In the latest edition of the Parlor to Plate dairy podcast from Ever.Ag Insights, our all-star panel discusses 2025. How might milk production shape up next year? Are folks eager to buy product at current futures levels? What export opportunities might be ahead?

Join host Kathleen Wolfley and panelists John Billington, Colin Kadis and Jake Kingsley for a spirited discussion.

Questions or comments? Topics you’d like to hear us discuss? Contact us at [email protected].

(Transcript auto-generated)

Future trading involves risk and is not suitable for all investors. Content provided in this segment is meant for educational purposes and is not a solicitation to buy or sell commodities.

00;00;08;25 – 00;00;28;26

Hello and welcome to Parler to Play, a weekly podcast from Ever AG Insights, dedicated to offering listeners enlightening discussion and actionable intelligence about dairy markets. I’m your host, Kathleen Wolf Lee. We are x I to have you along. If you like what you hear, please like subscribe and tell a friend or two to timestamp today’s recording. It’s Wednesday, August 28th.

00;00;28;26 – 00;00;47;07

September is right around the corner and it is about 1 p.m. central time. Here’s a quick rundown in the markets. It has been a bit of a volatile week here in the dairy market. CME Black Cheddar closed at 208, down $0.02 on the week at 213, giving back $0.16 from last week. Spot butter closed at $3.20, up $0.04.

00;00;47;07 – 00;01;12;22

And the Nondairy milk market finished at $1.31, up $0.02. And now for a rundown. In a gray market, December corn is trading around $3.90 per bushel, down $0.08 from last week. November soybeans at $9.76 per bushel, down $0.06. And the October soybean meal contract is trading around 307 per ton. Unchanged is a new week and yet another all star panel from the financial services team, he speaks feed.

00;01;12;22 – 00;01;31;15

We have Jake Kingsley, who manages risk for livestock producers on the feed side of the business. We have John Bilbo Billington. He’s back to parlor to plate for the first time in a while. He helps manufacturers and end users manage risk. And last but not least, we have caress. He lives somewhere outside the Pacific Northwest and he helps dairy producers manage risk.

00;01;31;17 – 00;01;33;05

Team. Welcome to Bali to plate.

00;01;33;07 – 00;01;35;00

Thanks for having me again, Kathleen.

00;01;35;03 – 00;01;36;04

Yeah, good to be here.

00;01;36;04 – 00;01;43;26

Okay, guys, September is right around the corner. Like I said, that means we’ve got a holiday weekend coming up. I’m curious, what’s everybody got on tap? Anything big fun. Exciting.

00;01;43;26 – 00;01;51;28

Kathleen, me and my girlfriend are heading up to the Upper Peninsula for the Labor Day weekend. I’ll leave tomorrow morning and we’ll be back on Monday.

00;01;52;05 – 00;01;55;10

The real question is, will you be a Yooper by the end of the weekend?

00;01;55;10 – 00;01;59;15

I don’t think so. I need a little bit more time up there than just a long weekend.

00;01;59;16 – 00;02;00;24

All right. Colin, what about you?

00;02;01;00 – 00;02;07;12

Honestly, Kathleen, I didn’t know that it was a weekend that was longer than normal until you just told me so we’ll see what happens one day.

00;02;07;12 – 00;02;10;02

Colin will be back to work on Monday. Everybody. And, Jake.

00;02;10;02 – 00;02;17;04

I think we’re going to stay a little local, hit the pool with the kids and have one last little, hurrah here before summer ends.

00;02;17;04 – 00;02;22;25

Yeah. It’s amazing. Once you have kids, it’s like your weekend plans just turn into. How can we keep things as normal as possible?

00;02;22;28 – 00;02;24;01

What are you doing, Kathleen?

00;02;24;02 – 00;02;44;12

Probably the same as Jake. Just like trying not to leave a five mile radius of my house, which really limits my possibilities of doing anything. But that would be pretty nice. In any case, guys, a little farther ahead. Other than this weekend, I kind of wanted to talk about 2025. Today we’re heading into September. I know that 2025 is still a ways off, but it’s not as far as we think.

00;02;44;12 – 00;02;59;18

So I’m curious, what are you guys hearing thinking about the set up for 2025? Bill. Bill, let’s start with you. We’ve definitely seen a little bit more action in first half futures over the course of the last, let’s say week to ten days. What are you hearing seeing from commercials and end users?

00;02;59;18 – 00;03;21;11

Yeah. You know, I think the big talk, at least around the cheese space, is revolving around exports, at least as of right now. The first six months of the year, we’ve had pretty decent sized exports, at least compared to the last couple years. It’s kind of helped us get to the prices that we’re at currently. I think what we’ve been seeing has been some continued tightness in milk production.

