 Well, I think we'll go ahead and get started. I'd like to welcome everyone to this April 2023 edition of the Extension Agri-Business Sections, Agricultural Market Situation Outlook Webinar Series. You may have missed it, but we actually celebrated our third anniversary last month. This is originally kicked off due to COVID. And I meant to make cupcakes and bring them into the office, but I didn't. But here we are now in April 2023. I'd like to welcome you all again for this edition. We're going to have a similar format but a bit of a different order. We're going to have a series of presentations by Extension Agri-Business Specialists with Q&A at the end. Please use the Q&A tool or the chat tool and we'll get to your questions at the end of the presentations. With that, I'd like to turn it over to Frank Olson who will be kicking us off today. Again, Frank Olson, I'm the crop economist, marketing specialist here with NDSU Extension. Once again, here's my contact information. So if there's something you want to chat about privately or you've had some questions later on, feel free to contact me. I'd be happy to visit. So today I'm going to... We had USDA WASDE report, the World Agricultural Supply Demand Estimates. We had an update in April, a couple of days ago. I do want to give a very brief update of that before we kick into some kind of discussion about planted acreage and in particular kind of weather and planting conditions as we see it today. So with that, next slide. Here's a summary of the pre-report industry estimates. So there's a survey that the major news agencies like Reuters and Bluebergen and Dow Jones do of private analysts to say, what do you expect the USDA numbers to be from these different reports? And so this is for the 2022, 23 ending stocks. So this is old crop inventories. USDA so far has not formally prepared forecasts for the 23, 24 crop year yet. That would be the new crop crop year. They will do that in the May report. So a month from now as we're going through this information, I'll be able to talk a little bit about old crop and the forecast for ending stocks in old crop as well as get some information now about what they expect for new crop. So we're still kind of in this old crop mode. I just want to summarize what went on. So if you look at the blue row at the very top, the average trade estimates, that was the number on average, that was the number that the private analysts and forecasters were expecting to see for US ending stocks. So how much reserve are we gonna have in inventory just before harvest of next year? And so if you compare the blue number to the red number, I usually like to do that because the blue number is the information that's currently in the marketplace because that's the trade was expecting. We're already trading our expectations. When the report comes out, which is the red line, if that number is above or below what we expected it to be, that's usually when we start to see some shock value or some adjustments in pricing. I did highlight the black row, which is the second from the bottom. That is the number that we got last month. So that was February's number and then we have the March number. And I have to change date because it was March 11th. I apologize. So if we compare the blue number to the red, there was an increase in wheat ending stocks. And I guess there wasn't a big shock value to that, but it did put a little bit of a downward pressure or kind of a negative psychology just that we're gonna have a little more inventory than we first expected. Two minor adjustments that USDA made in old crop inventories. First, the amount of wheat imports increased just a small amount, but they also reduced the amount of wheat going into the feed and residual category. So primarily most of that is in feed used for livestock feed. The residual really means the spoilage and wastage that goes into the system. So there's a cut reduction in the amount of wheat that USDA expects to go into that, primarily the feed pile. As a result then our ending stocks increase slightly. They made no changes, none any place within the corn and soybean forecast. So old crop corn and soybean estimates from last month to this month were unchanged. USDA was looking for a slight adjustment of probably a little reduction in the corn side and pretty much flat numbers for soybeans. We got actually got the same for both of those. So again, not a lot of shock value wasn't a lot of surprises, but some tweaks and adjustments in the market's thinking. We were also looking and trying to finalize kind of our expectations for South American production. Now most of the Brazilian soybean harvest is over with now. The first crop corn has been harvested, but second crop corn is being planted. So again, to remind everybody, Brazil has two corn crops, one where they plant and harvest corn and soybeans at the same time, just like we do here in the US. And then there's a second crop of corn that in the northern part of the country when they harvest their soybeans they come back and plant corn as a second crop. So you can do kind of continuous cropping in some areas. So there's still kind of some forecasting error if you will in the corn production numbers for Brazil, but the soybean numbers, both the private analysts as well as USDA is kind of narrowing in and honing on some very common numbers at about 153 to 154 million metric ton of production. So we knew this was gonna be a big soybean crop coming out of Brazil. The expectation was that that's been coming for a while. It's just now being confirmed as we start to tally up some of the harvest totals running as the combines run over the fields. For corn out of Brazil, again, there's some actual numbers embedded in that as well as some forecasted numbers. Current basically unchanged from USDA's forecast standpoint, the trade wasn't expecting large changes there because the second crop corn, the corn that's being planted right now accounts for about 75% of the total production. So the largest portion of the Brazilian corn crop is yet to be harvested. So we've got some information but not complete information about that. Shifting over to Argentina, again, we're comparing the blue line on top with the red line on the bottom. We've known for a while Argentina has had some very, very severe drought conditions. This is the third continuous year of drought they had. We knew that the yields were gonna be reduced. The private forecasters had been reducing their expectations or their forecast for both corn and soybean yields. And actually USDA is just now kind of catching up to some of the forecast numbers that we see out of the private industry. And so the USDA was, excuse me, private analysts were expecting about 37 million metric ton of corn production. That's really what we got out of USDA. The private analysts were expecting a reduction in soybean production. The production was a little bit larger than what the industry had expected. But again, that 27 million metric ton is well within the range of what the private analysts are forecasting on their own, doing their own math, if you will. So not a lot of shock value but basically confirmation that, yes, that Argentine crop is gonna be very small and in particular for the soybean production which has an impact on not only soybean prices obviously but also on soybean oil and soybean meal prices globally. On at the end of March, March 31 we did get the perspective plantings report. So this is the first estimate. It's a survey based estimate of farmers on what do you expect to plant in 2023? And I know there's already been a lot of discussion about this. I just wanted to give you the numbers for your own reference points. A couple comments and I wanna kick into what does this mean for North Dakota? So again, the blue line on top is what the average trade estimate, what the average trade guess was. The black line and the highlighted bolded black line in the middle is what we planted last year as just as a reference point. And of course the red numbers on the bottom was what the survey indicated. Now we always know that this is the surveys taken in kind of the first couple of weeks of March and it takes about a week to compile everything and put it together and then it's released at the end of the month. So we know that there can be some changes and