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Parlor to Plate – May 29, 2024
In the latest edition of the Parlor to Plate dairy podcast from Ever.Ag Insights, our all-star panel discusses watch factors heading into the summer months. Dairy markets have been on a wild ride – will that continue over the next few months? How might milk production fare as temperatures warm up? Are growing conditions favorable as planting wraps up?
Join host Katie Burgess and panelists Matt Tranel, Jon Spainhour 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;25
VOICEOVER
Future trading involves risk and is not suitable for all investors. Content provided in the statement is meant for educational purposes and is not a solicitation to buy or sell commodities.
00;00;08;27 – 00;00;32;17
KATIE
Hello. Welcome to Parler to play a weekly podcast from American sites dedicated to offering listeners enlightening discussion and actionable intelligence about dairy markets. I’m your host, Katie Burgess. We’re excited to have you along. If you enjoy the show, please like us. Subscribe and tell a friend or two as we kick things off. First, let’s timestamp the episode. It’s about 1130 Central Time on Wednesday, May 29.
00;00;32;19 – 00;00;53;02
KATIE
Today, BLOCK Cheddar closed at 181 a pound. That’s down $0.02 from last week to a three week low. Barrels finished at 196 a pound. That’s down $0.07 from a week ago. Butter is at 297 and a half, down nearly $0.14 from last week. And nonfat dairy milk is trading at 116 and a half, down three quarters of a cent from a week ago.
00;00;53;05 – 00;01;15;12
KATIE
Turning to grains nearby, corn’s at 457 a bushel. That’s down $0.04 on the week, while soybeans are at 1217, down $0.29. So let’s get to the show. Turning to our panelists, we’ve got a great group along today. First, joining us from Platteville, Wisconsin. We’ve got Matt TRANEL, who helps dairy producers manage price risk and then representing our commercial dairy customers.
00;01;15;12 – 00;01;25;10
KATIE
We’ve got Jon Spain, Hauer live from the Chicago office and also from the Chicago office, Mr. Jim MATTHEWS representing grain and feed markets. How is everyone doing today?
00;01;25;12 – 00;01;29;21
JIM
Really fantastic. Katie, thanks for having us. Doing great. Excited to be here, Katie.
00;01;29;23 – 00;01;49;00
KATIE
You know, it’s exciting times. It’s the end of May. Kids are getting out of school, corns popping up out of the ground, Hays being made, and soon enough it’s going to be heating up. So summer always brings a lot of interesting times in the markets, whether on the dairy side, we get concerned about our cows getting heat stress here or there.
00;01;49;04 – 00;02;06;29
KATIE
Grain markets are always good for a summer weather scare, too. So team today I wanted to talk about what is the biggest watch factor you have going into the summer months. And so, John, I wanted to start with you. The dairy markets have been a roller coaster here over the past few weeks. Do you think the rides going to continue and what are you watching?
00;02;07;00 – 00;02;29;09
JON
You know, Katie, if we go back to some of the earlier discussions, we saw the cheese market go from the one 4150 area to up over $2 and pretty fast fashion. And if we look to why that happened, I think a huge part of it has to do with exports. The cheese industry here in the U.S., we had record exports in March and we expect that when we see the April numbers, they’re going to be very similar.
00;02;29;09 – 00;02;45;02
JON
That’s a big hat’s off to everybody in the cheese industry that helped make that happen. But that also took a lot of cheese out of the country and out of the supply line. And at the same point in time, I think you had maybe some finished goods production issues. So you put those two together and you have an explosion of prices.
00;02;45;02 – 00;03;03;22
JON
We got up here and now I think to answer your question, are we going to see more volatility in prices? My thought would be, yeah, I think we did a lot of those exports when we were at 140 to 150 and the rest of the world was 175. Now, even after the the spot market coming down here in the last few days, we’re still well above the rest of the world.
00;03;03;22 – 00;03;23;07
JON
We’ve seen exports slow down and that we will continue to see exports slow. And that just puts more product back here in the domestic market. At the same point in time, I do expect to see prices pull back. I think until we solve all of our cheese production issues, we’re probably going to find some stability here in the 170 to 175 area.
00;03;23;07 – 00;03;43;19
JON
And then finally, on the butter side, we saw butter move higher and higher and higher all year. We moved up to three, 12 and a quarter was Friday’s settlement. That’s just an exceptionally high price at any time of the year, much less May. So that really stands out. The other thing that stands out is that the rest of the world is right around that 310 to 312 price.
