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Grain Demand and Cattle on Feed · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Egg Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the egg markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_01: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: This is your host, Mike Minor.
• 0:22
  SPEAKER_01: Let's get started.
• 0:24
  SPEAKER_01: Today is October 21st.
• 0:25
  SPEAKER_01: I've got Jeff with us here today.
• 0:27
  SPEAKER_01: How's it going, Jeff?
• 0:28
  SPEAKER_00: Hey Mike.
• 0:29
  SPEAKER_00: Doing pretty good.
• 0:30
  SPEAKER_01: Awesome.
• 0:31
  SPEAKER_01: Well, we got a couple fun things to talk about.
• 0:33
  SPEAKER_01: We're going to have a macro market overview here quick, and then we're going to have you talk about the Catalon feed report that we just had here at 2 o'clock.
• 0:40
  SPEAKER_01: How's that sound?
• 0:42
  SPEAKER_00: Seems like we're playing it kind of loosely with the uh fun things to talk about, but Hey, yeah, you might be right there.
• 0:48
  SPEAKER_01: Well, in the grain markets this week, I must say, we didn't have a ton of fun things to talk about.
• 0:52
  SPEAKER_01: They were pretty inactive this week for the grains compared to what we've become accustomed to, anyways.
• 0:58
  SPEAKER_01: 684 on the December corn this week here to close out.
• 1:03
  SPEAKER_01: And really last week we closed the week at 689.
• 1:07
  SPEAKER_01: So just five cent change week over week.
• 1:09
  SPEAKER_01: Uh pretty boring.
• 1:10
  SPEAKER_01: Soybeans here.
• 1:11
  SPEAKER_01: We close the week decently strong up four cents to 1395 on the November.
• 1:16
  SPEAKER_01: So right at the top of the range there on that.
• 1:19
  SPEAKER_01: I would say it we were talking before the podcast here, Jeff.
• 1:22
  SPEAKER_01: It's kind of interesting.
• 1:24
  SPEAKER_01: We're in the middle of harvest, and the biggest talk this week on these grain markets was demand.
• 1:29
  SPEAKER_00: Yeah, I mean I that's got to come back to some degree to the fact that we've we've got such a tight ending stocks ratio on both corn and soybeans, doesn't it?
• 1:42
  SPEAKER_01: A little bit.
• 1:42
  SPEAKER_01: A little bit, because we've talked a little bit more about like soybeans were the big one this week.
• 1:48
  SPEAKER_01: Let's talk about demand there.
• 1:50
  SPEAKER_01: Um the big talking point has been the the crush margins.
• 1:55
  SPEAKER_01: So aside from export concerns going on in soybeans, which we'll get to in a minute, there's been no concerns about crush demand here.
• 2:03
  SPEAKER_01: Um right now it sounds like they're making anywhere from three and a half dollars a bushel to five dollars a bushel for above the cost of soybeans uh on their margins for processors.
• 2:15
  SPEAKER_00: A market that maybe our folks don't watch real closely is that bean oil market.
• 2:20
  SPEAKER_00: Exactly.
• 2:20
  SPEAKER_00: Probably was the most entertaining of the week.
• 2:23
  SPEAKER_00: I mean, that thing had four days of decent upfront month, now over 70 cents again.
• 2:29
  SPEAKER_01: Exactly.
• 2:30
  SPEAKER_01: So with the value of crushed soybeans exceeding the cost of soybeans by over three and a half dollars a bushel, that's really enticing for processors to keep buying soybeans today.
• 2:39
  SPEAKER_01: And you can see it, the processor bids right here in our back door.
• 2:43
  SPEAKER_01: Brewster 35 over, uh, Volga's positive now.
• 2:46
  SPEAKER_01: You've you've seen some really strong soybean bids here at the end of harvest, pretty much.
• 2:52
  SPEAKER_01: So it's just an odd time of the year for them to maybe be making really big pushes.
• 2:56
  SPEAKER_01: And U.S.
• 2:57
  SPEAKER_01: soybean supplies, like you said, they're extremely tight.
• 2:59
  SPEAKER_01: Crush demand's been showing some bullish potential here lately, and uh Nove beans is kind of being supported here in the sideways trend.
• 3:07
  SPEAKER_01: So that demand sector's got talked about a lot here lately on the soybeans, and one of the things that could really help soybeans keep support through this winter if that stays around.
• 3:19
  SPEAKER_01: But the on the other side of things, the export demand is not so good on soybeans.
• 3:24
  SPEAKER_01: We've we've had some really nice sales been made on soybean exports from China specifically.
• 3:30
  SPEAKER_01: They stepped in the market pretty hard again this week, um, kind of meeting expectations there, which we should be seeing at this time of the year.
• 3:38
  SPEAKER_01: Problem can problem still there is the uh low water levels on the river right now are holding up uh shipments out of that area.
• 3:46
  SPEAKER_01: So, for example, you've got them trying to dredge out anything by Memphis, basically, south of the St.
• 3:55
  SPEAKER_01: Louis um St.
