 Good morning and welcome to the first of our four end of the growing season webinars. Over the next few weeks, you will have the opportunity to hear from our experts at NDSU about the major issues and possible solutions for crops to be harvested, stored and marketed. Thanks to all our speakers for making the commitment to participate. Please note that starting next week, the webinars will be on Tuesdays, starting at 10 a.m. For those of you who have other activities planned at the same time, we will be recording and you will have access to the webinars. Today, we have Drs. Brian Parman and Fran Olson as our presenters. Feel free to place questions in the chat box. The presenters will answer questions at the end of their presentations. There will also be time at the end of the presentations for general discussions. Thank you for joining us today. Sam and I hope that you find these webinars helpful in serving our clientele. I now hand you over to our presenters. Thanks, Mohamed. I'm going to go ahead and go first. We decided so Fran and I will kind of talk for 30-35 minutes-ish and leave time at the end for general questions as well. What I'm going to talk about today is just some general fall harvest costs upcoming, some big-ticket production cost items as we head into harvest and then start heading into the winter season, sort of an outlook on a few of the big-ticket production cost items moving forward. The first one I want to talk about as we head into fall is the price of propane, which the big motivation for that is then the potential cost of drying grain this fall at harvest. Last year, it wasn't as big a deal and this is a chart from Mont Bellevue, which is down in Texas, a major propane supplier and refinery. Last year, propane prices right around April, March of this year when Russia invaded Ukraine spiked up. Obviously not a record as you look at this chart. The highest price really was that period in 08 and 09 when propane was approaching $2 a gallon. Since then in 2014, it was approaching $1.50 a gallon and then this spring, if you look at this peak on the right, that was the early this spring and that was again approaching getting close to $1.50 a gallon. But last fall, it was also $1.50 a gallon, but one of the things going on last fall was we were coming out of a drought. The bushels weren't really there in North Dakota that needed to be dried. The number of bushels that you would typically expect because we had a drought last year, crops matured early because of the drought. As a result, the need for grain drying just wasn't as strong as it is typically in our state. But this year, there is the potential for that to happen. Now, I'm not a meteorologist so I don't have a forecast for how wet or how cool this fall is going to be as we as crops get to drying. But what I can say is that we're definitely off the peak for this year anyway, where it was approaching $1.50 and it's getting down closer to $1 a gallon. So it's considerably going to be less expensive this year if grain needs to be dried than it would have been the year before if the bushels had been there and things got late. And so I use a three month moving average and typically with propane, you do see peaks and it is a seasonal fuel that typically has higher prices in the winter, lower prices in the summer when demand is a bit lower. So I use this moving average to smooth some of the peaks out and there's been a downward trend again since the early part of the year. A lot of that was uncertainty as well. You had the invasion, we're still trying to figure out and it is impacting places like Europe, especially not having the access to propane potentially that they would have had before. But again, we've seen some relief there. So that's some good news on the propane front and then therefore the grain drying front. So if we look, I took these calculations from our ag engineering department, specifically Ken Halibank, he puts together these presentations on the cost of drying grain. He does presentations on it every year. So I just created a table here real quick to show, for instance, in this example is corn, what it would cost if the propane is $3 a gallon, $2.50 to $1.50 all the way down to $0.50 the cost per point of moisture reduced and this is at average or typical temperatures for the year and then the dollars to remove 10 points of moisture. So if you were going from say 26% to 16 or 25 to 15% for instance, which is not uncommon for North Dakota. So if we were down around, let's say $1.50 per gallon, so you're looking at about $0.03 per point of moisture or $0.30 a bushel to remove 10 points of moisture. So that's basically how to read this. So this can be found if anyone needs it, I can send this slide so that folks can kind of get an estimate of depending on what they're paying for per gallon of propane, how many points they're going to reduce corn at harvest using high temperature drying system and then the cost for instance, so you can do your own calculation if you're going to remove 10% versus 8% versus 6% etc all the way down. So this is just a nice reference table in 50 cent increments, but the calculation can be done for really any price. So if we look at the last three years what it would have cost for purchase propane, like I said 2021 October last fall was really the highest as we entered harvest season of the last three, well I think what I think will be the last four years including 2022. As of August the monthly price down there at the head in Texas and I realized that this is the Texas price and I can look at North Dakota prices as well, but the thing about North Dakota prices is they're sometimes a little bit higher than the wellhead price and sometimes a little bit lower, but for the most part they're about the same and it's so thinly traded in North Dakota from say April, May, all the way through September that it's hard for me to get a price so I have to take it out of a sort of a national price index in this case, but it's very close. I mean we're talking about a couple of cents usually difference. So August this year it's about $1.13 it does typically spike like if you look at this for for instance 2019 August was 40 cents a gallon by October it was 46 cents in November 53 2020 50 cents a gallon by October or it was it was about 52 53 cents a gallon okay and then 2021 it spiked up pretty high in October $1.11 a gallon all the way up to almost about $1.45 right now it doesn't seem like it's going to see the the big increase and that's not typically typical that it moves 30 cents or so possible that it's going to happen but right now it's kind of around that typical $1.10 a gallon that we've seen coming out of August so there probably will be some increase but you know stay tuned to see where that's going to go so again I don't expect that drying costs will be as high as they were in 2021 as far as the price that you have to pay per gallon but overall drying costs will probably be a lot higher because the bushels will probably be there depending on the weather again for us to have to do some drying now the other consideration to make sure that we always are cognizant of when we're drying grain is that you wind up with some moisture shrink this is pointed out in the in the presentations given by our ag engineering system for instance drying corn from 25 to 15 percent moisture will result in a reduction of about 11.8 percent okay because you're taking the water out if you're taking something out whether it's water or solids or something like that you're going to lose there is going to be some amount of shrink for instance okay so that's important for our producers to remember when they're harvesting their grain if they're and most of them already know this I mean they're well aware of it but it does might pay to remind somebody if they're doing a lot of drying the bushels that they see on the combine you may see a reduction in the the overall amount that you have left after moistures taken out but of course test weight does go up when that when you when you remove that moisture so the next topic real quick or harvest topic I wanted to cover was diesel fuel this particular item okay so as we're running trucks up and down the road and we're running grain carts and we're running combines we're going to be paying a lot per gallon for diesel fuel this year definitely considerably more than we paid in 2021 I realized we didn't harvest as much but it was much lower and then especially and then in 2020 so we're probably right now I just I pulled these prices not too long ago off-road diesel was around four dollars four dollars and 20 cents a gallon in North Dakota you know that's that's a buck buck and a quarter more even than they were last year so diesel prices are definitely higher