 Good afternoon, everybody. Welcome to the August 2023 edition of the NDSU Extension Agri-Business Egg Market Situation Outlook Webinar Series. Following the standard format, we'll have a series of presentations and answer questions at the end. Fortunately, everybody can be here. I think until the end of the program, we can field all the questions at that time. We ask that you use the Q&A tool or the chat tool if you prefer, but feel free to use that and we're happy to respond to any questions you have. With that following the standard order, we'll kick it over to Brian. All right. Thanks, Dave. So we've covered a lot of topics this summer, a lot with the Fed and some other things, but today's presentation is going to be on the most recent USDA's land values in rental data. The report comes out every single August, about mid-August, where the USDA uses survey data to put together their national land values and rents report for both pasture and cropland. And so I'm going to focus on this presentation specifically on the national stuff you've heard in the past. I've talked about North Dakota specific land prices and rents. So this one's going to be nationally themed for the most part. So the first chart here shows the USDA survey data for cropland values in the U.S. from 2009 until this year, 2023. And what you notice right away is that you had, since 2009, there have really been two periods. And if you went back before 2009, it looks pretty flat as well of land price increases for cropland nationally. And the big one before this most recent kind of started in 2010 and concluded in 2013 or 14, where land prices across the U.S. pretty much moved sideways for almost eight years or so from $4,100 nearly in 2014 to $4,100 in 2020. I mean, that's as flat as it gets. But do you look at the last three years or so? And in 2000, in 22, there was a 14%, 14.3% increase from 2020 to 2021, almost an 8%, 7.8%. And then the most recent year, 8.1%. So the biggest jump occurring from 2021 to 2022, that's that 14.3% increase. Last year and then last year, 8.1%. And then from 2020 to 2021, 7.8%. So almost two years of 8% increases, sandwiching 14% a year ago. And so that's kind of what we've seen taking place. And there have been some talks about things slowing down a little bit compared to a year ago. And that's what they're talking about with this 7.8% increase or 8.1% increase compared to 14.3%. And if you look at the map, this is put out by USDA and they divided into regions. With the USDA's data, North Dakota's cropland in the last year increased about 13%, 13.2% up to an average cropland value of $2660. Nowhere near the highest price stuff, obviously, that's Iowa at $10,000 an acre, Illinois nearly $10,000 an acre, Indiana $8,500 an acre, Ohio $8,200 an acre, down into Nebraska almost $7,600 $800 an acre. So North Dakota up pretty sharply. And if you go across the river from at least from Fargo into Minnesota, you know $6,800 an acre and up 10%. So actually North Dakota increased last year more than Minnesota did. And this map kind of lays out the darker the red, the more expensive the cropland is. And then the lighter colored, more yellow or manila colored is generally less expensive. And then they also track pasture land values as well. And this shows the same thing. There was a modest increase, not nearly as much as cropland from 2010 to 2014. When we saw record high cattle prices during that time, up to almost $1,300 an acre nationally. And then you look the last three years or so pasture land prices across the country have increased pretty sharply. Up last year, from last year to this year, almost 7%, 6.7%. But the year before, almost 15% from 2021 to 2022. And then 5.7, almost 6% from 2020 to 2021. So similar to what happened with cropland prices, a big jump a year ago, but instead of around 8% closer to 7% and then 5.7 the year two years ago with that increase. So increases in pasture land, very noticeable, pretty big jumps, but not quite at the magnitude that cropland prices have increased across the country. And then this is the same kind of map as the one that the USDA puts out for cropland prices, but this one pertains to pasture land. And you can see North Dakota had a pretty sizable increase in pasture land prices. It's a little fuzzy there, but 15, that's supposed to be about 15% with North Dakota's pasture land prices on average going over the $1,000 an acre mark for the first time. And again, not as expensive as some other states. You get into the Southeast and pasture land prices can be $3,000 an acre. I always caution though when we're talking about pasture land prices to really make sure that if you're if you're really deep diving into the comparisons between say the Southeast or Florida and places like Nebraska, South Dakota, North Dakota or Texas, you look at it in dollars per AUM. Everything tends to be reported in dollars per acre because it's simple and everyone's comfortable with it. But there is a big difference between the stocking rates in the Southeast versus the stocking rates in the Mountain States or the Northern Plains, where in the Southeast you might get away with two acres for a cow-calf pair and other places it's, you know, 15 acres for a cow-calf pair. So you got to make that adjustment and look at it from a dollars per AUM basis to see what is truly more expensive one versus the other. And the same is true for cropland, of course. I mean, some some areas are more productive than others, but it's a little more standardized and a little more well-understood and you don't see as dramatic as differences so much as you do with pasture land prices. So economic regions. These are the regions that the USDA uses. I put a little indicator in case anyone forgot that North Dakota is this really northern trapezoidal state at the top of the country right here. We're in the Northern Plains region. All right. And I just wanted to show, this is a table that's put out by the USDA as well. And actually last year, so from last year this year, the Northern Plains, which are these four states, Kansas, Nebraska and the Dakotas, had the highest cropland and pasture land increases on average as a region. So the Northern Plains increased at 14.1 percent. Okay. And then pasture land values for the Northern Plains increased 13 and a half percent with North Dakota up there with Nebraska and Kansas, 15.1 for us, South Dakota, the lowest. But our region increased the largest amount. Now one thing that's also tends to be true, and I'm just going to back up here and you look at this map, you see Iowa from a year ago increased 8 percent. And I use them because they're one of the leaders in cropland price increases. And what tends to happen a lot of times when we have these increases in cropland prices compared to, from North Dakota compared to like the Corn Belt, we tend to be a year behind. So if, and what I mean by that is if there's a big increase in the Corn Belt, North Dakota is going to have an increase as well, but it's going to be a year behind those other states. They're going to move fast and early and North Dakota is going to lag by a year. So they had a bigger jump last year in the Corn Belt than, than we did here in the Northern Plains. And so it's almost like we're kind of catching up and they, they've slowed down. So if, if that pattern were to hold true next year, we'll, we'll, we'll slow down to closer to, you know, that 8 percent mark