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Parlor to Plate – July 10, 2024
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In the latest edition of the Parlor to Plate dairy podcast from Ever.Ag Insights, our all-star panel discusses important watch factors. How might US dairy exports be impacted by recent market action? Are weather conditions favorable with grain growing season underway?
Join host Katie Burgess and panelists Kevin Peterson and Jim Matthews for a spirited discussion.
Questions or comments? Topics you’d like to hear us discuss? Contact us at [email protected].
Show Transcript
(Transcript auto-generated)
00;00;00;10 – 00;00;08;16
VOICEOVER
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;18 – 00;00;29;01
KATIE
Hello and welcome to Parler to play a weekly podcast from African sites dedicated to offering listeners enlightening discussion and actionable intelligence about dairy markets. I’m your host, Katie Burgess. Coming to you from the Chicago office today. We’re excited to have you along. If you like the show, please like, subscribe and tell friends as we kick things off. First, let’s timestamp the episode.
00;00;29;02 – 00;00;50;16
KATIE
It’s about 1130 central Time on Wednesday, July 10th. Today, Black Cheddar closed at 197 per pound. That’s up $0.07 from last week. Barrel finished at 194, up $0.04 from a week ago. Butter is at 311, down $0.02. And non-factor milk is at 118 per pound, unchanged from last week. Turning to grains, that’s been an interesting market to watch.
00;00;50;16 – 00;01;09;08
KATIE
December corn is down to 407 per bushel, down $0.12 from a week ago, and November soybeans are at 1075, down $0.50 from a week ago. Now let’s get to the show. Like I mentioned, I’m coming to you from the Chicago office today, and it’s fun, kind of probably our first ever all in person recording of parlor to play.
00;01;09;09 – 00;01;16;22
KATIE
Joining me here in the office, Jim Mathias, represent the feed side and Kevin Peterson to represent the dairy side. How are you guys doing today?
00;01;16;24 – 00;01;17;17
JIM
Doing great.
00;01;17;19 – 00;01;18;16
KEVIN
Just peachy.
00;01;18;19 – 00;01;38;22
KATIE
Thanks for having me, guys. It’s been fun to be down here with you. And so we’re coming off a holiday week, 4th of July last week, kind of getting back into the swing of things. Summer is always an interesting time for the grain markets. Interesting time for the dairy market. And so today and a couple questions for you kind of thinking about what’s the most important watch factor over the next month.
00;01;38;25 – 00;01;58;02
KATIE
What’s your most important watch factor over the next six months? And what’s that thing that you’re really watching to see how it plays out over the next year? So with that, I’ll kick things off. It is summertime then hot rainy here across the Midwest. And I would say the summer on the dairy side. You know, one of our big watch factors is always what’s happening with the weather.
00;01;58;03 – 00;02;18;01
KATIE
So we’ve got colleagues on the road out in California this week, and they report back that it is hot out there. Not only are the temperatures just scorching out in the Central Valley of California and in other spots really around the country out there, producers know that it’s a pretty long stretch. It hasn’t been fully cooling down at night, and talking to dairy producers.
00;02;18;01 – 00;02;36;11
KATIE
They report mixed things. Housing open lots do seem to be struggling with the high heat housing, freestyle barns doing a little bit better. But you know, Kevin, it’s the summer markets. The dairy markets are always good for a run here. Based on whether it’s summer, people shouldn’t be surprised. We haven’t happened every year, but it’s always a talking point and potentially a point of volatility.
00;02;36;12 – 00;02;51;20
KEVIN
Yeah, absolutely. And just to add to that, I mean, I grew up in Idaho personally, and I have family in Eagle, Idaho, which is pretty close to twin down there. And they’re above 100 for I think the next two weeks. I mean it is getting down to 70, 72 at night. So, you know, the cows might have a little time to cool off there.
00;02;51;20 – 00;02;58;11
KEVIN
But yeah, definitely a little early for, you know, two weeks of 105, 108 as the high every single day.
00;02;58;12 – 00;03;00;15
KATIE
Jim, I’m guessing you have something to say about the weather too.
00;03;00;16 – 00;03;23;12
JIM
Oh, man. We always talk about the weather, especially here in the summer weather markets for grains. But it’s been a weather year, right? I mean, this spring has been one of the wettest springs we’ve had in quite some time, most probably from a crop planting perspective in the US was one of the more delayed crops that we’ve had in terms of that planting progress over the last 5 or 6 seasons.
