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Cattle: Split Screen · Professional Ag Marketing Podcast

• 0:00
  SPEAKER_01: Welcome to the Capital Market Talk Podcast with Professional Ag Marketing.
• 0:04
  SPEAKER_01: Come here to get you fresh updates on what's happening week to week within the cattle market.
• 0:09
  SPEAKER_01: Trading commodity features and options involves substantial risk of loss and is not suitable for all investors.
• 0:16
  SPEAKER_01: Today is June 26th.
• 0:18
  SPEAKER_01: I've got Jeff Hoogendorn with us here.
• 0:20
  SPEAKER_01: ProEgg, how's it going, Jeff?
• 0:22
  SPEAKER_02: Good afternoon, Mike.
• 0:23
  SPEAKER_02: It's going good.
• 0:24
  SPEAKER_02: Finally got the rain we were looking for, huh?
• 0:25
  SPEAKER_01: And it doesn't stop.
• 0:28
  SPEAKER_01: No matter where you're at here this week, folks, it seems like whether you're in South Dakota, Minnesota, Iowa, you are getting rained on for the most part here over a span of quite a few days after what we would call very hot 90-degree temps last weekend.
• 0:43
  SPEAKER_01: So very much welcomed rainfall, but it uh, you know, it just to start off the podcast here, when you look at the corn market, pretty easily.
• 0:53
  SPEAKER_01: Well, it's pretty easy to tell what's going on.
• 0:55
  SPEAKER_01: You just look out your window, see rainfall everywhere, and the corn market goes down.
• 1:00
  SPEAKER_01: And I think it's that simple.
• 1:01
  SPEAKER_02: Yep.
• 1:02
  SPEAKER_02: Oh, I agree.
• 1:03
  SPEAKER_02: That and uh there's a lot of hard hard hits on that market this week and put in new lows, huh?
• 1:10
  SPEAKER_01: Very much so.
• 1:11
  SPEAKER_01: In the cattle market, we've got some interesting things to talk about today.
• 1:14
  SPEAKER_01: If you look back here, we had a cattle on feed report we can talk about.
• 1:18
  SPEAKER_01: We can talk about the equity markets a little bit and their correlation to cattle.
• 1:22
  SPEAKER_01: Uh, where do you want to start off with here this week, Jeff?
• 1:25
  SPEAKER_02: Well, we started off the corn market, so let's bleed that over into the feeder cattle side of things, I guess, Mike.
• 1:31
  SPEAKER_02: You know, one of the it just seems like this marketplace doesn't really care much about uh outside influences this week.
• 1:40
  SPEAKER_02: And this is a really kind of a minor um observation, probably.
• 1:45
  SPEAKER_01: A very new observation.
• 1:47
  SPEAKER_02: That yeah, that's probably better said.
• 1:49
  SPEAKER_02: Um, you know, you look at corn being lower this week, well, feeder cattle have been, you know, sharply steady, um, and live cattle, you know, really been working themselves lower, and you know, what they've been hooked up very well with for a long time is the equities markets.
• 2:07
  SPEAKER_02: Um, so you know, we've kind of seems like we've got cattle really just doing cattle things this week and divorce themselves from lower corn market on the feeder cattle side, uh, higher equities markets uh over on the live cattle side.
• 2:23
  SPEAKER_01: So the cattle market is not caring in the past three days if the equities are going up, which is new because a prior ten days to that, feeder cattle in the S P 500 had an 88% correlation.
• 2:36
  SPEAKER_01: Very, very strong, for example.
• 2:38
  SPEAKER_01: So prior to that, if equities went up, cattle went with it.
• 2:42
  SPEAKER_01: Uh the feeder cattle market also did not care at all about the sell off in corn so far at this point.
• 2:48
  SPEAKER_01: It just is uh very steadily going kind of continuing this trend a little bit lower to steadying out here, isn't it?
• 2:55
  SPEAKER_01: Yep, that's for sure.
• 2:57
  SPEAKER_01: Um what other technicals do you got on the cattle market this week?
• 3:01
  SPEAKER_02: Well, what I look at for the past couple weeks now, and I've I've been pretty impressed by this, Michael.
• 3:07
  SPEAKER_02: You've got this trend line coming down off the top side on the live cattle market now, I'm talking.
• 3:13
  SPEAKER_02: Um and almost every day, and and it was true every day this week, um, if you if you pull up a chart, you can kind of pull across the top side of all these highs.
• 3:23
  SPEAKER_02: Every day this week you've kind of went up and bounced against that downward trend and have settled off quite a bit.
• 3:32
  SPEAKER_02: So, like, you know, today was probably one of the better closes, honestly.