this year that's going to eat into costs quite a bit especially if we're using doing a lot of trucking up and down the road running a lot of equipment we have a lot of bushels to harvest that's great but what we can expect that diesel costs this year are going to be significantly higher then of course there's you know general trucking and freight cost so this might go to people like our beat harvest folks who do a lot of you know the trucks are about to start rolling up and down the road here very soon anybody who's who's shipping whatever grain commodity that they're harvesting this fall freight cost is going to be considerably higher a lot of that is already baked in via the diesel price of diesel but the cost to hire truck drivers is going up as well labor costs across the country have increased quite dramatically double digit percentages and if you look you know if we go back to 2021 this increase has been considerable so that's one thing that we have to watch out for this year is that there might be some sticker shock as far as what it's going to cost to get grain hauled in and out of the field into its final destination or its storage storage space now here's another one and I've fielded several calls on this and that's uh decisions to trade off machinery this fall um and there's more to it than just the cost factor so just going nationally farm machinery and equipment costs are up about 18 percent uh over where they were a year ago so that's a calculation from this index and some of the challenges are not just in the increase in cost so some sticker shock of being up 15 to 20 percent in some cases anywhere and anywhere in between but the fact that with some new equipment you pay for it up front and you're not going to be able to take delivery on it until you know next summer that and that's and that's had a profound impact on used equipment as well because if you're in a situation or if one of the producers is in a situation where they need harvest equipment this fall your only option may be to actually buy used equipment which then you know a lot of other folks wind up in the same situation and so then you drive up used prices as demand for used equipment increases because you know if it's used it's probably sitting on the lot and available for you to take possession of right away so not only is used a new farm equipment costs up considerably but you may not be able to you may be on a wait list or waiting to take delivery for several months up to maybe perhaps even a year before you can get it so anybody who is thinking about for instance some new equipment for and I hate to say it but already thinking about spring planning if you're think if some producers are thinking about they need planning equipment they need a new planner they need a new disc they need some of this other stuff you may have to start if you're looking at new you may have you should probably be searching already because it could be several months before anyone is anything's available for them to take and if they have to go used the price of used equipment relative to new is very high right now and for all the reasons that I already mentioned so that's something to that you're going to want to remind producers and talk them through that hey this is the situation and here's the thing with with equipment it's been my experience and I haven't been at this as long as some for instance frame who's been at this a long time but typically if there is a price correction on equipment there isn't typically much of a correction on new equipment so what will happen a lot with new equipment is the prices will stop increasing or or stop increasing at such a high rate but they don't really decrease okay they kind of level off used equipment on the other hand has the potential to significantly decrease in in in value that that happened that's happened before it as recently as you know 2014 or so the price of used equipment came down considerably once a lot of the new equipment becomes available and everybody's trading stuff off dealers are having a hard time getting used equipment sold off the lot as a result the price of used equipment comes down that's probably going to happen in the future although I really hate to speculate to win I doubt it's next year considering that there's still these long wait lists for for new equipment so I think that used equipment will probably hold its value for a while a good while but again impossible right now for me to really say when that's when the when the pressure is going to be off and I suppose that's going to happen when eventually more of the machinery lots and equipment lots are have new equipment sitting there for folks to take possession of right away so natural gas I just wanted to comment on this before I go into the next portion and that's the the potential for pre-pricing fertilizer big spike in natural gas in in in 2021 and natural gas prices this year in 2022 have have continued to move upwards as well I know we don't do a lot of natural gas drying in North Dakota other states they do they do more of it you have to pipe it in unlike propane which you transport typically in store on on farm but this also ties directly into fertilizer prices a lot in a you know historically natural gas prices and fertilizer prices were tied very closely together highly correlated over time that correlation has kind of fallen off to a degree where the price of natural gas is not a big a factor in what the overall price of anhydrous and then your your end type fertilizers are down the road but right now it's definitely a factor because of the you know you've got countries like Europe for instance who had got a lot of their gas from from you know Ukraine and Russia and these other countries and that's potentially not going to be there this year driving up the global price of natural gas and if the price of natural gas definitely gets high enough it's going to have a an impact on the cost of nitrogen fertilizers because that's the main ingredient in producing them so kind of leading me into the fertilizer discussion it's usually around this time of year October September November when I start talking about potentially pre-pricing fertilizer for spring because usually fertilizer has a cyclical price nature where it's higher in these during spring planting so March April May then it is in safe during harvest season as co-ops and and then natural gas manufacture natural gas fertilizer manufacturers in general start trying to get rid of some inventory this year is different though I think to a to a degree and that's because of the high price of nitrogen fertilizers that we saw last spring reaching records you can see from this chart from dtn around march and april last year urea for instance topped a thousand dollars a ton nationally it's since come down which is good down about 20 percent since april where it peaked and so I'm not as adamant that folks pre-price or potentially start pricing fertilizer heading into spring of 2023 simply because I don't know that it's going to that I think there's an outside chance that it continues to come down a little bit further so if you are going to pre-price maybe waiting several months from now to be to do it but I'm not sure that we're going to be get back up to a thousand dollars a ton a lot of that was uncertainty baked in to these prices that folks just didn't know what was going to happen now that a considerable amount of time has passed some of that uncertainty on how what the supply is going to look like of natural gas and then eventually fertilizer is going to be some of that risk premium has been taken out of it so it's more fundamentals driven and less based on some speculation of supply availability I don't think that that that risk is going to be built back in so it may pay this year to actually wait and and be able to save 50 or a hundred dollars a ton over uh those are pre-pricing this year with some of the some of these fertilizers phosphorus same story it's down about 10 so uh not the big reduction that that that nitrogen has seen so about half that so 10 so down below a thousand dollars a ton on map and and dap as well so again I don't I don't think that this is going to be another product that is probably the top's going to come off of it again heading into spring so it may pay definitely to wait a few months before thinking about going ahead and pricing some of these inputs potash on the other hand is the one fertilizer that really hasn't moved it's really not coming off of the high that uh that that it saw in early April a big reason for that is the fundamentals on it are still the same a lot of potash comes from Belarus and Russia we get most of ours from Canada but Belarus and Russia are big world suppliers okay and so you know