 My name is Dave Ripplinger. I'm an Extension Economist with NDSU Extension and I'll be moderating or at least kicking off today's webinar, our ongoing agricultural market situation outlook series that's being held monthly, basically the Thursday after each WASDE report. We're happy you joined us today. As is the usual method of doing this, we're going to have a series of presentations with questions at the end. We ask that you use the Q&A tool as this is the webinar version of Zoom. If you want to use chat, we can use that as well. What we'll do right now is just go ahead and start off with Brian Parman. Hey, thanks, Dave. So I just want to do a short little talk today on inflation and specifically as it pertains to food prices with the USDA report that came out I guess a few weeks after the last situation and outlook that we gave and a lot of news outlets have kind of picked up on it. And my next slide kind of shows some of the bigger national headlines, Washington Post and trying to explain why food prices keep going up and that was published yesterday. Bloomberg, and I know that says August 17th, that should have been the 16th type of my fault. Or no, no, no. Yeah, no, that's right. August 17th, my fault. I thought I was going to say September there was another one. And then NewsDakota, some more locals, September 1st, spending Fed support explained for food price inflation. And there were countless others that I could have put on there, especially global inflation concerns in some of the developing what we call developing countries. The food, the inflation that I'm going to show that's been occurring in the United States is many fold worse in a lot of these developing countries. Their food prices have spiked 20, 30 percent compared to what I'm going to show you guys today. So my next slide just kind of shows the breakdown of where retail food spending in the price environment actually is. And so what you kind of see here is what folks are spending on what is part of their budget. And so housing being a huge component of most people's budget, that's about a third of the budget. And housing is not just the mortgage and insurance that could be upkeep and maintenance. Or if you're like me and you had to buy a brand new air conditioner during the hottest part of the summer, things like that goes into your housing costs, health care, personal insurance and pensions, transportation. So the big three, housing being the biggest, then transportation, but then food about 13 percent or so of the typical consumer's budget is spent on food. So when we have inflation and food prices, that makes a significant change in somebody's spending habits and overall budget as does obviously transportation and housing. So my next slide, I just wanted to show the source for a lot of the information that I'm going to be showing here. And it came from the USDA's food price outlook from ERS, which was the report was put out Wednesday, August 25th of this year. And if you want to, that website right there, that link will get you to the actual report. There's a lot of stuff in there to read and charts and graphs. So I'm kind of breaking down and summarizing what I think are the key points of that report for you guys to look at here today. And sort of the source information for some of these news articles that you're seeing coming out and just sort of an explanation of what I think's going on. So my next slide shows the USDA's food price outlook through 2021. So these are the annualized inflation rates for these specific items. So food at home, as you can imagine, that's going to be prepackaged or fresh items that are designed to be consumed at the home that you're going to buy at the grocery store. And then the food away from home category, that's your restaurants and cafeterias, that kind of thing. And what you can see is food at home prices, two and a half to three and a half percent inflation in 2021, what's predicted, and then food away from home prices, about a percent higher, three and a half to four and a half percent. And when you read the report and you read other supplemental information regarding that, one of the reasons for the difference is they've pointed to labor, both labor shortages in the food preparation and service industry, as well as increasing wages for those workers. So typically, and I'll show a chart here later on, they tend to move in concert with one another with the actual cost of purchased food and raw materials for the restaurants being their biggest cost, while labor and labor shortages are becoming a much bigger and bigger issue for those for restaurants and things like that. And so you're seeing a divergence where food away from home inflation is outpacing food at home. And then they also did a projection for 2022 with the projection being one and a half to two and a half percent, which is typically what you would expect about an average of a two percent inflation rate on food is kind of what's predicted year over year. But that food away from home inflation rates still projected to be much higher, maybe as much as double the average rate. And again, a big reason for that being potential labor issues. So my next slide shows, kind of breaks this into some categories for the next few slides. So all meat prices or meat products are expected to increase in 2021. So beef and veal, four to five percent pork, five to six percent increase, poultry three to four, fish three to four, dairy products, you know, your milk and cheeses around one to two percent, and then eggs two to three. And then all meats, if you combine them and average it out, about three to four percent total increase in 2021. And there's been some political comments on meat prices, specifically things like beef and pork, where the fact of the matter being there's a high concentration in the packing plants. Some folks are asking if there's some sort of price increases or what's called price gouging going on. It's been most pretty much categorically denied by those in the industry. But there are some folks in politics who are looking at this and asking the question is, are these price increases a result of production cost increases directly or is there some a little bit of price, what's called price gouging going on, where some companies are perhaps taking advantage of the situation and to increase profits because of the high concentration and general lack of competition in the meat processing industry. So my next slide shows a few of the other food groups, but we're seeing, you know, increases in those prices as well, at least through this year. Fresh fruits and vegetables, two and a half to three and a half percent increase. Fresh fruits alone, five to six percent. And then processed fruits and vegetables around that average in two percent mark, one and a half, two and a half sugars and sweeteners. A lot of that has to do sugars and sweets. We've got drought in the sugar beet region, our region. We've got hurricanes and problems in Louisiana and Florida in the sugar caning areas. And then, of course, cereals and bakery products up two to three percent. So for the most part, across the board, it's not just meats. They're seeing an inflation in all these food products. And one thing to note on the processed fruits and vegetables or the cereals and grains thing, a lot of these companies count on ingredients for their processed food, products, canned goods, dry goods, those kind of things from other countries and overseas. And there's been reports of 10 and 12 and 16 week lead times on some of these key ingredients that they count on from overseas to make some of these products. So we may see some inflation due to those issues with the shipping industry and the fact that ships are waiting maybe seven, 10 days to be unloaded with as many as 40, 50 ships sitting off the coast waiting to be unloaded, container ships with a lot of these products waiting for them. So my next slide shows meat products through 2022. Expectation being that a lot of the inflation seen in 2021 is going to come back a little bit. Dairy and eggs basically might falling a half percent, perhaps to maybe up a half a percent. So if you kind of pick the midpoint it'd be zero, same with eggs, no real change. Fish, one and a half to two and a half percent, typically what you'd expect, same with poultry, pork a little higher at two to three, and same with beef and veal. So I guess what they're, for the most part, a snapshot being that 2022, a lot of this inflation we're seeing this year is not expected to persist into next