Kevin McNew

Grain prices at the start of 2023 continue to be elevated at historic highs. Since the early days of the COVID pandemic, U.S. grain markets have soared, nearly doubling in the past two years. While prices at the end of 2022 are below the highs set in the spring, conditions heading into 2023 should support, if not further elevate prices more. Grain Demand Growth Outpaces Supply Trends For most of the 20th century, the global ag supply system has managed to stay ahead of a growing world population. Technological revolutions in agriculture – what has been termed the “Green Revolution” – began in earnest in the 1950s through crop hybridization, synthetic fertilizers and controlled irrigation, and helped keep global food supplies on a steep advance. But in the past decade, there are signs that the agricultural productivity gains are decelerating with recent data showing demand growth outstripping supply growth across coarse grain, soybeans and wheat.  Indeed, the decade of 2013-2022 saw annual growth in demand of global coarse grains, soybeans and wheat outpace the annual supply for these commodities by a wide margin.  These trends will be challenging to reverse in the near-term, and will act as a supporting factor or even stimulus to grain prices in the coming year, especially with carryover grain and oilseed stocks at multi-year lows. A Renewable Fuel V2 Wave  The ethanol industry has been a key catalyst of agricultural demand growth since the early 2000s, especially for U.S. corn. But in recent years, the industry has seemingly plateaued as government policies have pivoted away from ethanol and instead targeted the electric vehicle (EV) market for small duty vehicles.  While the widespread adoption of EV vehicles is a potential existential threat to ethanol and its linkage to motor fuel gasoline demand, the rate of adoption is still exceptionally low. Data from 2021 illustrate that even though EV and PHEV (plug-in hybrid EV) has doubled between 2018 and 2021, it is only 0.8% of all registered vehicles. Indeed, the number of gas powered vehicles increased over 10 million in three years, while combined EV/PHEV adoption increased by only 2.5 million. The relatively slow adoption rate for EVs will likely keep ethanol as a viable industry for the years to come, but also create a slow but systematic drain on future ethanol demand.  U.S. Vehicle Registrations by Power Type  While ethanol may not provide a catalyst for growth in future grain demand, recent policy initiatives have placed more emphasis on renewable diesel as a sustainable and environmentally friendly fuel for the heavy duty transportation system.  Renewable diesel, which is derived from renewable feedstocks, such as vegetable oils and animal fats, is chemically similar to traditional fossil diesel, but it has a number of benefits that make it an attractive alternative: Reduce greenhouse gas emissions by producing significantly less carbon dioxide (CO2) emissions than fossil diesel. Seamlessly replace fossil fuel diesel without any modifications to existing diesel engines or the infrastructure that delivers fuel.  Soybean oil is likely to be a significant feedstock used to produce renewable diesel because of its large availability and scalability in the future. Significant investments are being made to date which will add new soybean processing capacity to meet this expected demand surge.  Between 2023 and 2026, there is expected to be an extra 600 million bushels of new U.S. soybean processing capacity, representing a 27% increase over the sector’s output in 2021. This likely keeps soybean prices supported as the growing demand ramp up will require an extra 10 million acres from U.S. farmers in the coming years. Farm Cost Inflation: Permanent or Transitory? Nearly every farm input has seen drastic increases in the past two years, leading to higher costs for crop production. Fertilizer, energy, chemicals, labor, land and interest rates have all been on a steep incline. And while 2023 may bring modest pullbacks in some farm input costs, expect overall farm expenses to be on par with 2022.  Energy: Oil, natural gas and diesel prices have been trending lower since the summer of 2022, but still remain twice as high as they were in late 2020. The continued war between Russia and Ukraine , as well as the lack of long-term investment in fossil fuel energy sources, should keep energy markets elevated in 2023 with limited hope of significant price declines. Fertilizer:  Nitrogen-based fertilizers are greatly influenced by natural gas prices, and as such 2022 prices were nearly double what farmers paid in 2021. As natural gas prices have turned lower, we likely see a bit of a pullback on nitrogen fertilizer costs in 2023, but not as low as 2021. Land/Rent: U.S. cropland values soared 20% over the past two years, and is adding to the cost of renting farm ground. Cash rent costs over that same two-year period are up 6.5% and likely continue to increase into 2023 to keep up with higher land values and rising interest rates. Interest Rates : High inflation over the past year has caused the U.S. Federal Reserve to aggressively raise interest rates to their highest mark in 15 years. Although there has been a modest pullback on the inflation front, current inflation readings are still too high for interest rates to return to lower values soon. We expect interest rates to remain at current lofty levels for all of 2023. This panel was originally presented live at Farmer2FarmerVI in Omaha, NE.  Sign up to be first in line for Farmer2FarmerVII by clicking here.  FBN® Chief Economist and VP of FBN Research Dr. Kevin McNew discusses his predictions for the future of global grain markets in 2023 at FBN's Farmer2FarmerVI event. [Sign up to be first in line for Farmer2FarmerVII!] Copyright © 2014 - 2023 Farmer's Business Network, Inc. All rights Reserved. The sprout logo, and “FBN” are trademarks, registered trademarks or service marks of Farmer's Business Network, Inc.  The views and opinions are solely those of the author as of the date of publication, are subject to change at any time due to market or economic conditions, will not be updated or supplemented after the date hereof and may not necessarily come to pass. The views and opinions expressed herein do not reflect those of all personnel at FBN BR LLC (FBN) or the views of the Farmer's Business Network Inc. as a whole. Neither Farmer's Business Network, Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed. FBN Market Advisory services are offered by FBN BR LLC, dba FBN Brokerage and FBN Market Advisory - NFA ID: 0508695. Commodity trading, including futures, hedging and speculating, involves substantial risk of loss and may not be suitable for everyone. Past performance is not necessarily indicative of future results. All information, publications, and reports, including this specific material, used and distributed by FBN BR LLC shall be construed as a solicitation. FBN BR LLC does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. For the purposes of quality assurance and compliance, phone calls to and from FBN BR LLC may be recorded. Contact 877-472-4607 for more information.

