Friday Market Watch

LIVESTOCK:

The livestock complex didn't see much support throughout Friday's market as traders longed for the three-day weekend ahead of them. The cash cattle market did see some more trade, for mostly steady prices with the week's trend. Hog prices closed lower on the Daily Direct Afternoon Hog Report, down $0.32 with a weighted average of $74.98 on 4,702 head. 

Friday to Friday, livestock futures scored the following changes: December live cattle down $2.07, February live cattle up $0.15; January feeders cattle down $0.30, March feeder cattle down $0.53; February lean hogs down $0.13, April lean hogs down $0.08; March corn up $0.12, May corn up $0.13.

Friday's slaughter is estimated at 122,000 head, 18,000 head more than a week ago and incomparable to a year ago. Saturday's slaughter is projected to be around 37,000 head. This week's slaughter is estimated at 547,000 head -- that's 15,000 head less than a week ago and 23,000 head more than a week ago.

Beef net sales of 2,300 mt were reported for Japan (1,800 mt), South Korea (1,700 mt) and Mexico (200 mt).

Boxed beef prices closed higher: choice up $3.12 ($281.98) and select up $0.23 ($250.93) with a movement of 66 loads (46.78 loads of choice, 7.20 loads of select, 2.80 loads of trim and 9.58 loads of ground beef). The choice/select spread sits at $31.05. Throughout the week choice cuts averaged $280.07 (up $13.89 from last week) and select cuts averaged $248.64 (up $9.43 from last week) with a total movement of 347 loads of cuts, grinds and trim. Throughout the week the choice/select spread averaged $31.43.

More: Friday Closing Livestock Market Update - Last Week of 2023 Was Fruitful for Cattle

GRAINS:

March corn closed down 1 cent per bushel and May corn was down 1 cent. January soybeans closed up 10 1/2 cents and March soybeans were up 7 3/4 cents. March KC wheat closed up 21 1/2 cents, March Chicago wheat was up 18 cents and March Minneapolis wheat was up 25 cents.

For the Week:

March corn closed up 12 1/4 cents and July corn was up 13 3/4 cents. March soybeans ended up 39 1/2 cents and July soybeans were up 40 1/4 cents. March KC wheat closed up 13 1/4 cents, March Chicago wheat was up 16 cents and March Minneapolis wheat was up 8 1/4 cents.

DAIRY:

It ended up not being a very good week for milk futures. Only the January Class III contract closed higher this week with a gain of only a penny. All other contracts lost ground closing lower indicating the bearishness prevalent in the market. Spot cheese prices gained during the week but had little influence on traders. Now that weakness set in at the week and year, traders will be cautious over price potential and buyers of cheese may hold back. Milk output has not changed much as the impact of the cold weather and storm is behind. USDA released the November Agricultural Prices report. The average corn price was $6.49 per bushel, a decline of one cent from October. The premium/supreme hay price averaged $331.00 per ton, down $17.00 per ton from the previous month. The All-milk price averaged $25.60, down $0.30 from October. The Farm Service Agency has not yet released the average soybean meal price for the month. This leaves us unable to provide the income of feed price for the month and for the Dairy Margin Coverage program. Other prices to make note of on the report is the alfalfa hay price for the month was $267.00, down $14.00 per ton and the average soybean price of $14.00, an increase of $0.50 from October.

Friday Closing Dairy Market Update - Class III Futures Settle Lower

FORAGE: This Week's Hay Markets (Forage Fodder Blog)

OUTSIDE MARKETS:

The March U.S. Dollar Index is trading down 0.306 at 103.280. The Dow Jones Industrial Average is down 349.13 points at 32,871.67. February gold is up $1.20 at $1,827.20, March silver is down $0.18 at $24.08 and March copper is down $0.0145 at $3.8095. February crude oil is up $1.62 at $80.02, February heating oil is up $0.0329, January RBOB is up $0.0988 and February natural gas is down $0.079.

Top 10 Ag Stories of 2022: No. 1 - La Nina Remained in Control for Crop Year, Became Most Influential 2022 Ag Story

MINNEAPOLIS (DTN) -- La Nina never gave up its control over the entire course of 2022. While La Nina developed in late 2020 and persisted into early 2021, neutral conditions took over during the summer. But when it returned in late 2021, the episode never relinquished its grip on the Pacific Ocean or its driving force for U.S. weather in 2022. From early flooding and cold that delayed planting, to heat and drought that caused variable yields and livestock losses, La Nina brought plenty of weather challenges -- and earned the spot of the top ag story of the year, as selected by DTN.

From flooding to drought, La Nina was in control of the weather for 2022. 

In winter, La Nina favors clipper systems. These storms frequently moved through the northern U.S. and Canada in early 2022. Several of these systems dove farther south and brought cold, arctic air through large sections of the country, but there were relatively few cold air outbreaks that lasted for more than just a couple of consecutive days unless you lived in the Northern Plains or Canadian Prairies. 

Through the spring, La Nina favored a few deeper storm systems. Two such storms produced significant blizzards in April for the Northern Plains and eastern Canadian Prairies, burying them in feet of heavy, wet snow, leaving the region very wet and planting significantly delayed through May. Other areas of the Corn Belt were wet as well during the active pattern, and planting was delayed in many areas, especially the Eastern Corn Belt.

But the Central and Southern Plains did not benefit from the pattern, as it stayed much drier when the pattern should have been more active. A few significant storms went through with some rain and severe weather, but overall, the heat and dryness grew and significantly hurt the hard red winter wheat crop. Kansas, the leading wheat-producing state in the country, was hit the hardest, as the wheat tour confirmed. 

The cold across the north also stuck around during the late spring, and late frosts were being observed well into May.

In late May through most of July, the typical La Nina summertime pattern hit, and it hit hard. A large ridge of high pressure brought widespread heat to much of North America during these several weeks, hitting triple digits not only in the Southern Plains, where it is most typical, but also up into large portions of the Midwest and into the Northern Plains. At the same time, dryness took over a lot of the country, and drought grew through areas of the Southeast and Midwest and farther north in the Plains as well. Crop yields understandably took a hit, but did so unevenly, even within individual states. Livestock producers also had a tough time with the heat and drought, causing major problems trying to keep cattle alive. 

