 We're continuing on with our market situation outlook series monthly throughout 2021, building on something we started just as COVID hit. We're going to have four speakers today and just especially because we're a little bit late, I'm going to hand it right over to Brian. Yeah, I noticed that, thanks Dave, I noticed the typo. This is the fertilizer prices headed into 2021, not 2011. So it's not an outlook from 10 years ago. So a little typo there, sorry about that. So I'm just going to go ahead and get right into it, but what I just want to talk about today are the major fertilizers, potash, phosphorus and nitrogen, kind of what's happened with prices, perhaps answer some questions that have come up with regard to fertilizer prices and what's been happening and show some charts reflecting on where we are now versus where we were last year. So next slide please. So first I'm going to talk about our phosphorus fertilizers. So I'll start with DAP 1846. And if you look on the left hand side of all these charts, you'll see this tiny little red line and that's the start of this year. So that's 2021. So the green line is 2020. The purple line is 2019. That gray dashed line is the five year average. And then again, that tiny little red line on the left, because we barely have a couple of weeks into 2021. That's this year. And you can see that DAP is above the five year average and quite a bit above right now in January where it was this summer when it was down around $410 per ton. And then we saw this big increase in DAP heading into the end of the year through October, November, and December. And then here in January, it's increased a little bit as well, still below where we were last year, which was closer to about $510 a ton, but above that five year average. And this is for the week ending January 8th. And then my next slide is your MAP. And I know I have DAP in parentheses there. That's bad editing. So this is MAP Monomonium phosphate 1152. Just like DAP, it's quite a bit above. But relative to last year's price, MAP is even higher. MAP is up around $540 per ton to start the year, which is above 2019 and considerably above that five year average. So you look at that. You see that little red spike on the left hand side of the graph. And that's where it was as of about a week ago. And again, same thing, that big run up starting into October, November, and December. We saw phosphorus prices going up, and MAP going up relatively higher than even DAP did. Big reason for that is, and I'm going to talk about it here a little bit towards the end, is just what's happened with phosphorus prices versus nitrogen prices, and MAP has less nitrogen than DAP. All right. So my next slide shows potash prices. Now this is, it's above that five year average as well. You see the little red line there to the left approaching $370 a ton, again, above the five year average, but below 2019 prices, where it was closer to $380 a ton at this point last year. But it also came up as well. If you look at the green, starting around November where it kind of bottomed out, potash prices have come up pretty remarkably from $330 to $360 a ton in just about a month and a half or so. And then all the way up to $370 a ton here recently. So we've seen potash prices increase as well. Then my next slide shows the cost of nitrogen per pound, if we can move the slide forward real quick. Thanks. So this is the cost of nitrogen per pound, and this shows four nitrogen fertilizer products. It's a chart that DTN puts out. You've got anhydrous, which is green versus urea, which is red. U-28 is orange and 32 is blue, and nitrogen prices have been pretty much a steady trickle down since last February. And yes, they've rebounded some here recently per pound, but again, quite a bit lower than they were last year. And I have a chart that kind of breaks this down on the percentage change year over year, which we'll look at in the next couple of slides. So my next slide then shows a specific nitrogen product widely used here in North Dakota and Urea. And compared to, again, this has that little red line on the left-hand side of the graph. Below the five-year average headed into 2021. And that's because we had this big drop in nitrogen prices here in the last few weeks. So the 2021 price is quite a bit lower than 2019. So Urea prices are down, and that's what we saw with those other nitrogen fertilizers. And then my next slide shows starter fertilizers, so 1034-0. And it's right at that five-year average. So there was a big run up right before the start of the year. And then we had nitrogen prices come right back down in the last few weeks. So they've come down considerably just in the last few weeks from $530 per ton for starter down to about 400 and let's call it 65 or 70 looking at the chart. So we've got a bit of a mixed bag where we've had these phosphorus prices as the year ended as 2020 ended, headed into 2021, ramping up and staying higher, potash as well. And then nitrogen prices ran up and then have come right back down considerably over the last few weeks. So a bit of a mixed bag in terms of what fertilizer prices are doing depending on the product. So there's not this universal increase versus universal decrease. There's a bit mixed with phosphorus being higher and nitrogen fertilizers being lower. And then my next slide is kind of a table showing exactly relative to last year exactly what the prices have done. Next slide, please. So we look here, DAP is up 11% and this is 1% it's changed from a year ago. DAP's up 11%, MAP up 22.5%, potash, basically even down 1%, almost 2%, basically even. Urea up very slightly compared to last year up almost 3%, starter fertilizer down almost 3%, and anhydrous which is NH3 down 3%, and then 28 down much more at 12% and 32 down 8%. So again, that's what I'm showing you this mixed bag of nitrogen fertilizers for the most part are lower than they were this time last year, phosphorus quite a bit higher as much with respect to like MAP up 22.3% relative to this time last year. And actually a lot higher than they were this summer and early fall. This is relative to last year when they were higher than