00;03;43;19 – 00;04;03;17
JON
We got a cold storage report that came out on Friday afternoon. It shows that our stocks are in really good shape here in the U.S. and we’ve seen the butter market kind of fall back to earth. And as of today’s cash session, after it was over with, we ended up through that $3 mark, ended up at about 297 and a half in terms of are we going to see more action?
00;04;03;18 – 00;04;23;05
JON
My sense is, is that there’s still some concerns about the long term stock building situation of butter as well as times in the past we’ve seen the U.S. price be high. What be out of line with the rest of the world right now? Like I mentioned, the rest of the world is in that 310 ish area. I don’t know that that means that we’re going to export anything right here, right now.
00;04;23;05 – 00;04;33;23
JON
But if we go to much lower, we do open the door to exports and do a high price fat environment in the international world, and that can bring prices right back up. So those are the things we’ll be looking for.
00;04;33;25 – 00;04;50;03
KATIE
Just to build on that in the cold storage report really took the wind out of the sails of the butter market, but I won’t call it a sinking ship quite yet, just given all those other factors out thereof and users are still nervous, which is what helped get prices up to these really high levels so far. And to your point, international markets are high, too.
00;04;50;03 – 00;04;53;27
KATIE
So we’re off of a really high price, but we’re still at a very high price.
00;04;53;27 – 00;05;12;24
JON
I think that stock’s report meant something because it was a big inventory number at a high price. Right. Had we been at a lower price, I don’t think it would have meant as much. But 312 and May is kind of a, hey, there’s a problem here. PRICE And maybe that stock’s report said there may still be a problem, but it’s not as big of a deal right now as we may have thought.
00;05;12;24 – 00;05;32;19
KATIE
It could be for sure. And John, I think that’s a good segue way into Matt. One of the other pieces that we saw happened is the USDA milk production report a week ago showed that, hey, milk production still down, but it’s not as big of a problem as we thought it could be. So Matt, John mentioned, you know, he’s going to be watching milk supplies as it leads to cheese and butter production over the summer.
00;05;32;19 – 00;05;37;04
KATIE
As you’re looking at the summer months ahead, what’s the biggest watch factor on your minds? Yeah, I.
00;05;37;04 – 00;06;01;22
MATT
Think it’s milk production. Milk production has is and continues to be really the biggest watch point that we have moving forward. As you mentioned in that USDA milk production report, we are still down, but stronger milk production supplies than what we had maybe anticipated as a market going into that report. You look at throughout the countryside, certain areas such as Wisconsin continue to make strong gains.
00;06;01;22 – 00;06;19;12
MATT
California is not doing too bad either. But at the same time, we have certain areas throughout the United States that are dealing with the avian flu and seeing some struggles based upon that. So we’ll be interested to see how that kind of plays out. In the coming months. We will start to see some heat stress across the summer.
00;06;19;12 – 00;06;36;01
MATT
And I think when you talk to producers out there, that’s kind of the number one thing that they are looking at is production. They’re looking at replacement heifers being low. They’re looking at the cost of replacement heifers being high. And I think that’s just kind of the watch point that we really need to kind of keep a pulse on moving forward.
00;06;36;01 – 00;06;41;04
MATT
And I agree with John as a result of that, volatility is going to be around for quite some time yet this summer.
00;06;41;04 – 00;06;49;21
KATIE
And Jim, how about you? From a market perspective, the summer is always an exciting time in your world. What’s your biggest watch factor as we head into the summer months?
00;06;49;26 – 00;07;10;18
JIM
yeah. Now is the time, Katie. I mean, the entire spring we talk about planting, planting, planting. And I like to quote our colleague Mike North. You know, late planting is not late planning until it’s late planning and we had a lot of headlines talking about the wetness in the Midwest, a lot of the adverse weather that folks have experienced now over the past couple of weeks.
00;07;10;18 – 00;07;35;29
JIM
But at the end of the day, the crop report that we received from the USDA yesterday on Tuesday afternoon revealed that the U.S. farmer did a ton of catching up last week. And all signs point to a very similar week this week in terms of being able to find just a couple of days of sunshine, just windows open enough for guys to get out there and wrap things up.
00;07;35;29 – 00;07;56;21
JIM
So we have caught up to the five year average on corn. We have surpassed the five year average in terms of our planting pace on projected acreage on soybeans. So we’ve done a great job catching up and we have seen the markets at least the last two sessions Tuesday and Wednesday as we record on Wednesday morning, we have seen the market pull back.