Infrastructure Impacts from Climate Change: An Examination of the Mississippi River The Mississippi River is a vital resource for U.S. agriculture connecting farm products in the Midwest to export terminals at the Louisiana Gulf. Roughly 60% of all US corn and soybean exports flow to the Louisiana Gulf for export to world markets, according to USDA-AMS.  This fall, attention has focused on the importance of this key mode of transportation as persistent and expansive drought conditions have led to epic lows on the Mississippi River. The result has been a significant disruption to grain flows and caused farmers to feel the economic pain of this lost avenue for trade.  While the science on climate change suggests temperatures will continue to warm, the impacts of a warmer climate on the Mississippi River are not immediately clear. On the one hand, rising sea levels may increase the risk of flooding at export terminals along the Louisiana Gulf during hurricanes which could disrupt trade. Warmer temperatures are also likely to bring more persistent drought events, as well as create more common and intense heavy precipitation events. It is in the extremes – too much water or too little water – that causes barge transportation disruptions and is a likely consequence of future climate scenarios. What Happens When the Mississippi River Is Disrupted? When the Mississippi river is disrupted, U.S. farmers face lower prices because the cost to reach export terminals is increased. But the extent of how far reaching those price impacts across the U.S. Midwest are not well understood.  In this report, we look at three key factors as it relates to disruptions along the Mississippi River and the corresponding financial burden on U.S. farmers: How do price impacts vary along the Mississippi River? Have the impacts changed in recent decades? What is the impact on U.S. competitiveness in global export markets as a result of Mississippi River trade disruptions? To answer these questions, we examine three key historical events that have led to significant disruptions in grain flows on the Mississippi River. The first is Hurricane Katrina, which impacted the Louisiana Gulf in the fall of 2005 and disrupted grain movements for a 9-week period from August 29, 2005 to November 2, 2005. The second event, also a major hurricane, was Hurricane Ida, again hitting the Louisiana Gulf on the 16-year anniversary of Hurricane Katrina. Like its predecessor, Hurricane Ida led to protracted trade disruptions from August 28, 2021 to November 8, 2021. Finally, we examine the most recent drought event in the fall of 2022 which started September 19, 2022 and continues to persist as of this report in December 2022.  Our examination focuses on corn prices around the U.S., relying on the FBN® historical cash price dataset on over 3,000 markets.  Hurricane Katrina in 2005 Hurricane Katrina had prolonged impacts on grain pricing and transportation during the fall of 2005  ( LSU AgCenter, 2006 ). The immediate consequence was loss of power and grain export terminals which prevented loading and unloading grain. It also destroyed river channels & markers preventing barge traffic, and barges were backed up for weeks waiting to move thereby exacerbating the storm’s early destruction.  The graphic below shows the impacts of Hurricane Katrina six weeks after the initial storm hit the Louisiana Gulf. The map on the left shows the extent to which regional corn prices were reduced as a direct result of the hurricane. Darker red areas are most impacted with losses of 40-cents a bushel or more to a farmer’s corn price. The graphs on the right show the impact of Hurricane Katrina on barge costs either from the Upper Mississippi region of St Paul, MN or the Lower Mississippi region of Memphis, TN. The bars represent higher costs versus normal for each week following the Hurricane.  Key Observations from Hurricane Katrina Corn prices were impacted across a wide area as a result of Hurricane Katrina. Because the Illinois River and Ohio River serve as key grain flow channels to the Mississippi, this created a solid economic channel for the ripple effects of Hurricane Katrina to be felt. Farmers in the Mississippi Delta region were most impacted and suffered the biggest price losses versus their counterparts in key grain belt states.  