year as far as retail and consumer food products. And then other selected food groups is my next slide. Fresh fruit, fresh fruits, fresh vegetables, about the same thing, one to two percent, two to three. So again, this decrease in the rate of inflation headed into 2022. Expectations being that things are going to sort of even out that the drought that we've experienced this year might not persist into next year. We'll be able to and we'll be able to get the products where they need to be. And a lot of what's helping on the fresh fruits and vegetables side are products being imported in from Mexico because a lot of that doesn't require container ships and it's just a lot easier to get products here than it is if they're coming from overseas. So my final slide kind of in this presentation, I just wanted to put food price inflation into perspective. And so 2021 bearing in mind that 2021 is a projection still and not the actual number because we're not through that year. But here you see food at home versus food away from home. And food at home being more volatile than food away from home typically. But they tend to move together. And what you can kind of see here is that food at home overall rate of inflation is much higher than it's been the last three, four years. And you look at 2016, food at home prices 2016 into 2017 was actually negative. In other words, retail food costs actually came down overall while restaurants for the most part stayed about flat. And then we had the pandemic in 2020, big increase 2019. We had the trade dispute, those kind of issues. And then here the last year, food at home prices again are expected to stay flat. And you see this divergence in food away from home again, we talked about how that's partially due to labor issues and so forth. But overall, on a long time horizon here, and we're talking about many, many years, still the food inflation rate is not just extremely high when put into historical perspective. I mean, it's not even as high as it was during the, it's approaching at least the food away from home is approaching the levels of the financial crisis. But food at home still really hasn't yet. I mean, it's in that maybe just below 4% range, 2007, 2008, it was it was north of 6%. And then as recently as 2011, 2012, it was closer to four or 5%. So still not there yet. And that that wasn't a long, long time ago. And if you go back even further into obviously periods like the 80s, we saw much higher fluid food inflation rates. So it is something to watch. It's something folks are definitely concerned about, especially at a time period when there isn't a lot of potentially extra money to be had folks are still reeling somewhat from the pandemic. But at the same time, these inflation rates on a historical timeline are not outrageous, something to concern about, something to think about. And if the 2022 projections are true, then then really it's probably most of it's going to level out. And this appears to be what they've been, they've coined transitory, where it's just been a an uptick due to things opening up, some bottlenecks and pressure situations being alleviated. And once that happens, we kind of get back to that one to 2% range. So I appreciate you guys listening. If you have any questions, I'll be around again, use the chat box if you can. And with that, I'll go ahead and turn it over to Dr. Olson. Thank you. All right, thank you, Brian. Good afternoon, everybody. My name is Frank Olson. I'm a crop economist and marketing specialist here with NDSU. I'd like to provide a real quick overview and update on kind of September WASDE report information. We got just end of last week about updates on production and usage for our major commodities in the US. I'd also like to make a few comments about a hurricane idea and some of the impacts that's having on our local basis level. So first slide, please. This is just a summary and comparison of what was the trade expecting, kind of trader, the private traders and analysts, what were they expecting before the report versus what the USDA numbers came out on last Friday. So if you compare the row on the very top, which is the average trade estimate versus the row on the very bottom highlighted in red, which is the actual numbers we got from USDA, you'll see that they're very, very similar. And if you notice what happened during Friday's markets, the news came out, there was kind of a dip, and then it recovered and basically closed unchanged. The moral of the story, just to get to the bottom line of this, the numbers came out very close to what the trade was expecting. We did see a slight uptick in corn and soybean yields, which again was part of the expectation. And so that was, I think most analysts and most reporters on this said, well, it was basically a neutral report. And a lot of times our September report does not turn out that way because September is the first month that USDA uses all three of its sources of information for yield. They do a farmer survey, they use the satellite imagery to try and estimate yields as well as what they call objective yield surveys. So they actually send individuals out into randomly chosen fields to do yield estimates very similar to what a crop adjuster would do. So they combine all three of those sources of data in the September report for corn and soybeans to try and give us the best information we can. Now, given the early planting progress, and especially in the western corn belt, the warmer summer that we've had, you know, both the corn and soybean crop has been pushed along. So I think most people right now think that these numbers are relatively solid, even though they're in September. So we don't right now expecting any major changes into the October report, just because the crop development is a little bit faster than normal. So I want to touch just a little bit on concerns that I have about people in this region having kind of this backyard syndrome, or just because it's dry and really horrible in my hometown or my local area or out my backyard. I get the question, so why isn't the grain markets responding? Don't they understand what's going on up here? And I'll address that question in just a moment. Just a couple of comments before I move on. The corn production level, and really when we go through all this math, we're really trying to come through and say, well, how many bushels of corn and soybeans and wheat are we going to have available to use in the upcoming marketing year? So this debate about planted acreage, harvested acreage, yields, all of that really comes together in what's that production number? So to give some historical perspective, the corn number, which is just a little bit under 15 billion bushels is the second largest corn crop we've produced in the US. The 4.374 billion bushels of soybeans we're producing, expected to produce this year is the third largest soybean crop we've had in the US history. And that's a combination of again planted harvested acreage, but also trend line yields. So the yields each year keep going up a little bit. The corn number at 176.3 is right at trend line yields. So the moral of the story is right now we expect to have an average corn crop in the United States if you adjust for and compensate for better technology. When you look at the soybean number at 50.6, that's just slightly above average, but just by a small fraction, about 50 bushels is the trend line yield. So basically right now, based on the math we have so far, we're looking at an average corn crop across the US and average soybean crop across the US. When we combine that with some increased acres, we're getting some very, very large production numbers. So next side, please. This is the ending stock. So we take the supplies, we subtract out the potential use. This is our forecast for ending stocks. How much grain do we think we're going to have in reserves just before harvest of next year? So and obviously the larger those reserve, those forecasted reserves are, the larger margin for error. So we could have bigger problems and still have these reserves available in case there are some troubles. When we look again, once again at the very top row, which is the average trade estimate, this is what the forecasters are expecting USDE to come out with versus the numbers on the very bottom, which is the numbers that USDA did give us. Again, very, very close to what the trade was expecting. So now let me tie in these near record production levels with the consumption part. Our total consumption levels, at least the