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. This week, Jim is joined by Jenny Wackershauser and Kathleen Wolfley.
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.
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Hello and welcome to another edition of the Green 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 for an amazing team of analysts with the intention of helping dairy and livestock producers manage their risk. I’m your host, Jim Matthews, reporting from Chicago.
00:00:32:29 – 00:00:59:09
My kind of town on what is a very sunny Thursday and what has been a mostly cool and cloudy and wet week here in the Midwest. And Jenny will be turning to you, of course, for your weather skills. So stay tuned for those ladies and gentlemen for perhaps a good transition to joining me today from Wisconsin. I claim to the world that she is on the field team, but she really just does it all.
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The grain, dairy, you name it, all things risk management. Miss Jenny Wacker shows her and returning to the grain feed from New York dairy broker and agent Miss Kathleen woefully team. How are we today?
00:01:15:07 – 00:01:16:16
Good. Good morning.
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Speaker 1
Could not be better.
00:01:18:03 – 00:01:20:01
Wow. Fantastic.
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Speaker 1
How about you, Jim? How are you today?
00:01:21:21 – 00:01:37:03
Dude, I’m doing great, Ernie, I am pumped up. We’ve got a great group here. My usual partner in crime is offline today, so I don’t know, maybe I feel I don’t want to say liberated, but I’m feeling good.
00:01:37:08 – 00:01:39:23
Speaker 1
Jake. She’s too busy listening. The new Taylor Swift album.
00:01:39:23 – 00:01:51:03
Claims she’s got other things going on this week, but we really know we really know what’s going on. T Swift how was that, by the way? Where was there an album or was it just a song or two?
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Speaker 1
Was A31 songs? Oh yeah, 31 songs to dig into.
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Where does she find the time?
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She had a big concert series. Yeah, she was at the Super Bowl. Where does she find the time? Well, Kathleen, you found the time because you’ve got a fantastic looking clock behind you. And speaking of time, page, if you would kindly timestamp the broadcast, it is Thursday morning. We’re gonna take a quick look at the markets here. We’ve got corn unchanged here today.
00:02:17:12 – 00:02:41:03
On Thursday we’ve got May trading just below 440 at the moment. We’ve been flirting with this for 40 territory. Now for me we’ve got a couple side bets here, a couple side bets here within every egg between Jake and Kristen and myself. In terms of where may corn futures ultimately settle, that number is around 443. So we keep flirting with that threshold between Jake and Chris and I.
00:02:41:07 – 00:03:00:06
We got to keep an eye on that threshold there. These corn I would say it’s threshold. Is this for 70 to 475 type of range. We’re just under that by a cent this morning. We’re at 474. So we gotta keep an eye on these corn. I think what’s been allowing the corn market to have a whole lot of fun lately is the wheat market.
00:03:00:06 – 00:03:20:29
We’ve got May wheat up at 596, just under six bucks, but we have been trading just over six. We’ve taken those July wheat futures. Well above. We almost approach 625. So we’ve been keeping a sharp eye on that wheat market and how it’s been supporting corn over the last, let’s say, 3 or 4 trading sessions, soybean meal, stubborn little byproduct.
00:03:20:29 – 00:03:50:06
We’ve got May at 340 at the moment we’ve got December just under 350. We’re at 349 as we trade. So soybean meal has also been on a nice little run as of late. A slight pullback here this morning. It’d be interesting to see how we close out the week tomorrow in terms of what managed money wants to do with this protein market, but let’s turn it to the dairy markets here for the time being because we have Kathleen back in action.
00:03:50:06 – 00:04:01:18
Kathleen, we’ve had a couple of reports this week. Right? I think we had milk production and cold storage. What was your take on both of those reports as you bounce back this week? Kathleen, anything to write home about?
00:04:01:19 – 00:04:20:19
Speaker 1
Yeah, Jim, we did have two reports this week and it is just ultimately been a really noisy week, particularly in the class three market. We’ve jumped somewhere between in a 50 cent range ish. But let’s start with the milk production report that came out on Monday. Production was down 1% year over year, which is a little bit better performance than our projections had pointed to.
00:04:20:21 – 00:04:43:24
Speaker 1
I think good production out of California did help to narrow the gap some. Their production was up 7/10 of percent, and folks in California do tell us that milk flows have been pretty healthy here to start the spring. I’ll admit that the numbers last year were pretty easy to be one thing that we were keeping a really close eye on as it relates to the Milk Production report, was any potential impacts from HpaI or avian influenza on production in the southwest?
