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 Jake Kingsley and Phil Plourd.
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 Grain Feed, brought to you by Ever Egg. 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, Mathews reporting from Chicago.
00:00:31:17 – 00:01:01:07
On another beautiful spring like Thursday morning here in the Midwest. Joining me today from Kansas. That’s right Kansas director of feed procurement Mister Jake Kingsley. And returning to the grain feed not as guest host but as guest from Wisconsin. President of the insights division, co-host of the Dairy Download and more importantly, dairy industry royalty, Mr. Phil Plourde team.
00:01:01:09 – 00:01:02:05
How are we today.
00:01:02:12 – 00:01:04:09
Doing very well today, Jim.
00:01:04:12 – 00:01:23:02
It was much nicer in Chicago yesterday and I believe today than it is in Madison, Wisconsin today. There’s no sunshine here in Wisconsin. It’s a little cloudier on and off here in Chicago too. I think it’ll get sunnier again later. But it’s not just you feel okay, it’s us too. I’m not just saying I’m sorry, Jim. So we’re good.
00:01:23:05 – 00:01:30:22
I’m just going to say, yeah, things are sunnier in general when you’re around, so we’d love to have you here more. And then, Jake, there’s no place like home. Right, bud?
00:01:30:23 – 00:01:38:17
That’s right. We are finally back in Kansas. Yellow brick road and rainbows and all.
00:01:38:20 – 00:02:06:03
Well. Congratulations, buddy. We’re very happy for you. And glad that you’re settling in back in the homeland. Ruby. So the king claims I got them on? Yeah, under the desk. Well, good deal folks. Guys, we have a lot to run through today, so, page, if you would kindly timestamp the broadcast. It is Thursday morning and Jake Gray markets are pretty green.
00:02:06:05 – 00:02:24:24
The screen is green. Jake, I don’t know what you did this morning. I know you put your little feelers out there in the market spreading rumors maybe about how don’t tough things look in Kansas. If you’re looking out your window and seeing some of that wheat crop deteriorate, I don’t know what you’re telling everyone, but as we look at the board, we’ve got nearby corn.
00:02:24:24 – 00:02:48:23
We’ve got July. Corn is now up $0.05 this morning, Thursday morning. So we’re at 400 56.25 on July. And DC is trying to inch its way closer back up to 480. We got within a cent of it earlier this morning. Currently trading at 478 on December. Corn. wheat futures that we just highlighted there with Jake’s expertise are back up just a touch.
00:02:48:27 – 00:03:13:10
It had been wheat driving corn lately. We’re kind of seeing the opposite today. Corn is up a decent chunk. White and wheat. Trying to hang in there. It’s maybe only 2 or $0.03 higher. It’s beans and meal that are the big boys today. We’ve got July beans just under 1190. We’ve got no beans right at 1180. That’s up almost $0.15 on the day.
00:03:13:16 – 00:03:38:16
We’ve got July meal. That’s stubborn little byproduct is back in action. Got July meal at 360 in December meal at 362. So that stubborn little byproduct which is showing some resilience here a couple days ago before pulling back more into that general, let’s say, steady trend that it had been in is back in action here today. So lots happening here in the feed markets.
00:03:38:23 – 00:04:05:11
But Phil we’re going to start with you because this week was ADP week in Chicago. It’s a big week for the dairy industry here in Chicago. Every year it’s something like it’s always around mid late April right. We’ve got the whole crew coming in town every week. Represent you fill the highlight of the industry panel on Monday then hosting the insights team meetings in our offices.
00:04:05:11 – 00:04:29:17
So what was your takeaway from the big week this week? Yeah I don’t know. Chicago’s the city of broad shoulders and things with Carl Sandburg Road. At one point in time it was the meeting of shrugged shoulders at, ADP. A lot of uncertainty. I’m not sure. A lot of conviction. I mean, sometimes you hear a little theme, you know, we have a BPI and it builds up, builds and offices.
