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Parlor to Plate – July 31, 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 market reactions. How did cheese and butter prices move following last week’s Cold Storage report? How are milk futures reacting to warmer temperatures, tighter heifer inventories and snug fluid supplies? And what impact are healthy crop conditions having on grain markets?
Join host Katie Burgess and panelists Ryan Yonkman, Kevin Peterson and Brandon Weigel 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;23
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;26 – 00;00;35;13
KATIE
Hello and welcome to Parler to play a weekly podcast from Maverick Insights dedicated to offering listeners enlightening discussion and actionable dairy market intelligence. I’m your host, Katie Burgess, and we’re excited to have you along. If you liked the show, please subscribe and tell a friend or two as we kick things off. First, let’s timestamp the episode. It’s about noon central time on Wednesday, July 31st, and today the spot Markets black cheddar closed at one 91.5 per pound.
00;00;35;15 – 00;00;54;17
KATIE
That’s down two and a half cents on the week. Barrels finished at one 97.5, unchanged from a week ago. Butter is up at three 12.75, up nearly $0.04 on the week. And nonfat dry milk is at one 24.5 of a penny. And this one doesn’t normally make the rundown, but the spot market is all the way up to $0.62 per pound.
00;00;54;18 – 00;01;13;17
KATIE
That’s a gain of $0.08 on the week. Turning to the grain markets. Those prices continue to make new lows. December corns at 401 per bushel, down $0.17 on the week, while November soybeans are at 1022 per bushel, down $0.42 from a week ago. So let’s get to the show. Got another great group along today. And guys July 31st.
00;01;13;17 – 00;01;24;06
KATIE
We’re two thirds the way through at least unofficial summer. So welcome to the show. And I got to kick things off. We’ve got Ryan Johnson joining us from Chicago. Ryan, how’s your summer been going?
00;01;24;10 – 00;01;33;09
RYAN
Hey summer’s been going great. And at times when we wish it would last longer, I can tell you, with three kids, two dogs and a cat, we are ready for school to start.
00;01;33;11 – 00;01;39;04
KATIE
How about you? We’ve got Kevin Peterson joining us from Chicago as well. You live in the fun summer city lifestyle, Kevin.
00;01;39;07 – 00;01;51;04
KEVIN
You know I am. I started my summer off with the honeymoon galavanting around Europe, and since coming back, just been focusing on work and golf. So, you know, no kids. And so probably having a better summer than you coming over here.
00;01;51;09 – 00;01;54;03
RYAN
If only his golf game could speak to that.
00;01;54;05 – 00;02;01;24
KATIE
Sounds like a fun one to me. And then last but not least, we’ve got Brandon Weigel joining us from the Platteville office. Brandon, how’s your summer been shaping up?
00;02;01;27 – 00;02;16;23
BRANDON
It is flying by. It is going very fast. It’s been enjoyable, though. It hasn’t been too miserable. Hot up this way. Got to spend some time out in Idaho for a stretch of a week work trip. But I always love spending time in Idaho, so that’s kind of been the highlight of my summer so far.
00;02;16;28 – 00;02;22;03
KATIE
And Brandon, I know you’ve got some fancy show pigs over there. How are your show pigs doing in the fair season?
00;02;22;07 – 00;02;30;23
BRANDON
Good. We’re actually not quite started yet. August is the primary time frame for most of the show pigs that I raise at least so few weeks yet.
00;02;31;00 – 00;02;50;26
KATIE
Exciting times. Well, speaking of exciting times, the dairy markets have had plenty to offer us here over the past week or so. One of the things that’s been fueling markets is the cold storage report that USDA released last Thursday afternoon. So, Kevin, let’s kick things off with you. Can you give the listeners an update on what that report said and how the markets reacted?
00;02;51;01 – 00;03;09;21
KEVIN
Yeah, I think to start with butter there. You know, we have higher inventories than this time last year. Although that butter price continues to trade above $3. I mean, I think if you put your econ 101 had, that market hasn’t really traded to where most people think it should just given those USDA indicators. But turning into cheese definitely trending.
