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Cattle: Get Sideways · Professional Ag Marketing Podcast

• 0:00
  SPEAKER_01: Welcome to the Cattle Market Talk Podcast with Professional Ag Marketing.
• 0:04
  SPEAKER_01: Come here to get your fresh updates on what's happening week to week within the cattle market.
• 0:09
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:15
  SPEAKER_01: Today is December 17th.
• 0:18
  SPEAKER_01: I've got Jeff here with us.
• 0:19
  SPEAKER_01: How's it going, Jeff?
• 0:20
  SPEAKER_01: Good, Mike.
• 0:21
  SPEAKER_01: Thanks for having me on.
• 0:22
  SPEAKER_01: Good deal.
• 0:23
  SPEAKER_01: Well, we got some fun stuff to talk about here today.
• 0:25
  SPEAKER_01: Let's talk about the chart action recently in this live cattle.
• 0:29
  SPEAKER_01: We are down a little bit today, Jeff, but I actually hear it's been a little bit boring for the last week as we just chop sideways.
• 0:36
  SPEAKER_00: Well, that's the that's the exciting news.
• 0:37
  SPEAKER_00: Like we haven't moved in uh three to six dollar ranges here on the dailies um for almost like a week and a half here, Mike.
• 0:45
  SPEAKER_01: The question is direction.
• 0:46
  SPEAKER_01: You know, we uh we had been in a recovery standpoint until the sideways action.
• 0:51
  SPEAKER_01: You are bouncing between the 50 and the 100-day moving averages.
• 0:55
  SPEAKER_01: I think we're at a pivotal point here, as you were talking about before the podcast, of what direction we want to head from here, Jeff.
• 1:02
  SPEAKER_00: Yeah, and I and that's I think that's one of the key things that we're gonna have to be paying attention to because you know, as we do a post-mortem dissection on the major drop that we saw through uh November there, you know, cash was certainly lower, um, but really um probably mostly driven by lower futures action, right?
• 1:25
  SPEAKER_00: So, and uh if you don't watch the charts a lot, I mean correct me if I'm wrong here, Mike, but you know, it'd be bouncing around between the 100 day and the 50 day moving averages, the 50 day running oh, about you know, I'll call it two to three dollars lower than where the market is, 100 day rate up on top of what we've been bouncing our head on here.
• 1:43
  SPEAKER_00: That's pretty unusual, isn't it, to be running a little bit of a range like that.
• 1:47
  SPEAKER_01: Yeah, and especially this gives momentum traders nothing, right?
• 1:51
  SPEAKER_01: I mean, this isn't giving them any sense of direction to try to continue to push this thing, they're at a standstill.
• 1:57
  SPEAKER_01: So I think wherever you do start to go from here, whether you break the 50 or break the hundred, that's what they're gonna want to build on after that break.
• 2:04
  SPEAKER_00: Yep, and I guess what I'm what I'm driving at is I think the cash will have the ability to follow either direction.
• 2:10
  SPEAKER_00: Um, packers are sitting here uh they're gonna need some cattle again this week, is what we're hearing.
• 2:16
  SPEAKER_00: Uh we are starting to build buy into some shorter kill weeks, so we'll see how they how they use that into their advantage if they're able to gain gain any sort of leverage or not.
• 2:26
  SPEAKER_00: But you know, I don't think they're sitting on just a ton of inventory, is what we're hearing.
• 2:30
  SPEAKER_00: So if these uh futures do break to the upside, I think that will force the hand of the packer to pay a little bit more money.
• 2:37
  SPEAKER_00: Um, but on the flip side, if you look at what's happened to packer margins, which I know we um we don't care much about packer margins, I get that, but what I can tell you, Mike, is when we've inflated the packer margins because of the lower futures causing the lower cash prices, um, two weeks ago, call it, um they did speed up the kill speed.
• 3:01
  SPEAKER_01: They bought aggressively through that time frame and still kind of are even.
• 3:04
  SPEAKER_01: Yes, following that.
• 3:05
  SPEAKER_00: So I I think you know they make decisions at that time that affects them weeks in the future.
• 3:10
  SPEAKER_00: Yep.
• 3:11
  SPEAKER_00: So today those packer margins have gotten about as ugly as what they've been at um through this uh you know, call it fall time frame, really summer fall.
• 3:20
  SPEAKER_00: Um and I gotta believe they're making decisions to slow up the chain speed some as we stare into those first few weeks of January.
• 3:29
  SPEAKER_01: And it doesn't look like we're gonna get into any more cattle going into Q1, does it?
• 3:33
  SPEAKER_01: I mean it looks like shouldn't be a hole there.
• 3:36
  SPEAKER_00: Sure shouldn't.
• 3:36
  SPEAKER_00: You know, the the weight thing continues to scare us a bit, right?
• 3:40
  SPEAKER_00: And it needs to.
• 3:41
  SPEAKER_00: Um really that's just something that's sitting out there at any given time.
• 3:46
  SPEAKER_00: Um we could get into kind of an unexpected, at least short-term supply because we have too many heavy cattle for too long.
• 3:54
  SPEAKER_00: Um I think we're getting through the time of year when that should be a problem.
• 4:00
  SPEAKER_00: We should end up uh with fewer and fewer feed yards um with an issue of man, I just got cattle that are on the edge of the pack are really not wanting, um, and some really big discounts staring at me.
• 4:14
  SPEAKER_00: I gotta move these things.
• 4:15
  SPEAKER_00: Usually that's more of a November, maybe December problem.
• 4:19
  SPEAKER_00: Uh as you get closer and closer into January, I'd like to think that there's fewer and fewer people in that position that would really force the uh hand of the feed yards and force the the leverage over to the to the packer side of the equation.