if, if, you know, conditions don't change a lot. So that's, I just something to keep in mind that when you maybe read some articles about a big jump in, in cropland prices in Iowa or Illinois or something like that. And, and then the year's data comes out in North Dakota's at 7 percent and they were at 11, chances are things remain, we're going to catch up the following year. And that's, that's what we see happen a lot. So let's talk about rents real quick. They don't, USDA doesn't make their own, make their own charts for rents. So I have to, I use their data, but I have to make my own charts for those. And 2023 was the, the biggest increase last year to this year. And then the year before we had 4.7 percent and 5 percent a year earlier. And then that 2020 to 2021 period about 1.4 percent increase in cropland rents. So nationally it averages about 155 bucks an acre. And you can see the increases kind of started in 2021 after being pretty flat following that run up that occurred in two, from 2009 to 2014. So rents have followed, but not nearly as high in magnitude. And then pasture land rents have increased. These are small numbers, you know, averaging 13 bucks an acre in 2021 up to $15 an acre. So I just said from, you know, that's 15.4 percent. It's a much obviously lower dollar amount than cropland prices. So a dollar increase from 13 to 14 can be a bigger, big jump percentage wise. But nonetheless, we can see that it is increasing quite a bit. And then so one of the last things I wanted to say on this, just kind of showing what's going on, gone on nationally is rental rates versus land values and what's happened. So since 2020, cropland values are up 33.2 percent. That's in total, not per year, but from 2020 to now, according to USDA data nationally, cropland values are up 33 percent. Since that, in that same period of time, cropland rents are up about 11.5 percent. So 11.5 here. And then we look at pasture land. Since 2020, pasture land values are up 25.5, almost 26 percent. And pasture land rents are up 15.4 percent. So not, not nearly as much as pasture land values. So if we use the cap rate, which, which a lot of folks use, I know to kind of look at a rate of return on farmland, and I realize it's imperfect and I didn't put in some equity accumulation in there, but even that notwithstanding, I also didn't deduct property taxes, which is often done if you're doing an official cap rate for it. The national cropland cap rates therefore have dropped to 2.8 percent. So that's just taking the average cropland price, taking the average rent, I should say, for cropland and dividing by the market price of cropland. That comes out at 2.8 percent. If you deduct taxes, it's probably closer to 2.5, 2.4 right now. It's hard to get a national average tax rate because they vary widely, whether you're in Nebraska, North Dakota, whatever. And then pasture land cap rates barely hitting 1 percent. It's actually below 1 percent. I had to round up to get to 1 percent. And so I asked the question, with interest rates approaching 8 percent now, last I checked they were around 7.1, 7.2 on the 30 year, and the Fed's minutes coming out here recently suggest some more rate hikes may be coming, which may push them up to 8 percent. How long do we think that these rents are going to stay so low relative to cropland prices? And I realize a lot of folks may say where rents are, well, they're not really that low. Well, they're only 2.8 percent of the market value. And if you have to borrow a 7, 7.5 percent, maybe 8, what kind of rate of return do you need to have before it looks like a decent investment? And then the second thing is I just pulled this out because I've actually had some conversations with people recently talking about possibly buying farmland or something like that. And this was just pulled today, the current CD rates for FDIC insured deposits, like I said, as of yesterday. And you can right now get a 1, and I think I pulled these from Edward Jones, but a one year CD at 5.3 percent, a three year at 4.8, you know, you compare that to 2.8, 5, 5.5 percent looks a whole lot better than a 2.8 percent rate of return and possibly lower when you put in taxes. So is that going to start, are people going to start making decisions looking at these, what are my other options for investing this money? Well, I can get a guaranteed 5.5 percent or so, 5.25, and my money's only tied up for a year, or I can possibly make a big down payment, borrow the rest at 7 percent, and I'm hoping I'm getting 2.5 percent rate of return, or that the capital gain on farmlands high enough year over year that it makes up the difference. I don't know, right away, I'm not trying to make any declarations based on that, only just pointing out that that's where things stand right now. And it's the first time in a long time that, you know, you're looking at CDs as a very real, if you're on a fixed income or soon to be on a fixed income, and you've got some money socked away and a safe haven for it that's going to generate a guaranteed rate of return, these CD returns aren't half bad. So, you know, that's all I wanted to touch on today was just talking about what the USDA's report has said. There isn't anything too shocking in there, especially when we had North Dakota's reports that we put out back in April, like for the most part expected what I saw. But the environment's actually changed since then when we're talking about these rates of returns of both interest rates where they are now and rates of returns on some of these traditionally what are considered very safe investment alternatives like a CD. So, I will be around to answer some questions here later on. But with that, I will turn it over to Dr. Frane Olson. Thank you. All right. Thank you, Brian. I'll start sharing my screen and just double check that you can see that okay. I'm assuming everything's working right. All right. So, I actually have a lot of material to burn through today. So, I'm going to go through this relatively quickly, kind of at a higher level. Again, I'll be around for questions. So, please as we're going through, think of what your questions might be. If I didn't cover it, I apologize, but I'll do my best to try and answer anything that you think about or want to discuss some more. So, here's my contact information. I usually throw this up here. So, if there is something that comes up later on or you want to visit privately or offline, I'd be happy to do that. So, with that, we will get together kind of one of the current market issues. What, you know, short term for the next couple of weeks or so, what are the, what are they going to be the things we spend the most time talking about? Because of the stage of the year we're in and the forecast for weather, which I'll talk about in just a minute, yield projections are still going to be, you know, the highlight. Those are going to be the things that will get the highest attention. Just as an update, not that I'm promoting this, I'm just recommending that you pay attention. Pro Farmer has their crop tour starting next week, August 21st through the 23rd or fourth, excuse me. I know that garners a lot of attention. There's going to be a lot of social media posts talking about it and their findings. I also, in a few minutes, I'm going to show you some crop condition ratings or at least some vegetative health ratings and probably targeting some areas that if we do have some