00;03;09;21 – 00;03;27;06
KEVIN
You know well below a year ago down almost 6%. And then, you know, coupling in the production report for specifically American and cheddar cheese. I think that really helps to describe why we are flirting with $2 here, when many think that the market should be more in the 175 180 realm right now.
00;03;27;09 – 00;03;45;14
KATIE
Know for sure. It’s interesting to see those total cheese stocks that 6% gap compared to a year ago. And I think with that, we’re sitting at a position at the end of June where cheese stocks were down, notably from the prior year. We’ve had a hot summer, especially in some spots, and I think that’s got people a little nervous about what is supply going to look like.
00;03;45;15 – 00;03;51;08
KATIE
So, Brian, you said on the producer side of things, what are the producers looking at and how is the supply situation been?
00;03;51;10 – 00;04;11;08
RYAN
Yes, I think, you know, milk production was a prelude to cold storage and not a major surprise report. But the reality is, with us milk being down 1%, that was below expectations to the degree that we made less than a lot of pre report analysts were calling for I’d say from the producer sector. We’re not surprised. I mean we’ve certainly talked a lot about avian.
00;04;11;08 – 00;04;26;07
RYAN
We’ve talked a lot about the heat. We talked a lot about lack of replacements. We’ve talked a lot about our profitability in a lot of regions. Just started showing up in April. So I think not a hard number to rationalize. But again, I think for report readers, it was like, you know, hey, how do you not call that number bullish?
00;04;26;14 – 00;04;42;21
RYAN
We’re down 1% a little less than we thought. I think what’s intriguing, Katie, for me, trying to connect the dots on this whole supply demand equation is okay, fluid milk flow down 1%. But we’re starting to report now on these solids. We know butterfat and protein levels are up. And you know on a solid basis we’re up about 1%.
00;04;42;21 – 00;05;00;03
RYAN
So I take that and say okay. But then you go back to the cold storage report. And Kevin got just done talking about how cheese stocks are down 6%. And so I think what’s really interesting in this whole deal is we’ve had this demand equation that I think is just felt for so many people for so long. And so I think it really starts to challenge some of that.
00;05;00;03 – 00;05;15;12
RYAN
We know the exports have been rocking, that data has come out. But I think when you start to look at some of the stuff, it to me really challenges some of these other demand factors domestically. For sure. When you try to connect the dots between the milk report, the stocks report and some of these other things we’ve been talking about on the demand fronts, for sure.
00;05;15;13 – 00;05;34;09
KATIE
I mean, there’s just so many gives and takes right now in the market of like on one hand, consumers are still dealing with inflation. On the other side, they’re finding value in dairy products. And we’ve seen, you know, retailers promoting cheese pretty heavily, especially over 4th of July to help keep product moving. I think the theme though, that we keep coming back to is that us consumers are looking for value.
00;05;34;09 – 00;05;50;08
KATIE
And so if they’re finding that in the grocery store shelf or some of these restaurants running promotions to move traffic, you know enough that demand has been rated as good in a lot of spots, especially in an environment to your point where like milk is down, but solids are still up. Always a little hard to know what to make of that as well.
00;05;50;14 – 00;06;11;18
KEVIN
Yeah. And I think to add on to all this, I mean, you know, one of the things I look at is, you know, year to date mozzarella production has been up 93 million pounds, while cheddar production has been down 135 million pounds. So I think seeing that and kind of what we’ve been talking about in stores where people are waiting for, you know, promotions to be ran to go and maybe buy those natural slices off the shelf.
00;06;11;19 – 00;06;27;09
KEVIN
However, things like moths continue to move export. And, you know, just given that relationship, making more months and less cheddar, you know, moths can’t show up in Chicago. And so I think that also is helping, you know, keeping this cheddar market up in the mid 90s and, you know, really flirting with again pushing $2.
00;06;27;15 – 00;06;45;06
KATIE
That’s for sure. And so as we see these higher cheese prices, we’ve got class three milk futures and class four milk futures for September and October at least are both trading above $21 100. Wait on the flip side Brandon, I’d love to toss it to you. We’ve got the grain markets moving even lower today from a producer feed cost perspective.
00;06;45;06 – 00;06;48;19
KATIE
What are folks seeing out there and what’s the latest in the grain space?
