Ted, T3 and Anna talk through the problems caused by chronically high milk supplies before diving into a discussion on why the widening block-barrel spread hurts dairy farmers.

Anna: Welcome to "The Milk Check," a podcast from T.C. Jacoby & Company, where we share market insights and analysis with dairy farmers in mind. Today is November 1st. We've still got too much milk, Class III prices aren't doing what we would generally expect for this time of year, even though demand seems okay. Ted, why don't we start off with your impressions on what's going on right now?

Ted: Well, we're in a very unique situation where 75% or 80% of the time, in the second half of the year, the prices for milk and dairy products go up. I guess as late as three or four months ago, we thought that that cycle was gonna continue for 2018. Obviously, it hasn't. And we find ourselves in actually a pretty desperate situation with the Class III price nudging the $14 range. The PPDs are at a lower level than we've seen in my memory. And Class I sales are bad. However, in spite of all that other sales, other than fluid milk sales are pretty good. Exports are still very good on an annualized basis, but the price of milk is low. The question is, how is this problem going to be solved anytime soon? We're going to need to see a reduction in the amount of milk out there in order for these prices to go up.

We've heard a lot of conversation about it. Everybody talks about it. There's sales. There's talks about record number of dairymen in Wisconsin and New York, and so on going out of business, but the production goes up and not down. And our production numbers have reflected that for the last six months.

T3: The feeling that I get is that in the last month with the price of cheese dropping instead of going up as we get into the holiday buying season, if you're a dairy farmer who's been on the fence trying to decide whether to stay in this business, it's almost like the last month has been that final nail in the coffin that's made you decide maybe this isn't worth it. And it takes three, four, five, six months for those decisions to play out. But I wonder if the latest price decrease was that final nail into the coffin that that maybe has changed the landscape a little bit. Maybe we're finally going to see some of the negative production numbers that we need to see if we're going to hope for a turnaround in dairy prices.

Ted: We all would like to see a little light at the end of the tunnel other than the train coming at us. I'm sure the dairymen even more than us would like to see that. However, we don't want to paint a false picture. We got to see some production reductions.

T3: Our current situation reminds me a lot of the mid-1980s. The '70s was a period of high volatility. Milk prices, corn prices, oil prices all significantly increased. There was a period of significant inflation, but more importantly, there was a period of significant increases in commodity prices and significant volatility. And then in the '80s, inflation subsided. The economy as a whole started to grow strongly, but it didn't really pull the agricultural commodity business with it. The '80s was a great time to be an investment banker in the stock market. It was not a great time to be a dairy farmer. The mid to late '80s was a period of relative stability in dairy prices at the low end of the spectrum.

Ted: Let me take a little bit of an issue with that just for the sake of the discussion, to point out what's different. It wasn't the '80s necessarily, but in 1974, we had a huge price increase going on for two or three years in dairy prices. And the psychology at that time was that it would never end. It's like every increase in pricing, anytime that market's going up, whether stock market, dairy prices, milk prices, cheese prices,