00:04:43:24 – 00:05:07:19
Speaker 1
Production in that region has been on a pretty steady downtrend for the last couple months, but the declines in March were a bit bigger than what we’ve seen here more recently, which is partly related, I think, to HpaI impacts. With that in mind, I don’t think it’s out of line to assume that we could see some rolling impacts on production across the US here over the course of the next couple of months as more regions are impacted.
00:05:07:19 – 00:05:28:03
Speaker 1
But I do think that one of the big questions right now, from a supply standpoint is how quickly do the cows bounce back? Those that have been impacted by HpaI, and perhaps more importantly, in this type of demand environment, will it really matter? On Wednesday, we got a cold storage report, and that gave us a little bit of a glimpse of what’s happening on the product.
00:05:28:03 – 00:05:49:18
Speaker 1
Supply of the ledger cheese stock situation was a little bit lighter than expected. Month on month stock gains running a little bit behind the typical pace. You just have to wonder at this point what led to the slower than average gain from February to March? Maybe not make as much cheese. Did we ship more exports in March? Was domestic demand a little bit better?
00:05:49:21 – 00:06:09:05
Speaker 1
And I think just generally, whatever the case is, I think it does set up a slightly more friendly supply story in the cheese market. And here this morning we are seeing placer and cheese trading a little bit higher on the butter side of the equation though. The report said, hey, we’ve got butter in the warehouse. Inventory gains from February to March topped the average month to month move.
00:06:09:05 – 00:06:32:12
Speaker 1
Reports point to pretty solid churn activity. Cream is available out there. What we really don’t know, though, is whether the butter in the coolers is in retail packages or in bulk supply or bulk form. Bulk is what trades in the CME. And for now, I think that $3 butter prices in Chicago say a bulk availability remains a key concern.
00:06:32:12 – 00:06:37:14
Speaker 1
And I just I don’t know though this whole surge report here this week really did much to quell that concern.
00:06:37:19 – 00:06:45:13
Kathleen, what about the flip side of this conversation? Anything new on the demand side of the equation when it comes to the dairy markets?
00:06:45:19 – 00:07:02:07
Speaker 1
Well, Jim, I think that’s a really good question. On demand. I’ve been out of pocket for the last couple months. Not really watching the market two too closely. And I come back in the demand picture doesn’t seem like it’s really changed all that much from what we’ve been able to pick up. Demand out there in the domestic market isn’t all that high.
00:07:02:08 – 00:07:22:00
Speaker 1
It’s not horrible, but not all that hot. And from an export perspective, I think that we’re still in this position where we had really solid exports in the month of February, which I think coincides with some of the weaker prices we saw going into 2024. But here now we’re sitting with a cheese price. It’s in the mid dollars 80 range.
00:07:22:03 – 00:07:33:15
Speaker 1
And it really brings the question of how long can we expect to see fairly strong exports in 2024, given that the forward curve is elevated relative to our competitors?
00:07:33:21 – 00:07:52:17
Okay. Thank you very much for that, Kathleen. Greatly appreciated. And Jenny, let’s turn it to you. And let’s just stick with dairy for a hot minute because Kathleen touched on both the supply and demand side of the markets this week, as you mentioned, it being a, you know, potentially a noisy marketplace lately, we’ve seen a lot of big swings in the dairy market this week.
00:07:52:17 – 00:07:59:10
Any comments on those swings and potentially how folks should or should not be stepping in to managing risk on those price movements?
00:07:59:15 – 00:08:25:19
Well, I think the volatility we’ve seen in dairy is only offset by the quietness we’ve seen in corn and soybeans. And so it really is, I think, putting some emotion into dairymen who for the most part are still working with tight margins and are seeing their feed market that should be getting less expensive. Just holding that seasonal and seeing these huge swings on a daily basis practically on milk.
00:08:25:19 – 00:08:46:00
And it reinforces why we do what we do. Good risk management helps take the emotional decision out of that, really looking farther out and making sure we’re managing those margins versus making intraday decisions on how to market milk or how to hedge that position takes a lot of the emotion out. And I think that’s a key thing to look at here.
00:08:46:00 – 00:09:03:26
When we’re talking about the avian influenza and different stories coming into our market. At the core of milk, it’s always the supply and demand market. So we have to keep in mind that truly your milk trucks going to be dictated by what comes in for sales of our products, where our supply is, where does that demand come in?
00:09:03:26 – 00:09:13:12
And we have to look at those numbers more deeply than just the day to day emotional trade that seems to be going on in the last few weeks here in class three milk specific.