00;06;48;22 – 00;07;05;28
BRANDON
Yeah, on the grain side of things, these futures values just continue to work in our favor as dairy producers, livestock producers that are looking to take physical feed ownership here. I would say that by and large, future values are finally in a spot where people like, you know, all year we had been pretty patient on owning any physical new crop feed.
00;07;05;28 – 00;07;26;13
BRANDON
Future values are finally there. I’d say the basis has been the hang up in a lot of areas, specifically in the west southwest part of the country. Midwest basis values are finally starting to fall in line, where it makes sense to start taking some ownership on basis. But by and large, this crop is pretty well set. You know, we’ve made it through pollination in the Midwest without many hiccups.
00;07;26;13 – 00;07;46;03
BRANDON
People are feeling very confident. These good, excellent ratings continue to be as strong as they have in many years. So from a fundamental supply standpoint, there’s very little, by the way, a concern. We’re at a spot that milk over feed margins, as most people are know, are in the best spot that they’ve been in several years. So if you’re taking action on one, it certainly makes sense to start taking the action on the other.
00;07;46;03 – 00;08;00;22
KATIE
That is totally true. And I think that, you know, for those of us here at Ever Egg, as we sit and stare at screens all day, we’re watching these good milk prices. We’re watching these feed costs come down. You know, we’re excited for dairy producers for the latter half of this year. It should be some pretty good margins.
00;08;00;22 – 00;08;21;23
KATIE
But as we all know, markets can always change. So always looking for opportunities as well to help folks manage risk to make sure they’re locking in some of these good numbers, both on the income side and on the cost side. All right a question for both of you, Kevin and Ryan. You know, one of the other surprising pieces in the dairy market here over the past week has been the way market spot was up at the highest it’s been since 2022.
00;08;21;23 – 00;08;29;09
KATIE
That fuels the class three price to move a little bit higher. Can you give us an update on what’s been happening with whey and what it has meant for the class three value?
00;08;29;14 – 00;08;45;17
RYAN
I’ll take a stab at it here. Kind of from the demons perspective, a reminder every penny and weigh is about $0.06 in the class three price. So get to your point when we start talking. You know, I remember conversations early in the year when whey was in the mid 30s. Right. And there wasn’t a lot of reasons why I should go higher.
00;08;45;17 – 00;09;04;20
RYAN
Right. We got these new cheese plants. Meanwhile, this cheese capacity demand in China is not very good. Fast forward I know we’re talking about 60. Some said way take $0.25 times six. It’s a big part of the equation. That’s about a $1.50 in class three terms from early in the year to now. So it’s been a very meaningful part of the class three equation, certainly for class three producers.
00;09;04;20 – 00;09;23;23
RYAN
I think sitting here and kind of watching it, what seems to resonate to me is meanwhile, whey was a very soft conversation. We’ve been talking about the high protein market strong like bull for a long period of time. That demand just doesn’t seem to have wavered. The price action has been fantastic, and there’s a legitimate relationship between the two products.
00;09;23;23 – 00;09;33;04
RYAN
And I think from afar, I look at that if one is really, really strong, how weak and the other one be, I think we’re one felt soft, the other one has been very strong and continues to trade that way.
00;09;33;07 – 00;09;48;12
KEVIN
Yeah, I would definitely agree with that. On the high protein. I mean, obviously you have your let’s call it, you know, bodybuilders or weightlifters in the GNC. That stuff has been continuing to fly off the shelves. You know, I think that also is going into what right now maybe seems to be the trend is more of a high protein diet.
00;09;48;12 – 00;10;04;06
KEVIN
You know, cottage cheese has been really good for that. Oh, and then I was just in Costco the other day and now they’re selling protein pancakes. And they had a few pallets of those as well. So the high proteins have definitely been driving it. You know, also I would say last week and this week hearing reports of some, you know, wage issues across the country.
00;10;04;06 – 00;10;15;01
KEVIN
And I think that really sparked this most recent move with some limit up action in those futures. But again, to Ryan’s point, really all starting with the high proteins and the solid demand we’ve been seeing there for a long time.