The La Nina pattern did favor better rainfall in the Southwest, and the annual monsoon showers were more active this year than in previous years. Drought steadily decreased in the region, but streamflow seemed unaffected for quite some time. The Colorado River dealt with historic declines in water levels, and Lake Mead revealed some significant items that were otherwise buried underwater.

Some eventual cool shots and episodes of rain moved through the Corn Belt in August and September, but for most of this year's crop, it was too late or came in sporadic fashion. Irregular rains led to widespread variability in crop yields not only between states, but within states, and even some counties.

Drought spread over much of the country during the fall and, according to the U.S. Drought Monitor, was historically bad. 

The increasing dryness led to more issues with river flows across the country and eventually came to a head in October as historically low water levels affected barge transportation on the Lower Mississippi River. River levels bounced around through November but stayed low until the pattern became much more active.

While La Nina took a bit of a break in late fall, perhaps gearing up for a clipper-filled winter season, several systems were able to move through the U.S. and provide some easement in the widespread drought across the country, especially right in the middle from eastern Texas up into Wisconsin.

Drought here is now minor as we head into winter, and a stark turnaround from the summer heat. But it remains across large portions of the country, including the western Plains where hard red winter wheat went into dust during the fall. Crop conditions reported by USDA were at their lowest good-to-excellent ratings on record for this time of year. Cold weather that came in November promptly shut down the crop and is heading into the 2023 season with a poor outlook. 

La Nina's impacts were not limited to the U.S. either. Crop production was limited throughout most areas of the world, including heat and dryness in Argentina and southern Brazil, and significant heatwaves in India in the spring and Europe and China during the summer. The only large agricultural areas to receive beneficial weather were in central Brazil, the war-ravaged Black Sea region, and across Australia, which is trending toward a record wheat crop.

This Week's Drought Summary (12/29)

A powerful low-pressure trough developed in the upper levels of the atmosphere over the eastern contiguous U.S. (CONUS) during this U.S. Drought Monitor (USDM) week (December 21-27). At the surface, the trough was associated with a strong cold front that poured frigid arctic air into the U.S. east of the Rockies. Daytime maximum temperatures in the northern Plains were well below zero degrees Fahrenheit, with minimum temperatures colder than 20 below zero, at the peak of the cold wave. Bismarck, North Dakota, registered minus 10 for a high and minus 20 for a low on December 21 and 22; the high was below zero for 4 consecutive days and below freezing for at least 2 consecutive weeks. Williston, North Dakota, recorded minus 17 for a high and minus 29 for a low on December 20. The freezing arctic air spread to the Gulf of Mexico and East coasts, and even breeched the Rocky Mountain chain to reach the Pacific Northwest. The high temperature at Tupelo, Mississippi, was only 18 degrees with a low of 4 on December 23. Rain, freezing rain, and snow accompanied the arctic front as it swept east and south. An inch or more of precipitation fell across parts of the Gulf Coast and from the Appalachians to East Coast when the front tapped Gulf and Atlantic moisture. Some parts of the Mid-Atlantic and Northeast states received over 2 inches of precipitation, while an inch or more occurred over the lee sides of the Great Lakes, largely in the form of heavy lake effect snow. Buffalo, New York, officially measured 50.3 inches of snow from December 23-26, but much more snow fell in other favored leeside areas. Locally up to half an inch of precipitation occurred from the northern Plains to Upper Mississippi Valley. But the northwesterly flow was otherwise dry, so large parts of the Great Plains, Mississippi Valley, and Ohio Valley to Gulf Coast received less than half an inch of precipitation to no precipitation. The arctic blast froze soils across much of the Great Plains to Upper Mississippi Valley. Any precipitation that fell was not able to penetrate the frozen ground to increase soil moisture, so much of this region had no change in USDM status. In reaction to the eastern trough, an upper-level ridge developed over the western CONUS. This kept weekly temperatures near to warmer than normal from California to the Four Corners states, but it also kept much of the West dry. The exception was northern California to the Pacific Northwest and parts of the central and northern Rockies, where Pacific fronts brought areas of rain and snow. Two inches or more of precipitation fell in coastal areas and in the northern Rockies, with up to ten inches in parts of western Washington. Meanwhile Hawaii and Puerto Rico had a mostly drier-than-normal week while drier- and colder-than-normal weather dominated Alaska. The deep freeze and dry weather resulted in status quo conditions for much of the country. Drought or abnormal dryness expanded in parts of the Midwest, Colorado, and Puerto Rico, while contraction occurred in a few areas in the Southeast, East Coast, Wisconsin, Colorado, and Washington.

Northeast

Half an inch or more of precipitation fell across most of the Northeast region this week, with locally 2 or more inches. The precipitation was above normal except for West Virginia, extreme southwest New York, and western portions of Pennsylvania. Soil moisture has mostly been replenished across much of the region and streamflow was near to above normal except over Long Island. Wet conditions dominate at the 1- to 4-month time scales, but long-term precipitation deficits still show up at 9- to 12-month time scales. The small areas of D1 (moderate drought) were removed from New England, New York, and northern New Jersey due to the short-term wet conditions, with D0 remaining to reflect the long-term dryness. D1 continued over Long Island where streamflow was still generally below normal. D0 was removed from southern Maryland, but added to Erie County, Pennsylvania due to 30-day dryness, low streamflow, and soil moisture deficits.

Southeast

The eastern and southern portions of the Southeast region received half an inch or more of precipitation, with locally 2 inches or more in parts of the Carolinas, Virginia, and southern Florida. Less than half an inch of precipitation fell across other portions of the Southeast. D0 was trimmed in parts of Virginia, the Carolinas, and Alabama, due mostly to short-term wet conditions. But the southeast corner of Virginia missed out on the recent precipitation, so D0 expanded across Chesapeake City and Virginia Beach City counties to reflect growing precipitation deficits.

South

This week was drier than normal across all of the South region. Around half an inch of rain fell over parts of southern Mississippi and southeast Louisiana. Otherwise, weekly precipitation totals were less than a tenth of an inch, with large parts of Texas and Oklahoma receiving no precipitation. Much of the region has been wet during the last 2 months, but dry conditions dominate at longer time scales. The cold and dry conditions this week locked moisture conditions in place, so no change was made to the USDM depiction in the South.

