In the latest Parlor to Plate dairy podcast from Ever.AgInsights, our all-star panel dive into current dairy and grain market trends. How are falling cheese prices affecting the market? What strategies are being used to manage risk in 2025? How might upcoming U.S. policy changes influence exports?

Join host Kathleen Wolfley and panelists Jake Kingsley, Kevin Peterson and Matt Tranel for a spirited discussion.

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

(Transcript auto-generated)

00;00;00;09 – 00;00;08;22

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

00;00;08;25 – 00;00;31;28

Hello, welcome to Parler to play a weekly podcast from ever again sites dedicated to offering listeners enlightening discussion and actionable intelligence about dairy markets. I’m your host, Kathleen Wooly. We are excited to have you along. If you like what you hear, please like us! Subscribe and tell a friend or two to timestamp today’s episode. It’s Wednesday, November 13th around 11:30 a.m. Central time.

00;00;31;29 – 00;00;53;08

Here’s a quick rundown of the markets. CME Block cheddar today closed at $1.69, down $0.06 from the prior Wednesday. Barrels close at $1.68. Down $0.13. Spot butter finished at 263 a nickel lower, and the nonfat dairy milk market closed at $1.39, basically unchanged on the week. And now for the gray market. D.C. corn is trading around 426 per bushel.

00;00;53;09 – 00;01;13;27

January soybeans at 1005 per bushel. And the soybean meal market is trading around 290 per ton. It’s a new week, and another star studded panel from the financial services team. On the feed side, we have the one and only Jake Kingsley from our commercial division. We have Kevin Peterson and from our producer group in Platteville, Matt Trino. Team how are we today?

00;01;14;00 – 00;01;15;12

Pretty good. Doing well.

00;01;15;14 – 00;01;20;17

Jake, you’re a Kansas City fan. Kansas City and the bills are playing this week. I’ll be honest, I’m a little nervous about the game.

00;01;20;18 – 00;01;23;22

I’m way more nervous than you. I don’t know if you watched last week.

00;01;23;22 – 00;01;42;17

Well, I mean, we’re missing some of our stud receivers here with the bills. And playing Kansas City always makes me nervous. We won’t go into the history, but good luck. But I hope we beat you. In any case, guys, let’s get into the meat of today’s discussion, which is not about football team. We’ve had a pretty big tone shift in the market over the past few weeks.

00;01;42;24 – 00;01;50;21

I’m curious, what’s your take on what’s been transpiring in the markets, and how are you helping folks manage risk in this environment?

00;01;50;27 – 00;02;15;13

Yeah, it’s been an interesting shift in 2025. We’ve had a almost a dollar decline in the barrels, at least in the last four weeks. I would say about $0.70 on the total cheese price. You’re starting to see that hit 2025 with some offers back there in the futures. You also have more capacity coming online and folks more so sitting on their hands back there waiting for the futures, especially on cheese, to try to come and meet where their budgets are.

00;02;15;13 – 00;02;37;27

And the caveat to that might be hearing of some talks of potential front loading of cheese and maybe even butter exports out of the country before the presidential shift. In the end of January, and potential tariffs off of that could be some front loaded buying for next year’s needs abroad. But so far, you know, prices continue to trend lower here on spot.

00;02;37;27 – 00;03;04;19

We’re at probably a bottom here spot wise. And milk’s beginning to turn around a little bit. And so I think that’s bringing more people to be a little more bearish in 2025. However, you still need to be hedged back there. We’re obviously shifting more towards options for that, what we’d call inflated 2025 curve from historicals. Also last year we had a seasonally uncommon run up in April where we went to 190 on average, where is typically our flush.

00;03;04;19 – 00;03;07;25

And so there’s definitely still some risk in 2025, I think.

00;03;07;25 – 00;03;21;08

Matt, I guess on the dairy side, what are you thinking? I mean, producers had a pretty good look at 2025. Are you advising folks still take a pretty aggressive move here, given the fact that we have washed out quite a bit on class three? Well, I.