issues or problems showing up, that they might show up. Obviously, the other part to that equation, because we are in the critical development stages, especially for soybeans, corn belt weather is going to be watched very, very closely also. There are some things going on yet with the Ukraine, Russia war and the ability of both Ukraine and Russia to be able to export, both sell as well as export ship the products. This is really primarily a corn and to some degree a wheat market issue. So the oil seeds are not going to be as impacted, but it is something we need to be paying attention to and can obviously turn things very quickly. So let's talk very quick update. We got updates on the ending stocks forecast for old crop, which as of the end of August now, we're going to be closing out the 2022-23 year. So USDA started to make those little fine tuning refinements before the official closeouts. We got one more on September 1. We'll have a survey of inventories. So that will become the ending inventory for old crop. It will become the beginning inventory for new crop. Now there were a couple adjustments, the one that I want to note the most. Most of these are kind of rounding error from the old crop standpoint. But one of the things that is starting to happen now, and it's a bit troubling from my perspective, is the drop in corn ending stocks. So if you look at what this report is really quick, and I'll be consistent across the way. The top highlighted in blue is what the average trade estimate was. That's what the private forecasters and analysts were expecting to see. The black highlighted or bolded line towards the bottom is what was reported last month. And then on the very bottom highlighted in red is the actual number that we received. So a couple different ways to think about it. Usually the market response is the blue line relative to the red line. But I'm talking about the difference between the black line and the red line. So what was that adjustment? What was that changes? There was some nibbling around the edges and some tweaks here and there. The biggest difference, which again is concerning a bit to me, is that USDA did drop corn exports by another 25 million bushels. And so it seems like for the last several months, their forecast or projections for corn exports, both old crop as well as new crop, have been softening. And I do think as we move forward into the summer or excuse me, into the harvest and post hovers period, those export sales are going to be really, really critical and very important. So I wanted to bring that up a little bit because as we move from old crop into new crop, these ending stocks from old crop become beginning stocks in new crop. So when I talk about the new crop numbers and all the adjustments that were made, just recognize one of those adjustments was we're carrying more grain forward from last year into this year, into this cropping year. So now when we shift to new crop, so the top row now what the trade is expecting to see was in green on the bottom in red is what we actually got from a USDA number standpoint. On the wheat side, a slight increase in the wheat numbers, again, some small tweaks here and there, most of that was due to some yield increases. I'll talk about that in just a moment. On the corn balance sheet, we actually got a, we were expecting a reduction in ending stocks for corn. We're expecting some of those yield numbers to come in a little bit lower, which I'll show you in a minute, which happened, but that reduction or that cut in ending stocks was a little bit larger than expected, larger than anticipated. So somewhat, I would call it neutral to somewhat supportive for corn, because when you look at the highest estimate and the lowest estimate, we're still pretty much in that mid-range, even though there are some bushel differences, we're still within that range of what we expected to see. On the soybean, we did tighten up the ending stocks again for new crop soybeans. The yield forecast was brought down a little bit, which we anticipated, but again, those numbers came in a little bit lower, the adjustments to the balance sheet, both production and consumption, tighten up that ending stocks a bit more than what the trade was expecting. So again, not that it was a big shock value, we really didn't see a lot of big market news or market movements when the report was released last Friday, but we did see some minor adjustments. So this is the table for wheat. So one of the things that we're starting to do now is not only have farmer survey-based estimates of wheat yields, which is a survey base, we are using USDA's using the satellite imagery or remote sensing, which I'll talk about a bit more in a minute, but they're also doing what they call objective yield surveys. So they're actually going into the fields and trying to do some testing and some actual sampling to get better ideas what test weights and et cetera are going to be looking like. So we did get an update on all wheat as well as all winter wheat, and then we break it down by class, hard red winter, soft red winter, white other spring, which is primarily hard red spring wheat, but there is some some white spring wheat included, and of course the Durham numbers. So this is production. So these are total bushels produced, it's not ending stocks. Notice that we did take the spring wheat production levels down just a little bit. We also had a slight increase in the Durham number. Now, I'm not going to put a lot of pressure on these numbers right now, because there's still a lot of things that can happen in in particular in Durham. In my assessment, that's kind of rounding error difference between what we saw, what the trade was expecting, and what what we actually got. So because there aren't a lot of private estimates that come in for the Durham numbers. So when we look at all wheat, we did take a little bit of the top end of the wheat, but the some of the winter wheat numbers came in a bit stronger than people were expecting. Moving on to the big story, which of course was what is the corn and soybean yield going to do? And the reason the August forecast is so important is because USDA moves away from trend line and adjusting the trend line up and down a little bit to again, actually field surveys, they're surveying farmers. They surveyed about 14,600 farmers across the US and asked them what their best estimate of their their average corn and soybean yields were going to be. And they'd accumulate that over nationally. But they also again used the satellite imagery in particular in those areas where they feel that there's going to be some problems or trouble spots to try and get a better idea of what what is the size of that trouble area. And in a few years ago, we had a Doracho storm, that big windstorm that came through Iowa. And they used remote sensing or that satellite imagery to try and identify about how many acres or how large of Iowa was actually hit and damaged by that relative to what what you know, the rest of the state looked at. So again, the blue line on top is what the trade was expecting. The black line is what we got last month. And then red line in the very bottom is what the USDA numbers actually came out with. So again, very close that the the private estimates as well as the USDA numbers matched up very closely, we did get a slight reduction in both corn and soybean yields. So far, they haven't made any major