Midwest

Parts of Minnesota and Iowa received up to half an inch of precipitation this week, while an inch to more than 2 inches fell in favored snowbelt areas to the lee of the Great Lakes in Michigan. The rest of the Midwest received less than half an inch, with the driest areas over southwestern portions of the region. The precipitation amounts were above normal in parts of Minnesota, Iowa, Wisconsin and Michigan, while the rest of the region was drier than normal for the week. Moisture surpluses eliminated the spot of D1 in northern Wisconsin, but the deep freeze locked conditions in place in Iowa and Minnesota where no changes were made. D0 and D1 were expanded in Indiana, Illinois, Ohio, and Lower Michigan, and D0 expanded in eastern Missouri, based on several indicators. These indicators include dry soils, low streamflow, and mounting precipitation deficits, especially as seen in the 1- to 12-month Standardized Precipitation Index (SPI).

High Plains

Most of the High Plains region received less than half an inch of precipitation. Pockets of half to 1 inch of precipitation were found over North Dakota and the mountains of Colorado and Wyoming. The precipitation was above normal in parts of all of the High Plains states, but late December is in the dry season for much of the region and normals are low. With the entire region experiencing a deep freeze this week, little change was made to the USDM depiction. The exception was Colorado, where D0 expanded in south central counties due to low snowpack and 1- to 4-month precipitation deficits, and D0-D1 contracted in north central counties based on precipitation surpluses at the 1-week to 3-month time scales.

West

Pacific frontal systems brought rain and snow to coastal areas of the West, from northern California to Washington, and to parts of the Rockies. Two to 5 inches of precipitation fell along the coastal and Cascade ranges, with up to 10 inches locally in Washington. Amounts ranged up to 2 inches or more in the northern Rockies. Pockets of up to 1 inch of precipitation were found over the central Rockies, but for the states further south, southern California, and the intermountain basin, little to no precipitation occurred. Since this is the wet season in the Pacific Northwest, the heavy precipitation this week resulted in month-to-date totals that were barely above normal in some areas, and 3-month precipitation totals were still below normal across most of the Pacific Northwest. Very dry SPI values were still evident at the 6-month time scale in spite of this week’s precipitation. Soils were saturated and real-time and 7-day stream levels rose significantly in response to the rain, but 28-day streamflow levels, which are more relevant for drought monitoring, were still very low as of the Tuesday morning valid date of this USDM. Snow depth increased at some sites in northern Washington and the Idaho to Colorado mountains, but most locations in the Pacific Northwest experienced no change or a decrease in snow depth. Reservoirs in Oregon continued very low across the state, with some of the large reservoirs (e.g., Owyhee, Warm Springs, Prineville, Howard Prairie) less than 15% full. Most of the reservoirs across the Pacific Northwest saw very little change in reservoir levels since the beginning of the month. D1 was pulled back in those parts of Washington that had the heaviest precipitation and reflected improvement at 1- to 3-month time scales, but most of the D1 and the D0 were kept in place across the Pacific Northwest to reflect the aggregate indicators and conditions at all time scales. The bulk of the precipitation that fell in California occurred near the end of the USDM week. This precipitation, and the precipitation that followed after the Tuesday morning valid time, will be evaluated in next week’s USDM. No change was made to the rest of the West region outside of Washington.

Caribbean

This week was drier than normal across most of Puerto Rico, with the month to date unusually dry. D0 (abnormally dry) was added along the northwest and southern coasts where upper-layer soil moisture was drying; D0 was added to northeast Puerto Rico where streamflow was low. Local observers noted that the grass was beginning to turn yellowish along the southern coast of Puerto Rico, especially in the southeast.

Rain was plentiful during the fall in the U.S. Virgin Islands. Although this is the dry season, conditions have been unusually dry in recent weeks. Rohlsen Airport on St. Croix had its driest Nov 22-Dec 21 out of 63 years, while East Hill on the eastern end of the island, had its second driest Nov 22-Dec 21 out of 49 years. Weather reporters indicate that St. Croix received from 0.13 inches to 0.54 inches, with both extremes on the western end of the island, while St. Thomas received 0.04 to 0.24 inches, and St. John received 0.90 inches or less.

The lack of rain turned the Standardized Precipitation Index negative on the one-month time scale for all three islands. The values for St. Croix and St. Thomas indicated severe to extreme drought, so abnormal dryness (D0) was introduced on those islands. St. John received more rainfall than the other islands for the week, keeping its one-month SPI at a moderate drought level, so it remained free of abnormal dryness. The SPI values at longer time scales remained neutral or wet for all islands.

Well levels benefited from the fall precipitation, but the distance from the land surface to the water level has begun to increase again. St. Croix’s Adventure 28 well was 26.14 feet below the land surface on Dec. 26. St. Thomas’ Grade School 3 well was 8.35 feet below land surface on Dec. 26 after dropping more than 6.5 feet in the past nearly seven weeks. The Susannaberg DPW 3 well on St. John was 9.09 feet below land surface on Dec. 27.

Pacific

Drier- and colder-than-normal weather dominated Alaska, but with near to above-normal snowpack, no change was made to the depiction in Alaska, which remained free of drought and abnormal dryness.

Hawaii was mostly drier than normal this week, but this followed a very wet week last week, so no changes were made this week.

The Republic of Palau received slightly less than the desired 2 inches per week at Palau IAP and Koror COOP with 1.89 and 1.61 inches, respectively. Adequate rainfall in previous weeks should sustain them.

The Mariana Islands all had plenty of rain. Guam received 2.59 inches, while Rota reported 10.94 inches, including 8.24 inches on Dec. 27 alone. Saipan received from 1.88 to 2.44 inches at the three reporting sites. These islands need an inch weekly to meet minimum water needs.

The Federal States of Micronesia were mixed with most locations reporting receiving less than two inches needed to meet minimum water needs per week. Kapingamarangi, in severe drought (D2), received 0.78 inches, while Lukunor and Ulithi, both at D0, received 0.8 and 0.94 inches, respectively. Nukuoro reported 0.31 inches and may be abnormally dry soon without more rain. Several days of data were missing for Fananu, Pingelap and Kosrae so their locations were not evaluated this week. Chuuk, Woleai and Pohnpei reported 2.02, 4.36 and 4.66 inches, respectively.

The Marshall Islands were mostly below 2 inches of precipitation for the week, except for Mili, which received 2.65 inches for the past week. Abnormal dryness (D0) was introduced for Jaluit, which received 1.71 inches for the past week after several weeks of slightly below normal rainfall. December precipitation through the 27th for Jaluit amounted to 5.93 inches. Ailinglaplap and Kwajalein remained at D0 and received 1.54 and 0.95 inches, respectively. Wotje reported no rain for the week, but had ample rain recently. Majuro received 1.73 inches, and the reservoir held 23.185 million gallons on Dec. 27.