Hurricane Ida in 2021 Hurricane Ida made a most unwelcome landfall exactly 16 years to the day that Hurricane Katrina struck. And like its predecessor, Ida had lasting financial impacts that persisted for several months causing deep losses for U.S. farmers.  The graphic below shows the price impacts four weeks after Hurricane Ida, which resulted in the most consequential price losses for farmers. Likewise, barge rates in the right hand panel also peaked out at about a 50-cent increase versus normal as a result of the disruptions. Key Observations from Hurricane Ida As in Hurricane Katrina, price impacts were most pronounced in the Mississippi Delta region and had smaller impacts into the corn region of the U.S. Midwest.  But, unlike Hurricane Karina, the maps for Hurricane Ida show farmers in the key grain belt states faced a much smaller impact and less area of the grain belt region was impacted.  Even though Hurricane Katrina and Ida had similar impact periods from late August to November, and barge rate increases for both hurricanes were on par with each other, Hurricane Ida had less residual impact on farmers in the Upper Midwest, especially, IA, MN & WI.  The more muted impact 16 years later is likely a reflection of increased demand over that time period from the growth of ethanol plants. In 2005, before the ethanol industry evolved, there was less competition for corn and as a result the loss of river shipping had a more pronounced impact on prices. By 2021, ethanol production capacity in Iowa and Minnesota had nearly quadrupled in size, representing a significant demand alternative for farmer grain movements   Drought in 2022 Unlike the two hurricane events discussed above, the drought of 2022 led to much longer and more profound price impacts as a result. Barge rates were three to four times higher than the biggest impacts seen from the two hurricane events, and as such led to a much wider strike area of price impacts. Key Observations from 2022 Drought Price impacts were more severe because of the inability for any barge traffic to move during extreme low-water conditions.  However, the biggest impact areas continue to be the Mississippi Delta region, but as far away as Indiana and Ohio along the Ohio River had sizable impacts. Upper Midwest farmers in Iowa and Minnesota felt limited impacts as ethanol continued to provide a key market for farmers in those regions. Implications on U.S. Price Competitiveness While disruptions in grain flows along the Mississippi River have immediate consequences to farmers for prices paid, another distorting impact is in the international market. U.S. grain prices for export from the Gulf market to foreign buyers will climb sharply due to the scarcity of grain to meet needs. And as such, this has an impact on future sales of grain to international buyers. The chart below shows the amount of distortion seen as a result of the Mississippi River drought during the fall of 2022. The graphic illustrates the difference or spread between U.S. corn export prices at the Louisiana Gulf and the corn price at an export destination in Brazil. The three panels illustrate price differentials for different delivery periods in the future. The green bars show what transpired between September and November of 2022 while the orange lines are the recent 5-year averages for comparison. Key Observations on International Competitiveness Massive distortions occurred during the Mississippi drought period with U.S. corn prices trading as much as $1.50 a bushel more than our competition in Brazil. During this time of the year, U.S. prices are generally less than Brazil prices, giving U.S. corn an advantage in international markets. Not only did prices for immediate shipment get distorted, but buyers who would be positioning for 1- or 2-month ahead shipments (which is the normal course of international buying) would still see U.S. prices uncompetitive versus Brazil.  The consequence of this distortion is likely a sizable amount of lost export business, which serves to limit U.S. demand and has a second order effect on all farmers by depressing prices further.  Copyright © 2014 - 2023 Farmer's Business Network, Inc. All rights Reserved. The sprout logo, and “FBN” are trademarks, registered trademarks or service marks of Farmer's Business Network, Inc.  The material provided is for information purposes only. It is not intended to be a substitute for specific investment, business or any other professional advice. Neither Farmer’s Business Network, Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed.