00;03;23;12 – 00;03;43;06
JIM
You know, we talk about the old adage, you know, corn being knee high by a 4th of July. I mean, I think that is a adage of yesteryear, if you will. But this year, maybe not as much this year, kind of driving around the Midwest, corn was going to be high in a lot of spots because of that delayed planting and not what is usually a, you know, shoulder type of height.
00;03;43;06 – 00;04;06;20
JIM
But despite all of those delays, clearly the markets are pricing out a fairly normal development period. As we move forward. You know, we’ll be entering pollination stages for the bulk of the U.S. corn crop year in the coming weeks. You know, we’ll be in pod building stages for us soybeans probably over the next, let’s say, six weeks or so.
00;04;06;20 – 00;04;26;16
JIM
So we’re kind of entering that crucial development period. And yet the market feels very comfortable. You know, selling the heck out of this thing as we move into that stage leaves us a little vulnerable, potentially for managed money to cover some shorts if we do start to get spooked by weather forecast. But yeah, weather is okay, at least for the Midwest for the time being.
00;04;26;19 – 00;04;32;21
KATIE
So I guess then, Kevin, turning to you, my big thing was whether Jim’s big thing was whether what are you watching over the next 30 days?
00;04;32;21 – 00;04;54;00
KEVIN
Yeah, I think, you know, we always talk about dairy. The big short term thing tends to always be exports and how much marginal capacity we can kind of clear out of the country to help out if domestic demand might be a little sluggish. So definitely watching exports. I mean, obviously the last six months or so, Mexico has really stepped up and has bought, you know, a lot of cheese from us and have kept up on nonfat and everything else.
00;04;54;00 – 00;05;17;20
KEVIN
They usually buy. But, you know, I’m really interested to see how June plays out. We just got through another strong May export month with cheese moving to Mexico. However, if we remember really the first trading day of June, the peso took a tumble of 10% through the month of June. Now is battled back a little bit, but I’m interested to see how much they still buy, even with their buying power being kind of cut off at the knees.
00;05;17;20 – 00;05;40;02
KEVIN
I’m of the opinion that they’ll still be strong. You know, everything we’re hearing is droughts in Mexico. Water conditions are very poor, and I just really don’t think it’s very prosperous to dairy there. And I do think that this trend is kind of more here to stay where they’re just going to get product from the US, especially as we have some new capacity coming online in the Texas area and, you know, southern Midwest, if you will.
00;05;40;03 – 00;05;42;16
KEVIN
It’s pretty close to the Mexican border, for sure.
00;05;42;17 – 00;06;00;27
KATIE
And I think to watching those export markets, I know Mexico, we’re lucky they’re our neighbor. They’re one of the areas of the world where we’ve seen the most growth in cheese import. But you know, those other places South Korea, Japan, you know, we just keep battling it out with Europe for market share. So it will be interesting to see over the next 30 days, do those export sales drop off like we think they could or how does that play out.
00;06;00;27 – 00;06;24;22
KEVIN
Yeah. And you know, on that note, you look at the global landscape of cheese. I mean really, you know, maybe five $0.06 here or there, but really everything’s kind of on par right now in global cheddar. Prices and even market prices are pretty close as well. And so I think to that point, I mean, I’m kind of looking at maybe some, you know, let’s see how assistance goes to try to clear some more product and get some export assistance to really be able to compete with that market for.
00;06;24;22 – 00;06;36;16
KATIE
Sure, if they for the next 30 days. And honestly, probably the second half too. Yeah, absolutely. So as we switch now, you know, biggest watch factors for the next six months, I mean I’ll let you go first on this one. What’s your big six month watch factor.
00;06;36;18 – 00;06;55;27
KEVIN
Yeah my big six month watch factor is really demand. When we talked a month or two ago I mean demand was definitely sluggish. However, in the last few weeks it has picked up at least domestically, you know, tracking restaurant reservations and things of that nature. Definitely picking up there as well as the retail sale category is picking up too.
00;06;55;28 – 00;07;03;28
KEVIN
And so obviously we want to see that kind of remain throughout the summer, but definitely showing signs of life there where two months ago it was really pretty dismal.
00;07;04;04 – 00;07;23;19
KATIE
I think along with that, as I think about kind of my big watch factor, take a subset of that is what happens with the butter market between now and the end of the year. I mean, I think I’ve heard a lot of different numbers out there from does the fact that we’re so high priced over the first half of the year, I mean, we’re going to go set new records during the back half, or do we get to the demand season like you talked about?
