 My name is Dave Ripplinger, Bioenergy Bioproducts Economic Specialist with NDC Extension and the regular host of our monthly webinar. Today we're kind of covering the gamut beginning with Brian Parman who because he does have some other commitments immediately following his talk. If you have any questions for him, we'll actually let you take those right away. Otherwise, if you have any questions, we'll save those towards the end after everybody else has a chance to speak. Cover them then. Please use the Q&A function or the chat and we'll get to every question that you have. But with that, I'll turn it over to Brian. All right. Thanks, Dave. I'm going to pull up my screen share. Just give me a thumbs up if you, when you see it. So today I'm going to talk about backgrounding. It's that time of year for our livestock producers to be, you know, they're going to start making decisions on, are they going to background or sell weaned calves and what the outlook for that looks like this year. So we have a video series that covers this more in detail. And so I'm just going to kind of give a little bit of a CliffsNotes version of that presentation. If you want more information and how that sort of breaks out and our logic at coming to these conclusions, you're free to view those. Now the first thing I want to say though, and this is kind of a myth or misconception sometimes that folks have when they're thinking about backgrounding. And that is that during periods of high feed costs, backgrounding won't make any money or it's harder to make money when feed prices are high. And that's not necessarily true and often isn't true as long as the cattle market reacts accordingly to the way it typically does when that situation happens. So here's a here's a chart and this is this is older. It's from the year 2000. So corn prices are quite a little bit higher now than they were then. But the relationship tends to hold and that's what the what's important about it and important to remember. When you look at this, okay, we've got three separate corn prices, $1.68 per bushel corn, $2.60 cent corn and then $3.50 cent corn. And what you see is this is and then on the bottom you have the weights of steers or feeder calves and then you have the price difference here on the left. And so when you take this corn price that's $1.68 a bushel what you'll notice is the spread between $5.50 weight and eight weight steers or eight weight cattle is a lot bigger. Okay, so you feeder cattle are relatively more expensive compared to eight weight steers when corn is cheap or feed in general. This would represent all feed at $2.60 cents that line gets flatter and then at $3.52 cents that line's flatter still. So what winds up happening is relative to the price of 800 weight cattle $550 weight cattle are less expensive. So while you're paying more for feed, you're receiving relatively more for your fed, you know, backgrounded calves because of the fact that in those scenarios cattle feeders are willing to pay you to put the weight on yourself. Okay, so those heavier weight cattle are relatively more valuable relative to the $550 weights and that's one of the ways that you wind up still turning a profit even when even when cattle feed prices are high. So here is the the assumptions that we use for prices in the analysis that we that we put forth and we use grass hay, alfalfa, silage, grain, DDGs, limestone and we had to revise these up this year. The other revisions that we use that were higher had to increase yardage costs. Now I'll say that Carrington uses 40 cents in their analysis. Typically I raised it to 45 because we've had inflated costs inflation and costs that is equipment costs repair costs. So that has a you know and so I'm almost 10% increase there had to increase the interest rate last year was a lot lower. It's about seven and a half percent now seven to seven and a half increase marketing costs increase vet med costs and then increase the trucking costs to a $1.50 per 100 weight shrink and death loss stay in the same. So I just want to make clear that we've we have taken into account with these scenarios the increased in costs. Now you might say well I don't charge yardage that high well that's okay I want to use a conservative number that is high enough so that if I am not too low in other words I don't want to I don't want to project too much too much profit here. So we did six scenarios steers at three different rates again for the most part one of which we take all the way out to finish so 575 weight to 1270 and that one's putting on 3.6 pounds a day at $2 and 50 cents per day and then heifers three different scenarios we take really small heifers 450 weight up to 750 at 1.8 pounds then 550 to 850 also at 1.8 and then a more aggressive ration to gain 2.8 pounds per day and that obviously that's going to cost more to $1.74. So just to show you kind of what the what a ration would look like here's a 1.8 pounds average daily gain expected scenario for steers from 500 to 800 weight and this is kind of you know we'd have 10 pounds of grass hey 17 pounds of silage two and a half pounds of DDGs and then some salt comes out to $1.41. I'm not going to go through each one of these scenarios I just want to show you and then the higher rates of gain when you start getting up to 2.8 or the 3.6 scenario that one is going to use a lot more corn than hay to achieve that weight and obviously a lot more in general. And so let's just talk about that quick scenario I was said at first the biggest thing with this the takeaway from it is so we go up here and we're is on to get from 500 pounds to 800 pounds it's 167 days on feed at 1.8 pounds per day here's the projected selling price and the the beginning value of the the 500 weight steer and so what you see then is what's really this winds up being a negative $2.26 total okay so essentially break even at best and the biggest reason for that these this yardage costs this lot costs at 45 cents a day it comes out to $75.15 and that's where a lot of it's being eaten up because they're on feed for so long so you're paying these these overhead costs for every day that it's the animal sitting there in the lot and as a result you break even it just eats into it you're just not putting on the weight fast enough it takes about as much work to to feed a higher ration than a lower ration and and so the the yardage costs eats into your potential profits and then here's the here's the example on 2.8 pounds on steers okay and you can see more expensive you're going to be feeding some more corn less less of less hay we use some grass legume hay some silage more of that and and DDGs for 35 pounds okay and that's obviously more expensive a $1.76 but we're putting on 2.8 pounds a day and as a result what happens all of a sudden we're now turning a profit of $58 per head or about 58 cents a day big reason the biggest reason for that yes the feed costs are a little bit higher but because they're only in the lot for 100 days instead of whatever it was before 167 let me double check yeah 167 167 days so 100 versus 167 and our lot cost is only 45 bucks right and so that's where a lot of that is is coming from is we just and we don't have as much time that the interest is eating into our our profits either because we're turning it turning them over faster so I did these the same kind of analysis that I just showed here I did it for all the six scenarios you saw previously and I've got a table because in these presentations we don't have time to go through these in so much detail and so this was that first scenario I showed where essentially you're losing two cents a day basically breaking even at best the scenario I just showed $58 per head and then the finished steer at 3.6 pounds a day yeah they're in the lot quite a while but you're putting on a lot of weight and that comes out to about 112 per head so you'd be making essentially 60 so 62 cents per