The Grain Feed – July 20, 2023

00:00:00:21 – 00:00:09:09
VOICEOVER
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 to buy or sell commodities.

00:00:09:11 – 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 their risk. I’m your host, Jim Mathews, reporting from the Chicago office.

00:00:30:16 – 00:00:51:17
JIM
After spending the last day or two in the great Hoosier state of Indiana, joining me this morning and someone who also joined me in Indiana yesterday, dairy broker and agent Ms. Kathleen Wolfley and as always from Texas, director of feed procurement, Mr. Jake Kingsley team. How are we today?

00:00:51:18 – 00:00:53:02
JAKE
Pretty good. How are you guys.

00:00:53:02 – 00:00:55:06
KATIE
Couldn’t be any happier to be here, Jim.

00:00:55:06 – 00:01:13:18
JIM
Wow, that’s amazing. Glad to hear that, Kathleen. You had a wild trip yesterday. You did a pit stop in Toledo, right the first night to get to northern Indiana. And then you turned around last night and drove all the way back to a Western slash upstate New York. How was that?

00:01:13:20 – 00:01:19:14
KATIE
It was great. I think it was a record. I only stopped one time in eight and a half hours.

00:01:19:16 – 00:01:21:12
JIM
That’s that’s incredible.

00:01:21:15 – 00:01:23:06
KATIE
Yeah. Put that one in the record books, guys.

00:01:23:13 – 00:01:43:04
JIM
I think that is a record. I’m impressed. I drove for an hour and then got hungry again. And then as soon as I got home, I was hungry and had to eat again. So it’s just I pretty much have to load up on food, especially an eight hour trek. Well done. Jake, you were very busy. Probably crossbreeding citrus plants.

00:01:43:05 – 00:01:44:25
JIM
How did that go?

00:01:44:28 – 00:01:51:05
JAKE
Not well. It’s very hot here in Texas, so pollination is not going well.

00:01:51:08 – 00:02:23:23
JIM
I’m very sorry to hear that, Jake. But speaking of pollination, we will lead into the grain and feed markets because it’s that key time of year for our favorite crops here in the U.S. So, Paige, if you would kindly timestamp the broadcast, it’s Thursday morning. It’s been another wild week in the Chicago markets. We’ve had another weather driven rally over the last day or so with big swings in the market and also some heightened concerns in the Black Sea region.

00:02:23:25 – 00:02:51:03
JIM
But with every weather market, we get those big wild swings in big volatility and of course, oftentimes better to sit these out rather than chase depending on the market. As I look to the board as we record this Thursday morning, Corn once again did try to attempt $5.60 a bushel, but has pulled back to below 5.50. So we’re seeing a lot of choppiness here as we move forward through the rest of July.

00:02:51:04 – 00:03:15:05
JIM
The December meal contract again tried to push four 20 $420 per ton, but is pulling back a little bit towards 410. So those protein levels remaining a bit heightened after that bean acreage report from just a few weeks ago now. So we relayed some of this information to some of our favorite dairymen in the great state of Indiana yesterday.

00:03:15:05 – 00:03:30:02
JIM
And we’d also discussed what’s been happening in the dairy market lately and how it impacts those farmers. So, Kathleen, if you don’t mind reviewing some of those notes from the audience yesterday and relay it to the audience this morning, what’s going on with milk?

00:03:30:07 – 00:03:55:21
KATIE
Yeah, sure thing. Well, it’s been another really topsy turvy week in the dairy markets, particularly on the cheese and the Class three front. I would say generally it does seem as though the tone is starting to shift in a more positive direction on the cheese and class three side of things, in part because it’s summertime, it’s hot. We’re starting to see a little bit of seasonal tightness and milk production.

00:03:55:24 – 00:04:21:25
KATIE
Cheese markets are cheese availabilities, particularly for fresh cheese, which is the currency in Chicago seems to be following suit. If you look at California alone, California cows are starting to feel the stress after a couple of days of 100 plus degrees. And the expectation, looking at the weather for Visalia for the week ahead, looks like 100 plus for the next seven days as well.

