WEBVTT - Weak Foodservice Capacity Lifts Restaurant Costs 0:00:22.480 --> 0:00:25.240 Welcome to Chopping It Up. I'm your host Mike Hanlon, 0:00:25.239 --> 0:00:28.320 the senior Restaurant and Food Service analyst at Bloomberg Intelligence. 0:00:28.440 --> 0:00:31.200 Today we're joined by David Maloney. David is the founder 0:00:31.240 --> 0:00:35.440 of datam Fs, a supply chain consultancy. He's the host 0:00:35.479 --> 0:00:38.159 of the Farm to Fork podcast and partner in the 0:00:38.159 --> 0:00:42.239 Pastry Art Cafe in Sarasota. So thanks for taking time 0:00:42.280 --> 0:00:44.560 away from your many jobs to do this, David. 0:00:45.479 --> 0:00:46.320 Thanks for having me. 0:00:46.400 --> 0:00:49.680 Mike. Sure thing and we were just catching up quick 0:00:49.720 --> 0:00:51.479 before the podcast, and he told me you gave up 0:00:51.520 --> 0:00:54.440 beer for lent. So you're an IPA guy, right. Do 0:00:54.480 --> 0:00:59.120 you have any I pas right now that well prior 0:00:59.160 --> 0:01:01.440 to Lent that you were especially enjoying. Sure? 0:01:01.680 --> 0:01:04.320 Yeah, I prefer the locals. So Sarasota, we have two 0:01:04.360 --> 0:01:07.319 big breweries. Matter of fact, there's a one of them, 0:01:07.360 --> 0:01:13.240 Big Top. There's a big circus. The Ringling Brothers wintered 0:01:13.280 --> 0:01:17.440 here and so there's a lot of circus. There's a 0:01:17.440 --> 0:01:19.479 circus museum, there's all kinds of stuff in here. 0:01:19.480 --> 0:01:22.240 So Big Top is the main one of the big breweries. 0:01:22.280 --> 0:01:24.600 And actually they're opening up a beer garden about ten 0:01:24.640 --> 0:01:27.960 minutes down the road this month. So it's a celebration 0:01:28.120 --> 0:01:31.160 of being over and me giving up beer, I guess. 0:01:31.680 --> 0:01:37.959 And there's another one that's one National War Award. It's 0:01:38.000 --> 0:01:43.360 a small brewery called Caloosa, which was the Indians that 0:01:43.400 --> 0:01:46.760 were here settled in this area of Florida named after them, 0:01:47.040 --> 0:01:50.120 and they have a zote that is pretty good. As 0:01:50.120 --> 0:01:52.960 matter of fact, I'm pretty sure that's my Easter basket 0:01:53.640 --> 0:01:56.160 is for sixteen ounce zots for Sunday. 0:01:56.960 --> 0:01:59.840 Nice man. You know those sixteen ounce IPAs will get 0:01:59.840 --> 0:02:00.480 you too, man. 0:02:00.520 --> 0:02:03.000 Oh, I know, they're too big. That's why I never 0:02:03.040 --> 0:02:04.280 buy them. They're just too big. 0:02:05.640 --> 0:02:08.520 Yeah. There's one of the New York Industrial arts. They're 0:02:08.520 --> 0:02:11.040 excellent and super strong. And the first time I drank them, 0:02:11.040 --> 0:02:12.600 it was like a real hot summer day. It was 0:02:12.639 --> 0:02:15.120 like pre gaming for a Metallica concert, and they went 0:02:15.160 --> 0:02:17.440 down really really fast, and I was like, well, I 0:02:17.680 --> 0:02:20.440 got to slow down here, you know. And I've been 0:02:20.440 --> 0:02:23.720 introduced to Zombie Dust recently. It's a Midwest brewery maybe 0:02:24.160 --> 0:02:29.799 Zombie ducks Dust. Zombie Dust all right, cool artwork too, Yeah, 0:02:29.960 --> 0:02:33.040 check them out. And so you were mentioning you substituted 0:02:33.240 --> 0:02:34.920 with a different alcohol. 0:02:37.440 --> 0:02:38.720 Yeah, I did. 0:02:39.240 --> 0:02:42.160 I'm not much of a liquor fan, but I am 0:02:42.200 --> 0:02:44.840 a more garita fan, and. 0:02:44.840 --> 0:02:47.279 So I decided, well, I'll buy a bottle. 