In the latest Parlor to Plate dairy podcast from Ever.Ag Insights, our all-star panel digs into holiday demand ahead of Thanksgiving. How is the upcoming cooking and baking frenzy impacting butter prices and cream multiples? What moves are Class III and IV futures making? And are feed costs still giving dairy producers something to be thankful for?

Join host Katie Burgess and panelists Brian Fletcher, Ryan Yonkman and Natalie McCarty for a spirited discussion.

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

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Content provided in this segment is meant for educational purposes and is not a solicitation to buy or sell commodities.

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Hello and welcome to Parlor to plate a weekly podcast from ever again sites dedicated to offering listeners enlightening discussion and actionable dairy market intelligence. I’m your host, Katie Burgess. We’re excited to have you along today. If you like us, please subscribe and tell a friend or two. To kick things off, let’s timestamp the episode. It is 10 a.m. central time on Wednesday, November 20th.

00;00;30;13 – 00;00;49;11

Here’s a rundown of CME spot markets over the past week. Yesterday, Black Cheddar closed at one 72.25 per pound. That’s up half a cent on the week. Barrels finished at one 72.5, up $0.04 on the week. Now it’s my turn. Milk is hanging out right around 140 per pound. That’s unchanged from a week ago. And butter is at two 58.25.

00;00;49;12 – 00;01;07;14

That’s down a penny and a half from last week. And now at the lowest level dating back to January of this year. Turning to grains. Corn is up for 26 today, unchanged from a week ago, while January soybeans are at 988 per bushel, down $0.22 from a week ago. So let’s get to the show. We’ve got a big week coming up.

00;01;07;14 – 00;01;26;15

Milk production report comes out from USDA this afternoon. So note we are recording on Wednesday morning before those official numbers are released. We’ll get cold storage on Monday. But I think what everyone is waiting for Thanksgiving coming up just a little more than a week away at this point. Tim, welcome to the call. Thanks for joining today from Chicago.

00;01;26;16 – 00;01;31;21

We’ve got Brian Fletcher and Ryan Jackman. So guys, tell me, what are your favorite Thanksgiving foods?

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Well, I feel like mine has shifted over the years. My mother in law makes a heck of a stuffing. So I’m going to go with the stuffing this year.

00;01;40;13 – 00;02;06;19

To add on to that, I used to say turkey. Judging by the last few Thanksgivings, though, I think I’m officially off the turkey, especially depending on who’s cooking it. I’ve had a few, myself included, very dry, not so good kind of Christmas story outcomes. So now last year we actually had steak and I’m sticking to that. I know it’s not a traditional Thanksgiving entree, but it was pretty delicious and a lot easier to prepare.

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Well, I’d say for our dairy farmers they’re probably okay with that. And then joining us from California, we’ve got Natalie McCarty. Natalie, what’s your Thanksgiving favorite?

00;02;14;00 – 00;02;22;00

I think my favorite is pumpkin pie, but it has to have lots of whipped cream on top of it. So support in the dairy industry.

00;02;22;06 – 00;02;40;27

That’s right. Lots of good dairy. So of course, turkey is the star. Well, except I guess in the Fletcher household. But other than that, dairy is, very important supporting player when it comes to the Thanksgiving menu. That tons of butter on that turkey mashed potatoes and are covered in butter. Exactly to your point, Natalie. Whipped cream for that pumpkin pie.

00;02;40;27 – 00;03;02;24

Or maybe some hot cocoa afterwards in the afternoon. So I wanted to bring a few fun facts. So traditionally from the butter market perspective, some of our biggest butter promotions over the course of the year are going to be happening right now. So the week leading up to Thanksgiving, or probably the week of Thanksgiving, I know just here the last week we saw butter promotions more than double compared to the first week in November.

00;03;02;25 – 00;03;18;16

So hopefully that’s encouraging consumers to go out and pick out a bunch of butter. Another one though, that kind of surprises me. So despite being from Wisconsin, macaroni and cheese is not a Thanksgiving staple around here. But according to the internet, the number two side dish, I know. Do you guys have macaroni and cheese in your families?

00;03;18;17 – 00;03;23;28

We’ve actually introduced a macaroni and cheese casserole that cannot leave the table at this point.

00;03;24;03 – 00;03;29;15

Now that there’s a three year old and a one year old, we have tested that out and it’s definitely a fan favorite.

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I think it’s a good call. I mean, we macaroni and cheese regularly, but Thanksgiving seems like a good time to add it in. And of course, though, I mean, being here from Wisconsin, we always have a nice cheeseboard bread or a little turkey made out of cheese. All those types of things too are important. So for consumers out there, I think that dairy super important on Thanksgiving.

00;03;47;04 – 00;04;06;15

And then for us watching markets, you know, watching really carefully how does that consumer demand play out? I think that on one hand we talk a lot about how consumers you have felt stress this year, dealing with inflation. Yet at the same time, Thanksgiving, Christmas coming up, time to celebrate. So it’ll be interesting to see how do consumers got there and what are their purchasing patterns look like.

