The past several months’ future markets with corn, soybeans, and milk have been a wild ride. Over the past 15 years, I can’t recall a period like the one we’ve experienced as of late. At the same time, the 2023 growing season has been turbulent, to say the least. Couple these two experiences together and I remain optimistic, having found substantial margin opportunities alongside business-minded dairies. More on this in a bit. First, let’s delve into the growing season impact, and then lean on some market insights from a trusted colleague.

This growing season brings heterogeneity

The term “variation” has become cliche to the point I’m sick of the word. To me, the word is important and carries roots in statistical analysis, with variance being a meaningful trend tied to something we can influence through management. For example, there could be meaningful nutrition variation associated with two different ingredient vendors like we covered in the article “Don’t allow variation to become a cliche” in the April 10, 2022, issue of Hoard’s Dairyman. However, the term variation doesn’t apply to the 2023 growing season in my mind, I’ve begun using the term heterogeneous.

This growing season has been like the black and white spots on a Holstein cow, with abrupt differences in moisture evident within a quarter mile for many farmers from the Central Plains to the Northeast. The growing season is beyond our control, yet we can manage the harvest to smooth out the heterogeneity to some extent.

Hopefully, you recorded your cornfield tasseling dates, and have marked the 45-day post-tasseling date on your calendar. For many, tasseling has been spread out — even within a field — but focus on when most of your fields have tasseled and begin walking fields around 40 days after this date. If you don’t have this date in hand, call your agronomist and get their insights. Expect the harvest window to commence somewhere between 45 and 60 days after tasseling and plan accordingly. We’re likely to have a spread of moisture, quality, and yield like we haven’t experienced. We can manage this by proactively walking fields and having a solid game plan.

I recommend not harvesting too wet or immature. The shrink costs through giving up starch by harvesting immature, inefficient fermentation and leaching will outweigh the costs associated with slightly less fiber digestibility and harder grain associated with the more advanced fields. Instead, time your harvest to achieve around 35% dry matter for as much of your acreage as possible. Let the kernel maturity and quality shake out where they may but control the fermentation by getting the crop to average the ideal dry matter for ensiling. For the drier and more mature fields, obliterate the kernels. This may require slowing down a bit and checking the kernel processing regularly. With potentially expensive grain this fall, optimizing starch digestibility through kernel processing is paramount. Your dairy can optimize this harvest, and I’m positive that many will!

Futures market movement
With future grain, and also milk, prices in mind, let's transition to discussing several interesting thoughts passed along by dairy risk management consultant Mark Linzmeier this past week. I reached out to him after having followed his weekly MarginSmart reports closely but being unable to grasp the fundamentals behind the $1-plus bullish run we’ve experienced in milk prices as of late. I couldn’t wrap my head around the movement, though Linzmeier’s comments brought some clarity to the market movement. As I learn, I feel obligated to pass what I learn along to you all! Here are his thoughts paraphrased in my words:

Consecutive bear weeks in milk futures have rebounded. Earlier this year, nine of 11 weeks experienced downward movement in milk futures for the third quarter and beyond. This extended negative movement was like stretching a rubber band to its limit and then letting it go. Projected conditions changed slightly, and now a strong bull run over a week or two erased much of the negative movement the prior two to three months.

Dairy risk protection is changing futures trading. I’ll have to defer back to Linzmeier on this one, as I don’t yet grasp all of the interactions!

June’s milk production increase over last year was tempered. The year-over-year production increase was limited, thus signaling production slowing and adding fuel to bump milk futures up.

Grain futures are impacting milk futures. Expensive futures for grains are forecast to equate to less milk production through diet changes to trim feed costs. Less milk equates to higher future prices. Alternatively, future grain prices softening would signal the opposite, and futures could turn bearish. There is quite a bit to play out here as we head toward grain harvest.

Replacement dairy and beef cattle numbers are down. With beef and cull prices being attractive, the dairy herd may trend down, which would limit milk supply and keep a cap on production forecasts. This would signal elevated milk price futures.

I’m exceedingly optimistic despite our industry being faced with challenges. Borrowing today’s motivational text message I sent to my closest buddies, “Every day presents new challenges, which are perceived as opportunities by those who embrace them and see great potential ahead.” The future is bright in dairy, my friends!

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(c) Hoard's Dairyman Intel 2023
August 14, 2023

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