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.
00:00:00:21 – 00:00:09:12
VOICEOVER
Future trading involves risk and it’s 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.
00:00:09:14 – 00:00:30:14
JIM
Hello and welcome to another edition 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 the risk. I’m your host, Jim Matthews, reporting from the Chicago office.
00:00:30:17 – 00:01:10:09
JIM
It’s been a long few weeks on the road, visiting dairies and feed mills across Indiana, New York, Wisconsin. Big thanks to Phil Plourd, president of the Insights Division, for stepping in and being an excellent host for the show. I hope everybody enjoyed his presence here. I know I always do. Joining me today, as always from Texas, director of procurement, Mr. Jake Kingsley, and two of my many travel partners of the last couple of weeks from Wisconsin dairy broker and agent Mrs Katie Burgess, and from Indiana, director of Grain Market Intelligence, Mrs. Shelby Myers team.
00:01:10:12 – 00:01:11:09
JIM
How are we today?
00:01:11:09 – 00:01:12:04
JAKE
Doing pretty good, Jim. How are you?
00:01:12:07 – 00:01:13:14
KATIE
I’m doing great.
00:01:13:16 – 00:01:16:00
JIM
I’m doing fine, thank you. I’m excited to be back hosting the show.
00:01:16:13 – 00:01:19:01
JAKE
We’re glad to have you back.
00:01:19:07 – 00:01:20:18
SHELBY
Yeah, welcome back!
00:01:20:21 – 00:01:28:11
JIM
Thank you very much. And great seeing both of you ladies in Indiana, it feels like a long time ago, but it was only like two weeks ago.
00:01:28:11 – 00:01:33:26
KATIE
It was really fun. We got to see how corn was growing across the Midwest. So, always a good time to hit the road in the summer.
00:01:33:28 – 00:01:54:14
JIM
Yeah, one could argue it wasn’t growing, or at least very well, I think, in some of the places that we had seen. But I think maybe that explains some of the market movement we’ve had over the last couple of weeks. So great to have everybody together. It’s a full house, we’ll keep this thing short and sweet for the viewers and listeners.
00:01:54:18 – 00:02:20:14
JIM
We’ll do some rapid fire commentary here, especially after the AG markets have now been back in a broader free fall after that drought driven rally we referred to moments ago. So, Paige, if you would kindly timestamp the broadcast, it’s Thursday morning, so please keep that in mind when listening or watching this recording. It’s Thursday morning here. There is a USDA report tomorrow on Friday.
00:02:20:21 – 00:02:43:27
JIM
So just keep that in mind. That’ll be 11 a.m. Chicago time for when you are watching and or listening. So let’s move forward from here. Three analysts, Rapid Fire. Let’s keep Paige happy and keep moving. Jake, two minute drill, weather markets, always a wild ride every summer, especially this year. We’ve seen the markets erase essentially this weather rally of the last couple of weeks right back to where we started.
00:02:44:00 – 00:02:46:28
JIM
So what are you seeing on the feed side of things?
00:02:47:03 – 00:03:09:21
JAKE
That’s right. Right back to where we started just a couple weeks ago. So I think if you hadn’t taken the opportunity before, you’re getting a rare second shot at putting some top side coverage on your futures exposure for new crop here, getting a chance to price out some of the rest of the summer feed usage at much lower values than we were not very long ago at all.
00:03:09:23 – 00:03:33:11
JAKE
So managing futures, utilizing options or something to cap the upside still be flexible to the downside I think is the way to go here. But we’re starting to see a little bit of shaking and moving in the basis market too. We had been taking advantage of canola there for a while. It had been drifting lower and now seems like it is bottomed out and even bounced back five or $10 higher in most places.
00:03:33:11 – 00:03:58:12
JAKE
I think that is in response to a dry weather in Canada and across the US and the fact that it was one of the better value products out there nutrient-wise. And we’ve seen soybean meal basis kind of come down and it’s stagnated, hasn’t really bounced back like canola had. So still both very good price wise, near to the historically average ranges.