[FBN Members: Click here to access the September 2022 U.S. Corn & Soybean Yield Forecasts Report ] [Not an FBN member yet? Click the link above and create a free FBN account to unlock the report.] The USDA released their most recent Crop Production report on August 12, 2022, based on initial survey-based U.S. corn and soybean yields. Their results forecast U.S. corn yield to be 175.4 bushels and 51.9 bushels for soybeans (1).  However, based on futures values and some trade estimates, market sentiment is that the USDA’s August corn yield estimate is too large.  FBN®’s model-based yield forecast for U.S. corn and soybeans published in August was at a more conservative 170.0 bushels for corn and 50.7 for soybeans. Yields in Iowa and Nebraska are expected to be significantly below the strong yields seen in 2021. Ahead of the USDA’s next report, which will be released on September 12, 2022, FBN is once again looking at its own models to forecast corn and soybean yield.  Will yield increase or decrease compared to last month’s estimations? Click here to unlock the FBN Research team’s predictions in our latest report, free for FBN members . [Not an FBN member yet? Click the link and create a new member account to access the report.] FBN yield forecasting FBN has produced corn and soybean yield forecasts at the national, state and county levels since 2019. Having seen success in predicting yields relative to others in the industry, our empirical yield models are continuously updated with new information throughout the growing season based on: Growing conditions Crop development and health Weather readings and satellite imagery As the season progresses from late June to early October, the models generate yield predictions as new data and information becomes available.  Analyzing FBN’s success In our latest report, FBN will continue to predict both U.S. corn and soybean yield ahead of USDA’s report. But we will also look at how FBN’s forecasts have historically presented low yield errors compared to other published predictions.  Unlock the report Find out more by signing up to become an FBN member and downloading the September 2022 U.S. Corn & Soybean Yield Forecasts Report. By becoming an FBN member , you'll join a global network of farmers — 43,000+ strong and growing — who are already taking advantage of the opportunity to reduce their production costs and maximize the value of their crops.  You’ll also have access to unique insight from experts in the latest FBN Research publication for free in the Reports section of the FBN app. Source: 1. USDA Crop Production Report, August 12, 2022 FBN Market Advisory services are offered by FBN BR LLC, dba FBN Brokerage, FBN BR and FBN Market Advisory - NFA ID: 0508695 Disclaimer: The views and opinions are solely those of the author as of the date of publication, are subject to change at any time due to market or economic conditions, will not be updated or supplemented after the date hereof and may not necessarily come to pass. The views and opinions expressed herein do not reflect those of all personnel at FBN BR LLC (FBN) or the views of the Farmer's Business Network Inc. as a whole. FBN makes no representations, warranties, or guarantees as to this content. Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. Commodity trading involves risks, including the possible loss of principal. Copyright © 2014-2022 Farmer's Business Network, Inc. All rights Reserved. "Farmers Business Network," "FBN," and "Farmers First" are registered trademarks of Farmer's Business Network, Inc. All other trademarks are the property of their respective owners.

The 2022 growing season has seen U.S. farmers facing many critical challenges with late planting, record-setting heat, persistent drought and regionalized flooding. The result has led to sub-par growing conditions in many key growing regions.  USDA will release their first survey on U.S. corn and soybean yield potential in their Crop Production report on August 12, 2022.  Since 2019, FBN® has been closely monitoring state and county corn and soybean yield forecasts. And with the USDA set to release their first survey on U.S. corn and soybean yield potential, what does FBN forecast? FBN’s forecast for corn and soybean yield potential According to a survey of analysts, on average they expect the U.S. corn yield to be 175.9 bushels per acre, and soybeans are pegged at 51.1 bushels per acre. (1) In 2021, U.S. corn yields were record high at 177.0 bushels per acre, and the U.S. soybean yield in 2021 was 51.4. For the 2022 crop cycle, FBN’s corn and soybean yield forecasts have been declining in tandem with deteriorating crop conditions as reported by USDA. (2) Drought and extreme heat have been a persistent problem over the Southern and Central Plains this growing season, and at times brought unfavorable growing conditions into Western Iowa, Eastern South Dakota and Southern Minnesota.  Weather forecasts for the balance of August show heat and dryness likely to remain, which will challenge crop yield potential in these key growing areas. What this means for the crop year The margin of error for corn and soybean yield forecasts should decline among firms as harvest season approaches. This has been a crop year that continues to have problems pop up - hot and dry weather, significantly delayed planting, localized flooding. Regardless of USDA’s Friday yields, we expect the final corn yield to fall short of the current expectations by the market. Become a member today Become an FBN member today and join a global network of farmers — 43,000+ strong and growing — who are already taking advantage of the opportunity to reduce their cost of production and maximize the value of their crops.  As an FBN member, get insight from experts in the latest FBN Research publication for free in the Reports section of the FBN app. Sources: Survey conducted by Reuters and released on August 8, 2022. USDA Crop Progress reports for 2022 FBN Market Advisory services are offered by FBN BR LLC, dba FBN Brokerage, FBN BR and FBN Market Advisory - NFA ID: 0508695 Disclaimer: The views and opinions are solely those of the author as of the date of publication, are subject to change at any time due to market or economic conditions, will not be updated or supplemented after the date hereof and may not necessarily come to pass. The views and opinions expressed herein do not reflect those of all personnel at FBN BR LLC (FBN) or the views of the Farmer's Business Network Inc. as a whole. FBN makes no representations, warranties, or guarantees as to this content. Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. Commodity trading involves risks, including the possible loss of principal. Copyright © 2014-2022 Farmer's Business Network, Inc. All rights Reserved. "Farmers Business Network," "FBN," and "Farmers First" are registered trademarks of Farmer's Business Network, Inc. All other trademarks are the property of their respective owners.

