In the latest Olympic edition of the Parlor to Plate dairy podcast from Ever.Ag Insights, our all-star panel discusses market gymnastics. How have consumers stretched as prices and interest rates have vaulted upward? What flips and twists did dairy markets perform amid this week’s broader market correction? How can producers take the gold with their risk management strategies?

Join host Kathleen Wolfley and panelists Jon Spainhour, Matt Tranel and Brandon Weigel for a spirited discussion.

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

(Transcript auto-generated)

00;00;00;00 – 00;00;08;21

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;23 – 00;00;32;15

Hello! Welcome to Parler to Play, a weekly podcast from Egg Insights, dedicated to offering listeners enlightening discussion and actionable intelligence about dairy markets. I’m your host, Kathleen Wolf Lee. We are excited to have you along. And if you like, watch here. Please like us. Subscribe and tell a friend or two to timestamp today’s recording. It is Wednesday, August 7th around 1 p.m. here’s a quick rundown in the markets.

00;00;32;15 – 00;01;01;24

See me black cheddar closed at $1.97, up a nickel on the week. Barrels close at $1.95, down $0.02, but butter finished at 310 $0.03 lower, and the nonfat dairy milk market closed at $1.23. Down a penny and a half. Now for the grain markets. September corn is trading at 3 to 3 per bushel, unchanged September soybeans at 1004 per bushel, down $0.10 in the September soybean meal contract, is trading at 324 per ton, down four bucks from a week ago.

00;01;01;28 – 00;01;22;02

It is another week, and yet another all star panel from the ever AG Financial services team. First up, we have Brandon. While he’s a jack of all trades out of Platteville office, helping dairy, livestock and grain producers manage a risk. In Chicago we have John speaking. How are my favorite blazer wearing trader? He works closely with commercial hedgers to manage their exposures.

00;01;22;02 – 00;01;30;00

And last but not least, we have Matt Trino, who works with dairies across the country to manage milk price risk team. Welcome to Parlor Plate this week.

00;01;30;02 – 00;01;31;24

Thanks for having us. Excited to be here.

00;01;31;25 – 00;01;48;14

Maybe this isn’t happening in the Chicago or in the Platteville office, but here in Western New York, in the Home Office, the Olympics are maybe on in the background. So when I can go and get a glass of water, just peek at what’s happening with the track and field, the gymnastics. Curious, what is everybody’s favorite event?

00;01;48;18 – 00;02;05;14

You know, that is a good one, Kathleen. I mean, I got to say, we’ve got him on here in the Platteville office. Two been spectating the last several days. I would say I’m a fan of both the track and field events, but also gymnastics. It always is pretty impressive. Some of the acrobats that they can do there, for sure.

00;02;05;14 – 00;02;10;11

I mean, it makes me really just feel like a horrible athlete in general. Just watching these.

00;02;10;11 – 00;02;11;00

People.

00;02;11;03 – 00;02;16;23

Flip their bodies around or run 50 yards. In the time that it takes me to get out of my office chair. How about you, John?

00;02;16;23 – 00;02;32;15

I’m not entirely sure what it’s called, but I really like the event where people have to run and then do target shooting. It’s just a really cool event. I’m not exactly sure what it’s called, but to be able to run distances and then stop and then shoot a rifle accurately I think is pretty cool stuff.

00;02;32;16 – 00;02;39;21

Yeah, you got to like, get your heart rate down enough so that you’re not, like all over the place. That is a good one. I haven’t seen any of that on TV yet. Okay, Matt, your last.

00;02;39;27 – 00;02;44;19

I play a lot of sand volleyball, so I really like the super sand volleyball, both men’s and women’s.

00;02;44;19 – 00;03;01;22

It is some high quality watching. I know that I’ve really forced my two year old to watch a lot of sand volleyball and just generally a lot of the Olympics, and he would really prefer to watch Paw Patrol, but the Olympics are on, so we watch the Olympics anyway. Thinking about topsy turvy things like gymnastics. Let’s talk about the markets this week.

00;03;01;22 – 00;03;19;24

It has been a really strange start to the week. We’re three days in Monday we saw a big meltdown in the markets, at least here on Wednesday afternoon. Class three seems to be on its second day of higher moves. Brandon, can you talk to us a little bit about the broader matters at play here that’s influencing the markets?