00:04:21:27 – 00:04:42:01
KATIE
I think it’s a similar story in the Southwest. Jake can attest to that. And the Midwest is supposed to get a little warm next week, too. So like I said, it’s summer. We typically see heat stress in in the dairy herd this time of year. So no real big shocking news. But that does tend to lead to a little less milk production.

00:04:42:05 – 00:05:10:17
KATIE
I should also note that slaughter rates are starting to pick up over the course. The last couple of weeks, we’ve seen slaughter rates above the five year average pace. So I suspect that producers are looking at these high whole cow prices and saying, hey, any animal that’s kind of looking at me funny or is not producing up to where I need or to be producing, given current feed costs, she’s going to the sale barn to get a little cash on the on the call market Last thing on on the cheese markets Jim cheese in class three.

00:05:10:17 – 00:05:34:17
KATIE
One of the other reasons why we I suspect we probably started to see a little bit of a tone shift is that we are starting to pick up a few more notes on better demand both in the domestic market and there is some talk that those low cheese prices that we saw a couple of weeks ago may have helped to move a few more spot exports as well, potentially helping to clean up some of the excess that we were feeling just a couple of weeks back.

00:05:34:19 – 00:06:07:12
KATIE
So I would say Jim and Jake, even though it seems like the cheese market is has probably made a bottom at this point, we do continue to see pretty sizable carry in the futures market with a rough $0.30 spread between spot block cheddar prices and November cheese futures. So I think that right now one of the big questions in the market is whether the market can realistically or cheese prices can realistically get back to 185 one 990 type prices into the fourth quarter.

00:06:07:19 – 00:06:26:17
KATIE
Given persistent concerns around demand, both domestically and internationally and the fact that we are still seeing growth in milk production. So big care in the futures market today, even though it seems like the tone is starting to shift, you just have to wonder how much upside is there given all the dynamics at play.

00:06:26:24 – 00:06:39:15
JIM
Okay. Understood. Thank you, Kathleen. I believe we were also noting before recording, we’ve got a couple reports maybe over the next few days. Are there anything in particular that our dairy producers should be looking out for?

00:06:39:18 – 00:07:03:25
KATIE
Yeah, for sure. The end of the month is always an interesting one as we get the milk production report today, Thursday, July 20th. Our models are pointing to somewhere around a half percent increase in milk production year over year for the month of June. But I think that producers should really be watching that cow number. How many cows are we ahead of prior levels here in the month of June?

00:07:03:25 – 00:07:18:19
KATIE
How is that trend starting to shift? And next week on Tuesday, we get a USDA cold storage report that’ll give us a little bit better idea of how the seasonal build wrapped up for both cheese and butter. So two reports to watch here in the next couple of days.

00:07:18:25 – 00:07:39:16
JIM
Okay, excellent. Thank you for that, Kathleen, very much. Appreciate your insights here this morning. And of course, yesterday in the great state of Indiana, Jake, Kathleen mentioned a couple of the reports that are coming out for dairy producers. Fortunately, we do not have any big reports coming out on the grain and feed side from the government really for a few weeks now.

00:07:39:16 – 00:08:00:13
JIM
So we get a little bit of a breather. But we look at what the government did over the last two reports and we deserve to have a bit of a breather, especially on the protein side. And as we move again into somewhat of a weather market, if you will, things have kind of moved around a bit and we’ve had corn rally back up to some recent highs.

00:08:00:13 – 00:08:14:03
JIM
Meal continues to push a little higher as we look at the exchange this morning. So how is this rally and futures done anything in terms of maybe relieving the basis market for some of our dairy producers? Any insights there?

00:08:14:09 – 00:08:44:15
JAKE
Yeah. So I think this little rally that we’ve seen here over the last few days has kind of spurred some some Midwest producers to take advantage of another opportunity to get some corn sold into the rail market and to some of their other destination markets here. And so we’ve seen another little dip in Western rail destination, corn basis, not a huge break, but a continued downtrend that we’ve seen developing over the last 4 to 6 weeks or so.

00:08:44:15 – 00:09:10:13
JAKE
We’re within arm’s reach of what I would call historically average basis ranges for corn. And a lot of the western U.S. and a lot of the Western Corn Belt as well, much better than we’ve seen the last couple of years. Areas where you guys were traveling yesterday, Indiana, Ohio, Michigan, not seeing quite as big of a break, but still relatively attractive numbers compared to the last few years that we’ve been dealing with.