00;07;23;19 – 00;07;43;02
KATIE
And it turns out people kind of have what they need. I don’t know what way it’s going to play out. If I had to put a range around butter for what I think the ranges for the second half of the year, I think I’d take almost $1.50 on high side and low side on it. So I don’t know that I have an answer for this one for the next six months, but to me it’s butter market just going to continue on this high price path like we’ve been on.
00;07;43;02 – 00;07;53;14
KATIE
Or do we get some sort of counter seasonal decline a little early?
00;07;53;14 – 00;08;14;15
KEVIN
Yeah, I used to think maybe I had an opinion and now I’ve given up on the butter market. I mean, the last six months, if you looked at any fundamental report, you know, economics 101, as probably said, we’re trading 20 or $0.30 over where maybe we should be, and it just hasn’t broke. So, I mean, if anything, right now, I guess I take the high side.
00;08;14;17 – 00;08;23;06
KATIE
It’ll be interesting. So from maybe high price butter to, I don’t know, maybe low price feed. What’s your watch factor over the next six months?
00;08;23;06 – 00;08;42;23
JIM
I price butter to low price feed. I mean, that’s about all we could ask for next six months. I mean, in the six month window, that’s a big window. But between now and six months from now, we will have realized the U.S. grain harvest. You know, that’s going to be obviously extremely impactful to global feed pricing. You know, we were touching on whether to start the show.
00;08;42;23 – 00;09;03;17
JIM
I mean, that’s the big one is we’re going to get through this fall. We already had a record U.S. corn crop the previous fall. What is this one going to do? It does not need to be a record harvest to still maintain a very comfortable U.S. and global balance sheet. Same for soybeans. You know, we took a couple acres off of the projected soybean crop here at the end of June report.
00;09;03;17 – 00;09;24;15
JIM
And yet the market feels very comfortable selling soybeans here because again, weather even though has been very adverse from end of March through end of June, forecast for now are okay. So we will have realized the, you know, U.S. grain harvest. We will also within that six month time frame, you know, there’s a hope for, you know, maybe an interest rate cut or two.
00;09;24;16 – 00;09;50;15
JIM
We will have had an election during that six month time. So it’s going to be a pretty key window here. And I think something to keep in mind of a lot of very protectionist policies. I think being pushed by either party as we head into this election. And if you continue to kind of ramp up the trade war rhetoric and protectionist and pro tariff policies as we move forward for a dairy farmer buying feed, I’d say that’s a good thing.
00;09;50;15 – 00;10;14;00
JIM
If we make it difficult or at least disincentivize our trade partners to buy American grain, that’s going to keep more and more of that grain here at home, which again, is bearish pricing. Not as optimistic for the Rowe crop farmer himself, but for that dairy farmer buying corn. You know the lack of export potential for this market has been a huge bearish factor for those buying grain.
00;10;14;00 – 00;10;33;03
JIM
And you know, you Katie and Kevin talked about Mexico being a huge partner for us. They’re huge partner in corn as well. They’ve been the biggest partner really buying American corn. So they’re going to be a huge factor keeping an eye on them, keeping up their corn demand and for whatever reason that were too slow. They’re kind of the last holdout in terms of being a huge partner for us.
00;10;33;03 – 00;10;45;09
JIM
So again, that’d be more of a bearish indicator if they were to slow down. So you know, next six months I think confirms potentially a longer term bearish picture in a good way for the U.S dairy farmer.
00;10;45;13 – 00;10;57;26
KATIE
I guess from that perspective, Jim, kind of continuing on to like 12 month factors. Obviously the grain market, we harvest grain once a year, whereas we’re making milk every day. As you’re thinking on taking that the next six months out into 2025. Yeah, things do people need to keep in mind.
00;10;57;27 – 00;11;18;14
JIM
Yeah. As we move into 2025 than a year out. You know, we talk about the seasonality like yes here in the states of course, or in the northern hemisphere. You know, we plant corn once a year. We harvest once a year, for the most part, South America, then they’re doing that. Conversely, you know, they are planting, let’s say, shortly or not too long after we are harvesting here in the US.
00;11;18;14 – 00;11;37;06
JIM
So from a global perspective, we are able to harvest grain, you know, multiple times a year. I think if you look at year out in the South, Americans have had a pretty decent crop year this year. Last two plus years is three years. We talked about the Argentines having terrible weather, been in a drought, not being able to produce as much rain and feed for the global market.