Another big USDA report, and another moment where many commodity analysts were caught off guard about acreage estimates.  Heading into the June Acreage report, traders collectively believed USDA might increase corn acres by 400,000 from USDA’s 89.5 million estimate in March. Conversely, the trade expected a modest decline from USDA’s March soybean estimate of 91.0 million to 90.5 million in June.  Ahead of USDA’s June 30th report, FBN released its own forecasts on June 27th —  based on member contributed data — which told a much different story. Namely, soybean acres were likely to fall much more aggressively than the trade expected, and our peg was at 89.0 million acres — a full 1.5 million acres less than the average of analysts. Indeed, USDA’s June soy acreage forecast at 88.3 million acres was a shock to the trade but not to FBN’ s farmers who had read the report and were prepared for a bullish soy estimate.  For corn, USDA was mostly where the trade expected at 89.9 million acres, and although FBN was on the high side of the trade at 90.4 million acres, we felt the bullish bean / bearish corn story warranted corn pricing action ahead of the report. On June 28, 2022, FBN issued sales recs at $6.60 Dec corn futures ahead of the report, and with current post-report values of $6.20 this has seemed like a prudent course of action. Key analysts' expectations vs. USDA's June 2022 Acreage Now two years in as a forecasting group, FBN has demonstrated its proven accuracy around key acreage reports. This is a result of a large number of FBN farmers participating in the surveys, which leads to actionable insights and enhancement of our member’s marketing abilities.  The table below illustrates forecasting accuracies for corn and soybeans of various analysts for the last four acreage reports during which FBN has used member surveys to provide forecasts. Compared to the shown analysts, FBN has achieved a much lower forecasting error during this period with an average error of only 1 million acres. That is 30% better than the next best forecaster, and well below most analysts —  which have substantially larger errors of 1.8 to 2.5 million acres. We believe this illustrates the power and uniqueness of FBN ’s crowdsourced data approach for using member data to improve marketing outcomes. Corn and soy acreage forecast error, 2021-2022 Source: FBN/Reuters/USDA FBN ’s June 2022 Performance on Other Crops Crop FBN USDA Avg Analyst (Range) Spring Wheat 11.4 11.1 10.8 (10.4-11.5) Durum 1.8 2.0 1.8 (1.7-2.0) Cotton 12.4 12.5 12.2 (11.0-12.7) Sorghum 6.6 6.3 6.5 (6.3-6.8) Rice 2.42 2.34 2.45 (2.25-2.6) Source: FBN/Reuters/USDA What it means for the farmer Survey participation is key.  If you were a respondent, thank you. With the report in your hands ahead of others, you were set up to make key marketing decisions before USDA’s release.  FBN Market Advisory services are offered by FBN BR LLC, dba FBN Brokerage, FBN BR and FBN Market Advisory - NFA ID: 0508695 Disclaimer: The views and opinions are solely those of the author as of the date of publication, are subject to change at any time due to market or economic conditions, will not be updated or supplemented after the date hereof and may not necessarily come to pass. The views and opinions expressed herein do not reflect those of all personnel at FBN BR LLC (FBN) or the views of the Farmer's Business Network Inc. as a whole. FBN makes no representations, warranties, or guarantees as to this content. Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. All investments involve risks, including the possible loss of principal. Commodity trading, including futures, hedging and speculating, involves substantial risk of loss and may not be suitable for everyone. Past performance is not necessarily indicative of future results. All information, publications, and reports, including this specific material, used and distributed by FBN BR LLC shall be construed as a solicitation. The information and data provided comes from sources believed to be reliable but FBN BR LLC does not guarantee its accuracy or completeness.  For the purposes of quality assurance and compliance, phone calls to and from FBN BR LLC may be recorded.  Contact 877-472-4607 for more information. Copyright © 2014-2022 Farmer's Business Network, Inc. The sprout logo, "Farmers Business Network," "FBN," and "Farmers First" are registered trademarks of Farmer's Business Network, Inc. All other trademarks are the property of their respective owners.

