In the latest edition of the Parlor to Plate dairy podcast from Ever.Ag Insights, our all-star panel discusses important drivers in dairy and grain markets. How are dairy end users planning and hedging as they look to 2025? What steps are producers taking to manage risk heading into next year? And how is South American weather impacting grain prices?

Join host Kathleen Wolfley and panelists Zach Bowers, Kevin Peterson and Britt O’Connell for a spirited discussion.

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

(Transcript auto-generated)

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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.

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Hello and welcome to Parler to Play a weekly podcast from Drag Insights, dedicated to offering listeners enlightening discussion and actionable intelligence about dairy market. I’m your host, Kathleen. Hopefully. We are excited to have you along. If you like what you hear. Please like, subscribe and tell a friend or two. Let’s timestamp today’s recording. It is Wednesday, October 2nd around 1 p.m. central time.

00;00;34;25 – 00;00;58;07

Can’t believe it’s October. The fall leaves are starting to get a little bit more crunchy here in Western New York, but here’s a rundown on the markets. See me block cheddar close at 203, down $0.15 on the week. Barrels at 215, down $0.28. Spot butter down to the lowest level since January at 268, $0.18 lower. And the nonfat dairy milk market closed at $1.36, down $0.02.

00;00;58;12 – 00;01;20;23

And now for the grain market. December corn is trading around 433 per bushel. November soybeans at 1057 per bushel. And the December soybean meal market is trading around 342 per ton. It’s another week. And another all star panel from the financial services team. First, we have Kevin Peterson in our Chicago office. He helps commercial clients manage risk and anchor in the Platteville office.

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We have Brett O’Connell, who works diligently for grain producers across the country. And last but not least, we have Zach Bowers, who works with dairy producers to manage milk market revenues. Tim, welcome to the show. It’s been a little while. Thanks for having us on today. Is everybody excited for fall? You got your pumpkins out. The moms are ready to go.

00;01;39;17 – 00;01;44;27

Dad. Summer’s over by the weather does feel nice. Pumpkin spice latte season, plaid shirts and all.

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Oh my goodness. I love a good pumpkin spice when appropriate, but I’m more of an apple kind of girl. So we’ve been hitting up the local apple orchard getting those apple cider donuts, which I don’t know, they hit the apple cider donuts in the Midwest. Or is that just a northeast thing?

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Oh, they sure do. We got our apple picking.

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Yeah. This place. I don’t think they actually grow their own apples anymore, but they’re still a staple in the Kathleen running around on the weekend stop. In any case, team thought today we could talk about what is the most important thing in the markets right here, right now on October 2nd, the beginning of the fourth quarter. Kevin, let’s start with you.

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What’s the most important thing in your mind right now?

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Yeah, from my viewpoint, I think the most important thing is actually done with Q4 and the hedge wise and really looking out into 2025 as a lot of end users start to set their budget for next year. Obviously, we’ve been talking for a while now. Two massive plants coming online. But the big question still remains can we get them out?

00;02;41;05 – 00;02;57;26

And and so I think if you’re an end user looking out at that curve class three and cheese curve, obviously the highest full year curve we’ve ever seen. And so it doesn’t look very appealing to go out and get anything done right now again, even as budgets are being set. But again, it’s the question of can we get the milk?

00;02;57;26 – 00;03;19;13

And if we can next year it should be extremely oversupplied in cheese, obviously. However, though if we can’t, things might still run a hair tight. We have a lot to make up for this year’s production wise off cheddar specifically to kind of get back to average levels of production. So I think that plant out of Hill Mark can help turning to other commodities like butter as well, where we have a little bit of a pullback here.

00;03;19;13 – 00;03;41;19

Obviously, it seems that at least for now, butter manufacturers are pretty happy with stocks in the coolers for the holiday season. But we know, as in years past, you know, that can kind of turn on a dime. But futures out there as well is still holding now a premium to current spot levels. And so yeah that’s my biggest focus right now continues to be those 2025 markets and getting customers taken care of out there.

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So I guess thinking about your 2025 commentary, aside from new cheese plans coming online. So let’s theoretically say they get all or most of the milk that they need. What are some of the other cases for a bearish market? What could take the market lower aside from the new plants coming online in your mind?

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Obviously the plants are the big one. But aside from that, you know demand has been pretty sluggish all year domestically. And I think we see that continue to be a trend. I don’t think that’s obviously going to help the markets at all as well. And then you know, always we talk about export ability or on marginal product. Europe has been running pretty hot over there.

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However, if they cool down and we’re not priced competitively, I think that’s also going to be another case in the market next year.

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But right now it seems we are pretty competitive on a forward looking basis versus let’s say, European mozzarella prices. So we are on competitive footing. I guess the question that I keep coming back to you in the cheese market is we exported a heck of a lot of cheese in the first half of the year, record amounts of cheese.

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How does the market digest cheese availability or the export picture? If we don’t hit those record high levels again, I mean, if we don’t hit new records, does the market look at that as more of a bearish indicator, if indeed we do have more cheese on the marketplace, come say March, April next.

00;04;54;22 – 00;05;17;12

Year I mean yeah, absolutely. Yeah. If we get more supply and exports cut off, we’re going to be in a glut of products. Even just looking at those manufacturing plants on their own, those new cheese plants, maybe we’re talking about a 5% increase in cheese, whereas demand usually is more around maybe the 2% level. So yeah, without expanded export capabilities or a really good demand, we’re going to outpace ourselves.