0:02:47.040 --> 0:02:52.520 Tequila, a good bottle tequila, and I dog this the 0:02:52.639 --> 0:02:55.280 length of tequila. I think I've not that I drink 0:02:55.320 --> 0:02:58.240 that much, folks, but I really don't. I have a 0:02:58.280 --> 0:03:00.920 couple of beers or I wondered who drinks. I love 0:03:00.960 --> 0:03:05.560 a nice glass of wine when I'm cooking. But it's uh, 0:03:05.919 --> 0:03:09.240 I've probably drank more tequila this this Lent than I've 0:03:09.320 --> 0:03:11.600 drinking in the last decade, at least, that's what I've 0:03:12.000 --> 0:03:12.880 followed my friends. 0:03:13.680 --> 0:03:14.840 Well, I'm a tequila fan. 0:03:15.240 --> 0:03:15.360 Uh. 0:03:15.800 --> 0:03:18.240 You know, there's plenty of brands I like, but I'm 0:03:18.240 --> 0:03:19.120 big on G four. 0:03:19.400 --> 0:03:22.560 So if you come four, all right, I'm gonna need 0:03:22.600 --> 0:03:24.799 to detox from tequila for a while. 0:03:24.880 --> 0:03:29.720 So well, you know, probiotics, it's supposed to be the 0:03:29.720 --> 0:03:33.440 best alcohol for you. So okay, cool, all right, let's 0:03:33.680 --> 0:03:35.960 let's jump in. How's business at the cafe? 0:03:36.920 --> 0:03:37.720 You know, it's good. 0:03:38.480 --> 0:03:42.000 It's good, you know, generally Sarasota, and we're located on 0:03:42.080 --> 0:03:44.800 Main Street downtown Sarasota. We bought it two and a 0:03:44.840 --> 0:03:48.920 half years ago. It's been there for thirty years. We 0:03:49.040 --> 0:03:53.480 have probably the best patio in downtown historic Sarasota. I 0:03:53.480 --> 0:03:56.600 mean it's a great spot. You know, everybody comes in there, 0:03:56.680 --> 0:03:59.280 the mayor comes in there. I mean, it is the community. 0:03:59.760 --> 0:04:05.520 It's the heartbeat of downtown Sarasota, you know, Sarah. Florida 0:04:05.560 --> 0:04:08.360 in general, I think struggling with when I say struggling, 0:04:09.760 --> 0:04:13.040 tourist business isn't quite what it was the last couple 0:04:13.080 --> 0:04:14.600 of years. And I think part of that is we 0:04:14.640 --> 0:04:17.039 have a lot more competition now. We were kind of 0:04:17.080 --> 0:04:19.760 the destination of choices. We were one of the only 0:04:19.800 --> 0:04:25.160 ones that were fully open, So you know, I think that, 0:04:25.640 --> 0:04:28.560 and you know, let's face it, as an industry, we've 0:04:28.640 --> 0:04:31.200 raised our prices. I mean, we at the Cafe haven't 0:04:31.240 --> 0:04:35.240 raised our prices in over fifteen months, but you know, 0:04:35.279 --> 0:04:38.880 we probably had fifteen percent price increases since we bought 0:04:38.880 --> 0:04:40.080 it two and a half years ago. 0:04:41.480 --> 0:04:42.120 So we have that. 0:04:42.279 --> 0:04:45.080 We have more competition as Florida gets more crowded to 0:04:45.360 --> 0:04:48.320 you know, as far as so, but our traffic is down. 0:04:48.600 --> 0:04:52.839 And I'm hearing this consistently downtown, from high end restaurants 0:04:52.880 --> 0:04:58.040 to to QSR is down ten percent or so year 0:04:58.080 --> 0:05:02.239 on year, which is tough, but you know, it also 0:05:02.360 --> 0:05:04.920 forces you to get smarter about your business. And we 0:05:05.120 --> 0:05:08.120 have and we're making money. And if you can say 0:05:08.120 --> 0:05:10.680 that in this business, you're doing pretty well. 0:05:11.200 --> 0:05:14.400 Yeah for sure. All right, good stuff. So let's get 0:05:14.440 --> 0:05:18.080 into datam fs. Who's the typical customer and what services 0:05:18.160 --> 0:05:19.080 are you providing them? 0:05:19.800 --> 0:05:23.000 Yeah, so we're a consultancy of actually a group of 0:05:23.080 --> 0:05:32.800 fifteen mostly retired or near retired supply chain executives or consultants, 0:05:33.279 --> 0:05:40.200 some in food service distribution, some in food manufacturing, you know, 0:05:40.279 --> 0:05:43.960 for big brands like Procter and Gamble, And you know, 0:05:45.160 --> 0:05:47.720 we all have different talents. You know, mine in particular 0:05:47.839 --> 0:05:50.360 is more in the data supply chain commodities, which we're 0:05:50.400 --> 0:05:53.839 going to talk about today. You know a lot of 0:05:53.839 --> 0:05:59.800 the other partners have obviously different expertise, but we all 0:06:00.240 --> 0:06:03.240 one passion and that that passion is to see the 0:06:03.640 --> 0:06:07.719 food service supply chain evolve. And I think you know 0:06:07.760 --> 0:06:12.360 what what COVID did to the food service supply chain 0:06:12.480 --> 0:06:16.640 is that one it exposed it that that it needs 0:06:16.640 --> 0:06:25.680 some help, but it also raised raised the the expectation 0:06:25.800 --> 0:06:28.560 and performance and the food service supply chain and the 0:06:28.600 --> 0:06:32.400 importance within the organizations. So I I I think this. 0:06:33.720 --> 0:06:37.080 You know, we all want to see this, this food 0:06:37.120 --> 0:06:41.480 service supply chain evolve at least a little bit faster 0:06:41.640 --> 0:06:45.680 than it is. And you know, we think that the 0:06:46.040 --> 0:06:48.599 that you know, we have a passion for that and 0:06:48.680 --> 0:06:51.599 all this compounded knowledge that we've have, we can help 0:06:51.640 --> 0:06:53.159 it get there and that's our goal. 0:06:54.440 --> 0:06:56.960 Great, all right, So my mentor always taught me to 0:06:57.000 --> 0:07:00.760 start from the very beginning. Uh, when I'm doing my research, 0:07:00.960 --> 0:07:04.920 So how our feed and fertilizer costs tracking versus last year? 0:07:05.120 --> 0:07:06.120 And what's your outlook? 0:07:06.880 --> 0:07:11.720 Yeah, so we have good news there, right, So corn, 0:07:12.360 --> 0:07:15.640 the corn and soybean crops domestically were much better than 0:07:15.640 --> 0:07:19.600 the last couple of years. You know, weather was much better, 0:07:20.360 --> 0:07:26.120 acres acres, particularly for corn, we're very strong. So we've 0:07:26.160 --> 0:07:33.080 got historically adequate to almost ample corn supplies domestically. Soybean 0:07:33.120 --> 0:07:36.520 supplies you could make the argument that they're borderline tight 0:07:37.080 --> 0:07:40.840 to adequate. Well, we're going to see bigger soybean acres 0:07:40.840 --> 0:07:44.360 this year in the United States, and so I'm optimistic 0:07:44.400 --> 0:07:48.000 if these cop crops can perform that we're going to 0:07:48.000 --> 0:07:50.840 see even better supplies as we get into twenty twenty five. 0:07:50.960 --> 0:07:53.920 So the trend and feed, which is extremely important for 0:07:53.960 --> 0:07:58.120 the food service industry and retailers for costs, particularly for 0:07:58.200 --> 0:08:03.480 proteins and dairy, the trend and is down. We are 0:08:03.520 --> 0:08:07.920 seeing that across the board with soybean meal, corn, even 0:08:08.000 --> 0:08:14.000 soybean oil, wheat supplies are down. So that's a very 0:08:14.040 --> 0:08:17.640 good sign at least for commodity prices over the next 0:08:17.680 --> 0:08:18.320 couple of years. 0:08:19.120 --> 0:08:22.000 Great, and then is there a lag in how long 0:08:22.160 --> 0:08:25.320 we might see that kind of yeah. 0:08:25.360 --> 0:08:30.600 So, so you know, for restaurants, restaurants don't really buy feed, 0:08:31.160 --> 0:08:34.280 right they buy they buy the proteins and the dairy 0:08:35.960 --> 0:08:39.640 from from where feed can be a major cost component 0:08:39.840 --> 0:08:40.640 in that production. 0:08:41.400 --> 0:08:43.440 So it differs. 0:08:44.040 --> 0:08:48.840 So typically the poultry industry, of the chicken industry will 0:08:48.840 --> 0:08:52.080 react much faster, right, that lag will be much shorter. 0:08:52.480 --> 0:08:54.319 And we can talk about that more in a minute. 