adjustments and shifts. The next major survey for acreage for actual planted acreage will come in June. So they survey farmers before they seed saying what are you expecting to do? They come back with a follow-up survey in June to say what did you actually seed and we make those comparisons. So let's just gonna again compare the blue numbers to the red numbers. The corn acreage was we were expecting an increase. The increase is a little bit larger than what the average trade guess was. But again, well within the range, well within kind of what we would consider that normal range of expectations. For soybeans, most analysts on average are looking for a slight increase in soybean acreage. In reality we got basically the same numbers that we had last year. So flat plantings for soybeans relative to last year but again down a bit from what the trade was expecting. The all wheat number is kind of interesting. Now that is all wheat. So it's all both winter wheat and spring wheat. The total number, it was about a million acres higher. So when you look at the blue versus the red about a million acre increase from what the trade was expecting which again puts them a little bit of downward pressure on the wheat number. Kind of the surprise to everybody, at least from my sense was we actually had an increase in the winter wheat seedings. So what the trade was expecting, that number that 36 million acres excuse me is very close to what this survey, the winter wheat seedings report survey and that we got in January said. And it looks as though there was a little bit more winter wheat actually seeded than what the original January survey had said. Now for spring wheat and Durham which is really what we're concerned about here in North Dakota, the trade was expecting a slight increase in spring wheat acreage from last year. We actually had a decrease. And again, not major change, but enough of a decrease that the markets did perk up in particular spring wheat market looked at and said, well, wait a minute, we can't be too aggressive in letting prices drift lower. And then for the Durham numbers again the trade was expecting basically flat to a slight increase. We actually had a little bit larger increase in Durham at least the prospective plantings part of it than what the trade was expecting. So what does this mean now for North Dakota? So I put this kind of in historical context. I looked at for 2021, 2022, those are actual seeded acreage. So those are actual acres reported. The 2023 on the far right hand side is what's came out of the prospective plantings report just for North Dakota. And I picked the top six crops from an acreage standpoint. So the green bar is soybeans, the blue bars is spring wheat, the gold bars corn, the black bars canola, the brown bar is dark brown is Durham, and then the purple is sunflower. Now the sunflower would be all sunflower, both confection and oil seed. So obviously our acreage and the planted acreage is up from last year from 2022, which is not a big surprise, given the fact that we had quite a bit of prevent plant last year. So I did want to include 2021 two years ago as another reference point for people to say, well, what do we think is going to happen to acreage within the state? Yes, if you compare to last year only, it's going to be a little bit deceiving because of prevent plant, but back in 2021 we had almost very little, I'll show you this in a minute, almost zero prevent plant in the States. We had dry enough planting season that we were able to get everything seeded. So we're kind of in between the 21 and 22 numbers. So when we look at planted acreage for each of the major crops, soybean acreage is up from last year, but down from the higher number we saw in 2021. Same with corn. The corn number was up pretty significantly from last year, but recognizing again, most of the prevent plant acres we had in North Dakota were in the Southeast corner of the state, which is very heavily corned soybean country anyway. For spring wheat, the blue bars, pretty similar to last year, but again, up from, excuse me, down a bit from 2021. And then when we look at canola, canola acres have been slowly growing. Again, part of it is the relative profitability in canola and the higher canola prices we've seen. Dermacage within the state, again, up a little bit from two years ago, up a bit, quite a bit from last year's numbers, but again, some of that was prevent plant. So what does this mean? I want to put this kind of back in context for us. I want to be very cautious as I've been talking to enough farmers and industry people in the state that I think a few of them are getting this backyard syndrome. So I want to be really careful that we don't fall into backyard syndrome and saying, why isn't the markets responding to the problems we're having up here? Doesn't everybody know we have a lot of snowpack left? We do, I mean, the market recognizes that, but to be realistic, we're about the only ones left in the country that has snowpack. I hate to say that, but that's the reality. So this is out of the National Weather Service. This is the snow depth as of yesterday. So these are numbers and basically satellite imagery it was taking yesterday. So the blue, it would be the depth of the snow. And notice that, yes, in the Rocky mountain area on the far left hand side in purple, they've had some very significant snowfall and good skiing conditions, but when we look into the agricultural producing regions in the central plains as well as the Midwest, we're about the only ones that have snowpack left. So yes, we have snow to melt. We're gonna have some flooding issues this spring. We may have slightly delayed planting. We'll have to wait to see what happens with rainfall, whether we actually have concerns about a lot of prevent plant. So the market recognizes we're behind, but please understand, we're about the only place in the country that's really behind, at least as of right now. So when we look at the snow depth, which just shows the colors and where the snow located as of yesterday, when we look at soil moisture conditions. So again, this would be as of the 10th. So this would be April 10th. It's about not quite a week old. This is an estimate of the soil moisture in the top meter of soil, about the top three feet of soil. Okay, and so how much from a volume standpoint, how saturated is that top three feet or the top, basically that root zone? Now notice up in North Dakota, Minnesota, where you saw the snowpack, they're really not measuring anything because the ground is still frozen. But you get outside of our area and you start looking at what's happening within not only the Great Plain States, but also then what's happening within the Corn Belt. And you start to see some drastic changes. So Iowa and Nebraska is a bit on the dry side. Iowa has been on the dry side, but they've been getting some rains recently. Central and Northern Illinois is in pretty good shape, but you get into Southern Illinois, Missouri, and in particular down into that, those Mississippi River Valley States, like Arkansas, Mississippi, Louisiana, that's where those big rain showers have been coming. So we've got part of the Eastern Corn Belt like Southern Illinois, Indiana, Ohio and Kentucky that have quite a bit of soil moisture right now. They're a bit on the wet side. And you see that really stark line that goes from the green into the oranges and the reds by the time you get into Nebraska, Central in particular, Western Kansas, the Panhandle of Oklahoma and Texas, all of a sudden those areas get very, very dry. And obviously that is a concern now for the winter wheat market on what is the crop condition of the winter wheat crop as it starts to break dormancy, which is something I've been talking about pretty much all winter long. So we do have this kind of stark contrast I wanted to show because in the Eastern Corn Belt, there are some areas that are in pretty good shape. And I think we'll have some pretty rapid planting progress once the soil temperatures warm up a little bit, but we do have part in particular of the Eastern Corn Belt that's still pretty wet right now. And we'll have to wait to see if there's any planting delays from the Eastern Corn Belt. And again, all eyes are on, from the wheat market anyway, all eyes are on Kansas and Oklahoma at