In the latest edition of the Parlor to Plate dairy podcast from Ever.Ag Insights, our all-star panel discusses 2025 outlooks. How could grain markets impact dairy producer profitability in the coming months? How are cheese supply and demand looking into next year? What strategies should producers consider when hedging next year’s risk?

Join host Erica Maedke and panelists Jon Spainhour, Ryan Yonkman and Brandon Weigel for a spirited discussion.

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

(Transcript auto-generated)

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;27 – 00;00;33;25

Hello. Welcome to Parler to Play, a weekly podcast from Corporate Insights dedicated to offering listeners enlightening discussion and actionable intelligence about dairy markets. I’m your host today, Erica McKee. We are excited to have you along. And if you like what you hear, please like us. Subscribe and tell a friend or two. Today’s recording. It’s Wednesday, November 6th around 11 central time, so we are still waiting for all of the spot dairy markets to close.

00;00;33;25 – 00;00;57;12

Quick rundown today’s markets. We know Black Cheddar is at a 175, down $0.14 from last week. Wednesday barrels at 181 down 11. Now we’re still waiting for the butter market. But as of yesterday’s calls we were down $0.03 from the prior Tuesday at 268. Nonfat dry milk closed yesterday at 140. That’s up a penny from a week before today in the green complex.

00;00;57;12 – 00;01;24;23

December corn is trading at 425 per bushel. That is up $0.06 on the day. January soybeans at 1002, and then December soybean meal at $298 per ton. It is a new week. In another star studded panel from the financial services team on our team, we have Brandon Weigel with us today from our commercial division, John Speed Hower. He is one of our media stars of the GDC Analysis Podcast and host of the Forecast Update live video series.

00;01;24;23 – 00;01;38;22

And finally, from our producer group we have Ryan Jackman. So I’d like to ask our panel today, what are they watching for clues on how the 2025 dairy markets will shape up. So let’s start with you, Brandon. Let’s talk grains and what that matters to dairy producers.

00;01;38;22 – 00;01;56;12

So I guess the big thing that everyone’s watching as it pertains to grain and feed markets, as we move towards 2025 and coming out of harvest here this fall, is what is South American weather doing? That’s been the hot topic. We know that harvest in the Midwest went very well. Harvest pace is well above where it’s ever been.

00;01;56;12 – 00;02;14;06

I mean, this is a record pace for most producers. A lot of this corn bean crop that got pulled out has been taken out over the course of the last six weeks, and there’s very few people that have corner beans left to harvest. Yield results have been strong. We know that this market is going to continue to face some fundamental headwinds from the supply side.

00;02;14;06 – 00;02;36;09

I think that there’s very few concerns about, you know, having an abundant crop. We know that the domestic corn and soybean balance sheet is in a much better position in order to spend the last several years. And now South America kind of comes into focus. They were very delayed on their planting piece. If we drag this thing back, you know, just four weeks ago, they were only about 10% done with bean planting and a lot of grass, which is that primary being growing region of Brazil.

00;02;36;09 – 00;02;53;17

Fast forward here to this week. And now there are 80% planted in there, right back on track with their five year average. So as long as they continue to see good weather come to fruition, this market’s going to continue to face some of those supply driven headwinds. You know, on the flip side, we’ve kind of got a balance this up with some of the recent headlines around the election.

00;02;53;17 – 00;03;12;27

Right. And that’s where we talk about export demand specifically with soybeans in general. You know soybeans. They started off the day very poorly. We’ll say that they’ve actually recovered throughout the day. I think as the vines have digested some of this news around the election results end of the day, though, we’ve got some supply headwinds that are going to be keeping a lid over this market.

00;03;12;27 – 00;03;25;18

As we look at both the protein market and the corn market for dairy producers and, you know, downside opportunity, I think that, you know, really comes of South America’s weather continues to come at a pace that allows for that crop to potentially be another record.

00;03;25;21 – 00;03;34;27

So, Brandon, I know a lot of people have been watching us export numbers. We had a couple of really big buys. Do you see anything moving there, give or take the election?

00;03;34;27 – 00;03;58;00

Yeah, I think so. We can certainly see some softening of that export strength that we’ve seen recently as we work our way into 2025. I think that as we potentially see some of these policy changes, trade or tariffs implications, that could certainly slow the pace of export demand specifically with China. We know that’s the big one. I think there’s still some question marks as to if Mexico will be impacted with tariffs.

00;03;58;00 – 00;04;06;00

Obviously that could hurt corn export demand if we see anything happen with Mexico. But I would expect to see that slow as we move into 2025.

00;04;06;00 – 00;04;13;18

That’s good feedback Brian. And put inside. John, how about you. What are you looking ahead to in the dairy markets as you look through 2025?

00;04;13;19 – 00;04;33;22

Well, I hate to steal the thunder from the forecast update live that we talked about this morning, but there is a chart that Phil put on there, which is our favorite look. And it essentially shows the expansion and finished goods for cheese capacity. And then we match that up against the long term compound average growth rates of cheese demand.

00;04;33;22 – 00;04;58;02

And when you look at that, there are times where we stair step a little bit of capacity increase and we barely meet the growth in demand. But we’re in fairly good balance. What I think I’m looking at as we move into 2025, we’ll have more and more plants coming online with finished goods, cheese capacity and it appears, you know, on paper at least, that it’s going to temporarily outstrip the demand side of things.

