Regional Manager’s report – Aug 2022 grain mill

We are in the month of August 2022 with this newsletter, and we have finalized the first three quarters of fiscal 2022 as of May 31, 2022. We made it through the spring planting season without any major issues, unless you count the massive amount of snow received starting on April 12th, and the welcomed moisture since then. With the spring starting as one of the driest in history, it was again a much different year. Coming into Spring 2022 with no subsoil moisture was a big concern, but the snow and rain since then changed the outlook a lot. Most of the acres got planted, starting with very dry conditions, and finally wondering if we would get it all in due to wet fields. As of this writing, we are expected to see temperatures in the high 90’s but generally the crop is in pretty good condition. As I have traveled to the East, I saw areas not far away with too much moisture and they did not get all the acres planted. It appears the recent rain came at the right time and was very beneficial to the crops. Commodity values have taken on a new life and are still at multi-year highs for all grains, but off the highs of a few weeks ago.

Planted acres appear to be somewhat normal in terms of crop planted, with some shifting of acres due to timing and commodity prices at planting time. Our grain handle for the first three quarters of fiscal 2022 is down compared to last year and it is hard to predict what grain quality and production will be given the weather extremes we are experiencing. The winter wheat harvest has progressed into the Dakotas, with reports of good yields in some areas and others that are still in the extreme drought areas. This is a similar varied story as last year. Early reports on the winter wheat quality were good test weight and protein in the 10.5 to12.5 range. Lack of rain in the south pushed the wheat harvest along rapidly. The harvest season will be drawn out this year because planting got delayed after the snowstorm in April.

There is a USDA report coming out on August 12th. This will have some states posting “recertified” planted acres as well as some updated yield estimates which could impact market direction. Grain shipments (mostly corn at this point) out of the Ukraine has tempered commodity markets as that volume comes into the world markets in a slow but steady fashion. Ethanol demand has been good, so that is friendly to corn. Soy oil is in high demand too, which is friendly to soybeans. Wheat will build ending stocks to use ratios again. The current crop year yields will determine what direction wheat wants to go. Commodity prices are still at better values than recent years, but wheat may come under more pressure based on export and domestic demand, or lack thereof. There will be a period of continued volatility as the markets figure this out, as the markets always do.

At the end of May (3rd quarter), SWG is ahead of budget and hoping to finish the 4th quarter of the fiscal year strong. Even though grain volume is down, margins are good, and the input side of the business looks to be lower in volume but strong margins due to early positioning of input products. We tasked our employees to be very diligent in monitoring grain quality inbound, as there is still a wide range of carryover qualities out there. One bright spot is the higher commodity values, which makes it easier to deal with any quality discounts or cleaning costs to get grain marketable. With more normal weather conditions, the energy business felt the impact of more demand for diesel and gas. Grain drying will remain up in the air until we get later in the harvest season. Due to the wet conditions and abundant grass in pastures, we noticed less volume of feed sales. Cattle producers are doing what is right, but the demand is just less. It looks like this year will be a year to build hay supplies as the hay crop is far better than what we have had in past years.

The crop input values tend to follow the grain markets and were stronger thru the season driven somewhat by demand, but higher prices limited volumes. Supply issues were not present to any major extent during the 2022 planting season. Refined energy products are still in adequate supply too as the world starts to come out of the pandemic slowdown. Energy demand is picking up as people are traveling more. It appears that domestic travel is much higher than a year ago and that alone is a good sign that people are trying to get back to normal. This drives some near-term demand for energy products.

Feed and Animal Health sales remained strong even with the much better pasture conditions and hay crop. During good times, it is still important to keep livestock herds maintained and healthy. Check with your nearest SWG Feed Sales rep and help them understand your needs and we will be happy to help. A strong mineral program and water monitoring is always a good management practice when cattle are on grass. Water quality is less of a concern this year but still needs to be considered as we get into the drier time of the year. When and if, nutrition is not the total solution, remember to get your animal health products from your nearest SWG location. If you have a prescription from your vet that needs to be filled, we can accommodate that at our locations that handle animal health Rx products. We have some very knowledgeable staff and good working relationships with several of the local veterinarians that allow us to service all your animal health needs. We will fill all VFD prescriptions at all our locations and have the training in place to maintain the necessary records to comply. Let us know what you need, and we will do our best to make it available when you need it.

As it relates to Safety and Compliance, we continue to update and maintain our facilities and continue with ongoing training for our employees to create a safety culture that is good for both the company and our owners. We are continually educating our staff on safety and a host of new compliance issues. It seems like when we get one thing covered, another one pops up to deal with. Safety and the health of our employees and customers will be an ongoing process as we figure out how to continue to work and remain healthy. We have a good group of local Safety Specialists that are working on safety all day, every day, with the intent of becoming more proactive as we promote Safety and Compliance. Thanks to our employees for making Safety and Compliance a part of the culture and for maintaining our level of excellence. Safety at the farm level is something that should not be taken for granted. As we approach harvest and haying season for 2022, everyone needs to pay attention to doing things the safest way possible. Taking chances never works out well. Working safely should be talked about daily and each one of you should have a plan in place. If you don’t have the time to do it right the first time, what makes you think you will have the time to do it over?

Another ongoing reminder related to equity retirement, any requests for equity retirement either for age or estate require a form to be filled out. You can contact our main office and we can help you with the necessary forms to get this done. Also, remember that the age requirement is currently at 70, so please plan and get the request submitted. Talk to your relatives, friends, and neighbors who are out of the area to make them aware of the process. They simply need to call us, and we will check on the equity balance, see if it is eligible, and send the necessary forms for the request. Age 70 retirements should be submitted as always and as CHS approaches the end of the fiscal year they will review those applications and will retire what they are able. Estates still come first and remember to contact us if you have questions.

As always, thank you for your continued support of the cooperative system, and for putting your trust in our people and your company. The success of your cooperative is not about any one person or event, but a true team effort. Please feel free to contact us with any questions, suggestions, or concerns.

Remember “Do it Safe by Choice”.

I will leave you with this quote:  “Public opinion is nothing more than this: it is what people think other people think.”