Parlor to Plate – September 14, 2023

00;00;00;00 – 00;00;02;28
VOICEOVER
Future trading involves risk and is not suitable for all investors.

00;00;02;29 – 00;00;08;18
VOICEOVER
Content provided in this segment is meant for educational purposes and is not a solicitation to buy or sell commodities.

00;00;08;20 – 00;00;33;27
PHIL
Hello and welcome to Parler to plate a weekly podcast from Ever.ag Insights dedicated to offering listeners enlightening discussion and actionable intelligence about dairy markets. I’m your host, Phil Plourd. We’re excited to have you along. If you enjoy the show, please like us. Subscribe and tell a friend or two. First things first, let’s timestamp this episode. It’s about 2 p.m. Central Time on Wednesday, September 13.

00;00;34;02 – 00;01;03;07
PHIL
Today, BLOCK Cheddar was at a $1.91 per pound, down $0.05 from last week. Barrels finished at a dollar 82 per pound. Also down a nickel on the week. Butter is at 277 a pound, up $0.05. And lastly, the dairy complex nonfat dry milk is trading at $1.11 per pound, up $0.02 on the week. Turning to grains nearby, corn was at 463 per bushel, down 2% of the week, while soybeans were also down 2%, trading near 1335 per bushel.

00;01;03;13 – 00;01;23;09
PHIL
Let’s turn to our panel of top tier ever.ag teammates. First, joining us from the Madison, Wisconsin, area, Katie Burgess, who works with producer and commercial accounts. I felt second from Platteville, Wisconsin. Let’s say hello to Matt Tranel, who helps with producer risk management. And finally from Texas, Jake Kingsley, our director of food procurement.

00;01;23;14 – 00;01;24;15
JAKE
Good Afternoon, Phil.

00;01;24;17 – 00;01;31;26
PHIL
As is the case every week. Let’s start with what’s the buzz? Let’s talk about what’s making the most noise in the areas we cover. Katie, you go first today.

00;01;32;02 – 00;02;02;10
KATIE
Yeah, there’s been a lot of buzz in the cheese and class three space, and I think we’re starting to see the tide turn in the cheese international space yet again. So it’s been exports on experts off all year and this summer cheese prices were really low so we booked a lot of exports. It seems like now some of those sales are kind of coming to an end, hearing a little more chatter about maybe some pushback of cheese or definitely international buyers looking more towards Europe than to the US.

00;02;02;15 – 00;02;15;17
KATIE
And so with that, we’ve seen the spot cheese market back down. blocks Dip below 190 briefly this week and it’s been weighing on the cheese market and the Class three market, which has definitely caught people’s notice.

00;02;15;19 – 00;02;43;06
MATT
Speaking of the Class three, end of the spectrum this week, it’s been quite brutal up until really today’s trade, Wednesday’s trade. We’ve seen four straight days of down. Taking us from a peak of 1948 on last Friday to essentially a low of 1786, this $19 threshold has been a tough number to really crack and get through to a substantial or a long lasting period of time.

00;02;43;06 – 00;03;07;07
MATT
And unfortunately, with this move down and cheese, the 15 cent retracement in the black cheese price, we have essentially taken off a buck 60 in just four days. So dairies are feeling pretty good about where prices were headed last Friday than there not, feeling quite as good here today. Hopeful that some of the bids that we found here in the cheese market today lead to a rebound of some sort.

00;03;07;08 – 00;03;11;00
MATT
So that’s kind of the buzz in my world, Jake. What kind of fun things have you seen this week?

00;03;11;04 – 00;03;38;21
JAKE
Yeah, I think the big talk in the feed market this week is the September WASDE report. USDA kicked that out at noon Eastern on Tuesday. Maybe not quite as exciting as it could have been. A little bit of a change to the corn balance sheet. We saw a slight increase in corn ending stocks, continued lack of exports, really allowing for quite a bit of fluff in that piece.

00;03;38;21 – 00;04;02;02
JAKE
And then taking a look at the protein side and soybeans and soybean meal, they found a way to cut yields to a degree, but also do a little bit of maneuvering on the demand side to meet the overall change. There still saw a decrease in ending stocks in soybeans. Interesting little move that they made was a decrease in soybean crush.

00;04;02;02 – 00;04;20;24
JAKE
So we had been talking about adding crush capacity over the course of the coming year, maybe offering a little bit of opportunity to the downside, particularly in basis and cash values. Seems like maybe our yields could trend low enough that we start to undercut our ability to crush more beans at this point.