00:09:10:13 – 00:09:32:01
JAKE
So we haven’t jumped in and bought everything we need for next year. But certainly considering or actively taking advantage of this opportunity to get maybe the first quarter of the year’s needs booked up as far as a basis contract is concerned, I mean, these are again, some of the better values we’ve seen in quite a while. So you want to lock up a little bit of that all you can.

00:09:32:01 – 00:10:00:18
JAKE
But again, it seems like this trend downward could be continued, especially if we maintain a yield somewhere in the low one seventies or even the high one sixties and get into harvest. We could see that more traditionally seasonal break as we go into harvest there. So taking advantage of a little bit of it early, but definitely wanting to remain flexible as we get into what we would call maybe an opportunistic environment later this year.

00:10:00:20 – 00:10:21:08
JAKE
Protein has kind of stalled out. And in fact, in a lot of places it kind of perked back up a little bit. I think as you had noted earlier, the balance sheet took a fair beating here. And in fact, the Canadian canola balance sheet has thinned out a little bit here. I think they’re expecting a potential return to more normal export numbers there.

00:10:21:08 – 00:10:43:28
JAKE
We’ll see how that plays out, because a lot of that is is canola and mule going to China. So we’ll see. I kind of wonder if that’s not more so a concern with the headlines we’re seeing out of the Black Sea right now. They are the world’s leading exporter of sunflower oil. So by nature, they’re going to also export quite a bit of sunflower meal typically to China.

00:10:44:01 – 00:11:08:26
JAKE
So we will see how that plays out. I think there’s probably some room for that balance sheet in Canada to fluff back up a little bit. But for the moment, basis there is kind of stalled out and perked up a little bit. But I think if you’re going to do anything in the protein realm, you continue to keep it in the October to March window so that if South America gets something good going and has a nice harvest, February and March timeframe, we have plenty of room to work there in the second half of the year.

00:11:08:26 – 00:11:30:01
JIM
Okay. Thanks for that, Jake. In terms of the just to focus on your timeline on the Oct to March, right for that protein with futures, the way they are at the moment is that more on a basis level. We had a couple folks ask us yesterday with the change in market dynamics just over the last few weeks, maybe what we’ve been advising lately.

00:11:30:03 – 00:11:34:08
JIM
So would it be from a basis contract only for that oct March period? For now.

00:11:34:10 – 00:12:03:13
JAKE
I think with today’s values, yeah, you’d probably work in more of a basis only type of contract and then shoot for a futures target like you were talking earlier on sub 400. I think there’s a good chance that that 365 number that we printed a few months ago was probably the low tied mark for soybean meal futures. So it’s going to be probably tough to get back there unless we really see our balance sheet here in the US bulk up.

00:12:03:17 – 00:12:17:27
JAKE
I think we’d have to see a surprisingly strong yield at harvest to do that. But for the moment basis only and then try to get something 400 390 maybe even as aggressive as a 380 type of target on the futures versus the December contract there.

00:12:17:29 – 00:12:44:06
JIM
Okay. Understood. Jake, I agree with you on that front in terms of unfortunately for our protein buyers, that 365 realm leading up to that acreage report, probably the low for now with some time over the second half of this year heading into next year. And Jake, you do deserve some credit, I believe, on the bold predictions recording of a week ago or so or so.

00:12:44:08 – 00:12:49:11
JIM
We asked 450 or 550 December corn futures, I believe you said 550.

00:12:49:16 – 00:12:52:09
JAKE
I think I did. You’re right. I almost forgot. I think it did.

00:12:52:11 – 00:13:10:26
JIM
I didn’t forget. I didn’t forget. Now, they did not take the yield numbers down as aggressively as you were predicting. But because it’s a weather market, because we have this volatility, we did come up and hit 550 very quickly nonetheless. So very well done, Jake.

00:13:10:28 – 00:13:15:02
JAKE
Thank you. We got it out of the way. Now we can make our way to 450 and try to get an opportunity for these dairies.

00:13:15:02 – 00:13:36:25
JIM
I hope you’re right, by the way, of your ride. Let’s get some of that rain shifting back into the forecast. I don’t have any trivia, bold predictions today. But Kathleen, as you can imagine, based on our New York trip from just a few weeks ago, one of the first things I ate when I returned home yesterday was ice cream.