they were say in July of 2020. Next slide, please. So one of the reasons for what's happened was the production cut they've had they had these lower fertilizer prices now for quite a while, especially if you look at it in a historical perspective. And one of the things that happened, and this wasn't a obviously a price driven decision, but the supply of phosphate declining in China due to COVID-19 in Hubei province. So that's affected, you know, world supply that's a big producer of phosphorus fertilizers in the world. And then mosaic reduced phosphate production in Florida, Louisiana, and then the potash mine in Canada in late 2019 into early 2020. So they reduced production to basically get supply in line with demand and help improve price. And there's a lag when you do those kind of things. OK. And so as a result, some of this big run up we saw in the fall and I'm going to get into it in a minute was we had a production cut to try to improve prices for fertilizer dealers early last early 2020 late 2019. And then, of course, we had this fall this year in 2020 where it was drier. The weather was warmer and farmers were able to go in and do a whole lot of work and catch up application. There were reports and I have an article that I read about it that some guys were delaying their phosphorus applications that they would have put on to help cut costs in some of these leaner years. And then they looked at this year where they had a better cash flow position and the weather to support this fall, big fall application. And so that's what happened. So you had a production cut, if you will, if you want to call it a production cut, and then you had a big increase in demand this fall over what we've seen the last few years just created this scenario where it wasn't that there we were short on fertilizer or anything like that. It's that you got to get it where it's needed relatively quickly so you can create these short-term periods of somewhat of a deficit or excess demand and it drives prices higher in certain localities. Next slide, please. So again, factors contributing to these higher prices and this is as per a DTN survey that many farmers took advantage of the dry fall in the Corn Belt and the ability to apply anhydrous post-harvest and 73% of their respondents and this was in the Corn Belt area stated they had already bought or were going to buy fertilizer before the end of 2020. That should have said it was for the end of 2020 there. So they'd already purchased the fertilizer or they'd already bought it and applied it. Then you have tax implications on pre-pricing some of these inputs. You're looking at the fact that you got the CFAP payments and you got maybe even some more of MFP2 in the early part of 2020. And then we had a big commodity price rally in the fall. So it was an opportunity to go ahead and pre-price these inputs that gets trickled through the market driving prices higher. And then some, again, taking advantage of the higher grain prices with phosphorus, that's what I said before, catching up a little on phosphorus applications that they may have delayed or reduced in years past waiting for an opportunity like this to go ahead and reapply the amount of phosphorus that if they had a deficit going. And then one last thing, the river, there was some areas on the river where Mississippi, mainly where there was some closures with the locks and other problems. And so it was hard to get barges for a period of time up north from the NOLA port down south. And so that caused some logistical challenges and increased fertilizer prices late fall early 2021. Next slide, please. Then, of course, you just have higher commodity prices. And higher commodity prices make local retailers of certain inputs believe that folks are willing and able to pay more. And so you might get a little bit of a price bump from these guys trying to recoup maybe some of the losses that they've seen in years past because there's this opportunity with higher commodity prices and the knowledge that folks are coming in and wanting to take advantage of the dry fall and the favorable conditions for applying your spring requirement of fertilizer and being able to get into the field and get field work done very early. Next slide. Then another thing that came out was this article, and this is taken as a direct quote from a DTN article, which I think they got from someplace else. But the fact that phosphorus prices in the US jumped in November. And part of that, I think this is part of it, not all of it, was the Department of Commerce's announcement at the end of November that it's doing an investigation in the countervailing duty on imports of phosphorus fertilizers from Morocco and Russia, where one country, Morocco faces tariffs or duties of 23.5% while Russian-based products ranged from 2020 to as high as 72.5%. So while this may not have a huge impact on the overall supply of phosphorus coming in or phosphate fertilizers coming in, it's still a factor and people trade on all kinds of different information and knowledge. The expectation maybe this creates some kind of shortage or increased duties for Morocco who knows what they're actually thinking, but it could have had an impact on overall phosphorus prices. And then my final slide, talking about prices heading into the spring, there may be some softening of wholesale prices into spring for both phosphorus and nitrogen. And the big reason for that is, like I said, we had this big spike in demand this fall and pre-pricing that took place in the fall. And so this big increase in prices for that reason. And if a bunch of guys got into the field, if a bunch of producers got into the field, got the fertilizer applied that they needed to get applied, we may see this spring where we have a big softening or a reduction relative to the last few years on the amount of fertilizer necessary or that folks feel is necessary to be applied, softening prices quite a bit. But the one caution I would say with that if you're holding out, any weakening in prices may be tempered somewhat by international demand. So if prices begin falling pretty dramatically, kind of what happened with