00;03;19;26 – 00;03;37;24

Yeah, it seems like here the last several weeks, the macro economy as a whole has been on a little bit of shaky footing. You know, if we look at things from large corporate earnings across the board, there have been some, you know, fairly, I would say dismal earnings or at least earnings that are not meeting expectations with a lot of these big companies.

00;03;37;24 – 00;03;58;29

And then on top of that, we’ve had some less than desirable unemployment data. Last week we had unemployment data come out and that is actually up now half a percentage point over the course of the last three months. So that has tripped some of these, you know, economic recession indicator worries. That was a word that was being thrown around a lot earlier in the week was, hey, are we headed into a recession?

00;03;58;29 – 00;04;18;29

Right? Is some of this unemployment information finally enough to kind of be, you know, moving the needle in terms of kind of moving this economy back in a direction that people have feared for a while now. You know, as we look at, you know, largely the consumer and how they’ve been holding up through this higher interest rate environment, we know that credit card debt continues to be an issue.

00;04;18;29 – 00;04;40;08

And, you know, props to the InSight’s team for kind of putting some of this data in front of us. But we know that, you know, total consumer credit outstanding is now at 17.8 trillion. This is 4.3% higher year over year. We have credit card balances outstanding at 1.14 trillion. That’s up 10.8% year over year. So we know the consumer continues to lean on debt to fund their lifestyles.

00;04;40;10 – 00;05;00;08

I think that the impacts of inflation and subsequently the impacts of higher interest rates are finally starting to catch up with people. The fed did come out last week and say they were not going to cut rates here in August, but there is expectations for at least a quarter of a point rate cut in September. That’s going to be something that, you know, this market as a whole is watching very closely.

00;05;00;08 – 00;05;12;06

We know that the fed probably needs to cut rates here based on what is kind of going on in the economy. There’s a lot of people calling on them for it, and it seems like some of this is starting to catch up where it’s about time they’re ready to pull the trigger.

00;05;12;13 – 00;05;20;11

So we saw this big meltdown in the international stock market in the US stock market. John talked to us about what happened in the dairy markets.

00;05;20;11 – 00;05;40;09

Kathleen, that’s a great question. And dairy markets kind of had a weird reaction in here and saying that they had a reaction at all is a little hard to put together. We started to see cheese prices start to move lower last. Oh, I don’t know, call it the middle of the week last week and there was some financial pressure that was taking place.

00;05;40;09 – 00;06;11;10

But you know, none of the things that you just spoken about had really come full mass. And we saw things starting to move lower in the class three side of things. And then I’ll take September, for example. We were last Wednesday, September opened at 2175, and it moved progressively lower. And as we went through the week and got in the Monday morning, by Monday afternoon, September was at 1975, so we had moved $2 100 weight and for trading sessions, I don’t want to say that’s unprecedented.

00;06;11;10 – 00;06;30;20

I would just say that’s pretty darn big and we don’t normally see that now. We did see the stock market stabilize on Tuesday, and we did see a GDP that came in a little bit stronger. And then we got a dairy products report as well on Monday. And all of a sudden the class three market is off to the races.

00;06;30;20 – 00;06;53;02

And now September has recaptured almost a dollar of the losses. So it moved $2 lower and four trading sessions and now has moved $1 higher. And just two. If you were to say was there a macro market effect, I’d say possibly. There’s no saying that it wasn’t in there. Maybe it was some sort of manage money unwinding potential long position.

00;06;53;02 – 00;07;10;16

I’m not sure about that, but what I can say is people do get a little scared during these times, right, of uncertainty. And I won’t say that it necessarily caused the market to move lower, but it certainly does make you stand back. And if you’ve got something to buy, they’re in a market meltdown. A lot of times people say, you know, I’m just going to wait.

00;07;10;16 – 00;07;23;15

It’s not that I’m going to sell anything. It’s just I’m going to wait to buy. I think that helped create a little bit of a vacuum. And then as soon as the market stabilizes, people reenter the marketplace. And here we are up a dollar again in just two trading sessions.