00;04;20;26 – 00;04;37;25
PHIL
So looking at the market action that we’ve seen on the Class three cheese side, do you guys think it’s just sort of a calendar thing, a sort of a general loss of faith over the past week? I mean, that, you know, we were holding up some pretty good values. We were carrying a little bit of a premium. Then all of a sudden, kaboom, we’re lower.

00;04;38;02 – 00;04;40;12
PHIL
What do you guys think is going on there?

00;04;40;12 – 00;04;59;13
KATIE
I think you’re right about a little bit of a calendar aspect Phil of hey. It was really hot to that pull made people a little nervous. When it’s 90 plus degrees in Wisconsin, people just get a little worried about that fresh cheese supply. But hey, it’s the middle of September now, so we don’t have to worry about those nineties again for nine months at this point.

00;04;59;15 – 00;05;16;08
KATIE
But I also think that it as we’re looking forward from a calendar perspective, we are heading into a strong demand period just seasonally. So while we’re off the highs, I don’t necessarily know that we can fall all that far, just given we’re at a point where holiday demand is going to be here before we know it.

00;05;16;13 – 00;05;46;04
MATT
Yeah, I guess from my seat I kind of look at it as if you look back across our careers, it seems like $19 is kind of like a pivot point in the milk market. It seems as if it’s almost like a transitionary point between where buyers feel it’s maybe cheaper milk versus more expensive milk. And so given where feed prices are today and there is some money to be made for dairies at $19, I think the buyers just kind of pulled back maybe a little bit, sat on their hands and we’re looking for another hedging opportunity down the road a little bit.

00;05;46;04 – 00;05;54;13
MATT
And in 19, a lot of dairies felt there was good enough value in there to maybe sell it aggressively. So that’s kind of what I’ve kind of noticed from my seat.

00;05;54;15 – 00;06;12;28
PHIL
Jake, on those WASDE numbers. You know, there were no major, major shocks there. And I mean, I don’t know that anything was majorly bearish, certainly not the numbers weren’t probably weren’t bearish at all, but then the market struggled yesterday. Is that just sort of a the bull must be fed every day situation and lacking nourishment, prices went down?

00;06;13;02 – 00;06;44;29
JAKE
Well, I think we’ve got a true bifurcation of these two commodities to a degree that they’re now starting to work a little bit against each other. There’s still significant concern around soybean yields. And so that’s going to underpin that market. We continue to think that the 390 December futures, mark, is a great target for ownership, possibly the low end of that futures range for a while until we establish a better crop than we’re currently expecting really, And corn as bearish as that balance sheet looks.

00;06;44;29 – 00;07;11;23
JAKE
I mean, 2.2 billion bushels of ending stocks is a big number. In the past we’d be sub $4 corn on that one all day long. But at a certain point, soybeans and corn have a price relationship that historically limits out somewhere close to November. Soybeans futures being three x that of December corn futures. And we’re at 2.8 something here today.

00;07;11;23 – 00;07;34;27
JAKE
So, again, yield is underpinning soybeans and the protein market and thus really propping up that corn market for us here. Exports are doing okay in soybeans, but we did see a little bit of a cut yesterday. So maybe that’s an indication of things to come or an attempt to do a little bit of demand rationing. But exports are kind of nonexistent in the corn market.

00;07;34;27 – 00;07;43;08
JAKE
And so right now, the biggest driver is these two commodities kind of pull in against one another to limit big moves for for the time being.

00;07;43;08 – 00;08;01;12
PHIL
You mentioned exports, Jake. Our center of the plate segment this week, I think we’re going to talk about this are some interesting dynamics in the dairy and the grain space between, you know, domestic fundamentals over here and international fundamentals over there. And there’s a little bit of a a difference there. I don’t know Matt and Katie on the dairy side.

00;08;01;12 – 00;08;10;07
PHIL
My sense is we have some supply questions domestically, but we have demand questions internationally. Want to talk about that for a little bit? Is that how does that look to you from.

00;08;10;07 – 00;08;34;11
MATT
A domestic supply standpoint? We feel that the milk supplies is going to continue down the path of contracting a bit. We do have an upcoming milk production report on Monday, September 18th, and our Ever.Ag Insights team has essentially estimated that we’ll be down 7/10 of a percent year over year. And we’re looking for about a 5000 head drop in cow numbers.

00;08;34;16 – 00;08;55;10
MATT
That would be a little bit more aggressive than what we saw in July, which July was a little bit of a surprise what USDA came out with. But given all the dispersal sales that we’ve been seeing pop up, given the hot weather that we’ve seen and many other factors, we do anticipate, at least here in the nearby, that we will continue to see milk supply contract even though weather is starting to get cooler.