After a steady climb over the past six months from $5.50 to $7.50 a bushel for the bellwether December 2022 futures contract, the past three weeks have seen relative choppy trade keeping prices hovering around the low $7 mark.  USDA’s acreage report at the end of June along with US growing season weather will be key drivers for deciding if futures can reach new highs heading into harvest. Likewise, basis levels for fall delivery will be adjusting as we get closer to harvest and estimates of new supplies start to dial in. Download the 2022 U.S. Acreage Report Current cash forward contracts which quote new-crop basis for delivery this fall have been generally trending higher in the Western Cornbelt but flat to a bit lower in the Eastern Cornbelt. Last year had big corn crops, especially in Ohio and Indiana, which has kept spot basis levels in those states below normal for much of the past six months. Meanwhile in the West, dryness in the Plains and lack of grain supplies has underpinned spot basis for much of the year.  Is this a good time to be locking in the new-crop basis for delivery at harvest? Or would you be better off waiting for new-crop basis to improve? To answer that, we examined 2006-2021 basis bids at harvest for key states and developed our FBN Basis Model to help guide marketing decisions. This model is tuned into a number of factors like US and local production, stocks, ethanol, and exports and gives a basis forecast based on the expected supply and demand situation for this fall.  The results of the forecasts are presented in the chart below for 15 key states. In addition, we illustrate the current year new-crop basis averaged across buyers to compare whether current basis offerings are above or below expected basis levels at harvest. Of the 15 states, only 2 states (KY and MO) show current new-crop basis quotes that are at or below the forecast value for the state. Most states have forecast basis that not only is higher than current quoted basis for that state, but that also is above the long-run average basis at harvest. The key drivers of this are declining US carryout expected for 2022 as well as fairly sizable changes in local production due to acreage changes between 2021 and what is expected in 2022. If USDA were to find even lower acreage in the June survey, and/or if yield potential erodes over the season, then this could add more basis upside this fall. Falling production combined with near-record exports and ethanol production expected in 2022 likely keeps local basis supported heading into harvest, and yet another market where farmers are better off waiting to price on.  New-crop corn basis forecasts Click here to enlarge the image. What it means for the farmer A tightening US and global corn market is unlikely to get corrected in the next six months. Most end users are not eager to bid up basis for this fall, but as the growing season progresses we expect the corn crop size to continue to be downgraded, which likely opens doors for better basis opportunities closer to harvest than what exists today. FBN Market Advisory services, including FBN Market Intelligence, are offered by FBN BR LLC - NFA ID: 0508695. The risk of trading futures and options can be substantial and may not be suitable for all investors. We do not guarantee customers will receive specific benefits or value from participating; results will vary and may result in loss. All information, publications, and reports, including this specific material, used and distributed by FBN BR LLC shall be construed as a solicitation. FBN BR LLC does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This newsletter contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by FBN BR LLC. Past performance is not necessarily indicative of future results. For the purposes of quality assurance and compliance, phone calls to and from FBN BR LLC may be recorded.  Copyright ©2022 FBN BR LLC. All rights reserved. The sprout logo, "FBN" and "Farmers Business Network" are registered trademarks or service marks of Farmer's Business Network, Inc.   The views and opinions are solely those of the author as of the date of publication, are subject to change at any time due to market or economic conditions, will not be updated or supplemented after the date hereof and may not necessarily come to pass. The views and opinions expressed herein do not necessarily reflect those of all personnel at FBN BR LLC (FBN) or the views of the Farmer's Business Network Inc. as a whole. Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. Commodity trading, including futures, hedging and speculating, involves substantial risk of loss and may not be suitable for all investors.

On May 18th, UN Secretary General António Guterres warned of a looming global food shortage that could last for years ( UN Press Release ). As wheat prices skyrocket, brought on in part by the war in Eastern Europe, the recent UN alarm highlights the growing humanitarian and geopolitical threats that FBN pointed out in the days following the war’s outbreak nearly two months ago ( FBN State of Ag ). Unfortunately, there is no near-term solution to curb runaway food inflation. While US farmers will begin harvesting winter wheat in the coming months, a recent report by USDA shows little optimism for a bumper crop to cushion global shortages. According to that report, USDA expects the 2022 US winter wheat crop to be 8% lower than 2021 and, if realized, this year’s constrained harvest would be the third smallest crop in the past 20 years.   Over the past 9 months, the La Niña weather phenomenon has been like a tactical missile intent on wreaking the most damage to key winter wheat areas. Heading into planting last Fall, conditions were unusually dry across stretching from Texas up to the Central Plains and west towards the Rocky Mountain front range, the breadbasket of the US which accounts for one half of all winter wheat supplies. As winter gave way to spring and farmers looked to the skies for crop saving moisture, Mother Nature proved unyielding and La Niña’s persistence brought ever worsening drought conditions. U.S. Southwest Plains drought monitor Sizing up a potential disaster USDA’s May 12th survey showed lower than expected production, but that may only be the start of what could be further downgrades to an already diminished crop. This week, the Wheat Quality Council conducted its annual fact finding expedition sending 80 scouts across Kansas and parts of nearby states to collect their own assessments. FBN was part of this excursion (see results for Day 1 , Day 2 , and Day 3) and found little reason to second guess the lower benchmark of USDA.  FBN conducted its own poll simultaneously this week, querying our farmers across these 5 states about their yield expectations. The results of that poll are illustrated below in the map and tables. Farmer yield expectations conform closely to the USDA assessment, but in some cases could prove to be worse than what USDA found in the early May survey. Of the 5 states, FBN farmers expected lower yields in 4 states versus what was found by USDA. Also, there were fairly high claims of total crop losses from FBN farmers, which was also found by Wheat Tour Scouts, suggesting that more than normal acres could be abandoned.  FBN wheat yield shows big downgrade What it means for the farmer We expect the yield and production potential for HRW wheat to be downgraded as we get into harvest. Better moisture in the Northern Plains and into Montana could help limit some of the downgrade from the southern reaches. But it will do little to stem the trend of dwindling HRW stocks in the US. FBN Market Advisory services, including FBN Market Intelligence, are offered by FBN BR LLC - NFA ID: 0508695. The risk of trading futures and options can be substantial and may not be suitable for all investors. We do not guarantee customers will receive specific benefits or value from participating; results will vary and may result in loss. All information, publications, and reports, including this specific material, used and distributed by FBN BR LLC shall be construed as a solicitation. FBN BR LLC does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This newsletter contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by FBN BR LLC. Past performance is not necessarily indicative of future results. For the purposes of quality assurance and compliance, phone calls to and from FBN BR LLC may be recorded.  Copyright ©2022 FBN BR LLC. All rights reserved. The sprout logo, "FBN" and "Farmers Business Network" are registered trademarks or service marks of Farmer's Business Network, Inc.  