head per day heifers was the same story so I ran it for heifers doesn't matter if you start at 450 finish go into 750 or start at 550 to 850 the yardage fees just kill you at 170 days and 167 days and you're just not putting the weight on so essentially you're 22 bucks and 17 bucks it's pretty close to breaking even but you get up to 2.8 pounds a day and they're on feed for 90 days and all of a sudden we're making a hundred dollars ahead now or almost a dollar a day and so you've really got something there so with the heifers not only are you closing that spread gap that's why it's the most profitable in terms of dollars per day per head you're closing the spread gap and you're putting on the weight so that's essentially what what what it's telling us is that you know we've got to put they are paying for us to put weight on the relative value of 800 to 850 weight cattle is strong even though even though feeder feeder cattle prices are high and if but if we if we keep them in the yard too long then that then that yardage costs and the labor and everything else in the upkeep erodes that profit for the most part and so that's really what what it's telling us now if you can put if you can put weight on at 1.8 pounds for a lot less than than what we're estimating say you know we say it's a dollar 40 and you can do it for 80 cents well then that that obviously makes a difference but you know feed costs are what they are for the most part and so if you're using your own materials I mean you got to charge yourself essentially market prices so concluding thoughts this year more aggressive rations are much more profitable than than the slow rate of gain due to higher yardage costs this overhead cost has has really increased quite a bit and then the most profitable on a per day basis is backgrounding heifers at a high rate of gain because they're paying for weight to be put on but also that price spread gap between heifers and steers where the slide happens that tends to improve as you get to 800 850 pounds and by the time you get to finished weights it's pretty much non-existent okay so with that I am finished with my portion of the presentation today and so I have a little bit of time to answer any questions that that may may come out here in the chat Brian this is John I wanted to ask you a quick question can you remind us what's in your yardage costs okay so that's going to be things like electricity of these you know fuels daily labor charges that kind of stuff thanks I'll just say that things like trucking that's a separate cost you know for shipping animals in and out that fees those are out those are not in yardage now some some budgets you'll see they'll include feed in the yardage costs I've seen budgets that do that we do not we we separate the overhead from yardage and the and the operating costs of like diesel fuel and everything goes into yardage and feed is a separate category so that's just something to look at if you see if you see uh some of these other budgets I've seen where the yardage is 90 cents or a dollar 15 or something that's because they're include including feed most of the time good afternoon everybody I'm Frank Olson I'm the crop economist and marketing specialist here with NDSU extension I've got to actually a portfolio of things that I want to talk about today we'll start with an update on the usd reports that came out yesterday and we'll shift into some of the more more current issues that I'm getting a lot of questions about so let's start with the the information from both the production report as well as the WASDE the world agricultural supply and demand estimates from yesterday's release I'd like to start with the production report and again so every every month during the growing season USDA provides some updates on their expectation or forecasts for not only yields per acre but they also might make some adjustments on plantings but more importantly the total production number so if you take harvested acreage times yield you should get total production so just to remind everybody about the layout of this particular table what I'm trying to do is compare the what the industry estimates were or what the private forecasters the private estimating firms were looking at before the report was released and we'll compare that to what we saw last month and then obviously what we can what we got yesterday so the blue roll on the very top which is average trade estimates so there's a survey of about 20 to 25 private forecasting companies it's made usually about a week or so before the WASDE and the production reports come out and say well what do you anticipate what is your best estimate for what USDA is going to give us so if you look at the very top row that is the average estimate for all of those that are reporting we have the highest trade estimate the lowest trade estimate to kind of give us the range of what that expectation might be the highlighted black row towards the bottom is last month's information and of course the red highlighted in the very bottom row is what we got yesterday so typically what I do is I want to compare what was the trading expecting to see versus what did we actually get and again we can use last month as another reference point but when it comes to market adjustments or any kind of market price movements it's usually based upon what we expect to see not necessarily what we had last month so let's start with corn very quickly I'd like to start with the yield number because there wasn't any adjustment in the harvested acreage estimates this was all the the change in production was all because of a change in the yield and yield forecasts so there was a slight uptick in the national average yield in the United States that was really due to increased yield projections out of both Illinois and Indiana so it'd be the eastern corn belt Illinois went from about 110 bushel statewide average to about 115 bushel statewide average and Indiana went from about 187 to a 191 and so though the combination of those two relatively large corn producing states brought our average up a little bit on the soybean side again we were expecting pretty much a flat line number based on what we saw last month whoops that that 150.6 is a wrong number I apologize that's my error I was going to correct that and I didn't so what was the trade expecting to see about a just under 150 you've got something just over 150 very small change again not enough to really change market psychology a lot a little bit much we did get a slight increase in the production numbers most of the increase in the yields were really in those soybean producing regions kind of in the south and then the east of the of the what we would consider the corn belt so if we think about the Mississippi river valley those soybean the states along the Mississippi river valley actually had a slight increase in their soybean yield expectations but more importantly it was basically the southeast portion of the midwest so think about for example Kentucky Missouri those states that those the yields went up a little bit there enough to make a difference so this is the production estimate now when we look at ending stocks and again this is another key number that the market focuses on we're taking not only total supply but we're subtracting total usage to get a forecast or an estimate of how much do we think we're going to have in the grain system just before harvest of next year so again I want to compare the blue row on the very top with the red row on the very bottom the trade was expecting to see about 578 million bushels of ending stocks in wheat we got something very close a little bit less than what the trade was anticipating part of that was because us da did a slight increase in the domestic food consumption so basically the amount of wheat they're going to send into the milling sector again not a large change not enough to really shift market psychology