In the latest edition of the Parlor to Plate dairy podcast from Ever.Ag Insights, our all-star panel delves into what’s spooking markets. Is EU pricing likely to trick US markets into rising? How might US elections treat export demand? Is avian influenza still frightening dairy prices? 

Join host Kathleen Wolfley and panelists Brian Fletcher, Zach Bowers 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;16 – 00;00;29;07

Hello and welcome to Tricks or Treats. Oops! I mean Parlor to Play, a weekly podcast from Everyday Insights dedicated to offering listeners enlightening discussion and actionable intelligence about dairy markets. I’m your host, Kathleen Wolf Lee. We are excited to have you along. And if you like what you hear, please like us! Subscribe and tell a friend or two to timestamp today’s recording.

00;00;29;07 – 00;00;55;22

It is Halloween Eve, Wednesday, October 30th, a little after one central time. Here is a quick rundown in the market. See Me Black Cheddar closed at $1.89, down $0.03 on the week earnings finish at $1.93, up $0.02. Spot butter finished at 271, up a nickel, and the nonfat dry milk market closed at $1.39, up $0.03. And now for the grain market December corn is trading around 411 per bushel.

00;00;55;22 – 00;01;17;21

January soybeans at 989 per bushel. And the December soybean meal contract is trading around 301 per ton. It’s a new week, and another star studded panel from the ever AG Financial services team. From our producer group, we have Zach Bowers on the feed side, we have Brandon Weigel, and from our commercial division, we have Brian Fletch Fletcher. Team got a big question for you.

00;01;17;22 – 00;01;19;05

What are we doing for Halloween?

00;01;19;05 – 00;01;31;06

I think mine’s a little more predictable than Zach. I got one party on Friday. That’s about it that I’m going to. You going to be a milkman, though? Ooh, wife is pregnant. She’s going to be cow. So there you go. How about you, Brandon?

00;01;31;07 – 00;01;46;29

Well, we’re, doing a little bit of a costume party here in the office tomorrow, so plan is. And I don’t know if this is going to be a well sought after or not, but it’s a partner costume party, so my partner and I are going to be dumb and dumber. The old suit jacket, the orange ones. The blue ones.

00;01;46;29 – 00;01;47;26

I think it’ll be fun.

00;01;47;29 – 00;01;50;18

I was gonna say, Brandon, are you dumb or are you dumber?

00;01;50;19 – 00;01;51;14

Do to be determined.

00;01;51;18 – 00;02;03;19

I don’t know here. I won’t yell it as my three year old has been yelling it. He’s going to be rumble on the double. And I have one ladybug. Because you know, why wouldn’t you use a hand-me-down ladybug costume for a nine month old?

00;02;03;19 – 00;02;05;01

That’s fair. Nice.

00;02;05;01 – 00;02;10;16

I’m supposed to be writer, but I don’t know how I’m going to come up. The writer from Bob patrol costume.

00;02;10;16 – 00;02;24;00

Sounds like we’re on the same wavelength. Kathleen, my three year old, is going to be writer, believe it or not. And my one year old is going to be the Tin Man. That was my Tin Man costume when I was one year old, so oh.

00;02;24;00 – 00;02;24;28

My gosh, we’re.

00;02;24;28 – 00;02;30;22

Starting to recycle quite a bit. I still need to figure out what I’m going to be, but I’ll definitely be trick or treating tomorrow.

00;02;30;22 – 00;02;50;29

Well, I hope everybody has their candy already, but I know at the grocery store last week when I went, candy was pretty tough to find unless you wanted Christmas candy. But anyway, Tim, as it is Halloween and as is tradition, I’m curious what’s spooky in the markets to you? Brandon, let’s start with you on the grain side. What’s spooky in feed?

00;02;51;03 – 00;03;13;09

So spooky. And feed. I would say an hot topic on everyone’s plate. We know with the end of October comes a big week next week with the election, right? There’s a lot of differing opinions around how election results can change export demand. Specifically, as we look at volumes these last few weeks, both corn and soybean meal export volumes have been very strong.

00;03;13;09 – 00;03;34;20

If we look at corn specifically, we’ve just come off the 13th largest single weekly corn export volume ever. So there’s a lot of question marks as to around if those volumes will be maintained as we work our way into the middle of November and the end of the year. I think offhand, you would say probably not. The volumes that we’ve seen thus far are probably not sustainable.

00;03;34;20 – 00;03;56;10

I think we’re seeing a lot of pre-election buying in case there are any policy changes or tariff implications as we work our way to 2025, and you’re seeing some opportunistic buying from places like Mexico, because there is a lot of corn that is piling up in the Midwest. That has to be moved. A lot of these terminals and elevators are running out of storage space in basis values are at seasonal lows.

00;03;56;10 – 00;04;16;00

So it’s an opportunistic buy for Mexico. I would say that the big question mark there is how does a decrease in export volume lead to changes in prices? Because so far corn has been very stagnant. We have been stuck in this sideways 4 to 420 range. Big spook is does corn break $4? Finally, if we see some of this export volume dry up.

00;04;16;01 – 00;04;35;11

Your comment around Mexico got me thinking about some commentary we saw out of the president, Claudia Sheinbaum, earlier this week or late last week around basically trying to rebuild some self-sufficiency within Mexico’s supply chain, particularly as it relates to corn. Do you think that that’s potentially something a little spooky in the US corn market or for U.S. corn sellers?