• 3:36
  SPEAKER_02: We're only up 10 to 20 cents, but you know, considering how high a high a lot of these days we put in, we'd go up you know, over a dollar quite often, end up being 50 cents lower by the end of the day.
• 3:49
  SPEAKER_02: And uh today we still didn't bust out to the top side of that trend line.
• 3:53
  SPEAKER_02: We went up and hit our head on it again, but you know, closed in the green at least, so probably a little bit better closed.
• 4:00
  SPEAKER_02: And sooner or later, this market's gonna get tired or or or maybe get trapped is a better um discussion point.
• 4:09
  SPEAKER_01: I think it's getting trapped right now, because like you just talked about the highs not taking out the prior day's highs, but in the last four trading days, the lows have also been getting higher a little bit, and it's right around on top of that 50-day moving average, which is going up at a pretty good rate.
• 4:25
  SPEAKER_01: So yeah, I think you're getting trapped there, aren't you, where it's gonna have to make a decision soon.
• 4:30
  SPEAKER_02: Yeah.
• 4:30
  SPEAKER_02: And so, you know, we don't watch the technicals super close or anything.
• 4:35
  SPEAKER_02: It's just this is one of those examples, Mike, where it's at work this week, and it it won't it won't continue to be a you know the same discussion as we go into next week.
• 4:44
  SPEAKER_02: I'm sure something will change, right?
• 4:46
  SPEAKER_02: But it's just been impressive to watch um really the last couple weeks.
• 4:50
  SPEAKER_02: And you know, I think part of the reason why we're probably gonna find ourselves uh you know in a decision-making point here is because you know fundamentals are gonna take over this marketplace.
• 5:02
  SPEAKER_02: Um and I I expect that's gonna be true either you know tomorrow or maybe into next week.
• 5:09
  SPEAKER_02: Next week will be a shorter week and low volume on holiday week and all that fun stuff.
• 5:16
  SPEAKER_02: So maybe that'll prove to be incorrect.
• 5:18
  SPEAKER_02: But you know, this marketplace is gonna turn itself over and look at cash fundamentals, I think, pretty hard.
• 5:25
  SPEAKER_01: What do you think about uh fundamentals on cattle here going into a major holiday, the July 4th timeframe?
• 5:31
  SPEAKER_01: Uh a lot of people look at the summertime as before fourth, after fourth.
• 5:36
  SPEAKER_01: What do you what do you see going into this uh holiday week?
• 5:40
  SPEAKER_02: Well, so first time in a long time, Packers got the leverage back last week, right?
• 5:47
  SPEAKER_02: And and so fine, you know, we had pretty tough cash week considering you know a lot of those markets were somewhere between four and even a few markets as much as seven dollars lower, Mike, than what they printed on the week be prior.
• 6:03
  SPEAKER_02: Um, you know, from these type of levels when you've gone up almost I don't know how many weeks in a row and a lot of covered a lot of ground.
• 6:13
  SPEAKER_02: Um I'm talking about the cash market now, you know, one could easily say, well, big deal it set back for the first week and basically forever, right?
• 6:20
  SPEAKER_02: But I think it's more important than that.
• 6:22
  SPEAKER_02: I think it's uh an indication that Packer leverage has swung back their direction here a bit.
• 6:29
  SPEAKER_02: Um so we haven't seen a lot of activity so far this week.
• 6:32
  SPEAKER_02: Be interesting to see, you know, when we get cash traded, looks like that'll probably happen on Friday again.
• 6:39
  SPEAKER_02: But my suspicion it's gonna be lower again.
• 6:41
  SPEAKER_02: And and once you kind of start that slope, um it's hard to stop it, right?
• 6:48
  SPEAKER_02: And my belief is that it probably will get stopped, but you know, expect this thing to probably erode a little bit more than what most people were uh is suspicious of as you know, just as it relates to the cash market.
• 7:03
  SPEAKER_02: Over on the beef side of things, that market has been incredibly resilient, right?
• 7:09
  SPEAKER_02: I mean, from a seasonal perspective, I keep telling everybody, you know, seasonally this thing uh likes to head lower, demand gets weaker for beef as you get into the back half of summer after the 4th of July.
• 7:21
  SPEAKER_02: Well, really, that should have probably started to happen this week, Mike.
• 7:25
  SPEAKER_02: And uh I don't know if it first just wants to go clear 400 bucks before it goes down, or if uh we're just gonna eat beef for the rest of the summer.
• 7:33
  SPEAKER_02: I I suspect that seasonal trend will still hold true and we'll uh get past some 4th of July stuff and work that market lower, but uh that's a huge win for the industry for sure.
• 7:46
  SPEAKER_01: Well, for outside market influence, if you're talking about the demand side, SP 500, new record price this week.
• 7:54
  SPEAKER_01: That's something to probably talk about.
