Transcript

Futures trading involves risk and is not suitable for all investors. Content provided in this segment is meant for educational purposes and is not a solicitation to buy or sell commodities.
Welcome to Ag Smarter – The Dairy Feed, a new podcast from the Ever.Ag team.

I’m Kathleen Wolfley, and I’m joined today, as always, by the one and only Jim Matthews, who I am disappointed in today because he is not wearing green on Saint Patrick’s Day. Or… maybe it’s a light green.

In any case, it’s March 17th at 10:30 a.m. Eastern Time, or for you Central Time people, 9:30 a.m. Jim, how are you today?
Happy Saint Patrick’s Day. I’m clearly wearing green—clearly. And I wore my Ever.Ag cheese socks today that also have some yellow and green on them, so I am feeling very Saint Patty’s Day today.

In any case, Jim, as always, there’s plenty to talk about in these markets today. Plus, we’re going to have a couple Words from Wichita with Jake Kingsley.

But it’s been a bit of whiplash in the grain markets over the last couple of days. What has your attention?

Well, Jim, we’re starting this week on a little bit firmer footing. Class III and Class IV prices yesterday were a little bit stronger.
Things that I’m watching: exports are still quite strong. We saw some data last week on U.S. exports for January. Cheese exports were 114 million pounds, 11% more than the year before. We’re still shipping a lot into Mexico—no surprises there, as they’re our biggest buyer of U.S. cheese outside of the domestic market.
Latin America outside of Mexico was also a big buyer—30 million pounds shipped into Latin American countries outside of Mexico, which was a pretty stark increase from what we typically see. I think it was about a 35% gain.

On the butter market, there are still lots of shipments of butter and AMF—that’s anhydrous milk fat that I talked about a couple of weeks ago. Plenty of product moving into the international market.

When I was looking at the fat exports from a butter and AMF perspective, we are chewing through some of the additional butterfat being produced at the farm level.

My calculations suggested that there were about 31 million additional pounds of butterfat produced at the farm level year over year, January to January. The increase in exports chewed up about 85% of that fat.

So when we think about lighter stock levels, especially on the butter side of things, the export story tells a pretty clear picture of where that fat was going if it wasn’t going into inventories.

The other thing I’m keeping an eye on, Jim, is the U.S. dollar. This is still pretty export-related, but the weaker U.S. dollar has been pretty helpful for exports over the last couple of months.
With the U.S. Dollar Index creeping up toward that 100 level, it does potentially create a bit of a headwind for exporters.

We’re still competitive on price, especially when we look at butter and cheese markets relative to European markets, but don’t lose sight of that U.S. Dollar Index creeping a bit higher.
Hello again from Wichita.

There’s an old saying: If you don’t like the weather in Kansas, just wait a few minutes and it’ll change. After a weekend in the 80s and waking up to 15 degrees this morning, I’d say that phrase has been very thoroughly verified.
The same sentiment apparently now applies to futures markets. Most major ag commodities pushed to six-month highs late last week, only to give up the bulk of those gains in a single volatile session on Monday.

Grain producers were active sellers of both old and new crop on the rally, and we took advantage of the opportunity to lock in some improved basis values as feed buyers.

While the war in the Middle East holds the headlines and continues to be a prominent factor in day-to-day price movement, Chinese trade negotiations are top of mind and likely the key contributor to the exceptional decline in the soy complex.

To start the week, we’ll be monitoring that and looking for opportunities to start committing to next year’s protein needs, should we revisit some of the lows established over the past year.

With Monday’s limit-down move in soybeans and soybean oil, along with corn sliding $0.13, farmer selling has cooled off. That means basis values may need a little recalibration.
But we’re not expecting a huge pop higher from here. With the break in futures, we are much closer to our price targets on some existing basis contracts and new-crop hedge strategies.
Fundamentals still suggest there should be plenty of room to work lower from here, so we’re being patient and proactive—working orders to stay in front of this fast-paced market.
I’ll have more updates next week. Until then, here’s to hoping markets behave at least a little better than the weather.
Jim, what’s your reaction to that?

Jim, I’m kind of curious—that planting intentions report. Were those surveys collected prior to the run-up in fertilizer prices?
Things that I’m watching between now and when we talk next: we have a Milk Production Report on Friday this week. Our early estimates are somewhere in that +3% to +3.5% range.
I’m going to be keeping a very close eye on cow numbers. I still think there is tremendous incentive for folks to hold on to as many cows as they can to breed as many beef-on-dairy cross calves as possible and harvest the value off those day-old animals, which are still running in the $1,500+ range.

I know the beef market has been a little volatile, but we’re still seeing some pretty solid cash prices for those calves out there.
Then next Tuesday we will see a Cold Storage Report, so two reports coming up here to keep an eye on.

No parting words, Jim, other than if you found today’s episode helpful, be sure to like and subscribe. 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.