nitrogen fertilizers and then if phosphorus winds up falling in the next month or so, some of these companies are going to be looking to export it into countries where they maybe are willing to pay a lot more. So we get some smoothing that happened. So the spiking that happened was kind of a regional thing, a domestic logistics issue. And any reduction I don't think is going to be as dramatic because we'll see some retailers or basically wholesalers looking to move and export any fertilizers if the prices soften too much. So with that, I can go ahead and perhaps take a question or two if there is any in the chat box. Otherwise, I'm turning it over to Tim Petrie, I believe. Okay. Well, good afternoon, everybody. Just go to my first slide if you would, please. I've had a number of comments lately from people saying now that the vaccine is rolled out for COVID, you know, the retailing will go back to normal and restaurants open and so on. And therefore, cattle prices should be much less volatile than they were, say last year or whatever. And I do not really agree with that and show you some of the reasons why in a minute the, you know, the backgrounding decisions have already been made, cattle are being backgrounded or already sold or this week we got huge sales, 7,000 head that kissed yesterday. So that decision is over. So I want to take kind of a longer run approach and look ahead to the calf market for 2021 this next fall and just show you all some of the different things that can happen that are going to affect the market and likely cause it to be volatile. But anyway, here's the five to 600 pounds steers North Dakota the last three years. Just like Brian said that little red line way in the left hand side is this year we didn't color code this in advance or whatever and actually my last year's is purple instead of his green. I switched those two around. But anyway, there's the purple line was last year. In fact, when you go to fall you see the last couple of years have not been that great obviously you cattle producers know that I think though it was quite a feat for us to stay at the last half of the year in 2020 at 2019 prices with all the things going on. Now you stay in the top there I say that you know the last three years 2017 isn't on this chart but 1718 and 19 we hit right at 180 and then declined into October like we usually do and we would have done easily 180 in 2020 because we're already at 177 there by the end of February before the pandemic hit and we would have likely followed that blue line across there which is 2018 so again looking ahead right now for 2021 I'm saying as of now I'm using those 2020 was 2008 2018 prices as a guide but a lot of things can happen so go to the next slide the two biggest fundamental factors that affect fall or anytime calf prices are slaughter steer prices and corn prices so I'm going to talk about both of those plus a couple other factors. So anyway here are slaughter steer prices and the purple line again is last year and it was all over the board we started off the year the same as the last two years and again we would have stayed quite likely on that like blue 2018 line averaged around 117 or so and you know everything was going so great into February and then the pandemic hit and all of volatility but again looking ahead to fall and what calf prices might be I think we need to hone in on those red squares there which is the live cattle futures market and you see the cash market here we're starting off the year 112 and that's about where the February futures are but then by April we bring them up there to 118 and 117 today I guess they're just off of here and then continue higher than the last three years averaging about 120 on those particularly from the June futures on we are higher than last year and so that is supportive to calf prices however that's again going back to you know that vaccines kicking in and more restaurant hotel or institutional trade going and good consumer demand it's also based on record exports that are now predicted and you know and you know that isn't a done deal either we've got a new administration in Washington and so what's going to happen to trade is is very uncertain and you know how much do the restaurants come back and all that so there you know it looks positive now but a lot of things can happen which would cause volatility so go to the next slide please another supportive factor is that our calf crop has declined the last two years and you know 19 and 20 likely to decline again in 2021 we'll know more about that for next month's talk you see up there in the top the national egg statistic service has a cattle inventory report actually cattle producers are being surveyed now that'll be released January 29th that'll tell us how many college replacement heifers everything else by state that we have in the US and so tune in on the webinar in February or next one and I'll have a summation of what that says and maybe how many calves we'll have so go to the next slide the other big issue that we have of course is weather here's the drought monitor that just came out this morning and start off on the top there you see how we know how dry it is in North Dakota but you know misery has company there and we pretty much most of the western US is extremely dry there's a lull down there they've had some some unseasonable snows even down in Oklahoma and Texas here in the last few weeks I just talked to my counterpart down there this morning and you know things aren't that bad down there but a lot of the US is very dry so this could impact calf prices does rain you even look over into the western corn belt there into Iowa very very dry and in northeastern Iowa and even a little bit slice in there into the other ice states Illinois and Indiana so that certainly is a concern from the cattle side go down to the bottom the dark green is major cow calf areas and then the red over the top of that is where there's drought you see on the bottom left there just about half the beef cows now are in an area of drought so if that continues and you know we need rain as it shows you there on the towards the right hand side we absolutely