00:13:36:27 – 00:13:41:21
JIM
So just a personal question, Kathleen. What’s your favorite ice cream?

00:13:41:23 – 00:14:12:13
KATIE
Okay, so there is a local ice cream manufacturer, Perry’s ice Cream here in the Buffalo area in Akron specifically. And they have this ice cream called Let’s Dough Buffalo, which number one? Let’s dough buffalo number two. It’s just delicious. It’s it’s my best. It’s it’s the best ice cream. But they also have one for the Cleveland Guardians. The Guardians is like the chocolate version.

00:14:12:16 – 00:14:18:01
KATIE
It’s like they have a buffalo and they have the chocolate version, which is the same, but it’s chocolate.

00:14:18:02 – 00:14:21:23
JIM
Okay, so what’s in the let’s dough buffalo? Is it cookie dough?

00:14:21:27 – 00:14:28:05
KATIE
I think that it’s like cookie dough ice cream, but it has other really amazing inclusions.

00:14:28:06 – 00:14:29:09
JIM
Oh yeah.

00:14:29:13 – 00:14:35:03
KATIE
Which I believe is the appropriate term for what they add to ice cream to make it so special.

00:14:35:04 – 00:14:41:14
JIM
Excellent. Well, now vaguely delicious in the let’s dough buffalo ice cream flavor giant.

00:14:41:16 – 00:14:45:25
KATIE
I wouldn’t say vaguely delicious. I would say just plain delicious.

00:14:45:28 – 00:14:50:20
JIM
It’s not plain. It’s not plain. It sounds wonderful. Jake. Favorite ice cream.

00:14:50:20 – 00:15:00:26
JAKE
So if I had to go with just straight up scoops of ice cream, it’s going to be chocolate chunk. But my preferred my preferred dish would be a plain vanilla shake.

00:15:00:27 – 00:15:14:06
JIM
A plain vanilla shake. Excellent Jake. I did almost up at a steak and shake yesterday. They always I always just kind of pulled me back in, you know, right when I thought I was out, they pulled me back in my favorite flavors. Mint chocolate chip.

00:15:14:08 – 00:15:15:13
JAKE
GROSS.

00:15:15:16 – 00:15:17:01
KATIE
Yeah.

00:15:17:03 – 00:15:21:12
JIM
Wait, a hold on. Kathleen. Ooh, yeah. GROSS Or ooh, yeah. Good.

00:15:21:14 – 00:15:25:18
KATIE
Oh, yeah. Good. That’s like.

00:15:25:20 – 00:15:28:00
JIM
Come on, Jake, What’s wrong?

00:15:28:02 – 00:15:32:24
KATIE
Be honest. Jake just said that his favorite is a vanilla milkshake.

00:15:33:00 – 00:15:37:25
JAKE
Not a fan of mint in my ice cream, that’s all.

00:15:37:27 – 00:15:52:13
JIM
After establishing chocolate chunks. So for for the viewers out there and everyone in the audience, if you are in the Northeast, Ohio and Northwestern, slash upstate New York area, please check out that Perry’s ice cream in there. Let’s dough Buffalo.

00:15:52:14 – 00:15:59:18
KATIE
Yes, which I do whatever cookie dough ice cream with crushed cookie swirls and cookie dough pieces.

00:15:59:21 – 00:16:21:18
JIM
Beautiful. And and also, whatever the Cleveland version is. Yeah, that happens to you. Check that out. Do or don’t. That’s a Cleveland version of it. So I think that’s going to be all for today. Excellent work to you both. Thanks for your tidbits on your very personal questions. I’ve asked you. I appreciate the insights. They’re a big thanks to Kathleen for returning to the show.

00:16:21:18 – 00:16:43:22
JIM
Great to have your insights today. We’d also like to thank Korrie and the ever.ag insights group for their support. Thank you Paige for production magic and thank you to the viewers for watching the grain feed. Contact information is on the screen. We greatly appreciate your feedback. That’s all for today. We’ll see you next time on the grain business.

00:16:43:24 – 00:17:07:12
JIM
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