• 4:34
  SPEAKER_00: So I I think we're almost out of the woods on that topic, um, maybe not completely because of the weight situation.
• 4:42
  SPEAKER_01: We've got some other things going on in this cattle market, uh more indirectly, don't we?
• 4:48
  SPEAKER_00: Yeah, I know you you and uh some of the folks on our team have spent some good time on uh you know just how closely the equities are related to the cattle market.
• 4:58
  SPEAKER_00: I think that's uh certainly an interesting observation, um you know, especially bigger picture.
• 5:05
  SPEAKER_01: You know, when you look since 2005, I think you ran the data and it was like a 63% correlation between this SP 500 and and uh cattle prices there on futures.
• 5:15
  SPEAKER_01: So it let's put it this way.
• 5:17
  SPEAKER_01: Uh we've seen a very strong correlation, especially recently, between the stock market and cattle prices.
• 5:24
  SPEAKER_01: It seems like if we're up or down that day, the both of them seem to be trading together.
• 5:29
  SPEAKER_01: Maybe the the degree at which they're trading seems a little bit different, but at least direction-wise, they're they've been trending very close together with each other.
• 5:38
  SPEAKER_01: A uh a fresh stock fall here the last couple days.
• 5:42
  SPEAKER_01: I think this was our fourth day, basically closing lower on the stock market again.
• 5:46
  SPEAKER_01: It looks like it's mainly tech stocks that are dragging things lower, just concern concerns about artificial intelligence and their valuations.
• 5:55
  SPEAKER_01: Um and that's really uh put a little bit of a uh a negative light on some of these riskier investments or maybe profit taking ahead of the end of this year, Jeff.
• 6:05
  SPEAKER_01: And I think that's spilled into some other things, whether it be the crude oil market is that dipped down to 55 now, almost contract lows going all the way back to uh uh to this last early part of the year.
• 6:17
  SPEAKER_01: Um you could look at it from the stock market.
• 6:20
  SPEAKER_01: We've pulled back quite a bit, and I think cattle here have maybe felt that along the way as well.
• 6:25
  SPEAKER_01: When when we started to recover there the in the stock market, the cattle market actually recovered at that same time frame as well.
• 6:31
  SPEAKER_01: So we've had very similar highs time frames, we had very similar lows here recently, and now they've built to back together, and now they're both consolidating sideways a little bit, but the stock market's pulling it lower the last couple days.
• 6:43
  SPEAKER_00: Yeah, and so yeah, even some of the inner to inner day type of trade, you know, you've got today for an is a perfect example, cattle really didn't have any other fundamentals to trade.
• 6:53
  SPEAKER_00: So it seemed like they just gravitated towards the equities.
• 6:56
  SPEAKER_00: Um, equities were putting in their lowest, uh close to their low of the session, you know, right on the close of the cattle, and that was the low point for the cattle market today, too.
• 7:08
  SPEAKER_00: So I would I would just pile onto your discussion and say, especially watch that if there isn't a lot going on from a fundamental standpoint.
• 7:17
  SPEAKER_01: As far as cattle, big catalyst drivers, like if the stock market would have a five-10% correlation or correction, you know, that that's going to encourage whatever.
• 7:26
  SPEAKER_01: I'm I'm still curious on how many longs are in the cattle market managed money-wise, but it'll encourage those to leave at a faster rate, that's for sure.
• 7:33
  SPEAKER_00: That's a hundred percent.
• 7:34
  SPEAKER_01: Any final thoughts?
• 7:36
  SPEAKER_00: I think the you know, let's pay attention over the next few days, and we are a little bit of a disadvantage because we'll be getting into some holiday trade here pretty soon.
• 7:43
  SPEAKER_00: A little bit less volume.
• 7:45
  SPEAKER_00: Um, you're gonna be switching out of the uh D futures completely as that just gets hooked up to cash the best it can here.
• 7:53
  SPEAKER_00: So February is probably the market to be starting to look at more and more.
• 7:57
  SPEAKER_00: Um, let's pay attention.
• 7:59
  SPEAKER_00: If we start going on, uh it looks like we're building momentum, like you mentioned, Mike.
• 8:04
  SPEAKER_00: There's momentum traders out there that have made a lot of money in this cattle market.
• 8:07
  SPEAKER_00: So don't kid yourself.
• 8:09
  SPEAKER_00: They're gonna be watching very intently.
• 8:11
  SPEAKER_00: If we start pushing, uh, you know, right now I got the February chart sitting here in front of me.
• 8:16
  SPEAKER_00: If we start pushing kind of below that 227 and uh 60 cents or so, I'm gonna call it.
• 8:23
  SPEAKER_00: Um, you know, let's let's say we're gonna start pushing momentum one direction or the other, that would be on the lower side.
• 8:30
  SPEAKER_00: Where's that hundred-day moving average right now?
• 8:33
  SPEAKER_01: Right on top of where we're at, basically.
• 8:35
  SPEAKER_01: The last these last uh going all the way back to Friday's uh Thursday's highs in this cattle market, it's right on top of that.
• 8:44
  SPEAKER_01: So like February, that's gonna be 231.
• 8:47
  SPEAKER_00: Yeah, so those are kind of the targets that we're gonna be watching as far as hey, are we pushing one direction or another?
• 8:53
  SPEAKER_00: We're gonna assume that the rest of the complex and probably including cash fundamentals are gonna follow that momentum.
• 8:59
  SPEAKER_00: We'll see what happens if we get if we actually trade a more than a two dollar range here, Mike, in the next week or so.
• 9:06
  SPEAKER_00: That would be one first interesting question.
• 9:08
  SPEAKER_01: That it will.
• 9:08
  SPEAKER_01: All right, thank you for your time today.
• 9:10
  SPEAKER_00: Thank you.