00;11;37;06 – 00;11;59;05
JIM
They had a decent year this year. The Brazilians had a decent year. This year. If they do the same that one year time frame from now, you’ve gone now back to back to back bumper crops, northern and southern hemisphere again. For the U.S. dairy farmer buying this feed, that’s a good thing because if the globe has plenty of this stuff, that means we’re going to have plenty of it here at cheaper pricing.
00;11;59;05 – 00;12;04;00
JIM
So buying that feed potentially continued lower prices as we move forward.
00;12;04;07 – 00;12;06;17
KATIE
Lots of stuff to think about there. We’ll see how it goes.
00;12;06;19 – 00;12;07;26
JIM
Lots of thinking about, lots.
00;12;07;26 – 00;12;11;00
KATIE
Of thinking on the weather politics. It’ll be an interesting one to watch.
00;12;11;00 – 00;12;12;02
JIM
That’s right. As always.
00;12;12;06 – 00;12;25;01
KATIE
It’s always so calm and moving you. I know a lot of the commercial customers I work with are starting to think about 2025 budget. What the plans are there is you’re talking to your customers and thinking about the market for next year. What’s the biggest thing in your mind?
00;12;25;02 – 00;12;45;26
KEVIN
Yeah, the biggest thing on my mind is really capacity versus growth and demand. I mean, as we look into 2025, we have some I mean, there’s no better way to put it. Mega plants coming online with block cheddar and mozzarella cheese and really just seeing if demand can keep pace. I mean, at a 30,000ft view, we’re looking at about 5% additional capacity in cheese.
00;12;45;26 – 00;13;08;17
KEVIN
And a typical growth rate year over year might be anywhere from 1.5 to 2%. So let’s just call it 1.8. So, you know, a really big deficit in demand when looking at the added cheese that’s going to be coming online. It doesn’t take into consideration maybe some smaller plants we lose that are inefficient along the way. But even with that taking place there’s going to be a big gap to fill.
00;13;08;17 – 00;13;15;03
KEVIN
And I think we’re really going to have to look to the export market to find homes for this new cheese coming on next year, for sure.
00;13;15;03 – 00;13;29;05
KATIE
I mean, it’s going to be a big shock to the system in a way that I never remember seeing before that we’ve got new plant capacity coming online. Dairy heifers are hard to come by. So this whole where does the milk come from? How does it show up at the same time, you know, where is demand come from for this new product too.
00;13;29;05 – 00;13;44;09
KATIE
So and of course the timing of that’s always uncertain also of how the start up period go for the plants. When do we see that cheese in the market? Lots of unknowns there. And I mean, I think talking to customers as they’re thinking about budget, you know, good opportunities to like start thinking about how to manage your price risk for next year.
00;13;44;09 – 00;14;04;03
KEVIN
Also. Absolutely. You know, on the same front of that for next year. I mean, obviously, a lot of speculation on timing of when this potential atmo proposal could go into place. But we’re also talking about maybe getting rid of a barrel when all we have is new block capacity coming online next year. So I think really a lot of interesting things to be on the lookout for, for sure.
00;14;04;03 – 00;14;22;03
KATIE
And that was going to be mine too, is that federal order changes? We don’t really know. You know, what’s going to happen. We got a proposed announcement from USDA last week. And if you want to learn more about that, I know in last week’s episode of Parlor to Plate, Brian Fletcher gave a great overview. So if you didn’t give that one a listen and want to learn more, go back and check that out.
00;14;22;03 – 00;14;37;10
KATIE
But you know, we’re in the stage right now where we’ve seen the proposal. USDA has got a comment period. Now they’ll draft a final proposal. We expect to see that in Q4. And then producers will vote on it and we’ll see what we get. So, you know, I think that’s a big thing that we don’t know the details yet.
00;14;37;10 – 00;14;52;13
KATIE
We don’t know, you know what the timing exactly is going to be of how those changes may be enacted. But also, you know, starting to think about planning for 2025. Important to think about if federal orders do change, how does that impact your business? So guys, anything else to add to the rant for today?
00;14;52;16 – 00;14;53;06
JIM
That’s a wrap.
00;14;53;06 – 00;15;13;13
KATIE
All right. Well thanks so much for hosting me here in the Chicago office. It’s great to join you, Jim. Kevin, all the team down here. And big thanks to the insights team for your production support. And thank you to you, our listeners. We appreciate you tuning in. If you’d like to learn more about how we help customers manage price risk, please contact us at insights at ever Dot egg.
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The post Parlor to Plate – July 10, 2024 appeared first on .