00:03:58:15 – 00:04:15:18
JAKE
And with the dry weather, we’ve seen not a lot of reason to believe that they’re just going to go blow through the bottom of those ranges any time soon. So still good opportunity to step in and get a little something done there. One, we have seen that I’m a little excited about as corn basis, particularly in the rail dependent markets.
00:04:15:18 – 00:04:41:17
JAKE
The western half of the U.S. have started to drift lower in some spots, 15, 20, even $0.30 lower than what they were just ten days or two weeks ago. And I think that’s because of a) having good weather conditions across the plains states and the source regions for those folks as well as catching this rain and now and some rain in the forecast across the part of the Midwest there.
00:04:41:20 – 00:05:00:18
JAKE
So still probably 15, $0.20 above what I would call historically average in a lot of spots. California seems to be lagging on this break, but I think we we are seeing some opportunity and I would encourage folks to consider stepping in and maybe getting a little bit of corn done if you have been able to realize one of these breaks.
00:05:00:26 – 00:05:11:24
JAKE
Midwest hasn’t quite caught that move yet, but I would expect it to come if we continue to catch rains and continue to expect the export market to be quiet going into the next crop year.
00:05:11:25 – 00:05:39:11
JIM
Thank you for that, Jake. I appreciate the note at the beginning of what you’re saying here. We don’t always get a second chance when it comes to the markets, when it comes to buying opportunities, however you want to look at it, we are now getting that second shot here. So, for folks that did ride this rally out, which we encouraged, that patience on a weather driven market such as the market we’ve seen, maybe time to step back in on either side, if not both from the cash and futures perspective.
00:05:39:13 – 00:05:47:13
JIM
Shelby, two minute drill, We’ve got those big reports tomorrow that I referenced at the beginning. So what’s the scoop with those two reports tomorrow?
00:05:47:15 – 00:06:10:01
SHELBY
Yeah, tomorrow is the acreage report that USDA releases. This is a survey of what farmers actually planted compared to that March report when we were talking planting intentions. So this is the follow up to what what we thought would happen. And now what actually happened, given the spring weather. We have early estimates that corn acres are going to be about 91.8 million acres.
00:06:10:04 – 00:06:40:00
SHELBY
That’s the trade average right now. That would be about 143,000 fewer corn acres than what was presented in March, but 4% higher than planted corn acres compared to last year. Soybean acres are expected to come in about 87.7 million acres, about 220,000 more than March. But right in line with the 2022 numbers, that 87.5 million acres is about where we’ve seen soybean acres the last couple of years.
00:06:40:03 – 00:07:10:17
SHELBY
USDA and market analysts expect that to be about level with what we’ve seen in past years. All wheat acres are expected to decrease about 200,000 compared to March. That’s still going to be about 9% compared to last year. And that’s really influenced by those winter wheat acres that I know we’ve talked about here on the grain feed. There’s been incentives out there to increase wheat acreage that double crop crop insurance opportunity that you could have where you plant winter wheat through this past fall into harvesting right now.
00:07:10:17 – 00:07:32:25
SHELBY
Then throw a soybean crop on top of that and you can insure both of those. And we saw large increases to planted acres across the Midwest for winter wheat and that’s going to be influenced, I expect, in the numbers tomorrow. The other thing we’ve been watching for the acreage report are those cotton acres. It’s also something we’ve talked about here on the show.
00:07:32:25 – 00:07:56:23
SHELBY
Cotton acre forecast; all the analysts expect about 11.1 million acres to be reported tomorrow, about 100,000 acres lower than what was anticipated in March. But that’s 19% down from planted cotton acres from last year. And that one, we think is really influenced by the price of corn, the incentive to plant corn and really driving a lot of producers to switch up their southern acres.