American Samoa reported adequate rainfall. Pago Pago, Siufaga Ridge and Toa Ridge received just about an inch of rain or more, which is the amount these islands need to meet minimum water needs.

Looking Ahead

As the cold air mass over the eastern CONUS exited out of the country during December 27-29, a strong Pacific weather system moved into the West, bringing abundant rain and snow. The western weather system will move across the West and into the central part of the country, while an upper-level ridge shifts eastward to dominate the weather over the East Coast. This combination will result in warmer-than-normal temperatures for much of the CONUS, especially east of the Rockies, and wet conditions from the Lower Mississippi Valley to eastern Great Lakes. The Pacific system will spread several inches of precipitation across much of the West, with 1 to 4 inches already having fallen through December 28. Predicted precipitation amounts for December 29-January 3 range from 1 to 4 inches over the Rockies and higher terrain of the intermountain basin, and from 4 to 10 inches or more along the immediate Pacific Coast, especially in California and the Sierra Nevada. As the weather system moves further east, 1 to 4 inches of precipitation is expected from east Texas to the Mid-Mississippi Valley and in the Southeast. One to 2 inches of precipitation is predicted across the central Plains to Upper Mississippi Valley, across parts of the Great Lakes, and into New England, with half an inch to an inch across the rest of the CONUS east of the Mississippi River. For January 4-10, the ridge over the eastern half of the CONUS is expected continue, keeping most of the country east of the Rockies warmer than normal, while the West averages near to cooler than normal. Odds favor above-normal precipitation across most of the CONUS, with near to below normal precipitation favored for parts of the northern and southern Plains. Drier-than-normal weather with near-normal temperatures are expected for northern Alaska, and wetter and warmer than normal for southern Alaska.

Top 10 Ag Stories of 2022: No. 2 - Russian Plan for Easy Conquest Riled 2022 Grain Markets

When thinking back to Feb. 24, 2022, the start of Russia's one-sided war against Ukraine, it is easy to forget wheat prices had already been trading near $8 and $9 a bushel, their highest levels since 2012. Prices had earlier been propped up in late 2021 by a spring wheat drought on both sides of the U.S.-Canadian border. U.S. wheat production totaled 1.646 billion bushels (bb) in 2021, the lowest in 19 years. Canada had a similar experience, watching wheat production drop 37% on the year to 22.3 million metric tons (mmt) or 819 million bushels (mb).

All wheat prices, like on this chart of Kansas City wheat, showed extreme volatility after Russia attacked Ukraine Feb. 24, 2022, but wheat wasn't the only market affected by war. (DTN ProphetX chart)                                 

The hangover of logistics and production problems from the initial global pandemic in 2020, China's surprisingly large corn and soybean imports in 2021, North American drought in 2021 and Brazilian soybean drought in early 2022 all formed a cluster of unexpected bullish events that raised concerns about higher prices, even before Russia invaded.

In late 2021, when reports first surfaced of Russian troops along Ukraine's eastern border, my first thought was Russia's President Vladimir Putin was bluffing. It seemed in character for him to poke market fears and spur wheat prices higher. Even more important, the Russian treasury was getting a nice boost, while the world's second-largest exporter of crude oil conducted military drills near the border. Spot crude oil went from the low $60s in November 2021 to above $90 a barrel in the days leading up to the war. It looked like a scam.

As winter progressed, however, it became obvious Putin was not bluffing and I don't think many of us Westerners thought Ukrainians had a chance against Russia's war machine. Almost immediately, Kyiv was under attack and in March, things looked bad. Some in the media predicted Ukraine would fall in a matter of months.

Because Ukraine is one of the world's largest exporters of wheat, corn, barley and sunflower oil, it didn't take long for world markets to respond with higher grain prices. Ukraine's winter wheat crop had already been planted the previous fall and there were questions about what would happen at harvest. The Russian Navy quickly blocked Ukraine's access to the Black Sea.

Eventually, spot U.S. prices of corn would hit a high of $8.27 a bushel by April and Kansas City wheat would hit $13.79 1/4 by May, but grains were not the only rattled markets. In the U.S., spot crude oil hit a peak of $130.50 a barrel in March, DTN's national index of anhydrous ammonia prices were going for more than $1,500 a ton at planting time and spot natural gas hit a high of $10.03 per million British thermal units (Btu) in August -- all much higher-than-normal levels. Europe's energy prices soared even higher as Russia withheld natural gas.

In the U.S. and Europe, inflationary pressures -- that were simmering before the war -- become even more worrisome after Russia invaded, especially as oil prices shot higher. Central banks were forced to raise interest rates and, by June, Federal Reserve Chairman Powell was warning about the possibility of a recession. Putin's war didn't cause all the financial problems in the West, but it certainly added to them.

As we finish out the final days of 2022, we now see grain and energy prices have calmed down. The Ukrainian people have shown heroic grit and continue to fight for their lives and livelihoods, helped by arms and money from the West. Diplomatic efforts by the U.N. and Turkey convinced Russia to allow grain shipments to leave Ukraine through the Black Sea and has helped to maintain hope for Ukrainian farmers in extremely difficult conditions.

Even though prices have calmed from earlier peaks, at the time of this article, world supplies of wheat and oil remain historically tight and the nuclear plant at Zaporizhzhia remains in harm's way, having lost contact with the power grid several times.

After losing Kherson in southern Ukraine this fall, Russia's invasion is looking more like a disaster with each day that passes. According to BBC.com, a U.S. general said around 100,000 soldiers had been killed or wounded on both sides of the war. Russian GDP was reported down 4% in the third quarter from a year ago. Putin's attempt to increase the draft had to be scrapped after widespread protests erupted.

It is natural for people of good will to hope for the best, but it is difficult to say what Russia will do next -- the malevolent threat is not gone yet. Big challenges and risks in the world's grain and energy markets are still ahead of us in 2023.

Top 10 Ag Stories of 2022: No. 3 - Fertilizer, Ag Chemicals, Fuel All Saw Price Hikes on Supply Concerns in 2022

OMAHA (DTN) -- Input prices for crop production, like the cost of many other items, saw large increases in 2022. Fertilizer, agricultural chemicals, and fuels all saw big jumps in price because of various supply issues and rising costs associated with manufacturing.