need rain this spring and a lot of it just to get back to normal if that doesn't happen in the drought expands that you know be earlier movement of calves to market likely and liquidation of cows and that always is has a negative effect on the market and then from the corn side as well what's the what's the weather going to be in the corn belt on what kind of a corn crop are we going to have we need a record corn crop so go to the next slide please to finish up there most of you in agriculture are aware that corn prices went from a very low level and through the summer and then by august have started increasing and so what I will say is the old rule of thumb holds true of change corn 10 cents change fall calf prices a buck in the opposite direction so certainly we have to to a watch corn and I suspect it will be volatile but I don't know anything about corn and so with that we're going to let the expert tell us what's going to happen to corn so go ahead frame all right well thank you Tim I don't know if I'm I don't know if I qualify as an expert but I'll do my best here so I wanted to give a kind of a review of the information that we got in the couple days ago in the January USDA reports and and more importantly give some implications for what does that mean as we move forward so as a reminder to everybody last Tuesday there were four major reports that USDA released now those four reports are always scheduled for this time of year it's just this year each one of those four reports had some surprises and some numbers that we weren't really expecting the market wasn't quite prepared for as far as magnitude of change and that's really what's what's now put a new fire into the marketplace and and as we move forward it's going to have some implications on what that means so on my first slide I'd really like to take a half a step back and and remind everybody so why is it that the these us we do USDA reports are so influential why is it that the marketplace spends so much time focusing on these numbers and there is a reason and most of the time when I talk to farmers they get really frustrated because as soon as the USDA report goes out it seems like the prices always go down well this is an example where no it doesn't always go down this is an example where obviously it had gone up so before I dive into the numbers I do want to give this perspective this kind of this higher higher view of what's going on the reason the USDA numbers are so important to the marketplace is number one the procedures the process that's used to develop these estimates is transparent we know the process that's used if I were to ask a private forecasting firm well how do you come up with that number I'd usually get the line well it's proprietary information I'm sure I sorry I can't share it with you but when it comes to the USDA process we know how they're doing it and the important thing is it's not a perfect process but it is very statistically defensible it's it's statistically valid so as a researcher I understand the process they're using again these are forecasts their estimates but the process is sound the only other comment I'll make qualification is the procedures have been put together and they're followed the same process as followed every year they're tweaked once in a while but these these processes or procedures work really well when we have typical or normal conditions okay if we have a very unusual year if we have something very abnormal if you have a extreme drought or extreme flooding or now you know more recently in the case of a trade war the the procedures this the math behind how they collect information and how they report the information it doesn't work as well okay because of this unusual conditions so when we see something different something unusual there's always a lot more debate about what the right number really is the other thing you got to remember is you know the question well why can't USDA do a better job why is it that they're making these estimates and there's always a trade-off between the cost and accuracy cost in the in the form of the financial cost but also in the time and effort it takes to actually to collect and prepare the information and we all know that USDA has been under some budget issues budget constraints and so they've really had to try and prioritize where do they spend their money when it comes to collecting information and analyzing that the second key point is you know USDA is a very large agency based on my my quick search there's about a hundred thousand employees within all of USDA that's all of the branches now obviously not all of those people are working on data that goes into these reports but there are pieces of it that do there's there's components to it that do flow into the the numbers that we got on on on Tuesday these employees are also scattered over about 4500 locations in the unit us and internationally my point of bringing this up is that they're to my knowledge there's no other private company that has these kinds of resources or the level of analysis that USDA does that provides to the evaluation of what's going on in the us as well as internationally the other thing that's interesting is you know the information is free right and everybody gets the access to that information at the exact same time so there's no leakage or anything the USDA works very very very very hard to make sure that everybody gets the same information at the same time that includes international buyers so if i've talked to a lot of international buyers because this is some of the programs we hear of it have at NDSU and USDA is still considered the most reliable source of information they have not only about what's happening in the US but many times about what's happening in their own countries okay the other final comment i'll make before i dive into the numbers is the USDA understand that when the market evaluates this the USDA information is one source now they put a lot of weight on that that's that's still considered kind of the gold standard of information but it's still only one piece of information and they do combine that with all of the other things