00;03;21;11 – 00;03;43;10

Rumors around avian flu floating around continue to spread. I think that conversation has come up a little bit more recently, and then just kind of the heat that the US is dealing with right now is also adding some issues to the milk production out west, to where all those cheese manufacturers and cheese plants that are coming online in 2025 might have issues getting Ahold of fluid milk.

00;03;43;10 – 00;03;53;07

And what’s your sense, I guess, from the budgeting standpoint, are folks getting eager to jump in at these levels, or are they waiting a little bit, holding off, kind of seeing where things shake out?

00;03;53;08 – 00;04;14;24

Yeah, I think you do see a little bit of both. I know there’s been some conversations around ephemeral changes and how that impacts budgets going forward. I do think you start to see people layering in, because the futures curve does have a little bit of a discount baked into 2025, at least within the class three space. So you do have folks trying to buy that coverage today.

00;04;14;24 – 00;04;34;03

But I think for the majority of the market participants, especially those spec traders and liquidity providers, you do see a little bit of hesitation when trading more so the components, right, the products that are going to be mainly impacted by these make allowance changes, or folks that are also hedging through a class three of four crash.

00;04;34;05 – 00;04;54;00

So sticking on the class three side of things, one thing that I’ve noticed is that there’s a pretty big disconnect between where futures for cheese are trading for 2024 and where they’re sitting for 2025. Given the fact that we’ve seen this pretty big run in European cheese prices in the last couple weeks, I’m curious, John or Colin, what are the opportunities for exports going forward?

00;04;54;01 – 00;05;15;09

That’s a great question, Kathleen. I think in regards to exports, this recent rally that we’ve seen is definitely going to impact our ability to continue to book exports, like what we’ve seen in the first six months of the year. But I do think the rest of the world is also impacted by tight milk supplies. And so maybe this higher prices, just more competitive prices, to say the least.

00;05;15;12 – 00;05;19;09

Colin, do you think that the US dollar coming down plays into that at all?

00;05;19;13 – 00;05;35;27

I would say so. Kathleen, you know we’ve just got some global price data. And right now even we’ve got cheese at 218 in the US and $2.32 in Europe. So we’re actually already even cheaper on a spot basis. And then as you go to 2025 with the dollar, you know, every time the dollar goes down, the euro goes up.

00;05;35;27 – 00;05;54;07

So bad for Americans going on European vacations, but great for Americans trying to sell cheese abroad. So I think that’s super supportive. And that might contribute to some of the futures action we’ve seen. You know, as a dairy risk manager for producers, I think there’s been a lot of frustration from our camp. We just watched the 2025 futures, not trade.

00;05;54;08 – 00;06;10;06

I mean, it was like zero volume really until a week ago or two weeks ago. And it’s been tough for us, especially when we don’t see prices that we all the time low. So the recent pick up in action has been interesting. And I don’t know if that’s exports or people kind of being forced into things. You know I think John made a great point.

00;06;10;06 – 00;06;33;16

We’ve got some of these really extreme, maybe shorter term supply constraints that probably will affect us in 2024. You know, bluetongue disease in Europe usually happens in the summer. Bird flu, if it has finally made it to California, which we don’t know, then you know, that would be significant. This is the number one milk producing state. So I guess the question is can those carry in or impact 2025 or those just going to support 2024?

00;06;33;16 – 00;06;38;16

It’s pretty hard to say, but it seems certain is that milk will probably be tight for the rest of this year.

00;06;38;22 – 00;06;43;06

Jake. Shifting to the feed side of things, what are you seeing on 2025? Well, I.

00;06;43;06 – 00;07;19;25

Think we are anticipating a potential for prices to remain favorable for those buying feed. We’ve got what appeared to be very healthy, sizable corn and soybean crops set to come out of the field here in the next 45, 60 days or so. That gives us a lot of grain and feed inventory here in the US. And then South America is slated to have a healthy little increase in production of both of those commodities, which they’ll start planting here in just a few weeks in some of the earliest areas, and start to harvest that stuff in February and March of 25.

00;07;19;25 – 00;07;43;16

And so if they get anywhere close to the current projections on that, we can expect feed prices to remain down here towards some of the lower end of historical ranges for quite a while. There’s certainly still some risk on the table. It’s hard to know what kind of unpredictable events could occur over the course of the year. We’ve got an election to get through and that could change the landscape of international trade.

00;07;43;16 – 00;08;03;17

We had a tariff war at one point. The really brought grain prices down here domestically, but at the same time, if you soften the dollar and our economy starts to slide, that makes our product more affordable on a global stage and you start to see exports ramp up. So we don’t expect a whole lot of fireworks at this point.

00;08;03;17 – 00;08;16;24

I think there’s good opportunity for feed buyers out there and probably will be for a little while, but we’re certainly trying to manage that now for the next 12 month, drop your feed year, if you will, while prices are down.