Unfortunately for crop producers, input prices do not appear to be dropping significantly as we move into 2023.

Fertilizer prices make up a large percentage of the total crop production costs. Prices rose in the first part of 2022 before leveling off in spring. Nutrients then saw a long, slow decline in prices in the second half of 2022.

Fertilizer prices were already higher because of various supply issues in recent years. The beginning of the Russia-Ukraine war in February 2022 was another factor that pushed prices higher. Russia and Belarus are large potash fertilizer producers -- the second and third largest potash producers in the world.

Supply from the Black Sea region stopped. Global prices spiked higher as there were major concerns supply from those countries was going to be hindered by the war. Major nutrient importing countries, such as Brazil, scrambled to find supplies to meet their fertilizer needs.

However, as it turns out, the war has had less of an impact on fertilizer supplies and prices than many feared.

Other fertilizer-producing regions of the world stepped up production levels after the war began. Canada, the world's largest producer of potash, increased production to offset the lost imports from Russia and Belarus.

By the end of 2022, while still fairly high historically, ample supplies of nutrients (especially in phosphorus and potash fertilizers) have some global fertilizer prices falling.

AG CHEMICALS COST MORE

Fertilizer wasn't the only input price costing more.

Shortages of agricultural chemicals due to the COVID-19 pandemic, labor shortages and increasing shipping costs all came together to cause prices to climb significantly higher in 2022.

DTN reported farmers saw large increases in the price for ag chemicals in 2022, in some cases twice as expensive as they were in 2021.

Glyphosate and glufosinate were the most affected active ingredients. Both were in high demand with glyphosate remaining the base of many weed control programs and glufosinate now a post-emergence spray option in soybean production.

Analysts hope increased production of these chemicals in 2023 will lead to lower ag chemical costs in the year ahead.

FUEL PRICES ROSE AND FELL

Fuel prices rose and then fell during the year. Much like fertilizer and ag chemicals, supply issues affected the flow of fuel; less supply pushed the fuel cost higher during mid-2022.

However, the year ended with lower fuel prices. Farmers will watch diesel prices closely, as well as propane, as the new year starts.

A colder-than-usual winter could cause propane prices to climb in early 2023. A cold front with extreme cold conditions, snow and high winds moved across the country just as winter started. 

Top 10 Ag Stories of 2022: No. 4 - New Packing Plants Point to Long-Term Shifts for Cattle Business

BIRMINGHAM, Ala. (DTN) -- It was big news in late 2021, when a beef processing plant was announced in North Platte, Nebraska. This plant, Sustainable Beef LLC, would be built on what was described as a "cooperative business model" with profits passing back to members. One of the largest new plants announced to date, with a planned 1,500-head daily capacity, Sustainable Beef was part of a trend toward new processors across the country that were announced throughout 2022.

Agriculture Secretary Tom Vilsack speaks with Henry Davis, CEO of Greater Omaha Packing Co., before a late-fall press conference announcing a $19.9 million grant to the packing plant. (DTN file photo by Chris Clayton)                                 

What's been behind all of this? Many analysts believe COVID-19 caused a paradigm shift, as Americans experienced for the first time in their lives the sight of empty grocery shelves. It became clear that concentrating meat and poultry processing in a handful of large companies was an issue of national security.

The Biden-Harris Action Plan was announced as a result, with President Joe Biden signing an Executive Order on Promoting Competition in the American Economy, in July of 2022. The plan noted that four large meat packing companies control 85% of the beef market; four processing firms control 54% of the poultry market; and four processors control 70% of the pork market. This level of concentration created a bottleneck in the food chain during COVID.

In November 2022, USDA attached $223 million in grants and loans to the problem, with Agriculture Secretary Tom Vilsack noting that the grants would go to 21 meat-processing projects in what he called the first round of the Meat and Poultry Processing Expansion Program. Biden said in a 2022 meeting with producers that his administration plans to invest as much as $1 billion to expand competition in the U.S. meatpacking industry.

Will more processing space be a positive for the beef industry? Basic supply-demand economics says it should be good for business, because more buyers will be competing for cattle. The long-term question is whether the business model can sustain itself. There is a reason the beef business became concentrated in a handful of processors. There's not a processor anywhere that can stay in business if it can't procure cattle at a cost that will allow it to make a profit. More competition will be good for cow-calf producers in the short term, there's no doubt. But it will take a delicate balancing act to keep the doors open long-term at this growing list of meatpackers and processors.

Idaho And Western United States SNOTEL Water Year (Oct 1) to Date Precipitation % of Normal (12/27)

Top 10 Ag Stories of 2022: No. 5 - Soy Crush Plants Give Long-Term Support to Bean Markets

OMAHA (DTN) -- Farmers know they're only a bumper crop or two away from below-cost grain prices. A bright spot on the soybean horizon is the expected high demand for soybean oil for renewable diesel and aviation fuel production.

Renewable diesel production and demand are soaring, which could increase the floor for soybean and corn prices by at least $3 and $2 per bushel, respectively, explained DTN Lead Analyst Todd Hultman. He likens the rise of biofuel and commodity prices to the ethanol boom in the mid-2000s.

"It's a new dimension of demand for soybean products that we've never seen before," Hultman said. "It's hard to grasp the potential."

That's led to a rush in permits for soybean crushing plants, with at least seven new or expanding plants announced since mid-2022. Those plants alone are expected to add 564 million bushels of crush capacity by 2026.

DTN began covering the crush plant craze early in 2022 and has continued to update the market on the subject throughout the year.

Renewable diesel production has nearly doubled from 971 million gallons per year in 2021 to 1.92 billion gallons in 2022, according to the U.S. Energy Information Administration (EIA). Refiners are quickly ramping up production to satisfy an insatiable demand for the environmentally friendly, low-carbon fuel and cash in on federal and state tax credits. The federal Renewable Fuel Standard (RFS) also generates a potentially lucrative market for renewable identification numbers, or RINs.

As with any rapid expansion, growing pains and altered plans are likely. In early December Epitome Energy announced its $400 million crushing plant planned for Crookston, Minnesota, is now scheduled to be built near Grand Forks, North Dakota.