00;07;56;21 – 00;08;26;20
JIM
We’ve seen corn futures come under pressure, soybean futures and soybean meal futures as well. So it is that time of year where we move beyond the Memorial Day weekend and the next big, let’s say, pivoting point for the market is the 4th of July. That’s just kind of that psychological marker as we look towards the summer and markets often peak during this stretch between Memorial Day and the 4th of July in terms of futures pricing.
00;08;26;20 – 00;08;43;02
JIM
So we got to watch these markets under pressure for at least two days now. Will it continue that way through the end of the week? It will be interesting to see. And this week just happens to also be the last trading day and just last day in general of the month of May. So we’ll have to keep an eye on some volatility there.
00;08;43;02 – 00;09;05;03
JIM
But part of the importance of keeping an eye on planting is that our friends in South America, of course, are trying to, you know, finish up their harvest. So it’s a pivotal time because we’re trying to close this gap between what is ultimately coming out of the United States in terms of its old crop and what is now coming out of South America in terms of what is fresh out of the ground for them.
00;09;05;10 – 00;09;34;19
JIM
The Argentine specifically are about done harvesting their soybeans. Will be done in the next week or two, and those beans will then be sent to port where they will be crushed and exported. And the global market will have a fresh take on some protein supply. And we’ve seen protein prices run up here in the U.S. futures wise over the last few weeks, perhaps today in yesterday’s trade in terms of meal coming under pressure, maybe an indication of, hey, we’re almost done planting beans here in the next few weeks.
00;09;34;19 – 00;09;53;29
JIM
They’re almost done harvesting beans down there. Maybe we close this gap in terms of protein availability after crushing those beans and bringing them to the export market. So it’ll be a really interesting stretch. As you noted, some are going to always bring some volatility. You know, we stress that these are seasonal tendencies and that they are trends. It’s not a guarantee.
00;09;53;29 – 00;10;19;03
JIM
And we’ve seen prices as recently as last summer, we saw two pretty severe jumps in the futures market when we saw severe heat and dryness stretches, you know, in June and July. So we always have to be mindful that adverse weather, not just through planting but through summer development as well, can have an impact on pricing. So for those buying this corn and buying this protein, we need to keep an eye on that as we push through the next month or so.
00;10;19;07 – 00;10;38;18
KATIE
Thanks for that, Jim. And I think by as you talk about the prices coming down a little and, you know, fingers crossed we have a good growing season. And if that’s the case, it feels like there could be more downside ahead for the grain market. Matt, as we look at the dairy producer side of things, we had April class three milk at 1550, but May is going to be closer to 1850.
00;10;38;18 – 00;11;00;16
KATIE
June is trading around 1950. Dairy producers are seeing some of the best milk trucks here in the upper Midwest that they’ve seen in quite some time. Producers in other parts of the country where they’re paid more on Class four, they’ve already been seeing some of those strong Class four numbers, but some strong Class three really helps. Matt, as you talk to producers you work with, how are they feeling about the margin picture as we head into summer?
00;11;00;16 – 00;11;01;22
KATIE
A little more optimistic.
00;11;01;22 – 00;11;27;24
MATT
Yeah, without a doubt. Areas within class three heavy utilization states there, their mood has definitely picked up. They are enjoying these prices. They’re hopeful that they stick around and wondering how high they might be able to go. It’s been good according to like the DMC margin piece, if you look at the margin for the coming months and we’re looking at margins that range anywhere from 10 to $12, obviously that’s built upon the all milk price versus the class three price.
00;11;27;24 – 00;11;45;18
MATT
But regardless, things are looking quite a bit better regionally up here in Wisconsin at present, we’re looking for margins to be somewhere in that 2 to 2 and a half, 100 way territory, not quite as high. And in some of the other states such as Idaho, New York or California. But things are definitely picking up and a lot more optimistic.
00;11;45;18 – 00;12;02;27
KATIE
And I was taking a look at the other I milk production model and it showed still May and June down a little bit, but probably into some slightly positive territory as we make our way into the second half of the year. You know, that being said, though, the numbers for the second half, while they’re positive, they’re like plus 2/10 of a percent.
00;12;02;27 – 00;12;14;14
KATIE
So really low when you compare that to historical standards. A big part of that, I think, is that they’re just not very many heifers out there to help grow the herd. Now, what have you heard talking to producers about can you get cows? Can you get heifers? If you want them.
00;12;14;14 – 00;12;31;14
MATT
You can get them if you’re willing to pay the price. And price is pretty steep from what I’m picking up. I mean, a lot of guys are still quoting somewhere between 20 503,000. Some are willing to pay it, some are not. And I think we have seen maybe some dairy producers adjust some of their calling schedules as a result of high replacement costs.