or the expectations in a big picture sense but we did some refinement for corn of course we had a slight increase in the total corn production but we actually had them relative to what the trade was expecting there was an increase in in ending stocks from last month but the increase wasn't as large as what the trade was expecting so translation is yes we had a slight increase in yield total production for corn went up but us da also adjusted the consumption side so we us da increased feed consumption by about 25 million bushels again part of that was because of an adjustment in the available supplies and a slight slight adjustment in yield and excuse me in price expectations for soybeans very similar to what the trade was expecting they were expecting a slight increase in ending stocks for soybeans we did get that we've been kind of on ending stocks for soybeans kind of bouncing around between this 200 million and about 220 million bushels back and forth once again we said it had a slight increase in the production but there was also a slight increase in the crushing numbers or the amount of soybeans going to the crush sector domestically that that offset or compensated so after talking for a long time the moral of the story was I think most people considered this to be relatively neutral reports set of reports no big shocks or surprises I did go through the global forecasts for global production and consumption again some very very minor changes or tweaks and adjustments so really this is a status quo report there wasn't a lot of shock value to it so these what I consider to be things that are inside of agriculture that we need to be watching now I want to turn attention to some things outside of agriculture that are also impacting markets as well both cash markets as well as futures markets so the first one and I did write about this in our in our most recent egg by the numbers newsletter I go through some a bit more of the details there if you are interested so this is a map based on the november 8th drought monitor map and what they've done here which is kind of slick is they've been they've identified what is the essentially the the watershed area for the mississippi river so just to orient to everybody down here is new orleans in the very south this is obviously north dakota we get into illinois indiana ohio so this would be the the ohio river this would be the missouri river this would be the arkansas river so these are the major rivers tributaries that go into the mississippi river and as you as you probably recognize they or have heard there's been a lot of challenges with the amount of barge traffic in particular for grain and fertilizer moving up and down the lower mississippi so when we talk about the lower mississippi we typically were looking at something from st lewis south is kind of the common definition so this lower mississippi river levels are are is actually relatively unusual a lot of times we'll have some some barge problems or some river level problems maybe on the all higher river or the illinois river or even ports portions of the missouri river but it's it's kind of unusual for that southern part of the mississippi to have these kinds of problems so i just wanted to give you an idea this is the mississippi river watershed you can see based on the drought monitor map that yes there's a lot of dry soil conditions the reason that becomes important is that we are having a hurricane that has been striking now that florida and and with that there's going to be a pretty significant amount of rainfall that's going to have some wrap around and hit the eastern corn belt or basically the this eastern region right here and the big question i think people are asking is so will that will that help mitigate or reduce some of the problems we're seeing and i guess the challenge i think we're facing is even though um ohio and into pennsylvania and kentucky are going to get some more rain and rain showers over the next several days you know it's it's forecast to be about three to four inches of rainfall the question i have is again given that the very dry soil moisture conditions they have very warm weather it's been in the 70s uh mid to upper 70s in this range right now in this region how much of that water that rainfall that does come will actually be able to hit some of the tributaries go into the ohio river and finally into the mississippi so even though it's going to be helpful and i think we need to be watching this i guess the long term outlook and i think the expectation from the marketplace is that we're going to continue to have some level of problems with barge shipping for the next several months at least again a lot of that will depend upon rainfall and snowfall within this watershed so i just wanted to give you a visualization and thinking just because it's raining doesn't mean that that water's going to end up in the river system so let's look a little bit at barge freight rates so each of those bars is a weekly freight rate this is updated as of this morning the the blue blue line it runs kind of through the middle is the three-year average for barge rates going from the illinois river down to the gulf of mexico and you'll notice this last week we did get a retracement or at least a lowering of some of those barge freight rates so to make a comparison i did the math really quick because this is based off of an index if we look at the rates that were charged last week that was about uh uh 1925 uh on an index which when you translate into you know 60 pound bushels like for soybeans or wheat that's about two dollars and 68 cents per bushel for freight costs by dropping it from last last week's rate to this week's rate we went from 168 or 268 excuse me down to 169 or about a dollar per bushel drop in the cost of moving grain particularly soybeans in this example from that illinois river where it enters the Mississippi down to the gulf now that's a significant drop it's obviously improving our ability and the cost to be able to deliver to the gulf ports but recognize the long-term average right here is about 139 on that on that index which is about 19 cents go call it 20 cents a bushel versus this current rate which is lower at about a dollar 69 so freight rates barge freight rates on the Mississippi river are still very very highly elevated they are going to have a limitation or or create some challenges i think from a cost standpoint for the Mississippi gulf uh to be competitive in the global market so again we need to watch this very very closely this is from the what's called lock 27 which is at granite city illinois so this is one of those again key locks we start monitoring how many bushels of what kinds of grain is flowing through this particular lock as as the illinois river enters into the mississippi river the reason i wanted to show this is it look at the type of products that are being shipped so if you look on the far right hand side at this is stack bar graph the yellow is soybean and the blue is corn and you can't really see it it's it's wedged in between there that's wheat so the majority of the grain moving from the illinois river system into the mississippi river system has been over the last several weeks primarily soybeans and again soybeans moving into the gulf forced to be loaded onto ocean vessels what we're seeing now as the freight rates the barge freight rates start to drop we're seeing a little bit of a resurgence or an increase in the amount of corn that's being shipped so the priority up until even though the costs have been very high there's been some challenges moving product the priority has been to try and ship soybeans into the gulf of mexico and into a lesser degree to ship corn this is having some impact on uh rail freight on secondary rail markets again this is updated as of today um now i want you to explain this very quickly the solid line is the secondary rail market or the cost