forecast we have right now are also for near record levels of consumption. So for both corn and soybeans, if the USDA forecast we see right now are true, these would be the second largest consumption years we have, with number one being last year. So last year on the consumption side for corn and soybeans, those were both record years. These are expected to be slightly lower than last year, but again, we have a lot of the marketing year to go. So the moral of the story again, the new information really wasn't a shock value to the marketplace, but it does set the tone for trading as we move forward. And so right now the tone is, well, we will have a good crop, we will have some bushels to work with. I think in my opinion, we're going to be shifting into this question of how quickly are going to be using these up? What's the demand base that we have right now, given that we have higher prices in the market? So next slide please. One of the things that I want to emphasize, just to go through a couple pictures, just to remind everybody, we really have in my opinion the tail of two crops. We have the western corn belt, which Mississippi River is usually considered the dividing line between eastern and western corn belt. So if you look at the western corn belt, again for corn, soybeans, and even for wheat, we're looking at Iowa, Nebraska, South Dakota, Minnesota, North Dakota. The western corn belt regions obviously have been dry for some time period. We've known about this for a while. It's not a big shock. We are monitoring and the industry is watching those numbers very closely. However, when you look at the eastern corn belt, Illinois, Indiana, Ohio, Kentucky, even parts of Missouri, they're expected to have some fantastic yields. So this is the drought monitor map. We've been watching this all summer long. We're starting to see some of that. The abnormally dry conditions creep into the Oklahoma and southern Kansas region. I don't anticipate that that will have a major impact on winter wheat seedings, but it is something that we need to be watching as we get into later in the fall and the winter wheat crop development. So on my next slide, there's, I recently ran across this. This is really a composite. So this is a vegetative drought response index. So again, this is put together by basically the same people that put the drought monitor together. And what they've tried to do is come up with a visualization for crop health. And they're using the vegetative indexes, those satellite imagery of vegetative index, how green is the crop, how healthy does the crop look as the base for that, but they're using the accumulated vegetative health. So they're looking at, well, let's take the vegetative health from last year and add it or last week and add it to this week and add it to next week and as we go on throughout the growing season. So most of the time when I've showed you pictures of vegetative health, it's just been a snapshot of, this is what we see today. What they're trying to do with this is say, well, we may have had really good growing conditions early in the season, but if later in the season it starts to get more difficult, what is it telling us about? So this graphic here shows that accumulated vegetative health compared to a 20 year average. So how do we see it sit today this week compared to the average of the last 20 years at this same time period? So it's not necessarily absolute measure, it's a relative measure. How do we sit today relative to where we would normally be this time of year? And obviously, you know, as you look at the reds and the browns and the oranges, those would be less below average. It's showing that the drought conditions are having impact on crop health. When you look at the white, that would be normal. That would be kind of typical, it'd be average. And then as you get into the greens and then the lighter greens and then the blues or darker greens and blues shows that yes, this is actually the crop accumulated has been in better condition that we would normally see. So once again, visually, I just want to point out, yes, this western corn belt we've known about the drought. I've heard lots of reports of extremely wide variation in yields in our region. I expect that to continue those reports to continue in both corn and soybeans. We know that northern Minnesota, especially northwest Minnesota has been very dry. We know there's been some pockets in southern Minnesota that are dry. We also have been watching that pocket in the central part of Iowa very, very closely. And if you notice that kind of extends eastward into that border between Wisconsin and Illinois. But I also want your eyes to drift towards, look at the crop conditions in eastern Kansas, Missouri, most of Illinois, Indiana, Ohio, Kentucky. These are also major cropland areas for corn and soybeans. Their crop has been outstanding. In fact, Illinois, Indiana, and Ohio are all expecting record corn and soybean yields for this year for this 2021 growing season. So the moral of the story is we're looking at nationally kind of average yields, meaning the eastern corn belt, it looks like it's going to more than offset the losses we're seeing in the western corn belt. So we're back to average. And that's why I call it kind of this tale of two cities. On the next slide, what has happened is we filtered out all of the grassland areas, all of the forested areas. So this is just cropland area. So it's the same map I've just filtered out to look at cropland only. And again, coming back to our yield and your yield expectations, when we look at total production, this is going to be important. The other thing before I go on, I want you to look at and think about where are the bushels produced right now this year? We're going to have a lot of bushels in the eastern corn belt. We're going to have fewer bushels in the western corn belt. And as we talk about export and export demand and more importantly, export shipments, how are we going to get the grain from the farm to those export terminals? This is going to be an important thing to come back to, especially as we talk about the issues that are now showing up in the Gulf of Mexico. Because a lot of that wet eastern corn belt, corn and soybeans end up being delivered to a river terminal either on the Mississippi or on the Ohio river and then barge down into the New Orleans ports to be exported around the globe. And again, given some of the damage, which I'll talk about at the end of my session here, this is going to have in my view some really important issues logistically and how we're going to get this grain move from where it's produced to where it needs to be shipped. Next slide please. Just to recap to give you a kind of visualization, how do we sit? This is for corn. I just want you to focus on the blue bars on the bottom, which are stocks to use ratio. It's scored on the right hand side of this graphic. The red line and the green line showed total production and total use of corn and the forecast for this upcoming year. The reason I wanted to show this very quickly is given our current projections for use and consumption, our ending stocks, even on a percentage basis, are expected to climb from last year's numbers into this year's numbers. Now what I always usually say is that 10% carryover stocks on corn is kind of the tipping point. So let's talk about pricing. Historically, if you look, if the corn market sees carryover stocks above 10%, we tend to have lower prices and more stable prices. When we get below 10% carryover stocks on corn, we tend to see much higher prices and a lot more volatility. So this 10% is kind of at least a psychological tipping point. And so we're excuse you right now at that kind of tipping point for corn. And that in my opinion, that's why I think we'll probably see corn prices soften a little bit as we go into harvest. We may see recovery coming out of harvest, a price recovery after harvest is completed. But again, we're going to have to wait to see until what those final bushel counts are going to be. So I think the corn market right now is more of any sideways to slightly downward trending pattern through the harvest months. I really don't expect to see a lot of shock value unless obviously something happens on a global political stage. Next slide shows the same information for soybeans. Notice now, even though we're looking at a slightly larger soybean crop than we had first expected, the demand base is there. We are expecting to see some very strong both domestic as well as export