that are going on in the marketplace to try and say well does this make sense is the information valid does it does it essentially meet my biases so let's just dive right into the numbers now i don't have time in today's report to really talk about all the information that came out there's well over a hundred pages of tables and numbers i've dug through a lot of that information and trying to synthesize it so on my next slide i'm going to start out with the production report so there's an annual production report where USDA comes comes out with their final numbers for harvested acreage national average yields as well as yields by state as well as total production by at the national level as as well as by state i want you to focus in on on three three lines the top line which is highlighted in blue is the what the trade was expecting to see so this is the average of a survey of private analysts saying what number do you think USDA is going to release in these reports and and the surveys are conducted by Reuters and Bloomberg and wall street journal as well as others the moral is these private forecasters put their best guest estimate together okay and the average of that is is the blue line on the very top we have the highest trade estimate the lowest trade estimate the black line that's highlighted towards the bottom is the last is last month's information so that was the information in the December production report actually technically November production report and then the red line on the bottom is the numbers we got on Tuesday so i really want to compare the the the blue row at the very top with the red row um row on the very bottom because that's really that what moves the market it's not what we saw back in in November or December it's really what do we expect to happen so the trade was expecting for example corn yields to be cut slightly in this final final january report for the 2020 production year but the reduction we got was much larger than expected and so what happened last month or the previous report really isn't the key it's what is the trade expecting to see because those expectations are already bid into prices that's already booked into especially the futures market so in the next slide all i did was highlighted the the two key numbers that came out of this particular report the surprise in the marketplace first and foremost was the corn yield the national average corn yield was taken down much lower than anybody was really expecting to see now a 172 as a national average corn yield is still is still pretty good but it's lower than we thought the number would be and as a result then total production the total amount of bushels we have available in the system is also lower on the soybean side again the trade was expecting to see a slight slippage a slight reduction in soybean yields but it was again kind of a little bit larger than most people would expect so we already have some very tight margins on soybeans which i'll talk about in a minute and so any any small change in the soybean market for the supply side or the demand side is going to have a big price response but the biggest surprise in my opinion it was really that corn yield in the corn production number dropping as much as it did on the next slide i'm going to shift into the quarterly stocks report so every quarter every three months usd8 is a massive survey of not only farmers but also all of the commercial handlers of grain and say how much grain do you have on inventory on a particular date well even though we got the numbers in in the first part of january now that the survey was actually taken in december so these are estimates for the amount of grain in the system as of december one i've also now circle circled and highlighted the the corn stocks number and again that was the number that was a bit surprising to everybody but it really confirms or helps cross validate the fact that yes we did have a lower crop than we had expected because in this in this quarterly time period we haven't we have consumption of corn both in ethanol as well as exports and feed demand but it's it's those numbers um really haven't hit their peak okay the more lot more of the story is this lower corn inventory number the grain stocks number the amount that we have on december one again adds validity to the fact that we didn't have as much production as we first expected if you compare the the blue line and the red line in soybeans and wheat they were both very close to what the industry was expecting but again the shock really was in the corn number on my next slide uh we'll shift gears again we'll talk a little bit about ending stocks so this would be actually for the wise of your report the supply and demand estimates so this is the the the set of information that combines not only the production uh numbers and carry over numbers from last year saying how many bushels do we have available within our system but also what do we expect the total consumption or usage to be for this particular marketing year and and then the question is well what's the bottom line how much grain do we expect to have in inventory in in reserves going into the harvest of 2021 now when we compare once again the the the blue line on top which is what the great train grain trade was expecting versus the red one on the bottom which is the actual numbers you'll see that these came out actually surprising like close if anything the wheat ending stocks number was a bit lower than what the trade was expecting of kind of at the very low end of the range with corn and soybeans being very close to what the trade was expecting now the the conflict in people's mind is well if we had this big reduction in corn and what is and a cutback in soybeans why didn't we see more of a reduction in those ending stocks numbers and in in particular for corn it was because the usd also adjusted the consumption they adjusted their forecasts for usage numbers they took all of the three major categories of feed demand ethanol demand as well as exports and they reduced those just a little bit and the reason they did that was because if as we have less bushels available average