00;10;15;01 – 00;10;27;20
RYAN
Kevin or Katie, maybe either of you, we’ve been spend a little time in the office talking about price relationships, weighed high protein way to nonfat. Is there any kind of rule of thumb relationships either of you could speak to? You know, say mathematically between those products?
00;10;27;20 – 00;10;48;25
KEVIN
Yeah, I think, you know, when you just look at the protein side of those two products, I mean, the general rule of thumb of that is, you know, nonfat should trade three times the price away and vice versa, where it should be, you know, divisible by three, the price of nonfat, you know, however, there are a lot of, you know, supply demand effects that can go into that at certain times.
00;10;48;25 – 00;11;13;09
KEVIN
I mean, obviously, if we look at, you know, this year specifically, nonfat demand has been, you know, really poor production has been really poor as well, kind of helping it not trade below a dollar, if you will. So I think those can get out of whack in times. And we’ve definitely seen that in the past, you know, because obviously, to your point, if you take spot whey today that would say we should be trading nonfat at what, $1.80 or north of which I think if you told anyone in the powder world that number, they would just laugh at you.
00;11;13;09 – 00;11;33;13
KEVIN
So I think we are just in one of those periods of times where we might not see that relationship be that exact, you know, multiple of three. But, you know, one would also say that it trades out of whack, but not for a long time. So, you know, to that point, is nonfat going to come up a little bit or is way going to, you know, for lack of a better term, collapse to meet that multiple.
00;11;33;13 – 00;11;34;00
KEVIN
Again, it.
00;11;34;00 – 00;11;51;07
KATIE
Is interesting to that, even though the nonfat price you’re going by that rule from a 3 to 1 that nonfat feels a little bit low nonfat yesterday did get to the top end of the trading range that, you know, we have been stuck in a trading range of, we’ll call it 105 to 125 for the better part of 18 months.
00;11;51;07 – 00;12;14;09
KATIE
Now we’re back up at the top part of that range. To your point, it’s always hard to know, like what’s driving what. But got to think, you know, maybe seeing way go up helps provide a little bit of support. I also think to your point that productions went down quite a bit. If anyone’s getting nervous about that with production being soft, it does sound like given the fact that it is summer, the balancing plants are running pretty light schedule, so we’re not making a whole lot right now either.
00;12;14;09 – 00;12;32;09
KATIE
And you know, here we are at the top end of the range. That being said, today at the spot market, we did see it come off the highs a little bit. So you know, lots of things to watch there of that nonfat market has been rangebound for a long, long time at this point. And so, you know, curious to see do we stick in the range or, you know, at what point do we finally begin to break out of it?
00;12;32;15 – 00;12;54;18
RYAN
And, hey, Katie, one more thing. Speaking of balancing plants and, you know, us milk being down 1%, a report we like to watch the Midwest milk spot premium for what? You know, spot loads of milk are trading for. It’s been really interesting. You look back at the last two, four, six, call it two months, spot loads of milk, have been trading you know -52 right now on an average about $0.75 over spot.
00;12;54;19 – 00;13;14;11
RYAN
Why that’s interesting is because the five year average is closer to like 2 to $3 under class. And so I think it just helps describe this tightness. Certainly we’re reading about and talking about in milk production. And we’re heading into a time of year where guess what, milk doesn’t get looser. So if you look at this spot report going forward, the five year average from here on out is more like 0 to 1 over.
00;13;14;11 – 00;13;21;15
RYAN
So if we’ve already been averaging that during what should be flush, I find it very interesting to infer what spot premiums look like a month or two from now.
00;13;21;15 – 00;13;40;29
KATIE
Yes, that report caught my eye last week too. I noticed that the number for this time of year was the highest it had been since 2014. So good point, Ryan, and maybe that’s a wrap for today because you know, like we talked about up front, I know there’s lots of parents out there waiting for school to start, and lots of dairy market observers waiting to see what happens when school milk picks up.
00;13;40;29 – 00;13;59;23
KATIE
So with that, thank you for joining us. Big thanks to our panelists, Ryan, Kevin and Brandon. Appreciate you guys joining me. And a big thanks to the Egg Insights team for your production support. Finally, big thank you to you, our listeners. We appreciate you tuning in. If you’d like to learn more about how everything helps customers manage price risk, please 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.