for renting additional uh trains so you have a base rate that that's paid and then you have to pay a premium if you want to sublease those trains from someone else so the base rate is set between a particular shipper and the the railroad company like in this case i'm using bnsf as the example um so the the primary market is when i as a shipper contract for long-term contract usually about a month one year lease with bnsf i have the choice then to either use it myself or sublease it to someone else but i can sublease that either at a premium or discount so if we look at for shipping in december the dotted line is where the rates are typically at this time of year that's a three-year average so about a $200 per car premium for for typical rail freight at this time well last week we were at um $1,188 for a bnsf shuttle and it's now dropped to a $850 per car premium so when you translate that if we go back to last week's number that's about a 32 cent per bushel premium that has to be paid just for additional freight to be able to ship that additional freight rate is now dropped to about 23 cents per bushel so there's still an extra cost to try and use use rail freight over what we would normally see this time of year but it is starting to mitigate or reduce a little bit because that barge traffic is starting to pick up so translation is the pressure on the rail system it's still there there's still going to be a lot of pressure to try and deliver grain either to the pnw ports as an alternative to the gulf of mexico or using rail rather than barge to ship into those gulf port facilities so we are starting to see even though we saw this rapid spike and increase in transportation costs internally we're starting to see some of that back off a little bit as we start to work through the backlog and some of the challenges and obviously as harvest now starts to wrap up the volume of grain that's flowing from the country into those export terminals will likely slow just because there is this heavy rush and and and need for exports during that harvest delivery period another way to monitor this is how much grain has been inspected at different ports and i just wanted to show so the red bar on top the solid red is the amount of inspections by week in the mississippi gulf so this would be the louisiana ports and the dotted red line represents the three-year average so over over this this problem that we've had with shipping the volume of grain that's being shifted and shipped into the gulf ports and inspected before it loaded onto a vessel was behind normal so we saw this normal curve during the harvest period some of that was delayed because of our shipping problems there were some catch up that was done we're starting to see those drop off again now as a result though look what happened at the pacific northwest which is the blue so this is what happened the solid line over the last several weeks the dotted line is what we saw over the three-year average so notice out of pnw we saw a real big surge in an increase above well above normal inspections meaning shipments into the pnw ports to be able to load it on the vessels so the translation is i do think some of the vessels that were intended to be loaded in the gulf were rerouted into the pnw and filled out a pnw supplies rather than the the gulf supplies which again a lot of that pnw supply chain comes from north dakota south dakota nebraska and western minnesota so one of the reasons even though freight rates have gone up secondary rail markets have gone up we really haven't seen much of a change in our local basis levels is because there is this demand coming out of the pnw so rephrasing that a little differently what that really means is the increased freight rates right now are being passed along to the end user so it's either the the end user consumer or it's the people that have booked this freight it's the local elevator or the the export terminals that are absorbing this extra cost some of that they're absorbing some of it they're going to try and pass on to the end user so i just want to reiterate that there's a lot of times farmers think well just because rail freight goes up or transportation goes up that all of a sudden we're paying the entire amount of that bill and that's really not true the bill for transportation is always shared between the buyer and seller and so i just wanted to demonstrate here's an example a real world real-time example of what's happening shifting gears i do want to talk a little bit about ukraine russia shipping agreement um it's come under the spotlight over the last couple of weeks i think we're going to continue to hear a lot of news about the developments and how this is all working out so just to give a real quick recap um last july there was an agreement signed between uh turkey and ukraine and the second agreement between turkey and russia so there's actually two different agreements they were helped the negotiation was was kind of spearheaded by the united nations so they had an agreement to allow safe passage for grain out of both the russian ports as well as the ukrainian ports to try and improve the flow of grain in particular into some of those wheat and corn markets that are very dependent upon those supplies they can't afford to really go into the global market and buy a large quantities of wheat off the market so this agreement was signed but the the agreement was only valid for 120 days basically this was a trial period that 120 days now will end on november 19th so there's a timeline that this has to be renewed or or or at least uh renegotiated and that negotiation has been going on now if you remember right about a week ago russia suspended this agreement for about four days because of a drone attack so there was an attack on a russia naval base in kramira which is that peninsula that kind of divides where the the russian ports are versus where the ukrainian ports are now there was that was a suspension for about four days now when that happened wheat prices popped we had about a 40 45 cent increase in wheat just because of this suspension and then of course once that suspension was rescinded and said okay we're going to allow shipments we figured out how to make this agreement continue to work all of a sudden wheat prices dropped again pretty rapidly so where do we stand today shipments are going through based on the old agreement however the united nations and turkey are currently negotiating with both russia and ukraine to both expand and extend this agreement now the russians have some are really demanding some concessions on the economic sanctions that western nations have imposed in in particular they're trying to get a relaxation of some of the banking restrictions to help finance both grain and fertilizer sales or shipments so again whenever you're talking international trade you have to worry about the financing of this trade agreement right of this contract for purchase and sale and normally in the old days before the war a lot of those transactions were handled by european or american banks well with the banking restrictions because of the war the russians are having a very difficult time getting financing to be able to sell and deliver both grain and fertilizers so they're putting pressure on the system trying to say we need to have some relaxation of these restrictions the ukrainians really want to expand this to include a 12 month agreement so we don't have to have a whole bunch of these little short negotiations but they also want to include more port facilities because right now the current agreement only covers three ports the largest of those is odessa and then there's two smaller ports right next to odessa so really it's just a small cluster of ports that are allowed to be able to have this safe passage and what ukraine wants to be is to be able to expand that safe passage corridor to include more port facilities so again