to those 550 to six weight heifers again, they're lower than Steers and But you know these Replacement quality heifers if you go and there's some 552 is it over three dollars or more than steers And so we're going to see more and more of that the further closer we get to spring the more demand Replacement heifers are going to be so we're going to see heifers selling at or above steer prices for the for the for the very good Replacements, but right now some of these market heifers aren't cheaper and I agree with John That's it'll be a good opportunity a little bit of slaughter steers because that does affect feeder cattle prices again this past week We were record high on them, but you know what? At all-time Record high prices the previous record high this year was the end of July Which usually is a seasonal low but that was done had a lot of factors going on very short of slaughter steers and Retailers short bought and bought it back up and now last week were record high on slaughter steers and again the futures You know are at least still indicating this is the top futures are for this year Indicating even some more improvement. It's possible a little bit by the end of the year Next year be above what they were at the beginning, but again by next year could be a little bit lower on the futures especially if You know depending on how we wrap up work brush so move along here then as John mentioned calves are very very expensive Should we sell them or should we do some backgrounding and yeah If you sell them like he showed you're gonna get $1,500 for some of those steers. I have a budget here in my website Just Google livestock economics. It's not much different than John's These are 550 in and 750 out going two and three-quarter pounds of dates You know he showed you about a $50 on them and I'm showing you about a $50 What I just wanted to show you is you know, we've brought calf prices up from 174 was my the budget that I'm think I showed you last year. We had 174 calves in we were projecting 155 out we had $4 corn and we're rejecting a $50 profit this year to 80 in 230 out To 60 corn and it's still $50. So every year at this time the market says that people need $50 to background steers and so that's what it off from last year We turned off a lot that turned out a lot better because prices kept going up instead of 155 We sold them for 170 or more and so instead of making 50 we made 150 We don't expect that to have Carl's laughing there Huh, but we don't expect that run-up in in prices and the futures don't indicate it is it possible Well, you have corn crashes or something else isn't well, we don't expect that to happen this year. So Again, then I just did some sensitivity here of calf prices versus out prices for the 750s and what profit might be again I was at 280 in and 230 out my so my $50 is right in there But you would go down to those 265 calves that I showed you You know, there were at the market we have 265 to 290 calves on that market last week And so that makes a big change in potential there of Profits or maybe adding some value to some cheaper calves is the way you can background You know some people John mentioned corn and some people kind of questioned My 260 corn because it's 180 or something in my head I guess or you know at birth old there just over to but at these prices of feeder cattle and at lower corn prices actually corn prices Don't make a big difference again. You know if we take $275 calves You know corn prices from 220 to $3 you're only Increasing the break-even by about $2 a hundred weight and you know right in there about 219 So we can have a wide range of corn prices there doesn't affect the break-even price that much and so again corn prices all over the board so a Lot of price risk management strategies Last year I'll show you a chart in a minute. I guess they didn't work Maybe some floor protection may be warranted in case some catastrophic event does happen or Whatever and you know kind of pick your poison here Which is best is you know easy for me to say and if we're going to continue to have an uptrend Like we did last year the cash market is best if we're going to have a downtrend You know pre-pricing them now Futures or forward contracting some would be the best if you don't know what they're going to do or if you want some floor then Doing an option or LRP You know gives you some floor protection, but leaves the upside potential open as well. So Again, here's the March feeder cattle futures. They've just been up up and up We've backed them off and again, we're down the limit today, but we don't expect them to crash on Down by twenty dollars or so on but again as John mentioned volatility is going to be the name of the game and So it's not expect unexpected that we'll see limit movements and we'll you know down and in some movement up And and but you know we're pretty toppy here on the chart again So our expectations and much higher futures into Prices into March are not expected this year like happened last year Last year of course on the bottom here the futures kept going up all the time So price protection is not necessary. We go back to 2013 here in October Or we had a hundred and fifty dollar futures It depends in 2013 it all depended on when you priced your calves in and in the background at catalog If you priced them in in October here, and you came out in January You did okay if you priced them in later You know in say in December and Then you didn't bring them out till March you lost money backgrounding. So again, it's kind of a you know the price protection would have been warranted. So it's a timing issue and And you know that's all part of the volatility that we're dealing with Anyway, Carl I'm gonna quit there. I don't know if you want to take a question or Move along, but I'm finished We have is there any questions out there for Tim on this? Tim I've been looking through the numbers and going really it's been a 450 to 600 dollar per head increase compared to last year Yeah, we were 100 dollars higher. It's yeah, absolutely Uncapped we we talk about our memory is usually nine months long. We forget about what happened a year ago Yes, well, and that's what happens. It's not gonna happen again What I don't make the question how about it going down? How quick might it go down? Is it gonna happen in one year two years or no fun? Yeah? If we have a catastrophic event, yes something like I said we need to watch corn next year We're gonna have fewer acres of corn that is a given. We're gonna plant more beans less corn and and Less double cropping corn for sure in the corn belt. How many acres are gonna go down? We still don't know Now everybody's watching Brazil for their soybean crop and their corn crop will Determine prices in the spring to help plan these but we're gonna have less corn And so we're gonna have to have good weather because we need a lot of corn because we're gonna We you know, we're still using corn enough and all although we've backed off prices So that's the thing to watch this spring is acres and corn price But but otherwise fundamentally we're gonna have less feeder cattle next year than we have this year So supplies are gonna remain very tight again with you know Demand is improving on the Fed cattle side. So we will hope should hold calf prices that Good levels again next year and even the you know the next year, but I think the the the advance is over Well from a cow calf producing standpoint, that's just excellent news to hear Thanks, Tim. If you're barge eating and buying calves and selling. Yeah, that's a margin business The cow calf sector is going to be very well rewarded this year in the next couple years