• 7:55
  SPEAKER_01: So the equities are feeling real good going into the holiday season.
• 8:00
  SPEAKER_01: And uh demand seems all fine and dandy, good uptrend there, but yeah, it kind of starts to fall apart normally this time of the year here from this point, doesn't it?
• 8:10
  SPEAKER_02: And I wouldn't make any larger observations, even if that turns out to be true, um, which head lower on the beef box beef prices here for a bit.
• 8:18
  SPEAKER_02: Um I'm gonna still call the demand in in excellent shape because it's done everything that we wanted it to do.
• 8:24
  SPEAKER_02: We always look at it and say, hey, beef's got a rally uh be going into these holidays, and it's it's done all that, right?
• 8:31
  SPEAKER_01: So it's a seasonal thing, not a cycle thing.
• 8:33
  SPEAKER_02: Yes, I think that's accurate.
• 8:35
  SPEAKER_02: Now, it might turn into a cycle thing.
• 8:38
  SPEAKER_02: That would be personally my belief.
• 8:41
  SPEAKER_02: Um you know, we've we've got uh retail prices continue to increase on the beef side.
• 8:47
  SPEAKER_02: We've got retail prices that uh some analysts say need to increase at a quicker pace than what they have been.
• 8:55
  SPEAKER_02: So, you know, time will tell, and and you know, we've still got some pretty cheap competing proteins out there.
• 9:02
  SPEAKER_02: So I I'd be a little shocked if we don't put some, if we don't do some harm to this beef market as we go into the you know, call it the back half of summer, call it the back half of the year, Mike.
• 9:16
  SPEAKER_02: We'll kind of have to see how it progresses, but certainly something we'll be keeping our eyeballs on.
• 9:20
  SPEAKER_01: Have you seen anything from a money flow perspective on managed money that's starting to scare you at all yet?
• 9:26
  SPEAKER_02: You know, I'm sure they're liquidating some just a little bit this week, but so that you know that's been interesting.
• 9:32
  SPEAKER_02: It seems like they're very much respecting that technical chart also uh and and willing to get rid of a little bit of their position here as we just kind of slip a little lower.
• 9:42
  SPEAKER_00: What about the Catalan feed report we saw?
• 9:44
  SPEAKER_00: That was somewhat friendly, wasn't it?
• 9:46
  SPEAKER_02: It was a little bit friendly.
• 9:47
  SPEAKER_02: You know, placements came in just a smidgen lower than what their expectations were.
• 9:51
  SPEAKER_02: Um you know, I I don't think there was any huge new news there, but we continue to have inventories lower than what we did last year, and I do think that trend will very much continue.
• 10:05
  SPEAKER_02: And you know, we were we were very short on cattle.
• 10:08
  SPEAKER_02: Packers may have a little leverage from us today, but uh it's going to continue you know to see shorter and shorter supplies just as we go through the rest of this summer, and that's you know, year over year comparisons.
• 10:22
  SPEAKER_02: We'll we'll get into more cattle, is my belief, as we get into later July and into August.
• 10:27
  SPEAKER_02: That's that's more of a seasonal observation than a broader observation.
• 10:31
  SPEAKER_01: I'd argue placements is also one of the harder categories for them to really dial in tight pre-estimates, wouldn't it?
• 10:38
  SPEAKER_02: Yep, there's a lot of volatility in that.
• 10:40
  SPEAKER_02: And it's a monthly report, so you know that that lessens its impact a little bit, but that's the other reason, Mike.
• 10:46
  SPEAKER_02: I mean, it's a it's a survey, um, like many of the stuff is, and and it can be off a couple percentage points.
• 10:53
  SPEAKER_01: All right.
• 10:53
  SPEAKER_01: Any final thoughts for our listeners this week?
• 10:56
  SPEAKER_02: I don't think so.
• 10:57
  SPEAKER_02: You know, it's as we look at uh we talked a lot about the market slipping in the charts, and I would just say, you know, things things are gonna have to get pretty rough on the cash market um in order for us not to build some support here, you know, the back of our minds, of course, we're all thinking, man, that the sucker's up there a long way, it can come down in an awful big hurry.
• 11:18
  SPEAKER_02: And that's certainly true.
• 11:20
  SPEAKER_02: Um, but you know, you look at what the discounts are on these futures markets yet, and they've got some pretty pretty big changes in the cash market priced in.
• 11:31
  SPEAKER_02: So if we're not pulling, you know, what, five bucks a week off here for a couple weeks on the cash, then we're probably going to be able to build some support on these futures markets.
• 11:43
  SPEAKER_01: All right.
• 11:44
  SPEAKER_01: Well, thank you for your time today, Jeff.
• 11:46
  SPEAKER_01: Uh, we'll catch you next time on the Cattle Talk podcast.