0:08:54.360 --> 0:08:56.480 I mean, but you're kind of seeing that dynamic right 0:08:56.520 --> 0:08:59.520 now where where we've seen poultry producers, at least on 0:08:59.559 --> 0:09:03.120 the spot markets, their margins are some of the best 0:09:03.160 --> 0:09:08.000 we've seen in almost two years. So and chicken producers 0:09:08.000 --> 0:09:13.040 typically aren't very disciplined with production and so you know, 0:09:13.400 --> 0:09:16.000 it wouldn't surprise me if we see much better chicken 0:09:16.000 --> 0:09:19.920 supplies this fall. Then a lot of anticipating right now 0:09:20.000 --> 0:09:23.880 or we expected, you know, just a couple months ago, 0:09:24.280 --> 0:09:27.720 so you have that kind of kind of quick lag. 0:09:27.760 --> 0:09:29.760 And then if you if you kind of take it. 0:09:29.720 --> 0:09:33.839 To the next stretched step, which would be hogs or pork, 0:09:33.880 --> 0:09:36.720 which is not really that big of an item for restaurants, 0:09:37.040 --> 0:09:38.880 all right, but you're going to go into so if 0:09:38.920 --> 0:09:44.120 you kind of think about chickens would be quarters, you know, 0:09:44.160 --> 0:09:47.840 a couple I'm sorry, a couple months reaction, three or 0:09:47.840 --> 0:09:50.600 four depending on how many what the layer, the broiler 0:09:50.720 --> 0:09:53.800 layer situation is. Then you would have hogs, which might 0:09:53.840 --> 0:09:56.360 be quarters. It takes a couple of quarters or so 0:09:56.520 --> 0:09:58.960 two or three quarters. And then you get into cattle, 0:09:59.000 --> 0:10:02.160 which is extremely important for the restaurant industry. Now we're 0:10:02.200 --> 0:10:08.320 talking years, right, and we have a particularly historic situation 0:10:08.480 --> 0:10:09.760 going on right now in cattle. 0:10:10.559 --> 0:10:12.680 Yeah, and we'll talk about that in a second. But 0:10:12.760 --> 0:10:15.560 and is that mainly a function of how long it 0:10:15.600 --> 0:10:17.880 takes to grow those animals to full size? 0:10:18.440 --> 0:10:21.800 Sure? Yeah, for sure, yep. 0:10:22.280 --> 0:10:25.480 Okay, great, So yeah, beef inflation, man, to your point 0:10:25.520 --> 0:10:27.600 continues to be a big talking point for all the 0:10:27.640 --> 0:10:31.199 restaurant companies we cover. Talk to us about the current 0:10:31.240 --> 0:10:34.520 dynamics in that market and how long you think it 0:10:34.559 --> 0:10:36.640 will take for supply to catch up with demand. 0:10:37.880 --> 0:10:41.320 Yeah, so it's going to the answer the last part 0:10:41.320 --> 0:10:41.880 of your question. 0:10:41.960 --> 0:10:43.800 It's going to take a while. Right. 0:10:43.840 --> 0:10:46.960 We are in a downward cycle and the cattle herd 0:10:47.280 --> 0:10:53.000 and you know, and that downward cycle takes years, and 0:10:53.080 --> 0:10:55.199 it takes years to recover, so. 0:10:56.760 --> 0:10:57.959 You know, and what drives that. 0:10:58.440 --> 0:11:02.240 There's several issues that can drive, but high feed prices 0:11:03.000 --> 0:11:04.200 the feed lots. 0:11:03.960 --> 0:11:06.839 Can dampen demand for the animals. 0:11:07.760 --> 0:11:11.920 You've particularly got drought in the southern planes, which we've 0:11:11.960 --> 0:11:15.360 had over the last couple of years. Very hard for 0:11:15.400 --> 0:11:19.000 the ranchers to expand if they don't have grass, right, 0:11:19.200 --> 0:11:20.800 very hard, I mean possible. 0:11:21.400 --> 0:11:21.600 Right. 