00;12;31;14 – 00;12;37;26
MATT
The slaughter data would say that cows are not going to market nearly as quickly as what they had been. So it really depends on the producer at this point.
00;12;37;27 – 00;12;45;15
KATIE
And Jim, when you talk to the producers on the feed side, what are you seeing as they think about their feed costs for the year ahead? Are they feeling pretty excited about it? Yes.
00;12;45;15 – 00;13;15;21
JIM
Well, say that people are feeling much more optimistic, as are we. And we noted, you know, the need to get over this final hurdle here of planting season volatility. But things are aligned for the dairy producer to be able to buy significantly cheaper feed this fall than they have the last 2 to 3 feed marketing years. Like I said, we’re cautious to say that it’s happening, but the stars are aligning and even where we sit right now is already better than what we’ve dealt with the last 2 to 3 years.
00;13;15;21 – 00;13;33;18
JIM
So again, the fact that we just came off of a record corn crop year in the United States on our recent growing season, I mean, even the projected 90 million acres from the end of March USDA planning report. If that number is static, which I think a lot of folks are starting to wonder if that number will actually grow.
00;13;33;18 – 00;13;53;20
JIM
But even if that stays static with average yields this summer, you continue to work with a very loose balance sheet in the United States in terms of corn available here. And the fact that the export program for us, it has remained fairly steady. And we can thank our friends in Mexico for maintaining a very strong purchasing pace from us.
00;13;53;20 – 00;14;19;17
JIM
But otherwise, you know, the big buyer everybody hopes to see in terms of a grain producer perspective is China. And they are clearly committed to the South Americans. They would love to remain in dependent from our grain supply. So even if with a subpar development season for corn, the lack of demand or the lack of, I guess, capacity to increase demand here would still suggest we have plenty of corn available.
00;14;19;17 – 00;14;44;05
JIM
And again, it just feels like the stars are aligning for the dairymen to be able to aim for those, let’s say, low $4 per bushel type of figures as we approach the fall of this year. So I can’t promise anything. But after two or three years of very elevated and volatile pricing, it does feel like things are starting to fall into place, have a much better purchasing level as we approach the next year.
00;14;44;06 – 00;14;51;12
KATIE
All right, One last question, John. I know you’re talking to a lot of the processors. How are they feeling about the milk supply picture for the next few months?
00;14;51;12 – 00;15;07;14
JON
You know, Kate, it’s a great question. And I think in general, people feel comfortable about milk and the milk supply. The only one thing I can add to that is at the peak, maybe people have said I just didn’t have quite as much milk as I thought. I was going to have. And so maybe that backs off a little bit of our finished goods.
00;15;07;14 – 00;15;23;17
JON
But I think in general people are looking at it saying they’re not expecting milk supplies to get worse. And in fact, I would say with Class four, you know, becoming more of a reality at these higher prices in class three haven’t rallied. It probably staved off a little bit of exodus from the industry for a little bit longer.
00;15;23;17 – 00;15;45;07
JON
I don’t know that it’s going to cause milk production to grow, but it certainly probably isn’t going to hurt things. I will point out just on the milk production side, going across the pond in the Europe, something that just kind of gets overlooked is the European milk production number for March was officially higher, just marginally. But still, we’ve talked about Europe having less and less milk and that’s been part of the impetus for higher prices in Europe.
00;15;45;07 – 00;16;06;27
JON
Now we’re going into some positive numbers, a little bit easy to lap on the year over year comparisons, but still, in the words of Phil Hyers, higher, right. And that does make a little bit of a difference. And I think other than some poor weather here in the spring, there’s a possibility that we may see European milk production start to grow year over year, even bigger as we get into the summer months and it gets a little warmer for sure.
00;16;06;28 – 00;16;22;15
KATIE
Summer is coming and there are so many things for us to be watching. That’s a wrap for today’s show. A big thanks to Matt, John and Jim. Thanks for joining me today, guys. And for our listeners, if you’re a dairy or livestock producer and you’d like to work with every egg, remember that the insurance transfer season is here.
00;16;22;15 – 00;16;40;17
KATIE
It’s the one time of year when you can transfer your dairy or livestock insurance policies to a new agent, and we’d be delighted to help. Please reach out at Insights at Evergreen AG to learn more and get connected to an agent. Finally, a big thanks to the ever Insights team for your production support. And thank you to you, our listeners once again.
00;16;40;19 – 00;16;50;05
KATIE
If you like the show, please hit subscribe and tell friends. And if you’d like to learn more about how we help customers manage risk, please contact us at Insights at Evergreen Egg.
