00;00;01;09 – 00;00;24;28 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 Ever.Ag. Each week we bring you clear, timely insight across dairy, grain and feed markets. Focus on what’s moving, why it matters, and what it means for your operation. 00;00;25;00 – 00;00;55;01 I’m Jim Matthews. I’m joined today, as always, by the one and only Miss Kathleen Wolf Lee. And also instead of Jake Kingsley. Today, in our Words from Wichita segment, we have phoned a friend from Platteville, Wisconsin, the Paris of southwest Wisconsin. We have grain and feed market advisor, Mr. Brandon Wagle. It is currently 1240 ish Chicago time. On Thursday. 00;00;55;01 – 00;01;24;23 We are recording Thursday afternoon because we had the report today, our monthly quasi report. And Kathleen, are you pumped to have Brandon here to chat with us? It doesn’t get much more exciting for a Thursday afternoon. Jim, did you hear that? Brandon? That’s like, thank you. You’re wrong. What a beautiful announcement. So, Brandon, you’re gonna you’re going to step in and help us. 00;01;24;24 – 00;01;49;05 We’re going to review the report here. Might even step in and just chat some livestock markets here for a minute. Kathleen, anything we should hit on dairy before we dive into the world of Brandon Wagle? All right, Jim, I think that the most important things to know in the dairy markets for a dairy producer is that we have seen some pretty notable erosion in the futures markets here over the course of the last couple of days. 00;01;49;05 – 00;02;23;09 So we’re looking at Q3 class reprises around 17, Q3 class for prices around 1835. Generally, we’re seeing some weakness primarily come into the non factory milk market. CME prices are down closer to $1.80. Lowest price we’ve seen really going back to March time frame. Seeing a lot more sell side liquidity come into that scene where you marketplace the ASR non factory milk price which ultimately determines the class for milk value of drives into that class for milk price. 00;02;23;09 – 00;02;44;03 That was down a little bit yesterday as well. So ultimately I get the sense that there is some additional weakness that is coming into that class for space that we kind of anticipated to see here. The the thing that’s been a bit surprising is the pace of the decline. We were sitting at $2 not to very long ago. 00;02;44;05 – 00;03;17;08 It was roughly a week ago. We were still sitting around $2 in that CME nonfat market, but again, seeing some notable erosion here in the last few weeks with both class three and class four values. And Kathleen Monday, this upcoming Monday is the last day to cover. What is that Q3? If you’re writing insurance for DRP, Jimmy nailed it on Monday, June 15th is the last day to write drop coverage for the third quarter. 00;03;17;09 – 00;03;41;04 And I guess I’ll add another reminder. We are coming up on the end of the crop here. So if you’re on the fence or you’re half paperwork sitting in your in your email box, keep in mind that the last day to transition your agent is on June 30th. So give us a shout if you have any questions, but would love to see you in the shop! 00;03;41;06 – 00;04;10;16 Wow! Well done Kathleen. Very nice job. And you talked about some erosion there. I think there’s been an erosion across numerous commodities, especially the grain markets now over the last few weeks. You talked about how dairy is being impacted. It’s been really interesting to watch commodities as a whole really over the last three plus weeks. You know, we’ve certainly talked a lot about crude oil and energy as we chat here week to week. 00;04;10;17 – 00;04;42;19 Kathleen, crude being back down for that spot contract below $90 a barrel. Things of course remain volatile there where there were a couple exchanges of strikes, you know, earlier this week. But you know, we’re sub $90 a barrel nearby. It appears that these stock markets here, the US stock markets are doing pretty good. Still we’re not exactly at you know, the highs of where we were, you know either a day or two or maybe a week or two ago depending on the index. 00;04;42;19 – 00;05;07;23 But we’re awfully stinking close to them. And then of course, Brandon’s going to help us chat some of the volatility we’ve seen in the cattle markets, too, because there’s been a whipsaw there in terms of some news, you know, on the US side of the border. But Brandon let’s chat wasD here as I think for the most part the June report usually isn’t super thrilling. 00;05;07;23 – 00;05;32;26 I think folks like to look forward to the end of June. You know stocks report. So stocks on and off farm as of June 1st that quarterly report. People also like to see that updated acreage report at the end of June. But we are looking at the June today. We’re talking about erosion. And I wasn’t sure if corn could get much lower here in the near term. 00;05;32;26 – 00;05;52;26 Brandon. But the screens are red corns down 2%, beans down a percent. You know, meal is roughly unchanged, but it’s been trading lower and trying to test some near-term lows. So, Brandon, what were your thoughts on this report today? Yeah, the was the report overall was very, very quiet, which like you said, not not too out of the ordinary for a June report. 00;05;52;27 – 00;06;14;19 We didn’t see any major adjustments really on this domestic balance sheet. Soybeans specifically. There was a very small increase in corn ending stock expectations, just 3 million bushels, so hardly enough to even talk about. But by and large, this balance sheet has been changed for several months now. Specifically on the corn side of things. There’s been a lot of questions here over the last week like, well, why are we just now seeing this big sell off? 00;06;14;21 – 00;06;34;07 There hasn’t really been a major catalyst here nearby for it, but we are really just truly seeing the fundamental picture like finally come to fruition. Right? We had had all of this speculative buying pressure on the back of something that wasn’t truly fundamental in nature. Now we’re seeing that unwind because there really hasn’t been a physical buyer on the back end to go alongside the fund buyer. 