usage. Our carryover stocks on soybeans are going to continue to be very, very tight throughout the next growing season. So what does that mean? We tend to have higher prices, a lot more price volatility. So as we compare corn and soybeans and kind of price movements, I do expect the soybean market to be much more sensitive than the corn market. The next slide shows the same information for all wheat. This is all classes of wheat blended together. Again, because of some of the challenges we're having here in the northern plains, our total wheat supplies are decreasing, our usage or consumption of wheat is expected to be relatively stable, which then means that we're starting to pull down our ending stocks. If we look at all wheat, that 30% ending stocks, I consider that kind of the low end of normal. When we look at all wheat, all classes combined together. On the next slide, I have the same information for spring wheat only. And of course, a lot of questions about spring wheat as well as Durham. Durham inventories are forecast to be exceptionally tight. In the spring wheat market, we've got a little bit different dynamics going on. Right now, the spring wheat market, we've got a pretty good read on what we have in North Dakota, Montana, Minnesota. But we don't know, we don't have as good a read on what's happening in Canada. And the Canadians on kind of a typical year produce about 40 to 50% more wheat than we do here in the States for spring wheat specifically. We're getting some early harvest reports out of Saskatchewan that indicate average yields, at least in some of those areas are going to be a little bit below what the Stats Canada numbers had come out earlier in the month. So it's putting a little bit of hesitancy now into the spring wheat market and a little bit more uncertainty until we get a little bit better read on what the volumes as well as the quality will be coming out of Canada. So I don't think we have a lot of downside risk in hard red spring wheat at this point. There might be some upward potential depending upon what happens out of that Canadian crop. Next slide please. So let me make a few comments about basis levels and kind of what's happening as a result of Hurricane Ida. So as everybody knows, you've seen it on the news, a lot of wind damage, a lot of water damage down in the New Orleans area. Ida shifted and kind of hit the city a little bit differently than Hurricane Katrina did several years ago, and there was actually more damage to our export facilities this time than there had been previously. So and recognizing that again right in that New Orleans river port system along the Mississippi river, we have a lot of grain loading facilities. A large portion of our grain is actually shipped and loaded, exported through that Louisiana Gulf region. So we have some facilities that have been damaged, some of them minor damage, some of them some major damage. The other thing that's happened is we did have some barge traffic along the Mississippi, especially the lower Mississippi, where there were some of the existing barges had actually sunk. And so even though we do have some river transportation going back and forth, it's restricted flow levels as well as only during daylight hours so that the riverboat captains can kind of navigate around some of the blockages that we're currently experiencing in the lower Mississippi. So we know that the export volumes out of the Gulf are going to be slowed. They're going to be slowed for quite some time. One of the big challenges even for those facilities that were not damaged is the lack of electrical power. So electrical power and recognizing that electricity is the primary power source for most of the conveyors and the internal elevation equipment in an export terminal. Electrical power is being restored and because there are some main transmission lines that went down that really are going to take some time and effort to get back up and running. So electrical power is coming back online, but the progress is relatively slow. We had several terminals that have had electricity restored, but they can't, they are not been reinspected and basically cleared from a phytosanitary standpoint to actually restart operations. So even some of the inspectors are having a hard time getting to all these different locations and getting the certifications they need. Next slide please. There are, and you should probably have seen some of the pictures on social media about some of the physical damage that took place. Some of those dam like the Cargill facilities where the those overhead conveyors had been ripped apart, you know, it's going to take several months for those to be either repaired or replaced. In most cases those are custom built parts. So not only do they have to take off what has been damaged, but they have to order the specialized replacement that needs to come in and then reinstall that. The current kind of private estimates and these are, I don't want to throw these around too hard, but their rough estimates is that they're expecting the shipping volumes out of the Gulf, Louisiana Gulf, to be off by about 30%, running at about 70% capacity for the next three to four months. And hopefully ramping up then to at least about 85% capacity or 15% reduction for the next six to eight months. So even though we're starting to see things come back online, it's still going to be kind of a long haul to get these things fully operational again. Now how is the market adjusting to this? How are we trying to redirect the flow of grain to make sure that we can meet our export needs and continue to sell grain out of the US? Some of that export facilities are exported grain that was scheduled to go out of Louisiana ports have now been shifted to the Gulf part of the, excuse me, the Texas Gulf Porks, primarily out of Galveston and Houston. They do have the capacity and the history of shipping not only wheat, but also corn and soybeans. The differences, these are basically rail service only facilities. They don't have the ability to receive and offload barge traffic to be able to reload it onto an ocean vessel. So obviously barge rates are much lower than rail rates. And so there is an increased cost to being able to deliver and export through the Galveston Houston ports. Next slide, please. We're also seeing shifting some of those loadings and destinations to the PNW, the Pacific Northwest ports. So again, some of the volumes of corn, soybeans of wheat are being shifted instead of being shipped out of the Louisiana Gulf. They're going to try and be loaded through the PNW. So we've seen a pretty substantial increase right now for this time of year. Seasonally, the kind of basis levels we're seeing for grain delivered to the PNW ports right now are very strong. The PNW is now going to have to try and pull some more of the grain from the northern plains and the western corn belt into the PNW to try and meet that export demand. And that's why I come back to that graphic earlier about where is all the bushels going to be located? The western corn belt and the northern plains do not have the volumes of grain that we normally have at this time of year. And so again, this PNW basis is trying really, really hard to pull as much grain from the R region into the PNW, which is also then impacting our local basis levels. So if you've seen the elevator bids more recently, we have some exceptionally strong basis levels for corn, soybeans, wheat for this time of year. Seasonally, we're looking at very, very strong basis levels. In my opinion, I don't think those basis levels will soften much throughout the winter months at least. So I think we're looking at some pretty strong basis levels moving forward simply because of the delays coming out of the Louisiana Gulf region. So with that, I'll conclude my remarks and we'll move on to Tim Petrie. Well, good afternoon, everybody. Good to be with you. Tim Petrie, Extension Livestock Marketing Count has been getting a lot of questions since the last time. And so let's go to my first slide about what's happened in the futures market. And really, what has happened in my estimation is the cash market has behaved just like it should, but it's the futures market that got over exuberant and made some adjusting. I kind of cheated here with two slides on the same one, but I just want to talk a little bit about it. The top slide is the one I showed you last month that shows that futures market. And so let's just go to the top right hand corner one month ago. And if you'll look at those