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By Ever.Ag
5
55 ratings
Listen Now
In the latest edition of the Parlor to Plate dairy podcast from Ever.Ag Insights, our all-star panel discusses important watch factors. How might US dairy exports be impacted by recent market action? Are weather conditions favorable with grain growing season underway?
Join host Katie Burgess and panelists Kevin Peterson and Jim Matthews for a spirited discussion.
Questions or comments? Topics you’d like to hear us discuss? Contact us at [email protected].
Show Transcript
(Transcript auto-generated)
00;00;00;10 – 00;00;08;16
VOICEOVER
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;18 – 00;00;29;01
KATIE
Hello and welcome to Parler to play a weekly podcast from African sites dedicated to offering listeners enlightening discussion and actionable intelligence about dairy markets. I’m your host, Katie Burgess. Coming to you from the Chicago office today. We’re excited to have you along. If you like the show, please like, subscribe and tell friends as we kick things off. First, let’s timestamp the episode.
00;00;29;02 – 00;00;50;16
KATIE
It’s about 1130 central Time on Wednesday, July 10th. Today, Black Cheddar closed at 197 per pound. That’s up $0.07 from last week. Barrel finished at 194, up $0.04 from a week ago. Butter is at 311, down $0.02. And non-factor milk is at 118 per pound, unchanged from last week. Turning to grains, that’s been an interesting market to watch.
00;00;50;16 – 00;01;09;08
KATIE
December corn is down to 407 per bushel, down $0.12 from a week ago, and November soybeans are at 1075, down $0.50 from a week ago. Now let’s get to the show. Like I mentioned, I’m coming to you from the Chicago office today, and it’s fun, kind of probably our first ever all in person recording of parlor to play.
00;01;09;09 – 00;01;16;22
KATIE
Joining me here in the office, Jim Mathias, represent the feed side and Kevin Peterson to represent the dairy side. How are you guys doing today?
00;01;16;24 – 00;01;17;17
JIM
Doing great.
00;01;17;19 – 00;01;18;16
KEVIN
Just peachy.
00;01;18;19 – 00;01;38;22
KATIE
Thanks for having me, guys. It’s been fun to be down here with you. And so we’re coming off a holiday week, 4th of July last week, kind of getting back into the swing of things. Summer is always an interesting time for the grain markets. Interesting time for the dairy market. And so today and a couple questions for you kind of thinking about what’s the most important watch factor over the next month.
00;01;38;25 – 00;01;58;02
KATIE
What’s your most important watch factor over the next six months? And what’s that thing that you’re really watching to see how it plays out over the next year? So with that, I’ll kick things off. It is summertime then hot rainy here across the Midwest. And I would say the summer on the dairy side. You know, one of our big watch factors is always what’s happening with the weather.
00;01;58;03 – 00;02;18;01
KATIE
So we’ve got colleagues on the road out in California this week, and they report back that it is hot out there. Not only are the temperatures just scorching out in the Central Valley of California and in other spots really around the country out there, producers know that it’s a pretty long stretch. It hasn’t been fully cooling down at night, and talking to dairy producers.
00;02;18;01 – 00;02;36;11
KATIE
They report mixed things. Housing open lots do seem to be struggling with the high heat housing, freestyle barns doing a little bit better. But you know, Kevin, it’s the summer markets. The dairy markets are always good for a run here. Based on whether it’s summer, people shouldn’t be surprised. We haven’t happened every year, but it’s always a talking point and potentially a point of volatility.
00;02;36;12 – 00;02;51;20
KEVIN
Yeah, absolutely. And just to add to that, I mean, I grew up in Idaho personally, and I have family in Eagle, Idaho, which is pretty close to twin down there. And they’re above 100 for I think the next two weeks. I mean it is getting down to 70, 72 at night. So, you know, the cows might have a little time to cool off there.
00;02;51;20 – 00;02;58;11
KEVIN
But yeah, definitely a little early for, you know, two weeks of 105, 108 as the high every single day.
00;02;58;12 – 00;03;00;15
KATIE
Jim, I’m guessing you have something to say about the weather too.
00;03;00;16 – 00;03;23;12
JIM
Oh, man. We always talk about the weather, especially here in the summer weather markets for grains. But it’s been a weather year, right? I mean, this spring has been one of the wettest springs we’ve had in quite some time, most probably from a crop planting perspective in the US was one of the more delayed crops that we’ve had in terms of that planting progress over the last 5 or 6 seasons.