00:07:56:29 – 00:08:20:02
JIM
Okay. Thank you for that, Shelby. Very interesting little tidbits there, especially on the wheat and cotton markets. I know our focus a lot of the time when we’re speaking with dairy producers, when it comes to these acreage reports, naturally, it’s corn. Is the primary focus very important to keep some of these other commodities in mind because they all impact how much availability we have and what some of your insurance notes that you stated.
00:08:20:02 – 00:08:40:08
JIM
There are some interesting opportunities for some of those growers and again, potentially impacting some of the supply on the other feed commodities. Let’s turn it to Katie now. There’s one market that did not experience a weather rally over the past few weeks and that was milk. Katie, what’s the scoop with milk?
00:08:40:10 – 00:09:03:18
KATIE
That is right, Jim. The milk market has just been down, down, down. And so yesterday USDA released their June class III price at 14.91 July. Right now, futures are trading closer to 14.50, so July could be even worse. That’s all based on cheese prices this week falling into the one thirties. That’s the lowest cheese values we’ve seen since really the height of the pandemic in 2020.
00:09:03:20 – 00:09:23:01
KATIE
Mercifully, we’ve got the Class IV market hanging up closer to $18. But even that’s been under pressure here as of late. And so as I talk to dairy farmers across the country, especially given all the volatility and uncertainty on the feed side, watching these milk prices sink lower, it is getting really, really tough out there from a margin perspective.
00:09:23:06 – 00:09:39:09
KATIE
So a couple of things I wanted to leave dairy producers with to keep in mind. So one for folks out there who signed up for second quarter DRP, you’re likely looking at some pretty nice payouts to help fill in some of these holes in the milk check. So those claims will be coming your way late July, early August.
00:09:39:16 – 00:09:59:24
KATIE
Check with your agent or log into the vault site that Ever.Ag hosts to see how your policy is looking right now. Additionally, taking a look at some of the other help that could be coming USDA’s dairy margin coverage program. That’s the one through your local FSA office. We’re looking at payments of more than $4 hundredweight likely for May, June, July.
00:09:59:26 – 00:10:29:25
KATIE
So, some of that money could be hitting your bank account as early as next week. And then looking ahead. I want to encourage everyone out there to, you know, keep an eye on managing risk. The futures values that are deferred are still holding a pretty decent premium. And so, as we look out at 2024, the values right now, you can lock in our closest $17 trigger prices, which I know is not very exciting given current cost structures, but it’s still decent prices compared to history.
00:10:29:28 – 00:10:52:23
KATIE
And for instance, if you look at Q1 Class III of the DRP floors, I had some producers look at this week were about 17.20 as the trigger price. Those would have paid out seven of the past ten years. So definitely worth considering to get a layer of protection on there. You know, not only to help you sleep better at night, but just to make sure that if these low prices stick around, you’ve got some coverage.
00:10:52:25 – 00:11:10:14
KATIE
And the great thing about DRP is it’s only a floor. So if and when this market eventually turns around, you’ll just pay that premium and be able to ride the market higher. So just encouraging producers to keep a close eye on feed costs. Take a look at what they can do on the milk side. And these are volatile, volatile markets.
00:11:10:14 – 00:11:13:08
KATIE
So managing risk is super important right now.
00:11:13:09 – 00:11:49:18
JIM
That’s exactly right. Thank you for that, Katie. And we did the parlor to plate recording yesterday. I did that alongside of Kathleen Wolfley and a couple of other folks and noted make sure that you stay disciplined in your risk management. Right. So no matter where prices are moving and what things look like as we head through the summer here on each side of the feed and dairy side, you know, keep those targets in place, keep an eye on second half, like you said, Katie, for potential opportunities there, because even though things seem dire right nearby, there are still potential opportunities to protect yourself further down the road.
00:11:49:18 – 00:12:07:17
JIM
So thank you very much for that. Excellent work to you guys. We’re going to keep this brief. Just another quick two minute drill here. We got 4th of July coming up, so we’re just got to hit a couple trivia questions on the 4th of July. Just a few. And again, with the caveat that just because I’m the host asking the questions, it does not mean I’m always right.