00;06;34;07 – 00;07;01;26 That had really caused the rally here a couple months ago. Yeah, and I think that’s significant, Brandon, because like you talked about that money, you know, stepping in like if you look at the commitment of trader reports, you are seeing the managed money position for some of our grain and feed commodities really reduced dramatically in terms of the net long, you know, corn position that we had had, you know, just a few weeks ago, maybe some of that war fertilizer premium happening from the Middle East. 00;07;01;27 – 00;07;22;16 You talked about the demand side, the purchases. I mean, Brandon, the the export market is still pretty good for corn, right? And we’re still we’re still consuming a lot of corn for ethanol, the export market strong. But I think people are really looking at that one trading partner that we think we might have a really big deal with, you know, with the Chinese. 00;07;22;16 – 00;07;45;00 But Brandon, I think, you know, we talk about Middle East, talk about China, talk about the US. I think there’s one element of the report that maybe has helped continue to drive this down. That’s outside the US. I think it’s South America, right. We saw a decent pick up in corn production. And for Argentina, both corn and beans production. 00;07;45;00 – 00;08;07;02 And I think we’ve talked at length at least on the grain and feed teams at Everest over the last however many months, that largely things have been pretty stink and good in South America. And yet we haven’t really seen any big adjustments on production. The USDA, maybe they save some of that for today because, you know, you saw Argentine and Brazilian production on Corn Jump. 00;08;07;03 – 00;08;25;16 You saw the Argentine being production jump. So Brandon does that at least help provide a global buffer to the balance sheet and help keep pressure on our markets for the near term. Yeah. No, I agree, Jim, that South American Buffer is definitely going to provide a little bit of a near-term cushion to not only our domestic balance sheet, but global balance sheet. 00;08;25;16 – 00;08;57;16 And I think as we kind of watch this thing going forward, obviously anytime that we see production increases in South America, it does tend to keep a lid on our prices, especially when our balance sheet is already in such good shape. So I think as we kind of progress this market, like going into what tends to be some more seasonal softness here domestically once we get through pollination in the US, as long as there haven’t been any major weather issues, kind of in conjunction with these production increases in South America, it should help to keep this market more compressed going into the back side of this year. 00;08;57;23 – 00;09;17;04 Okay. And then Brandon, you and I are both in the Midwest. I know we each got rocked with some storms over the last 24 hours, and I think we’ve got some more heading our way. But like you said, in terms of those weather issues, I think I don’t know because I’m, I don’t manage money with funds on commodities. 00;09;17;04 – 00;09;40;00 And it’s on not one of these people. But I think when it comes to manage money and when the way they look at the corn and beans markets, when they think of weather problems in the United States, I think they really focus on drought. And I think when the heartland here come July, if that were to just get stink and bone dry and super hot, that might alarm them. 00;09;40;00 – 00;09;59;15 But I think for the most part, like you get excess rains coming through, like for the most part they seem okay with that. They’re focused on some of those dryness and heat type scares as you move through the summer. But don’t don’t take that to the bank because, yeah, because this is what I do. I’m not a manage money, manage money guy. 00;09;59;16 – 00;10;25;23 But Brandon, that all being said, then we’re at this pivotal time here for grain and feed markets. We are starting to hit some of the key development phases soon for each of these respective crops. But last week, we also had a at least a headline grabber in the cattle markets. I believe we had a certain issue with the screw screw worm. 00;10;25;29 – 00;10;50;29 How do you say a Brandon screw worm? Screw worm? You got it, Jim. But what’s happening with that brand? It is. It is officially on our side of the border. It caused some panic. What’s your take on that situation? Yeah, it’s more than anything. One of those uncertain market events. And obviously markets hate uncertainty. We’ve kind of seen the initial I would say volatility wash out of the marketplace from it. 00;10;51;00 – 00;11;09;02 You know, the expectation going into the first anticipated case was that immediately the market would have some sort of a knee jerk reaction lower, because any time over the last nine months that there was a rumor of it in the US, it sent the market limit lower within minutes only to recover one. It was confirmed that it was not an actual case. 00;11;09;02 – 00;11;29;14 So going into the actual first confirmation here about a week ago, everyone figured, hey, market is probably going to sell off hard for a few days. But when we look at the long term element of it, if there actually is a widespread issue in the United States with New World screw worm, it would be more of a long term support of the slightly bullish story. 