00;03;23;12 – 00;03;43;06
JIM
You know, we talk about the old adage, you know, corn being knee high by a 4th of July. I mean, I think that is a adage of yesteryear, if you will. But this year, maybe not as much this year, kind of driving around the Midwest, corn was going to be high in a lot of spots because of that delayed planting and not what is usually a, you know, shoulder type of height.
00;03;43;06 – 00;04;06;20
JIM
But despite all of those delays, clearly the markets are pricing out a fairly normal development period. As we move forward. You know, we’ll be entering pollination stages for the bulk of the U.S. corn crop year in the coming weeks. You know, we’ll be in pod building stages for us soybeans probably over the next, let’s say, six weeks or so.
00;04;06;20 – 00;04;26;16
JIM
So we’re kind of entering that crucial development period. And yet the market feels very comfortable. You know, selling the heck out of this thing as we move into that stage leaves us a little vulnerable, potentially for managed money to cover some shorts if we do start to get spooked by weather forecast. But yeah, weather is okay, at least for the Midwest for the time being.
00;04;26;19 – 00;04;32;21
KATIE
So I guess then, Kevin, turning to you, my big thing was whether Jim’s big thing was whether what are you watching over the next 30 days?
00;04;32;21 – 00;04;54;00
KEVIN
Yeah, I think, you know, we always talk about dairy. The big short term thing tends to always be exports and how much marginal capacity we can kind of clear out of the country to help out if domestic demand might be a little sluggish. So definitely watching exports. I mean, obviously the last six months or so, Mexico has really stepped up and has bought, you know, a lot of cheese from us and have kept up on nonfat and everything else.
00;04;54;00 – 00;05;17;20
KEVIN
They usually buy. But, you know, I’m really interested to see how June plays out. We just got through another strong May export month with cheese moving to Mexico. However, if we remember really the first trading day of June, the peso took a tumble of 10% through the month of June. Now is battled back a little bit, but I’m interested to see how much they still buy, even with their buying power being kind of cut off at the knees.
00;05;17;20 – 00;05;40;02
KEVIN
I’m of the opinion that they’ll still be strong. You know, everything we’re hearing is droughts in Mexico. Water conditions are very poor, and I just really don’t think it’s very prosperous to dairy there. And I do think that this trend is kind of more here to stay where they’re just going to get product from the US, especially as we have some new capacity coming online in the Texas area and, you know, southern Midwest, if you will.
00;05;40;03 – 00;05;42;16
KEVIN
It’s pretty close to the Mexican border, for sure.
00;05;42;17 – 00;06;00;27
KATIE
And I think to watching those export markets, I know Mexico, we’re lucky they’re our neighbor. They’re one of the areas of the world where we’ve seen the most growth in cheese import. But you know, those other places South Korea, Japan, you know, we just keep battling it out with Europe for market share. So it will be interesting to see over the next 30 days, do those export sales drop off like we think they could or how does that play out.
00;06;00;27 – 00;06;24;22
KEVIN
Yeah. And you know, on that note, you look at the global landscape of cheese. I mean really, you know, maybe five $0.06 here or there, but really everything’s kind of on par right now in global cheddar. Prices and even market prices are pretty close as well. And so I think to that point, I mean, I’m kind of looking at maybe some, you know, let’s see how assistance goes to try to clear some more product and get some export assistance to really be able to compete with that market for.
00;06;24;22 – 00;06;36;16
KATIE
Sure, if they for the next 30 days. And honestly, probably the second half too. Yeah, absolutely. So as we switch now, you know, biggest watch factors for the next six months, I mean I’ll let you go first on this one. What’s your big six month watch factor.
00;06;36;18 – 00;06;55;27
KEVIN
Yeah my big six month watch factor is really demand. When we talked a month or two ago I mean demand was definitely sluggish. However, in the last few weeks it has picked up at least domestically, you know, tracking restaurant reservations and things of that nature. Definitely picking up there as well as the retail sale category is picking up too.
00;06;55;28 – 00;07;03;28
KEVIN
And so obviously we want to see that kind of remain throughout the summer, but definitely showing signs of life there where two months ago it was really pretty dismal.
00;07;04;04 – 00;07;23;19
KATIE
I think along with that, as I think about kind of my big watch factor, take a subset of that is what happens with the butter market between now and the end of the year. I mean, I think I’ve heard a lot of different numbers out there from does the fact that we’re so high priced over the first half of the year, I mean, we’re going to go set new records during the back half, or do we get to the demand season like you talked about?