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 – May 29, 2024 appeared first on .
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By Ever.Ag
5
55 ratings
In the latest edition of the Parlor to Plate dairy podcast from Ever.Ag Insights, our all-star panel discusses watch factors heading into the summer months. Dairy markets have been on a wild ride – will that continue over the next few months? How might milk production fare as temperatures warm up? Are growing conditions favorable as planting wraps up?
Join host Katie Burgess and panelists Matt Tranel, Jon Spainhour 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;25
VOICEOVER
Future trading involves risk and is not suitable for all investors. Content provided in the statement is meant for educational purposes and is not a solicitation to buy or sell commodities.
00;00;08;27 – 00;00;32;17
KATIE
Hello. Welcome to Parler to play a weekly podcast from American sites dedicated to offering listeners enlightening discussion and actionable intelligence about dairy markets. I’m your host, Katie Burgess. We’re excited to have you along. If you enjoy the show, please like us. Subscribe and tell a friend or two as we kick things off. First, let’s timestamp the episode. It’s about 1130 Central Time on Wednesday, May 29.
00;00;32;19 – 00;00;53;02
KATIE
Today, BLOCK Cheddar closed at 181 a pound. That’s down $0.02 from last week to a three week low. Barrels finished at 196 a pound. That’s down $0.07 from a week ago. Butter is at 297 and a half, down nearly $0.14 from last week. And nonfat dairy milk is trading at 116 and a half, down three quarters of a cent from a week ago.
00;00;53;05 – 00;01;15;12
KATIE
Turning to grains nearby, corn’s at 457 a bushel. That’s down $0.04 on the week, while soybeans are at 1217, down $0.29. So let’s get to the show. Turning to our panelists, we’ve got a great group along today. First, joining us from Platteville, Wisconsin. We’ve got Matt TRANEL, who helps dairy producers manage price risk and then representing our commercial dairy customers.
00;01;15;12 – 00;01;25;10
KATIE
We’ve got Jon Spain, Hauer live from the Chicago office and also from the Chicago office, Mr. Jim MATTHEWS representing grain and feed markets. How is everyone doing today?
00;01;25;12 – 00;01;29;21
JIM
Really fantastic. Katie, thanks for having us. Doing great. Excited to be here, Katie.
00;01;29;23 – 00;01;49;00
KATIE
You know, it’s exciting times. It’s the end of May. Kids are getting out of school, corns popping up out of the ground, Hays being made, and soon enough it’s going to be heating up. So summer always brings a lot of interesting times in the markets, whether on the dairy side, we get concerned about our cows getting heat stress here or there.
00;01;49;04 – 00;02;06;29
KATIE
Grain markets are always good for a summer weather scare, too. So team today I wanted to talk about what is the biggest watch factor you have going into the summer months. And so, John, I wanted to start with you. The dairy markets have been a roller coaster here over the past few weeks. Do you think the rides going to continue and what are you watching?
00;02;07;00 – 00;02;29;09
JON
You know, Katie, if we go back to some of the earlier discussions, we saw the cheese market go from the one 4150 area to up over $2 and pretty fast fashion. And if we look to why that happened, I think a huge part of it has to do with exports. The cheese industry here in the U.S., we had record exports in March and we expect that when we see the April numbers, they’re going to be very similar.
00;02;29;09 – 00;02;45;02
JON
That’s a big hat’s off to everybody in the cheese industry that helped make that happen. But that also took a lot of cheese out of the country and out of the supply line. And at the same point in time, I think you had maybe some finished goods production issues. So you put those two together and you have an explosion of prices.
00;02;45;02 – 00;03;03;22
JON
We got up here and now I think to answer your question, are we going to see more volatility in prices? My thought would be, yeah, I think we did a lot of those exports when we were at 140 to 150 and the rest of the world was 175. Now, even after the the spot market coming down here in the last few days, we’re still well above the rest of the world.
00;03;03;22 – 00;03;23;07
JON
We’ve seen exports slow down and that we will continue to see exports slow. And that just puts more product back here in the domestic market. At the same point in time, I do expect to see prices pull back. I think until we solve all of our cheese production issues, we’re probably going to find some stability here in the 170 to 175 area.
00;03;23;07 – 00;03;43;19
JON
And then finally, on the butter side, we saw butter move higher and higher and higher all year. We moved up to three, 12 and a quarter was Friday’s settlement. That’s just an exceptionally high price at any time of the year, much less May. So that really stands out. The other thing that stands out is that the rest of the world is right around that 310 to 312 price.