these are the issues you're going to hear be hearing a lot more about it it does have some shock value in the marketplace obviously because of the example of when russia suspended the agreement so wheat is going to be the most sensitive corn will have some response to it but not to the degree that wheat will and my last slide the last set of comments this is something that we have been talking about for actually for about 12 months now but it's really not hit the top of the news cycle and i do want to bring this up because it has some potential long-term implications so mexico just as a reminder is the largest export destination for us corn so mexico is the largest buyer of corn except for last year when it was china but with that exception mexico has been our number one buyer of us corn for many years well their new president issued after he took after he took office issued to decree basically an executive order that mexico would ban the use and importation of genetically modified corn or all crops by 2024 and they'd also start to phase out the use of glyphosate domestically now yesterday mexico's governments the government organizations the government agencies said that they cannot purchase any us yellow corn that um because it uh it does because they don't want the gm corn so the vast majority 96 i believe the of the us corn has gm traits to it well if you're going to import generic us number two corn number two yellow corn it's likely going to have some gm traits to it now this is the mexican government so the government does make purchases off the off the market it right now to my knowledge to my understanding there's not a restriction on private companies buying us corn but there is some restrictions on government agencies buying us corn and when we look at total exports into mexico it's always a blend of what the government is doing versus what private companies are doing so what i'm saying is this is starting to signal now that the the mexican government the current administration is very serious about this so now as an alternative what mexico's trying to do is they're trying to to move to a system where they direct contract or have direct agreements with farmers to purchase non-gmo corn so they want to go kind of a contracting system directly with farmers rather than going through the open market and then finally just as a reminder so mexico is pretty much self-sufficient in white corn which is the primary use for food like tortillas etc they do import a lot of yellow corn large quantities a lot of it most of it from the united states primarily for livestock feed but there are some food uses for yellow corn in mexico and of course that's what's causing the problems my last comment and then i'll hand it over to to tim petrie is that yes we do have this us us mca us mexico- canada agreement there are some specific provisions in that regarding trade for gm and non-gm and products and obviously this is going to go on for a while so we'll have to wait to see will will the us negotiators be able to use the us mca as enough leverage to prevent any kind of restrictions on us corn entering the mexican market so just keep your eyes and ears open this is something else that we're going to have to be paying attention to so with that i will stop sharing my screen and i will hand things over to tim good afternoon everybody tim petrie extension livestock marketing economist today i'm going to just expand on some of the things that brian said we did not compare compare notes before this but many of the things i'm going to say just kind of mirror what he had to say he did mention that we're going to provide more information and that is now available and the website is a long one i would have given you the url but my fingers have been crushed in too many uh squeeze shoot gates and i if i tried to type but i wouldn't get it it's the whole page across so if you just google end issue extension egg hub you see in the red circle there and then backgrounding you'll get to the backgrounding website and uh at the present time we have three new videos on there uh dr jerry stucca has got they're all about 20 minutes long so i'm only going to talk to you about 10 minutes as brian did so all of ours if you want to know more about either what brian said or i said or about what dr stucca says just do that extension egg hub backgrounding and you'll get to it and uh and then you click on like the ones below one more is going to be added dr carl hoppe at the character research station is going to do one on alternative feeds and feed costs brian again alluded to the fact that we can feed different things and that feed might be high and so uh carl is going to talk to you about that so those are all important issues and help yourself to that so um these are my charts that i keep for five fifty to six weight steers on the top and then for the seven to eight weights on the bottom that are important in in backgrounding because on the top either you're pricing your own cattle into your backgrounding lot or you're buying them or the other thing is should i sell them so i'm going to get to the market report in a minute that brian mentioned before and and do some things but yeah our calf prices are there have been averaging thirty dollars uh more than last year and uh you know are right now up there and probably you know we've kind of put in our seasonal below this week in north dakota is going to be a tougher price wise for uh calves because yesterday it kissed the market was off a little bit because the storm napoleon is closed today the napoleon market they hope to have a sale tomorrow and uh stockman's are closed today they had a sale tuesday but they're not going to have a sale today and and so that might affect the prices a little bit but anyway like brian said just because prices are higher doesn't mean we can can't background and so we have to look at the uh price of steers going out and corn and so go down to the bottom slide there uh is the heavier weight yearlings and again they're about 20 dollars higher than they were last year but what's i think important for us and i'm going to talk a little bit more is what are our expectations for prices and so the red line is cash prices but those gold squares and there is a futures market for 800 pound steers and so uh you know there that those are what you could lock in if you do a futures contract or i'm just going to mention livestock risk protection here in a minute the market just closed and uh the january futures closed at 181 70 up about two dollars today and that's what i've got on the chart there march at 183 and uh april up at 186 95 so uh you know i think he used 184 in his budgets and so you know depending on when you sell them that that might be the case there so here's the on the left is the market report that brian showed you but again i want to expand on that and and uh use this market report is some stuff some uh information maybe that you can backgrounding so in the middle that purple circle there you know that's basically what he was using or if he went down to the to the and there's one budget down to the 500 pounders he used 214 and so on but uh let's just use this 550 to six weight steers and yeah the average was about 207 uh last week that's what i have in my chart but look at there at the wide range in prices for the same weight and grade of cattle at the same the markets there 187 up to 227 so from a backgrounding standpoint you start getting up there into that 225 227 uh steers you know back to his budget you're going to need to have a really good price coming out or really cheap corn so you know what i'm saying is if some maybe some of those top-end steers you have that are going to bring that price uh $1,300 ahead uh maybe we could sell some of those and take the money and and again it all depends on whether you know you're pricing them in or whatever if you're buying cattle to background you