Transcript

00;00;22;22 – 00;00;49;17
Unknown
I’m Jim Matthews. I’m joined today, as always, by the one and only and now standing Kathleen woefully. It is 10:10 a.m. Chicago time. It is Tuesday, June 16th. Kathleen, we’ve got a lot of fun stuff ahead of us today. And just just to remind folks, if you missed last week’s episode, we had Brandon Wagle on from Platteville, Wisconsin.

00;00;49;17 – 00;01;13;02
Unknown
We did a great episode on the livestock market, specifically the cattle market. Some of the news there, we touched on the June report. So great episode last week covering a lot of stuff. Kathleen, how are things looking at least the first half of this week? You’ve got a standing desk. Things are looking. Things are looking up, if you will.

00;01;13;02 – 00;01;41;22
Unknown
In that sense, they are looking up. And that sense for avid YouTube watchers. Hopefully next week’s episode, I will not just have a blank wall behind me, it’ll be new. Some new decorations. I don’t know if I’m going to go crazy with wallpaper, but yeah, I’m excited to have something other than a white blank wall behind me. In any case, Jim, I also want to call out if you missed who Weeks Ago episode, check it out with Katie Burgess.

00;01;41;24 – 00;02;09;01
Unknown
She talks about some of the changes that are coming as of July 1st for the livestock programing and for the LGM programing. So we had two episode episodes in a row that we’re don’t miss. Kind of. That’s right. And it’s not too late to go back and watch them. How about that? Definitely not. Definitely not. Okay Jim I’m going to start with the dairy markets if that’s okay.

00;02;09;02 – 00;02;30;19
Unknown
Let’s do you to shop around in dairy on a on a weaker note, the thing that I want to talk about today is demand. We are seeing cheese prices at the CME that are sitting sub $1.50. And they kind of just been shopping there for the last few weeks. I continue to hear that there is ample supply of cheese out there in the marketplace.

00;02;30;21 – 00;02;53;13
Unknown
We continue to make more each and every day. We got plenty of milk out there in the marketplace. We have this new capacity that if it’s not running full at this point in time, it’s pretty darn close. But I think that the additional supply that we’re sensing in the market or seeing come to the Chicago is, is based on some lackluster demand dynamics.

00;02;53;20 – 00;03;22;14
Unknown
Looking at foot traffic for restaurant and QSR week over week. For the last seven weeks, we’ve seen declining traffic year over year. And in the retail space, natural cheese sales really not doing much of anything for activity has been, again, fairly lackluster. Pricing is not that all that aggressive. So I think that we’re in a dynamic today where US cheese demand is just struggling to get up off the mat.

00;03;22;16 – 00;03;47;03
Unknown
That brings me to the export market. We remain increasingly reliant on export sales, and I may have mentioned this last week, but we exported 142 million pounds of cheese in the month of April. We are still competitive on cheese exports here. As we we rolled through the middle of June as compared to European mozzarella prices. We exported 11% of our cheese production year to date through April.

00;03;47;05 – 00;04;19;27
Unknown
That’s up from 9% year to date through April in 2025. And I suspect that we’re in a position today that if we want to keep the cheese market from getting entirely overwhelmed, we will need to keep that cheese export pipeline full. What does that mean? Ultimately, in my expectation, unless we can get domestic demand rolling, it will likely keep a damper on US cheese pricing because we need to stay competitive to get that product a sale.

00;04;20;00 – 00;05;03;04
Unknown
So Kathleen, I’m looking at the class three milk futures markets and also then the cheese markets. It looks like we essentially let’s say we top this thing out somewhere around end of April early May. You’ve been talking a lot about the cheese production and supply numbers versus demand. Is there a seasonal element to cheese and or class three finding that top at the end of April, early May, or are we truly just looking at a pure supply and demand function of hey, despite exports being strong, there is just an abundance of cheese hitting the markets here and prices are under pressure.

00;05;03;04 – 00;05;25;17
Unknown
Is it as simple as that? Historically, we we tend to see some seasonality in cheese in class three, and that we make a lot of milk during the first part of the year as we hit the spring flush. That means we’re making more cheese. And we kind of hit the summer doldrums of of demand. Generally. We’re building up for that holiday demand season, right.

00;05;25;18 – 00;06;02;22
Unknown
We’re going to domestically consume a lot of cheese in that, in that, let’s say fourth quarter time frame. So I think generally there is some ebb and flow as we as we move through the seasons. I do suspect, though, that compared to, let’s say, the last decade, because of this export dynamic becoming increasingly more critical to the US market as a as an additional outlet for product, that we may see some of that seasonality start to lessen.

