NO BULL---- Back to School

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08/18/2022

BACK TO SCHOOL

It's that time of year again! I officially have a 3rd grader and a preschooler.

Godspeed to Miss Marsha (Genevieve calls her "Marsh"). She will need all the help she can get this year!

Apparently he won't have any homework this first week, which frees him up to run the zero-turn after school.

Dropping Out

If there is one word that seems to be a recurring them in this (dare I say it) post-pandemic world, it is shortage. Be it toilet paper or combines... no item or industry has been spared from a rash of shortages, teachers included.

Just as kids head back to school, the nation is grappling with a crisis - a shortage of 300,000 teachers and support staff across the country, according to the National Education Association. The teacher shortage isn't new - but it has been accelerating at a concerning rate as  74% of teachers reported being dissatisfied with the job, up from 41% in 2020 - in a June survey by the American Federation of Teachers. In that same survey - 40% expressed their desire to leave the profession entirely over the next two years.

Recent national data has been difficult to run down, but the graph below shows a concerning trend. Turns out supply and demand are applicable to more than just grains.

An aging workforce, a few very rough years in (or out of) the classroom, stagnant wages that failed to keep pace with other sectors (much less keeping up with inflation), and the resulting lack of new entrants have left schools alarmingly understaffed. College enrollment in education programs is down 35% the past 10 years.

Plus, teachers' wages have remained relatively flat for 25 years, while also earning an alarming 23.5% less than comparable college graduates.

Differences vary state to state, but one thing is evident - the pay gap is real. 

If there is anything we all learned during the Covid lockdowns of 2020 it is that teaching is the most underappreciated profession on the planet.

States and individual districts are taking a number of measures in an attempt to bridge the gap. Florida is issuing temporary teaching certificates to veterans, Arizona is waiving bachelor's degree requirements, a South Carolina district is touting a $10,000 sign-on bonus, and some districts are opting for four-day school weeks instead.

Des Moines Public Schools is even offering an added $50,000 retirement incentive to keep teachers in the classroom one more year!

The Wheels on the Bus

Unfortunately, teachers are not alone - districts are struggling to keep enough bus drivers on staff as well. 

According to The Hustle, the average school bus driver is 56 years old - 14 years older than the median US worker.

We don't need to get into the details, but think about an older/semi-retired workforce coupled with Covid-related ramifications... layoffs, return to work in closed spaces, kids, masks...

You get the picture.

A few weeks back I saw a sign at a bus garage near Waterloo, Illinois (rural area just south of St. Louis) -  $1,000 bonuses for drivers.

I called them earlier this week to ask a few questions:

The $1,000 bonus (per month) is paid on top of their normal hourly rate for the duration of the school year. On top of that, any training time is paid in full and counts towards the bonus. School started in the district this past Monday, where they are still trying to fill vacancies on eight of their 35 total routes.

That rural Illinois district is far from alone. Districts across the country are cutting routes or suspending bus service entirely due to the shortage.

Driver's Ed

We all are tired of hearing the terms pandemic, post-pandemic, transitory, inflation and anything related to shortages or supply chains. If there is one other category we cannot seem to escape, it's green - including electric vehicles or EVs for short.

EVs aren't a bad thing, but they seem to have came at us all at once specifically after Joe Biden was determined to be the winner of the 2020 election - we saw a flurry of electrification announcements as the auto industry banked on green initiatives on the incoming administration.

Just five years ago, global new vehicle sales hit 87 million with barely 1% of sales being EVs. Turns out 2017 was when we hit peak-internal combustion cars, as sales have been on the decline in each year since.

According to BloombergNEF's Long-Term Vehicle Outlook, the entire global fleet of internal combustion engine cars is projected to peak just above 1.2 billion this year, before falling slightly next.

As you can see below, the trend accelerates though, as EVs replace traditional gasoline and diesel-powered vehicles.

Plus, here in the U.S. we are somewhat late to the party, as China and Europe have already began embracing the switch: 

No shock here, but California has the largest share of EVs in the country, at nearly 40%.

So what helps push the U.S. consumer to electrify? Government intervention - duh!!

It has been widely-known the government offers a federal income tax credit of up to $7,500 for the purchase of a qualifying electric vehicle. Up until last week's passage of the big, fat, green bill (I mean Inflation Acceleration Reduction Act), Tesla and GM vehicles would NOT qualify as total EV sales surpassed the 200,000 unit threshold to qualify for such (GM had the Volt, Bolt & Spark already).

Over the course of the past 12 months I personally have sold a car, bought a new one, then sold it six months and 12,000 miles later. Needless to say - I have been on the lookout for a new vehicle a few times.

In my searching a few months ago I found a Jeep that looked to be heavily discounted:  

Yes, new 4-door Jeeps are ridiculously expensive.

Me:  Wow, this looks like a fantastic deal!

Also me:  Wonder that that 4ex means?

(scrolls down) 

Me:  Those dirty **&@$*#!! It is a hybrid and they included the tax credit in the price!