shifts or adjustments in harvested acreage. But I some colleagues, Dave Ripplinger and John Bearmocker and I just got back from Kansas City, Missouri at at a national conference of our peers that do the outlook with an extension. And one of the comments that was made for some of those drought areas in particular in Wisconsin, and possibly parts of Nebraska as well as Minnesota, we may see a little bit higher corn abandonment this year because of chopping the corn silage than we normally would. Now that has not been factored yet into these corn production numbers. So we're taking the top end off the the the corn estimates, we're taking a little bit off the top end of the soybean estimates. So I'm going to show you some maps in just a moment and I'm going to highlight a few things because what I one of the things one of my big takeaways from our meeting in Kansas City, which I understood and thought about, but I really didn't put into context is we're really starting to see again a very big difference between yield estimates and expectations coming out of the eastern corn belt versus the western corn belt. Now in in in marketing language, what that means is we're kind of using the Mississippi River, which is really that dividing line between Iowa and Illinois, then runs all the way down to the Gulf. We're kind of using that that as the the imaginary dividing line between the eastern corn belt and the western corn belt. And you'll start to see some of these differences show up in just a moment as they go through what the USDA yield forecasts are by state. So we got the national numbers, but then we have the state numbers. And I know in the past, I've spent quite a bit of time talking me some of the weather conditions and concerns and drier soil moisture conditions in the western corn belt, because that was the area of greatest interest. That was the area that people are really talking about. But we cannot forget what's going on in the eastern corn belt. And I was I was reminded of that very strongly at our national meetings, because the eastern corn belt right now based on everything we see is going to have a really good corn and soybean crop. And so we have to be very careful about getting kind of this backyard syndrome and worrying too much about what's going on in our neighborhood and forgetting about what's happening at the national level. So the darker the green, the more bushels are produced. So this is based on bushel count, not planted acreage and not yields. This is how many bushels are produced. So again, darker green, more bushels. Notice that we have this pocket. We have northern Illinois, central and northern Iowa, southern Minnesota, parts of eastern North Dakota and eastern South Dakota, and of course, a big portion of Nebraska. So remind everybody, this is what USDA forecast for yield by state was. And I want to explain very quickly, the top number is their current estimate for the yield in that state. And then the number underneath it is the percentage change, percentage increase or decrease from the previous year. So in this case, let's just look at Iowa. They're still projecting or forecasting a 203 bushel statewide average yield, which is down about one and a half percent from the previous previous year from last year's numbers. So when we start looking at these numbers, notice that whenever there's a hatch mark or a pound sign or a hashtag, that means that it's a record year or a record production. Now, the reason that Illinois is down 6% from last year's last year was their record production year. So we have to realize Illinois is coming off a record corn yield number from last year. So look at the eastern corn belt. We're looking at, you know, 191 for Ohio, 195 for Illinois, a little over 200 for Illinois, a little over 200 for Iowa, a 184 for Nebraska. So this core and then a 183 for Minnesota. So this core corn producing area is even though there's some stressed areas, there's some problems showing up, these numbers are still very strong numbers. And as we went around the room and talked to the specialists, the people that have my job or team's job across the nation, they looked at these numbers and said, you know, based on their conversations with farmers and industry and what they saw driving up down the road, they would not have any major argument or disagreement with those numbers as of today. So I got confirmation from my professional peers that these numbers seem to be reasonable based upon what they're currently seeing. For soybeans, again, the corn belt is the corn belt, right? That's where the core corn and soybeans are produced. But for soybeans, we have a little bit broader trade territory. So we have a little bit heavier concentration up here in the Dakotas and the northern growing regions, but we also have this Mississippi River Valley. And many times we forget about all the soybeans that are growing along this Mississippi River Valley. And that's really important when we think about national average yields and what that means for the soybean supply. Now, some of this is going to be single crop, some of this is going to be double crop soybeans. So they have taken, they planted, for example, winter wheat harvested the winter wheat, replanted soybeans, a shorter season soybean, and then coming back and actually double cropping in one production cycle. So some of these are going to be full season beans, which much higher yield potential, some of them will have produced a wheat crop first and then followed it with a soybean crop. So again, just geography, I just want to recenter everybody on where are those core soybean producing regions. So now let's look at the states. What are the major states that produce soybeans? And again, what kind of yield potential are we looking at? So if you'd look at the major states, Ohio, Indiana, Illinois, Iowa, Minnesota, Nebraska, and then we get up into the Dakotas here, the Eastern Corn Belt, including Kentucky, which has quite a quite a few soybean acres in today's world. Those are looking at some very, very good yields. Now, Illinois and Iowa are a little bit lower than last year, but again, recognizing last year was a really, really good year in that part of the country. We are looking at the drought modern map. So the story that I did get was a lot of the crops are living rain shower to rain shower, right? But they are recognizing that in Iowa and Illinois, they often get even on a normal basis an inch or so a week. So they tend to have more rainfall than we do. So there's living from rain shower to rain showers a little bit easier in the Corn Belt than it is up here in the Northern Plains. Now, based off that map I just showed you from the National Drought Mitigation Center out of the University of Nebraska and Lincoln, that same group puts together what they call a vegetative drought response index. I've talked about this before and what they're doing is they're taking the vegetative health index, that satellite imagery of how green is the crop and they're accumulating it. They're adding it up over time from planting season until this date and they're comparing that to what would they normally see at this time of year. So this is an accumulation throughout the whole growing season and there are some pockets. There's some areas especially early on that did have some drought stress in particular in western Iowa when you get into southern and the eastern portion of Nebraska, when