00;06;02;25 – 00;06;28;13
Unknown
Okay. Very interesting. And Kathleen, is there any love for cheese and or the rest of the dairy markets and products around the 4th of July holiday? Yeah, we certainly have grilling season. So there are demand hooks over the summer, but I don’t know if you’ve been to a cookout over the summer, you don’t tend to put out a lot of shark platters.

00;06;28;15 – 00;06;38;03
Unknown
If you’re hanging out at the campsite, it’s 80 degrees. Sweaty cheese just.

00;06;38;06 – 00;07;09;15
Unknown
Isn’t the best. Well, I guess it depends on your preferences. I know that I personally when I’m grilling, which I think is fairly frequent, I do add cheese to my burgers especially, but also sometimes my chicken and whatnot. I will say my children don’t have a temperature threshold yet for cheese. It doesn’t matter how hot and steamy it is out there.

00;07;09;17 – 00;07;33;01
Unknown
They want cheese. I just this is all anecdotal for the viewers and listeners. This is not a case study on the modern American child, but even a week ago, my mom called me and said, man, these kids love cheese. And it was toasty. And they were not stopped from wanting to consume all of grandma’s cheese in the refrigerator.

00;07;33;01 – 00;07;57;02
Unknown
So a little anecdotal tale, but just to give you a sense of at least the current Midwestern American child this day, I’ll add color from the northeastern child. This is a real proud parent moment in that my kids will only eat white cheddar. So no yellow cheddar around here.

00;07;57;04 – 00;08;40;17
Unknown
New York State or Vermont white cheddar cheese. Okay, well, in the willfully household. Wow. Okay. Well, in the Midwest here, we’ve got the yellow stuff sitting in our refrigerator. So yet another rivalry between the great states of New York, Illinois and Northeast first Midwest. But, Kathleen, I think we can get past our differences here, and maybe we should just chat quickly on the macro markets for a moment, because I would love to get through an episode with not talking about Iran at all, but they continue to make some headlines here in terms of a potential deal with the United States and some of the other Gulf states.

00;08;40;19 – 00;09;05;05
Unknown
Energy prices have come under some significant pressure. We’re talking about crude oil pricing now being near three month lows. So as Brandon talked about last week, and we had talked about in the last, let’s say, couple episodes, it did feel as if grain and feed pricing had somewhat decoupled from the energy markets. But now all have been under some pressure now for the past couple of days.

00;09;05;05 – 00;09;35;12
Unknown
So maybe Kathleen, I think something that at least maybe Phil Plourde had brought up in one of his newsletters and we talk about here internally is, you know, did higher energy prices take away some of the ability for the US consumer to buy some of these products that you are referencing, like cheese, let’s say, or maybe it’s altered their behavior to head out to either a full service dining or quick service restaurant.

00;09;35;13 – 00;10;01;03
Unknown
Have we we have any thoughts here? I know it’s early and this is a pretty notable breakdown in energy pricing, and it does take some time to trickle its way ultimately to that retail consumer at the pump. But what are your thoughts on that front? If we can at least bring energy prices back under some pressure and tame them a bit, does it give a little bit more purchasing power to dairy products in the United States?

00;10;01;10 – 00;10;35;07
Unknown
I think that’s possible, Jim. Maybe we’ll see a bit of a return to restaurants, if indeed the reason why we’re pulling back on restaurant spending is because of those high gas prices. But even still, it’ll it’ll take a while for us to unwind these high prices, because still the crude oil reserves remain low. So I guess my anticipation is that it’s not going to be a tomorrow turn around like consumers will be spending more on gas for the the better part of the rest of 2026.

00;10;35;08 – 00;10;59;18
Unknown
Sure. Yeah. And as as we know very well the crude oil pricing, we watch gasoline pricing then launch right along side of it, especially as we hit the pump in the beginning parts of the summer here. But even when crude oil collapses quickly, we don’t reflect those prices as quickly at the pump. So yeah, things are going to be a bit elevated.

00;10;59;19 – 00;11;25;09
Unknown
It’ll be interesting to see what that purchasing power looks like through the rest of the summer for both dairy and our livestock markets. So and I think there’s an element to Jim of inflation versus wage growth as well. We’d been on an incline, a wage growth relative to inflation where wages were outpacing inflation. But I think the recent upticks, the most recent inflation data was up for point 2%.

00;11;25;10 – 00;11;55;02
Unknown
Right. A lot of that was driven by energy costs. But I think there is this element of yeah, there are jobs in the market we’re growing that that the jobs report did show positive payrolls. But is the wage growth keeping pace? Yeah, I think it’s going to be really interesting to see this economic data. And then what our new chairman of the Federal Reserve is going to do with some of this data, especially as an energy pricing does come lower.