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Quick math for 2 to 3 years on new cheese coming online.

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History does say you don’t tend to grow capacity and demand in a linear fashion. So I don’t know. Stay tuned. 2025 I think it’d be pretty interesting from a cheese market perspective. Zach your turn. What’s your most important thing?

00;05;32;28 – 00;05;53;23

Yeah, I mean, to go off of that, I’m the same opinion, right? 2025. Right. We should be pretty well wrapped up at this point with Q4 hedges. And if you’re not I mean, don’t feel like you missed the boat, right? We’re off of our highs, but we’re still talking $2,122 milk out there, right? October. We don’t see a lot of risk in mathematically, but November December are free to go as they please.

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So, you know, if you’re still open on some stuff there, that’s obviously priority number one, as we’ve seen, you know, that’s the most affected by this recent fall off in the cheese spot market. Right. But the beauty of it has been you know, as Kevin alluded to, budgets are being set. We’re clearly seeing the end user starting to step out into that 2025 curve to start establishing some of their hedges.

00;06;13;21 – 00;06;32;16

Right. We’re seeing some government purchase orders coming through, as they typically do this time of year, as well as, I think, export orders, too, when they look out at that curve and see sub $2 futures versus what they’re paying right now. Right. So we want to really take advantage of that because, you know, even though near eight months in class three are falling, we’ve seen that Janet Junker push into new highs as of yesterday.

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Right. So what we definitely want to take advantage of that for all the reasons that, you know, you guys just said. Right. The number one question mark is if milk is going to be there or not. Well, we’re going to walk into a time period where seasonally we’re going to get more milk out of the same cows, right.

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We do know of some plans for some expansion on dairy farms across the US coming in the next six months as well. Two that coincide with some of those cheese plants. So I think you’re going to start seeing the milk. For the most part, it feels like pretty much every state, you know, obviously, barring California and Wisconsin, has really dealt with the bird flu.

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So that shock is probably out of our system as well. So yeah, taking advantage of the support in the trade volume we’ve seen in the 2025 curve is definitely our priority number one right now.

00;07;11;03 – 00;07;28;23

What about the powder space. Are you guys watching anything in particular there? I know New Zealand milk production has been a little stronger to start the season. China’s on air, more active at G.D.. There’s some talk about stimulus packages in China. What should people be watching out for as it relates to the powder market?

00;07;28;25 – 00;07;47;21

Yeah. You know, I think when I look at that market, I kind of compare it right now to similar to cheese, I mean, definitely supply constraints in there. I think year to date now through July, I want to say we made about 200 million less pounds of nonfat here in the US. And so obviously, I agree that demand has been a little sluggish, especially out of China.

00;07;47;21 – 00;08;06;16

But still, when you make that much less powder year over year, I think you can tend to see prices rise, which we have continuing to hold kind of a premium on New Zealand. And I think that could continue as well just with our supply constraints. They obviously have weakened demand as well out of China, but tend to be making more skim milk powder down there versus whole milk powder.

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So yeah, I would look to see us continue to trade a premium to them, whereas historically that probably isn’t the norm.

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Right? I don’t want to forget about you and the grain market. The ever important grain market. What’s the most important thing going on on your side of the desk? So I think really what we’re.

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Going to be watching right now is South American.

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Weather.

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That is the.

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Thing that sort.

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Of was the catalyst behind this most recent run in the grain and seed complex, as we saw the funds.

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Carrying a.

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Pretty aggressive short position on both corn and beans and looking to cover that as some of this early South American weather was a bit questionable. Now, as we move forward, forecasts do look more amicable for a good growing season in some of these drier parts of Brazil, with rains forecasted to continue to fall into and through October. But I think that’s really going to be the main watch point.

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Purpose has been really early in the US this year. It’s amazing how many guys are already done with soybeans, but anecdotal evidence of both the soybean and the corn crop suggests that it is going to be a very strong crop. We’ve heard of some really pretty high wild yields out here. Not to say it’s great everywhere, but even in the areas that are disappointing, you know, those folks are only maybe 5 or 10 bushels off of their average, which is pretty incredible, especially considering some of the early season struggles and damage that some of those folks had.

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So I think South.

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America weather, that.

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Is our main watch point here in the grain and feed space.

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How’s demand looking at grain and feeds? It seems like every once in a while I’ll catch little notes from the grain team around export orders. Stronger. Weaker than years prior. Yeah, especially on corn.

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It’s not.

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Really a demand.

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Issue. We’ve seen really solid demand for corn products. It’s the production issue, if you will, meaning we’ve simply out produced our current demand. Although I can’t say that it’s poor demand. It’s very strong demand. If you look at all three of your major corn demand centers on the soybean side of things, you know, we continue to crush soybeans in this country at a near record breaking pace every month with the export program is lacking.

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And we have seen some sales here in the last few weeks, particularly to China, which is something that we needed to see happen. But we’re still behind pace of where we really need to be. And so that’s something.

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We’re going to.

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Continue to watch there as well.

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Well, a huge thank you to Brett, Zach and Kevin 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 listener, for joining us today. If you like what you hear, subscribe on your favorite app. If you’d like to learn more about how we help people manage risk, contact us at [email protected].

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