0:11:21.760 --> 0:11:27.920 So we've had that cycle, and yes, the drought has improved, 0:11:27.920 --> 0:11:29.959 and we can talk about that more in a minute, but. 0:11:31.559 --> 0:11:32.160 Just to give you. 0:11:32.160 --> 0:11:37.160 Perspective, the last time we went through this cycle, beef 0:11:37.200 --> 0:11:40.720 production peaked in two thousand and eight. We did not 0:11:40.920 --> 0:11:44.280 return to two thousand and eight beef production levels until 0:11:44.280 --> 0:11:47.880 twenty and eighteen. Wow, I'm not saying it's going to 0:11:47.960 --> 0:11:50.079 take a decade, but this is not going to be 0:11:50.120 --> 0:11:52.920 fixed next year or the year after. And yeah, we 0:11:52.960 --> 0:11:56.199 may see better beef supplies. I think we're going to 0:11:56.240 --> 0:12:00.240 see smaller beef supplies in twenty five. We may ac 0:12:00.440 --> 0:12:03.439 better beef supplies than twenty six, But if we look 0:12:03.440 --> 0:12:06.040 at our peak level, which would be twenty twenty two, 0:12:06.280 --> 0:12:09.360 it's gonna be at least twenty twenty eight. As a 0:12:09.400 --> 0:12:11.960 matter of fact, the USDA, I think and their long 0:12:12.040 --> 0:12:15.559 term projections doesn't have beef production returning to twenty twenty 0:12:15.600 --> 0:12:18.440 two levels until two thousand and thirty two. 0:12:19.360 --> 0:12:21.560 Wow. And so they're building, and they're in the process 0:12:21.559 --> 0:12:23.439 of building the herd, and that's part of the. 0:12:24.000 --> 0:12:26.760 Well, we haven't seen that yet, right. 0:12:26.880 --> 0:12:29.480 So we get a semi annual report from from the 0:12:29.600 --> 0:12:32.920 USDA on the cattle herd, the size of the cattle herd, 0:12:33.240 --> 0:12:35.440 and we got one at the end of January, and 0:12:35.440 --> 0:12:36.719 that was for January. 0:12:36.400 --> 0:12:38.480 One, and the cattle herd was down. 0:12:39.160 --> 0:12:42.559 Now there are things that I look for when we 0:12:42.600 --> 0:12:47.120 get our next report in the end of July. The 0:12:47.160 --> 0:12:51.560 conditions are there for them to expand. So certainly, let's 0:12:51.600 --> 0:12:54.000 just say, the watch is on, right, But. 0:12:56.720 --> 0:12:59.880 What I'm looking for is is. 0:13:02.120 --> 0:13:06.240 Less female animals in the slaughter mix or less female 0:13:06.280 --> 0:13:12.920 animals in the feed lots. And the idea is is 0:13:13.280 --> 0:13:16.160 there will be less at least as a percentage of 0:13:16.200 --> 0:13:18.920 a share of the total animals. There will be less 0:13:18.920 --> 0:13:23.120 because they're being retained to expand the hurt. And I 0:13:23.200 --> 0:13:26.559 haven't really seen that yet. Now, I will say, if 0:13:26.600 --> 0:13:28.640 you look at kind of you think of it this way, 0:13:28.679 --> 0:13:31.360 And this is probably one of the most important markets 0:13:31.800 --> 0:13:35.160 for a lot of the restaurants you cover. But it's 0:13:35.160 --> 0:13:38.000 the beef trim markets, which typically go into Hamburger. 0:13:38.440 --> 0:13:38.600 Right. 0:13:39.679 --> 0:13:43.679 The beef, the leaner beef trim, meaning not as much fat, 0:13:43.760 --> 0:13:48.360 typically comes from your working cows. Okay, so your mama cows, 0:13:48.480 --> 0:13:53.120 your dairy cows, et cetera. Those prices right now are 0:13:53.160 --> 0:13:59.000 at record highs and seasonally they should continue to go higher, 0:14:00.120 --> 0:14:03.319 and they're a full eight percent above the peak last 0:14:03.360 --> 0:14:09.679 year already. That suggests to me that, hey, maybe some 0:14:09.760 --> 0:14:11.239 of these cows are being. 0:14:11.000 --> 0:14:14.320 Retained, gotcha, And so that's going to hurt near term 0:14:14.400 --> 0:14:20.960 supply if that happens. Got it? Very interesting? All right? Uh? 0:14:21.040 --> 0:14:23.720 You know we you touched on pork a little bit. 0:14:24.640 --> 0:14:29.640 But yeah, breakfast is important for me. I I fast intermittently, 0:14:29.720 --> 0:14:32.160 so I don't need too during breakfast time. But ye, 0:14:32.800 --> 0:14:34.600 all day breakfast is great man. That's how I love 0:14:34.600 --> 0:14:39.600 New Jersey diners, you know. Yeah, so is avion flu 0:14:39.680 --> 0:14:42.680 still impacting the egg market? And and what's happening in 0:14:42.720 --> 0:14:45.520 pork bellies and sALS? Are my bacon and sausa's price 0:14:45.600 --> 0:14:46.520 is going to go up this year? 0:14:47.120 --> 0:14:49.600 Okay, well let's start with the pork. The pork one 0:14:49.680 --> 0:14:54.280 is easier, so they will start there. So, yeah, pork 0:14:54.280 --> 0:14:56.440 prices might be a little bit more expensive this year. 0:14:56.480 --> 0:14:59.760 But but but we got some data from the USDA 0:14:59.840 --> 0:15:04.040 the in December. The hog herd is is we get 0:15:04.120 --> 0:15:06.400 that data quarterly instead of semi annual. 0:15:08.080 --> 0:15:10.280 The hog herd is bigger than we anticipated. 0:15:11.280 --> 0:15:13.560 Pork production is going to be up pretty strong, particularly 0:15:13.640 --> 0:15:18.320 the back half of this year, so we may see 0:15:18.360 --> 0:15:22.120 some stronger retail feature activity for pork, which should lift those. 0:15:21.920 --> 0:15:22.840 Markets at times. 0:15:23.440 --> 0:15:25.640 Right, But I don't really don't think they're going to 0:15:25.760 --> 0:15:29.520 run away from US, and I think pork is going 0:15:29.600 --> 0:15:32.760 to be just fine, So you'll be good on your bacon. 0:15:34.680 --> 0:15:36.200 As far as avian flu. 0:15:36.800 --> 0:15:40.160 So the good news with avian flu and table legs 0:15:40.720 --> 0:15:43.280 is we haven't really had any cases for about two 0:15:43.360 --> 0:15:47.280 months or a little bit over two months, but we 0:15:47.480 --> 0:15:51.680 had quite a few cases in that migratory period where 0:15:51.680 --> 0:15:55.400 the birds were migrating there during the fall and into 0:15:55.560 --> 0:16:01.080 the winter into the early winter. The number of broiler 0:16:01.240 --> 0:16:04.080 i'm sorry, table egg layers. When I say layers, I 0:16:04.080 --> 0:16:08.080 mean like a hen who's laying the eggs, right, Those 0:16:08.120 --> 0:16:11.800 were down on the latest USDA report, So that would 0:16:11.800 --> 0:16:15.080 be the March one number about one percent year on year, 0:16:15.200 --> 0:16:18.480 So that's the first time we've fallen below year ago levels. 0:16:18.480 --> 0:16:20.640 As a matter of fact, it's the first time that 0:16:20.760 --> 0:16:23.360 March has been below i'm sorry, only the third time 0:16:23.400 --> 0:16:26.240 in the last seven years that March has been below February. 0:16:26.840 --> 0:16:30.240 So it's definitely impacting the number of layers we have. 0:16:31.000 --> 0:16:35.560 The egg prices are much more expensive than we anticipated 0:16:35.600 --> 0:16:39.280 anticipated them to be probably six months ago or before 0:16:39.360 --> 0:16:42.880 that avian flew. And even if we don't have any 0:16:42.920 --> 0:16:47.360 other cases, this is likely the impact the table eggs 0:16:47.360 --> 0:16:52.360 supply markets for probably at least into the summer. And 0:16:52.880 --> 0:16:55.880 so you know, we got through Easter already that's our 0:16:55.880 --> 0:17:00.040 big demand, right, I mean, the pool for Easter is done, 0:17:00.960 --> 0:17:04.080 so it's not that we I expect them to run 0:17:04.119 --> 0:17:07.880 significantly higher. But but the down seasonal downside could be tempered. 0:17:09.480 --> 0:17:12.639 Interesting, And is there any concern that you know, uh, 0:17:12.920 --> 0:17:16.120 the like my spring migration could spread. 0:17:15.840 --> 0:17:16.840 A for sure? 0:17:17.000 --> 0:17:20.520 Yeah, yeah, sure, sure, So it's certainly something we have 0:17:20.600 --> 0:17:24.800 to watch. But you know, I mean there's always avian 0:17:24.880 --> 0:17:25.960 flu every year, right. 0:17:27.200 --> 0:17:28.200 You know, we had a. 0:17:28.119 --> 0:17:32.040 Couple of years ago we had really bad for table leggs. 