Transcript

Futures trading involves risk and is not suitable for all investors. Content provided in the segment is meant for educational purposes and is not a solicitation to buy or sell commodities. Welcome to Ag Smarter, the dairy feed brought to you by AG. Each week we bring you clear, timely insight across dairy, grain and feed markets focused on what’s moving, why it matters, and what it means to your operation.

I’m Jim Matthews. I’m joined today, as always, by the one and only Miss Kathleen. Woefully. It is about 1015 Chicago time. We are recording on Monday. It’s a little bit of a goofy week scheduling here amongst the team, mainly myself to blame, but we are recording Monday morning and Kathleen, how was your weekend? It was a little crazy.

You know what my favorite part about the weekend though, Jim? Yes. Is that we went and got some Nerf guns. Oh, and one of the local tourism places around here brought in some dinosaurs, and we went and shot Nerf darts at dinosaurs as we drove around the 40.

Well that’s fantastic. I’m sure if you could dig up some of the cavemen, they’d be very jealous that you’d get to shoot at dinosaurs. That’s probably a probably a fantasy of their, didn’t shoot at dinosaurs. I thought, Kathleen, you were going to say the best part of the weekend is that when it ends, you get to hang out with the upper egg team first thing Monday morning.

That’s what I thought you were going to say. Yeah, that was going to be my second thing. Okay.

Weekend was the light. And what’s also delightful, Kathleen, is that as we do start this new week, here it is the first day of June. So the first trading day of the month, we are seeing some interesting behavior in terms of trading and markets this morning. In terms of maybe some money, I’d say moving in usually on the first day of the month, but now it’s almost feeling like money is moving out for some of our products.

Here we have corn as we record. Monday morning is down $0.06 and meal down $2. So for the folks out there feeding corn and protein, this is a nice way to start the week and the month of June. And what’s super interesting, Kathleen, is that we’re doing this as crude oil trades up 8%, crude oil is up 8% because we took a little action against the Iranians here over the weekend, and I think they did as well.

So crude is feeling the squeeze. The Straits of Hormuz remain closed. So normally I’m saying this because that would mean corn is up and other feed and commodity markets are up, but not today. Kathleen, as we start the day, corn is looking at this from, I believe, a pure corn fundamental play and saying we’ve got a lot of it.

Planting is wrapping up. Weather is looking pretty good. Maybe a little seasonal pressure here as we start the month of June. What are you seeing as we start this month? Kathleen. On the dairy side, things are a little perky than I would have anticipated as we started June. If we think back a couple of weeks ago, we were starting to watch that nonfat dry milk market move a bit lower off of the the recent highs in that 230 ish mark on the CME, CME spot market.

And now we’re we’re looking at futures that are actually starting to pick back up a bit. Saw some movement some stronger movement late in the week last week. And it appears to be continuing here on Monday morning. Similar story in butter. Butter prices dipped the lowest levels in a couple months. I would say this that was maybe two weeks ago and now we’ve been picking back up ever since.

Futures are also rolling higher on the back side of that higher spot movement, so we are seeing some pick back up in the class for space class reason been a bit more mixed and a little bit of Christmas colors out there in the cheese market. Overall. I’d say, Jim, that there’s still plenty of milk out there. The key questions, as we’ve talked about at length is what does the export market look like for the future?

Can we stay competitive? There seems to be some headwinds on the domestic demand side. So just trying to sort through all those questions of milk supply, demand, exports, etc.. Yeah, there’s a lot to sort through there, Kathleen. And the viewers and listeners out there, if you’re wondering how to sort through this and maybe manage some of that risk.

We had a fascinating episode last week in which we had miss Kitty Burgess as a very special guest, and Katie walked through some of the changes to some of the insurance products as we start the new crop year for insurance on July 1st this year. So if you’re wondering about managing risk and what changes might be coming to some of those products, beneficial changes, at least as that’s how we feel for the US dairy farmer, please tune in to that episode from last week.

It was a good one, wouldn’t you say? So, Kathleen? It was. I was rewatching some of the clips from that show and always such a pleasure chatting with Katie. Always. Yeah, she’s so insightful. I like to surround myself with people smarter than me. It’s not hard to do. You can usually just I can you just walk out onto the street and grab a few people?

But to have you and Katie on the show, upping that level up even further, it’s just fantastic. Makes me feel makes me feel special. That’s great Jim. We all we all want you as the listeners as well. We want you to feel great. That’s great. Okay, so I’ve got a question for you. Sure. We’re early on in the week.

Early on in the month. It’s the last month of the first half, in the last month of the second quarter, right? Yeah, that was tricky. That was a lot of angles a lot of angles for the month of June.

One of the things or what’s the top thing you’re going to be looking out for in the month of June? Yeah, I would say, Kathleen, from a grain and feed perspective, we are still working with very seasonal commodities when it comes to the corn market specifically. And as we get past Memorial Day, if you look back over five years, ten year, 15 year historical charts for December corn, it tries to find its highs, weather permitting, it tries to find its highs somewhere in this window of Memorial Day to the 4th of July and funds or manage money.