you get into eastern Kansas and obviously up here in the northeast corner of North Dakota. So these are the areas that as we're going through that crop tour, if you're going to start hearing some areas that don't have the kind of the yield potential or there's some concerns showing up, it will in my opinion will likely be in these areas. So do not be surprised if we get into eastern and kind of east central Iowa and you start hearing some reports that things aren't looking quite as good as what they're hoping for or even into southern Minnesota here. Now if another way of looking at this is and again this is a different source, we're still using NDVI that vegetative health index but we're scoring it differently. All we're doing is we're taking the pictures this week saying what kind of greenness do we see this week, this week of the production year relative to history. So are we above average or below average in kind of greenness of the crop given what we see today. So it's not an accumulation. So what's happened before is irrelevant. We're just taking a snapshot of today and we're saying if we take a snapshot today how does today compare to this same week over time what we normally see at this time of year. Now normal if you look down in the very bottom in blue here I have highlighted the formal definition. So normal is the average the historical average from 2000 to basically last year to present okay. So if you notice the scaling over here when we think about the greenness of the crop is that about the same as we would normally see is it about 5% less 15% less or is it 5% greater or 15% greater. Now notice when you get into those core corn belt areas Ohio Indiana Illinois Iowa even into Nebraska most of those with with the exception of few pockets up here that are a little bit behind most of that area is normal or slightly above. Now this is for all crops not just corn and soybeans. The reason that we're seeing these red marks into Arkansas, Missouri and parts of Kentucky because they've actually had excess of rainfall and so they're starting to get a little bit of the yellowing of the crop simply because the soil moistures are so high they've had they've had a lot of rainfall over the last couple of weeks and is starting to show some stress in the crop. So as we look forward recognizing and I'm going to look at the crop progress support that about 78% of the Iowa corn crop right now is in the dough stage or the filling stage about 71% of Illinois is in the filling stage or past the flowering stage in this in the central part of the corn belt and that we've got about 87% of the Iowa soybean crop is setting pods and about 80% of the Illinois crop is setting pods. So right now from crop development standpoint soybeans are going to be more sensitive to the temperature and growing conditions than corn will be. Corn can still be impacted both positively and negatively but not as dramatically as let's say the soybean crop. So if we look at the extended forecast not only coming into this weekend but into next week the temperatures are expected to rebuild. There's a high pressure system that's supposed to rebuild over the central part of the US bringing a lot of heat into that core growing area. So there's an average or excuse me above average probability of above average temperatures. So we've got to be conscious of that and the markets are starting to pay attention to the fact that in particular soybeans which have tighter ending stocks to begin with maybe in more jeopardy because of this temperature. On top of that when you look at the extended forecast for rainfall they're not expected to get any major rain showers coming through. Again there's a chance for some spotty showers, some areas may pick up a little bit of rain but as far as a widespread rain event there really isn't any major event like that shaping up you know from the weekend on into next week. So these weather conditions on top of current crop conditions the information we got from the from USDA saying well what do we think will happen to to crop yields what is the trend line or the rephrase that what is the adjustments that we might see in crop yields and yield potential as we move into kind of this tail end of the growing season. So a lot of things to talk about there's a lot of information that we're trying to process right now. We have had quite a bit of pullback in both corn and soybean prices which has taken wheat with us at least temporarily. It looks as though we might be setting some short-term bottoms in both corn and soybeans right now over the last couple of days. I hope that's correct we'll have to wait to see and I do think that this this weather concern about hot and dry conditions returning into the corn belt is is putting us giving us a little bit of a lift back into the into the marketplace. So that was my last slide I will try and take a breath now and hand things over to Tim Petrie. Good afternoon everybody Tim Petrie here extension livestock marketing economist. For the last webinar was on July 13th and I left off saying that the semi-annual cattle inventory would be coming out a week later and we're anxiously looking forward to that our expectation obviously would be that the cow herd particularly on the beef side the beef cow herd would be down because of the high beef cow slaughter and the severe drought in the last couple of years and so the report did come out and here it is I'm not going to concentrate on the black numbers here but mainly just the change over a year ago and you know our expectations held true again and I'm going to go through every market class here but get some highlights with the purple arrows there so we start off on with beef cows there we're down 2.6 percent and that's 29.4 million had a significant talk about that in the next chart beef replacement heifers down 2.4 percent another thing that I'm going to discuss is some people say well you know this is what producers said would be replacement heifers but you know if conditions are appropriate they the other heifer category you could always put a bull in with some of those but you see there are other heifers count five percent as well so that means you know our heifer supply is down and then on the bottom I think significant for fall calf prices in particular is that category is the number of feeder and calves outside of feed loss not yet in feed loss our cattle and feed is down 2.2 which is finally into the fed cattle price we'll talk about in a minute but our supply is down 3.6 percent so that means we'll have 3.6 percent less calves to sell this fall and into spring with back on themselves so obviously that's very very supportive to prices with those lower numbers and significant of that probably shows up more here this is a busy slide but the July 1st report is much less detailed than the January report we have to wait for January to see the state by state numbers actually counting by counting numbers to see where growth may be affecting us most of this is really a foreshadow of what we can expect for the January report but anyway on the top end is beef cows and you see this is the fifth straight year then of liquidation and so our expectations for the January report will follow that through of significance is the previous sickly colo in beef cow numbers this is for the July report was in 2014 at 29.75 million head is showing up there this July we are down to 29.4 below 2014 why