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The post Parlor to Plate – July 31, 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 market reactions. How did cheese and butter prices move following last week’s Cold Storage report? How are milk futures reacting to warmer temperatures, tighter heifer inventories and snug fluid supplies? And what impact are healthy crop conditions having on grain markets?
Join host Katie Burgess and panelists Ryan Yonkman, Kevin Peterson and Brandon Weigel 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;23
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;26 – 00;00;35;13
KATIE
Hello and welcome to Parler to play a weekly podcast from Maverick Insights dedicated to offering listeners enlightening discussion and actionable dairy market intelligence. I’m your host, Katie Burgess, and we’re excited to have you along. If you liked the show, please subscribe and tell a friend or two as we kick things off. First, let’s timestamp the episode. It’s about noon central time on Wednesday, July 31st, and today the spot Markets black cheddar closed at one 91.5 per pound.
00;00;35;15 – 00;00;54;17
KATIE
That’s down two and a half cents on the week. Barrels finished at one 97.5, unchanged from a week ago. Butter is up at three 12.75, up nearly $0.04 on the week. And nonfat dry milk is at one 24.5 of a penny. And this one doesn’t normally make the rundown, but the spot market is all the way up to $0.62 per pound.
00;00;54;18 – 00;01;13;17
KATIE
That’s a gain of $0.08 on the week. Turning to the grain markets. Those prices continue to make new lows. December corns at 401 per bushel, down $0.17 on the week, while November soybeans are at 1022 per bushel, down $0.42 from a week ago. So let’s get to the show. Got another great group along today. And guys July 31st.
00;01;13;17 – 00;01;24;06
KATIE
We’re two thirds the way through at least unofficial summer. So welcome to the show. And I got to kick things off. We’ve got Ryan Johnson joining us from Chicago. Ryan, how’s your summer been going?
00;01;24;10 – 00;01;33;09
RYAN
Hey summer’s been going great. And at times when we wish it would last longer, I can tell you, with three kids, two dogs and a cat, we are ready for school to start.
00;01;33;11 – 00;01;39;04
KATIE
How about you? We’ve got Kevin Peterson joining us from Chicago as well. You live in the fun summer city lifestyle, Kevin.
00;01;39;07 – 00;01;51;04
KEVIN
You know I am. I started my summer off with the honeymoon galavanting around Europe, and since coming back, just been focusing on work and golf. So, you know, no kids. And so probably having a better summer than you coming over here.
00;01;51;09 – 00;01;54;03
RYAN
If only his golf game could speak to that.
00;01;54;05 – 00;02;01;24
KATIE
Sounds like a fun one to me. And then last but not least, we’ve got Brandon Weigel joining us from the Platteville office. Brandon, how’s your summer been shaping up?
00;02;01;27 – 00;02;16;23
BRANDON
It is flying by. It is going very fast. It’s been enjoyable, though. It hasn’t been too miserable. Hot up this way. Got to spend some time out in Idaho for a stretch of a week work trip. But I always love spending time in Idaho, so that’s kind of been the highlight of my summer so far.
00;02;16;28 – 00;02;22;03
KATIE
And Brandon, I know you’ve got some fancy show pigs over there. How are your show pigs doing in the fair season?
00;02;22;07 – 00;02;30;23
BRANDON
Good. We’re actually not quite started yet. August is the primary time frame for most of the show pigs that I raise at least so few weeks yet.
00;02;31;00 – 00;02;50;26
KATIE
Exciting times. Well, speaking of exciting times, the dairy markets have had plenty to offer us here over the past week or so. One of the things that’s been fueling markets is the cold storage report that USDA released last Thursday afternoon. So, Kevin, let’s kick things off with you. Can you give the listeners an update on what that report said and how the markets reacted?
00;02;51;01 – 00;03;09;21
KEVIN
Yeah, I think to start with butter there. You know, we have higher inventories than this time last year. Although that butter price continues to trade above $3. I mean, I think if you put your econ 101 had, that market hasn’t really traded to where most people think it should just given those USDA indicators. But turning into cheese definitely trending.