00;03;43;19 – 00;04;03;17
JON
We got a cold storage report that came out on Friday afternoon. It shows that our stocks are in really good shape here in the U.S. and we’ve seen the butter market kind of fall back to earth. And as of today’s cash session, after it was over with, we ended up through that $3 mark, ended up at about 297 and a half in terms of are we going to see more action?
00;04;03;18 – 00;04;23;05
JON
My sense is, is that there’s still some concerns about the long term stock building situation of butter as well as times in the past we’ve seen the U.S. price be high. What be out of line with the rest of the world right now? Like I mentioned, the rest of the world is in that 310 ish area. I don’t know that that means that we’re going to export anything right here, right now.
00;04;23;05 – 00;04;33;23
JON
But if we go to much lower, we do open the door to exports and do a high price fat environment in the international world, and that can bring prices right back up. So those are the things we’ll be looking for.
00;04;33;25 – 00;04;50;03
KATIE
Just to build on that in the cold storage report really took the wind out of the sails of the butter market, but I won’t call it a sinking ship quite yet, just given all those other factors out thereof and users are still nervous, which is what helped get prices up to these really high levels so far. And to your point, international markets are high, too.
00;04;50;03 – 00;04;53;27
KATIE
So we’re off of a really high price, but we’re still at a very high price.
00;04;53;27 – 00;05;12;24
JON
I think that stock’s report meant something because it was a big inventory number at a high price. Right. Had we been at a lower price, I don’t think it would have meant as much. But 312 and May is kind of a, hey, there’s a problem here. PRICE And maybe that stock’s report said there may still be a problem, but it’s not as big of a deal right now as we may have thought.
00;05;12;24 – 00;05;32;19
KATIE
It could be for sure. And John, I think that’s a good segue way into Matt. One of the other pieces that we saw happened is the USDA milk production report a week ago showed that, hey, milk production still down, but it’s not as big of a problem as we thought it could be. So Matt, John mentioned, you know, he’s going to be watching milk supplies as it leads to cheese and butter production over the summer.
00;05;32;19 – 00;05;37;04
KATIE
As you’re looking at the summer months ahead, what’s the biggest watch factor on your minds? Yeah, I.
00;05;37;04 – 00;06;01;22
MATT
Think it’s milk production. Milk production has is and continues to be really the biggest watch point that we have moving forward. As you mentioned in that USDA milk production report, we are still down, but stronger milk production supplies than what we had maybe anticipated as a market going into that report. You look at throughout the countryside, certain areas such as Wisconsin continue to make strong gains.
00;06;01;22 – 00;06;19;12
MATT
California is not doing too bad either. But at the same time, we have certain areas throughout the United States that are dealing with the avian flu and seeing some struggles based upon that. So we’ll be interested to see how that kind of plays out. In the coming months. We will start to see some heat stress across the summer.
00;06;19;12 – 00;06;36;01
MATT
And I think when you talk to producers out there, that’s kind of the number one thing that they are looking at is production. They’re looking at replacement heifers being low. They’re looking at the cost of replacement heifers being high. And I think that’s just kind of the watch point that we really need to kind of keep a pulse on moving forward.
00;06;36;01 – 00;06;41;04
MATT
And I agree with John as a result of that, volatility is going to be around for quite some time yet this summer.
00;06;41;04 – 00;06;49;21
KATIE
And Jim, how about you? From a market perspective, the summer is always an exciting time in your world. What’s your biggest watch factor as we head into the summer months?
00;06;49;26 – 00;07;10;18
JIM
yeah. Now is the time, Katie. I mean, the entire spring we talk about planting, planting, planting. And I like to quote our colleague Mike North. You know, late planting is not late planning until it’s late planning and we had a lot of headlines talking about the wetness in the Midwest, a lot of the adverse weather that folks have experienced now over the past couple of weeks.
00;07;10;18 – 00;07;35;29
JIM
But at the end of the day, the crop report that we received from the USDA yesterday on Tuesday afternoon revealed that the U.S. farmer did a ton of catching up last week. And all signs point to a very similar week this week in terms of being able to find just a couple of days of sunshine, just windows open enough for guys to get out there and wrap things up.
00;07;35;29 – 00;07;56;21
JIM
So we have caught up to the five year average on corn. We have surpassed the five year average in terms of our planting pace on projected acreage on soybeans. So we’ve done a great job catching up and we have seen the markets at least the last two sessions Tuesday and Wednesday as we record on Wednesday morning, we have seen the market pull back.