blue, green, and purple lines, that's what's happened the last three years. You see usually the 800, 750, 800 pound steer market does top out there in October and then goes down as we see the big runs of cattle come here in the fall marketing season. But the futures market said, forget that this year, we're going all the way from, you know, the market was there at 160. We're going all the way to 173, which is way higher than it's been the last three years. And then go over the left hand side to follow through the next year. So go down then to the bottom slide is where we're at now. And you see the futures market has made a huge adjustment there. And so November futures now are down to 157. Let's keep this in perspective, though. I know people are saying, well, that's a big $16 decline in the futures, but still, you know, it shows more of the seasonal impact. And we're still above the last three years. So, you know, you might say prices are fairly respectable. We said we thought they would be a little bit higher than last year, and they are. And so it's really the futures market that's made an adjustment there. So what's to blame for the futures dropping $16 in a month is my question. So let's go to the next slide. A lot of times I blame frame for corn prices and, you know, you know, being facetious there and so on. So let's look a little bit at corn and feeder cattle and see if corn was to blame because remember that old saying that I always tell you change corn 10 cents, change feeder cattle in the opposite direction. So again, let's go back to the left hand side. This is November feeder cattle futures and these corn futures. And so yeah, that opposite relationship has really taken off or came through this year going back to left hand side of that chart there in April when corn skyrocketed feeder cattle went down, but then into May corn went down feeder cattle up and June the same thing. Corn went back up feeder cattle down that up just look at those highs in the corn all the way across there and in May, June and July and the bottoms on feeder cattle and then corn as frame said corn kind of leveled off the last couple of months here did fall some there towards a little bit dramatically there towards the end of August and feeder cattle sparked or their highs, but for the last month actually both feeder cattle and corn have been going down which is not characteristic of the market at all and moving basically in the same direction. So we can't blame corn. So what has happened let's go to the next slide then here I've got November feeder cattle and then the CME feeder cattle cash settlement index. There's no delivery of feeder cattle at the end of the contract. It settled with the cash index which is just an average market price of all 78 99 weight cattle at markets where USDA reports and that includes Napoleon and Mandan and Dickinson and North Dakota and then right down through South Dakota over into Montana down to Texas and all those markets just add up all the cattle sold that they divide by the number and then it's a seven day average so you see the the futures market there has been overestimating or really higher than the cash market the whole time go back to June the futures market is saying we'd have about you know 156 cattle now and and they were right back then but then I just kept right on going up in that 173 there what happened was the funds like to be long a corn had leveled off and the other some of the other commodities but feeder cattle and fed cattle we'll see in a minute we're going so they jumped on the bandwagon and ran it up and got way above the cash market there you see the cash mark was 156 and the futures were 173 they got to come together in November which they have done right now you know looking at when I don't have the September contract here but September futures close next Thursday and right now they're at one little over 155 and that's where the cash market is so the September has already came together the number has got to come together and it got a lot closer so that's came together so kind of what happened let's go to the next slide then uh is the two things that affect feeder cattle prices are fed cattle prices and corn and so kind of the same story there on the top I have last month and I'm wanting to concentrate there on April futures because for instance November feeder cattle placed what would be could be hedged against the April when they come out and so that uh April contract uh a month ago was up there at 142 and yet we had a cash market there of uh you know right back then of about 125 so a big difference there in and yeah that's always still April next year is always out and a lot of things are going right our demand is strong both domestic we've got record export demand and so on restaurants are open up but that's still quite a bunch to to make up and so you see down in the bottom slide now right now uh April futures have went down trading now at 136 still as I said before although they've came down still quite a bit higher than the last several years so there's still optimism there at least in the futures market and the red line shows you know we're at 126 now so to get up to 136 we'd still have to go up uh $10 by April but why did the futures market go down let's go to the next slide again and and kind of do the same thing there that we did on feeder cattle there's April live cattle futures on the top that got up there to uh almost 143 and again we've been plugging along here we're at 126 now but there was a big big uh road to hoe to get up to that 143 level by April and so again it was the funds the funds were long and they kept buying buying buying and they finally topped off hard there and then they started bailing and when the funds started bailing they come down and again the cash market through all that went up and and inched up so like I say the cash market is behaving and futures market just got over over exuberant there so go to the next slide just wanted to mention a little bit about the calf market some people said you know because of the drought and so on we probably see some uh earlier movement of calves but really hasn't materialized yet usually by mid uh October is when we start seeing the bigger run of cattle just you know I talked about those three markets in North Dakota the USDA reports and this was last week's report on the top they they didn't report the feeder cattle market because of extremely limited offerings uh and there have been some dribbling in I know Stockmans and Dickinson today is having a big sale over 2000 heads so that should be our first big test I'm not sure I hope USDA reports it so then we've got a really good test of cattle coming in at least for this week but anyway seeing the looking down at the bottom then is what the feeder cattle market has been doing and yeah it's you know it kind of hits its seasonal highs here and tends to go down into the fall as the runs hit and so I'm expecting that we're still right now kind of above at least the last two years the purple line is 20 and and the green line is 19 so I think uh you know we'll see some weakness into the fall that we always do but but you know more probably on that 2018 uh blue line there and above the last couple years and you know that's keeping corn constant like Frane said probably might happen and and the big the black swans don't happen and so on so again let's see what as the cattle start coming to market oh they do we've got good prospects for winter wheat down south and good grazing conditions down there so much different than up here so let's go to the next slide then just to wrap up that you know the projections for the next several years since now we've taken the cow herd down two years and they're going to go down again this year and our beef production is is going to fall uh next year after reaching record levels this year we do expect improvement in in cattle as you see on the right hand side but this is an annual average and yeah on year to year base I think we'll go up but that takes out the seasonality and we still have uh seasonal patterns to contend with and and things go along and you know what's next year's corn crop going to be and so on so let's go to the next slide I think uh you know there's still some room for at times on a seasonal basis at least looking for some price risk management because you know COVID is still going on we've got a lot of weather issues is the drought going to continue what's going to happen to corn and and the economy and and so on so uh you know just