prices will go higher as as average prices go higher it starts to ration usage and and on the feed side it starts to look at some substitution effects that's one of the reasons that the wheat number dropped more than expected is because when usd a made the adjustments they cut the the feed usage for corn but they slightly increased the feed usage for wheat so there's some substitution going on look at the relative prices of corn versus wheat in particular into some of the feedlots for example in in kansas and okla and um kansas and in colorado some of that substitution is is is pretty legitimate okay up k if you can uh go the next slide please there we go so these are the ending stocks numbers now these are in absolute bushels and it does give you a perspective on you know where we're at but a better way of in my opinion looking at these ending stocks is to look at it irrelative to history so on the next slide this is the ending stocks numbers for corn so the green line on top is total production the red line is total consumption of corn in the united states the blue bars in the bottom is what's going to focus on i've talked about this graphic before those blue bars represents that stocks to use ratio so we're looking at our ending stocks in bushels divided by our total consumption or our total needs so what percentage of our ending stocks are we going to have in reserve in case there's a problem going into next year so how much do how much grain are we going to have an inventory percentage wise just before harvest so the blue bars are the historical stocks use ratio it's scaled on the far right hand side the red bar you notice is the current usda forecast so this is updated for the january numbers and that red bar did slip just a little bit i mean it's it's it's now we're getting to those this pricing range where ending stocks and corn are starting to get a little bit tight what i what i traditionally say up because i've looked at this historically when we get to that 10 carryover stocks number a 10 stocks to use ratio if if the stocks use is above that the corn market feels pretty comfortable and they're they're not really concerned so we tend to have lower average prices more stable prices that inflection point that tipping point between kind of being comfortable and being uncomfortable is about that in my my assessment about of that 10 level which is really where we're at right now today so if our ending stocks get below 10 what tends to happen is we start to get more uh more price movement upwards we're starting to see that in on marketplace but we also tend to have more volatility prices get a lot more sensitive to new information and changes in our expectations and that's really i think what tim was referring to in his talk is that as you start to change and adjust uh corn prices that has a direct impact then on what what cattle prices will do now just for reference points we're at about 10.6 right now based on the current forecast back in 2012 which is the last time we had really tight stocks we're at about a 7.4 carryover and back in 1995 which is the record low we're about 5 carryover okay so you understand now we're starting to get into this range where the the corn markets feeling a little bit uncomfortable and they're starting to get a little nervous about what this might look like as we move forward on the next slide i've done the exact same thing for soybeans so i won't describe the blue bars it's it's the same interpretation please notice that red bar on the far right hand side that is the current USDA forecast for ending stocks as a percentage of use that number is actually 3.1 percent our record low was back in 2012 at 2.6 percent so we're now getting down to those carryover stocks levels that are very very close to the record low and you're starting to see obviously the soybean market respond to that one of the other things i've been watching now in the last week or so is the price spread between old crop and new crop soybeans okay so if we're looking at the what's the price relation new crop so i mean old crop soybeans have really taken off if you look at the march contract on soybean futures it's really taken off and gone crazy if you look at the november futures for delivery at harvest that price differential heads is is widening out which means the old crop prices are rising much faster than the new crop prices are and right now we've got about a $2.50 spread price differential between those two crops if you go back you know literally a little over a week ago about a week and a half ago it was close to a dollar a bushel difference so what that also signals to me is that the market's getting very very very concerned about our old crop supplies they're just really isn't much left in the pipeline that hasn't already been committed that hasn't already been purchased or has an ownership stake and not necessarily at the farm level but more importantly at the commercial level so again this is one of the reasons we're seeing soybean prices going very very high average prices increasing but wait hang on we will see higher volatility and that means both prices going up and going down depending upon the new information we have in the marketplace all right the next slide is the same exact thing but for wheat now this is for all wheat it's all classes of wheat blended together not just specifically spring wheat but this is going to the reason I used all wheat is because it's going to play into my next discussion about planted acreage coming into 2021 when we look at our reserves of wheat again not getting class specific we're very comfortable in our our ending stocks of wheat the inventories of wheat in the us are very comfortable right now what I typically say is an a typical or average ending stocks number because we tend to carry a little bit more wheat anyway is between 30 and 35 percent uh carryover stocks is kind of that typical ratio well we're currently at about 39 percent back in 2007 eight remember it's spring of 2008 when spring wheat prices and and winter wheat prices went absolutely nuts our ending stocks number was about 13.2 so we we need to have those wheat ending