00;07;56;21 – 00;08;26;20
JIM
We’ve seen corn futures come under pressure, soybean futures and soybean meal futures as well. So it is that time of year where we move beyond the Memorial Day weekend and the next big, let’s say, pivoting point for the market is the 4th of July. That’s just kind of that psychological marker as we look towards the summer and markets often peak during this stretch between Memorial Day and the 4th of July in terms of futures pricing.
00;08;26;20 – 00;08;43;02
JIM
So we got to watch these markets under pressure for at least two days now. Will it continue that way through the end of the week? It will be interesting to see. And this week just happens to also be the last trading day and just last day in general of the month of May. So we’ll have to keep an eye on some volatility there.
00;08;43;02 – 00;09;05;03
JIM
But part of the importance of keeping an eye on planting is that our friends in South America, of course, are trying to, you know, finish up their harvest. So it’s a pivotal time because we’re trying to close this gap between what is ultimately coming out of the United States in terms of its old crop and what is now coming out of South America in terms of what is fresh out of the ground for them.
00;09;05;10 – 00;09;34;19
JIM
The Argentine specifically are about done harvesting their soybeans. Will be done in the next week or two, and those beans will then be sent to port where they will be crushed and exported. And the global market will have a fresh take on some protein supply. And we’ve seen protein prices run up here in the U.S. futures wise over the last few weeks, perhaps today in yesterday’s trade in terms of meal coming under pressure, maybe an indication of, hey, we’re almost done planting beans here in the next few weeks.
00;09;34;19 – 00;09;53;29
JIM
They’re almost done harvesting beans down there. Maybe we close this gap in terms of protein availability after crushing those beans and bringing them to the export market. So it’ll be a really interesting stretch. As you noted, some are going to always bring some volatility. You know, we stress that these are seasonal tendencies and that they are trends. It’s not a guarantee.
00;09;53;29 – 00;10;19;03
JIM
And we’ve seen prices as recently as last summer, we saw two pretty severe jumps in the futures market when we saw severe heat and dryness stretches, you know, in June and July. So we always have to be mindful that adverse weather, not just through planting but through summer development as well, can have an impact on pricing. So for those buying this corn and buying this protein, we need to keep an eye on that as we push through the next month or so.
00;10;19;07 – 00;10;38;18
KATIE
Thanks for that, Jim. And I think by as you talk about the prices coming down a little and, you know, fingers crossed we have a good growing season. And if that’s the case, it feels like there could be more downside ahead for the grain market. Matt, as we look at the dairy producer side of things, we had April class three milk at 1550, but May is going to be closer to 1850.
00;10;38;18 – 00;11;00;16
KATIE
June is trading around 1950. Dairy producers are seeing some of the best milk trucks here in the upper Midwest that they’ve seen in quite some time. Producers in other parts of the country where they’re paid more on Class four, they’ve already been seeing some of those strong Class four numbers, but some strong Class three really helps. Matt, as you talk to producers you work with, how are they feeling about the margin picture as we head into summer?
00;11;00;16 – 00;11;01;22
KATIE
A little more optimistic.
00;11;01;22 – 00;11;27;24
MATT
Yeah, without a doubt. Areas within class three heavy utilization states there, their mood has definitely picked up. They are enjoying these prices. They’re hopeful that they stick around and wondering how high they might be able to go. It’s been good according to like the DMC margin piece, if you look at the margin for the coming months and we’re looking at margins that range anywhere from 10 to $12, obviously that’s built upon the all milk price versus the class three price.
00;11;27;24 – 00;11;45;18
MATT
But regardless, things are looking quite a bit better regionally up here in Wisconsin at present, we’re looking for margins to be somewhere in that 2 to 2 and a half, 100 way territory, not quite as high. And in some of the other states such as Idaho, New York or California. But things are definitely picking up and a lot more optimistic.
00;11;45;18 – 00;12;02;27
KATIE
And I was taking a look at the other I milk production model and it showed still May and June down a little bit, but probably into some slightly positive territory as we make our way into the second half of the year. You know, that being said, though, the numbers for the second half, while they’re positive, they’re like plus 2/10 of a percent.
00;12;02;27 – 00;12;14;14
KATIE
So really low when you compare that to historical standards. A big part of that, I think, is that they’re just not very many heifers out there to help grow the herd. Now, what have you heard talking to producers about can you get cows? Can you get heifers? If you want them.
00;12;14;14 – 00;12;31;14
MATT
You can get them if you’re willing to pay the price. And price is pretty steep from what I’m picking up. I mean, a lot of guys are still quoting somewhere between 20 503,000. Some are willing to pay it, some are not. And I think we have seen maybe some dairy producers adjust some of their calling schedules as a result of high replacement costs.