this stage for the winter wheat and winter wheat condition ratings. I just wanted to zoom in really quick on the snow depth just to give you an idea. This is just the North Dakota picture. We can also convert that into a water equivalent. So if you look at where we are right now, those pinks and purples, that's anywhere from like six to nine inches of moisture. So there are some areas of the region of the valley that have not only significant snowpack left, but also there's quite a bit of water content in some of that. So let's hope that given the dry conditions we had last fall, then and hopefully not too much of a frost layer that some of that goes back into the soil. This is my last slide and then I'll hand things over to Tim. I did want to give you some historical reference points for prevented planting acres. So these are based on FSA data on how many acres were actually recorded as prevented planting. Last year we had about just under 2.4 million acres in North Dakota. But you can see that we have these great big swings. If we have a good spring or a drier spring, we pretty much get everything seeded. It's goes wet years like 2020. And I went back to 2011, which is really one of our worst prevent plant years at about 5.3 million acres. So you tend to see either we get a lot of acres planted or we tend to have big planting problems because we're in the prairie pothole region and our potholes fill up and we have to go around all those potholes. So what are we gonna have for prevent plant in 2023? Obviously nobody knows right now but I'm getting a lot of questions from the press and saying, well, you know, are you gonna have another year like last year? What does this look like? My personal opinion is I think we will likely have some prevent plant acres, but I don't expect it to be as bad as 2022, just my personal opinion. So with that, I am finished. I will stop sharing my screen, stop sharing. And I'll let Mr. Tim Petrie take over. Good afternoon, everybody. Great to be with you. Tim Petrie extension, livestock marketing specialist. Well, Buzz, of course, this week, if you've been listening to livestock media is that we hit record high prices on fed cattle and probably not a big surprise. I think it was two sessions ago or something I spent my entire session talking about the chance of historically or record high prices this year. And I said very likely that we would do that this year on fed cattle, but not on feeder cattle. So it came to fruition. Last week, you see on the chart there, I won't go through all those past year's lines because I've done that before with you, but the red line up there is this year. So last week we had 173, 10 average on the live weight fed cattle prices at all time record high. The previous record high was back end of November, 2014, when it was 171.38. So we surpassed that by a couple of dollars. And this week, again, we're gonna go up. We probably will be up $5 or more this week. Maybe we traded here in the North in some in Iowa and South Dakota at 184 this week. And so probably I'm thinking the average might be around 179 or so this week. And so a really, really good demand for fed cattle, demand for beef is good. We're approaching the barbecue season. The beef cut out, what packers sell for been just going up day by day. It's $300 today, the highest that it's been since back in 2021 when all the restaurants were opening up and their freezers were empty. So they had to come in and get a lot of beef to fill their freezers and so on. And that isn't the case now. This is, we're preparing for the grilling season and beef is moving well. And so record high prices and we expect that to continue. The 2014 last yearly record was 153, 84. And so unless something drastic happens, we're certainly, we just beat a week daily and weekly last week and we'll continue. And there's the red are the futures there throughout the rest of the year. And again, by December up there to 172 and above 160. So it looks like we will set a record high. So that's supportive to feeder cattle. For sure the two biggest things that affect feeder cattle prices are fed cattle prices, particularly those distant futures when the feeder cattle will finish and then also corn prices. And so Frane gave us some good news air a couple million more acres of corn. And so, as he said, not much in the ground yet and we'll have to see how the corn bill does. And that's what causes volatility in feeder cattle but more corn acres and possibly some easing on corn prices would even be more supportive to feeder cattle. And on the futures the same way this is the monthly live cattle futures and our previous record was back there and then to 2014 as we've talked about before we were up there at about 170. And so we've surpassed the highest ever futures this week and actually today for a while April futures were as high as 177 they did back off here. The last I looked they were about 176. So records on the futures market as well. So everybody's, you know, I just had a meeting yesterday and somebody and I says, how high can prices go? And obviously they can go higher and more on that in a minute but the highest prices are likely going to occur when we get into rapid herd rebuilding. And again, I've talked about this before we've taken the US beef cow herd down four straight years or beef cow herd is now lower than it was in 2014 when we had record high prices. And the highest prices are likely to occur when everybody has rain and then can rebuild their herds and so heifer calves are held back and beef cow slaughter goes down and beef production goes down and that supports prices. So, you know, Frayne talked about weather on the upper left hand corner is today's drought monitor and you see it's still dry through cattle country where the cows are go down to the bottom left the dark greener where our cows are and you know, the biggest state is Texas for cows and then it goes right up Oklahoma, Missouri, Kansas and on up North Dakota is the ninth largest and so right in the midsection is where the cows are and that's where the drought is but we have seen a lot of improvement if we go to the upper right hand corner here's the drought monitor just last October 25th and you see a lot of the entire western part of the US was dry California very dry dry up through the center where the cattle are even Tennessee and Kentucky have a lot of cows and as Frayne said, they're really, really wet there now and so go back to where we were on the left hand side a lot of improvement in the drought monitor but right through the heart of beef cow country it's still kind of dry and so that would hamper some herd rebuilding on the bottom way on the bottom then back in October 25th circled in purple, you know, you know over 75% of the beef cow herd was in drought back then that's why we had that big liquidation last year but now we've brought that down go to the left hand side about 41% of our cattle in drought and so there's some improvement and there is interest in herd rebuilding in the areas that have moisture we'll just go ahead predictions weather predictions are kind of like corn and cattle predictions, they can be wrong but the seasonal drought outlook looks better. Again, this comes out from the National Weather Service and so you see down in Texas, Western Oklahoma, Western Kansas, that dark brown is where drought persists but in North Dakota that lime green is where drought removal is likely so we get rid of it up here into South Dakota get into Nebraska, it says drought remains but there is improvement so there's a chance at least and we're hopeful that there is improvement and if that does come to fruition there will certainly be interest in herd rebuilding. So here's our beef cow slaughter and the purple line is just that 2017 to 21 average the blue line last year, the drought as you saw in the drought monitor a beef cow slaughter was up 33% over the average last year we killed the most cows we'd kill for many years but you already see on the red line there this year as it's raining and raining in the east and California is about drought free and some improvement that we've brought to beef cow slaughter down here the last couple of weeks the closer than average and so an indication that maybe we will start rebuilding the herds. Here's last week's market report for heifers in North