00:09:13:12 – 00:09:30:23
I think that is excellent insight. And yes, something to always remind everybody out there. Let’s try and take the emotion out of trading, especially as the headlines start to roll in. Right? There’s always been a new little snippet every day here of how we should or should not try to become our own version of a veterinarian or scientist.
00:09:31:00 – 00:09:53:21
Let’s just stick to what we know here and manage risk the way we know how. Speaking of emotion and flipping to the feed side of things, right? We get into planting plenty of emotions there as well. We had that super, you know, dry conditions in the Midwest as we let up into Good Friday Easter. Now it’s been very, very wet necessarily, but we’ve had plenty of rain, especially in certain areas.
00:09:53:21 – 00:10:10:09
I would say even some in the Eastern Corn Belt, you know, we’re starting to flirt with. Is it too wet? Guys have not even been able to get out there yet because it’s been a little bit swampy. So you start to get those headlines too, on the green side and trading that emotion over the weather patterns. When can guys get out there and not get out there?
00:10:10:11 – 00:10:15:19
Let’s take the emotion out of green to Jenny. What’s been happening in the grain and feed markets this week?
00:10:15:21 – 00:10:45:29
The emotion right now in the grain market seems to be concentrated on wheat, which goes into a lot of the geopolitical. One of our biggest wheat trading countries is still always Russia and Ukraine. When you look at the overall global outlook, they are huge exporters, huge domestic producers, and when you start to put in those factors into the wheat market, a lot of times there’s the fundamentals, there’s more of a world market than when we talk about corn and soybeans.
00:10:45:29 – 00:11:09:18
So this week, a lot of the strength I think has come on a combination of news articles coming out of those countries on top of some of our biggest wheat belt states, Kansas, Oklahoma, Nebraska being dry. And now the weather report for the next ten days, and especially this weekend, is they could get up to four inches of rain over the weekend, depending on the weather pattern.
00:11:09:18 – 00:11:28:18
Well, that solves a lot of the dryness factors and it’s wheat which has already been planted. So we’re in the key time frame for them coming out of dormancy and really getting enough moisture to get them to maturity. So this wheat story may be a short lived one, and I think that’s been this volatile emotional trade coming in for that.
00:11:28:18 – 00:11:49:09
When you look at corn and soybeans and soybean meal specifically, that has been a lot quieter, and especially on our soybeans and our soybean meal. That’s been a crush trade when you kind of look at all the different charts, our day to day trade has been what does soy oil do versus what is soybean meal doing? And what’s a very narrow range soybean trade.
00:11:49:09 – 00:12:15:07
So just as we’ve kind of, I think talked a lot with our feed clients in here on the feed read specifically, this is going to be an interesting year within that soybean crush for an emerging market. The soy biodiesel just finding its normal. And so soybean meal is going to be one of the bigger volatile movers within that crush because it’s not finding new customers, whereas soy oil is trying to find that new normal.
00:12:15:07 – 00:12:25:11
So a lot of the volatility, this $15 per ton move we’ve really had in the last two weeks on soybean meal has been because oil has moved to the lower side of its.
00:12:25:11 – 00:12:44:27
Recent range, and I think it’s important for us to Jenny to take a big step back and say, yeah, this rally has really only been 15 to 20 bucks. And I don’t want to say only because that’s a decent move, but what we’ve been doing the last 2 to 3 years, which means rallies where we’ve moved 15 to 20 bucks over multiple sessions in a row.
00:12:44:28 – 00:13:07:27
Right. So in the grand scheme of things, over the past few years, this has been very limited, but it’s been enough for us, I think, to make note of it. I think for folks that had stepped in near or towards maybe the recent lows and picked up a pretty good chunk of their old crop protein needs. If this rally continues a bit further, you start to think about, you know, how do I buy some protection in case this market does ultimately make its way back lower?
00:13:07:27 – 00:13:29:25
And we do track, you know, the seasonal tendencies very closely with corn and soybeans and then meal as we move through planting. In terms of the you know, you talked about wheat rallying and for potential reasons why. And we’ve talked about corn then sneaking its way up, you know, closer to recent highs. Still not quite there yet inching its way there.
00:13:29:29 – 00:13:38:01
Any advice or guidance on how to handle this corn market? Maybe as we push our way through planting here in the Midwest this spring?
00:13:38:05 – 00:14:01:08
Well, our good friend Jake’s of course not here to talk basis, but I think our bigger conversation on corn continues to be managing basis risk over futures risk. We keep seeing literally a 20% range on corn, especially new crop corn. So that’s maybe lulling some guys into complacency. But basis still has the opportunity to break this year lower.