that takes that world price up and right now the expectation is that you know things may not be resolved in the next six months or so so that potash price remains elevated uh until perhaps some of the sanctions come off uh um Russia and Belarus and and the conflict and going into Ukraine so there's probably not going to be a lot of relief for potash prices anytime soon uh the good news on it though supply wise we're okay we get most of our we import most of the potash we use what we get most of it from Canada almost all of it so now I'm going to shift gears on this product uh this cost a topic and that is interest rates okay so this is uh uh uh where interest rates were as of the 30th of August so about a week ago or so and prime rate was five and a half percent and then in 2021 that prime rate was three and a quarter so up about two and a quarter percent uh uh compared to last year the 30-day library average is up up over you know 2.4 percent the one year up considerably and the 10-year treasury is effectively doubled and then we see that ccc loan rate has went from 1.1 and basically an eighth percent up to four percent so a big increase there uh in the ccc loan rate so anybody looking to utilize that tool that's available to them uh the the interest rate that they're going to pay on that is is dramatically higher than it was I'll still say it's it's pretty low by historical standards four percent is still pretty low but compared to one in 1.125 uh four is is quite a bit higher uh several magnitudes and then we I use mortgage rates a lot of times as just a proxy for like what folks might wind up paying for like a loan on to purchase new farmland or something like that and as of uh 8 18 so these are a little bit dated behind a few weeks um to get the average and the data from it but the 30 year about 5.1 percent and a 15 year 4.55 if you go back to last year these rates were dramatically lower I mean below 3 percent in most cases for the 30 year so up a couple of percentage points over last year so definitely a noticeable increase as the Fed has increased the federal funds rate over the last couple of quarters and then here's a weekly mortgage rates looking at uh this one going back was a primary market service weekly average this is as of 8 18 as well and all I did here was this is on a long run so this this chart here is a shorter time horizon this one's looking from about 2013 to now so you see how that increase there uh looks pretty dramatic but I like to put it into historical perspective these are some of the highest rates we've seen since about 2000 and 9 or 10 okay so but even those weren't terribly high you have to go back to 2009 or 10 to be as high as they were now but prior to that they'd remained above 5 6 7 percent for a considerably long time so historically interest rates still aren't very are not very high compared to the historical average but much higher than they've been over the last couple of years for sure so I show this to say some folks have talked about uh in the news have said are we in a recession are we not in a recession the technical definition of a recession is two consecutive quarters of negative GDP growth which we had albeit somewhat small quarter two I believe was about 1.6 percent and or a 0.6 percent quarter one was about a 1.6 percent decline both of those negative so by that definition um a slight recession but with a twist on this one typically during recessions unemployment rate goes up or gets gets worse uh this time that hasn't really happened very much it stayed low the labor market labor labor supply is labor demand is greatly outpacing labor supply so we don't see the unemployment occurring with it and I say all that to say so what is the federal reserve going to wind up doing um with these interest rates so there's a meeting coming up in September and I watch these I check them every few days and what this is is essentially you could think of it like this what is the market guessing or thinking that the federal reserve is going to do and this number has changed quite a bit before a few three weeks ago the thought was that the federal reserve was maybe going to raise rates half a half a point so 50 basis points that's dramatically shifted and the market's thinking there's going to be another three quarters of a point or 75 or percentage point 75 basis point increase at the september meeting here in a couple of weeks which would push that number up to three to three and a quarter percent and then I put the bottom chart in there to show by march of 2023 where does the market think the federal funds rate is going to be I would say um almost a majority thinks it's going to be four to four and a quarter percent or more and then you got a good chunk of folks who think it's going to be around 375 3.375 to 400 basis points or three and three quarters to four percent but pretty much the market all the way across is baking in more or expecting more rate hikes and a lot of that's going to come down to the inflation reports that come out for august which should be out in a few days and then september and what that unemployment number looks like the federal reserve has said they're going to be aggressive at trying to prevent or slow the rate of inflation and get it down to the 2% which is which is where they like it to be if they stick to their word and and all signs right now point to the fact that they will if these inflation numbers come out high again for august and then even on to september I would expect this this may even shift even further this has been moving to the right implying that the market is expecting higher and higher rates as the year has gone on as these inflation numbers keep coming in eight nine percent so that's something to watch and so the expect expectation is the fed is going to keep doing these these big rate hikes at least for the next few months so we can if going back to these interest rate numbers I fully anticipate that as the fed keeps raising rates some of this is going to go up now one last thing to keep in mind on that is that the federal funds rate and the rate that consumers or farmers or whoever is going to pay it's not a one for one if the federal reserve increases the federal funds rate 150 basis points let's say in the next couple of months or one and a half percent that doesn't necessarily mean there's going to be a one and a half percent increase in interest rates it's not a one for one in the higher this federal funds rate gets the less impact it tends to have in a lot of cases on the actual consumer lending rate in fact there's been times historically where the federal funds rate was actually higher than the rate you could get at the bank so it starts to lose its effect as it gets higher and higher and higher so last thing I just want to touch on is cash rents and land values rents first of all and from 2021 to 2022 both nationally and in North Dakota this one's North Dakota's this chart is for North Dakota did not wind up going up a lot even though land values did go up considerably and my next slide kind of shows that but there was a there was some caution when it came to cash rents especially considering where production costs were heading into 2022 if we recall you know when our most rental contracts negotiated well they're negotiated in the winter time before spring planning typically and at that time we already had sky high fertilizer prices we had fuel costs going up we had people worried about being able to acquire chemical herbicides pesticides whatever their chemistry was for the crop that they were growing and so there probably there wasn't a big appetite to pay a higher cash rent for for the same land you've been farming or potentially running new new land so that wasn't there so as a result yes there was a slight increase in cash rents in North Dakota 3% nationally it wasn't much I don't have the slide in there but I think it was around four and a half percent so North Dakota was kind of on par with with the the nation but not a big appetite for paying higher rents on the other hand there was a big appetite for buying land and you might say well what's the justification for that why would somebody be willing to go out and buy new land with high production costs but they won't be willing to increase their rent and and a big part of that was one low interest rates two perhaps even the biggest part was the the last few years of federal ad hoc programs mfp one two and then CFAP were all paid out to farmers in the form of cash well what do you do with cash you don't you don't go pay higher rent you go buy perhaps equipment or you go buy land with it if you have it laying around that's typically the case and so us a lot of that and then we had a strong year in 2021 right because we had strong