Dakota and so we're down there towards the middle of the page when we're getting into those heavyweight heifers and you see where it says replace the USDA market reporter is saying these are replacement quality heifers bringing a premium over their market counterparts and in some cases close to steer prices so some people are optimistic there and down towards the bottom there there was some 834 replacement heifers at 185 bringing $1,500 a lot of replacement heifers bringing $1,400 to $1,600 and so they're in demand and just kind of an indication that people think there are better times ahead. I circled that 192.83 that was some 700 pound replacements going back to that question that I had yesterday of how high prices can go and Fray knows the answer to this but I could ask the rest of you and I'm wondering if you would be in the ballpark and actually it surprised me a little bit but I went back in my archives at a PowerPoint back years ago and I haven't back many years but this is my January 7th, 2015 PowerPoint that I showed to a meeting then and down there you see 700 pound replacements were $290 so 192 there and 290 they're $100, 108 more back in 2015 so how high can they go? Well, they went that high last year or the last cyclical low back there in 2014 and that's so they obviously could do that again and actually they were paying 2,000 for them because bread heifers at that time were bringing 2,900 or 3,000 and 1,000 more than this so we gotta get some more rain and it's gotta come through and here's been getting questions about what bread heifers are bringing and stock cows bringing so there aren't very many being sold right now and actually the markets wanna back off because these heavy, heavy pregnant cows they don't want them to come into the auctions because they don't want them calving in there and hauling them the last couple, three weeks of pregnancy but here's some 155 bread heifers on the lower right there at Stockman's back on March 30th, average 2,000 and a young stock cows on the upper left hand 20, about $2,400 so that's what they're bringing now so anyway, certainly like I said the record high fed cattle prices and it looks like they're gonna keep going supportive to feeder cattle here's the yearling 800 pound prices and we got them up to $2,215 the highest two that they aren't at record high quite at record high levels a record high for 800 pounders in North Dakota in 2014 was $208 for the year and so we started off down there at 175 and so we could even do a record on these it all depends on what happens the futures at the end of the year there the feeder cattle futures are up there 230 or so October today at 232 to 25 about and so if that comes to fruition we would at least be close to record but a lot of optimism there on the feeder cattle side following the record high fed cattle and then a couple million more acres of corn so that's my spiel I don't know if Brian's ready or not or Dave but I'll stop sharing and turn it over to the others. Yep, I'm good to go. Okay. Okay, real quick today I'm just gonna cover some of the information that came out recently on employment on inflation and interest rates and then I quick discussion on land values and cash rents from a report that we completed about a week or so ago. So this is what came out the March inflation report came out most of it this week from what took place in March and most of the inflation numbers pretty much all of them whether it was the core inflation which was a bit higher but lower than they thought it would be as well as headline inflation which is all items came in lower and it came in at 5% which is the lowest in a couple of years actually as far as on an annual basis, okay that prices didn't go up 5% in March alone but when you annualize the inflation rate 5% is the lowest since I believe around May of 2021 so almost two years since inflation has been that low on a year over year basis core inflation was actually a bit higher and part of that has to do with what's being included in there and the main thing was energy was down energy costs and since energy is not included in core inflation which is all items less food and energy so then you have core inflation slightly higher and then the other thing was that wholesale inflation was down so that's stuck above the consumer level those would be products that are used in terms of producing perhaps other products those were down, that was down as well down to 2.7% on an annualized basis but while inflation was a bit lower than the industry thought it was going to be it was still quite a bit higher than the Fed's target of 2% for all items you know at 5% it's still more than double what the Fed wants to see and the other part about it was hiring has slowed down some but the unemployment rate stays really low right now in the US right there at 3.5% even though the jobs report was down and basically indicating a really tight labor market which is and a lot of times when the Fed's taking these actions of hiking rates unemployment tends to go up businesses can't expand as much and hire as much so that also helps curb prices because if people are getting laid off or unemployed they wind up not buying as much or not being as much of a consumer as they were before and the fact that that's not happening has also made the Fed's job harder as far as combating the inflation which they've been doing. So the next Federal Reserve meeting is in May is this month coming up soon and right now the majority so 65% or about two thirds of the market thinks the Fed's gonna hike rates another quarter of a point so 25 basis points which would take it from about five to five and a quarter percent on the federal funds rate and then of course 35% approximately basically think that there's gonna be no change that that isn't gonna change over and while things have slowed down one of the things that you've also gotta keep in mind is that we've had some months where inflation numbers had gone down and then hike ticked up the next month and 5% is still quite a ways from 2% and so when you look at it from the Federal Reserve's perspective they understand that you've gotta keep these rates high enough for long enough that people change their behaviors on buying not just hike rates so that and this is one of the challenges they also run into if you think about it this way suppose everyone imagines that rates are going to go down dramatically in the next three months so you may stop inflation for a couple of months as people halt buying bigger ticket items that you finance like cars, homes, those kind of things and then as soon as rates go back down the buying picks up dramatically again and we wind up right back in the same boat especially since folks haven't been laid off or anything in the employment situation stays where it is so my opinion is the folks who think that rates are going to go back down in the very near future are probably wrong in the sense because of the fact that if they know that if that happens and the higher interest rates are very short lived you don't get a behavioral change and all of a sudden prices start climbing again pretty dramatically and so based on historically if you look at the federal funds rate right now it's at about 5% the last time it was this high wasn't that long ago really it was about 06 where it was right around five, five and a half percent was the last time it was as high as it is right now so not all that long ago and if you look at most of the 90s and early 2000s it was closer to 6% or slightly above and it was that way for more than a decade now I'm not sure half a decade I'm not showing the 80s when it was much higher than that there were a lot of things going on then and so it's probably not all that applicable to this situation but just to be advised that the federal funds rate it's not all that long ago that it was higher than it is now and in the 90s the late 90s and early 2000s it stayed that way for most of a decade I mean from essentially 1995 to 2001 so how long can rates stay there? Well, they can stay there for five, six, seven years if need be so where does the federal funds rate right now put current mortgage rates? Again, they're not tied one for one and you can actually see it in this graph the federal funds rate's always lower than the mortgage rate but just because the federal