00;03;21;08 – 00;03;39;20

Think we still have to think in the large scale terms where we’re at as a market. Yes, we have washed away probably about a dollar dollars 25 from our peak in Q1, about $0.70 in Q2 as well over the course of the last 3 or 4 weeks. But at the same time, we’re not that far away from $19 milk in Q1 and Q2.

00;03;39;20 – 00;04;09;16

And when you look at Q1 and Q2 being around $19, that’s a very strong price compared to history. And so I’m still looking at those two particular quarters. I would say that there’s probably a little bit of a change in regards to maybe how we’re hedging. It’s back when we were north of $20, I would probably say that we were a little bit more aggressive in our use of the tools that are available to us, maybe more futures, more min max type strategies.

00;04;09;16 – 00;04;29;20

As we’ve fallen, we’ve probably went to a little more of a downside coverage upside being open type strategy, whether that’s puts whether that’s some type of insurance. So that if some of the supply hiccups that were reported during 2024, if those flare back up and the buyers get tight, we can still take advantage of some of those prices.

00;04;29;20 – 00;04;51;07

So it really hasn’t changed, I guess, in my seat, as far as still going after some hedging. That’s just kind of how we’re looking at doing it. And I’m sure leading into Jake’s feed is still cheap, and so there should still be a margin across Q1, Q2 in quarters that we generally don’t make a ton of money and usually drag on farm profitability each and every single year.

00;04;51;13 – 00;05;10;20

Yeah, I would say just adding in on your margin discussion that looking just purely at the margins on paper, using DMC 2024 should turn out to be one of the best years in a decade. 2025, at least based on last week’s pricing, was still pretty solid against some of the highest prices that we’ve seen since 2014 on a margin basis.

00;05;10;20 – 00;05;20;21

And again, that’s all based on what we’re seeing on paper using current futures markets. But the margins are still there even though we have seen prices come down to some extent. I mean, Jake, what are you seeing on the feed side.

00;05;20;24 – 00;06;04;16

Yeah, I think you for probably listened or read or watched someone comment on the Trump trade and any kind of market commentary you’ve consumed over the last couple of weeks, and I believe we are watching that play out right now. We continue to see some pretty healthy export sales to Mexico and unknown destinations, which usually means China. In what feels like an attempt to front load their inventories and really load up on feed grains ahead of what they expect to be an escalation of tariff dispute and potential trade realignment over the next handful of months and year or two.

00;06;04;16 – 00;06;29;00

If history tells us anything, their expectation of such a thing is probably correct, given the last Trump term and the way that they are now lining up and announcing some of the administration appointments ahead of inauguration there in January. So we continue to see a lot of purchasing. You can probably allocate some of that to some bargain buying down here at $300 soybean meal and $4 corn futures.

00;06;29;00 – 00;06;52;24

Sure, there’s of course, the hedge against South American weather, which they’ve got a long growing season ahead of them. And there’s still some uncertainty there. Those three pieces are driving some purchasing right now. And at the end of the day, even with these big sales, we’re not seeing a tremendous run up in price, which is allowing for some good risk management opportunity here and now in the current feed year through next September.

00;06;52;24 – 00;07;17;15

If you haven’t done a lot of buying there yet, and we’re even seeing some pretty cost effective opportunities to manage risk utilizing options out for the 2526 feed year. Just again, with having some futures levels down here towards the bottom end of the range, particularly soybean meal and protein products that these folks end up buying. But there’s certainly opportunity to manage risk for quite a while right here in the feed market.

00;07;17;17 – 00;07;37;08

Matt and Jake, you both are working with dairy producers. Do you think that there is a recognition from folks that the market dynamics have changed to some extent, and that there are still these really solid margins on the table, or do you think that folks are still looking in the rearview mirror and say, hey, my September milk check was really solid and feed costs were coming down.