00;07;23;18 – 00;07;41;15

I guess one thing that I found interesting is that during the dramatic drop in dairy prices over the course of, let’s say, last week into early Monday, gray markets were moving in the opposite direction. Brandon, can you talk to us a little bit about some of that nuance of why the grain markets seem to be perking up while everything was melting down?

00;07;41;16 – 00;08;00;06

Yeah, that’s a really good question. A lot of people have been wondering the same thing. What we largely saw there was very similar to what we saw in the stock market, right, where we saw managed money carrying a largely long position, unraveling some of those positions and selling their equities. Well, at the same time, they’ve already been short grains for a long time, right.

00;08;00;07 – 00;08;28;24

And close to record short. So in order for them to get back neutral in that position, they have to buy back contracts, right? So in economic uncertainty, like we were having largely on Monday, they are always looking to shore up their cash positions, go to a heavier cash position so they can take advantage of opportunities that arise. So they were buying back some of their contracts on both corn and soybeans to basically just get back to neutral or get back to even and take some of their risk off the table from how extremely short they’ve been.

00;08;28;26 – 00;08;36;11

Matt, I’m curious, did you feel a lot of calls from your clients curious about, hey, what the heck is going on in these markets?

00;08;36;11 – 00;08;52;00

Yeah, absolutely. I mean, curious or nervous might be a better word for it. It’s certainly there was a lot of, a lot of different phone calls asking what was going on. Is it going to last, or are we going to find a bottom here in the interim? It was obviously a question none of us really knew how to answer specifically.

00;08;52;00 – 00;09;11;06

But as we do know, markets don’t go in a certain direction forever. It did kind of seemed from my seat to be a little bit of a risk off, where you do find some sort of footing at a potential point in time. As John kind of alluded to, it did look like the buyers. It kind of just step back, not necessarily saying that they weren’t going to buy, but they were just going to kind of take a break.

00;09;11;06 – 00;09;32;12

And I think from a dairy producer side of the equation, we were still talking 19, 20, $21 prices against $4 corn and $325 a ton soybean meal. And so the margins were still there. The margins were still strong for dairy farmers. And so it wasn’t a huge surprise to see them aggressively look at either selling or protecting milk prices in a very uncertain period of time.

00;09;32;12 – 00;09;36;01

But yes, the phone calls definitely picked up, and there was a lot of people wondering what was going on.

00;09;36;05 – 00;09;57;09

So I’m curious, as we kind of take a step back away from the numbers on the screen, what about the fundamentals? Matt, from your perspective, have the fundamentals at the dairy side of things changed much? I mean, we’ve talked about how milk has been short across the country for what seems like weeks now. We’ve talked about heifer availability being limited or heifers just generally hard to find.

00;09;57;09 – 00;09;59;03

Has anything changed?

00;09;59;03 – 00;10;31;01

I don’t think the fundamentals have really changed. Like I said fundamentally, heifers are short, milk is tight, cheese in cold storage wasn’t as ample as what was anticipated, and cheese production maybe wasn’t as high as what was expected. And so those fundamentals haven’t really changed. But I do think that this recent event and some of the rhetoric that’s been kind of put forth in front of this market over the course of the last week or so, has definitely made sellers and dairy farmers a little bit more skeptical in regards to how much they trust the market and how high they think it maybe can go, or what a good selling price is.

00;10;31;01 – 00;10;43;15

I think all it kind of really did was brought forth the question marks even further in regards to what demand potentially looks like moving forward and what it looks like if we were to go into some type of hole back in the economy.

00;10;43;20 – 00;11;03;18

Yeah, that’s a really good point around the demand. And I guess, John, I’ll be curious on your comments here of have we seen a shift in demand at all as we’ve headed into the second half of the year? We saw some trade statistics yesterday for June that showed cheese trade for the month not quite as robust as what we’d seen basically from February through May.

00;11;03;18 – 00;11;19;02

Overall promotional activity at retail hasn’t been all that steady. It’s been pretty erratic, actually, of one week. It’s heavy promotions at a lower price. One week it’s not. In general, consumers seem to be reacting to value. Do you think that the consumer starts to sit up a little bit straighter in this environment?