00:04:29:20 – 00:04:49:10
it’s sort of a roaring noise as it rips through the hallways. nothing like that this year. I think in part that’s because the different markets have different characteristics. The butter market is the butter market, and it’s strong and robust, and no one wants to be bearish butter. Probably nobody should be bearish butter. It makes me nervous that nobody’s bearish butter.
00:04:49:10 – 00:05:09:05
But you know if there was a bearish butter position they were hidden very well in the room. So now a lot of talk about their lot of shrugged shoulders. If there was a story. And it’s a story that’s been dictating a decent amount of the overall global dairy price story, is that China is just not active on the scene.
00:05:09:05 – 00:05:35:01
A February import data came out. Yeah, the March import data came out terrible. Our Fresh Agenda team has calculated it’s a significant hole on the global balance sheet when China is not showing up with big appetites. And what that means is a it’s hard to move powders into China, B there’s more powders to move elsewhere, and then it even impacts product mix calculations in places like New Zealand.
00:05:35:01 – 00:05:54:23
Like, okay, well, we can’t make common powder. Google product is the Chinese aren’t taking a lot. We’re going to make cheese. We’re you know, and so it’s a sort of a cloud on demand globally and one that’s been very difficult to shake off. And the numbers are big. You know, it’s you know it’s 2.7 billion pounds of milk equivalent in just January.
00:05:54:23 – 00:06:12:11
In February the gap the China gap will call it. So that was talked about you know, was like he anything good about China? No. You know, China looking any better? He doesn’t seem like it. People that we ran into that you know, we presume have very good visibility to sales to China. didn’t seem upbeat in all seriousness.
00:06:12:11 – 00:06:32:14
And so I would say the kind of China no good talk was prevalent. And I think that lent a very bearish tone to any conversations about powders. And cheese is not always at the center of this conference. But, you know, it’s hard to escape the cheese market. I think that with the movement in the markets the past week, we’ve seen barrels over $1.80 a pound.
00:06:32:14 – 00:07:01:15
All of a sudden a little rally. It suggests that our exports have been clicking. We’re shipping against deals made when prices were cheap. So the story in cheese has been, generally speaking, when we’ve been below 160, below 150, call it people love us. Oh yeah, we’ll take some of that cheese from America. And when the markets have rallied, they’d say, oh well, yeah, you know we love you sort of and have looked at access supply elsewhere.
00:07:01:15 – 00:07:24:03
And so that exports on exports off rhythm has really dictated the price rhythm as well. We saw that just now. Data released that March cheese exports were over 100 million pounds a record high. But again that was seeded by a $1.50 cheese at points in the past, you know, 60 days. And now we’re at $1.80 barrels. What do we be able to do.
00:07:24:10 – 00:07:40:21
So I think that, you know, I think people acknowledge that rhythm. And I think what we’re the challenges, okay, that’s been there. And if you’ve been following that rhythm you’ve been right. It’s been pretty easy to predict. Oh well, no one likes US dollar 50 a ship. So is there something else going on is the big question. And anybody answered it.
00:07:40:21 – 00:07:57:07
But just a big question. Well yeah. And I think that they I mean so obviously from our side of things right on the feed side of things, the China not being there, at least in our industry, right, has been beneficial for the dairy farmer. Right. And we had a couple of conversations with some folks yesterday asking about China.
00:07:57:07 – 00:08:15:14
And, and it was saying that they were nonexistent from our side. And it was almost celebrated like, oh, okay, good. They’re still not there. So that’s been a big focus for us over the last 6 to 9 months, I think at this stage is China has clearly stepped away from the American grain market as much as they can.
00:08:15:14 – 00:08:43:05
I think there’s an element of the South. Americans have returned in force. Argentina has returned in force this year. So there is a market for them to pivot from us. But there’s also obviously then for political and I don’t know, it’s almost self-sustaining purposes that they also want to inherently just pivot from us. It is this trickling into the dairy markets as well, or is this just more of a just supply and demand function at the moment?