00;07;23;19 – 00;07;43;02
KATIE
And it turns out people kind of have what they need. I don’t know what way it’s going to play out. If I had to put a range around butter for what I think the ranges for the second half of the year, I think I’d take almost $1.50 on high side and low side on it. So I don’t know that I have an answer for this one for the next six months, but to me it’s butter market just going to continue on this high price path like we’ve been on.
00;07;43;02 – 00;07;53;14
KATIE
Or do we get some sort of counter seasonal decline a little early?
00;07;53;14 – 00;08;14;15
KEVIN
Yeah, I used to think maybe I had an opinion and now I’ve given up on the butter market. I mean, the last six months, if you looked at any fundamental report, you know, economics 101, as probably said, we’re trading 20 or $0.30 over where maybe we should be, and it just hasn’t broke. So, I mean, if anything, right now, I guess I take the high side.
00;08;14;17 – 00;08;23;06
KATIE
It’ll be interesting. So from maybe high price butter to, I don’t know, maybe low price feed. What’s your watch factor over the next six months?
00;08;23;06 – 00;08;42;23
JIM
I price butter to low price feed. I mean, that’s about all we could ask for next six months. I mean, in the six month window, that’s a big window. But between now and six months from now, we will have realized the U.S. grain harvest. You know, that’s going to be obviously extremely impactful to global feed pricing. You know, we were touching on whether to start the show.
00;08;42;23 – 00;09;03;17
JIM
I mean, that’s the big one is we’re going to get through this fall. We already had a record U.S. corn crop the previous fall. What is this one going to do? It does not need to be a record harvest to still maintain a very comfortable U.S. and global balance sheet. Same for soybeans. You know, we took a couple acres off of the projected soybean crop here at the end of June report.
00;09;03;17 – 00;09;24;15
JIM
And yet the market feels very comfortable selling soybeans here because again, weather even though has been very adverse from end of March through end of June, forecast for now are okay. So we will have realized the, you know, U.S. grain harvest. We will also within that six month time frame, you know, there’s a hope for, you know, maybe an interest rate cut or two.
00;09;24;16 – 00;09;50;15
JIM
We will have had an election during that six month time. So it’s going to be a pretty key window here. And I think something to keep in mind of a lot of very protectionist policies. I think being pushed by either party as we head into this election. And if you continue to kind of ramp up the trade war rhetoric and protectionist and pro tariff policies as we move forward for a dairy farmer buying feed, I’d say that’s a good thing.
00;09;50;15 – 00;10;14;00
JIM
If we make it difficult or at least disincentivize our trade partners to buy American grain, that’s going to keep more and more of that grain here at home, which again, is bearish pricing. Not as optimistic for the Rowe crop farmer himself, but for that dairy farmer buying corn. You know the lack of export potential for this market has been a huge bearish factor for those buying grain.
00;10;14;00 – 00;10;33;03
JIM
And you know, you Katie and Kevin talked about Mexico being a huge partner for us. They’re huge partner in corn as well. They’ve been the biggest partner really buying American corn. So they’re going to be a huge factor keeping an eye on them, keeping up their corn demand and for whatever reason that were too slow. They’re kind of the last holdout in terms of being a huge partner for us.
00;10;33;03 – 00;10;45;09
JIM
So again, that’d be more of a bearish indicator if they were to slow down. So you know, next six months I think confirms potentially a longer term bearish picture in a good way for the U.S dairy farmer.
00;10;45;13 – 00;10;57;26
KATIE
I guess from that perspective, Jim, kind of continuing on to like 12 month factors. Obviously the grain market, we harvest grain once a year, whereas we’re making milk every day. As you’re thinking on taking that the next six months out into 2025. Yeah, things do people need to keep in mind.
00;10;57;27 – 00;11;18;14
JIM
Yeah. As we move into 2025 than a year out. You know, we talk about the seasonality like yes here in the states of course, or in the northern hemisphere. You know, we plant corn once a year. We harvest once a year, for the most part, South America, then they’re doing that. Conversely, you know, they are planting, let’s say, shortly or not too long after we are harvesting here in the US.
00;11;18;14 – 00;11;37;06
JIM
So from a global perspective, we are able to harvest grain, you know, multiple times a year. I think if you look at year out in the South, Americans have had a pretty decent crop year this year. Last two plus years is three years. We talked about the Argentines having terrible weather, been in a drought, not being able to produce as much rain and feed for the global market.