00;08;55;10 – 00;08;58;14
MATT
And we probably will start to increase that a little bit.

00;08;58;14 – 00;09;14;26
KATIE
Again, to me, one of the big things I’m really watching right now is what is going to happen in the nonfat dry milk market. So if you want to be bullish dairy markets, non fat tends to be a leader. And as you see milk supply tighten up, we’ve also seen nonfat dry milk production go down, Stock levels are down.

00;09;14;28 – 00;09;36;22
KATIE
It gives us a reason to be bullish in the market. Yet it’s been under a lot of pressure lately. So to your point, Phil, right now it seems all about the international markets that when we look at buyers of powder like Southeast Asia, their demand has been down this year, China’s demand has been down also. And with that, with China’s demand being down, that means that New Zealand has to find market share elsewhere.

00;09;36;22 – 00;10;00;05
KATIE
So they’re taking some of the US’s market share in Southeast Asia. So from a U.S. dairy price perspective, thank goodness we have Mexico who’s been buying pretty strong because without them our exports would be way down on a year over year basis. So I think we’re really closely watching that interplay. Like not having as much milk domestically seems bullish, but the international demand picture is just continue to be bearish outside of Mexico.

00;10;00;05 – 00;10;20;11
PHIL
And I’m for a cheese market perspective, we kind of get the sense that export volumes are going to slip sequentially here in the weeks ahead. Just because we booked a bunch for July and August when prices were cheap. But then all of a sudden we go to the most expensive cheese in the world and we don’t believe the exports are going to persist at a strong rate into year end, correct?

00;10;20;12 – 00;10;28;26
KATIE
That’s right. It seems like it could be a struggle. So at least for now, domestic demand has held up well enough to hopefully or likely support that market through the holidays.

00;10;29;01 – 00;10;48;24
PHIL
But that capacity, you know, that that cheese could actually go back to back filling some supply holes domestically created by the milk production shortfall. So there is you know, there are circular elements in all of this, Jake. You mentioned exports on corn being nothing special, maybe a little downtick in exports being expectations internationally. What’s the talk in the grain markets?

00;10;48;24 – 00;10;52;29
PHIL
South America, China, what’s going on from where you sit in that tension between domestic and international?

00;10;53;00 – 00;11;11;01
JAKE
There are a lot of questions left out there that will probably be answered over the course of the next six months here. Of course, we’re near harvest here in the U.S. but then just about the time we wrap up and put combines in the barn will be all eyes on South America. And what is their production going to be?

00;11;11;01 – 00;11;40;13
JAKE
They are slated right now for record acres, and if they can get anything close to average yields, they’ll be darn close to record production. Overall, we’ve got a strong El Nino in the forecast, which is typically good for Argentina as far as growing conditions are concerned, but less favorable in the northern portions of the Brazilian growing region. That becomes important when we start to look especially at the surfena or second corn crop out of Brazil.

00;11;40;19 – 00;12;02;06
JAKE
A lot of that comes out of their northern part of their country. And then, of course, there’s always the question of what does China end up buying if they can get everything that they need from South America, I think they continue to give us the cold shoulder. We’re not necessarily aligned politically, and they’re coming to us kind of as a last resort if they can help it.

00;12;02;06 – 00;12;28;04
JAKE
But at the same time, even if South America falters a little bit, we continue to catch little snippets here and there of the Chinese economy starting to really cool off and have some longer term concerns. So depending on how that plays out, they could have a lower demand overall, which would again be good for us as feed buyers to maybe see some long term downtrend in prices.

00;12;28;06 – 00;12;45;15
PHIL
Well, Jake, you know, rarely do we have commodity market discussions where China isn’t a centerpiece. And, you know, the China dimension of dairies, interesting and intriguing right now. And it’s never not intriguing on the grain side, but that’s it for today’s show. Thanks to our panelists, Katie, Matt and Jake. Thanks to the ever.ag Insights team for production support.

00;12;45;15 – 00;13;02;18
PHIL
And thanks to you, our listeners. Once again, if you like the show, hit the subscribe button on your favorite podcast app. I also invite you to check out our new online portal at Insights dot ever dot AG. There you can find all of our publications and all of our shows like this one or from the From the Furrow or the grain feed.

00;13;02;21 – 00;13;10;20
PHIL
If you’re interested, contact us at Insights@ever.ag