00;03;09;21 – 00;03;27;06
KEVIN
You know well below a year ago down almost 6%. And then, you know, coupling in the production report for specifically American and cheddar cheese. I think that really helps to describe why we are flirting with $2 here, when many think that the market should be more in the 175 180 realm right now.
00;03;27;09 – 00;03;45;14
KATIE
Know for sure. It’s interesting to see those total cheese stocks that 6% gap compared to a year ago. And I think with that, we’re sitting at a position at the end of June where cheese stocks were down, notably from the prior year. We’ve had a hot summer, especially in some spots, and I think that’s got people a little nervous about what is supply going to look like.
00;03;45;15 – 00;03;51;08
KATIE
So, Brian, you said on the producer side of things, what are the producers looking at and how is the supply situation been?
00;03;51;10 – 00;04;11;08
RYAN
Yes, I think, you know, milk production was a prelude to cold storage and not a major surprise report. But the reality is, with us milk being down 1%, that was below expectations to the degree that we made less than a lot of pre report analysts were calling for I’d say from the producer sector. We’re not surprised. I mean we’ve certainly talked a lot about avian.
00;04;11;08 – 00;04;26;07
RYAN
We’ve talked a lot about the heat. We talked a lot about lack of replacements. We’ve talked a lot about our profitability in a lot of regions. Just started showing up in April. So I think not a hard number to rationalize. But again, I think for report readers, it was like, you know, hey, how do you not call that number bullish?
00;04;26;14 – 00;04;42;21
RYAN
We’re down 1% a little less than we thought. I think what’s intriguing, Katie, for me, trying to connect the dots on this whole supply demand equation is okay, fluid milk flow down 1%. But we’re starting to report now on these solids. We know butterfat and protein levels are up. And you know on a solid basis we’re up about 1%.
00;04;42;21 – 00;05;00;03
RYAN
So I take that and say okay. But then you go back to the cold storage report. And Kevin got just done talking about how cheese stocks are down 6%. And so I think what’s really interesting in this whole deal is we’ve had this demand equation that I think is just felt for so many people for so long. And so I think it really starts to challenge some of that.
00;05;00;03 – 00;05;15;12
RYAN
We know the exports have been rocking, that data has come out. But I think when you start to look at some of the stuff, it to me really challenges some of these other demand factors domestically. For sure. When you try to connect the dots between the milk report, the stocks report and some of these other things we’ve been talking about on the demand fronts, for sure.
00;05;15;13 – 00;05;34;09
KATIE
I mean, there’s just so many gives and takes right now in the market of like on one hand, consumers are still dealing with inflation. On the other side, they’re finding value in dairy products. And we’ve seen, you know, retailers promoting cheese pretty heavily, especially over 4th of July to help keep product moving. I think the theme though, that we keep coming back to is that us consumers are looking for value.
00;05;34;09 – 00;05;50;08
KATIE
And so if they’re finding that in the grocery store shelf or some of these restaurants running promotions to move traffic, you know enough that demand has been rated as good in a lot of spots, especially in an environment to your point where like milk is down, but solids are still up. Always a little hard to know what to make of that as well.
00;05;50;14 – 00;06;11;18
KEVIN
Yeah. And I think to add on to all this, I mean, you know, one of the things I look at is, you know, year to date mozzarella production has been up 93 million pounds, while cheddar production has been down 135 million pounds. So I think seeing that and kind of what we’ve been talking about in stores where people are waiting for, you know, promotions to be ran to go and maybe buy those natural slices off the shelf.
00;06;11;19 – 00;06;27;09
KEVIN
However, things like moths continue to move export. And, you know, just given that relationship, making more months and less cheddar, you know, moths can’t show up in Chicago. And so I think that also is helping, you know, keeping this cheddar market up in the mid 90s and, you know, really flirting with again pushing $2.
00;06;27;15 – 00;06;45;06
KATIE
That’s for sure. And so as we see these higher cheese prices, we’ve got class three milk futures and class four milk futures for September and October at least are both trading above $21 100. Wait on the flip side Brandon, I’d love to toss it to you. We’ve got the grain markets moving even lower today from a producer feed cost perspective.
00;06;45;06 – 00;06;48;19
KATIE
What are folks seeing out there and what’s the latest in the grain space?