It has not been a good growing season for wheat farmers in Kansas, Oklahoma and Texas. Even in the fall when wheat was seeded, conditions were not particularly good and in many regions it has gotten much worse over the past six months. Case in point, Stevens County, Kansas in the southwest part of the state. At planting time in the fall about 24% of the county was in a moderate drought, the lowest classification by the UNL’s Drought Monitor. But today, the drought reading stands at 70% of the county classified as being in exceptional drought, which is the most severe drought rating.  Although some moisture has occurred in dry areas of the Southern Plains over the past week, it may be too little and too late to salvage the crop for some producers.  So far no official government estimates have been made, with the first winter wheat yield survey-based estimate coming from USDA on May 12th. Here, we present estimates for the biggest and most drought-impacted states of Kansas, Oklahoma and Texas to try and assess the potential for yield there. These three states combined account for about one third of all US wheat production, and so losses there can be meaningful for the overall US wheat picture. The model we use is based on several key metrics, covering the past 31 growing seasons: county average soil moisture readings, daily county weather data (i.e. temperature and precipitation) and state level crop condition ratings.   The forecasted yields for each state show significant downgrades from last year’s tallies. Kansas is expected to see the biggest drawdown, with state average yields expected to be slashed by nearly 9 bushels an acre. In total, the expected losses for these 3 states would be about nearly 90 million bushels of lower production this year compared to last year. On an entire US wheat crop that would be around 1,900 MB at trend line US yields of 49.5, this magnitude of loss from these 3 key states would be hard to overcome as it accounts for roughly a 5% loss just from these states. Certainly, some regions will likely fare better and help buffer the steep losses in the Southern Plains, but the market will likely have to focus on an exceptionally tight HRW wheat balance sheet after multiple years of excess supplies.  What it means for the farmer With all that is going on in Eastern Europe and the global trade disruptions, adding in a big loss to the US wheat crop could create more upside. The KC wheat market in particular may see the best upside here as prices will need to price in exceptionally tight stocks. In the past few weeks, the KC price premium versus Chicago has dwindled but that should begin to elevate as more visibility occurs around the damage in these key growing regions. FBN Market Advisory services, including FBN Market Intelligence, are offered by FBN BR LLC - NFA ID: 0508695. The risk of trading futures and options can be substantial and may not be suitable for all investors. We do not guarantee customers will receive specific benefits or value from participating; results will vary and may result in loss. All information, publications, and reports, including this specific material, used and distributed by FBN BR LLC shall be construed as a solicitation. FBN BR LLC does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This newsletter contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by FBN BR LLC. Past performance is not necessarily indicative of future results. For the purposes of quality assurance and compliance, phone calls to and from FBN BR LLC may be recorded.  Copyright ©2022 FBN BR LLC. All rights reserved. The sprout logo, "FBN" and "Farmers Business Network" are registered trademarks or service marks of Farmer's Business Network, Inc.  