Epitome CEO and founder Dennis Egan cited the company's frustrations with the state of Minnesota in completing the needed air permitting processes as the reason for the move.

Bureau of Reclamation, Pacific Northwest Region - Storage Reservoirs in the Upper Snake River (12/27)

Average daily streamflows indicated in cubic feet per second.
Reservoir levels current as of midnight on date indicated.

Upper Snake River system is at 30 % of capacity.
(Jackson Lake,Palisades, Grassy Lake,Island Park,Ririe,American Falls,LakeWalcott)
Total space available:	2822435 AF
Total storage capacity:	4045695 AF

Friday Market Watch

LIVESTOCK:

It was a tremendous week for the livestock complex, and for the most part, the market ended on a positive note by Friday's close. Hog prices are unavailable on the Daily Direct Afternoon Hog Report because of confidentiality issues. However, we can see that 440 head have traded and that the five-day rolling average sits at $79.66. 

From Friday to Friday, the livestock futures scored the following changes: December live cattle up $1.85, February live cattle up $1.97; January feeders up $0.22, March feeders up $2.05; February lean hogs up $2.05, April lean hogs up $2.65; March corn up $0.13, May corn up $0.12.

More: Friday Closing Livestock Market Update - Cattle Press Higher Into Christmas Weekend

GRAINS:

March corn closed up 5 3/4 cents and July corn was up 3 3/4 cents. March soybeans closed up 12 1/2 cents and July soybeans were up 14 3/4 cents. March KC wheat closed up 8 3/4 cents, March Chicago wheat was up 13 3/4 cents and March Minneapolis wheat was up 9 1/2 cents.

For the week:

March corn closed up 13 1/4 cents and July corn was up 9 3/4 cents. March soybeans ended up 3/4 cent and July soybeans were up 3 1/2 cents. March KC wheat closed up 30 3/4 cents, March Chicago wheat was up 22 1/2 cents and March Minneapolis wheat was up 22 1/4 cents.

DAIRY:

Dairy cattle slaughter in November totaled 250,900 head, a decline of 1,900 head from October. However, this was 5,600 head more than slaughter in November 2021. There is currently not much interest in culling heavily, as milk prices have been good. The gain of cheese prices this week supported nearby Class III milk futures with January jumping $0.69 from its lows and February up $0.42. Later contracts were only slightly above their lows or showed minor losses. Even with underlying cheese prices increasing as much as they did, gains in milk futures were limited due to traders holding an overall bearishness in the market. Gains were tempered by a decline of dry whey and a large decline of butter during the week. Dairy markets will be closed on Monday and will reopen Monday night at the usual time of 5 p.m. Central time.

More: Friday Closing Dairy Market Update - November Culling Slowed From October

FORAGE: This Week's Hay Markets (Forage Fodder Blog)

OUTSIDE MARKETS:

The March U.S. Dollar Index is trading down 0.05 at 104.08. The Dow Jones Industrial Average is up 71.71 points at 33,099.20. February gold is up $9.40 at $1,804.70, March silver is up $0.28 at $23.91 and March copper is up $0.0545. February crude oil is up $1.71 at $79.20, February ultra-low sulfur diesel is up $0.1210, February RBOB gasoline is up $0.1139 and February natural gas is up $0.071.

Top 10 Ag Stories of 2022: No. 6 - Climate Takes Center Stage With Inflation Reduction Act, USDA Grant Programs in 2022

OMAHA (DTN) -- After more than a year and a half of negotiating with members of his own party, President Joe Biden got his signature climate legislation when Congress approved the $739 billion Inflation Reduction Act back in August.

The act includes a historic investment of $369 billion for climate initiatives, including about $19.5 billion for USDA conservation programs meant to champion climate-smart practices. The climate provisions in the law are expected to help lower greenhouse-gas emissions in the U.S. economy 40% below 2005 levels by 2050.

For a long stretch it appeared a bill meant to incentivize renewable energy could not clear Congress because of infighting among Democrats, especially in the Senate where Democrats could not afford to lose any votes. After months of talks, the bill finally passed both chambers of Congress along party lines as Republicans pointed to high inflation facing Americans and used the bill as a campaign talking point against Democrats.

CLIMATE-SMART AG

The IRA is the biggest climate act in the country's history, but USDA also moved in 2022 to jumpstart climate-smart incentives for farmers. After initially announcing plans for a $1 billion grant program, the Partnership for Climate-Smart Commodities, Agriculture Secretary Tom Vilsack expanded that funding last fall to top $3.1 billion. USDA has announced more than 140 climate-smart project grants. The goal of those programs is to help incentivize farmers and ranchers to lower emissions and sequester carbon in the soil.

"This is a really, really important day for American agriculture," Vilsack said in September. "I just hope people understand the significance of what we're doing here."

All told, the Partnership for Climate-Smart Commodities will involve more than 60,000 farmers and 25 million acres. USDA projects the project will amount to more than 60 million metric tons of carbon dioxide or equivalent sequestered. That's about the same as removing 12 million vehicles from the road for a year.

IRA DETAILS

Americans will start to see tax credits for heat pumps, rooftop solar panels and electric cars. The tax credits for EVs could go as high as $7,500, though more likely will average about $4,000. Companies will also get tax credits to install more EV charging stations nationally.

While biofuel groups continued to raise concerns over the Biden administration's fixation with electric vehicles, the Inflation Reduction Act also is a big deal for the renewable fuels industry. The law extended tax credits for biodiesel and also created a new renewable fuels infrastructure grant program. The law also opens up biofuels to create Sustainable Aviation Fuel (SAF) through new tax incentives. The SAF tax credits, in the short-term, could run as high as $1.75 a gallon. A new Clean Fuel Production Credits will run from 2025 to 2027.

"When it comes to ethanol and other renewable fuels, this bill represents the most significant federal commitment to low-carbon biofuels since the Renewable Fuel Standard was expanded by Congress in 2007," said Geoff Cooper, president and CEO of the Renewable Fuels Association when the bill passed Congress in August.

Talking about projects that will work on sustainable aviation fuels, Vilsack recalled earlier this month a conversation with the president of United Airlines who was pushing for such fuels to help airlines reduce their emissions.

"America needs an opportunity to create leadership in a lower carbon-based fuel," Vilsack said at an event at Tuskegee University in Alabama.

The IRA supports the biogas industry through a system of tax credits and will drive more biogas production from food waste as well as manure from cattle, chickens, hogs, as well as wastewater.