00;04;06;20 – 00;04;15;14

Moving to the markets a little more though. Butter really important for Thanksgiving. But what are prices have been soft. Ryan, can you give us the update on what’s happening there? Yeah.

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From a global perspective we’re seeing a lot of mixed signs. And so if we focus on the US side of things over the last, let’s say, 68 weeks, we have seen butter prices break that $3 price move into the low to 60s and broke to 60 yesterday, I believe. And it’s been really interesting because I would say that break in price, it came at a time where we saw global fat prices actually quite stable and it also came from a domestic perspective earlier than I would say, the general consensus of when this would happen.

00;04;50;14 – 00;05;14;09

But what’s been uncovered since that is that on the bear side of the equation, almost of the year, our butter inventory situation has been very, very healthy. So that continues to be the case. And what’s been really interesting is since the butter price has made this move and held this move, the domestic cream market has really weakened from a counter seasonal perspective.

00;05;14;09 – 00;05;42;23

So overall, the sense we’re getting is that if you if you need bulk salted butter, then you can find it. You can find it in the Midwest market and the western market. There by no means is any shortage. And right now what’s really interesting is the free market is very well-supplied as well. So this week in particular, we are hearing there was a quite a bit of cream exiting the state of Idaho and making its way all the way into California comes in multiples.

00;05;42;23 – 00;06;08;14

We were hearing sub 105 multiples delivered in the California, which looking at that, if you have excess churn capacity, there is basically a physical arbitrage where you can buy cream, turn it into butter, use the forward curve and view, line it up correctly. There’s a potential profit by doing that carry. So to me that should signal that cream should be getting bought very easily.

00;06;08;14 – 00;06;35;17

The fact that it’s still available makes me feel like the general market, even with that taking place, that there just isn’t an appetite to move bulk butter right now. You know, from a domestic perspective, it’s really kind of been an interesting trade. And globally, I think the wild card at this point is as we’ve made this move lower our prices relative not only to New Zealand but mainly to Europe, we have widened that gap in terms of our discount to the global market.

00;06;35;17 – 00;07;00;09

So now the prospect of exports is on the table. That’s the big debate right now saying does our lower forward curve allow us to get some material bulk exports. There’s always more resistance within that than you would think. Mainly because a lot of manufacturers have to switch up their production schedules. If they switch up their type of product, they have to make unsalted and salted, they have to make 82% fat, sort of 80.

00;07;00;09 – 00;07;26;11

So it’s not as easy saying we’re guaranteed to get a bunch of exports, but we’re definitely having that conversation this year. Whereas last year that wasn’t even in the realm of possibility. So overall, what’s going on pretty I would say bearish near-term added perspective, you know, supportive as we get in later into 2025. But right now the tone’s been hard to find a shining star in that at least the domestic market right now.

00;07;26;11 – 00;07;28;12

But maybe Thanksgiving, we’ll turn it around.

00;07;28;13 – 00;07;57;11

Who knows? I know I think that’s the tough part about the butter space right now, is that there’s so much focus on getting butter moved and into consumers hands here over the next four weeks. But then once the ball drops on New Year’s Eve, that butter demand really slows down quite a bit. And so I think that the manufacturers out there exactly to your point about cream, are just trying to be very strategic on what do we need to do in the next 4 to 6 weeks, but then also thinking and making plans for 2025, where there is still a lot of uncertainty out there.

00;07;57;14 – 00;08;01;26

Speaking of butter, any things we should be watching for in the Cold Storage report on Monday afternoon?

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Yeah, I think two things. It’s been interesting to see the weakness in not only the Korean market, but also the butter market with California over the last two months being the highlight of the milk production conversation. So today, I think the first to look for is, you know, that California milk production number. It is widely debated in terms of how negative it may be.

00;08;24;23 – 00;08;47;17

And then you said next Monday or Tuesday we have cold storage. And yeah, I guess within that, I would say that probably been the leading force of the bearishness surrounding butter. So if we see any change in the overall inventory draw down next week, I think maybe that changes the tone. It’ll be interesting. I know we’ll be glued and refreshing our screen until we get both numbers out for sure.

00;08;47;18 – 00;08;57;28

I think that’s a good lead in to I mean, Ryan, you’re spending all day, every day working with dairy producers. What are the things you’re watching for in the Milk Production Report and what have you? Just generally been hearing out there from folks?

00;08;57;28 – 00;09;22;26

Yeah, I think I don’t love the set up because I think right now we’re in the space of everybody is hoping for some good news to hit today on the milk report and hoping for some good news to hit and cold storage bought in regards to. We’ve had a decent little break, as I’m sure everyone has watched happen primarily December and in the first quarter, but we’ve seen the deferred get hit a bit too, and I’d say for dairies that are looking to, you know, clean up, hedging the first half, let’s just be real.

00;09;22;27 – 00;09;38;20

We know there’s a camp of dairies that took on a lot more risk. So I think there’s some hope for one more push, a Thanksgiving push, and maybe these reports with the California News, maybe remind the market of, hey, us milk is still pretty tight. And, you know, maybe stocks draw down. And in that is hope of a rally.