00;04;35;11 – 00;04;53;18

I think it could be, but I don’t think it’s much of an event here in the near term. You know, for them to change some of the programs and change some of the policies that they have, it likely take several years. It’s one of those things that’s easier said than done. They are very reliant on US imports, specifically on the corn side of things.

00;04;53;18 – 00;05;00;19

They are our largest corn importer. So I don’t think that’s anything that really spooks the market or changes things here for the next few years.

00;05;00;20 – 00;05;18;29

I mean, I think the whole market is spooky from a dairy man’s perspective. The high prices that we saw the last couple months was clearly supply driven, right? Not so much demand. I mean, demand was good throughout with exports and you could say domestic demand was okay. Nobody was ever excited about it. Nobody said it was awful. But none of that has really changed.

00;05;18;29 – 00;05;40;11

On the demand perspective. We’re in what should seasonally be probably our highest demand season as we buckle up and order product for holiday season. And in that, we’ve obviously seen a large sell off from the cheese side and from the butter side too. Right? Supply side has fixed a lot of the issues that they had over those summer months, which was heat and bird flu throughout many states.

00;05;40;11 – 00;05;59;24

We still are seeing the bird flu issue in California, but I don’t believe that to be the biggest issue as some people talk about it or say it is, especially being we saw a record number of spot loads trade at what some would say was maybe their peak supply issue for butter. That was right. So to me, I just it’s hard for me to make a story that says we can go higher from here.

00;05;59;24 – 00;06;16;16

I don’t think because supply side still has its issues of, you know, we’ve been down. Last milk report was up, but prior to that you had over a year of down on milk production. We have the heifer issue. The replacements aren’t there. That’s all. Probably putting a higher floor on this thing. But $20 milk to me doesn’t seem sustainable.

00;06;16;16 – 00;06;31;22

You’ve got new cheese plant taking milk last week. You’ve got a couple more cheese plants in the next 3 to 4 months firing up as well. So the cheese story is hard to make a bull case for, in my opinion. And then the fact that, you know, we had this bird flu in California and that’s going to short the class for market.

00;06;31;22 – 00;06;43;15

Meanwhile we see butter you know, break 30 $0.40 on you know, record volume doesn’t really bode well for me either. Right. So to me 2025 is held in there. Well take advantage of it because this market is spooky.

00;06;43;15 – 00;06;45;09

All right. How about on the commercial side.

00;06;45;09 – 00;07;08;26

Well I tend to agree with a lot of what Zach is saying with more finished goods coming to the US market, components being very strong, a lot of milk supply in some parts of the country, it looks as though growth is on the horizon. But what I would say the part that is a little bit unnerving on the commercial side is continue to be focused around the EU marketplace.

00;07;08;26 – 00;07;35;14

And if you were to look at dairy product pricing in EU, relatively US, the US is trading at a lower price tier, while the EU prices have come off the highs they’ve been, the rate of decline is slowed and in some cases we’ve seen forward prices actually increase. Example being over the course of last week we are seeing some over the counter trades for EU cheese in the 202 to 203 area.

00;07;35;14 – 00;08;00;13

For Q Q1, we’re seeing similar type product trade in the 208 to 210 area. Now, if you’re to compare each of those relative to the US, Q one trades, the US is trading lower. And what that means is it’s not a huge margin difference. It’s about $0.15 give or take. But it does put the US at a lower price tier, which should put them at the forefront of gaining export traction.

00;08;00;13 – 00;08;26;02

So it is one of those things that if you were to say, what would change that? I think the general opinion would be EU market pricing is still high. And the general thought, I would say is that their prices would continue to come down. We just haven’t seen that the last, say, 5 to 10 days. So if for whatever reason they continue to consolidate or even move higher, then I would say that probably continues to raise the floor of US pricing.

00;08;26;02 – 00;08;51;24

So we’ll be closely monitoring that moving forward. With that said, Zach was really highlighting a lot of US centric elements that can override that, at least in the short term. It does feel like the prospect of U.S. cheese production growing at near historic rate is we are beginning that ascent, you know, looking back in other periods of time when we have grown new capacity, we have mixed results.

00;08;51;24 – 00;09;09;06

But I would say our most recent example of that is the first half of this year and the first half of this year. We were from a cheese perspective. We were trading anywhere from 140 to 150 as new production was coming online. And I think that’s in a lot of people’s minds of what new production can do.

00;09;09;06 – 00;09;36;23

So I would say that my spooky thing that I’ve been watching is domestic demand. To piggyback on what you guys were saying, domestic demand has not been all that exciting for the last several months, and not all that exciting going into the holiday season. And with these new plants coming online, if we don’t have domestic demand and exports, firing on all cylinders or at least running pretty hard, seems likely that we could find ourselves in an oversupply situation.

00;09;36;24 – 00;09;40;13

I think that, from a producer perspective, should definitely be in the spooky camp.

00;09;40;16 – 00;09;58;15

Yeah, it feels like our reliance on exports is only going to grow, and if we’re not at a severe price advantage, then it puts a heavier weight on domestic production. And all the data that we’ve seen recently has suggested that domestic consumption is not growing very fast.

00;09;58;15 – 00;10;15;19

Yeah, for sure. And people are continuing to lean on value of a show me some limited time offers, show me some promotional activity, and maybe I’ll pick up a couple extra bricks, a cheese, or take the family out for dinner to take advantage of that value. But in any case, a huge thank you to the team for joining me today and sharing your insights with our listeners.

00;10;15;19 – 00;10;30;16

As always, thank you to our media team for mixing and mastering. And thank you to you, 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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