can go back down to you know under the 207 average and you know maybe at 190 up to 200 or whatever and and add value to those calves and so uh keep in mind that that wide range there the other thing that i want to mention is you see those fleshy categories they were on his as well and uh and he used 640 for corn corn is high priced and so i know we love to feed our cattle and i know we like to see him gain weight but be careful in your backgrounding program not to get them too fleshy because you're going to spend more money on feed and get a lower price at the market which just does not make sense so you just just kind of be careful there uh again he used 640 i just pulled an ethanol plant there towards the top of the chart today uh an ethanol plant in North Dakota it was paying 596 so maybe you know since his budgets corn would be down a little bit and you know offer some more profit levels there but on the other hand there's another uh ethanol plant that i looked at is at 644 which is more than he had in there so corn prices are vary throughout North Dakota and the basis levels are different and so on so depending on what you are again it's important to use a budget uh on if you just google livestock economics there's tools there and the in the budget that he showed you and and that i use is there and so you can put your own numbers into that budget uh the main one that i we got on there is the 550 uh up to the 800 pound but you can put your own numbers in that and and play around with that with your own feed cost and so on the other thing that he mentioned was heifers and i was you know i was going to expand on that and i i didn't know how much he was going to cover there but just like he said you know let's go up to those 475 pound heifers 450 to uh to uh 500 pounds you see the stairs last week averaged about 224 but go over there the heifers 193 194 so you got that big you know $30 discount for heifers and we do background a lot of heifers in North Dakota and keep them for replacements in fact uh uh mention more of that in the next slide but on January 1st we had the eighth largest number of replacement heifers ever after the worst drought and you know since the drought monitor started in in 2000 at least and yet we still had the eighth number largest number of replacement heifers and six out of the last 10 years we've had the top 10 amount of replacement heifers ever going back to 1920 so why do we keep heifers one it's because they're so severely discounted now compared to their steer counterparts like brian said every 50 pounds they gain they gain on steers till slaughter steers and heifers well actually slaughter heifers sold for a little more than slaughter steers last week because of the cuts are smaller but then let's drop down like he said drop down to those uh 7 close to 800 750 to 800 pound steers we're at 174 in the heifers at 170 so there's only a four dollar discount so like why his best budget was for heifers the best profitability was that you're you're gaining on steers in terms of of a price rate there so i would encourage you know we do background a lot of heifers and i'm sure that those listeners that do that are thinking about it again and that is a good value added enterprise for our heifers and we do that do do that in north dakota and uh the these are uh north dakota farm business management records and brian actually does these and so kind of for interest sake i just went back and looked at the last 12 years of uh profits from of developing replacement heifers versus beef backgrounding and uh you see an average there for developing a replacement heifers now you realize it's a longer you keep them a longer time you know we we put them in the lot now and take them to spring and then over the summer breed them and then sell them next fall is when we price them out for that north dakota farm business management and i realize it's also skewed by the really really high one in 2014 but it still averages with throw 2014 out it still averages about 200 dollars there compared to an average on backgrounding of 41 dollars again he showed you on those 550 weight steers up to eight about a 58 dollar on his average so that uh fits right in there last year was better than that you see and i'm and and uh it's all like he said it's all about pricing them in and pricing them out why did we have a good year last year in backgrounding well let's go back up to our prices there so we go up to our 550 pound steers and again it depends on when you price them in but if you priced them in in october there uh they were about 165 that light blue line is last year about 165 so then we go and bring them out on the bottom chart down there the 750 to eight weights there in january february they were 165 so there wasn't even a slide by the time we got there last year we were selling them for the same or in february they're they're bringing 170 so you are gaining on the weight that you even put in that's why it was such a good backgrounding here and we don't know what's going to happen this year and so on but uh you know right now he's in the in the in a little bit over what the average is but maybe a little bit under last year with his 58 dollars but again a corn might be cheaper than he had in his budget and you have your own numbers to compare there so uh you know that the the cattle cycle price cycle is going up we've got better prices you see the futures market here is better next year and will likely be better than next year and calf prices will be higher and that's what it looks like but when you're backgrounding you know it's a seasonal thing and if you sell them all the middle of february or the first of march or whatever it might be you're at the mercy of that day and we've seen it happen in the past covid year 2020 selling back on cattle were bad later we went because the market was plunging there so you know a frame has mentioned a bunch of issues going on and you know the with we have the economy the weather conditions what are corn price you want to do all a geo political thing from you know the russia ukraine but north korea is shooting missiles into the sea and we've got a new brazilian president and frayne mentioned the mexican president and all those issues uh do cause volatility and risk and and so especially on a seasonal basis so i don't think just because it looks like prices are higher that we should uh throw uh uh you know price risk management out the window i still think it's something that we should like it and talk to your lender and depend on your risk exposure again there on the left hand side there are a number of different risk management tools that that are available for livestock and uh and and if you're familiar with one and use one and one is better than the other and again talk to your lender but uh you know maybe consider that i'm just going to show you a you know one on livestock risk protection here just to kind of finish up as as an example but uh this was yesterday's livestock risk protection highest coverage available and uh and so the nice thing about lrp it offers flexibility because the futures market futures and options are only for 800 pound steers but in lrp you can do steers or heifers and then you say what they will weigh and that's the premium pay and the real advantages you can do any number you can do one head if you want to but anyway you may if you're looking at price risk management want to do a few you could do four you know five fifteen twenty head or whatever and some steers and heifers and we can see what the market does and if it looks like we're running into trouble do some more or whatever but anyway going across the top yesterday could have done a 178.65 you know our cost is about three dollars and uh this is going to be higher today on the bottom i had uh uh uh you know the the futures earlier we had to get this done by 11 to send it in but january futures close today at just a