00:08:43:06 – 00:08:57:17
I think there might be some of that, but at the end of the day, China is not as big a customer for U.S. dairy as it would be for U.S. corn, but China’s a big import, you know, big customer for New Zealand, for Europe and others. I mean, they buy some stuff out of the U.S. so it’s a more global story that way.
00:08:57:17 – 00:09:20:02
And I think it’s tied to two factors. One, China has, you know, said that it wants to be more self-sufficient on dairy and milk production in China is up 20, 25% over the past 2 to 3, three years. And so they’ve said we’re going to build more dairy infrastructure. They’ve built more infrastructure. The milk has arrived. And so that’s certainly played a factor.
00:09:20:04 – 00:09:41:25
And then, you know, the Chinese economy has been somewhere between mediocre and not great. People eat. But I think that, you know, certain, you know, dairy products and, you know, certain uses of dairy have been hurt by weak Chinese consumer demand, you know, generically speaking. And so those factors are the primary things driving the China’s story today in the dairy world.
00:09:41:27 – 00:10:05:03
Okay. So it still remains incredibly important, of course, to keep an eye on the Chinese economy as it is impacting both our grain and feed, but also dairy pricing and how it’s impacting our farmers here in the United States. Right. And potentially that double edged sword of, hey, if the Chinese are maybe struggling a bit and or maybe out of the game at the moment, hey, we’ll keep feed under pressure.
00:10:05:03 – 00:10:24:26
Fantastic, potentially. But the dairy side, you also maybe share the same fate. So we kind of got to keep an eye on how that’s going to impact everybody here in the U.S.. Don’t take too much of our corn. Please take more of our dairy. Yeah. Exactly. Right. Yes, exactly. That’s a great way to put it. And hopefully everyone in China, of course, watches the grain feed.
00:10:24:26 – 00:10:48:09
So we’re assuming they’re hearing our message loud and clear. Right. So you heard it here first. The subscriber numbers are a little hard to, to ferret out, but it’s possible rogue VPN interactions. That’s what VPN they’re for, to get the grain feed. That’s exactly all the grain feed. That’s exactly, exactly. All right, so, Jake, let’s let’s turn it to you and Jake.
00:10:48:09 – 00:11:03:25
So let’s keep our focus here at home for the moment because we touched on the, you know, the export market. We touched on the macro situation there for a minute. But, you know, we look at the screens again I joked earlier, the screens are green but things are looking up this morning. What do you think is driving this.
00:11:03:25 – 00:11:25:13
Because we have been talking about week to week. Is the planting numbers right? Because we have this gap between the monthly USDA data. We had the big planning report at the end of March. You get an April wise, the not a huge deal. You get the May Ys coming up next Friday. So a week from tomorrow as we record Thursday.
00:11:25:15 – 00:11:31:03
But other than that we just have to watch weather. We have to watch planting. What are you seeing from the feed side of things here today?
00:11:31:06 – 00:11:58:15
Yeah I think that’s right. We’re watching the the basic seasonal headlines here. Weather and planting progress and planting progress is ahead of the five year average. It’s probably right in line with the ten year average. We’re looking just about the same pace we did last year. Overall drought conditions have improved year over year. We still have some dry spots across most of the states west of the Mississippi.
00:11:58:15 – 00:12:19:28
They’re in the green belt, but the severity of drought is far less than it was last year. And really in the last week, a lot of places have got significant rainfall, inch and a half to 2 or 3. Some places, four plus inches. In the last week you talked about earlier, wheat had led the market higher last week, and then it kind of stalled out.
00:12:19:28 – 00:12:42:08
And that was mostly on the back of a wheat crop. Conditions starting to decline, taking some fairly healthy little cuts to the good to excellent rating and that sort of thing. Corn climbed up and followed it. And now I kind of wonder, just looking at the charts, I guess. I haven’t seen any headlines directly speaking to soybeans and meal here this morning.
