The Grain Feed – May 9, 2024

(Transcript auto-generated)

00:00:00:21 – 00:00:10:18

Future trading involves risk and is not suitable for all investors. Content provided in this for educational purposes and is not a solicitation to buy or sell commodities.

00:00:10:20 – 00:00:31:18

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 for an amazing team of analysts with the intention of helping dairy and livestock producers venture risk. I’m your host, Jim Matthews, reporting from the Chicago Home Office.

00:00:31:21 – 00:00:53:16

On a very wet and rainy and dreary Thursday morning. But joining me today from lovely Kansas, director of food procurement, Mr. Jake Kinsley. And returning to the grain feed. Also from his Chicago home office dairy broker and agent Mr. Zach Bowers team. How are we today?

00:00:53:20 – 00:00:54:26

Doing all right.

00:00:54:28 – 00:01:09:09

We are doing well. So sleepy. I’m a little sleepy. Zach, how about you? I’m a little sleepy, too. That was a late night, Jim. It’s a late night. And you know what? Not that kind of late night. As in a. We had to switch planes. Landing gear was down, but not in a cool way. It was down in a bad.

00:01:09:10 – 00:01:20:03

It wasn’t a big deal, though. According to the pilot, the pilot reassured us it’s not a huge deal, but you will have to get on a new plane. Yeah, three hours later.

00:01:20:06 – 00:01:23:17

Starting to make sense why Cody drives 18 hours.

00:01:23:23 – 00:01:45:08

It was a little bit more sense every once in a while with Cody Castors on to something every once in a while. But, gents, we had, we had a pretty good week, so a handful of us ever again from our dairy and feed the producer teams were down in Dallas. We had some awesome collaboration sessions talking about how cool we are mainly, and how we can continue to improve.

00:01:45:15 – 00:01:50:23

I mean, you guys, I know, I don’t know how you two could improve. You are. I think you’re both perfect.

00:01:50:25 – 00:01:52:18

I try every day. I appreciate every.

00:01:52:18 – 00:02:11:20

Time I wipe that and shows you that’s where. Yeah. That’s right. We’ll just get ideas. Perfect. That’s guys, no matter what they tell us, no matter what our wives tell us, we’re great. Well, speaking of near perfect, we have a lot happening in the markets this morning. We’ve got milk markets have been up. The feed markets under some pressure.

00:02:11:20 – 00:02:33:03

We’re getting closer to perfect in terms of what we could report this morning. So maybe page if you would kindly timestamp the broadcast. It is Thursday morning and we’ve got the feed markets again under some pressure here. We’ve got some red on the screen. You know it’s wheat that’s been that stubborn grain. Let’s say I know we always meal is our stubborn little byproduct.

00:02:33:06 – 00:02:50:24

But wheat is the one that is still managing to hold some green on the screen here this morning. So we have to keep an eye on that sucker, because I think, Jake, as we’ve discussed, it’s providing a little bit of support to that corn market. And we’ll let you touch on that here in a little bit. But we’ve got wheat up about $0.10.

00:02:50:24 – 00:03:15:13

You’ve got July Chicago wheat at 643. So that’s helping limit corns break down. We’ve got July corn at least back down a little closer to 450. We’re at 456 this morning. December is back under 480. We look at soybean meal, that stubborn little byproduct. We’ve got July meal at 374 in December at pretty much the same, maybe a couple of ticks lower.

00:03:15:14 – 00:03:39:08

But that meal market that have been on a pretty rapid run up, at least for the last three sessions. Now we’re starting to cool off a little bit. And as Jake, you’ll discuss as well. We do have that monthly wise. Do you report tomorrow on Friday. So recording Thursday. That’ll be out tomorrow on Friday. But we’re going to start off with Mister Zach Bauer is talking about these wild little dairy markets that we’re having a lot of fun.

00:03:39:08 – 00:04:06:16

And we’re in the big conference room ever AG headquarters in Dallas yesterday. Spot session kicks off and all you dairy brokers and agents, your screens light up. Everyone’s throwing a party. What was going on there? Yeah. Spot cheese is back to year to date highs 195. Limit up. Class three. Got a little fall through today. You know April class three came off the board at 15 half and you got 20 half trading today $5 difference in only a couple months right.

00:04:06:16 – 00:04:25:07

Very exciting from what’s been a quite frankly depressing market for the last 6 to 8 months. And I think what we’re seeing is finally that supply side is kicking in. Right. We have lost a lot of milk. We’ve seen it in the last seven, eight now, maybe even more. I’d have to go back and look. No pressure. Where we’re down on milk production.