commodity prices at the end of the year but production costs of 2021 were more in line with average than they than they were in 2022 and so you got these you had a big infusion of cash from CFAP you had some residual cash coming in from mfp2 and then you had a strong growing year so essentially a lot of cash floating around that cash was then turned into a new land purchase and unlike with a cash rental agreement where you got one or two years to cash flow it and all that's all the money you're going to make with a land purchase you can hope that maybe there's going to be some capital gain down the road that land prices are going to continue to increase and you can you can make some of that equity up that way if you wind up paying a lot right now so but back to but just kind of my two cents and outlook real quick on land values I do think that now that the that it's unlikely that there's highly unlikely and probably not going to happen that there's going to be any kind of big government program ad hoc program coming down the coming down at us in the form of a cash payment and while I think that 2022 is going to in the end prove to be a profitable year because of strong prices and a decent growing season I don't think that the the margin is going to be the same as it was in 21 and as a result we're not get farmers aren't going to be as flush with cash 2022 into 2023 again there won't be that high that the ad hoc program payments coming in and interest rates are essentially doubled where they were before that's going to mute some of this land price growth I would be absolutely shocked if land prices were I don't they're not going to go down but if they increase at the same rate that they did from 2121 to 2022 there'll probably be an increase but I don't think as high as the jump that that occurred this last year so with that I will go ahead and turn it over to Frane who will be talking about marketing strategies I believe for this fall yep thank you Brian and again we'll have some time at the end for Q&A so if there are some questions or things that you come up with again please use preferably the Q&A function but if you want to put it in the chat box we will try and get to them when we get a chance so here's my contact information I'm going to be going through kind of an outlook and update of what's currently going on talk a little bit about some marketing strategies in particular as we get into the harvest season now so if there are some things that you think about later on or want to reach out and visit about I have my email here as well as my office number and cell phone number so please again if there is something that comes up later on don't hesitate to visit so with that I will jump into corn so I'm going to go through the kind of the big three corn soybeans and wheat in that order this is some information I usually start with the USDA information because that's what the market starts with a lot of the private forecasters do even though they're doing their own forecasting they do kind of cross check and validate with what USDA is saying just to make sure they're not too far out of the realm of possibilities here so this is the information from USDA and both the production and the usage for corn the column on the far right hand side in blue is for the current marketing year so the marketing year for corn and soybeans starts on September 1 so we've now officially will be closing out last marketing year and we'll be getting the new marketing year so we've been focusing on these these blue numbers for a while because this is the crop that's been growing all summer this is the crop that will be harvested now shortly so the green column is last year's information and then the far left hand side in black would be from two years ago so we're going to use that as kind of a reference point to what what we're looking at and what we're expecting to see coming up for this marketing year before I dive into this in too too much detail and again I'm not going to get too detailed about the exact numbers because on Monday just as a footnote on Monday September 12th at about 11 o'clock a.m central time USDA will come out with updated forecasts for the column in the blue and we're not expecting major changes or major shifts I'll talk a little bit about what we might be able to see in in those numbers coming out on Monday but just recognize the information I have in the blue is from August 12th so about a month ago so again every year every month USDA updates this information it's called the WASDE report or the World Agricultural Supply Demand Estimates they focus primarily on US production and usage but they look at also at the global conditions as well and try and do some forecasting on global supply and demand as well as what's happening here in the US so I'll focus on kind of some US numbers I am going to talk a little bit about some changes in the global environment that we need to be continuing to watch so right now kind of the focus is really on what is our yield and yield potential especially for corn and soybeans now August is the first month that USDA updates their yield forecast based off of primarily survey information so up until August USDA is using essentially a trend line yield so they're using average yields based on history adjusted for technology better farming practices it's jumping on me automatically I'm not sure why as well as adjustment for a kind of up or down based on planting progress so if the crop is planted earlier planting progress is really fast the yield obviously has greater potential the crop has greater potential now in August USDA turns to a different methodology to come up with their yield and yield forecasts so in August they send out a survey of to farmers and say what do you expect your yield to be they also use some satellite imagery which I'll show you some some you know moment basically it's it's using the NDVI that vegetative index as a proxy for how healthy is the crop and they're using that to kind of cross validate what some of the farmer surveys are telling them now in September so we're coming up into the September report on Monday they're going to resurvey farmers and say you know now given another month worth of crop development what do you expect your average to be on your farm they're going to also use again some satellite imagery to try and cross validate but they're also going to send out enumerators they hire people scouts to go out into selected fields across the United States and actually do yield estimates very similar to what a crop insurance agent would do so now in September we're going to have three pieces of information to try and get a more accurate read on what is the average yield for a state but then also what's happening at the national level so the information we got last month in August national average yield was about 175.4 that was kind of an updated number it was down slightly from the 177 number which was the trend line so we're looking at slightly below average yields based on history recently a pro farmer did their crop tour they came up with an estimate their estimate for national average at about 168.1 again quite a bit lower than what USDA is forecasting currently but I want to caution everybody USDA looks at 31 states for corn and soybeans they do farmer surveys across 31 state area the pro farmer series only does nine states so they do a kind of a more concentrated look at what's going on within the corn belt and kind of extrapolate or take those numbers and say what does that mean for national numbers now more recently in the last couple days a few private forecasters now we're starting to come out with their individual estimates I picked a few of them just to give you an idea of what kind of the private forecasters are looking at so stone x which is formally fc stone I came out with a number of about 173.2 iHS market which used to be the informa economics I came out with a 171.6 number so I think that the the the the viewpoint right now is that because of some some drier conditions especially in the western corn belt which I'll show you in a moment the yield estimates the yield expectations for corn nationally is starting to drop a little bit and again a lot of this information's already already baked into or already been been evaluated and incorporated into the futures market and again the cash market uses the futures market as that starting point for determining local cash prices so I'll get into that in in in just a moment and try and clarify some of the details so the moral of the story is the trade most trade estimates right now are expecting the national average corn yield that's reported by usda on monday to be down slightly from the number that we saw in august so we'll have to see what usda's number