funds rate's gone up doesn't mean necessarily the mortgage rate goes down part of that has to do with expectations case in point, the federal funds rate was lower in November than it is right now and yet rates were over 7% then and now they're six and a quarter so like I said, there's some market factors and behavioral things that go on in lending that dictate some of this but they are heavily related the federal funds rate and the overall mortgage rate but it doesn't, I mean the Fed can increase rates for instance, 1% over the next three months and rates don't change at all but eventually they keep hiking them and leave them there for long enough and those rates do come up so my kind of expectation is if I just go back to this I agree with the majority in the market who thinks that the 65% who thinks it's gonna be a quarter of a percentage point increase or 0.25 that's kind of where I'm leading to I don't think it'll be a half especially with the numbers coming out as they are but I do think that they're gonna wanna keep the pressure on to see these numbers continue to come down and as a result, they're gonna have to do some kind of an increase I believe it's gonna be a quarter of a percent also so then the next thing I wanted to shift over to real quick was land values and we put out these reports every spring using the Department of Trust land surveys and then we put them into these NDSU regions there are extension regions that we put out the budgets for and we put them together and then we look at what land values have done we do it for pasture and cropland values and rents so last year was from 22 to 23 was one of the biggest increases or the biggest increase basically in over a decade in North Dakota as land values statewide on average were up 13 and a half percent obviously the South Valley is tends to be the most costly land in the state it's averaging 5,500 bucks an acre Southeast starting at close to $4,000 North Valley closer to 3,500 and then as you move west of course land tends to get less and less expensive with the Northwest being the least expensive at $1,400 an acre Rents on the cropland side as well were up almost 7%, 6.8% statewide this is quite a bit higher than the increase last year which was about three and on the land value side it was almost 11 last year so as land values were increased even more in the most recent year as did rents their percentage increased more than doubling again with the most costly rents being in the Southeast over the South Red River Valley Southeast region and then the least expensive in the Northwest obviously a lot of that has to do with yields precipitation and those kind of things and like I said we do it for pasture land values as well and rents statewide pasture land values were up 17.1% so even more than cropland values now you'll notice the grayed out areas on this map there just aren't enough pasture land transactions in these three regions the Northeast, North Valley and South Valley that we can't really get a meaningful average out of it you might only have five or six or seven observations and then one sale throws the average just completely skews it so as a result we just show these but overall statewide pasture land prices of 17.1% quite a bit more than last year and then if we looked at rents those are up as well 7.1% so pretty big jump in those and in a way it's not surprising pasture land values do tend to get pulled up with cropland prices but the other thing is with commodity prices high it's more than just a loose affiliation as well if you think about it this way why do cropland prices tend to rise they tend to rise in scenarios when commodity prices are high so if commodity prices are high driving up cropland prices well then that means cattle feed is also expensive because of high commodity prices what's the alternative to some one alternative to feed is grass well then if folks are saying well feed prices are high therefore I'm gonna go look for more grass it drives up pasture land prices so there's a relationship there that tends to happen too as commodity prices stay high it can drive up pasture land values as folks look for alternatives to feeding grains or anything like that and one alternative is course grass so then if we look at the average okay the state average from 2012 to the most recent 2023 it was pretty flat so increases in 2012, 2013 and 2014 and then from 2014 on all the way till 2021 that is a pretty sideways trend in fact even declining slightly but the last couple of years we've seen a big upswing in cropland prices and then cropland cash rents I mean that's a sideways of a trend as you'll see going from 2013 all the way to 2022 basically hanging out just below or slightly above $70 an acre statewide on average but then and last year had a modest increase and then or a year before that would have been 21 to 22 a modest increase of about 3% and then last year closer to seven so more than double the increase rate going up here and you see we're kind of approaching $80 an acre more like 75, 76 on the cash rents side so bottom line pretty big increase in land prices and a sizable increase in cash rents but not near as much as land values and so here's the interesting thing to think about when it comes to what's happened with land prices and there's a lot of statements and sentences on this slide, I realized that but it's something to kind of wrap our heads around here if you've all heard of the cap rates on farmland which is essentially just the rent the cash rent divided by the market value all at a capitalization rate or cap rate and when I do the calculation I don't include property taxes a lot of times I know it's done with by some folks but I stay consistent I either you either always included or never included I never include it and typically that cap rate on farmland so the cash rent divided by the market value is 100 basis points below the prevailing prime mortgage rate on a 30 year that kind of tends to be the case so the cap rate for 2023 was around 2.7% so in other words cash rent divided by the 2023 cash rent state average divided by the 2023 state average land price was 2.7% not accounting for taxes the current mortgage rate for prime borrowers is around 6.3% I showed a slide not that long ago that just showed it and then the other thing yields on corporate bonds like AAA bonds and beat well the highest the lowest risk is 4.3% I just pulled that this morning the yield on B, BAA bonds is five point let's call it five and a half percent from January 2020 to January of 2022 AAA bonds were between two and two and a half percent why do I bring that up? What the heck does that have to do with farmland? Well, it kind of reflects rates of returns for other investments that folks could make would be considered safe investments and a lot of times these AAA bond yields and interest rates and all these things are tied in together in terms of looking at investment opportunities and how much is your money working for you and what kind of rate of return are you seeing? Where right now at this moment, you would get nearly double the rate of return on just buying a bond that's gonna pay you a yearly interest rate versus farmland which is like 2.7% and it's been going down and if land values continue to rise at the rate that they have and that rent stays as low or doesn't accelerate as fast as land prices do this cap rate continues to fall and cap rates had been hanging out at 3% or but interest rates had been low during that period of time too for a long time since essentially the financial crisis they'd stayed pretty low and cap rates that relationship of 100 basis points below kind of stayed in there. Well, now that interest rates are 6.25% I think they're gonna be at least staying there for a while maybe a year or two who knows whatever it takes to get folks to change their behavior and as I showed before federal funds rates can stable well above 5% for a long time and so what would it take to get a cap rate from 2.7% to 5.4? And I just used seven years for this example rents would need to increase 10.4% per year with no change in land value at all. So land values would have to be flat rents would have to go up 10.5% essentially every single year for the next seven years in order to double it without cutting the legs out from under land prices or seeing