00;11;55;02 – 00;12;18;25
Unknown
So it’s going to be an interesting stretch. We’ve talked a lot about the 4th of July as we move through this summer here. Just a note on the grain side of things. It has been incredibly wet lately in the Midwest. We got some pretty big storms, and we were thinking about a lot of folks throughout the Midwest that got hit with tornadoes throughout.

00;12;18;25 – 00;12;45;09
Unknown
We also, I believe, had a technically a derecho come through again. I mean, it was a pretty volatile couple of weeks here in the Midwest. Tons of rainfall. Naturally, it continues to hit here. We’re getting a bit more today. The reason I’m referencing it is because crop conditions, at least in the Midwest, and we’re talking about corn beans, they continue to hold strong.

00;12;45;09 – 00;13;14;24
Unknown
We had a weekly crop progress report yesterday. On Monday, ratings were up 1% on corn and beans in terms of those good to excellent ratings. So conditions are improving. But I would just say at this stage it would be nice in some areas to let this thing dry out and air out a little bit. So I’m not I’m not calling for any I’m not saying anything too wet right now, just like I don’t like to to early on call anything to dry.

00;13;14;25 – 00;13;37;15
Unknown
At least again where we are, I, we recognize that folks in the, you know, western southern Plains, we’re incredibly dry. You know, in the previous few months here, Jake references on the words from Wichita that, you know, he was in Colorado last week. There have been getting some rainfall, but forage still going to be an issue in some of those western and southwestern areas.

00;13;37;15 – 00;13;59;24
Unknown
But here in at least the eye states, let’s say in surrounding states, we’re going to be hitting pollination here in a few weeks for the corn market. In some spots, it’d be good to let this thing maybe just air out a bit more. So we’ll keep an eye on that. We’ll keep an eye on conditions. But just from a markets perspective for grain and feed, things have been under significant pressure.

00;13;59;24 – 00;14;25;21
Unknown
Brandon touched on that last week. I would just note things of, let’s just say at the moment bottomed out. We’ll just say over the last 2 or 3 trading sessions here, corn futures and meal futures for those dairy farmers, for those cattle producers buying grain and feed, things have bottomed out for a moment. I think the market probably wants to see a we’ve got a three day weekend coming up.

00;14;25;26 – 00;14;45;18
Unknown
So funds kind of maybe pause ahead of three day weekends. We’ll have another three day weekend here, then in a couple weeks for Independence Day and then we’ll be we’ll be there, we will be in July. So we’ll see who’s knee high by 4th of July, as we used to say. But it’s going to be an interesting stretch.

00;14;45;18 – 00;15;08;25
Unknown
And Kathleen, now that I’ve reference Jake, perhaps we should wrap up and hear what Jake has to say in this week’s words from Wichita. Hello everyone. I’m back in Wichita after visiting dairies and colorful Colorado last week and they, along with many of their neighbors in the western Plains, are beginning to catch more frequent rainfall. But it is still dry and forage remains a top concern.

00;15;08;28 – 00;15;35;09
Unknown
The Midwest, on the other hand, is in pretty ideal shape, and crop conditions this week are within a few percentage points of both last year and the five year average. We’ve taken advantage of the recent futures breakdown in both corn and soybean meal to get a lot of our remaining summer needs priced out, as well as putting topside coverage on our new crop, exposure basis isn’t quite where we want it to be for the next feed year, but there is a good chance over the next few weeks we start to see that change.

00;15;35;09 – 00;15;58;02
Unknown
And if futures continue to fall the way that they have. There are some regions where we’ll say, just step in and buy the physical feed and don’t worry about the little bit of premium left in basis. We’re entering the window where byproducts associated with soy crush and ethanol processing begin to become attractive in price. And we’re watching for opportunities to buy soils, distillers, gluten and other related feed stuffs.

00;15;58;04 – 00;16;22;11
Unknown
As farmers market their grain and futures pressure the overall marketplace. Of course, we continue to monitor cottonseed, and rain in the Panhandle has helped soften or at least study that market. But we are stepping in now while prices are cooled off to get something done there. And finally, if you’re looking for some futures specific market Intel, look no further than our very own tech talk with Cody and Andy for in-depth analysis.

00;16;22;11 – 00;16;42;03
Unknown
Which reminds me, Cody, I accept your apology. That’s all for today. We’ll see you next week. That’s going to do it for this episode. If you found today’s content helpful, please 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.