is relative to what some of these private forecasters are so again just visually showing you the blue line is the trend line so that would be think about that as the average yield that's been adjusted for better farming practices for the technology we're currently using in agriculture the red line is the national average yield for each of the years the little dot on the far right hand side is the current usda forecast for for national average yields for the august report so what are some of the things we're focusing a lot on weather weather conditions we're in some really key crop development stages now especially in the corn belt for corn and soybeans the the the cob fill as well as pod set and pod fillings going on in a lot of the corn belt a lot of people use the drought monitor index as kind of a proxy for you know what are the areas of the of the nation that we need to be concerned about from a production standpoint it is something that i talk about even though personally i don't put a lot of weight on because as most farmers and and folks in in this part of the world realize is that even though you might have some very dry soil conditions if you get shots of rain at the right time at some key development stages you can still have a very good crop and so there isn't as probably as much correlation between final yield estimates and these drought monitor maps as as people had expected but it is one of one of those proxies it's one of those things that we're looking at so what are the areas that the market is currently focused on from a weather standpoint and hopefully you can see my cursor here the big area we're focused on is in not only in south dakota and nebraska but also western and kind of south southeastern uh iowa so there's some pockets in iowa there's a little strip here in minnesota that we've got some concerns about but really it's this south dakota and nebraska area that we're really concerned about when we get into kansas eastern kansas it's a little bit better shape western kansas where they have more of the wheat is in in a bit rougher shape there are some areas now in indiana that are starting to show up and show some stress as well and i do think some of the information that came out of the pro farmer crop tour recognize some of that that indiana was starting to have some some areas that were starting to suffer that may take the top end off the yield potential illinois in general is is in pretty good shape when you get into southern missouri a lot of this region and southern missouri doesn't have a lot of cropland area to it it's kind of the what they call the lake of the ozarks region so most of the core corn and soybean producing regions and in missouri is kind of the northern half of the state so i'm going to shift gears a little bit um and this is again an example of some of the satellite imagery that usda is using to try and help get a better feel for you know what areas uh how large an area and what areas of the country might have some yield potential problems or yield yield issues so i i chose this map because of the contrast it's it there's other uh n dvi maps that you can use as proxies i use this one because of the of the contrast it's a little easier to start to see where the areas of crop development that we are concerned about so in this particular version this is a think of this as a a an index an index that runs from zero to one so what we're looking at what us what the the satellite imagery is done is saying well what is the n dvi what is the vegetative health how green is the crop right now relative to the time period from 2000 through 2021 so we're looking at for this week how does the greenest of the crop this week compared to that 20 through 2021 time frame about 2020 about 21 years worth of data and they do this on a weekly basis so the what they're saying is that a ratio or an index of one 1.0 is that is the highest uh vegetative health that we've seen in that 21 period 21 day uh year period if you get down to zero it means that's the worst or lowest score lowest rating that we have seen during that time period so if you notice on the scaling on the right hand side these really dark blue it's from about 80 80 percent to 100 percent of the best that we've ever seen so you look at i areas like Illinois northern parts of Iowa parts of southern Minnesota when we look at the vegetative health this week or this last week relative to what we normally see this time of year we're definitely on that high end of the range relative to Nebraska especially you get into southeastern Nebraska here and even into parts of central Nebraska parts of South Dakota we're starting to see these reds and pinks which means that this is some of the worst vegetative health we've seen at this time of year in that 21 year time period so the areas that we're watching again we're starting to see some of the deterioration of of yield potential and the greenness of the crop in Indiana we're starting to see those blues turn more into the greens which would be more of an average or typical when we get into Iowa we're seeing these regions on the drought monitor map where there's the crop seems to be under some stress relative to what we would see this time of year and in particular then as you get into the western corn belt Nebraska South Dakota and even parts of North Dakota now the one caution I will say about the North Dakota NDVI numbers right now is that because our crop was planted so late our crop development we were planting late we've had some really good growing degree days so that the crop the corn crop in particular has been catching up a little bit but because the crop was planted so late when you look at the greenness of the crop right now relative to what we would normally see we're going to get a little bit higher scores simply because the crop development isn't quite as progressed as much as we would normally see so my point in bringing all of this up is if if the the yield and yield potential that some of the private forecasters as well as USDA is suggesting we will likely have some pretty good corn and soybean yields here in the eastern corn belt and along the Mississippi River Valley but when we get into the western corn belt the western growing regions parts of Missouri Iowa and in particular into Kansas Nebraska South Dakota and even potentially into North Dakota that's the areas where we might not have as great a yield and I I know that one of the things in talking to some of the some of the merchandisers they're a little bit concerned about test weights and again is if we if the crop starts running out of moisture later in the season even though the cob may have filled and we may have a lot of seed count on the cob or in the case of soybeans a lot of potential seeds in each pod that doesn't necessarily mean that we're going to get the test weights coming out of those that as the crop starts to shut down because of drier conditions it may not put on in the corn case of corn as much carbohydrates we also may have some of those smaller bb sized soybeans so potentially what that means is we may start to see basis levels local cash prices in the western corn belt hold help relatively well compared to the eastern corn belt which means that the market is going to try and have to pull some of the grain that we're producing in the eastern corn belt into the western corn belt to service some of the the processing needs in particular the ethanol plants and the soybean crushing facilities so just some things to be thinking about in looking at as we move forward so coming back to kind of the bigger picture issues how does this year compare to other years this is on the usage side I've talked a lot about the production side but what about the demand or usage portion of it now again we're going to get more updates throughout the growing season and throughout the rest of the winter on what our outlook for feed utilization which is the the blue line on top for corn the red line is ethanol consumption the black line is exports and the green line is kind of everything else so once again those little dots on the far right hand side of the current USDA forecast all of the other numbers that are solid would represent actual numbers that have been reported so these forecasted numbers can change a little bit over time so I want to focus on a couple key numbers that the market is going to be watching and and can watch on a regular basis one of them is the ethanol number so again every week the Department of Energy provides information on on a weekly basis how much ethanol is been manufactured the the previous week and this is a chart showing the weekly ethanol production going back to about 2015 you can see obviously we had some major issues during covid when we shut