00:12:07:17 – 00:12:15:03
JIM
So please make sure you second guess and check all my work here. Jake knows that better than anyone, right, Jake?
00:12:15:06 – 00:12:18:08
JAKE
I know that very well.
00:12:18:11 – 00:12:26:22
JIM
Good. Good deal. All right, Shelby, we’re going to start with you. Which president was born on the 4th of July?
00:12:26:24 – 00:12:28:26
SHELBY
I don’t even know.
00:12:28:28 – 00:12:30:24
JAKE
Jefferson.
00:12:30:27 – 00:12:31:24
SHELBY
I’m going to guess Grover.
00:12:31:24 – 00:12:35:06
JIM
Cleveland, not Grover Cleveland. You want to defer to Katie?
00:12:35:06 – 00:12:36:29
KATIE
Yes, I guess Grant’s.
00:12:36:29 – 00:12:37:28
JIM
No, not Grant.
00:12:37:28 – 00:12:40:15
JAKE
Jake, is it Thomas Jefferson?
00:12:40:17 – 00:13:03:24
JIM
No. We’ll get back to Thomas Jefferson here in a sec. Jake, Just as a clue. That would be Calvin Coolidge. Calvin Coolidge was born on the 4th of July. How about that? All right. Nice campaign material there, I suppose so. Katie, Jake has already referred to one of these answers which two presidents died on July 4th, the same day of the same year, within hours of each other.
00:13:03:24 – 00:13:09:11
JIM
Jake named one just now. Who are those two?
00:13:09:13 – 00:13:12:03
KATIE
Thomas Jefferson and Adams?
00:13:12:06 – 00:13:33:05
JIM
Yes, John Adams. Those guys died within hours of each other on the 4th of July. Pretty amazing stuff, you guys. Bonus name. The other president who also died on the 4th of July, kind of the same era, same group of dudes.
00:13:33:08 – 00:13:34:23
KATIE
4th of July is kind of rough for presidents!
00:13:34:29 – 00:13:38:01
JIM
Except for Calvin Coolidge, it’s his birthday!
00:13:38:03 – 00:13:39:02
KATIE
I don’t know, Jim.
00:13:39:04 – 00:13:53:06
JIM
It’s James Monroe. James Monroe died like five years later on the 4th of July. I mean, that’s a good- If I had to go, I guess I would maybe choose the fourth July myself. Jake, our national anthem. What’s it called?
00:13:53:09 – 00:13:55:07
JAKE
The Star Spangled Banner.
00:13:55:09 – 00:13:58:00
JIM
Who wrote it?
00:13:58:02 – 00:13:59:28
JAKE
Francis Scott Key.
00:14:00:00 – 00:14:07:24
JIM
Yes, Jake. Excellent. What battle inspired Francis Scott Key to write the national Anthem?
00:14:07:26 – 00:14:10:22
JAKE
I want to say the Battle of New Orleans, but I’m not sure.
00:14:10:29 – 00:14:40:11
JIM
That same war, different location, East Coast. Hmm. Shelby. Katy. Mm. It was at Fort McHenry at the Battle of Baltimore. Okay. Yeah. Good job, guys. Just, you know, those tricky little questions didn’t want to go completely. Like, who died on the day. We got to go a little bit of birthdays and some fun stuff. So, I hope everyone enjoyed again.
00:14:40:11 – 00:14:57:29
JIM
Always double check my work, please. So we have to cut out of all of my errors like we do every single week. But for now, excellent work today for everyone. We really appreciate Katie and Shelby for returning to the show. Great to have your insights. We’d also like to thank Korri and the Ever.Ag Insights crew for their support.
00:14:57:29 – 00:15:17:00
JIM
Thank you to Paige for the production magic and thank you to the viewers for watching the Grain Feed. We wish everyone a safe and very enjoyable 4th of July holiday next week. Please keep in mind how lucky we are to be celebrating the birthday of the greatest country on earth and Calvin Coolidge. That’s all for today. We will see you next time on the Grain Feed!
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