00;04;58;02 – 00;05;18;21

And I think that for me, that says a lot when we look at it through the lens of the export side of things, the U.S. is probably getting into a potential export competitiveness versus Europe. We’re seeing the European prices. You know, they’ve moved lower on cheese, but still relatively strong. And that 205 to 10 area on the futures.

00;05;18;21 – 00;05;43;29

I look out there and see our Q1 futures right now for cheese are you know in that 185. So that feels like we could get some exports in the past. We might look at that potential and say that’s pretty bullish. Yet exports prices rise have no exports. Prices decline. I think when we look at it through the context of the cheese capacity that’s coming online, it’s kind of one of those deals where you’re saying, I think we’re going to need those exports just to stay above.

00;05;44;01 – 00;06;05;20

We need something to carry that product out. So I’m looking at it saying in the 2025, specifically through the lens of cheese, that we’re steady to lower from our current prices and our current future structure. If we bring on more milk production, that probably starts to accelerate that and bring the price down a little bit more. When it comes to butter, that’s a difficult one.

00;06;05;20 – 00;06;27;08

As of right now, all these cheese plants that go up theoretically mean, and the absence of more milk that that milk is going to come out of the butter powder plants and that can rob some of that capacity or the finish goes on there. That is a support of argument. However, if we do backfill this in with more milk production, right, that kind of alleviates that support of this as well.

00;06;27;08 – 00;06;29;12

That’s what I’m looking at going into 2025.

00;06;29;13 – 00;06;44;21

So as we think about exports, Mexico is generally our largest customer for cheese for nonfat. You had mentioned that the markets were moving a bit this morning in the currency space. How big is that move. And then do you see that impacting exports?

00;06;44;21 – 00;07;07;21

Well, it’s funny, Brandon mentioned earlier that the grain market kind of had its move this morning and recovered. It looks like the peso had its move this morning and recovered a little bit. So kind of a knee jerk reaction lower. But having recovered you know its losses since then. However I would point out that the peso is down in a big way versus where it was going back to the middle of May.

00;07;07;21 – 00;07;26;26

So, you know, peso moving lower removes some of that Mexican purchasing power. And then when it comes to cheese, I think a lot of the exports that we saw earlier in the year were done potentially at a flat price. When we were at $1.40, $1.50, right. And we had a strong peso. As we move forward here, you know, I know the cheese market’s coming off its highs.

00;07;26;26 – 00;07;37;19

But we’re at $1.75 and a peso that’s weaker. I think we’ll put that in the category of not necessarily being bearish. But it’s certainly not bullish. And it probably creates some headwinds for US exports.

00;07;37;21 – 00;07;44;11

Thanks for your comments John. Those are good Ryan. Let’s turn it to you. What are you looking ahead in terms of finding clues about 2025?

00;07;44;16 – 00;08;00;24

Yeah, I think the writing on the wall for us has been in place now for a couple months. As far as how we’ve been trying to see this for the dairy. I mean, you go back to the September timeframe when hindsight’s 2020, but, you know, we made our highs. That’s pretty seasonal time to do it. And felt feed margins were at their extremes.

00;08;00;24 – 00;08;19;05

And that was when we really started looking forward for the dairies. Your October through March into Q2 is, you know, hey, it’s go time to start putting some of this margin to bed. Fast forward to today. Here’s the good the bad news, the bad news. Spot milk prices broke about $6 100 right from the highs and which is strongly affected in November December.

00;08;19;05 – 00;08;36;25

But when you look at Janda of next year, Q1 is down about $0.70. But as a whole, Unity’s class story is about 20 to $0.30 off its high as a whole. Unity’s class four I think is about 20 to $0.30 off its high. So as much as hey, you missed a break right in front of you, the 2025 curve.

00;08;36;26 – 00;08;55;08

And that’s really where we assess the risk to be the greatest. That’s part of the curve we really need to pay attention to. You haven’t missed the boat yet. Yes, Q1 has moved, but the rest of the year is still there, really held in really well, very flat curve. Technically we have a carry in the curve now. If you look at class three with today’s cash move, East is trading a premium.

00;08;55;08 – 00;09;14;21

So take this one for a thought process. Jan to March milk is worth more than what it’s trading today. That’s kind of a goofy statement when you think about we’re still in November and in theory in the last tropical holiday orders. So we still view the opportunity as being one that favors dairies go into next year. I think to have a strong opinion in next year is a tricky thing.

00;09;14;21 – 00;09;35;19

So I really think you got to let the numbers do the talking. The margin opportunities. Milk in a funnel on a percentile basis is still very high. I think John laid out very nicely the obvious risks that are in front of us for next year, and I think some of them do look pretty obvious. So I think to stare at next year’s market, say, doesn’t have downside or say it has to go up is a difficult program to sign up for.

00;09;35;19 – 00;09;55;14

So we’re trying to be active. We’re hopeful in the very short term. To John’s point of view, we’re in the one 70s now, cheapest price we’ve been since last April with some holiday orders. I’d love to see one more little pop year for dairies to continue attacking the rest of the year. We don’t feel great or certain that’s going to happen, so 2025 is a big focus and just making sure guys don’t blindly let it slip away.

00;09;55;17 – 00;10;17;19

Appreciate your insights, Ryan. A big thank you to Brandon, John and Ryan for joining me on today’s episode and sharing your thoughts with our listeners. Thank you, as always, to our media team for mixing and mastering. And thank you to the listeners for joining us today. If you like what you hear, subscribe on your favorite app. And if you’d like to learn more about how we help people manage risk, contact us at insights at ever.ag.

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