00;12;31;14 – 00;12;37;26
MATT
The slaughter data would say that cows are not going to market nearly as quickly as what they had been. So it really depends on the producer at this point.
00;12;37;27 – 00;12;45;15
KATIE
And Jim, when you talk to the producers on the feed side, what are you seeing as they think about their feed costs for the year ahead? Are they feeling pretty excited about it? Yes.
00;12;45;15 – 00;13;15;21
JIM
Well, say that people are feeling much more optimistic, as are we. And we noted, you know, the need to get over this final hurdle here of planting season volatility. But things are aligned for the dairy producer to be able to buy significantly cheaper feed this fall than they have the last 2 to 3 feed marketing years. Like I said, we’re cautious to say that it’s happening, but the stars are aligning and even where we sit right now is already better than what we’ve dealt with the last 2 to 3 years.
00;13;15;21 – 00;13;33;18
JIM
So again, the fact that we just came off of a record corn crop year in the United States on our recent growing season, I mean, even the projected 90 million acres from the end of March USDA planning report. If that number is static, which I think a lot of folks are starting to wonder if that number will actually grow.
00;13;33;18 – 00;13;53;20
JIM
But even if that stays static with average yields this summer, you continue to work with a very loose balance sheet in the United States in terms of corn available here. And the fact that the export program for us, it has remained fairly steady. And we can thank our friends in Mexico for maintaining a very strong purchasing pace from us.
00;13;53;20 – 00;14;19;17
JIM
But otherwise, you know, the big buyer everybody hopes to see in terms of a grain producer perspective is China. And they are clearly committed to the South Americans. They would love to remain in dependent from our grain supply. So even if with a subpar development season for corn, the lack of demand or the lack of, I guess, capacity to increase demand here would still suggest we have plenty of corn available.
00;14;19;17 – 00;14;44;05
JIM
And again, it just feels like the stars are aligning for the dairymen to be able to aim for those, let’s say, low $4 per bushel type of figures as we approach the fall of this year. So I can’t promise anything. But after two or three years of very elevated and volatile pricing, it does feel like things are starting to fall into place, have a much better purchasing level as we approach the next year.
00;14;44;06 – 00;14;51;12
KATIE
All right, One last question, John. I know you’re talking to a lot of the processors. How are they feeling about the milk supply picture for the next few months?
00;14;51;12 – 00;15;07;14
JON
You know, Kate, it’s a great question. And I think in general, people feel comfortable about milk and the milk supply. The only one thing I can add to that is at the peak, maybe people have said I just didn’t have quite as much milk as I thought. I was going to have. And so maybe that backs off a little bit of our finished goods.
00;15;07;14 – 00;15;23;17
JON
But I think in general people are looking at it saying they’re not expecting milk supplies to get worse. And in fact, I would say with Class four, you know, becoming more of a reality at these higher prices in class three haven’t rallied. It probably staved off a little bit of exodus from the industry for a little bit longer.
00;15;23;17 – 00;15;45;07
JON
I don’t know that it’s going to cause milk production to grow, but it certainly probably isn’t going to hurt things. I will point out just on the milk production side, going across the pond in the Europe, something that just kind of gets overlooked is the European milk production number for March was officially higher, just marginally. But still, we’ve talked about Europe having less and less milk and that’s been part of the impetus for higher prices in Europe.
00;15;45;07 – 00;16;06;27
JON
Now we’re going into some positive numbers, a little bit easy to lap on the year over year comparisons, but still, in the words of Phil Hyers, higher, right. And that does make a little bit of a difference. And I think other than some poor weather here in the spring, there’s a possibility that we may see European milk production start to grow year over year, even bigger as we get into the summer months and it gets a little warmer for sure.
00;16;06;28 – 00;16;22;15
KATIE
Summer is coming and there are so many things for us to be watching. That’s a wrap for today’s show. A big thanks to Matt, John and Jim. Thanks for joining me today, guys. And for our listeners, if you’re a dairy or livestock producer and you’d like to work with every egg, remember that the insurance transfer season is here.
00;16;22;15 – 00;16;40;17
KATIE
It’s the one time of year when you can transfer your dairy or livestock insurance policies to a new agent, and we’d be delighted to help. Please reach out at Insights at Evergreen AG to learn more and get connected to an agent. Finally, a big thanks to the ever Insights team for your production support. And thank you to you, our listeners once again.
00;16;40;19 – 00;16;50;05
KATIE
If you like the show, please hit subscribe and tell friends. And if you’d like to learn more about how we help customers manage risk, please contact us at Insights at Evergreen Egg.
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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