Parlor to Plate – August 30, 2023

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VOICEOVER
Future trading involves risk and is 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.

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KATHLEEN
Hello and welcome to Parler to play a weekly podcast from ever again, sites dedicated to offering listeners enlightening discussion and actionable intelligence about dairy markets. I’m your host, Kathleen Wolf Lee. We are excited to have you along. If you like what you hear. Please like us. Subscribe and tell a friend or two. First things first, let’s timestamp the episode.

00;00;31;03 – 00;00;52;25
KATHLEEN
It is Wednesday, August 30th at 1 p.m. Central. Here’s a quick rundown of the markets. See Black Cheddar closed at a dollar 99, up a dime on the week barrel. Finish to the dollar 86 up $0.06 butter. Finish it to 62, down $0.09. And the nonfat dry milk market closed at a dollar nine down just a fraction of a cent from last week.

00;00;52;27 – 00;01;17;26
KATHLEEN
In on the grain side of things, December corn closed at 482 per bushel. November soybeans at 1384 a bushel. And the December soybean meal contract is trading around 410 per ton. We have yet another star studded cast from the ever ag team joining us today. Tiffany Lamendola hails from the North Valley of California and supports dairy producer risk management from the second city of Chicago.

00;01;17;26 – 00;01;28;24
KATHLEEN
We have John with an H. Billington who works closely with commercial clients. And holding down the fort in Texas is Jake Kingsley, our feed specialist extraordinaire. Team, thanks for joining.

00;01;28;26 – 00;01;30;08
JAKE
Thanks for having us, Kathleen.

00;01;30;09 – 00;01;30;28
JOHN
Good to be here.

00;01;31;02 – 00;01;37;20
KATHLEEN
Well, let’s get right into it, Jake. I know you’ve had a busy couple of weeks. What is the buzz in the feed world? Yeah, I.

00;01;37;20 – 00;02;00;24
JAKE
Think the first thing folks are talking about are some of the results coming in from these crop tours making their way across the Midwest. So far, it appears that we are looking at a decrease in yields in both corn and soybeans from the current USDA projections, but have avoided a disaster even in the face of all this hot, dry weather we’ve endured during the growing season.

00;02;00;28 – 00;02;24;03
JAKE
Something else we’ve been kind of talking about here over the last few days is the adjustment to the Canadian canola balance sheet. They added quite a bit back in to their carry out for the coming crop year and so far it appears to be an adjustment higher in yields from previous crop years as well as reduction in exports.

00;02;24;03 – 00;02;32;22
JAKE
So maybe a little bit of a shake up in the canola market, but overall the North American protein balance sheets will remain pretty lean.

00;02;32;27 – 00;02;36;28
KATHLEEN
So generally that’s a pretty good news story for dairy producers that are listening.

00;02;36;28 – 00;02;55;28
JAKE
I think so. Gives us some confidence that we will have decent production here in the US and maybe not as quite of a beating from the dry weather we’ve endured this summer so that maybe prices will remain somewhat subdued as they have been here for the last month or so.

00;02;56;02 – 00;02;59;28
KATHLEEN
Well, thinking about the producer side of things, Tiffany, what’s the buzz in your world?

00;03;00;04 – 00;03;25;02
TIFFANY
Yeah, Jake mentioned it. There is some hot weather across the Midwest. I would say it was quite lovely out here in California. Even so, that hot weather seemed to trend milk supplies across much of cheese producing region, tightening up the cheese market, which was already selling just a little bit snug on the fresh side of things. So we’ve seen the market kind of get back close to reaching that $2 bill.

00;03;25;02 – 00;03;32;08
TIFFANY
So the buzz and what’s on everybody’s mind is does it have some more upside and where do we go from here?

00;03;32;08 – 00;03;53;05
KATHLEEN
Yeah, I know. Tiffany, you and I were looking at some data the other day trying to sort through what does history tell us about the post-Labor Day cheese market? And it kind of seems like history says we see a little bit of an upswing in spot cheese prices between the Friday before Labor Day and the Friday after. But I guess we’ll see what 2023 brings for the cheese market this year.

00;03;53;11 – 00;03;54;26
KATHLEEN
John, what’s going on in your world?

00;03;55;00 – 00;04;24;07
JOHN
Yeah, you know, Kathleen, I think from the commercial side of things, just as both Jake and Tiffany mentioned earlier, one thing that I’m paying attention to is kind of is cream multiples. And I think one of the main drivers behind all of that is out in California. They’ve been dealing with some pretty strong heat waves and that’s kind of tightening up that pre market, which took us up to I think in the West we were printing around 130 in terms of multiples.

00;04;24;11 – 00;04;44;25
JOHN
I think with that we we’ve got a little bit of seasonality fighting as well. We’re also in kind of peak ice cream production season. And so with that, you know, once that kind of rolls over, we would expect those cream multiples to kind of come back down to closer to the five year average or averages historical averages.