is 2014 significant well again that was a previous sickly colo and the previous sickly coli in prices and so we even have fewer beef cows than we had back then and then going down to the bottom again we mentioned beef replacement heifers and you see there again very low numbers and in fact both beef cows and beef replacement heifers are at record low numbers going back to 1993 the January report goes back to 1920 but here we the July they just started in 1993 and didn't report in 2013 and 16 because of money problems in DC but record low numbers since 1993 again very very supportive of the prices so you know the question is when is beef cow herd rebuilding going to start it isn't if it's going to start it's going to start sometime because our numbers are very historically low but when is it going to start is the big question and that obviously depends a lot on rainfall and frame showed you the drought monitor map on the left hand side and it's just usd takes the drought monitor map and puts that on the top of the map like he showed the production numbers where soybeans are produced and then he showed you the drought monitor map here it's the same on the left hand side the dark green are the beef cow areas again going right up from texas through north dakota and neighboring states there is where a lot of cattle there's some over in the appellation states some down in florida and some california so and then super imposed on top of that with the red dash lines is where drought is and so there is drought again like he mentioned through kansas and nabrasca and up in the northeastern north dakota and so on but key i think is down to the bottom left 34 percent of our beef cows are still in drought but uh again a lot of improvement is what did this map look like back in october of last year last late last fall and so you see there are a lot more widespread drought into the appellation states uh california was very very dry and so a lot of improvement there 76 percent of the beef cows were in drought last october that's why we had the big liquidation of cows and we have fewer cows we have seen improvement but you know still a third of the beef cows are in drought so first of all we don't you know our numbers are down our beef replacement heifers are down and also we still have some drought so that is that going to continue to improve and that's when uh you know the major beef cow increases will take place so we just kind of have to wait see prices are sending the signal to rebuild the herd but we have to wait for precipitation so go to the different market classes then a paddle and just start off with fed steers like i usually do and again i've been through the color coating green on the bottom is i leave that four years on here in 2020 was just a terrible year with cold and everything but the red line is what we currently are doing and just had steady progress kind of level off since june we picked there at the first week in june we had an all-time record high cattle prices on a weekly basis of 188 75 or 299 on a dress basis and basically have just been about there last week we were right at 186 for an average and so we're usually in the summer we do go down when the big slaughter hits but since we're so short of numbers and demand is holding very well i didn't bring the cutout slide i think i showed it to you last time the beef cutout is holding in there very well you know 15 percent above where it was last year so beef is moving so you know fed cattle prices are are up there in the mid 180s and the red squares there are the futures market for the rest of the year august and october and december the red bars and showing similar prices up there so usda is forecasting an average price for the year of 178 50 and would be significant above the last record high of 153 84 back in 2014 so we're at record high prices and expect them to continue in the gold squares and are the futures next year at higher levels with usda predicting next year on the cash of basis here of 185 50 so looks like strong prices which are again supporting the feeder cattle uh you know i've been if you've been reading the press about cap prices a lot of terms like they're off the charts and literally that's what's happening on my chart here is they're almost off the chart kind of interesting again go back to uh COVID year and i'm usually mid october is our low price there we're down at 150 and we're bouncing right up there near 392 last week a doubling in price since 2020 so a very nice increase again going up throughout the year and and so it's going to be a much better year for cap prices this year i do expect seasonal weakness that occurs and again probably focus in on that october 15th time frame but you know they're uh $84 right now higher than they were last year and so even if they come off 15 or 20 still going to be significantly higher than last year one other um and i use to say what prices might be this fall is just to look at the video auctions going on now for november delivery here was the northern livestock out of buildings there at the end of july july 27th and circled in blue on the left hand upper towards upper hand these are for november delivery calves and i just brought the 550 to six pound categories there on the top but you know you you see a wide range in prices there for the for the big numbers there the third one down over 3000 head range in prices of 283 and the low end up to 313 even some value added up on the top line there up to 321 but uh on that third line there an average of 292 and so kind of interesting on my chart that's what calves were uh last week in north dakota on the average of 292 but again there's a wide range and there will be a wide range in places this fall and markets for all the different factors that affect calves from they have they had their shots are weaning and now actually providing data on the implants that they may or may not have will be important for discounting or putting premiums on calves so you know a 283 to 313 prices looks like for this fall at auction markets and and again much better than last year there's the heavy weight yearling prices kind of the same thing they're up 73 dollars over last year 258 last year but again I think we sold some nearly 758 really nice steers at rugby last week for you know 270 or something so a wide range there there's the futures market again saying we're running a positive basis to the futures market now because a lot happens a lot of times when we're short a cattle and uh so uh you know very good prices this fall and again in the next year uh much higher than we were at the beginning of next year and maybe even a little bit above so uh good prices there barring uh you know the really getting dry in the corn belt again just remember that change corn prices 10 cents change for your cattle uh fed calf prices bucking out in the direction so I mentioned the growth in the corn bed or dryness in the corn belt and the trade is starting to see that so that's the big thing we need to watch here in the next week or so so again uh you know we're in the upper part of the cat an increasing phase the cattle price cycle but I think uh you know that we're near and near to selling calves now but when we start getting into the backgrounding programs I'll talk more about that in in the future day in future of webinars here in the next few months uh you know they're going in at a very very high value there and