00;11;19;02 – 00;11;49;13

Well, paraphrase from your illustrious comrade there, applaud and say if it ain’t on sale, it probably ain’t selling. There’s just a lot of discounting going on and that does seem to be moving some product. But I think outside of that, I think the dairy case is struggling just a little bit on that in the retail side. At the foodservice side, I mean, I think we’re all still sitting back waiting to see the results of these sales that are going on right now, if you will, the featuring that’s going on the $5 meals that are taking place out there.

00;11;49;13 – 00;12;17;14

I think we’ve seen some data that suggests foot traffic at least has increased into these establishments. But I don’t know that anybody can say that’s really resulted in more dairy sales. It’s probably resulted in more chicken sales, at least at this point based on the menus, but we just haven’t seen that feedback come in yet. What we can say is that outside of those meal deals, right, a lot of the quick service restaurants had a pretty dismal Q2, right?

00;12;17;14 – 00;12;35;09

And that meant that demand was down. You mentioned exports. I would say that at the export level, cheese exports that came in for June were good, but not great. To your point, we have been seeing them, you know, really blowing off the top of last year’s numbers. And these, I would say just return to a normal export run.

00;12;35;09 – 00;12;49;20

So I guess when it comes to the demand factor right now, we would say exports are just okay. Maybe at the retail side we’re seeing some volume move through because of featuring. But I don’t know that anybody would say boy is demand great right now.

00;12;49;27 – 00;12;56;19

Well Tim, I’m curious with all this volatility, have your recommendations for your customers changed? Brandon. How about you first.

00;12;56;19 – 00;13;18;17

I would say by and large corn has been definitely more stagnant. And so has protein than maybe the dairy markets have been as of late. But we’ve still been encouraging folks to take advantage of these prices that we haven’t seen in several years. You know, both by stepping into some physical ownership, you know, where the numbers feed. Well, and then certainly from a futures standpoint, looking to make sure we’re protecting topside.

00;13;18;17 – 00;13;25;05

So that way, if we do continue to see further deterioration in feed prices as a whole, we can still participate longer term.

00;13;25;05 – 00;13;27;12

Matt, how about from the dairy producer side of things?

00;13;27;15 – 00;13;39;04

It hasn’t changed a ton. Maybe it is just kind of stepping up coverage a little bit more than where we were at a little bit sooner than where we maybe thought we needed to add a layer. But for the most part, it’s still kind of status quo and sticking to the game plan also.

00;13;39;09 – 00;13;40;14

And John, how about for you?

00;13;40;15 – 00;14;00;14

I would say that this is just a time when discipline pays off, right? And you stick to your game plan. As Matt said, you know, I think if you were looking for a great example, if you’ve been a hedger in class three long or short, hedger, this volatility has demonstrated that things can change pretty quickly, and you want to make sure that you participate when you’re supposed to.

00;14;00;14 – 00;14;22;10

The differentiating nuance might come down to what type of hedging mechanism would you want to use. Or at very high prices. You know, from a long hedgers standpoint, we might want to consider optionality if we’re at very low prices from a long hedge or standpoint, you would consider future some sort of nuance in between there. So I think it’s just a matter of sticking with that game plan and staying disciplined.

00;14;22;16 – 00;14;46;05

Well, big thanks to the team for joining me on today’s episode and sharing your insights with our listeners. Thank you, as always to our media team for mixing and mastering. Thank you to you, the listener, 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.

Disclaimer: TRADING FUTURES AND OPTIONS ON FUTURES INVOLVES SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THE INFORMATION AND COMMENTS CONTAINED HEREIN ARE PROVIDED BY EVER.AG AS GENERAL COMMENTARY OF MARKET CONDITIONS. THIS INFORMATION SHOULD NOT BE INTERPRETED AS TRADING ADVICE OR RECOMMENDATION WITHOUT FURTHER DISCUSSION WITH YOUR EVER.AG ADVISOR. THIS IS A MATTER OF SOLICITATION.

The following music was used for this media project:

Music: Funky Intro 29 by TaigaSoundProd

Free download: https://filmmusic.io/song/9520-funky-intro-29

License (CC BY 4.0): https://filmmusic.io/standard-license

Artist website: https://linktr.ee/taigasoundprod

© Ever.Ag 2023, confidential and proprietary.

The post Parlor to Plate – August 7, 2024 appeared first on .