My curiosity was officially piqued. I did a little searching and made my way to FuelEconomy.gov - a federal site dedicated to fuel economy information that has a growing section dedicated to EVs.

You can search for qualifying vehicles by manufacturer - including hybrids like the Jeep I was looking at that only has an all-electric range of 21 miles per charge.

The site has changed since - updated to reflect last week's legislation that both expands and limits vehicle eligibility.

Sound contradictory? Certainly! It is the government, after all.

Tesla, GM, and Ford (who was quickly approaching that 200,000 unit cutoff) EVs will go back to qualifying for federal tax credits in 2023 as the manufacturing cap is removed.

The $7,500 credit on new vehicles remains in place but is restructured, plus used vehicles now qualify for a $4,000 kickback.

Some of the new limitations are a cap on car prices at $55,000, while the credit for trucks, vans, and SUVs is higher at $80,000. Additionally, there are new domestic source requirements including final assembly here in North America. There are also income limits, so better read the fine print.

If you are confused - just check out a list of eligible 2022 and early-2023 vehicles HERE.

It is also worth mentioning Uncle Sam isn't the only one who wants to see you in an EV. Many states have their own incentives as you can see below:

PS - I had been looking for a diesel Jeep Wrangler. Yes, a they put a 3.0L, 6-cylindar engine in Jeeps these days... likely that will not be the case in another few years.

Report Card

I see no need in spending a significant amount of time re-hashing last week's updated yields from USDA. Reason being - we have months to argue their estimates, which will undoubtedly change as objective data is taken into consideration on upcoming reports.

It is interesting, however, to look at Friday's yield estimates compared with last year as we see significant year-on-year improvements in the Dakotas and Minnesota (who were drought-stricken in 2021) and sizable losses in the Southern Plains and East (some of which were in the Garden of Eden in '21).

It is also interesting to look back at August 2021's yield map - it is nearly a mirrored opposite of Friday's results:

2022 national yield was estimated at 175.4 bpa last week. That is compared with a 175.9 average guess ahead of the report, and a 177.0 both in July and last year. Many are questioning USDA's estimate of a record 205 bpa in Iowa as well as yields in eastern states that came in higher than expected.

Once again - we are a sizable distance from the finish line when it comes to final yield. There is no need in getting worked up about a number that is far from set in stone.

Moving on to beans, Friday's estimate of a 51.9 bpa national yield would tie 2016's record, if realized.

State-by-state projections find sizable year-on-year increases in the Dakotas and Minnesota as expected, and a slew of records in the east and south - six states to be exact.

Looking at ratings, national conditions have been on the decline eight of nine weeks this year.

Although things have been on a downhill slide, finishing weather is viewed as non-threatening and a rash of recent rains look to bolster yield prospects heading into the end of the growing season. 

Moving on to corn this week's 57% good/excellent, the 2022 crop ties 2019 for the lowest ratings since 2012. The US corn crop has declined in condition seven of the ten weeks of reporting since early June. In the other non-declining weeks, the crop's condition remained the same overall. 

So, by the time the ears drop and combines roll - what is the correlation between weekly crop conditions and final yield?

Thanks to advances in genetics and precision ag - we are getting better at growing a crop with each passing year. Some of you will be rolling your eyes here, but bear with me... Take last year for instance as we headed into harvest with merely 60% of the crop rated good/excellent and managed to produce a record 177.0 yield - within one percent of trend.

Clearly there is a correlation between conditions and yield, but again finishing weather can be key.

Take 2017 for instance - at the time it was the lowest rated crop since 2013, but conditions improved during grain fill, producing a record national yield of 176.6 bpa at the time, against all odds.

This is an oldie, but a goodie as August 2017's cool temperatures bolstered kernel depth and ultimately helped the US produce a corn crop well-above trend.

FINAL THOUGHTS
Psyc 101

I hate it when people ask me what I do.

While I may live in a rural area, it isn't home to an abundance of crops therefore most people look slightly puzzled at the mention of corn or soybeans (they think sweet corn and edamame).

Back in my merchandising days it was "I buy grain from farmers" which was again met with a puzzled look.

Now that I am out of the cash grain business it has proved even more difficult explaining how I help producers manage risk, make business decisions, write weekly about random things and so on.

The fact of the matter is I play Dr. Phil more often than not. Afterall, marketing has never been about hitting the high.

Sure, we can talk about market drivers, fundamentals and macros all day long but marketing ultimately boils down to having the right mindset and approach. 

Good marketing is about making sales for the right reasons, which may range from business-based to a deal you made with yourself to sell XX it if the market did XX.

I often tell my guys (and gals - shout out Joanie & Bri!) - my job is to save you from yourself. Growing a crop and marketing those bushels throws farming into the top 10 for world's most emotional professions.

Again, it is the mindset and approach. We are coming to the tail end of the growing season where decisions need to be made (specifically for those who need to haul out of the field). If it isn't me, rely on guidance from a trusted merchandiser or industry professional.... or whomever at the elevator is your go-to Dr. Phil.