USDA PROGRAMS IN IRA

Among the top spending items for USDA, the Environmental Quality Incentives Program (EQIP) will receive $8.45 billion; the Regional Conservation Partnership Program (RCPP) receives $4.95 billion; the Conservation Stewardship Program (CSP) receives $3.25 billion; and the Agricultural Conservation Easement Program (ACEP) receives $1.4 billion.

Another $1 billion will go to the Natural Resources Conservation Service (NRCS) for technical assistance to producers. USDA will also receive $300 million to quantify carbon sequestration and emissions on farms.

At least $4 billion in the act goes to deal with drought relief in the Colorado River Basin.

Renewable energy programs through USDA overall will receive $13.3 billion. Rural electric cooperatives will receive $9.7 billion for loans to build out renewable energy infrastructure with specific language on "zero-emission systems" and carbon capture programs.

At least $5 billion will be used for forest management, including about $2.15 billion for funding to reduce dead wood and other vegetation that would be fuel for forest fires. Another $2.75 billion will go toward urban areas and other non-federal forests to develop incentives such as carbon sequestration in those areas.

Another $1 billion goes for loans for electric generation from renewable energy resources for rural and nonrural power companies. This includes solar, wind, hydropower, biomass, or geothermal. The federal government would cover up to 50% of the loans for such projects.

Companies championing carbon pipelines were also rewarded in the legislation. The 45Q tax credit for industrial carbon sequestration will be extended for projects that begin construction before 2033. The tax credits were also increased from $50 a ton to $85 a ton.

OTHER IMPACTS

The Congressional Budget Office (CBO) estimated the IRA would reduce deficit spending by $237 billion over the next 10 years.

The impact of the IRA is being felt in Europe as well as the U.S. The Financial Times reported in mid-December that European leaders are now forced to match the U.S. subsidies for green energy as well. European leaders have complained that the IRA created an unfair competitive advantage that was causing European countries to invest more heavily in the U.S.

This Week's Drought Summary (12/22)

This week, moderate to heavy precipitation fell over the northern Great Plains, parts of the Upper Midwest and much of the south-central and northeast U.S. This led to widespread improvements in drought conditions and abnormal dryness in these areas, as precipitation deficits lessened and soil moisture and groundwater and streamflow improved. Meanwhile, the West region was much drier this week than the last few, so few changes were made there, and mostly long-term drought and abnormal dryness continued across much of the region. A Kona low affected the Hawaiian islands this week, dumping heavy amounts of precipitation in the form of thunderstorms and high mountain snows on the Big Island, which led to improvements over most of the islands.

Northeast

Wet weather occurred in parts of the Northeast this week, especially in southern parts of New England. Areas suffering from long-term drought in Massachusetts and Rhode Island saw some reprieve, as the precipitation improved groundwater and streamflow conditions in the area. Long-term drought also improved in a few small areas of southeast New York. Elsewhere, the region remained mostly free of drought.

Southeast

Moderate to heavy rain amounts were common in the Southeast this week, especially in Alabama and the western Florida Panhandle. Areas of moderate and severe short-term drought in Alabama and the Florida Panhandle shrank in coverage due to recent heavy rains and improving soil moisture conditions. Drought and abnormal dryness coverage also decreased in the northern half of Georgia due to recent heavier rains. However, moderate drought coverage increased in southeast Georgia, where increasing short-term precipitation and soil moisture deficits resulted in worsening conditions.

South

Moderate to heavy rain fell this week across the eastern half of the south region, roughly to the east of Interstate 35 in Texas and Oklahoma. Due to increasing streamflow and soil moisture, and decreasing precipitation deficits, improvements were made across much of the eastern half of the region, including a small part of eastern Oklahoma, much of Arkansas, east Texas, Louisiana, Mississippi and Tennessee. In parts of Texas that missed out on the rains, degradations were made in a few spots where precipitation deficits, and in some cases streamflow deficits, mounted. Widespread severe, extreme and exceptional drought continued across much of central and western Oklahoma and the Texas Panhandle.

Midwest

Weather conditions varied widely in the Midwest region this week. In the western half of the region, conditions mostly stayed the same or improved after widespread precipitation over the past couple weeks, including much of Missouri and Illinois. Extreme drought was removed from southern Illinois after recent heavy rains improved conditions there. Improvements due to the last couple weeks of rain were also common across most of Kentucky, where drought coverage saw another drop this week. Small-scale improvements were made in parts of Iowa this week due to recent heavy rain and snow and improved conditions. Large-scale improvements were made in Minnesota this week after heavy precipitation occurred in the last couple of weeks. Drier conditions continued along the central Indiana/Ohio border this week, where short-term severe drought developed due to worsening precipitation deficits, streamflow and growing soil moisture deficits.

High Plains

Widespread moderate to heavy rain and snow fell over parts of the High Plains region, especially the Dakotas and northern Nebraska. Due to the growing snowpack and lessened precipitation deficits, improvements were made across much of South Dakota and North Dakota, as well as in north-central and northwest Nebraska and the northeast corner of Colorado. Improvements were also made due to recent precipitation in the Kansas City metro area. Farther west in Kansas, dry weather continued this week, and long-term precipitation deficits and soil moisture deficits continued to grow, leading to a small expansion of extreme drought to the east.

West

Compared to the last several weeks, this week was generally quieter across the West region, with the exception of snowfall in the eastern plains of Montana from the same system that impacted the Dakotas. Some improvements were made in eastern Montana, as this snowpack helped to further alleviate long-term precipitation deficits. Elsewhere across the West, mostly long-term drought and abnormal dryness continued in most parts of the region.

Caribbean

Drier conditions continued this week in Puerto Rico, except for the northeast corner of the island. Despite generally drier conditions over the last month in eastern Puerto Rico, medium- and long-term precipitation was sufficient to keep conditions away from abnormal dryness.

The U.S. Virgin Islands have trended drier in recent weeks as this is the dry season. Both satellite data (i.e., National Weather Service’s seven-day quantitative precipitation estimates) and station observations show that the rainfall amount received over most parts of the islands was less than 0.25 inches. The one-month Standardized Precipitation Index (SPI) showed that conditions have been significantly dry. However, the 3-, 6-, 9- and 12-month SPI showed wet or normal conditions over the U.S. Virgin Islands. If the current drier-than-normal conditions continue, the islands could deteriorate to abnormally dry conditions.