00:04:25:07 – 00:04:44:02

We continue to see those dispersals happening all the while. Seasonally, we’re going to be walking into a time where we start losing milk just because of the heat, losing components, and then you mix on top of that. Last week we got a phenomenal export report that exports were record highs 110 million pounds, 34 million of that go into Mexico.

00:04:44:02 – 00:05:01:03

Right. That I think on the backs of the supply side story, we saw a little bit of the demand side that we needed to see happen, albeit that was a march report. So it is looking back at history. If you look back at that time, we were 40 to $0.50 cheaper than the rest of the world. So it makes sense that we got those exports right.

00:05:01:03 – 00:05:18:15

So the million dollar question I think going forward is did we go too high, too fast and now price ourselves out of that market once again domestically, demand isn’t getting worse, but it’s not great either, right? I think the trend is our friend there, but at $2 cheese, I can imagine we probably start to lose a little bit of demand at $2.

00:05:18:15 – 00:05:34:23

Cheese. We definitely start to lose export markets. As you know, the rest of the world is at elevated prices. You know, 180 to 190. We’re now at $2, right. So I think it’s going to be interesting to see going forward how long we can hold these if they’re sustainable. I do believe we are a $2 cheese market eventually.

00:05:34:28 – 00:05:52:14

I don’t know if it’s right now and how long we can hold it. Right. So but overall I think again trend is our friend. That supply side isn’t going to uptick anytime soon with our replacements are with the cost of building new dairies, things of that nature. Right. So I think supply is going to remain tight. And just the million dollar question is when demand comes back for real and for long.

00:05:52:15 – 00:06:16:18

Yeah, I think the supplies to our markets too, right on the grain and feed side. You noted that, hey, we are looking back a little bit and let’s all remember that prices were low when those purchases started to happen. But I think we’ve also seen especially in the grain world. Right, Jake. Is that like just because prices are low, it doesn’t mean the global demand has to step in and grab those.

00:06:16:19 – 00:06:36:01

As we talked about with Phil on the show last week, too, talking about some of those exports, it’s not as important necessarily directly to the American dairy market as it is to grain. But like the Chinese, let’s say, lack of commitments to step in despite corn being on its low. So just because prices are low, it doesn’t mean folks have to step in and buy.

00:06:36:01 – 00:06:56:26

But it’s good to see our neighbors to the South continue to be a contributor here, at least in both markets, really, because they’re a major corn player now. It’s good to see him stepping into dairy. Zach, as we kind of enter the you know what, we’re starting to wrap up the school years here in the US. Is there any give me any differences in terms of the milk market when kids are kids are wrapping up school.

00:06:56:26 – 00:07:17:10

We enter the summer. Anything that we should keep an eye on? Yeah. I mean, it’s seasonally. You’re going to see fluid milk sales drop off. Right? Because schools aren’t purchasing anymore. Right. But at the same time you’re also talking about grilling season. So cheese demand is going to uptake a little bit as well too. Right. So I think you’re going to balance that off with demand elsewhere as well as supply components coming down just from the heat.

00:07:17:10 – 00:07:33:03

Right. So nothing out of the ordinary is going to happen there I don’t think. Gotcha. Good deal okay. That sounds good. Appreciate it Zach Jake let’s turn to you bud. We’re looking at the corn market. At least pull back. And I think we referenced maybe on the last show, you know, we had that wager when your son was in the room.

00:07:33:03 – 00:07:53:12

We said we wagered on, I think, a glass of milk. He’s not in the room. I think this is a stronger drink than some milk. But we’ve made a wager on May corn at 443, I think, and maybe a tick or two. And we know May’s not necessarily the focus. Now. We’ve only got a handful of trading days left, but we are trading right back to 443 again on maize.

00:07:53:12 – 00:08:13:16

So just in terms of how that reflects the corn market itself, we’ve seen some big swings in this market. I mean, just a couple of months ago, we made what were the maybe two and a half to three year lows in the nearby corn market. Then we’ve run up a decent chunk here, at least because of that very strong and stubborn wheat market.

00:08:13:16 – 00:08:22:29

But again, at least corn’s back under some pressure today. Meal is as well for at least three days running. Now, what’s the impact on the feed markets in your mind, Jake.