down an economy people weren't driving very much we didn't have the demand base for ethanol but now that we're starting to open up our economy again covid is is not necessarily under control but at least we're doing a better job of managing it we're starting to drive some more miles now the higher gasoline prices are also starting to curb some of that demand base a little bit so if we look on the far right hand side here we're starting to see this kind of the seasonal cycle for ethanol production kind of come back into that normal operating range we have seen a drop off here now more recently in the last couple weeks but uh again I do think that we'll start to follow this seasonal cycle so when we think about ethanol production the profitability of making ethanol yes gasoline prices are important but actually the bigger driver to that the more important driver for the demand base is how many miles are we driving so as long as gasoline prices don't curb consumption too much or we start to get into this kind of regular driving cycle I do think that the ethanol production the ethanol demand will be there so there's some pricing things going on with ethanol relative to gasoline that might cause some temporary disruptions but I really don't see that over a longer time period as being a major concern so coming back to the USDA's forecast for ethanol consumption this year versus last year I think it's going to be relatively stable I guess I would tend to personally agree with some of the USDA forecasts when we get into the exports this is a lot harder to predict and this is obviously where some of the political disruptions because of the caused by the war between Russia and Ukraine are starting to cause some more concerns and I'll talk a little bit more about those when we when we visit about wheat so what I've tried to do here is show who are the major corn exporters in the world so there's really four large exporters of corn the United States which is green is the top one the blue is Brazil the black is Argentina and then the gold is Ukraine now Brazil had a much better corn year this year than they did last year they the second crop corn or what's called their safrina crop was was okay it wasn't as large as what the trade was the first expecting but it turned out to be still a pretty good crop and so the expectation now is that Brazil will be one of our major competitors in the global market for corn and corn exports Argentina again they've had some drier conditions they've had some some yield cuts the what's there are some political issues going on now with their currency they're trying to make the Argentine corn and soybean exports a little bit more favorable in the global market because Argentina has had some very rapid inflation which has caused some real concerns with exchange rates so there the Argentine government is stepping in and trying to have basically a different exchange rate for corn and soybeans relative to all of the other products they're dealing with the one question I commonly get is well what about Ukraine Ukraine historically has been a pretty significant corn exporter but obviously because of the war and shipping problems those the forecast the expectation is they will be able to ship some corn but not nearly at the volumes that they were originally and so this is again one of the things that's impacting the corn market and the potential for the US to be able to export our corn globally so if we kind of try and synthesize all this what does this mean for pricing and price potential I want you to focus on the blue bars on the bottom that's the stocks to use ratio so it's scaled on the far right hand side the far left hand side is scaled in billions of bushels which represents the green line which is totally us production the red line which is totally us consumption including exports so you can look at kind of that relationship between production and consumption what I really want you to focus though is on the blue bars in the bottom so if we take our ending stocks how much grain do we think we're going to have in the bin just before harvest and we divide that by total use we get an estimate of what percentage of our total needs do we have in reserve in case there's a problem now notice the far right hand side which is in in red is the current USDA forecast looks like we have their forecasting just under 10 percent carryover stocks and 10 percent is kind of an important number for corn because if it gets over 10 percent carryover stocks the market feels pretty comfortable they've we've got a margin for error you know if there are some problems or disruptions that occur we have the extra reserves to be able to to use that as a buffer or shock absorber but if we get below 10 percent then market gets kind of nervous and we tend to see more in general higher prices but a lot more price volatility so for those years we have the blue line is relatively small we tend to have higher average prices but again a lot more volatility any new piece of news tends to put more of a shock value into the marketplace both upwards if it's if it's positive prices but also downwards if it's something that is negative for pricing so a couple time periods I want you to look at is of course what we're going through right now and what what that how that compares to what happened in 2011 2012 and 13 the last time we had these lower carryover stocks so this is a chart of the futures market prices for corn going back many many years and I pulled this chart this morning at about 8 o'clock because the futures market takes a short break between 8 and about 8 30 so I pulled these charts at that point so this this should be as of this morning the blue the blue over here is the current price so that was as about again 8 o'clock 682 would be the December futures we can look at that price relative to what we've seen historically so notice the volatility the price bouncing that we got here in the last several years versus what we saw back here in this 2011 2012 and 2013 time frame so when we are carryover stocks down here for example in 2015 through about 2020 when we had relatively strong carryover stocks we had that buffer we saw lower average prices in the futures market as well as in the cash and a lot more stability in the market price is a lot harder for a farmer to say boy there's a big shock in the market I'm going to try and price something at that point we're in this range right now where because of those ending stocks are getting tighter we can see this big price swings and that's going to be a bit difficult it's going to cause some frustration for farmers as they try and decide what to do so let's zoom in a little bit this is again we've taken a chart about 8 o'clock this morning for December futures now every one of these bars represents one day so we're looking at what happened this morning relative which is black the blue lines I put in and those are kind of psychological barriers support and resistance levels what I want to point out though is that look at the the general upward price movement we've had since earlier this summer so as as the crop has developed we're starting to see some of these big areas of the major corn belt start to have some production issues as our as our stocks the supply seems to be a little bit smaller we still have a relatively strong demand base our reserves or carryover stocks are starting to shrink we tend to see this upward movement in prices so again the information we get on Monday the big question I have in my mind is this about 680 seems to be a psychological barrier that seems to be kind of a limit as we look at prices here but it was also a kind of a resistance level or support level excuse me that we saw here this last spring so in my opinion 680 is going to be on the futures is going to be kind of a critical point if we can have enough price momentum if the if the information in the market is strong enough to be able to push us through that psychological barrier 680 the next will be just a little bit over $7 so we will probably have another 20 cent range if if the crop continues to have problems or it looks like it's going to be smaller than normal or our exports or domestic demand base is going to be stronger than we expect if we can break through the $7 mark then there's about a 50 cent range that we can get to up in these higher levels but it's going to take in my opinion some pretty large information there's going to be have to be some pretty big shocks to the system to be able to get us above that $7 futures market price so again I from a pricing standpoint I would look at that as as some key pricing points shifting to soybeans a very similar story right now the focus is really on yield and yield potential the August report from USDA was