00;06;48;22 – 00;07;05;28
BRANDON
Yeah, on the grain side of things, these futures values just continue to work in our favor as dairy producers, livestock producers that are looking to take physical feed ownership here. I would say that by and large, future values are finally in a spot where people like, you know, all year we had been pretty patient on owning any physical new crop feed.
00;07;05;28 – 00;07;26;13
BRANDON
Future values are finally there. I’d say the basis has been the hang up in a lot of areas, specifically in the west southwest part of the country. Midwest basis values are finally starting to fall in line, where it makes sense to start taking some ownership on basis. But by and large, this crop is pretty well set. You know, we’ve made it through pollination in the Midwest without many hiccups.
00;07;26;13 – 00;07;46;03
BRANDON
People are feeling very confident. These good, excellent ratings continue to be as strong as they have in many years. So from a fundamental supply standpoint, there’s very little, by the way, a concern. We’re at a spot that milk over feed margins, as most people are know, are in the best spot that they’ve been in several years. So if you’re taking action on one, it certainly makes sense to start taking the action on the other.
00;07;46;03 – 00;08;00;22
KATIE
That is totally true. And I think that, you know, for those of us here at Ever Egg, as we sit and stare at screens all day, we’re watching these good milk prices. We’re watching these feed costs come down. You know, we’re excited for dairy producers for the latter half of this year. It should be some pretty good margins.
00;08;00;22 – 00;08;21;23
KATIE
But as we all know, markets can always change. So always looking for opportunities as well to help folks manage risk to make sure they’re locking in some of these good numbers, both on the income side and on the cost side. All right a question for both of you, Kevin and Ryan. You know, one of the other surprising pieces in the dairy market here over the past week has been the way market spot was up at the highest it’s been since 2022.
00;08;21;23 – 00;08;29;09
KATIE
That fuels the class three price to move a little bit higher. Can you give us an update on what’s been happening with whey and what it has meant for the class three value?
00;08;29;14 – 00;08;45;17
RYAN
I’ll take a stab at it here. Kind of from the demons perspective, a reminder every penny and weigh is about $0.06 in the class three price. So get to your point when we start talking. You know, I remember conversations early in the year when whey was in the mid 30s. Right. And there wasn’t a lot of reasons why I should go higher.
00;08;45;17 – 00;09;04;20
RYAN
Right. We got these new cheese plants. Meanwhile, this cheese capacity demand in China is not very good. Fast forward I know we’re talking about 60. Some said way take $0.25 times six. It’s a big part of the equation. That’s about a $1.50 in class three terms from early in the year to now. So it’s been a very meaningful part of the class three equation, certainly for class three producers.
00;09;04;20 – 00;09;23;23
RYAN
I think sitting here and kind of watching it, what seems to resonate to me is meanwhile, whey was a very soft conversation. We’ve been talking about the high protein market strong like bull for a long period of time. That demand just doesn’t seem to have wavered. The price action has been fantastic, and there’s a legitimate relationship between the two products.
00;09;23;23 – 00;09;33;04
RYAN
And I think from afar, I look at that if one is really, really strong, how weak and the other one be, I think we’re one felt soft, the other one has been very strong and continues to trade that way.
00;09;33;07 – 00;09;48;12
KEVIN
Yeah, I would definitely agree with that. On the high protein. I mean, obviously you have your let’s call it, you know, bodybuilders or weightlifters in the GNC. That stuff has been continuing to fly off the shelves. You know, I think that also is going into what right now maybe seems to be the trend is more of a high protein diet.
00;09;48;12 – 00;10;04;06
KEVIN
You know, cottage cheese has been really good for that. Oh, and then I was just in Costco the other day and now they’re selling protein pancakes. And they had a few pallets of those as well. So the high proteins have definitely been driving it. You know, also I would say last week and this week hearing reports of some, you know, wage issues across the country.
00;10;04;06 – 00;10;15;01
KEVIN
And I think that really sparked this most recent move with some limit up action in those futures. But again, to Ryan’s point, really all starting with the high proteins and the solid demand we’ve been seeing there for a long time.