00;07;37;08 – 00;07;46;00

My October milk check was pretty solid. My November milkshake should still be pretty solid. Do you think that there’s a recognition that there is risk that lies ahead in 2025?

00;07;46;01 – 00;08;08;19

I think on the feed side of things, yes, the opportunity has been recognized and most are taking advantage of it, especially here in the shorter term window, the place where there used to buying feed here in the six and 12 month period out to next September because they can buy physical feed, it doesn’t cost them much out of pocket until it’s time to pay the feed bill, and they don’t have to do anything super complex to manage that risk.

00;08;08;19 – 00;08;29;12

You can just buy the flat price feed. What we would say are pretty attractive levels. And if you want to get more exotic with it, you can step in and start to own some puts to re expose yourself to downside opportunity. There are few folks stepping in, not near as many, but with the 2526 feed year, it’s hard to buy a physical feed for that time frame.

00;08;29;12 – 00;08;46;19

Just vendors aren’t super excited about selling that far in advance without knowing what their book looks like. And so there you have to step into some more intricate option strategies to maintain the cost effective approach there. And so not as many players stepping into that, but there is opportunity if you do want to try.

00;08;46;20 – 00;09;02;00

I think on the dairy producer side for milk, I think there’s definitely some hindsight 2020. I should have just protected or sold all of my way back in September October when prices were high. But as is often the case, no matter what the market you’re trading, you’re usually the most optimistic at the peak, in the most bearish at the bottom.

00;09;02;00 – 00;09;21;01

I do think we’re seeing producers begin to come to the table and say, okay, I was bullish. I’m still maybe leaning on some of the fundamentals of low heifer numbers, lower milk production, so on and so forth. But at the same time, I’m not going to give away the opportunity that’s in front of me. So let’s put on some insurance.

00;09;21;08 – 00;09;30;26

Let’s make sure I lock in some type of margin. Hopefully I’m wrong. Hopefully I pay a premium and prices go back to where my initial thoughts of where prices would go happen. But at least we have a secondary plan in place.

00;09;30;26 – 00;09;51;25

I think from a dairy perspective in general, I’m sitting in this position where there’s just a lot of uncertainty as we go into next year. There’s tremendous amount of uncertainty as we go over the next six weeks. We certainly have new plant capacity that’s coming online and the cheese market plants are actually taking milk or soon will be taking milk here in the latter 2024 and early into 2025.

00;09;51;25 – 00;10;17;02

And I’m just thinking about the volume of cheese that could be coming at us by mid year next year. It certainly seems like so long as the milk is there and oh, by the way, we’ve seen milk production in the positive in August and September, and it seems like the cows are lined up to at least help with the initial ramp up of some of those new cheese plants that we could find ourselves with a whole heck of a lot of product in our hands by mid 2025.

00;10;17;03 – 00;10;40;00

The big uncertainty to me is the demand side. It’s certainly we’ve shoved demand dynamics in the limelight over the course of the last several weeks, and that we figured out the supply side in. Holy smokes. Hey, without a major increase in demand here in the domestic market, without significant export opportunities, we could find ourselves with a lot of cheese looking for an outlet into next year.

00;10;40;00 – 00;11;01;24

So to some extent, we are modestly competitive into the international marketplace. On cheese, we usually think we need probably somewhere around 25 to $0.30 of discount versus the European market in order for those exports to pencil. So to some extent, I wonder if the recent moves in spot cheese and futures is a reaction of hey, we need to go be competitive in the international market.

00;11;01;24 – 00;11;19;20

European prices have been coming down in the last couple of weeks. We need to maintain that competitiveness to get products moving into the international marketplace. So there’s just a lot of balls in the air, a lot of uncertainty, particularly around timing. Oh, and at a Trump presidency, 2.0 on top of that, I don’t think 2025 is going to be boring at all.

00;11;19;22 – 00;11;39;07

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

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

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