They can act a little goofy here and there, because we have a couple three day weekends between Memorial Day, and we also have the Juneteenth three day weekend. Now, this year that’s a three day weekend. And then the 4th of July this year is landing on a three day weekend. So the market behaves a little differently when you have to chop up the week.

There’s especially a different approach to risk from managed money when they are going to be offline for three straight days. So as we work through the month of June, I am looking for that seasonal pressure, which one could very well argue we are already witnessing. If you look at the December corn contract, the highs for now. Knock on wood for the dairy farmer.

The highs are currently punched in mid May just at the current December corn chart. May 13th was the high for December. Cormier at 506 and a half. We are on a very healthy break from those highs. Just a couple weeks ago. A very healthy break. December corn as we speak Monday morning. It’s currently at four 70.5, so we’re at a 35 cent break from those highs.

So one could argue, hey Jim, that’s seasonal pressure. That’s already happening isn’t it? I feel like it is. I think for me, we already talked about Iran. We already talked about that conflict in the Strait of Hormuz and what it has normally done for corn pricing. And that has been to be supportive. But at this moment we are turning our eyes towards what I believe are pure corn fundamentals.

I think the question then, if you say, okay, we’re watching for that seasonal pressure, it’s already happening. The question we’re going to continue to receive is then what are the lows for December corn, and when are we going to achieve them. You usually achieve the lows let’s say August, September I think in the I think if you look at the five year historical, that’s more so August.

If you spread that back further from 10 to 15 years look backs you might argue it’s more closer to September, maybe early October. But in recent years it’s been August. So given all the things that are happening, what will the lows be? I think you could argue because of this issue globally, that maybe the lows are not as achievable as they were last year, in the year prior, in terms of those 385 type of numbers for December corn, I wouldn’t be surprised if support was a little bit higher than that in the low fours just because of this uncertainty.

Iran, global shipping, fertilizer, the at least discussions we had with China still not confirmed from China in terms of what they are actually going to purchase from the United States after President Trump is over there making a supposed deal on the agricultural side. There’s a couple of things that make me wonder how low we go. But as long as us weather stays okay in June and July, you could continue to see this market remain under pressure, at least compared to what it was back in the somewhat volatile month of May.

So that’s what I’m looking for in the last month of the first half and second quarter known as June. And also, I want to give a shout out to a very special farm girl, my Aunt Donna, as her birthday today, June 1st. So shout out Aunt Donna. But Kathleen, how about for you on the milk side? What else do we need to be looking for before we listen to Jake Kingsley down in Wichita?

Been thinking about this, and there’s a lot of different avenues that I could take, but I think I’m going to say European milk production. So as I look at some of the data, the French weekly figures are starting to tip a little bit lower on a year over year basis. And France is the number two supplier of milk and or producer of milk in in Europe.

So to see France starting to move a little bit lower on a year over year basis though, on a on a strong yearly comparison, does make me sit up a little bit straighter in my chair. The German figures are still quite positive, plus five ish percent year over year in terms of growth. Germany, your number one producer.

Ireland I’m here is a bit mixed, UK a bit lower and the Netherlands maybe a bit more mixed. So as we consider what is the second half look like on European milk supply is they really hit these strong year over year comparisons? Will we start to see June as the month where things start to sag, maybe a little bit less milk growth out of Europe, or will we start the second half of the year still in very strong momentum on on milk supply, I call out Europe primarily because they are one of our competitors on exports, particularly in the cheese front and butter two.

And at the same time, it’s important to remember Europe makes 1.6 times as much milk as the US. So what happens in the European milk supply matters for again export competitiveness. Just generally how much available supply of milk and dairy products there are globally. So that to me is one of the big watch factors as we flip the calendar from June to July.

Okay, that seems like a lot to think about. The French, our number two out of Europe. I’m not a dairy expert. To me that’s that’s wild. Good for the French numero do if you will dairy in that that part of the world. Okay, Jim, we didn’t get a chance to ask Jake this question, but maybe for next week.

But in any case, let’s hear what Jake’s got. Chorus. With this week’s words from Wichita. Hello everyone. I am back in Wichita. It is June 1st and we are in the home stretch of planting in the Midwest, where we are now near 90% complete on corn and beans. We’re starting to see that come out in the futures market with a pretty healthy downtrend.

Now, with nearby corn reaching some of the lows that’s had in its contract life. New crop stuff is still a little bit strong, but there are opportunities there to price out some of your existing needs or get topside coverage on some new crop exposure while we’re here. Plenty of volatility still to deal with as the Iran war is still ongoing and no long term resolution established there.

We did catch some rain in the western plains, which is far too late for the wheat crop, but potentially can be of benefit to those who are waiting to put corn and cotton in the ground, something we’ve been watching very closely as the cotton production in the Texas Panhandle. Most of that area caught at least an inch, if not to last week.

And so a lot of planters getting out into the field. I don’t know that that drives cottonseed values tremendously lower from here, but maybe it stunts the rally and gives an opportunity for some folks to step in and get some more significant tonnages priced at levels they are able to tolerate given the current milk market. So we will continue to monitor that and see you next week.

That’s going to do it for today. If you found today’s episode helpful. Be sure to like and subscribe and share it with a colleague or friend who could use some market clarity right now. We’ll see you next time on AG Smarter The Dairy Feed.