00;10;15;01 – 00;10;27;20
RYAN
Kevin or Katie, maybe either of you, we’ve been spend a little time in the office talking about price relationships, weighed high protein way to nonfat. Is there any kind of rule of thumb relationships either of you could speak to? You know, say mathematically between those products?
00;10;27;20 – 00;10;48;25
KEVIN
Yeah, I think, you know, when you just look at the protein side of those two products, I mean, the general rule of thumb of that is, you know, nonfat should trade three times the price away and vice versa, where it should be, you know, divisible by three, the price of nonfat, you know, however, there are a lot of, you know, supply demand effects that can go into that at certain times.
00;10;48;25 – 00;11;13;09
KEVIN
I mean, obviously, if we look at, you know, this year specifically, nonfat demand has been, you know, really poor production has been really poor as well, kind of helping it not trade below a dollar, if you will. So I think those can get out of whack in times. And we’ve definitely seen that in the past, you know, because obviously, to your point, if you take spot whey today that would say we should be trading nonfat at what, $1.80 or north of which I think if you told anyone in the powder world that number, they would just laugh at you.
00;11;13;09 – 00;11;33;13
KEVIN
So I think we are just in one of those periods of times where we might not see that relationship be that exact, you know, multiple of three. But, you know, one would also say that it trades out of whack, but not for a long time. So, you know, to that point, is nonfat going to come up a little bit or is way going to, you know, for lack of a better term, collapse to meet that multiple.
00;11;33;13 – 00;11;34;00
KEVIN
Again, it.
00;11;34;00 – 00;11;51;07
KATIE
Is interesting to that, even though the nonfat price you’re going by that rule from a 3 to 1 that nonfat feels a little bit low nonfat yesterday did get to the top end of the trading range that, you know, we have been stuck in a trading range of, we’ll call it 105 to 125 for the better part of 18 months.
00;11;51;07 – 00;12;14;09
KATIE
Now we’re back up at the top part of that range. To your point, it’s always hard to know, like what’s driving what. But got to think, you know, maybe seeing way go up helps provide a little bit of support. I also think to your point that productions went down quite a bit. If anyone’s getting nervous about that with production being soft, it does sound like given the fact that it is summer, the balancing plants are running pretty light schedule, so we’re not making a whole lot right now either.
00;12;14;09 – 00;12;32;09
KATIE
And you know, here we are at the top end of the range. That being said, today at the spot market, we did see it come off the highs a little bit. So you know, lots of things to watch there of that nonfat market has been rangebound for a long, long time at this point. And so, you know, curious to see do we stick in the range or, you know, at what point do we finally begin to break out of it?
00;12;32;15 – 00;12;54;18
RYAN
And, hey, Katie, one more thing. Speaking of balancing plants and, you know, us milk being down 1%, a report we like to watch the Midwest milk spot premium for what? You know, spot loads of milk are trading for. It’s been really interesting. You look back at the last two, four, six, call it two months, spot loads of milk, have been trading you know -52 right now on an average about $0.75 over spot.
00;12;54;19 – 00;13;14;11
RYAN
Why that’s interesting is because the five year average is closer to like 2 to $3 under class. And so I think it just helps describe this tightness. Certainly we’re reading about and talking about in milk production. And we’re heading into a time of year where guess what, milk doesn’t get looser. So if you look at this spot report going forward, the five year average from here on out is more like 0 to 1 over.
00;13;14;11 – 00;13;21;15
RYAN
So if we’ve already been averaging that during what should be flush, I find it very interesting to infer what spot premiums look like a month or two from now.
00;13;21;15 – 00;13;40;29
KATIE
Yes, that report caught my eye last week too. I noticed that the number for this time of year was the highest it had been since 2014. So good point, Ryan, and maybe that’s a wrap for today because you know, like we talked about up front, I know there’s lots of parents out there waiting for school to start, and lots of dairy market observers waiting to see what happens when school milk picks up.
00;13;40;29 – 00;13;59;23
KATIE
So with that, thank you for joining us. Big thanks to our panelists, Ryan, Kevin and Brandon. Appreciate you guys joining me. And a big thanks to the Egg Insights team for your production support. Finally, big thank you to you, our listeners. We appreciate you tuning in. If you’d like to learn more about how everything helps customers manage price risk, please 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.
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