stocks to get a little tighter before the wheat market really starts to get nervous so what's what's driving the wheat market right now is not necessarily what's happening directly in the wheat market but what's happening in the corn and soybean market and as I said USDA is already recognizing that we may see some substitution there may be some some wheat that would it may may have been in the export market or going into the into the domestic milling market that now might be diverted into the livestock feeding sector so the wheat market is going to have to have to work pretty hard to prevent too much wheat being diverted into the corn into the corn market as the corn substitute all right my next slide I'm almost there guys hang on just a quick update on South American production USDA really didn't adjust South American production for corn and soybeans in Brazil and Argentina a lot there were some adjustments in Argentina the USDA numbers actually are tracking relatively close to what the private forecasters or private estimates are saying the Brazilian crop USDA has been a little bit slower to adjust their expectations some of the private estimates are looking for bigger bigger adjustments a downward adjustment they're looking for average corn and average soybean yields to be cut a little bit more just because of some of the weather challenges they've had over the last several months so I do expect over time USDA may may tighten these up a little bit but these are still some very very big numbers especially coming out of Brazil so no major adjustments here there wasn't really any shock value in this but it is something that we're going to have to watch very closely as we move forward next slide um so the last report the last big report that came out on Tuesday was the winter wheat seedings report and the importance of the winter wheat seedings report is that now we're going to have to start playing this game of how many acres of what crop is going to be planted now obviously the winter wheat crop has already been seeded if price relationships change or the weather conditions change you know winter wheat can be ripped up and replanted into something else but given the drier conditions you saw the drought monitor map that that Tim showed a lot of the hard red winter wheat area anyways in pretty dry condition right now so the likelihood that you're going to rip up some of the hard red winter wheat and put in let's say a corn or soybean is is relatively low when we look at soft red winter wheat which right now actually has the highest market price is soft red winter wheat usually that's the lowest market price there's been a pretty strong incentive for those those farmers that are in the the soft red winter wheat producing regions to hold on to those acres the same case for white winter wheat so if we look at the total numbers that what the trade was expecting which is the blue what the actual number said which is the red and in this case what I really want to do is compare the red red row or red line with the black one that what what do we do last year so based on the USDA survey it looks like we're going to add about 1.5 million acres of winter wheat over last year's number now the interesting thing is we as we move forward the market is signaling very very strong that we need to have an increase in soybean acres we need to look at increasing soybean production to meet the demand base that's already kind of booked into or plugged into the system but we can't necessarily lose a lot of corn acres either because our corn balance sheet is starting to tighten up as well so the fact that we've got an increase in hard red winter wheat seedings is also now chewing into okay how many acres are actually going to be available to start switching crops or start shifting around as we get into the 2021 planting season so the next next slide is simply a statement saying look the battle has begun and I think there's more and more press talking about that we're going to have this discussion about given relative prices what are farmers going to plant in 2021 and how is all this going to play out and for North Dakota this is going to be really important because we are one of those swing states my final slide and I apologize for taking up so much time I just wanted to give a historical perspective on on planted acreage so the uh the gold one gold line on top is corn plantings the green is soybean plantings the brown is wheat plantings all wheat and then the the the fourth and fifth largest acreage crop so we have as far as annual production is cotton and sorghum and and I you know some people say well can't we steal some more acres from cotton or from sorghum well yeah but if we steal too much that makes a big change in their supply demand balance sheet as well and cotton prices have been going crazy as well as sorghum so I think it's going to be really easy to or very difficult excuse me to try and pull additional acres from some of these smaller acreage crops as we move forward so with that I'll be quiet and I'll hand things over to Dave I apologize for the length shocking frame it's good stuff uh yeah so I'm just going to make some brief comments about the corn ethanol markets uh there's a lot going on uh even in light in in in light of what happened on Tuesday with the announcements uh with supplies really you know up until that point we were looking at international factors you know using up a lot of corn and the things were going to get tight we also saw some some building of stocks and now things are are a little bit more dire than than than they were a few days ago again we now you know have a much smaller corn crop according to USDA uh that demand for corn elsewhere uh is going to be really hard to compete against uh and then in all of this too you know we have this relatively weak fuel demand it is winter it is the shutdown season but we're seeing really high stocks uh in in corn ethanol which is really depressing if you've heard in the last week or two there's some you know announced permanent shutdowns of some ethanol refining capacity uh in the industry one of those was you know a wet corn mill