00;11;29;16 – 00;11;50;25 So initial reaction right when the market opened the day following the announcement of it, we were 5 to $6 lower on feeder cattle, but within an hour we rebounded and ended up moving almost limit higher. And ever since then there have been some additional cases. There’s like been at least five cases. From what we’ve heard so far. Some of that have been in cattle. 00;11;50;26 – 00;12;19;25 There’s one in a dog, one in the goat. So it’s obviously here. I think the market has largely digested that. Now it’s just going to be is the USDA able to contain it. They are putting protocols in place. It’s not one of those issues that is very likely to impact like the dairy industry, nor is it likely to impact significantly, at least like feedlots, just because those feedlots, dairies, those cattle have animals, they have, excuse me, they have eyes on those animals at all times or very frequently. 00;12;19;27 – 00;12;39;22 It’s more so your cow calf operations, your big ranchers that are maybe looking at those pairs only a couple times a summer. Those baby calves are most susceptible right at birth to getting infestation in the navel cavity. And obviously that’s where there’s the largest amount of concern for death loss. So USDA is doing everything they can to try and mitigate their quarantining. 00;12;39;22 – 00;12;58;10 Certain areas, they are dropping sterile flies in the impacted areas as well. So doing everything they can. But it’s still going to create a lot of uncertainty in there until there is a little bit more known about it. So in the past year or so, there’s been lots of chatter about the Mexican border because of new worlds. Guru worm in Mexico. 00;12;58;11 – 00;13;16;08 The US shut down the border because it’s here in the US now. Do you think that that border reopens? And if it does indeed open, does that put more of a bearish signal into the market? You know, it’s very, very hard to speculate. I hate to speculate on whether or not it’s going to reopen or not because of this. 00;13;16;10 – 00;13;33;23 Secretary Rawlins has said there’s no immediate plans to reopen it even now that it is here. But it is something that she mentioned is on the table, and I think we’ve all kind of recognized that it’s probably on the table if it gets here, I don’t think they’re going to open the floodgates because they are trying to mitigate it. 00;13;33;24 – 00;13;53;15 Now that it is in the United States, if there gets to be too many cases where it just kind of gets out of control, then I think you could probably see them just say like, well, it’s here already. Like, why are we keeping it closed? So but the interesting thing is there’s an article yesterday Mexico is actually banning the import of US livestock now. 00;13;53;15 – 00;14;16;23 So they’re turning the tables on us a little bit. Kind of ironic, but they’re more political than anything. But yeah, I guess there’s a second thing on this beef market that I want to touch on. So Jim mentioned drought as it relates to the grain markets. But what about from a beef perspective, as we look at rangeland across the western part of the country, it is dry. 00;14;16;27 – 00;14;40;00 Do you think that that potentially could have an impact on rebuilding of that hurt or even further liquidation on those, those cow calf operations in the West? Certainly. It’s a great question. I do think that the severe drought conditions that we’ve seen in the West and Southwest is definitely going to be a hindrance to heifer retention, and everybody’s talking about half retention. 00;14;40;00 – 00;15;01;22 They’ve been talking about it for a few years, and it looked like we were starting to see the green shoots of it. I still think we are, but I think it’s going to be much more modest than maybe what we had seen in prior cattle cycles, just because those pasture conditions are not going to be great, right? So I do think that that’s one of those elements of this market that probably is going to be more so delayed than what it has been in previous cycles. 00;15;01;24 – 00;15;26;05 Okay. So if you’re a dairy producer or a livestock operator, how do you manage your risk in this environment? Yeah. So I guess a couple different fronts depending on what that individual operation is doing, whether they’re retaining ownership on them. Background. Them finishing them or if they’re selling them is day old. I think most areas are in that ballpark right now of selling them as day olds. 00;15;26;07 – 00;15;45;05 There is a livestock risk protection tool out there, much like on the dairy side of things with DRP. LRP for unborn calves has been out for about a year now, so a lot of producers have started to implement that because the futures market, despite the volatility, is still hanging within about 15 to $20 100 weight of all time highs. 00;15;45;06 – 00;16;18;17 The cash market is still around all time highs. So most folks are like, well, there’s been a lack of speculative buying pressure over that. Three 7375 area both in the futures and cash market. We’ve seen the market test that area on almost three separate occasions in the last year, and we’ve really struggled to push through that. So LRP is probably the best way for Darius to be managing the price of those day old calves out anytime between like the next 13 weeks and all the way out ten months. 00;16;18;17 – 00;16;34;01 So we’ve got a pretty large time horizon there. Well that’s good. You’re right for this episode. If you found today’s episode helpful. Be sure to like and subscribe and share it with a colleague or a friend who could use some market clarity right now. We’ll see you next time on AG Smarter. The dairy feed.