00;04;44;25 – 00;04;47;07
KATHLEEN
And how do you see that influencing the butter market? Yeah.

00;04;47;07 – 00;05;11;20
JOHN
So usually in theory, the higher the cream multiple, the less need for butter production because manufacturers would skip the turning of butter and just decide to sell cream outright on the exchange. And and so with these high cream multiples, it’s incentivizing producers and manufacturers to kind of ease away from butter production. And with that comes tighter butter markets.

00;05;11;25 – 00;05;31;00
KATHLEEN
Well, let’s shift gears to the center of the plate. Labor Day weekend is coming up, which means it’s the end of summer vacations. Harvest is kicking off and we are in the thick of the 2024 budgeting season. What are some of the key things that your respective clients are focused on and how are you helping them navigate these markets?

00;05;31;03 – 00;05;55;21
JOHN
Yeah, so from the dairy side of things, one thing that we’re looking at is kind of how the futures curve looks in the later months, right? So when all these budgets get set, companies have more money to spend for the upcoming year. And so we tend to see a spike in activity. One thing that stands out to me is kind of where we were in cheese price last year compared to where we are today.

00;05;55;22 – 00;06;21;10
JOHN
From a budgets perspective, we saw a curve closer to like the 210 range, whereas now we’re sitting in the one nineties and so that comes across as much more affordable prices similar to what we saw in the butter markets. Whereas the buyers that were paying, you know, close to $3 are seeing 250 this year. And so it seems a lot more attractive at these lower price levels.

00;06;21;17 – 00;06;23;06
KATHLEEN
Tiffany, how about on the producer side?

00;06;23;07 – 00;06;48;18
TIFFANY
I’d say for producers, most across the U.S. right now are gearing up for harvest, whether it’s corn silage corn for old corn, another cutting of alfalfa. It’s definitely top of mind as we turn into September. Interestingly enough, check in with some producers out here in California. If you recall, our June was incredibly lent and cool. It led to some pretty big winter forage crops.

00;06;48;21 – 00;07;12;11
TIFFANY
And I’m checking with folks. It seems like corn silage harvest is a little bit delayed because of a little bit longer time needed for that. Winter silage delayed the corn planting, so folks seem to be anywhere between 1 to 3 weeks behind on that. So that’s coming up. I think as I mentioned, this this thought in close watch of the cheese and class three market folks are really starting to pay attention.

00;07;12;11 – 00;07;34;03
TIFFANY
We’ve seen the Class three futures hit $19 in a few spots, and I think that’s brought a few of them back to their. It’s a number that seems attractive. And I think folks are watching for the opportunity to get another layer of coverage on should we get to some more attractive levels out in the fourth quarter and a good start on 2024.

00;07;34;06 – 00;07;40;04
TIFFANY
So we’re certainly advising folks to pay close attention to your post-Labor Day to work on those efforts.

00;07;40;05 – 00;07;46;23
KATHLEEN
Jake, I’m guessing that on the feed side, it’s been pretty busy as as we have seen markets come down here over the course of last couple of weeks.

00;07;46;27 – 00;08;14;21
JAKE
Yeah, we’ve had quite a few folks taking advantage of these breaks in the marketplace and then this rally back higher here. And soybean meal was another opportunity for folks to maybe manage some inexpensive put options underneath of their protein purchases. Corn’s been a little less active, but opportunity there nonetheless. And kind of like Tiffany was saying, silage out in California has been a big deal because they’ve been able to get it at half the price they were paying last year.

00;08;14;21 – 00;08;34;02
JAKE
So folks are packing that away a pretty high volumes a year and a half, two years worth of inventory, if they can get it and have the cash to put it away. And we’re starting to get into some silage harvest in the Midwest where we’re hearing that it dried down maybe a week, ten days, even two weeks quicker than normal.

00;08;34;02 – 00;08;56;08
JAKE
So they’re out there trying to get in and get silage put away before it gets too dry. And maybe that’ll give us a little bit earlier. First, look at what yields are really doing in that part of the world. So a lot of pieces moving around, but we’re starting to get more and more information rolling in every day that I think is going to continue to drive a little bit of volatility in these feed markets.

00;08;56;14 – 00;09;18;21
KATHLEEN
I guess I’ll just add my $0.02 on what’s happening in western New York where I am. I’m at I can hear the fourth cutting activity happening behind my house here. And I think that corn silage should start here within the next couple of weeks. But it’s been pretty spotty in in the northeast of who got inundated with rain over the summer and who’s been relatively dry and have been able to get crops done early.

00;09;18;23 – 00;09;40;25
KATHLEEN
A big thank you to Tiffany John with an H and Jake for joining me today. I appreciate you sharing your insights with our listeners. As always, thank you to our media team for mixing and mastering and thank you to the listeners for joining us today. If you like what you hear, subscribe on your favorite app. If you’d like to learn more about how we help people manage risk, contact us at Insights.

00;09;40;28 – 00;09;41;19
KATHLEEN
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CODY
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