about 51 almost 52 bushels per acre national average yield pro farmer tour as well as stonex and iHS market are looking at some very similar numbers so it would the surprise of the market on next Monday would be if USDA took that number down more than we had expected I do think we'll see a little bit of slippage just because some of those crop condition ratings in in the western corn belt are not as favorable as it were about a month ago but I don't expect it to see a really big contraction because the soybean you know the soybean harvest hasn't started yet we still have some development time especially as you get into the core corn belt states when we look at the current forecast relative to kind of the long-term average if we're looking at an average we're we still are looking at an average yield above the trend line so it right now it's looking as though we'll probably have a better than average yield from a yield standpoint but again that can change quickly depending upon you know heat and temperature as we get into these key development stages for the soybean crop when we look at usage when look at consumption the soybean story is a little simpler we really have two big uses the crushing industry as well as exports notice that the crushing industry has been a very strong and stable growing area I'm going to talk about that again in a little bit as we look at some new crushing plants coming online exports short-term exports is really the area that we need to be watching especially for the next couple months so let me talk just really quickly about crushing because I know that I'm getting a lot of questions in particular about the ADM marathon plant that's being constructed now at Spiritwood there was groundbreaking for the ethanol plant for the North Dakota soybean was it the North Dakota soybean growers which is the a joint venture between Minnesota soybean as well as some private investors in Castleton there's also a plant that's being planted constructed for excuse me for in Minnesota at I'm losing the name of the town right now just across the river in Minnesota now those are local developments so and and obviously we'll have an impact on local demand base and basis levels but we need to look at a lot of the pricing that I'm talking about today is really at the national level so I just wanted to remind everybody that right now there's about 14 plants that are either under construction that are existing plants are going through with some kind of expansion or that are still on the drawing board under development so my guess right now my personal belief is I don't think all 14 of those plants will get built but obviously some of them are currently under construction or under expansion so we will see a growth in the demand uh the demand base the ability of the U.S. to be able to receive and crush soybeans most of that has been driven by a move towards renewable diesel fuel a stronger demand for the oil seed portion of it now if all of those plants at least conceptually if all those plants were built we'd see a growth about 45 million bushels of additional capacity so what we'd we'd go from about 2.2 billion to about 2.7 billion now that would be a huge expansion now that will happen over the next several years so it's not an immediate growth in demand base but it is these projects are coming online I think by this time next year we're going to see some of those expansions in particular in the corn belt start to kick in and that demand base for crushing will start to grow so longer term I do think this is going to be a major change because once the plants are in are constructed in operation they tend to stay in operation just because of the large overhead costs so something in a little bit more distant future to be looking at short-term um soybean again it's it's the global soybean trade is actually relatively simple to understand you look at what's happening in the U.S. what's happening in brazil and what's happening in china so when we look at soybean exports this would be export for whole soybeans the blue line is brazil the green line is the united states the black line is argentina now argentina produces a lot of soybeans but they don't export a lot of whole soybeans they usually process it into oil and meal first and then export the oil and meal now here's the real driver of course is the chinese imports which is the red line right now there is some concern about whether usda is is overestimating the the the rebound in demand for from china for global soybean production uh because they've had some covid shutdowns their economy is not as strong as it normally is the profit margins for producing hogs in particular pork and in china has not been strong for for quite some time um so you know that there are some industry analysts are saying is is usda overestimating the ability of china to import uh large amounts of soybeans off the global market now they are going to import a lot of soybeans there's no question it's just how much are they going to import and they import are they going to buy it from brazil or are they going to buy it from the us so for soybeans we have a relatively short window over the next about four to five months where really the soybean crop coming out of the us will be the dominant source for chinese buying the expectation is that brazil is going to have a very large production next year brazil is going to already planning to increase their acreage if they get normal yields they're going to have a real big monster crop i'm going to put a lot of pressure on us soybean exports later on this winter so again just something to keep in mind i do think there's an opportunity over the next several months but we're going to it's a relatively tight window that we have to work with when we look at the blue bars in the bottom our soybean inventories are relatively tight they're not at historically low levels but they're definitely on the tighter side of of the supply usually that five percent five to six percent is kind of that tipping point that i talked about before similar to corn so when we look at price volatility again in this graphic the blue is the price we saw this morning i drew in the red lines and the black lines to kind of show historically long term what have we seen and where do we compare today versus what we saw for example in this 2012 11 12 and 13 time period kind of the last time we had really big high soybean prices obviously we had this spike during the summer but as we got to crop planted and it looked like we're going to get some production this year prices have dropped so let's look at what's going on you know kind of shorter term this is again daily prices uh the blue excuse me the black line is where we were this morning at about eight o'clock the blue lines are those support and resistance levels you know we've we've had more of a choppier trade in the soybean market and again some of that is not only the size of the u.s crop but also then some of the things that are going on in argentina and their ability to supply product into the global market as well so there's there's some conflicting news if you will in the global markets right now that's been impacting soybeans we're going to get some more production information next monday that will obviously have an impact on the soybean market whether it'll be a positive impact or negative impact is yet to be seen so shifting it into wheat and i know we're going to run out of time here so i apologize hopefully there's some questions um wheat is a little bit different story again when we look at excuse me go back to production uh we're going to have a reasonably good wheat year i know that the winter wheat crop especially in kansas was kind of a mixed bag uh proteins tend to be a little bit higher than average uh yields were very variable but in general it'll be an okay hard red winter wheat crop the soft red winter wheat crop looks like it'll be a pretty good uh production year we're still in wait to hear kind of what that the final yield numbers are from this the spring wheat growing region um there is some uncertainty yet but it looks as though the earlier reports that i have heard and again please feel free to confirm or deny is that you know the wheat crop is looking pretty good uh protein levels are about normal uh test weights are actually been pretty good the large variability in yields depending upon when it was seeded and what kind of of land it was seeded on but in general a pretty good spring wheat crop as well so let's look at the demand base the blue line is is what the what usc calls food it's basically domestic milling relatively stable over many many many years we don't we don't see even though prices change we don't see a lot of of shift in the amount of of wheat we use