00;09;38;20 – 00;09;58;19

Now I think dairies ultimately are prepared to manage more risk into as the outlook for next year I still think looks to be one surrounded with more risk in regards to a lot of what we’ve talked throughout this year with the new processing plant and yes, a little more milk. So we’re kind of in this weird spot of a lot of risk managed in kind of hoping for one more little pop brewski to get a little more done.

00;09;58;22 – 00;10;19;09

You outlined it well as we’re heading into 2025, as I work with dairy producers, if milk production really starts coming at us and demand isn’t that great, you could see a pretty soft scenario for early next year, given some of the new cheese processing capacity. Yeah, when we look at the international space, like Brian kind of referenced that, hey, if we can get some product exported, whether it’s cheese or butter, that provides a more bullish scenario.

00;10;19;09 – 00;10;40;28

So I mean, I think for customers right now on both sides, whether you’re a buyer or seller, you need to be looking at that 2025 risk management plan pretty in-depth just to figure out, making sure you’re protected. But, you know, ideally leaving yourself some flexibility by using options are insurance to take advantage of market moves. Because, you know, if we’ve learned anything from 2024, prices probably went lower than we expected this spring.

00;10;40;28 – 00;10;58;00

On the cheese front, higher than we expected this fall. On average, our forecast was pretty close, but on any given month there tends to be a lot of volatility. So I think that’s an important lesson going into 2025. However, I would say for our dairy producers on the feed side, Natalie, things are looking good. It’s a little easier to make decisions over there.

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I know you’ve been talking to producers out in California on the road in Idaho last week. What are you hearing from folks that you talked to?

00;11;05;00 – 00;11;29;23

Yeah, I mean, I think as people count their blessings this year, I think they’re definitely counting their blessings and feed right now on the futures front, only versus last year, corn is down 10.7%. Wheat’s down three you know and change. And then the leader in the down board right now is soy meal at down 38%. So I think it’s got smiles on a lot of people’s face.

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And I think a lot of people are looking to take advantage of these down markets.

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So yeah, Natalie, those are pretty notable declines. And bringing feed prices back to producers to the lowest we’ve seen in some time. I know that this is always a dangerous one. When we look at margins on paper, a feed costs and milk prices, it’s shaping up pretty good for 2025. You know, there’s always things out there like interest rates, labor costs, all these other inflationary parts too that play a role.

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But what’s the mood out there as producers look into next year.

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Coming for mine? I was looking at this before the call. You know, at this point in time, harvest is over. A lot of, I’d say, clock type contracts are getting in place for next year. Budgets are in place, if you will. I think with every week forward as dairymen, we’re getting a lot more dialed in on basically what next year’s cost of production is going to be.

00;12;17;19 – 00;12;30;29

Don’t get me wrong, you can take feed risk and that can change. But down at the levels narrowly was talking about it. I think we’re seeing dairies. Yeah with some confidence being able to get feed bought. When you do that and you add in your operational cost, you get a pretty good idea what it’s going to cost to make milk next year.

00;12;30;29 – 00;12;45;23

Right. And so talking to some dairies, you know, looking at our own dairies, I think you’re starting to see a lot of costs for production. You know, still a out like kind of a high number. But in that 18 territory I know we’ve got some higher. I know we’ve got some lower I feel like eighteens maybe that midpoint.

00;12;45;23 – 00;13;00;22

You know, it’s by the time you take out some non milk revenue. Hey is 17 to $18 milk a breakeven spot for next year. I think it’s probably fair for a lot of the country. Again there’s some better and worse. So when you take that and map it across the curve is there opportunity in 2025 to make a buck?

00;13;00;22 – 00;13;13;15

I think the answer is for most dairies. Yes. So I’d say the margin outlook isn’t one that gets people giddy, but it’s at least one where it’s like, hey, it’s there, right? We’ve all lived through curves where it’s not, so it’s viewed as opportunity and guys trying to be careful.

00;13;13;15 – 00;13;35;12

Certainly, I think to piggyback off of what Ryan said, I mean, you look at the nearby prices and they’re very cheap. But as you go out in the futures curve, you know, there really isn’t much of a carry at all. So you can, you know, for example, on the protein side, with it being down 38% right now, you can lock in some pretty attractive levels even for next year.

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So I know it seems a little far out, but we’re looking at some options, strategies and things like that. On the risk management side as well.

00;13;42;05 – 00;14;02;13

Sounds like we have a lot of things to be thankful for as we’re looking into 2025. That’s a wrap for today’s show. Big thanks to our panelists Brian Ryan and Natalie. Appreciate you all joining me today. And for the conversation and a big thank you to our listeners. We know that many of you are producers, processors, retailers who are working hard each and every day to provide wholesome food for the world.

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We really appreciate everything you do for the industry, and we’re honored that you choose to help support you in those endeavors. I’d like to wish everyone a very wonderful Thanksgiving. And then, as always, big thank you to our team here at Every as well. Appreciate the production support. And finally, if you’d like to learn more about every week and how we help customers manage risk, please contact us at insights at ever.ag.

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