00:14:01:08 – 00:14:20:11
But we have to get into planting season. So the more risk that’s going to come in is like we’ve talked about the weather and this planting window. We’re still early in the planting window. And so far planting progress reports are in the five year average. In some areas. It’s ahead of last year’s planting progress. So we’ve got lots of time.
00:14:20:11 – 00:14:38:23
We’ve got over a month to get everything in, and I think the national average is 14 days to get the US crop in the ground. So we have lots of time. If you get a good enough window with the equipment we run, we can get this planted. The risk right now is kind of that basis. We know the US crop is abundant and it’s sitting in guys beans.
00:14:38:25 – 00:15:00:14
What’s the value that’s going to entice that to move. And so we keep advising guys maybe get 4 to 6 weeks out of your corn. But if you’re still in the spot market because not a lot is changing and everyone’s getting busy with planting. So we’re going to have less and less farmer participation in the market as they’re getting busy with planting.
00:15:00:14 – 00:15:20:01
So I think it’s still a good time to be having the discussions on what you still need to have bought and where you’re sitting, and we’re still looking at using some option strategies for new crop. There is still risk in this because we don’t have it planted in the ground. I don’t think any of us think we can say this is the low of the year kind of moving forward.
00:15:20:02 – 00:15:37:20
Yeah. And the reason we talk about that seasonal tendencies. Because what you said, Jenny, it is not in the ground yet. So a lot of folks are asking us about, you know, where could new crop futures go on corn, where could it go? And a lot of folks, I think, including us, can envision a world where we are trading $4 on new crop corn.
00:15:37:20 – 00:15:57:18
The reason we are still 75 to $0.80 away from that is because we’re not over that hump yet. This this crop is not in the ground just yet. I think we do need to see that crop in the ground. And you combine that with the amount of corn that we still have in the beans and folks on the crop side still holding on to a pretty decent amount of this stuff.
00:15:57:18 – 00:16:16:01
I think we could hope that at least the stars begin to align, where ultimately, once this is in the ground, guys feel compelled to either start to unload some of their old crop and or take advantage of maybe some dryness pops that you get through early summer. Perhaps, but at some point it does feel like basis needs to come back to us a little bit further.
00:16:16:08 – 00:16:33:02
And I think we all agree here at least there’s plenty of downside potential still in this corn market. We just have to get over and pass a couple of these variables. And then before we wrap up, just a couple variables to mention is that crude oil remains fairly elevated. It has pulled back a little bit from its recent highs.
00:16:33:02 – 00:16:51:18
We were testing, you know, close to 90 bucks a barrel there when things were really starting to get heated up in the Middle East in the last week or two deals perhaps slightly contained. Once again, we we say contained and perhaps we don’t ever really know. But the market’s pulled back a little bit. But 80 bucks is still pretty high and we’re now a month away.
00:16:51:19 – 00:17:06:09
We five weeks away from Memorial Day. My kids will be out of school and the first week of June. I mean, that’s when you start driving around a little bit more. You start to pick up that energy demand in the US. So we want to keep an eye on that. We’re definitely keeping an eye on we, as we said.
00:17:06:09 – 00:17:24:20
And then lastly, we actually had a pretty nice little export sales report this morning for corn. I feel like it doesn’t really get much love this marketing year, but we’re still selling corn. We’re still selling corn. It’s certainly not to the big powerhouse. And everybody likes to talk about week to week, but I’d say we had a pretty nice export sales number this morning.
00:17:24:20 – 00:17:44:01
So again, if that’s a trend where we start to exceed required pace week to week in terms of those commitments, maybe the USDA has to make a couple changes in terms of revising that export number higher at some point. Too early to say, but on keep all these variables in mind again, we’ve got the vision where we want it to go.
00:17:44:03 – 00:18:04:28
We’re just not quite there yet. We got to get past a couple of these points. But that being said, I want to thank you both for being here today. Awesome to have you two wonderful ladies on the show. Really excellent work and Jenny, Kathleen, always great to have you on. Amazing insights. And of course want to thank the Ever Insights Crew for their support.
00:18:04:28 – 00:18:15:16
Thank you to 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 Kathleen.
00:18:15:18 – 00:18:17:07
Speaker 1
Feed back.
00:18:17:07 – 00:18:25:01
In and the question feed back through. And that’s all for today. We’ll see you next time on the grain feed the.
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