0:17:33.200 --> 0:17:35.399 We're always going to have it, you know, I would 0:17:35.400 --> 0:17:41.240 say that, you know, the the US poultry industry is 0:17:43.200 --> 0:17:48.280 very good and becoming better and better at insulating itself 0:17:48.280 --> 0:17:51.640 from it. So you know, my hope is it won't 0:17:51.680 --> 0:17:52.240 be as bad. 0:17:53.400 --> 0:17:53.920 Okay, cool? 0:17:54.480 --> 0:17:54.600 Uh? 0:17:54.800 --> 0:17:58.600 And finishing up on breakfast coffee prices, they're up year 0:17:58.600 --> 0:18:00.920 over year. What's your twenty twenty four outlook? 0:18:01.800 --> 0:18:05.440 Yeah, so, I mean we've had some challenges in Brazil. 0:18:06.200 --> 0:18:10.600 You have some challenges with robust to crops, you know, 0:18:10.720 --> 0:18:14.520 not quite honestly not my area of great area of expertise, 0:18:14.560 --> 0:18:16.879 but you know, fairly inflated prices are. 0:18:16.800 --> 0:18:18.440 Likely to persist for coffee. 0:18:18.840 --> 0:18:21.240 But but not expected to run away from where we're 0:18:21.240 --> 0:18:21.720 at today. 0:18:23.200 --> 0:18:27.800 But that's a pretty delicate crop, right and something that 0:18:28.320 --> 0:18:31.440 you know, one bad frost or oh for. 0:18:31.440 --> 0:18:34.359 Sure, yeah, for sure, and it could it can then 0:18:35.000 --> 0:18:39.360 it can impact supplies for a couple of years. 0:18:39.520 --> 0:18:43.800 Right, Okay, yep, yeah, so uh it being volatile, it's 0:18:43.840 --> 0:18:48.960 definitely something we watch closely for Starbucks Tim Horton's coffee chains. 0:18:50.600 --> 0:18:52.760 Milk and cheese prices are way down year over year. 0:18:52.760 --> 0:18:54.040 Do you expect that to continue? 0:18:54.680 --> 0:18:55.679 Well, I'll tell you so. 0:18:56.280 --> 0:19:03.240 Uh. It's interesting that the the milk milk production has 0:19:03.240 --> 0:19:06.320 been tracking below year ago levels and typically when you 0:19:06.400 --> 0:19:10.320 see that, you would see much higher cheese prices, and 0:19:10.359 --> 0:19:11.760 we're not seeing it this year. 0:19:12.200 --> 0:19:13.159 And let me step back. 0:19:13.200 --> 0:19:15.359 One of the reasons that milk production is tracking below 0:19:15.440 --> 0:19:17.680 ye ago levels relates. 0:19:17.240 --> 0:19:19.000 Back to the cattle situation. 0:19:20.080 --> 0:19:25.080 So what happens is when cow supplies, remember those working cows, 0:19:25.119 --> 0:19:29.719 get very tight, prices go up for them, and so 0:19:29.760 --> 0:19:32.000 the dairy farmers kind of have these low milk prices. 0:19:32.040 --> 0:19:34.880 In the last couple of years, they've had high feed prices, 0:19:34.920 --> 0:19:40.160 including high alfalfa hay prices. There's an incentive for them 0:19:40.240 --> 0:19:45.760 to liquidate some of their lesser performing cows, right, and 0:19:45.840 --> 0:19:49.119 so those cow prices are high, and so they liquidate them. 0:19:49.200 --> 0:19:52.600 So the cattle herd, that dairy cow herd is declining, 0:19:53.200 --> 0:19:56.360 and milk production is declining in part because what's going on. 0:19:56.359 --> 0:19:58.680 With cattle right now. 0:19:58.720 --> 0:20:01.520 Back to cheese, but cheese just doesn't seem want to 0:20:01.560 --> 0:20:05.040 go up. And what's interesting with cheese right now is 0:20:05.080 --> 0:20:08.800 I run a rough disappearance model on it, and disappearance 0:20:08.880 --> 0:20:11.160 meaning you know, we kind of relate that to consumption, 0:20:11.280 --> 0:20:12.600 but we don't really know what. 0:20:12.640 --> 0:20:13.240 Happens to it. 0:20:13.359 --> 0:20:20.160 Right The disappearance model on cheese here in the United States, 0:20:20.520 --> 0:20:23.359 the growth is the twelve month average of that growth 0:20:23.400 --> 0:20:25.040 is just zero point three percent. 