In The Grain Feed, Jim Matthews is joined by a rotating cast of analysts to discuss what dairy and livestock producers can be doing to manage their risk.
Questions or comments? Topics you’d like to see discussed? Contact us at Insights@Ever.Ag or give us a call at (312) 492-4200.
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Transcript:
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Future trading involves risk and it’s not suitable for all. Investor contact provided in the strike is meant for educational purposes and is not a solicitation.
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To buy or sell commodities.
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Welcome to another episode of The Grain Feed brought to you by Ever.Ag This is your weekly news feed for all things grain and all things feed. Each week we bring you updates on the markets with unique perspectives from amazing team of analysts with the intention of helping dairy and livestock producers manage their risk. I’m your host, Jim MATTHEWS, reporting from the Chicago office.
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And a slightly cooler.
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May morning, but warm weather is coming, folks. Don’t you worry.
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Maybe we’ve turned the corner here finally entering the summer. But weather is also a hot issue.
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No pun intended for the markets as well. We’ll get to that in a minute. First, joining me today, as always.
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Director of feed procurement, Mr. Jake Kingsley. And returning to the grain feed from Cuba.
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Wisconsin dairy broker, agent, risk manager and.
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Restaurateur.
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Mr. Matt Tranel. Team, how are we today? That’s great. I’m doing well as well. Thank you, guys. I appreciate that.
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Lots to run through today.
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But first, Paige, if you would kindly timestamp the broadcast. It’s Thursday morning. Feed
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Markets were steady, lower here at.
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The board after what had been a noteworthy rebound for the December corn futures market. But as I look at my screens as we start recording here, corn has come.
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Back to unchanged.
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So potentially continuing this hot streak for the corn market. Last week, while Jake and I were in Florida visiting some of our dairy and livestock producers, that corn market finally broke that $5 level for a minute before quickly rebounding towards 530 yesterday. So whether as I referenced, remains that key issue now warm and dry in the Midwestern corn growing areas, that heat coming in, perhaps next week into the eyes, states getting into the eighties, maybe even nineties for some.
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So watching that very closely managed money appears to be taking some risk off the table as we head into a three day Memorial Day weekend. And as we’ve noted on a couple of prior episodes, they now have a net short position. So if the managed money characters out there are covering their positions, that means they’re covering those shorts and helping support this market.
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So be interesting to see their position and open interest and the CFTC’s commitment of Trader report tomorrow afternoon, Friday afternoon.
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Miguel, what has been.
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That stubborn little byproduct finally giving way a bit, giving us some relief, remains under some notable pressure and now trading near its lowest levels really since Thanksgiving or slightly before. So nice to see us finally achieving that 3.75 target for December meal futures and perhaps giving us some opportunities to step in a new crop. Hedges for your protein purchases.
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With feed on the decline.
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Milk pricing has mostly been moving in tandem with that feed. Pricing also pushing lower while we were in Florida last week, Jake, but yesterday it felt that maybe we brought markets back to life for perhaps a brief moment. So we will turn to Mr. Matt TRANEL to give us some insights on the dairy markets. Matt, what’s happening with milk?
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But
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So there’s there’s a few different things that are happening in milk here lately. And yeah, the trend for the longest time has been lower in milk
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until really this week, which began the week in a higher fashion. But when you look at the board right now,
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we’re right back to where we started the week.
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But
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the main thing that has essentially come out
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this week,
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is on Tuesday,
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the USDA essentially sent out a solicitation
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to purchase cheese and other food products. And this went back to a program that came out in September of 2022 called The American Agriculture to Feed Kids and Families Program. And I guess before we go any further, USDA was
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they stressed that this was not a food box program.
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So just want to make that very clear, because any time we kind of hear government buying cheese, it always kind of goes back to the food box program where markets just were put in disarray
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many months. So this is not a food box program. But USDA mentioned that they were going to buy roughly 47 million of cheese in various styles of cheeses.
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And ultimately bids on this program are due by June 5th.
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And if this were to fill in full
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just looking back at maybe some previous delivery periods, we estimate that it would be roughly 5 to 7 million of cheese
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per month. USDA has not specified delivery timeframes as of yet, so we’re not going to speculate on that just yet.
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But we see this as supportive to the market, not necessarily a game changer in the dairy markets, but ultimately, when this was released, many minds went to previous programs. And so we did see some short covering. We did we did see some buying on the futures markets yesterday, Wednesday morning. We saw a lot of the futures markets early in the day, up 30 to $0.40.
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But by the time spot cheese came around, nobody really cared. We saw spot cheese
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take black cheese down
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seven and a half cents, I believe it was. And futures were essentially lower on the day. We also saw this week a new record as far as volume traded and particular contract month. That month was the June
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2023 contract we saw over 1800 contracts traded on
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Tuesday, I believe it was.
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And ultimately it’s more or less a spread trade. We’re
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seeing short futures moving out of the June contract into the July contract. We watched open interest fall in June. We saw open interest gain in July and we saw 1100 or so of those trades
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take place earlier this week on on Tuesday.
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The other pieces that we are seeing this week and as of Friday were two big reports.
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We always have a milk production report and a cold storage report during a particular month. And so we did see the April reports come out
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One on Friday was the milk production report. Some of the highlights there.
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saw production come in at 19.2 billion. We’re up 3/10 of a percent year over year,
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down just a little bit from where the March numbers came in.