as an aside here there's an astute listener of this program that uh back uh months ago said you know that 173 I sell my cattle feeder cattle in March and that 173 I haven't sold them for that for a long time so uh he uh did an LRP contract which you know makes him look pretty good now so you know their seasonal variation uh take advantage when you can and and uh but looks like better times ahead so with that let's go to Ron and see what's happening to our tax bill well thank you Tim I appreciate the information uh good afternoon everybody uh Ron Haugen I'm extension farm management specialist on campus and I'm going to talk about uh taxes today I'm going to try to dig into the federal tax proposals that are that are ongoing so my first slide here I just want to say that um I'm just mainly concentrating on the house ways and means uh proposal that that they that they were working on last Monday um and um things are changing as we know things change all the time and I never really want to study things before you know while things are being made in Congress because everything always changes I'd rather just wait till it's actually passed and the president signs it and then study it but I just wanted to give you a flavor of what's going on there's been a lot of questions so the next slide kind of just going to talk about the overview of what's what's in that committee uh the committee chairman his name is Richard Neal he's from Massachusetts and the minority the minority uh on the committee is led by uh Kevin uh Kevin Brady of Texas and I had to look those people up because I wasn't quite sure who was working on the committee anymore but what it basically does the highlights it does uh protect the step up the step up basis for farmers there's been a lot of issues on that people are really upset about that there's been a lot of backlash and so it appears that they're working on that it's going to roll back a lot of the tax cuts from the 2017 uh tax cut bill and some of these things are going to be starting uh yeah immediately and most but most things are going to be starting in the next tax year 2022 now this bill is the 811 pages and then so I'm not a tax attorney I'm there's people diving into this stuff and trying to understand it at this point so the next slide I wanted to talk about the tax rate changes um and so right now based on that previous uh tax cut the top marginal rate was 37 percent and that'll pop that up to 39.6 uh for singles uh over 400,000 and marines 450 uh there's also hidden in there a surcharge over a five five million uh then you uh it's it's over five million of modified agi I'm not I'm not quite sure what they mean by modified at this point the definition but there's another three percent so that kind of pops it up to to uh 42.6 percent then long-term capital gains the top of the capital gains would would pop up to 25 percent and kick in at 450,000 and as we know we have a flat rate now for corporate tax at 21 percent the proposal would be to actually drop that down to 18 percent on the first 400,000 and then to 21 and then over five million 26 and a half so the next slide just shows you the the brackets that we had on the old law before the the the the TCGA was signed back in December of 2017 2017 so it's basically going to revert back to that according to this proposal the top rate will be 39.6 I don't know exactly how they're going to if they're going to align the brackets the way they were before but that's that's that's the way it is right now on the bottom from 10 to 37 and that'll be changed so the next slide was going to talk about the estate tax and that's the big one here it actually rolls back the current 11.7 million dollar estate exemption and cuts it in half to five million at the end of 2021 it was set to expire in 2025 so people that are doing estate planning right now for the next three months in this tax year they're going to have to keep an eye on this and see what happens it does protect the step-up basis because it because based on that section 2032 a valuation if if if a person inherits farmland and continue and and continues to operate it the the stepped up basis is in effect and but there's still a question what if somebody inherits farmland that is not going to farm it some some some sibling that's that's in another state or whatever are they going to get the stepped up basis there's still questions there in this proposal so next we're going to talk about about the qualified business income deduction the qbi qbi c d i should say and that's where you get the there's going to be a little a bump there that the 199 a would cap the 20% deduction at 500 000 for married and 400 000 per single it would just cap it before it was kind of phasing it and now it's just cap so this may impact especially people to deal with co-op some of that impact of the pass through income okay next um so with all this information it's very tough to do income tax planning we have three months left to do so i wanted to just touch on a couple things here and the next slide talks about um next slide please there we go uh there's there's a lot of crop insurance proceeds that was probably gotten this year because of the drought because of the low yields and one thing that people don't understand is that you can defer those crop insurance proceeds to the next year provided you show that you normally sell your crop in the next tax year and um only the only the physical crop loss proceeds can be deferred but if you have a revenue policy and get money be based on the revenue that cannot be deferred and some some insurance companies break it out and some do not so you need to be aware of that when you are if you decide to defer some crop insurance next we do have um as i've talked in some of my other talks there is methods to defer all livestock sales for breeding stock and for all all animals those are the code sections i won't get into that but there's methods to do that some people would have had to force had a forced sale of livestock this year so that could come into play and next some people have sold their their uh their commodities and they want to defer it and into the next tax year and one thing that can be done is that if you have a deferral contract and if you're doing your tax planning and you say hey maybe i should have a little more income i should i defer too much you probably could do several deferral contracts not just one big one and then you could you could opt out a one and just report that money in the in the current year in kind of a little more strategy as far as tax planning so something to think about next um this publication 20 to 25 farmers tax guide always a good place to to look contact your tax professional and um the last slide then uh i guess a second to the last uh 2022 with all these proposals it's going to be way different than 2021 so we'll just wait and see what happens and my last slide then before i turn it over we'll just see what were this political football bounces and see what happens and uh and see where we end up so i just wanted to give you a little flavor of what's going on so next uh the next speaker then is is uh david rippenlearn he's going to talk about renewable diesel thanks ron uh david ripplinger bio products bio energy economic specialist then these two extension and you have the basically the the focus of my talk this month is just to convince you if you're not convinced already the renewable diesel has arrived and that this new relationship between agriculture and energy is is emerging probably the state's worst kept secret for two months regarding the new adm plant about a month ago marathon and marathon petroleum and adm did announce that they do have a partnership agreement that is that the soybean oil from the the plant that's now reconstruction near spiritwood will be going to marathon dickinson i'm not a surprise but it has been formally announced again this is just part of this bigger renewable diesel play a more recent announcement coming from iowa is the construction of a plant in northwest iowa that is about the same size as the one in spiritwood again taking advantage of the same opportunity to keep highly valued vegetable oil here in the states much of that soybean meal likely be fed too but it's a it's another project in addition to one in northeast iowa that was announced a few months previous and so we're kind of expecting this to be one of the next of many announcements for new soybean plants another plant in the region by crookston the epitome energy facility they did