0:20:25.880 --> 0:20:26.639 To give you some. 0:20:26.520 --> 0:20:32.879 Perspective, that is the smallest growth that we've seen, not 0:20:33.000 --> 0:20:38.560 including COVID, in over a decade. So something's going on 0:20:38.720 --> 0:20:40.520 there that I haven't been able to point my finger 0:20:40.600 --> 0:20:41.080 on yet. 0:20:41.280 --> 0:20:42.879 Could be prior high prices. 0:20:44.600 --> 0:20:47.119 You know, I know, I eat less cheese probably than 0:20:47.160 --> 0:20:50.280 I did ten or I love cheese right like my 0:20:50.400 --> 0:20:52.200 IPA's all right, So. 0:20:53.760 --> 0:20:56.400 But I drink less IPAs and I eat less cheese. 0:20:56.440 --> 0:20:58.359 The older I get, you know, exactly. 0:20:58.480 --> 0:21:00.959 So what I'm trying to you know, remember when we 0:21:00.960 --> 0:21:04.080 were young and you would say, oh, yeah, but but 0:21:04.600 --> 0:21:06.480 they're old, And now I kind of look at myself 0:21:06.520 --> 0:21:08.520 and well I have to try to try to go 0:21:08.640 --> 0:21:10.960 back and say, well, I don't understand what my kids 0:21:10.960 --> 0:21:13.000 are doing, but I'm old. 0:21:13.119 --> 0:21:14.160 So what's the difference? 0:21:14.359 --> 0:21:22.120 Right? So, for sure, and wet it's been on sale, 0:21:22.160 --> 0:21:24.119 should we expect continued weakness in that market? 0:21:25.000 --> 0:21:29.760 So you've got probably not right now. 0:21:29.800 --> 0:21:31.560 I don't expect it to run away from this, but 0:21:31.640 --> 0:21:34.240 you've got some challenges with the winter wheat crop here 0:21:34.280 --> 0:21:38.119 in the United States, but which is not abnormal, you know, 0:21:38.320 --> 0:21:44.120 And from the February weather numbers showed that the winter 0:21:44.160 --> 0:21:47.080 week country was still in drought and over fifty percent 0:21:47.119 --> 0:21:49.520 of the of the US crop is is winter week 0:21:50.440 --> 0:21:53.160 and so is it dire? No? 0:21:53.400 --> 0:21:56.040 But is it? Uh? You know, we've been in whek. 0:21:56.080 --> 0:21:59.280 This will be the third consecutive winter that winter wheat's 0:21:59.320 --> 0:22:02.840 been in a drought, and it'll be the and it's 0:22:02.880 --> 0:22:05.280 not as bad as the prior to winters. So I 0:22:05.320 --> 0:22:07.440 think what we're going to see is very similar supplies 0:22:07.480 --> 0:22:11.400 and similar prices. Now will if we do if those 0:22:11.600 --> 0:22:17.639 corn and soybean crops perform this summer. Uh, then that 0:22:17.680 --> 0:22:20.840 could pull wheat down into twenty five some and it could, 0:22:21.119 --> 0:22:24.080 but then eventually it might also encourage some acreage. So 0:22:25.200 --> 0:22:27.960 we'llhaps see, you know, if we're going to see weakness, 0:22:29.200 --> 0:22:31.080 maybe we see if we get if we get a 0:22:31.119 --> 0:22:35.560 bumper spring wheat crop, and that's that's more important for 0:22:35.600 --> 0:22:38.920 the restaurant industry because that's your higher protein weeks. That's 0:22:38.920 --> 0:22:42.240 your Durham wheat. That's your hard red spring wheat, Durham 0:22:42.240 --> 0:22:46.920 wheat going into pasta's hard red spring going into typically bagels, 0:22:47.240 --> 0:22:49.920 pizza doughs, et cetera. I mean, maybe if we get 0:22:49.920 --> 0:22:53.200 a bumper, but there is drought developing in the northern 0:22:53.240 --> 0:22:55.600 plains typically where those crops are. 0:22:57.160 --> 0:22:57.720 Make a home. 0:22:58.560 --> 0:23:03.000 Okay, but it seems like generally good news for the 0:23:03.000 --> 0:23:06.600 pizza chains. The last couple of points, you know, between 0:23:06.680 --> 0:23:08.840 cheese and wheat. 0:23:08.960 --> 0:23:12.720 Yeah, I will say this about cheese. The risk in 0:23:12.760 --> 0:23:15.840