domestically the red line is exports that's obviously the area that we have kind of the most concern so i want to focus in a little bit on exports um i looked at historically what are the the major exporters of wheat um i included kind of shadowed some of these other countries but i wanted to highlight what's going on in russia which is the red line the united states which is the black line and then ukraine which is the blue line um so because of the war going on ukraine is having some problems they are able to ship some of their product but not at the volumes that they normally would russia had a is going to have and is having right now a very big production year they've got a very big wheat crop coming um the expectation is that russia will start picking up some of the sales business that ukraine cannot meet because their shipping has been a little bit more more fluid than the ukrainians um they have their supply chains haven't been disrupted as much as the ukrainians have so the idea is that some of those countries that may have been buying from ukraine may shift to russia that's yet to be seen um russia is now starting to complain that they're not getting kind of the interest in the marketplace that they normally would at this time of year so again the usda numbers that i'm showing on this graphic might be a little bit overestimated for the russian um russian wheat exports but again they had a very good big crop they're going to be very price competitive just to show you what i'm talking about these are the value of wheat loaded onto an ocean vessel these are daily prices um the the three lines that i want you to look at is the is the brown line which is ukraine that's a this is all for winter wheat now it's not a spring wheat prices all winter wheat prices so these are global prices so the brown is ukraine the red is russia the green on the very top is a hard red winter wheat loaded at the gulf of mexico basically at new orleans so you can start to see how the us price compares to other comparable hard red winter wheats in the global market again the because of the size of the russian crop that's also starting to pull down some of the global prices and the us winter wheat crop has to be competitive with our global partners um and and so we're starting to see some softening of the hard win winter wheat price which again is now putting some weight into the spring wheat prices when we look at let me just look at spring wheat specifically when we look at carryover stocks for spring wheat we are relatively tight right now based on recent history we're seeing that in spring wheat prices so again as of this morning the the blue is what we saw about 913 this is going back historically we have seen obviously higher prices this last summer but again that was a lot that was a combination of the the war between ukraine and russia but also very delayed planting we had here in the northern plains so when we look at today's prices my point let me go back my point is today's prices relative to history are still very strong the problem is we've gotten we've kind of got our our thoughts and ideas distorted by what happened this last spring so if you look at what's going on in the spring wheat market we've got kind of a trading range going on right now um there are some things that might break us out of that trading range either up or down and it really comes down in my opinion the size of the canadian crop so this is a canadian spring wheat production in gold versus us spring wheat production in green so you can see what's kind of the trends going on so we had to recover in spring wheat production here in the us but also in canada now here's where they produce spring wheat in canada um manitoba siskachuan and especially northern siskachuan is where most of the spring wheat is produced and then into alberta these these kind of beige areas are really hardcore durum producing regions so there's a lot of wheat produced it's just is it spring wheat or is it durum so when we look at spring wheat it tends to be a little bit in the in the central and northern parts of siskachuan the southern part right along the montana us border tends to be more of the durum growing region the reason i'm bringing that up is if you look at drought conditions and soil moisture conditions in in not only manitoba which have been relatively strong but then you get into siskachuan and into alberta you know this is the area that everybody's concerned about so these drier areas in southern and central siskachuan yes it's impacting spring wheat but it's probably having a larger impact in my view on the durum prices and durum outlook um so with that i will stop because i'm going to run out of time i'm already one minute over for me that's actually not bad so i'll stop sharing and we'll go to questions i know that was a real quick blow through on on topics um i apologize for taking up so much time are there any questions for either brian or myself i know that's a lot to absorb okay looks like we have one question here um who are the buyers of russian wheat uh actually that's a very good question um the big buyers of russian wheat tend to be egypt um north africa and parts of the middle east so egypt is the largest single largest single buyer of wheat globally as a single country uh logistically because of obviously egypt is relatively close to the black sea moving wheat from the the russian areas into through the black sea through the strait of istanbul into um egypt is relatively straightforward russia has both russia and ukraine have become major suppliers for for egypt now because of some challenges again with the supply chains out of ukraine russia has become the dominant buyer but russia also sells a lot of wheat into um iran iraq afghanistan even into a little bit into india bungledesh but also into north africa um so the countries the point is the countries that russia usually supplies or that ukraine usually supplies are are typically not big buyers of us hard red winter wheat um our prices tend to be a little bit higher most of our winter wheat buyers hard red winter wheat have uh it's it's the philippines it's mexico um it's japan it's those countries that have a little bit higher quality standards they want more consistency in their products so even though we don't usually compete head to head uh but it does impact obviously global supplies so if if there's a country that typically buys from russia or from ukraine they can't get their wheat from those those sources they will turn to the global market possibly buy from europe they could possibly buy from australia they might come to the us but again it's relatively unlikely given the kinds of countries and some of the other trade restrictions that we have in particular going into the middle east countries very good question well a quick question for you certainly with regards to stock to use it seemed like of the crops you mentioned soybean wheat corn the stock to use ratio for wheat is kind of lower than the rest um this year versus last year will that help the price um it it will to some degree and what i showed because of the sake of time i showed you just spring wheat if you look at the carryover stocks for all wheat if you blend spring wheat winter wheat and endurum and white wheat all together in the us we actually have what i would consider average carryover stocks for wheat so what ends up happening then is we start seeing some price differentials between the different classes of wheat so so what typically you think about well what is the price in average for wheat and we say well is spring wheat above or below some of the other classes so of all the big three crops corn soybeans and wheat actually soybeans is the tightest supplies when we look at kind of the big picture issues um then i would say probably corn we're not really super tight on corn but it's getting to a point where people are a little uncomfortable we still have relatively comfortable stocks of wheat but spring wheat or a bit tight on so it's a subclass it's one of those uh those areas where yeah i think spring wheat has probably some more price volatility then let's say a winter wheat would have but i don't know that we're going to see great big rallies like we saw this last spring so that would be more useful for our producers than because we produce a lot of the spring wheat versus Kansas correct correct yep yep if no questions you can always send your questions or chat to um Frayn or Brian thank you Frayn and Brian thank you all for participating this morning this will be recorded so others who cannot make it or for those of us who present and would like to kind of review certain parts it will be available to you in a short while maybe a few days thank you all and have a good day thank you