announce that fagan and fagan was the the epc for a bunch of ethanol corn ethanol refineries a decade ago uh they're the the epc for the the plant uh soybean crush plant dump here crookston which is also again about that same size you know right around 40 million bushes a year again as we're doing this you can kind of just see all of these these beans that you know hadn't been crushed you know slowly disappearing that supply is uh being taken care of with these new new places again one of my things i want to get across today is this relationship between petroleum and agriculture and there we have chevron who's obviously an oil major uh working with bungie who's obviously an ag commodity major to have that offtake of of of oil again we're seeing more and more of this the marathon adm announcement and the chevron bungie announcement uh you know it's becoming really really apparent that a lot of this is being driven from the petroleum side is that these petroleum majors know that they they they see a huge opportunity if not a need to get into renewable diesel that that that scrambling for feedstock is really critical that they have to get that uh in order to operate and here's just a hodgepodge of announcement so we have kinger morgan which is a major pipeline uh company here in the united states they and nesty are looking to retrofit a lot of of tanks for uh green diesel uh renewable diesel and other other fuels the the food versus fuel issue in the lower right hand side i think is critically important that the us soy industry came out and said that food versus fuel is not a thing but if vegetable oil is 60 a pound or a dollar a pound uh you can tell me if that's going to impact where that where that oil which in the past has gone primarily to food is going to go in the future we do have a construction so it's really tough to see in the middle and left hand side in su city construction on a plant to convert animal fats and oils for renewable industry was announced so this is going to be right next to the tyson plant uh there in su city again to keep that material in the in the space and then that'd be diverted to a biodiesel plant and then finally uh the announcement on the bottom is about nesty uh buying a group out of minnesota agri trading which has a lot of uh exposure to that that that that animal fat oil space and so that'll be an off-take operation for or a way for nesty to have that further exposure in terms of securing feedstock here domestically uh the last thing i just want to bring up is something to watch which is almost completely unrelated to renewable diesel our our regular stories almost by the hour about a firm in china that has a significant exposure to real estate and apparently is unable to service its debt and one of the questions now it's we're 13 years and a day past the anniversary of leeman brothers declaring bankruptcy uh you know there is their systemic risk presented by this company china evergrand to the rest of china you know what exposure do do american companies have in terms of uh you know having that relationship with evergrand or how much could expand further uh there seems to be a lot going on um and and it's increasingly more clear that they're not going to be able to service their debt in the near term the question is how might china as a country uh intervene to prevent the spread of that risk and probably within a week or two this will be a much more important story just like renewable diesel now appears to have become a more of a front page story as opposed to being buried somewhere a few months previous so those are the comments that i had if there's any questions be happy to field those for you again you can use the q and a tool or you can use the chat box you're welcome to use either one comment i did have with with frane's comments about basis and the strong basis here in the region obviously the corn ethanol refineries are short physical corn in the region and so you know they do need to bid that up a bit to get those physical supplies to keep keep operating i was going to ask if any of the other panelists had any comments i'll make a quick comment about um you know david's um presentation or recap of the renewable diesel uh market and the implications for soy oil i've actually vegetable oils in general but soybean oil specifically and change really the rapidly changing um profit margins and economic you know where's where's the revenue generated from crushing soybeans and it's it's shifting fairly rapidly where price historically soybean meal was the dominant source of revenue with soybean oil kind of being the co-product to now where soybean oil is really the driving force behind profitability with uh with more so more balance between the soy oil and the soy meal when it comes to revenue streams and kind of prioritization of how much um how do we manage our capacity so this is this is really an emerging story we don't know exactly how it's going to play out but it is something that will definitely have an impact on our region yeah and one thing i did see this morning uh in the trades frame that there was a date put on it they figured by 2025 that that that oil will be the primary product and that you know ever after that so i i felt like in months past when i said things like that i was kind of ahead of things but if industry's saying it now too it maybe it's right and there is a question for you frame so germ's been on a roller coaster ride any thoughts on pricing yeah and and part of that roller coaster was because we had a one or two large uh semolina manufacturers pasta pasta folks that were caught short they were waiting for the harvest run to be able to come in and procure some of their needs they were caught short and and really needed to make some pretty important purchases at a time when farmers were saying well you know i don't know how many bushels i'm going to have so we saw a spike up once those orders were filled we've seen now a bit of a retracement again as i know in the spring wheat talk we're having a lot of conversations and questions about the exact size of the canadian durum crop once again early reports coming out of of field harvest and this could just be a timing issue but the early yield reports for spring wheat and durum out of canada were below what we had expected so i think the durum industry now is taking us taking kind of a step back and a breath and saying well let's find out exactly how many bushels we're dealing with in particular on the canadian side and it will try and move forward from there so i really don't see a lot of downside downward pressure on durum prices i do think there is some upward potential it but it will be very heavily dependent upon the size of that canadian durum crop and as well as the quality profile and i don't on durum you'll always have to talk about the quality profile great thanks friend uh brian i think a question for you uh issues with fertilizer prices and or supplies yeah issues with actually actually both of those um some of the problems i think i put it now let's say the last newsletter what's the one i wrote uh wrote up a little segment on fertilizer and prices uh right now are you know kind of approaching a 10-year high on all fertilizers not just uh nitrogen which tends to be one of the higher ones but on phosphate and potash as well prices go high that in some cases it's for different reasons uh for shipping issues which we've we've already discussed you've also had plant shut downs due to both covid and hurricanes and problems in texas which is impacting fertilizer production especially the you know h3 production which from which all nitrogen fertilizer is needed and then you know some of the materials and the issues of the ports and so yeah there are definitely there's some big concerns with the fertilizer availability and costs heading into spending into 2022 this is the time of year typically where dav and i are sitting there telling folks to pre-priced fertilizer because this is typically the cheapest time of year to do it but right now with with costs as high as they are you know nitrogen well above and many other than h3 above 50 cents a pound pound of in you know that's the highest we've seen at this time of year since you know 2013-2012 so i i think there's definitely potential for these prices to increase but there's also potential for them to stop and from giving me the typical hedged economist answer but the truth is we just don't know and then it's also going to depend on some of the things the grain deals with on