so you're at risk for calves coming out in March or whenever February March April when they might be background so you know I wouldn't throw price risk management out the window because if you're selling them all in one day or so on you're at the mercy of that but the best marketing strategy there I think if you're interested in price risk management is to do a floor price but leave the top side open because we're going to be short of cattle and right now the demand is good we don't know what's going to happen to corn though so something like livestock risk protection of futures market options might be something to consider oh so I want to end up a little bit I haven't talked about lamb prices for a while and lamb prices the last year or so have been extremely volatile you know on the left hand side there the light blue line there is last year again and there in April and May $250 lamb and then at bottom just completely fell out them into summer and so by now they were down to $95 but uh seen a nice increase the red line again back up this year to average to above average and now uh last week averaging up here in the northern plains about uh 205 so we're back up into respectable prices for lambs so sold a lamb a load of lambs out of tappin on a week ago today but they were really nice lambs and shorn lambs which may tend to be a little premium for uh 201 50 so the main reason is why the price went down so dramatically and now why we're back up is simply that uh when prices started going down feed lots hell lambs they got too heavy and and so the number of lambs built up the the box on the right end is every month the usd does a survey of a feeder lamb inventory made early in colorado and so those numbers kind of bear that out down there uh last year at on august first we had over 88,000 lambs on feed again there was a backlog and they were heavy at some wing as much as 200 pounds and this year in august we got less than half of that 42,800 so we're back to current where they're not too heavy again those lambs out of tappin weighed 140 pounds versus they were discounting over 155 pound lambs last year and adam as much as up to 200 pound lambs and all of those lambs backed up so we're back to you know what you might call a normal or average situation and and much improved there and and hopefully can stay that way so with that we're gonna stop sharing and turn it over to the yeah so i'm gonna make some comments about renewable diesel again a lot going on in the market it's it's continuing to steadily grow and it's certainly reached the size where it's of national importance uh although there's still folks who sometimes ask if it's even a real thing uh and it most certainly is uh so this is a chart using data from the department of energy and this is nationwide uh showing consumption uh within the country of both biodiesel which is the yellow and renewable diesel uh which is the grain as you can see that the grain has increased dramatically just in the last few years and by the end of 22 was essentially par with with biodiesel consumption uh don't have the the numbers here but between the two of them uh between the two of them uh they each uh they make up about five percent of the diesel market in the country the diesel market is about is about 60 billion gallons a year in here where that more than three billion uh at the begin at the at the end of last year beginning of this year uh looking specifically at california which is driving uh the renewable diesel market primarily uh although there is rising consumption although still small in oregon and washington state which both have uh low carbon fuel standards like california does uh we look at the the chart there on the right and it has uh diesel so petroleum-based diesel uh in that light blue renewable diesel in the red and biodiesel in the dark blue and you can see again renewable diesel rising steadily uh and significantly now in the last few years uh renewable diesel itself actually sales actually exceeded petroleum-based diesel sales in the first quarter this year in california um and on an annual basis we're looking at almost you know we're on our way certainly to almost two billion gallons of renewable diesel sales in california alone uh that biodiesel number as you can see has been pretty flat uh translating that into magnitude if all of the renewable diesel and biodiesel used in california came from soybean oil it would take the oil from about a third of the u.s soybean crop so it's substantial at the same time to point out that's not the case uh just want to show the magnitude there but if we look at the actual numbers only 20 of the gallons of feedstock used to produce renewable diesel in the first quarter in california actually came from soybean oil uh it's still primarily tallow which has been was has been a long term feedstock and more recently used cooking oil the the issue with both of those is they're really capped markets especially on the tallow side we're still scrounging up used cooking oil supplies from around the world and sending to california but that market too it looks like it's almost essentially tapped out and those numbers will will start staying steady and they're going to have to be made up with other vegetable oil uh soybean oil uh corn oil and canola oil here in in coming months and quarters but again just to look at that again if all of the renewable diesel was made with soybean oil it'd be a third of the crop but again only one fifth is so it's still uh in terms of total soybean oil produced at the farm level not actually crushed and physically available but at the farm level it's still a relatively small number so there's still quite a bit of giving this uh in terms of of how much growth potential there is with the existing market again we've seen a significant increase in the uh price of all of these items uh but there's still room to go on supplying additional soybean oil to that california market a lot of language on here but just want to talk a little bit about margins uh one of the questions that comes up too is as this market builds out how quickly are these investments you know this new industry going to become closer to break even and we do that with with tools called margins just some quick calculations that that are done we do it for corn ethanol and for soybean crush and now renewable diesel as well you know the we do this for a couple of reasons most importantly it's a quick snapshot to see if the industry is profitable but you can also see more than that you know we by by having that history you can see if profits are increasing or decreasing and then by looking at the individual contributors to margin you can see you know what's driving that number on both the revenue and the expense side so when we calculate margins typically it's only a few things that we include primarily because they're the big drivers and also because those are typically more readily available data it still might be private data or that for example that usda doesn't report but it's not particularly difficult to find and there might be one or a number of new services that provide that data so on the renewable diesel side obviously the big contributor on the in terms of revenue is the actual price of the fuel and what we see for other folks who calculate this we actually just use diesel prices because at the pump renewable diesel and diesel are indistinguishable so that's a pretty