I-States drought (PPC)
Heavy rainfall across portions of the western Great Plains and Intermountain West led to improvements across much of the Western U.S. except northern Washington which has seen below-normal precipitation and worsening drought conditions. Parts of the South saw heavy rain that saw improved drought conditions from central Mississippi southeastward to Florida.
Drought conditions in the Midwest continue to intensify with nearly 93% of the region abnormally dry as seen in the chart below. More than 80% of corn and soybean acreage in Illinois and Iowa are in a drought, together they produce more than a quarter of the nation’s corn and soybeans. Missouri is one of the hardest hit states with 16% of the state under extreme drought. The worsening drought conditions in the Midwest have not yet led to higher corn and soybean prices due to large harvest projections. Corn and soybeans are the input for a myriad of food items from salad dressings to chicken – aka “corn with wings.”
Falling milk prices (STKL)
Falling milk prices, high input costs, surplus milk supplies, and high live cattle prices are encouraging dairy farmers to cull their herds. Supplies of milk are so high in some regions that farmers are dumping milk according to the Daily Dairy Report. Since the middle of the month, the June Class III futures contract has been trading below $15/cwt. If that price were to hold it would mark the lowest Class III price since May 2020, the height of the pandemic supply chain problems.
Weaker domestic consumption from tighter household budgets and a weak export market for cheese and butter have weighed on the demand side this year. The cost to produce milk is near an all-time high. At the same time, meatpackers are paying about a third more for finished steers. In April and May, dairy farmers sent 38,200 more dairy cows to slaughter compared to the prior year. The strong growth rates in oat milk sales do not suggest that dairy milk has crimped sales. However, May was the first month that milk prices were deflationary.
Agency of record switch (STZ)
Constellation Brands awarded Initiative as its media agency of record (AOR). The new contract follows a review of its $600M account that began in February. Horizon Media had been the AOR since 2009. Constellation Brands stated that Initiative is “renowned as a data-fueled, and creatively-driven provider of marketing solutions.” Initiative was named 2023 A-List Media Agency of the Year. Highlights included winning Nike’s international account last year. Constellation Brands excels at marketing, M&A not so much. Constellation Brands changed Modelo’s agency of record at the end of 2021 and it has not missed a beat.
