In Forecast Update Live, our analysts gather to discuss the highlights of our monthly Forecast Update.

Questions or comments? Interested in receiving the forecast? Contact us at Insights@Ever.Ag or give us a call at (312) 492-4200.

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00;00;00;20 – 00;00;08;18
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;06 – 00;00;33;00
PHIL
Hello and welcome to Forecast Update Live, a monthly show from Ever.Ag insights where we gather to discuss our dairy market forecast. I’m Phil Plourd substituting this month for our regular host, Jon Spainhour, who is on assignment. Joining me today, we’re excited to have two top analysts from the insights team. First, Matt Gould, who’s back from assignment, and Erica Maedke.

00;00;33;01 – 00;00;39;00
PHIL
To get us started- Erica, what changes, if any, are we seeing to the Ever.Ag insights forecast this month?

00;00;39;05 – 00;01;02;25
ERICA
Hi, Phil. Thanks for having me. I would say that there’s been some pretty notable changes for our forecast this month and everything is lower. So especially as you look at the Class III and Class IV prices, from a dairy producer perspective, it’s multiple dollars in many cases that we are seeing decreases. So all of the baseline commodities are lower for longer than we have been in previous forecasts.

00;01;03;04 – 00;01;05;02
PHIL
So we kind of kicked the can down the road, right?

00;01;05;08 – 00;01;06;12
ERICA
Very much so.

00;01;06;12 – 00;01;19;02
PHIL
All Right. Matt, the past couple of months, Erica has had what I believe to be the easier job of presenting the bearish perspective on things. But we’re going to make her do the bull side this month. How about you give us the bearish arguments?

00;01;19;12 – 00;01;43;09
MATT
Yeah, I don’t know if you could say easier or just more right. The reality is, is that in our conversations we are hearing about the worst demand environment in years. Increasingly, we’re making references to 2009 in terms of demand. And part of the reason why we lowered our forecast this month, maybe in large part in why we lowered our forecast this month is all related to demand.

00;01;43;25 – 00;02;07;16
MATT
We’re seeing cracks everywhere. At the retail sector, consumers are trading down and away from dairy. And then at the food service sector, we’re hearing about cuts to suppliers for similar reasons. So when it comes to domestic demand, there’s not really a bright spot today. And from our perspective, this appears to be more of the new normal. And the why behind it, I think, is probably pretty clear.

00;02;07;24 – 00;02;30;20
MATT
Consumers have run out of money, so that isn’t something that we expect to change tomorrow or a week from now. Certainly the demand situation is worse than we had previously expected. And then there’s exports. Our futures curve has been priced at this big premium and we haven’t been able to yet book, at least we’re not aware of, a big clip of exports to help balance the situation.

00;02;31;00 – 00;02;38;25
MATT
So on one hand, you have this really tepid or struggling domestic demand environment and on the other hand, our relief valve hasn’t yet fire.

00;02;38;25 – 00;02;50;13
PHIL
Yeah, it doesn’t really take much, right? I mean, if exports are down £10 million, £20 million a month, it’s not as though the domestic demand situation is. Well, we’ll just take that cheese on, right. I mean it’s a big problem.

00;02;50;14 – 00;03;15;16
MATT
Yeah, exactly. And you know, the price of cheese in this country is set by the last load. Then there’s the supply side of the situation. We haven’t yet seen the signal to suggest that supplies have fallen off. Actually, quite the opposite. Milk is at huge discounts in the Midwest. Unusually so. And so that’s the other conversation in our shop is how long will it take for milk supplies to shut off in a big way.

00;03;15;24 – 00;03;23;17
MATT
And it hasn’t happened yet. And I think, to use your analogy, kicking the can, it appears as an industry we’re kicking that can of slowing production down the road.

00;03;23;19 – 00;03;24;28
PHIL
Erica, what’s the bullish argument?

00;03;25;02 – 00;03;43;25
ERICA
Well, I will say it is still fairly lonely over here in bull land, but I think we’ve got a little more support now when we’ve got prices as low as they are today. So, yeah, and many times we’ve talked the cure for low prices is low prices. You will see both supply and demand responses.

00;03;43;25 – 00;04;04;07
ERICA
On the supply side of things, we watch slaughter data very closely. The last two weeks we’ve seen dairy cow slaughter, not just at the five year average but at the five year maximum. So dairy producers are getting the message that this is painful and we need less supply. On the demand side of things, we’ve heard about some folks kind of destocking their supply chain.

00;04;04;07 – 00;04;25;19
ERICA
They recognize that the demand is down a little bit. There is a short term push to clear out a little bit of inventory. That is short term. They will come back to a normal buying pattern. Additionally, we are seeing some additional promotion. So US is showing some data indicating that promotions are increasing at the retail shelf as well as prices are a little bit lower.

00;04;26;10 – 00;04;49;23
ERICA
That will stimulate demand, especially in this very inflationary food environment as consumers are shopping for value. Cheese and other dairy products will become relatively more affordable and move some more product on the shelf. And then finally, overall price levels are very attractive. So as we look internationally, US cheese, U.S. powder- definitely a clear favorite there.

00;04;49;24 – 00;04;58;18
PHIL
Yeah, I mean, I don’t think anybody here has lost faith in the axiom that low prices cure low prices. I think the the gazillion dollar question is when?

00;04;58;18 – 00;05;00;22
ERICA
Whe, exactly. When?

00;05;00;22 – 00;05;20;22
PHIL
You know, how much it should be, how much pain on the supply side, how much encouraged on the demand side, and what Matt says is a very tricky demand side environment to figure it all out in. Thanks, guys, for that look at the forecast. Each month we like to feature our favorite look, a page that we put in our forecast update publication.

00;05;20;23 – 00;05;41;15
PHIL
This month, we’re looking at how drought unfolded pretty quickly across key growing regions in United States. In the month of June, dry weather helped the corn crop get an early. That was great, but then the dry weather persisted throughout the month of June. But when the rains stopped, we start to see some real questions emerge about the prospects for the crop in the absence of meaningful moisture.

00;05;41;29 – 00;06;03;00
PHIL
The graph we’re using this month shows how the drought situation in the month of June 2023 was the most acute that we’ve seen since the Drought Monitor started publishing historical data, and that includes 2012, which turned out to be a pretty bad crop year. Now, over the latter part of June, it started raining a little bit July. There’s weather in the forecast.

00;06;03;00 – 00;06;25;19
PHIL
The price of corn has gone down a dollar on new crop over the past ten days. Very volatile environment. So maybe the situation is curing itself, but the early season drought kind of a fascinating thing to watch unfold. And one of the cool things is that on our Ever.Ag Insights portal, we have a new Web exclusive Thursday drought Map and Graph Festival.

00;06;26;06 – 00;06;47;03
PHIL
Every Thursday, we’re publishing new charts and maps that show how the drought situation is impacting corn, soybean, dairy regions across the country. So go to Insights.Ever.Ag for a look at that. That will do it for this month’s episode of forecast update live. Thanks to Matt and Erica. Thanks to everyone on the insights team for their work on the forecast.

00;06;47;03 – 00;07;07;14
PHIL
And thanks to you, the viewers, for tuning in. If you don’t receive our forecast update and would like to subscribe, please reach out via email at insights@Ever.Ag. And if you like this video, be sure to subscribe to our YouTube channel. Give us a thumbs up and share us with the friends. We’ll see you next month for another edition of Forecast Update live.

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