00;08;16;24 – 00;08;26;29

One thing I know that the feed team and the grain teams have been watching pretty closely is the Canadian Rail strikes. Any updates there, Jake, and how that might impact basis levels into next year?

00;08;27;04 – 00;08;58;14

Yeah, I’m not sure how long lived or how far out that will drag. We had. As of last Thursday, the 22nd railroads locked union workers out and there was officially a strike ongoing. And then later that day, the Canadian government stepped in and said, hey, we have to have these lines moving. It’s critical infrastructure and can become a health hazard for for the country and everybody that relies on these rail lines.

00;08;58;14 – 00;09;24;27

And so those lines are coming back up. Workers are back to business, and they’re trying to unwind. And some of the backlog that has occurred there. But a lot of the damage is already done. If you think about it, a specific example as a feed buyer is that this strike had been talked about for months and months and months, and when it looked like it was becoming imminent, canola processors don’t want to go to a full cold stop at their production plants.

00;09;24;27 – 00;09;45;05

So they started dialing back their production capacity several weeks in advance to try to extend the life of their on site storage capabilities so that if they did end up having product stack up in front of them, they could continue to run for a little bit longer. And so you already see a supply squeeze happen in that way.

00;09;45;05 – 00;10;11;19

And then you also have all kinds of different products on the rail lines that get prioritized at different tiers. So hazmat and refrigerated products were the first to be sidelined so that they would be in protect places. Should a shut down occur. They may be some of the first to come back online to get those folks to rely on those products back into supply, and that could push things like grain and feed towards the end of the priority list there.

00;10;11;19 – 00;10;39;08

So it’s certainly caused an increase in some spot cash prices, and it’s going to take a while to unwind that sort of thing. The question will be, can they get caught up and how much of a compounding effect will it have if they’re still behind. And then we get into harvest here in the US, which is our busiest time of the year for rail demand, that sets us up for a potential for a lot of logistical snafus, which would suppress price at some of these origin places.

00;10;39;08 – 00;10;54;10

You got corn stacking up and being stacking up in the Midwest at harvest, and then you have folks that are relying on this product coming to the other end of the rail line, these destination markets in the western US and the southern parts of the country, that they’ll have prices jump up because they’re not getting the product they need.

00;10;54;10 – 00;11;10;29

So we’ll see how that shapes up. It’s still very fluid as of this moment. There has not been a resolution, and most of those that are back to work are not super happy to be back there under the same conditions that they had before, and they’d like to get some sort of contract in their favor.

00;11;10;29 – 00;11;28;08

Taking all that into consideration, Colin, I’m curious on what do you think the producer outlook is for 2025? I mean, we’re kind of in this position where these are some of the weakest speed prices that we’ve seen in quite some time. These are some of the highest milk prices that we’ve seen in quite some time. In theory, producers should have a few bucks in their pocket.

00;11;28;08 – 00;11;29;03

How do they react?

00;11;29;03 – 00;11;47;09

I think that’s a great question, Kathleen. You know, just to kind of put some background into the producer mindset. You know, in April, we had guys milking thousands of cows who were saying if they got two more months of the same margins, they were going to go broke. You know, now we’re in some of the best prices producers have ever seen in, you know, 20 or 30 year careers.

00;11;47;09 – 00;12;02;25

I think the producer sentiment is, as we looked at 2025, hey, I really want to make sure that I don’t end up in another April situation. So there’s a lot of fear that, you know, the producer is kind of in charge and these kind of screw this thing up. And I say that because, you know, we got this June revision on milk production.

00;12;02;25 – 00;12;19;06

We were down 1.7% year over year. And that was the biggest setback in daily average production since March 2003. So it really seems like if the supply on the milk side comes back, it’s really going to put pressure on prices. Talking to the producer that they continue to say, hey, I can’t find the heifers, it’s tough to make the milk.

00;12;19;06 – 00;12;34;08

You know, we continue to see these revisions in. My expectation is we’ll definitely see them through the end of the year as the weather becomes more favorable, though, and we maybe remove some of these things like birds and gluten. I do kind of wonder if the producer won’t be able to come back and start to be positive on milk production.

00;12;34;08 – 00;12;53;01

And I know one of the economists on our team, Matt Gould, says generally it takes six months of good margins to bring producers back into producing. You know, at this point, we’re way past six months of good margins for most producers. So we do have to be careful. I know the heifers are expensive, but just because they’re expensive doesn’t always mean that there aren’t enough.

00;12;53;01 – 00;12;55;24

Sometimes it just means that there’s a lot of people that want them.

00;12;55;27 – 00;13;16;00

Well, Tim, big thank you, as always for joining me on today’s episode and for sharing your insights with our listeners. Thank you, as always, to our media team for mixing and mastering. Thank you to the listeners for joining us today. If you like what you hear, subscribe on your favorite app. And if you’d like to learn more about how we help people manage risk, contact us at insights at Ever AG.

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