just a massive increase in cash rents in one year. And so I just, I like to, I put that in there for folks to think about because when we're talking about new land purchases or you're looking at a rent versus purchase decision I would much rather rent and I'm only paying 2.7% of the asset value than buy it and that's essentially the rate of return I'm paying myself is 2.7% and buying it and it interest rates at 6.5% I certainly don't want to borrow money at 6.5% and see a 2.5% rate of return that's tough, it's tough to square that circle even when you account for the fact that you're accumulating some equity and land prices can go up, they also might not. I mean, I just showed a, we go back here they also might not go up or they might stay about the same and then if you account for inflation it's an effective decline but we look here from 2014 all the way to 2021 pretty much no change in state average. So that can, that period can happen too it's tough, if you're borrowing at 6.5% and seeing a 2.5% to 3% rate of return or something like that. So that's kind of all I wanted to point out land prices are big, North Dakota's not unique they're up in other states as well Kansas, Nebraska, South Dakota, Minnesota, et cetera, et cetera and so these are just things to think about and when we're talking about land prices and outside investments I wanted to just specifically show some options that somebody would have with where money could be parked and seeing a pretty as close to a guaranteed rate of return as you're gonna get on these AAA bonds and yet and where farmland rates return basically set themselves. So I'm going to stop sharing and I believe and I am now going to turn this over to Dave Ripplinger. So thank you very much. Great, thanks Brian. Yeah, I just wanted to make a couple of comments that I've been getting some questions including earlier this week about federal government's involvement in carbon markets climate-smart agriculture, if you want to call it that all of these different ways that agriculture might play a role in either reducing emissions or capturing carbon in the soil. And really one of the biggest ways it's come about, I know I've talked about before is the Inflation Reduction Act which was passed last August provided a substantial amount of funding for this would be a new program within USDA for climate-smart agriculture in addition to other large sums across a variety of different agencies related to climate. But within this space within USDA and agriculture what the IRA has really done is provided significant funding which is now being rolled out through USDA NRCS. And again, just background, climate-smart egg is very much a new term although it's being used quite regularly in a variety of circles including in egg research as well as these carbon markets and the like. And really you're looking at a practice that does one of two things if not both and that's either reducing greenhouse gas emissions from proper livestock production or forestry or increasing the amount of carbon that's sequestered in the soil. What we've learned in the last few months which was I think pretty obvious was that NRCS was going to administer these new funds and then what we've learned more recently and so they're gonna do it through existing programs which most of us are familiar with at least a few of the acronyms. One of the things that's come across to quite clearly as these programs develop and we're very much in the early stages of what climate-smart egg will look like in terms of federal funding. There really is this expectation that the impacts are quantifiable which is something that the private sector is wrestling with as well. I do have a slide that American Farm Bureau put together but I think it's really helpful and it illustrates that increase in funding from the IRA. And again, if you see in the previous slide to this one, we're not on to 18.05 billion NRCS is gonna do some research. They also need funds for administering the program as well as doing some additional work to look at ways to verify data. But the one thing you can get across all four of these charts and for each one of them it's the authorized amount either in the farm bill which would be the blue number, the baseline or what we now have with the IRA. And for almost all of those which you see is that baseline number being flat in the next four years according to the baseline, but with the IRA dramatic increase. So we can start in the upper left-hand corner with the conservation stewardship program where the baseline was a billion dollars in each of the next four years. But above that, beyond that, we see an additional 3.25 billion dollars because of the IRA. Similarly for Equip, although the numbers are bigger an additional 8.45 billion dollars. The conservation, regional conservation partnership program a dramatic increase in funding. Their baseline was 0.3 or $300 million a year almost increasing almost 10 fold by 2026. And then also the agricultural conservation easement program. All four of those are seen as different legs of rolling out climate smart A in USDA. What we've seen NRCS is really, I think, been working hard to get a hold of this, Congress passes the law signed by the president and then it really has to be administered through existing channels. And one of the things NRCS is trying to do is figure out how they can do their best very quickly. Again, because the fiscal year for 2023 is now almost halfway, it's halfway over and they have this money to roll out. NRCS had a request for comments for public input in November asking a few questions about how they should address a variety of topics related to climate smart ag and administering these programs. And we haven't seen too much in terms of how that'll like fully be rolled out or NRCS is gonna deal with things but we do know based in part by announcements by the administration in February that they're going to use existing programs. So those ones that we just talked about and the practices specifically are primarily existing practices that have long been funded within each of those programs, but essentially check mark as having tangible climate benefits where there is research that supports some sort of climate benefit to some extent. So those are listed, NRCS has those available. We've also identified a much shorter list of provisional practices where you can receive funding but right now the evidence isn't overwhelming that there are significant climate benefits and that at a future date if those benefits don't materialize they may end up stopping funding those types of practices. Again, but for right now those IRA funds are gonna support any of those practices. The way that the program in some respects is being rolled out is they're really just topping off these programs that have been oversubscribed for the most part in recent years but those additional funds must be allocated to these climate smart practices that have been identified either existing practices or provisional practices. Really basic, farmers on the line if you're gonna talk to farmers about this the very first thing to do is go talk to your local NRCS office, you know given a variety of talks where I touched on this a bit and occasionally there are NRCS staff in the room and they're very much ready to have those conversations to help farmers apply for these funds. As you can see in terms of the increased allocations you know there's a lot of work opportunity things that can be done with these funds but it needs to go through this process. And so that's there's nothing really changed here and again that's one of the nice things about this rollout within NRCS within these existing programs. It's just more money with some practices identified as being eligible. We don't, there's no real new hoops created quite yet although we're almost certainly gonna get there. Where we're going to go or where NRCS wants to go and you could see this from that request for public information they wanna develop a formal system to track emissions reductions and sequestration and there's this acronym, this MMRV that's being used quite a bit. So measuring, monitoring, recording and verifying emissions or sequestration. And that again that's something that the private sector is also working with. NRCS just wants something for themselves which might be the