cropping decisions and what both the planning intentions look like do we expect a big corn crop this next year and is that going to impact nitrogen prices or big corn and wheat crop so right now there's a lot of i guess uncertainty as far as fertilizers go and that's why like in our last newsletter i kind of encourage you guys to use the crop compare tool that we create here at AVSU and run some through some of these scenarios where you kind of look at the retail price of fertilizer and if it's you know really high headed into the spring does this $5 $5 50 cent corn make a lot of sense if i've got to spend an extra 50 bucks an acre to fertilize it and that's the decision that we're facing right now so there's a lot of concern with that and we'll continue to monitor it but unfortunately because of the nature of some of the problems we're just unsure of what if they're going to resolve by then and if so if that is that going to stop the prices right now you know if you twisted my arm and told me to uh make a suggestion i would say holding off just because of how high prices are right now uh there's probably a bit more potential for them to stop them and then go up a lot more but at the same time that's the capital so that's that's my very weak preference would be to hold off on pre-prices right now just given how high prices are if i can add one thing really quick too um if there's ever a time that soil testing will pay it's going to be this year um so so please you know for if you're farming or if you work with farmers please please please make sure that that that you take the time and effort to go out and do the soil testing get the probes this fall we're going to have tremendous variability from field to field on on available fertility because of the crop and then and the variability of crop yields and when you look at today's fertilizer prices and the potential to be able to save some money by knowing how many pounds of fertilizer you have in the field and being able to utilize that first uh soil testing is going to be one of those things that'll pay you huge huge dividends just because again of the variability that we're going to have in in existing uh levels in the soil this fall yeah especially if you didn't have much of a crop this year probably use a lot of fertilizer and you know as much man you look at potash prices we haven't seen prices this high a long time i mean they're basically almost doubled or if the price virtually doubled but if you don't need to put it on please don't it can send cost you this year the same thing with that the last extremely high right so how to reinforce what i'll answer the next one all right so what percentage of uh spending on food in countries other than the u.s. well the u.s. is around six to seven percent of your average household budget you spent on food um and we tend to spend more in the u.s. dollar dollar wise nominal dollars than a lot of other things so you'll hear it sometimes food in the united states is you know some of the cheapest it's not the cheapest in the world if you look at the dollar amount spent on food the u.s. is actually quite high it's just that as a percentage of our income is very low so then you look at a country on the other end of the spectrum for instance Nigeria they'll spend over 50 percent of their minimum budget on food even though the food is basically half the cost nominal dollars of united states it's cheaper but it's a but it's a poorer country uh median incomes are much slower but the much higher percentage so what's happening there as far as the food inflation this is not a u.s. in fact quite the opposite it's much higher in developed countries than it is here and you increase for instance i read an article in bloomberg of global where they talked about inflation in Nigeria brought him up at 20 percent well 20 percent of 50 percent of your budget is a big number and that is that is real uh budget squeeze and felt by those people so if you wanted to know that's kind of where they sit and then you've got everything so the bottom line is the percentage of our budget food is still relatively cheap as a percentage of your income so while it's something to look at and definitely something that is understanding in front of the meat counter i'm thinking about one as a consumer it's still not something that's going to change drastically our way of lives for most of us in the country other countries quite the opposite you may be if they increase prices 20 percent and it's already 50 55 percent of the budget to probably change my death so i don't know if that answered your question quite but that's kind of giving you both ends of the spectrum and then and then there's pretty much everything in between okay so i guess i guess that's how i answer that as far as you know we have a question uh soybean crushing plant at castleton question mark uh yes i have heard rumors of a plant plant in castleton to crush soybeans i don't know if anybody else has a comment yeah i've heard the same rumors i have no confirmation that that's going to happen so right at this point you know i would consider it uh one of those plants that's kind of in the in that maybe mode and we'll wait to see what actually develops okay how's the canadian canola crop what would your outlook on canola pricing from now through spring um so we're going to have exceptionally tight canola supplies um that again last year the canadiens had a very aggressive export program on for canola a lot of that went into the chinese market um ending stocks in canada for canola are going to be paper thin uh from old crop from last year into this harvest so there's a lot of canola crushers that are really really hoping and praying that we have a good canola crop again from what i'm hearing in particular out of saskatchewan some of those early yield reports are not quite as good not quite as strong as what the statistic canada which is kind of canadian version of the usda is saying at the national levels now maybe some of those yields will start to pick up as we get into the the later seeded crop but at least the earlier reports are that canolas again canola yields are down from what we were expecting and we were expecting a relatively tight crop now there was a flurry of announcements that there was going to be additional crushing capacity on the canadian side for canola coming in there was i think three or four different announcements of some major crushing plants coming in obviously just like the plant in in spirit wood those will will take a while to come online and so the canadiens right now kind of have the existing crushing capacity um canola prices are exceptionally high there's some fantastic new crop contracts they're starting to come out for 2022 canola i think that would also be a really strong indicator of what the industry thinks is going to happen we're going to have to have an increase in canola acreage to be able to not only meet supplies but also rebuilds inventories so once again i i think downside risk in canola is very minimal we are going to have a lot of volatilities me a lot of bouncing around simply because we are so tight on supplies any new kind of shift or or or i um adjustment in people's expectations will have an impact i guess as a wild card coming back to comment that david made about the the chinese economy um if we start to have a leeman brothers problem in china that will mean that the chinese yuan their currency will probably decrease in value which is going to make it much more expensive for them to buy imported product so even you know again this exchange rate and the and the currency valuation and the expectation about how strong is the chinese economy uh psychologically could have an impact on commodity prices in a broader sense but also more specifically on canola simply because the the chinese had been buying a lot of chinese canola last year that was again kind of the surprise of the market and the reason that the canola prices suddenly took off and went crazy great thanks frame uh saying that there's no more questions i want to thank all the panelists for presenting and fielding questions this afternoon and all of you for joining us and sticking it out to the end just so you know we do archive our webinars and slide decks they're available at the website on the screen and our next webinar will be again the thursday after the next was the release that'll end up being october 14th at one o'clock central time so once again thanks everybody for joining us and i hope you have a great weekend thanks