00:12:42:10 – 00:13:02:16
kind of looks like maybe they’re playing a little bit of catch up to everything else, and everything else is responding with just a tick higher. To stay out in front of them is what it feels like. The rain across the Midwest certainly slows down planting progress. But again, we’re we’re nowhere near delayed. We’re nowhere near late planting at this point in the year.
00:13:02:16 – 00:13:29:20
And the crop progress reports as of what was Sunday the 28th were ahead of pace. So I have to believe these are just a little bit of whiplash in the market based on typical seasonal weather headlines. Fundamentals are still very healthy. We’ve got plenty of corn in the bin across the US, the soybean ending stocks number is as healthy as we’ve seen in the last four years.
00:13:29:20 – 00:14:03:01
Now, we’re aiming to put some pretty stout acres in the ground here over the next few weeks. So I expect volatility to continue in the futures market basis numbers have been pretty steady. We saw a little bit of a break down a couple of weeks ago. Finally in corn basis numbers, particularly for folks that are willing to contract through September and then even starting to see some new crop numbers for October through next September, popping up looking a little more attractive a little earlier in the year than we’ve seen in the last few years.
00:14:03:01 – 00:14:24:10
So some opportunity there. I don’t think we’re at a point where we’re excited to go out and work up a bunch of feed for the next 12 or 18 months today, because we still believe that there’s room to work this thing lower, both on futures and basis. but we’ve been talking to a lot of folks about where is the number to step in and take some action on some of this stuff.
00:14:24:10 – 00:14:45:03
And it doesn’t mean you go buy everything for the next year. But the first quarter. Or even if we get to certain numbers in different regions, maybe even half of next year’s basis, and then start working some futures numbers against that to get a cash price locked up with your vendor, broad sweeps were probably 20 or $0.30 away from where we want to be per bushel.
00:14:45:03 – 00:15:07:25
So $710 a ton on corn basis and a lot of parts of the country. And then on soybean meal and canola meal, new crop numbers. We’re still 15 or $20 a ton above where I think we could get or where we would start stepping in and aggressively making some first purchases. A lot of other commodities that we can’t hedge have started to follow suit.
00:15:07:27 – 00:15:37:29
We saw distillers make their nice break as corn prices finally declined and grain started to move out of the bin into the commercial pipeline. Gluten kind of trends. Right along with that, soils and forages particularly forages in the west where they always have concern of drought. And they’re 1 or 2 years away from running out of inventory. Those numbers have all come down and are putting pressure on silage and wheat lids.
00:15:38:00 – 00:16:00:25
For these folks that were paying two and three what they normally would for those types of products the last couple of years. So everything’s starting to cool off, one that we haven’t seen quite break yet. In fact, cottonseed kind of doing its normal thing at this point in the year. Every time somebody buys a little bit, the price jumps up a few dollars, and then the next person buys and it ratchets up again.
00:16:00:25 – 00:16:25:17
And we’ll probably see that continue. That’s just the nature of a limited inventory until we get harvest going again in October. And gins really get rolling through their inventories in November. So we’ll see that trend probably continue. But we’ve been talking about it. The acreage estimates that came out at the end of March expect for Cotton Acres to be up in the southeast in the Texas Panhandle and California and Arizona.
00:16:25:19 – 00:16:55:28
And then it’s just a matter again of whether do we get the timely rains that we need to get back to normal yields, particularly in the Texas Panhandle, if those guys get something of a normal yield there, I think we see a significant drop off in cotton seed price come harvest time, and new crop values could be I mean, this seems like a big reach, but we could be looking at a $5,075 a ton decline in cotton seed price by the time we get there.
00:16:56:03 – 00:17:13:03
If all else kind of holds steady where we’re at today. So a lot of things to look at here. Ultimately, I think we’re going to continue to see volatility with weather headlines for a little while. That’s not abnormal for this point in the year. We just got a we got to have a little bit of a game plan and stick to it.