little bit higher than what's shown there 181.70 and the march at 183 you know just like it shows there so these offerings that come out this afternoon at 330 the prices are going to be since the futures were up a couple dollars today uh the price offering is likely to be also be up a couple dollars today and and for probably a similar cost premium to to you and then the heifers are uh the offering and so on are just always discounted 10 percent from the steer so i'm not saying you know you have to do this and i'm not saying don't look at futures and options or other methods i'm just uh you know giving you a little scenario here and i realize a lot of you maybe you don't know about lrp or other and if you do want more information on you can see your extension agent about programming and i'm happy to provide education uh if you want that but my main idea to tell you here is you know we're if we're selling them all our background it's cattle at one point in time this spring you know the market could be affected at that time so just don't forget about price risk management just another thing probably switching from the producer side to the more the consumer side we've seen all this news media lately about work you know i i agree that even influenza has caused a lot of turkey loss and that prices are higher but uh that the the idea that there won't be turkeys available is not really the case and if you read our news newsletter i had quite a bit more on that but uh you know high prices try to cure the situation and so actually the us is the largest turkey producer in the world and the largest exporter of turkey in the world but since so we did lose turkeys and price went up this year go to the right hand we are importing a whole bunch more turkeys and on the bottom exporting less turkeys because we have fewer here and down on the bottom left we put hen turkeys into the cold storage kind of throughout the year to to get them to Thanksgiving time and then take them out the toms more go into processing for the drumsticks and turkey bacon and all those things but interestingly enough it doesn't show up quite as well on this slide but we had uh you know our last cold storage report showed 3% more hen turkeys in cold storage than last year and if you remember last year kind of maybe there was that same rumor but there were turkeys around and yeah prices are higher but on the other hand usually when we get near to Thanksgiving the week or so before here coming up uh stores lost leader turkeys at lower than their cost simply to lure you in to buy all the other ingredients for the holiday meal the green beans and the dressing and all that and so you know war is developing that's kind of probably likely to happen again so and the other thing is we have record meat production and so we have actually plenty of other meat alternatives as well and so with that Veterans Day is coming up tomorrow both Brian and I are veterans and so on behalf of Brian and I we wish all our fellow veterans and service men a happy Veterans Day and with that we will go to Dave. Great thanks Tim. Yeah I would caution any new parents to reconsider serving something other than turkey I actually did that a few years ago and I think my then six year old's jaw dropped it was a beautiful country ham but that kind of exploded in my face anyways today I'm going to talk about something that's actually been a long time coming we're entering the last few months of 2022 which is the last year of having statutory numbers for the RFS so I just wanted to go through this because we're actually going to enter this new period where EPA is going to determine what those numbers are going to be so just a reminder the RFS has been critically important in agriculture especially in its early years in helping support the build out of the corn ethanol and biodiesel industries which led to you know a significant increase in demand for corn and soybean soybeans here in the United States a little quick review so it was enacted in 2005 updated in 2007 expanded the way it works which was kind of important as we move forward you know there's certain businesses called obligated parties that are required to participate in the program and they either have to physically handle biofuel or trade for credits for somebody who does and so each year they have to turn in rins to the EPA they kind of document what they did in terms of actual physical activity or their trade important in that is that each year EPA supposed to be in the summertime is announces that number for the next year it's the renewable volume obligation or rvo the total number that EPA is requiring across the economy to be used in that next year the EPA is the regulator they had some flexibility in its management both in terms of what the law said and then as they created their own regulations to manage it and it's been a bit of a bumpy ride with really inconsistent application of of policy and rules and following timelines and the like under you know the current and previous two administrations basically the entire life of the RFS it's you know it's experienced some some unique attributes based on how EPA administered administered the program important to know too is that again they can adjust these rvo's based officially on two things either an adequate supply which is not demand so would the would folks be able to bring this to market was it physically available in the market or would be in that next year or would it cause severe economic or environmental impacts to communities or or industries important to know too they've never they never really used this this widespread number on economic impact including in the drought in 2012 that's never been the reason but they've certainly gone in year after year and and and and ratcheted down the number so this is a chart that shows that at least through through 2019 and what they did so there's the statutory volumes on the left so that's what Congress said when they passed the the second bill in 2007 they actually had the standards and said this is what we expect it to be but again EPA could adjust those numbers and ended up adjusting them quite dramatically one of the first things they did is they've never really increased that cellulosic biofuel number because there really hasn't been much available on the market and they've really kind of capped the conventional biofuel mandate that number and again note it doesn't say corn ethanol but they've really capped that number at 10% of the amount of gasoline sold so it kind of pretending that there's this this this blend wall or having a regulatory base for blend wall and that's you know that's persisted for you know almost a decade in in in in light of those different options they had and through a variety of different sets of conditions both political and market-based but again the big thing to take from this is that the EPA has asserted its authority and changed those statutory volumes quite a bit but what's important is those those statutory levels only went through this year so now it's really interesting we were actually officially supposed to have draft guidelines on this coming Monday of what EPA planned to do not just what it's going to set for the next year or a few years but actually what how they're going to manage the program how they're going to set those numbers what philosophy they're going to use and it is really important because it will let us know if the EPA is going to actually have any teeth in in managing the program and that question is really kind of up in the air they were supposed to do it it's supposed to come on on Monday I just saw that they're going to wait two more weeks before or they've asked for two more weeks to finalize the rule but not not change the the date of the final rule so again they're going to issue these draft guidelines folks can make comments EPA takes them back then issues the final rule the date of the final