00;11;37;06 – 00;11;59;05
JIM
They had a decent year this year. The Brazilians had a decent year. This year. If they do the same that one year time frame from now, you’ve gone now back to back to back bumper crops, northern and southern hemisphere again. For the U.S. dairy farmer buying this feed, that’s a good thing because if the globe has plenty of this stuff, that means we’re going to have plenty of it here at cheaper pricing.
00;11;59;05 – 00;12;04;00
JIM
So buying that feed potentially continued lower prices as we move forward.
00;12;04;07 – 00;12;06;17
KATIE
Lots of stuff to think about there. We’ll see how it goes.
00;12;06;19 – 00;12;07;26
JIM
Lots of thinking about, lots.
00;12;07;26 – 00;12;11;00
KATIE
Of thinking on the weather politics. It’ll be an interesting one to watch.
00;12;11;00 – 00;12;12;02
JIM
That’s right. As always.
00;12;12;06 – 00;12;25;01
KATIE
It’s always so calm and moving you. I know a lot of the commercial customers I work with are starting to think about 2025 budget. What the plans are there is you’re talking to your customers and thinking about the market for next year. What’s the biggest thing in your mind?
00;12;25;02 – 00;12;45;26
KEVIN
Yeah, the biggest thing on my mind is really capacity versus growth and demand. I mean, as we look into 2025, we have some I mean, there’s no better way to put it. Mega plants coming online with block cheddar and mozzarella cheese and really just seeing if demand can keep pace. I mean, at a 30,000ft view, we’re looking at about 5% additional capacity in cheese.
00;12;45;26 – 00;13;08;17
KEVIN
And a typical growth rate year over year might be anywhere from 1.5 to 2%. So let’s just call it 1.8. So, you know, a really big deficit in demand when looking at the added cheese that’s going to be coming online. It doesn’t take into consideration maybe some smaller plants we lose that are inefficient along the way. But even with that taking place there’s going to be a big gap to fill.
00;13;08;17 – 00;13;15;03
KEVIN
And I think we’re really going to have to look to the export market to find homes for this new cheese coming on next year, for sure.
00;13;15;03 – 00;13;29;05
KATIE
I mean, it’s going to be a big shock to the system in a way that I never remember seeing before that we’ve got new plant capacity coming online. Dairy heifers are hard to come by. So this whole where does the milk come from? How does it show up at the same time, you know, where is demand come from for this new product too.
00;13;29;05 – 00;13;44;09
KATIE
So and of course the timing of that’s always uncertain also of how the start up period go for the plants. When do we see that cheese in the market? Lots of unknowns there. And I mean, I think talking to customers as they’re thinking about budget, you know, good opportunities to like start thinking about how to manage your price risk for next year.
00;13;44;09 – 00;14;04;03
KEVIN
Also. Absolutely. You know, on the same front of that for next year. I mean, obviously, a lot of speculation on timing of when this potential atmo proposal could go into place. But we’re also talking about maybe getting rid of a barrel when all we have is new block capacity coming online next year. So I think really a lot of interesting things to be on the lookout for, for sure.
00;14;04;03 – 00;14;22;03
KATIE
And that was going to be mine too, is that federal order changes? We don’t really know. You know, what’s going to happen. We got a proposed announcement from USDA last week. And if you want to learn more about that, I know in last week’s episode of Parlor to Plate, Brian Fletcher gave a great overview. So if you didn’t give that one a listen and want to learn more, go back and check that out.
00;14;22;03 – 00;14;37;10
KATIE
But you know, we’re in the stage right now where we’ve seen the proposal. USDA has got a comment period. Now they’ll draft a final proposal. We expect to see that in Q4. And then producers will vote on it and we’ll see what we get. So, you know, I think that’s a big thing that we don’t know the details yet.
00;14;37;10 – 00;14;52;13
KATIE
We don’t know, you know what the timing exactly is going to be of how those changes may be enacted. But also, you know, starting to think about planning for 2025. Important to think about if federal orders do change, how does that impact your business? So guys, anything else to add to the rant for today?
00;14;52;16 – 00;14;53;06
JIM
That’s a wrap.
00;14;53;06 – 00;15;13;13
KATIE
All right. Well thanks so much for hosting me here in the Chicago office. It’s great to join you, Jim. Kevin, all the team down here. And big thanks to the insights team for your production support. And thank you to you, our listeners. We appreciate you tuning in. If you’d like to learn more about how we help customers manage price risk, please contact us at insights at ever Dot egg.
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