good proxy we don't currently collect retail renewable diesel prices i i'm sure we'll get there soon we can't get it at the wholesale level but again for these integrated oil companies it really is that retail number that's a little bit more valuable also on on the renewable diesel revenue side both really important government incentives a renewable diesel does receive that dollar production tax credit just like biodiesel does that's a that's quite a bit of money and then obviously what's driving renewable diesel are low carbon fuel standard policies and so that that that carbon credit could be a significant contributor as well and then finally on the expense side you know the the cost of the feedstock be it soybean oil use cooking oil like you know having having those four pieces of data we can calculate margins and again it's not going to be precise in terms of the calculation there's a lot of things that aren't included there's also a lot of things that are specific to any given business or refiner if you're looking at them but it does it help it is really quite helpful in some of the purposes identified above some of the things that are excluded there are there is a co-product with renewable diesel production it's actually renewable propane we typically don't include that in the margins although it's sizable each to 10 percent of renewable diesel production or the feedstock that goes in ends up as propane which is valuable obviously in itself as a fuel but also you know it is low carbon so you have that advantage as well and we typically skip all those other operating expenses capital expenses transportation costs etc for the most part we think that those are somewhat fixed they're especially generally on on the operating capital side they're also really tough they're very much refinery specific and so you know we just don't have that level of detail unless you really work for the company itself and finally too we calculate these margins on a gallon equivalent basis the same thing we do with corn ethanol so we take all of those revenue expense numbers and convert them over to that gallon equivalent so for example takes about eight pounds of vegetable oil to produce a gallon of renewable diesel so we multiply that per pound price by eight to get the per gallon basis so finally getting to the punchline and it's actually that dark blue line which is the margins I calculated for renewable diesel and focus on that first just to see I mean it's been continues to be profitable if we see that it was as high as three dollars per gallon you know about a year ago less than a year ago a substantial amount again there's things that aren't included here those operate another capital expenses but we know at that time that the folks involved in this industry were making an excess of a dollar 25 a dollar 50 a gallon as they reported on their quarterly calls and so that kind of follows through what's here and of course it's dipped quite a bit and there's a couple of drivers in that one of the big ones is the price of soybean oil is relatively high which makes a difference the price of transportation fuel in general as you may have noticed that the pump has been lower this summer and it's and we're about at par where we were last year nationally and that's almost the case here in california the production tax credit is steady and the carbon credit the value of that is actually a little bit lower that it is actually substantially lower than it was last year in terms of the total value and then a slightly smaller contributor to profitability if you look at the the quarterly reports you know that it came out say a lot of folks just had their q2 calls folks are still very excited about this we're going to see additional supply you know we're already at half of that market it's still profitable there's still things being done in terms of expanding capacity it's going to come online that will come online here in the next year and coming years where they're already you know you know putting steel in the ground or making these these these transitions to a renewable diesel facility so you know to me if i look at this i'd say well obviously you know the quick takeaway which you can interpret yourselves as well that it's still profitable just not as much as it was and then given all these other changes in the market it's still profitable so those were my comments and that concludes the comments that we had from all of the presentations with that we'll open it up for questions i see that we have one and there's more you know as they come up feel free to to engage with us so we can give you additional information as you might see fit so the question that's up is a question that's obviously directed at me although frame frame probably knows what it's talking about tim does brian's probably like what on earth is that so question about what's happening to the beat to ethanol research and the truth is nationally because we did a lot of that at nbsu and i was involved with it to a large extent it's really been shelved for more than five years the economics just like any biofuel right now are extremely appealing it's just that there's easier things to do technologically you know it would you know it's easier obviously this renewable diesel coming online with significant volumes you know that's going to fill much of this low carbon fuel market but i i do take calls pretty regularly including one from last week from developers in nebraska who are interested in it i haven't updated the economics the agronomics are kind of known you know that the the feedstock that would be used even though they you know refer to it as an energy feature industrial beef you know to date that would just be a sugar would just be destined for biofuel production but as i mentioned in the back of the envelope economics are extremely appealing just like they are for a lot of biofuels but it's you know it it ends up being a bridge too far to really get folks too excited uh the people i talked to last week would be looking at putting a new front end on an existing corn ethanol facility uh to take advantage of of the opportunities and what they were specifically looking at and i've talked about before uh is the inflation reduction act which has significant incentives for uh clean fuel so they have a clean fuel tax credit which can pay in excess of a dollar a gallon which uh you know beat ethanol would be almost certainly be eligible for you know that and for those to actually to get that credit you have to have the facility built and in operation uh within just a few short years here so there's there's kind of this window in which folks would have to act um but in terms of more uh broad research there really hasn't been any uh you know what what was done before and that included uh we did we did do agronomic work uh we did engineering work and i did some economic work you know most of it stands up you know it would have to be updated in terms of prices and things like that it's just there in terms of additional activity um you know there's really not any plan at this time if and if anybody's interested feel free to give me a call i mean if i talk to folks from Nebraska or Idaho i can certainly talk to folks in the region are there any other questions if not since it is a beautiful day and it's going to get warm over the weekend i hope that you guys all have a great weekend and we'll be back next month thanks