Wheat farmers have been counting down the days until they can harvest their crop and reap record high prices. With the war in Eastern Europe showing no signs of letting up, wheat markets have skyrocketed to unforeseen levels as key supplies from Ukraine and Russia will be less available to world buyers this year. As such, Kansas City wheat futures are above $11 for the benchmark July contract, which is a record high for this time of year. Indeed, it is over twice as high as the average value of $5.30 a bushel that farmers have faced in April over the last 7 years heading into harvest. Planning for Weather Impacts While farmers certainly welcome high prices as harvest draws closer in the next few months, Mother Nature will have her own ability to determine the richness of this year’s bounty. Drought is plaguing much of the key corridors of winter wheat production in the Southwest Plains . A La Niña weather system has kept moisture at bay for much of the fall and winter, and as the crop breaks dormancy soil moisture reserves are severely lacking. But for those farmers that are seeing normal or even above normal crop conditions, that doesn’t mean it is smooth sailing into the harvest finish line. The spring and summer growing season is also a time of elevated severe weather threats . And one of the most detrimental weather perils is hail, which can occur as a result of strong thunderstorm activity.  For wheat, it is most susceptible to hail damage once the crop has reached the head formation stage as damage to the grain kernels can be irreversible. Research by Farming Smarter shows that even a moderate amount of hail damage during the start of heading can result in crop losses that are about 50% of normal yields. Click here to learn more about crop-hail insurance Unfortunately for farmers, this time of critical crop development coincides with the same point in the season when hail risks are increasing. For farmers that grow wheat in the Plains, it is highly likely that hail will fall in a county where they live. The map below illustrates the incidence of hail falling in a given county during the time of winter wheat heading up to harvest over the past 20 years. In many regions of the Plains, there is an 80% chance of hail falling in a given year. This year, with so much on the line, even areas with lower incidence of hail risk may want to consider some hail insurance. There are many types of hail insurance and various deductibles which allow us to tailor coverage to fit your personal coverage needs at a cost that makes sense. Learn more by contacting one of our agents . How Does This Apply to Your Farm? Run the numbers with an expert FBN Crop Insurance agent today to see if hail insurance makes sense for you. Call 877-204-4645 or click here to learn more . Copyright © 2014 - 2022 Farmer's Business Network, Inc. All rights Reserved. The sprout logo, “Farmers Business Network”, “FBN”, "Farmers First" are trademarks, registered trademarks or service marks of Farmer's Business Network, Inc.  We are an Equal Opportunity Provider. FBN Crop Insurance services are offered by FBN Insurance LLC (dba FBN Insurance Solutions Services LLC in Texas, and FBN Insurance Solutions LLC in California and Michigan) and are only available where FBN Insurance LLC is licensed. FBN membership is not required to purchase through FBN Insurance LLC, but certain features are only available to FBN members. FBN Crop Insurance is currently offered in the following states: AK, AL, AR, AZ, CA, CO, CT, DE, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WA, WI, WV, WY.

A lot has happened in the 3 short months of 2022. That’s why we felt it was important to take a look at the state of agriculture in 2022 to see what events led us to where we are today and where we’re headed in the future. This report is meant to bring more transparency to agriculture and help farmers make knowledgeable decisions for their operations.  Watch Kevin McNew, FBN®’s Chief Economist talk briefly about what you can expect in this report and the impact it will have on farmers and agriculture in the coming year.  Watch now How did we get here?  COVID-19 and supply chain issues Both issues have led to increased chemical and fertilizer prices along with other factors that have made it challenging for farmers to source necessary crop inputs. Historic consumer and commodity price inflation With food price inflation at the highest it’s been in over 40 years, key crop prices have spiked due to demand and drought-induced supply shortfalls. War outbreak in Ukraine The war in Ukraine affects wheat markets as both countries account for 13% of global wheat production and 30% of international wheat trade. Without a quick resolution to this conflict, global grain prices will continue to rise.  Key farmer takeaways  Looking to the future, what can farmers expect for the state of ag in 2022? Based on our report, there are a few key takeaways farmers should keep in mind. Grain markets will smash record highs in 2022 U.S. acreage shift not likely to derail price strength Biofuels will provide short and long-game effects to agriculture growth Farmers will face rising costs and see limited profit growth.  Understand the justification for those takeaways and get our full analysis by downloading this free special report below.  Get the free report Watch a roundtable discussion with the authors of the report as they discuss some of the key takeaways and get your free copy today. Members can access this report and more in the Reports section of the FBN app. Disclaimer: The material provided is for educational purposes only. It is not intended to be a substitute for specific individualized tax, business, legal, investment or professional advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner, or investment manager. Neither Farmer's Business Network, Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed. FBN Market Advisory services are offered by FBN BR LLC, dba FBN Brokerage and FBN Market Advisory - NFA ID: 0508695. The risk of trading futures and options can be substantial and may not be suitable for all investors. Trading should only be done with true risk capital. We do not guarantee customers will receive specific benefits or value from participating in FBN BR LLC; results will vary. Past performance is not necessarily indicative of future results.  All information, publications, and reports, including this specific material, used and distributed by FBN BR LLC shall be construed as a solicitation. FBN BR LLC does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. For the purposes of quality assurance and compliance, phone calls to and from FBN BR LLC may be recorded. Contact 877-472-4607 for more information