00:08:22:29 – 00:08:43:19

Yeah, I think we’ve seen quite a bit of whiplash here in the futures market as you’re talking. You know, it’s interesting to see that wheat’s driving it and that a lot of this is domestic headlines. We’re hearing some of our folks that are out there chopping wheat right now for green chopper forage on these dairies. Texas Panhandle guys are they’re very happy with the yields on the stuff.

00:08:43:19 – 00:09:09:27

The quality’s a little lower. The protein content’s just a splash lower. But typically with a wheat crop, the higher the yield, the lower the protein. So nothing out of the norm there will be interesting to see over the next few weeks how the crop really shapes up across the greater part of the grain belt there. I know we’ve had a lot of hail events across parts of Kansas and Oklahoma, and parts of Nebraska that could be fairly detrimental to some yield.

00:09:09:27 – 00:09:33:14

And in certain bands of that area, I ran from Dallas up to Wichita along 35 yesterday. Now 80 mile an hour along the side of the highway is hard to get a good yield estimate on this crop, but it doesn’t look terrible from the driver’s seat, and it is turning rather quickly. I think there was a noticeable change in the color of the crop from just Monday to now, so it is moving along.

00:09:33:14 – 00:09:56:12

Start to get some good data out of the field. Combines running through it here in just a matter of a couple of weeks. I think by the time we get to Father’s Day here in a month, he’ll be running through the heart of Kansas and really know what that crop’s doing. So that’ll maybe take a little bit of the unknown out of these markets for a while, and then we’ll truly be focused on precipitation events across the IE states in the more traditional weather market.

00:09:56:12 – 00:10:24:06

For our growing season here. I think it may feel a little counterintuitive, but this run up in futures can be beneficial to feed buyers and end users here because we are hearing yet again, I think this is now probably the third quick up cycle in futures values that we’ve had in the last 45, 60 days. And with each one of those and this one’s no different, we’re seeing more grain being sold by the farmer into the commercial pipeline.

00:10:24:09 – 00:10:46:17

Some stuff coming off of storage in the commercial elevators that was on priced, some new stuff coming out of the bins. I think our team is estimating that roughly two thirds of the old crop bushels have been now sold by the farmer. So catching up a little bit closer to where normal would be still pretty lightly sold on new crop.

00:10:46:17 – 00:11:06:04

But another layer did get sold with this run up in futures. And the point is, basis didn’t have to do much work to make that stuff move, right. In fact, I would say since the end of March when we got our acreage report to now we’ve seen some basis values in the Midwest slide, particularly in corn and soybean meal.

00:11:06:08 – 00:11:34:04

We’ve seen overall cash prices across the country. Basis values have slid just a little bit, not as much as we think they could before. This is all said and done, but we have seen some movement. Canola has been a little bit of an outlier. We’ve got concerns of a potential rail strike with the Canadian railroad unions that I think the deadline to resolve or strike is May 21st or so, and a lot of canola comes out of there.

00:11:34:04 – 00:11:53:18

So that’s got some people on edge. They’ll typically start to slow down movement along those lines here a week or two ahead of a potential strike. But they’re in negotiations right now. So that’s kind of set that market off a little bit. All in all, fundamentals are still very healthy. This run up in futures gives us again opportunity to try to catch a break down in basis.

00:11:53:18 – 00:12:11:12

Maybe get some of those numbers set. I think we’re at a point in the year where taking a bid to your feed vendor is to your benefit. They’re looking for folks to come in with firm numbers and say, hey, this is what I’m willing to own for the next year, and then they can run that back up the supply chain and try to get something done on your behalf.

00:12:11:12 – 00:12:41:21

So working through those conversations with folks try to give people targets on where to start buying. I’m not saying buy all of next year’s feed, but we’re definitely talking about where to get that first layer on first quarter, third, maybe even the half of what you need for basis numbers for the next year in certain situations. So still, generally speaking, 2020 maybe $0.30 away per bushel on new crop corn for a lot of folks, we’re still probably a good $15 a ton away on proteins for new crop.

00:12:41:27 – 00:13:03:05

But we’re inching our way closer to that every day. So if we can get those knocked out and then you catch a break down in futures to finish out that price, then you’ve got some feed bought three, 4 or 5 months ahead of when you actually have to start running it through the dairy and got time to catch, like we’re seeing this nice rally in dairy to start to pin down some profitable numbers on the farm.