same as what the private sector works that make it defensible. Again we're gonna see billions of dollars in outlays to these programs. They wanna make sure that they're put to use and that there's a quantifiable demonstration of the positive benefits of it. And this kind of continues a lot of what we've seen from the federal government in the last year to 18 months. They really wanna leverage public-private partnership. So NRCS, the federal government is bringing money to the table. But this is really in many respects meant to be paired with other funds be they carbon offset contracts, other payments for ecosystem services, other practices that are adopted within this bigger space that's starting to emerge with regard to climate smart ag and even beyond that just other benefits that these practices can provide. NRCS also really wants to identify ways that they can maximize the benefits from these funds. In general, kind of basically you'd be somewhat critical and say they're just putting more money into these practices not really identifying those which have the most bang for their buck. Just in terms of practices or which applications might have more benefits than other applications. For example, that same no-till practice in a given county in North Lakota versus somewhere in a Corn Belt state to actually identify if they're gonna give $5 to only one of those acres where are they gonna get more of those benefits from? A lot of work would have to be done to build that program out. They're also looking at ways that they can be more effective. How can they streamline their processes? Which is really just building on ongoing quality activities within NRCS but with these additional funds with the importance of climate it kind of continues to emphasize getting folks to participate and they do make no two of groups who've traditionally been less likely to participate in these programs. And then finally, they also want to identify ways to provide additional technical assistance and outreach. This might be done in part by extension. There's also a term called trusted egg advisors. And again, even within NRCS if you're familiar with some of those programs there's funding available to support some of those activities. And again, they're just trying to figure out the best way to do that with respect to these climate smart egg practices. And then the last thing actually just added this after we were visiting before the webinar started because it is that time of year why are gas prices rising? Kind of first and foremost before you even realize what's going on you can look at the calendar. It's a little bit early but there is seasonality in gas prices as we transition to the summer driving season. And we're actually a bit early in that but there's a few things that's happened. As first is that we see a number of refineries shut down for a short period of time and to transition to summer blends which are required in many markets in the country and those blends. So you have a shutdown so you have less supply going out and these blends are more expensive which leads to higher summer gas prices. We also see a notable increase in gasoline use in the summer. And that's kind of just a standard thing. More specific to 2023 and what's going on there's really kind of two key drivers the one that's gotten the most news recently is OPEC has agreed to reduce supplies going forward. They want to see higher oil prices to meet the needs of their nation members. And then finally too, we have a very strong economy. It's exactly right where we have a lot of parts of the economy that are struggling. There's likelihood of recession, those types of things, all that discussion but in general we do have a relatively strong economy and we almost certainly have many households that have extremely solid income streams with no hesitation, not only to drive their vehicle but to maybe travel more. We've seen significant increase in household travel expenditures recently. And I'd also go back to Brian's comment about those energy prices declining. Part of that was gasoline which is part of that bundle that the Bureau of Labor Statistics has. The big one is really natural gas. What we saw this winter, primarily in Europe they were significantly short on natural gas with the war in Ukraine and the reduction in imports from Russia. They had an extremely mild winter we're now through that. And we made it past that time there's also greater confidence going forward that we'll be able to weather those types of situations. And that has led to a significant reduction in natural gas prices. And of course we're now moving to a part of the year where natural gas purchases by households are exceptional but that was much of that driver. Now what we might end up seeing as we go into May and June is an increase in those household energy prices. And another thing to note too as shown by the chart from AAA, prices are rising but they're still substantially less than they were a year ago. Based on season now we'd expect them to rise into June but there's a number of things I can go and the one wild card in this is if, when and how severe recession strikes and exactly how the motoring public decides to respond. And that'll be something we'll only see with the passage of time. Those were my comments and that completes the prepared remarks of our presenters for the day. At this time we're happy to entertain any questions you might have. Again, you can use the Q and A or the chat tool and we'll gladly respond in the time we have remaining. I'd also note that this is a monthly webinar and we will be back next month, a little bit later in the month, on May the 18th to talk about the May WASDE and other market situations, things that are gonna rise and be timely at that time. But with that, the floor is open and I'd also ask the presenters if they have any other comments or questions or things that they had come to mind when they were speaking or hearing the other presenters talk. And really, so you guys all know that's just a way for us to stall so you can ask questions. We'd really like to have questions from you. There is a chat there asking if these PowerPoint slides are available and this is taped with the slides but can they download the slides or would we have to send them separate? Yeah, so if the presenters wanna send them to me I can compile them and have them uploaded. And typically what we do, I mean, if anyone wants to email me I can send directly to you but typically what I do is I will just refer back to that website again because that will give them access to the presentation itself and then in this case to the slides. Thanks Tim. And I think this is probably a question for Frayn and I think we've already covered this. Will there be a lot of PP acres in North Dakota this year? I, yeah, and I did address that a little bit in my talk. My personal belief is that it won't be as big as last year. I think we, you know, there was a couple of things last year we went into the fall with a lot more rainfall. We did have obviously heavy snowfall not as much as from the snow stand point is this year but we also had a lot of spring rains. Now the, this year in contrast we went into the fall very dry. A lot of the slew holes or potholes were already dry even the permanent kind of the permanent wetlands areas that we normally think of a lot of those had very, very low levels or had gone dry. And our soil profile is also still pretty dry. We didn't have a real heavy frost. There is a frost layer, but it's not real deep and thick. And so I do expect to see a, we're gonna see individual patchy areas of flooding. There are gonna be people that have some concerns but I don't know that we're gonna have widespread prevent plant like we did last year. Now again, the one caveat of course is if we, if we get a lot of rain come now in the first part of May that will continually slow things up. Obviously that's a, that will be a game changer but based on what I see of the extended forecast I just don't anticipate that'll happen. I do expect to see some prevent plant. We always have some, you know little places here and there every year. It will, my best guess again right now would be, you know, something closer to the long-term average our long-term average is a little over a million acres of PP in the state. We had 2.3 last