rule is still June of next year and there's a you know a lot of questions about you know what exactly is this going to look like and how much is it really going to mean knowing that the RFS has been managed and some decisions have been made under varying conditions or with varying justifications for for quite some time just moving over really quick time what's going on the ethanol market because it is interesting you know we had this dramatic decline in ethanol production in the late summer and then an equally impressive the recovery or you know just increase it in production back to the previous levels you know a lot of this was driven by just some simple you know market economics you had old crop kind of expensive folks needed to you know the refineries do need to have maintenance a number of them went offline did their maintenance in in August, September getting ready for that new crop to come online and have done so I also have on this chart so that the production is that blue line so you can see that significant drop and then recovery on the chart and then you also see too that stocks are actually you know pretty pretty well declining during that during that time you know that there wasn't oversupply but it wasn't as if you know that they were responding to that type of issue it was really just getting ahead of this this this next thing this is actually a little bit different than what happened in gasoline these numbers are for gasoline that's supplied so this is gasoline going from the wholesaler up that supply chain so you can kind of think about as gasoline sale so that's that blue number you know if you look at it you know the number throughout the summer was kind of choppy and then a little bit a little bit lower in that that late summer period and right at that late summer period is when the ethanol production fell off a cliff and at that same time gasoline supplies actually came online they kind of refilled refilled everything as they needed to manage their physicals on the right hand side and what that red line is is production relative to gasoline supply so I take this as kind of a proxy for a blend rate so we you know long heard you know that there's a E10 blend wall and in some cases there there is a regulatory blend wall based on read vapor pressure and emissions also just this idea that you know you couldn't go beyond that because you know no one would put in flex fuel pumps no one had flexible vehicles even though there were folks ready to do that and what we've seen in you know really since the recovery from COVID is we've seen use far above that 10 percent level partially because of E15 and again there's an E15 waiver right now because of high energy prices it's an emergency declared by the administration E15 widely available as well as some pickup in E85 sales in in certain markets including California because they're low carbon fuel standard but it is interesting too you know that it's that it's been at that level of course it dipped gasoline supply didn't dip at that period but now it's recovered just kind of a unique a unique late summer that we've kind of been through and we'll see what happens for the transportation fuel industry as we enter winter you know things should slow as the economy you know enters recession possibly if it hasn't already you know what that'll mean to to gasoline sales to biofuel sales so those were the comments that I have now we're happy to turn it over for Q&A and I do see that we do have one question but as we feel these questions you're more than welcome to ask additional questions as time goes on in frame it looks like this one is for you and it's a good one and so I'll read it aloud but you might want to read it twice so Soybean traditionally had been 80 cents to $1.10 under for my basis so a negative basis this harvest they were negative 35 to negative 40 is that due to the shifting of exports to the PMW if so are the buyers not worried about the lower protein content which was traditionally an issue so a great question okay so the person to answer it well I hope so and I don't know if John had a had some some comments to make too or not we'll I'll answer this question and then we'll find out if John has comments as well so very quickly all things being equal there is a slight discount for soybeans in the marketplace global marketplace for soybeans shipped through the PNW we tend to have lower crude protein levels so when you measure it with the standard NIR machine like they have in the driveway of the elevator the crude protein levels in the soybeans in the northern growing regions tend to come out lower however when you measure the amount of amino acid content basically the when you when you crush it and turn it into soybean meal and you look at the quality and the feed value of the soybean meal that amino acid content is actually higher or more favorable for in particular for pork feed you know for hog feed than other parts and so there's this disconnect between what the marketplace is measuring as quality and then what is really happening at the feed level my point being that's when there's lots of soybeans around nobody's worried about getting the quantities they want the quality differential between PNW between US Gulf and and and South American basically Brazilian soybeans there is a difference but it is a small difference compared to not being able to have product and so the concern was coming into harvest one of the reasons we're seeing strong harvest basis levels for soybean is there was this demand base to get shipments out through the PNW as a backfill or substitute partial substitute for some of the product going through the US PNW so what I'm trying to get at is do you as a global buyer I would rather have soybeans that may not have the exact quality parameters I want and be able to keep processing and using those than worry about the small differences in in those quality parameters so it's much more driven by the demand base and the ability to get product shipped to where it needs to be on time I hope that was clear probably clears mud brilliant it was great John did you have any comments for today there is one more question I don't know if this is for frame it sounds like this looks like a Ron Haugen question yeah it's remaining 25% of ERP money is coming question mark can anybody feel that he's in the office next to me so I went over there but he's on another meeting so I couldn't ask him yeah okay I haven't heard of any news of you frame I have not no I have not yeah so Dave there is just one piece of news I thought was worth pointing out I don't have a slide for it but we found out yesterday in South Dakota in the community of Sioux Falls that voters actually rejected a campaign to stop a very large investment a roughly 500 million dollar investment in a new pork processing plant and I think this is actually good news in terms of livestock development not just for those fine people down in in South Dakota but I also think for pork producers in North Dakota have access to that market so just something I think is worth noting and and that's really all I have unless there's questions specific to that that's great thanks John yeah it's quite a quite a lot of activity around that issue the last six months in Sioux Falls yeah well I think I think those folks understand that a $500 million investment has a substantial direct and indirect economic impacts to that area and probably outweigh I mean there's always there's always some negatives with some of those plants that you know cost benefit I think those people see the the benefit I don't see any other questions does any other presenter have any last comments they want to make other than you know if you don't have to go out don't go out and if you are out drive safe right yep all right well thanks everybody for attending thanks for centers for for giving their talks and we'll see you guys in about a month thanks