00:13:03:05 – 00:13:27:18

So that’s kind of been the approach here lately. We’ll see what this was. The report tomorrow brings us, I think people are probably going to focus pretty heavily on what the USDA numbers look like for South American production. We continue to see South American agencies erode their production numbers on the crop down there, as weather kind of moves through and slows down the pace of harvest and gives us some concern about quality.

00:13:27:18 – 00:13:50:05

And we’ve seen the last couple months, USDA really hasn’t budged on that. Do they finally make a change here on the May report? Hard to know. I think a lot of people are betting that they at least should. We don’t know if they will. And then we’ll also get the first look at new crop balance sheets, the line items for total production for this next crop year, export demand, crushed demand, ethanol, all of those pieces.

00:13:50:05 – 00:13:54:10

We’ll finally get the first look at those. So that may do a little bit of shaking up the markets as well.

00:13:54:14 – 00:14:15:15

Yeah, I think the fact that the May was the which again it’ll be out. Well we’re recording this on Thursday. That’ll be up Friday morning. The magazine is just that first look of the new crop balance sheet. Right. So there’s nothing to really compare it to month on month. It becomes front and center in terms of like when you’re actually looking at the physical wised report that becomes the front and center you’ve got.

00:14:15:15 – 00:14:49:07

Your far right column is now what the current USDA projections are for the marketing year. The column to the left of it will we’ll have an A next to it because this will be the first look. But I think it might be a reminder to some folks that even with the smaller than anticipated acreage number we got at the end of March, if we use trend line yield with that number on top of what was a record production from this past fall, it could be a refresher for some folks that, oh yeah, this is a pretty big corn balance sheet.

00:14:49:13 – 00:15:17:26

And yeah, perhaps the USDA can then tuck away some of those South American production cuts into what will now be old crop type of column in the global supply and demand sheet. So again, I think we’ve been arguing for at least a couple months that they should, or at least or could at least try and chase some of those South American local agencies that you referenced, Jake, to some of those, a little bit lower because they remain fairly stubborn.

00:15:17:26 – 00:15:42:11

We’ve seen a lot of pretty significant flooding in southern Brazil, but maybe that’s been too recent for the USDA to make any concrete changes. Based on that, you brought up some of the strikes in Argentina. Does it actually ultimately impact soybean production? No, it does slow down the transit of those beans from the field to the point where they can then be crushed in containers out of there.

00:15:42:11 – 00:16:02:13

And so perhaps that gap between what the Argentines can supply the world versus what’s remaining in the US, I think maybe we’re seeing some of that strength in the protein market as of late. But again, at least the last few sessions under some pressure, I think maybe that’s what we’re seeing now. The last 2 or 3 days. Is the market doing that natural repositioning ahead of a wise report.

00:16:02:17 – 00:16:19:07

So it’ll be an interesting one, Jake, as always, especially when they come out on a Friday, because then you could just get a couple hours to trade it. You’ve got a weekend to digest it before we come out firing on Monday. Always a good look. And you know what, Jake, before we go, you’ve got your smile hat on.

00:16:19:09 – 00:16:20:22

Are you going to get a new hat next week?

00:16:21:00 – 00:16:27:04

I’m hoping so. I’m hoping so. This one’s a year old getting a little dingy. Time to upgrade that up.

00:16:27:05 – 00:16:47:03

So. All right, so Jake and I will be zigzagging across Florida next week. The highlight will of course be the southeast Milk Leadership Conference in Tampa. So we’re very excited about that. And we’ll have a couple of our other colleagues bouncing around with us too. So very exciting. Jake. I means I have to physically see you two weeks in a row.

00:16:47:03 – 00:16:49:12

So how are you feeling about that? What a treat.

00:16:49:15 – 00:16:51:00

What a treat.

00:16:51:02 – 00:17:16:15

Folks. Zach, you buying that? Not for a second. I was not for a single snack. Neither am I. Fantastic. But at least Jake, you smiled through it. And I really appreciate you at least, at least making an attempt. So that’s awfully nice, gents. This is some fantastic work. A big thanks to Zach Bowers for returning to the show, especially on limited sleep from a late night in Dallas.

00:17:16:15 – 00:17:37:05

Again, not in the coolest way, but we did it. We’re back. Great to have your insights. Always a pleasure. Appreciate it. We also like to thank the Ever 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 Zach.

00:17:37:07 – 00:17:38:09

It’s never seen the show.

00:17:38:13 – 00:17:46:08

Feed back up to feed back. That’s all for today. We’ll see you next time on the grain feed.