that simply wasn't going to make ethanol anymore uh also going along with that too is some uncertainty in policy both at the federal level uh and a little bit of optimism or some some positive news from state-level policies so just to talk really briefly about what's going on in terms of margins again I go to the South Dakota ethanol numbers pretty often because there's no North Dakota numbers but just to kind of see where they're at so right now you know they're reporting and this is the you know basically what's happening last week in South Dakota paying almost five dollars for corn tracking you know pretty closely right you know much higher than they've been paying you know a few weeks a few months ago and hurting margins the silage grains have been solid you know around that $200 mark corn oil is high and then really what's hitting them is the ethanol the ethanol prices it has really weakened the last few weeks we're up to about $1.50 for a bit which might have made uh 485 corn uh workable uh now we're down to that that that simple crush again not talking about other operating or or capital expenses but a 40 cents a gallon again I I would just use this really quick rule of thumb of 50 cents a gallon being break even and so we're clearly below that and really kind of looking forward uh think about what's going on fundamentally in the market uh you know corn I don't see any savior in terms of corn prices coming down significantly and I can certainly see downward pressure on ethanol prices again as those stocks build probably the biggest news longer term what's going to go on this year is what we're going to be doing with the RFS and so the administration uh did not announce uh renewable volume obligations for 2021 uh for for most of the fuels they they kind of kick the can down the road and the Biden administration has that is going to be able to make that call interesting you know EPA actually did send it up to the White House in June uh the numbers that they they that they calculated using uh their methods White House just basically never finalized the numbers and so there's a lot of uncertainty there exactly where where uh the Biden administration might see biofuels and again this is in light of COVID this is in light of uh other concerns and it really might be a signal to the market of what the the Biden administration thinks about biofuels you know are they a fundamental part of decarbonizing transportation or are they going to lean more heavily on electric vehicles and the like uh also really big news of what's going on so the supreme course did announce uh in the last week that they are going to pick up a uh a case from the appeals circuit basically saying you know did did the administration air when issuing small refinery waivers the the biofuels industry is a little upset that they did that because the the appeals court decision was in their favor basically saying that you know EPA had violated uh the law by doing that uh so we're gonna have to wait until you know august or september to see what the supreme court uh finally says uh also a little bit troubling in something we'll know within the next week is there's a lot of thoughts that the administration the current administration the trump administration uh might issue many more small refinery waivers between now and next wednesday they certainly could do that and all that would do is is muddy the water muddy the water further um you know in terms of the rfs and its actual impact on on those things it was originally designed to do you know the little bit of good news and all of this is that a lot of the state level uh low carbon fuel policies are really taking hold the california market is strong there's look at a lot of states to you know create those cap and trade models frayn asked me just before we came on you know is there something like that at the federal level and i'm sure there's going to be you know there's going to be a bill there's going to be discussion i don't think we're ready for cap and trade but at the state level uh it's really coming on strong what we're going to see unlike during the trump administration a lot of states especially california you know decided that they were going to pick up the standard and run with it in terms of uh environmentally beneficial fuel policies and now we have the biden administration which certainly sees this as a priority but exactly how they do it remains to be seen so those are our comments now that we're kind of back on track a little bit behind schedule because of our initial delay but i invite any of you to ask a question either using the q&a tool or the chat function um and give you just do that as you might be thinking of questions posting those questions just remember that we will have another webinar uh thursday uh february 11 so that'll be right after the next was the report and then also you can check out the slides and a recording of this and other webinars at the the outlook web page with the urls on the on the screen there i already mentioned some folks weren't able to make it online today they'll definitely uh be reminded that the webinar is there and of course if you want to come back and listen to any or all of this or the webinar from december you're very welcome to do that i'm not seeing any questions coming up i must have been quite thorough i wouldn't ask is do any of the panelists have any questions or thoughts or comments about there or any other presenters remarks or we all just i really i really don't have anything else to add i'm sorry without going on for another 20 minutes i anyway i did see one oh always great well thank you thank you for the compliment marsha we appreciate that we do like the positive feedback the only piece of news i would tell everyone which is not related to agriculture directly but the uh state legislature is considering having a 10 or 11th month school year either this year or next year because students have fallen behind so that may affect a lot of us maybe not at work but in other aspects of our life so that'll be interesting i want to thank everybody for for calling in today we hope we can see you uh in february thanks