00:17:13:03 – 00:17:36:27
Yeah that’s right. Yeah. It’s it is so not abnormal that it is, normal. Right. I mean it’s a like truly this is the seasonal tendency is during planting we get these pops and volatility. We get folks wondering debating like what is late planting is May 2nd late planting. Well the answer is no for those of us up north.
00:17:36:27 – 00:18:09:19
But you start pushing into mid-May and you’re in the same situation. Folks start to wonder, well, now I’m closer to June 1st than May 1st, and it just it gets people going a little bit. It riles people up a little bit. And also, when you break down the individual states in terms of where they are on their planting progress and our insights team, there’s an amazing job producing this for us is that we can see that, like in Indiana, and we know this from the folks that we talked to in the Hoosier state that the the conditions there are pretty wet, right?
00:18:09:19 – 00:18:34:09
I mean, we’ve got guys in the the central to northern areas that have not even thought about field work prep at this stage in the game. Again, I think May 2nd. That’s okay. I think if we had the same conversation on June 2nd, maybe not as great. So we stick with our game plan. Like you said, Jake, I think you did an awesome job of telling folks over the past few weeks, you know, maybe for corn, we’ve been incredibly patient.
00:18:34:16 – 00:19:03:11
Maybe you wrap up the rest of your April, wrap up some May, and maybe even go into some of June, but potentially lead the second half of that summer open. And again, just to reiterate, as we talk about the the vision of the future of where feed prices are going, whether that is corn pricing protein or, Jake, your statements regarding cotton and cottonseed, this is all with the caveat that we have a fairly routine spring and summer if we suddenly have something catastrophic happen to us.
00:19:03:11 – 00:19:25:07
Of course, that’s why we put hedges on. That’s why we have protection in place in these ceilings in place, just in case the unforeseen does occur. So I think at this stage, Jake, you had a visitor. I think that your secret sauce you’re getting advice from from other folks behind you. I know it’s not just you. There’s other brains in the in the Kingsley operation that I think that.
00:19:25:09 – 00:19:26:19
Yeah, he’s pretty sharp.
00:19:26:21 – 00:19:30:29
He’s gonna keep us. He’s gonna keep us on our toes for a couple of weeks until daycare gets going.
00:19:31:00 – 00:19:50:10
Moving is hard. That’s right. You know, it’s it’s not just planting. Whether it’s the Kingsley household that’s keeping us on our toes for the next few weeks. And also, Jake, I think back in February, you and I made a, a bat over. And I can’t say it because your son’s in the room, so adult beverages that we would owe each other.
00:19:50:12 – 00:20:10:17
Back when May futures were trading, I think at 443. Now, when we saw pricing drop into the four tens, I was people were giving me a hard time on that wager. But we’re looking at May at 447 this morning. Okay. We still got a couple weeks left of May trading. Are you sweating it? Well, we’ll say we we said we’ll say we wagered glasses of milk.
00:20:10:19 – 00:20:13:16
Are you sweating it? Do you think you’re going to be buying me milk?
00:20:13:18 – 00:20:16:27
cool as a cucumber.
00:20:17:00 – 00:20:37:14
Okay, so Uncle Jim is sending milk to the house, to the Kingsley household. That’s what you guys are in the high. Yeah. Okay, well, that is a fearless prediction, Phil, if I’ve ever heard, once you’ve got your fearless prediction of the day to borrow from your dairy downloads, we’ve we’ve made it all happen full circle here at the grain feed.
00:20:37:16 – 00:20:57:27
Excellent work today, you guys. A huge thanks to Philip Lord for returning to the show. It is great to have your insights. We would like to thank the Egg Insights Crew for their support. Thank you to Paige for production magic. Thank you to the viewers for watching the grain feed. Contact information is on the screen. We greatly appreciate your, Phil Plourd?
00:20:57:27 – 00:21:03:10
Feedback. That’s all for today. We’ll see you next time on the grain feed.
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