year. I would expect if I were to forecast something to be a million or a little over. So I think we will have some but not to the extent we did last year. Great and I think another question for you Frane about the current status of the corn contract or the corn relationship with Mexico. Yeah, so just a real quick context of, you know for the last several years has been this debate and ongoing kind of concern about the Mexican government prohibiting the importation of GMO corn and the use of GMO corn as well as glyphosate within Mexico. So where does that stand right now? They, within the USMCA which is kind of the new version of NAFTA there was some provisions put in and that when it was renegotiated to allow a mediation time period where the three countries that were involved would be able to try and work out and have a mediation process where they'd be able to bring forward their concerns and have them discussed as the three parties rather than taking it to WTO. That process has been initiated. The United States has asked the Mexican government to provide a detailed listing of concerns and as well as any kind of research backing their concerns to open up that discussion. And so we're still waiting to see what the Mexican government's response will be to that. And then the negotiations for some kind of resolution will take place from there. So right now, the any kind of formal prohibition of importing GMO corn has been moved back into 2024. So we do have a little bit of a window here. We don't expect that to impact short-term buying our sales of US corn into Mexico. Thanks, Brian. And then a question for me thoughts about diesel prices this summer. The big driver of diesel prices on the band side is just the state of the economy, which remains quite strong. So as long as freight movements don't shift dramatically, that's generally supportive of the price regime that you're under. Obviously the OPEC oil supply reduction will impact that. And I did, my original gut would say I wouldn't expect much in terms of prices changing. I did just pull up the CME diesel futures. And after this month, they expect to go up a little bit made then they're flat as a rock through the end of the year. It's a tough one to really get too much of a grasp on again because there are a variety of factors that can cause large significant shifts within days as we've seen recently. And then finally a question for Brian with lower cap rates on agricultural land. Do you think it will slow the rate land values, slow the rate of land values being sold or just pull out outside buyers? Well, I think actually a little bit of both because if you pull out some outside buyers even if they make up 10 or 15% of the market that's still 10 or 15% of buyers who look elsewhere because the rates of return are better. And that's significant. Like when you think back to the housing bubble bursting in 0809, it wasn't like 20 or 30% of people lost their homes. It was like 7, 8, 9% and it still cratered things. So that would have an impact. I think the other thing that will have an impact is rates staying high because I'd said in my talks where I discussed this that a lot of the land that had been purchased in the last couple of years had been either purchased entirely with cash or such a big cash percentage laid down that a higher interest rate isn't that big a deal. I mean, if I'm only financing 20 or 30% of the purchase then it's not as big a deal paying higher interest. That's one thing. And the other thing is if you're a lender and they're putting down that amount of money you don't really concern yourself with it because you're pretty protected if 70% of the value of the assets are repaid. That said, I think that land prices continuing going up is going to price some people out of the market. I mean, that's obvious. So you get to a point where some folks who might have been buyers a few years ago can't afford it then you couple that so that makes the payment go higher when you do finally have to start financing more then a higher interest rate means you're gonna have to pay more in interest as land prices go up. So it does have a sort of a self limiting mechanism in there because as prices go up and if rates stay high then inevitably the price gets to a point where folks really can't justify the purchase and so things slow down. And that's why in my example when I talked about cap rates if let's say interest rates stay around 6% for the next five years the most likely scenario where they cap rates get closer to where they are typically compared to interest rates that's a increases in the cash rental rate and land prices more of a hold even, right? I don't think there's gonna be a big decline a big push to sell necessarily but you just won't see the increase anymore. Yeah, it looks like another question for Brian do you have any idea on the percentage of farmland purchases that happened with a 1031 exchange involved? That I'm not sure about I've actually been asked that question before and I don't know how many involve a 1031 exchange. I mean, I'm not sure. Can you define what that is in case folks don't know? What was that Dave? I didn't, I didn't guess it. Can you just define what a 1031 exchange is in case any attendees don't know? Yeah, so I'm not super familiar with 1031 exchanges but I do know it has to do probably frame can even explain that better than myself but it has to do with like the rollover of it. I believe go ahead Frank, if you're going. Yeah, or Ron, if you want to hand I can handle it but if Ron you want to jump in. Go ahead Frank, you know. Okay, no, so when you sell property, the gain on that property is taxable income. Well, you have a window and I forget the exact time window but if you take that sale of property A and you're within that time window you can purchase similar types of property and you'll roll that gain into the new property. So the sale of property and then the repurchase of a similar tract is not a taxable event. So basically you're delaying or forestalling the tax obligation or tax consequences of a sale and a repurchase. And so there are time windows because of that time lag or that window where if somebody has sold some property made a gain on it they might be looking for other properties that they can defer their tax liability. And as a result, they'll pay a little bit higher price for that repurchase higher than market just because they're looking at it from a tax management standpoint. Yeah, thanks Frank to find it better than I can. I always just kind of looked at it as a kind of a deal like a, if you sell stock you can then roll it into a new stock purchase and you don't have to pay the capital gain on it if you hold it for a certain length of time and things like that like an investment. The only thing I kind of was familiar with that part of the only thing on the 1031 though or not or the rollover, like I said, if somebody is selling farmland you, most of the time folks, this is anecdotal purely, but most of the time folks sell they're not selling to look and buy new they just buy new like if they're looking to accumulate land they're either gonna be, they're looking to sell because the a family member dies or something and they're trying to split up assets or they're getting out of farming or something like that. So they're probably not gonna go purchase more land down the road. And then if they are in the market to buy they're probably not looking to unload everything they're probably looking to grow the size of their operation. So again, I don't know how many of those actually take place and so, and I'm not sure that there's data available on it to be honest where I would find it. But I would, I guess my weak guess is that it's low that it's probably not a common practice not that it's totally uncommon just that I don't think that that would be something just thinking about it logically that folks would do all that on it. Thanks, Brian and Frank. And that does exhaust our questions. I really do wanna thank all the folks who did ask questions it's fun, it's lively makes us know that you're paying attention. But with that, I wanna thank our attendees again and as well as our presenters this webinar will be posted to the webpage we'll also get those presentations up there as well. And with that, we'll see you in May on the 18th. Thanks.