Specifically, St. Croix (Henry Rohlsen AP) reported 0.16 inches of rain this week. Despite recent dry conditions, the depth to water level at Adventure 28 Well (St. Croix, USVI) on December 20, 2022 was less than 26 ft below land surface. Even though an increase in depth to water is observed due to less rainfall this week, St. Croix remains free from dryness due to plentiful rainfall in fall.

Similarly, on St. Thomas (Cyril E. King Airport), 0.11 inches of rain was observed this week. The depth to water level at Grade School 3 well (St. Thomas, USVI) on December 20, 2022 was 7.26 ft below land surface. A slight increase (about 1.3 ft) of depth to water level from last week was observed due to the lower amount of rain that was received this week. However, there is enough moisture to remain drought free for this week.

On St. John, at Rafe Boulon (Windswept Beach), 0.14 inches of rain was reported this week. The depth to water level at Susannaberg DPW 3 well (St. John, USVI) on December 20, 2022 was 8.66 ft below land surface. Despite trending drier this week, the observation at Susannaberg DPW 3 well showed the depth to water level was shallow enough (less than 9 ft) to remain drought free. Thus, St. John continues to be drought free this week.

Pacific

Alaska remained free of drought or abnormal dryness this week.

Drought conditions improved by a full category in most locations in Hawaii this week, due to precipitation associated with a Kona low. The one exception was on the southeast slopes of Kilauea, where December precipitation continued to be below normal, and abnormal dryness continued.

Kwajalein received only 0.46 inches of rain this week with two days missing. This week is the fourth consecutive week with less than one inch of rainfall. Thus, Kwajalein deteriorated to abnormally dry conditions. Similarly, Ailinglapalap received only 0.30 inches of rain this week with two days missing. Ailinglapalap also had below-normal rainfall in the past two weeks (i.e., 0.88 and 0.38 inches of rain each week), initiating a short-term drought (abnormally dry). Jaluit observed 1.44 inches of rain this week with one day missing. Jaluit also observed drier conditions in the past two weeks (i.e., 1.11 and 1.38 inches of rain in the past two weeks, respectively). However, because of the significant wet conditions in the past two months, Jaluit remained drought free. On Majuro, 4.75 inches of rain was reported this week with one day missing, so the island remains free of drought. Similarly, Mili and Wotje reported 3.82 (two days missing) and 2.00 inches of rain, respectively Thus, Mili and Wotje are free of dryness or drought. No depiction was made for Utirik due to missing data.

Pago Pago reported 3.86 inches of rain this week. In addition, Siufaga Ridge (NPS in American Samoa) and Toa Ridge (NPS in American Samoa) reported 4.92 and 4.16 inches of rain, respectively. Thus, American Samoa remained free of drought conditions. Palau IAP (Airai) reported 2.78 inches this week. Koror COOP station also reported 2.30 inches of rain (with one day missing), resulting in drought-free conditions.

This week, 2.34 inches of rain was reported on Yap. Last week, 2.51 inches of rain was reported. However, below-normal rains were reported in the previous four weeks. Thus, Yap remained in short-term abnormal dryness for this week. On Ulithi, only 0.59 inches of rain was reported this week with one day missing. In addition, Ulithi had experienced below-normal rainfall for the past three weeks, so it remained in short-term abnormally dry conditions. On Kapingamarangi, only 0.17 inches of rain was reported this week. In addition, Kapingamarangi has been dry in the past several weeks, and therefore it remains in short- and long-term severe drought. On Lukunor, only 0.49 inches of rainfall was reported this week (with four days missing). Thus, Lukunor remains in abnormally dry conditions. No data was reported this week at Pohnpei. However, wet conditions prevailed in the past three weeks and previous months, so Pohnpei remained free of dryness. On Woleai, 2.01 inches of rain was reported this week, with one day missing. So, Woleai remained drought free. At Chuuk, only 0.45 inches of rain was reported this week with one day unaccounted for, but it remained free of dryness due to wet conditions in the previous weeks. On Fananu, 1.51 inches of rain was reported this week, allowing the island to remain free of drought or abnormal dryness because of the significant amounts of rain in October and November (i.e., 16.45 and 10.91 inches of rain, respectively). On Nukuoro, 3.90 inches of rain was reported this week, allowing the island to be free of drought or abnormal dryness. No data was reported for Pingelap in the past three weeks to make a depiction.

The drought-free conditions have continued across the Mariana Islands this week. Rainfall reported on Guam was 0.89 inches, allowing the island to remain free of dryness or drought. Wet conditions continued at Rota, which received 1.28 inches of rain this week. In addition, the amounts of rainfall observed on Saipan (IAP, manual gauge), Saipan (ASOS) and Saipan (NPS) were 0.48, 0.46 (one day missing) and 0.26 inches, respectively. Thus, Saipan remains drought free this week.

Looking Ahead

As the current week leading up to Christmas Day comes to a close, a powerful storm system will drag a strong Arctic cold front through much of the central and eastern U.S. to the east of the Rocky Mountains. Light to moderate precipitation amounts, much of it in the form of snow in the central Great Plains and Midwest, will transition to heavier precipitation as the storm system strengthens in the Great Lakes region late in the week. Moderate to heavy precipitation accumulations are likelier in the eastern Great Lakes, Northeast and Mid-Atlantic. Into early next week (the week of Monday, December 26), heavier precipitation is also likely in northern Idaho and in far northwest California, western Oregon and western Washington.

Looking ahead to December 27 through New Year’s Eve, the National Weather Service Climate Prediction Center’s outlook favors warmer-than-normal temperatures in most of the Lower 48, with the exception of most of the Southeast region. Above-normal precipitation is strongly favored in much of the West, moderately favored from the Great Lakes south to the Gulf Coast and slightly favored in the Central and Northern Great Plains. Below-normal precipitation is favored in central and southern Texas and in New England. In Alaska, above-normal precipitation is favored in the southern half of the state, above-normal temperatures are favored in southeast Alaska and below-normal temperatures are favored in the northwest half of Alaska. For the period spanning December 29 through January 4, above-normal temperatures are favored over the entire Lower 48, and above-normal precipitation is favored over most of the Lower 48 as well. Above-normal precipitation is favored in southern Alaska, while temperatures are likely to vary from warmer than normal in the southeast to colder than normal in the Northwest.