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Count numbers came in at 9.4, 3 million head. We were down 16,000 cows for March. A lot of that had to do with the fire that took place in Texas during April
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because 15,000 of those cows of the 16 essentially came from the state of Texas, production in Texas was up just 1.3% year over year in April.
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That compares to a 5.1% growth rate that we saw on average in Q1 2023. And then just kind of looking at some of the other milk sheds, we saw California production down 1.9% in April. Year over year. The Southwest region was down a half a percent and then all other milk sheds were up 1.2 to 2.2%.
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Cold storage also came out. This one came out
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on Wednesday. Cheese inventories
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were printed at 1.46, 3 billion. We were up 3 million compared to March. Pre report estimates had April closer to one and a half billion pounds. So we look at this particular report as friendly to the cheese market.
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But are inventories right in line with expectations at 328 million?
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USDA did revise their March numbers higher by 16 million to 309.
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We look at this report for butter as neutral to the market. So as a result, we are looking at markets in the dairy complex today, down about $0.05. Nothing huge. We are seeing a little bit of a build out into the 2024 market. We’re up about $0.05, but cold storage was very neutral to the market.
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okay, understood. Thank you, Matt. Lots of info. There’s we appreciate you running through all of that. And as you noted, sometimes the markets can get a little jittery depending on certain news stories, especially as they reflect on previous events that have affected the markets. So always take those headlines, digest them for what they really are or what might be and move forward from there.
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So thank you very much, Matt. Let’s turn it to Jake. Jake, we hit the road last week. We were in the south east. Next week we will be in the south west. So what are you reporting to our dairymen regarding the physical feed markets on your travels?
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a lot of time kind of focusing on managing corn futures with the decline from $6 down to touching that $5 mark.
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think we broke through that when we were in Florida last week and we’ve rebounded
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fairly nicely since then.
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So it’s good to get a little bit of coverage on while we were down there. Focus now is kind of shift more to our
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protein needs here.
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Futures, as you had mentioned earlier, have drifted lower. I think December’s trading somewhere around the 375 ish mark here this morning.
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We’ve been kind of having folks take advantage of that, either manage that on the exchange with the option strategy of some sort or even in different parts of the country, particularly the western U.S., We’ve been looking at maybe getting part of your October, November, December or October March.
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Canola needs bought up while we’re down here just by a cash contract with your mill. More towards the central U.S. the true grain belt there where more of the soybean production and crush occurs.
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Canola is maybe not as attractive, but there are some pretty decent numbers for soybean meal in select spots. So some of those folks are able to take advantage of that and get that booked up.
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So we had some opportunity in corn and now we’re having some opportunity in protein. I think
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most folks have seen fiber prices come down considerably. Our folks in the West had all the rain that they could possibly take earlier this spring, as we know. And so that’s allowed for quite a bit of forage production, particularly in California and other parts of the West.
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They’re relieved. A large swath of the country of the pressure from that. I mean, we saw soy whole pellets drop from 300 something down to high ones in the Midwest. I think alfalfa has come off of the 350 to 400 mark in the western U.S. down towards
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somewhere in the mid to low twos at this point and feels like there’s still some pressure to be had on it.
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So starting to see some opportunities here. I don’t think we have to go in on everything for the next crop year, but certainly a nice opportunity to have much better prices than we had
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last year. And get started with this feed buying
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Good deal, Jake. Thank you for that. Yeah, get started with this feed buying year.
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I think that’s an excellent note to end on. From your standpoint, start layering in from the prices we’re seeing. We’ve been very patient with a lot of folks for the last few months now anticipating this pressure from larger balance sheets. So let’s perhaps step in to what the market has given us to this point, just in case things happen this summer that might alter the supply side, at least of the feed markets, depending on that Midwestern weather reference.
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So speaking of Midwestern weather, we got a big.
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Raise this weekend. You guys.
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The Indy 500.
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I know you’re both avid fans.
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So let’s do a bold prediction for the Indy 500. Will borrow from Kathleen and.
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Phil from their dairy download podcast.
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Bold Prediction.
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Matt.
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Who wins the Indy 500
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number three.
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Car excellent no name.
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Zone.
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Okay.
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Okay.
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Understood.
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I appreciate your honesty, Jake.
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Bold prediction. Who wins the Indy 500?
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I love I know less about the Indy 500 than I do about South Dakota trivia.
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All right. Let’s let’s let’s re approach this one name in Indy 500.
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Racecar driver.
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Mario Andretti, retired.
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more Mario Andretti.
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Okay. We have we have a name. Matt, Do you have a name for an Indy 500?
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Right.
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Don’t Google
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NASCAR. Not yeah. My if anyone’s wondering, my guess is I’m going to take your word on that. But my guess is Scott Dixon. Scott Dixon.
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Very eventful, bold predictions.
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This week. I hope the fans watching this show enjoyed that one. And we’ll see who is right, since maybe I’m the only one that named someone potentially racing. Very exciting stuff for us in the Midwest, you guys. That’s what we have going on here at the green field. So thank you very much, gents. Great insights. With the exception of your bold predictions, great insights to the markets this week.
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We greatly appreciate you both being on the show. A big thanks to Matt for returning to the show. Thank you to Corey and the Ever Insights crew for their support. Thank you to Paige for her production magic and thank you to the viewers for watching the green feed.
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We will not every.
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Show next week with the holiday coming up. So please have a safe and wonderful Memorial Day weekend ahead. And please take a moment to remember why we celebrate such a holiday and the sacrifices that have been
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made throughout this great country’s history. That is all for today. We will see you next time on the grain feed.