• 3:57
  SPEAKER_01: Louis loading area, uh, where where the locks stop essentially, and they've got the exports closed for parts of the day to try to dredge that out, and then the rest of the day they can send ships through.
• 4:10
  SPEAKER_01: So you've got to send smaller ships then, the can be loaded as heavy, uh more 12 footers instead of 14 footers after that point.
• 4:17
  SPEAKER_01: And uh what you're seeing out of that right now is just a getting getting uh we have really tight logistics, right?
• 4:24
  SPEAKER_01: So when you s throw a few things off, all of a sudden we're just all clogged up.
• 4:28
  SPEAKER_01: And that'd be right in the southern side of uh, you know, St.
• 4:32
  SPEAKER_01: Louis on down.
• 4:33
  SPEAKER_01: And uh when we start talking about the impact of that, the rail market's been really big.
• 4:39
  SPEAKER_01: You've seen rail uh freight levels go like two, two, three, four hundred percent up here since this has occurred because now you're sending a lot of grain by rail instead down to like the Gulf in Texas.
• 4:53
  SPEAKER_00: So it's almost becoming more of a financial issue versus you you can get the stuff shipped to where you need it to go, it's just a whole lot more expensive.
• 5:02
  SPEAKER_00: And getting more expensive.
• 5:04
  SPEAKER_01: And it's just harder because you've got to figure out trains now that you weren't expecting and all of that.
• 5:09
  SPEAKER_01: So it uh especially if we have another train uh problem here going forward, which uh still isn't out of the cards yet, it sounds like uh we'll hear more about that in the future.
• 5:19
  SPEAKER_01: But a lot of logistical stuff, uh you saw basis really weaken in the Eastern Corn Belt.
• 5:24
  SPEAKER_01: They had a really big crop too, so it makes sense.
• 5:26
  SPEAKER_01: Um that's been a huge talking point lately on demand for for these grains and corn as well.
• 5:33
  SPEAKER_01: You know, uh we've talked about it a little bit with uh demand on corn.
• 5:37
  SPEAKER_01: Exports have been really slow here so far, keeping a lot in-house, it sounds like uh going forward, uh, especially for this time of the year.
• 5:44
  SPEAKER_01: They're gonna get backed up uh on the corn exports, especially sending anything down the river again.
• 5:50
  SPEAKER_01: And then ethanol, uh, we've got huge stocks and pretty low production yet for this time of the year.
• 5:55
  SPEAKER_01: But it's just funny how we keep talking about demand in the middle of harvesting.
• 5:59
  SPEAKER_00: So in a nut nutshell the uh ex the grain exports on beans and corn for us, Mike.
• 6:06
  SPEAKER_00: You got beans, you got sales.
• 6:10
  SPEAKER_00: Sales are decent, shipments not great.
• 6:12
  SPEAKER_00: Yep.
• 6:13
  SPEAKER_00: Um, and then corn, just everything pretty poor.
• 6:16
  SPEAKER_00: Is that a fair way to describe that?
• 6:19
  SPEAKER_01: Pretty much.
• 6:20
  SPEAKER_01: And I would say the big one on soybeans just going forward is watch Brazil's crop development.
• 6:24
  SPEAKER_01: They're gonna have a huge crop, it sounds like coming in about January, February, March.
• 6:29
  SPEAKER_01: And if they don't get a lot of these beans shipped by that time frame, time's kind of up for the United States on shipping out some uh soybeans because we're a lot more expensive here in the United States than the rest of the world on our grains because of our US dollar.
• 6:42
  SPEAKER_01: So that's gonna finally start hitting us hard.
• 6:45
  SPEAKER_01: How about the cattle on feed, Jeff?
• 6:48
  SPEAKER_01: What did we learn in that today?
• 6:49
  SPEAKER_00: I tell you what, it it it probably uh on face value, you know, is pretty boring.
• 6:53
  SPEAKER_00: We came in just exactly on top of our our pre-report estimates on the cattle on feed.
• 7:00
  SPEAKER_00: But I would tell you that's probably pretty exciting.
• 7:03
  SPEAKER_00: Anybody that's been watching that uh unfold over the past year or so.
• 7:07
  SPEAKER_00: You know, we've come in here uh, I don't know, more times than I can count that uh the cattle on feed placements were supposed to be you know four to eight percent lower than last year, and they would actually come in to be uh pretty much on pace um with a year ago.
• 7:25
  SPEAKER_00: So um I think uh it is pretty exciting, even though we came in as the marketplace was um kind of expecting here.
• 7:34
  SPEAKER_00: We're four percent lower on placements for the month of September compared to last year.
• 7:40
  SPEAKER_00: Uh that puts us about one percent less total on feed.
• 7:45
  SPEAKER_00: So um we've talked about this plenty.
• 7:47
  SPEAKER_00: Anybody that studied the cattle market in the past year or two probably has talked about this plenty too.
• 7:53
  SPEAKER_00: But I think you know, obviously uh this is an excellent indicator to suggest maybe our all of our math isn't um failing us, um, that we can still run a spreadsheet, and you know, we probably are very much uh right on the edge of starting to finally see less cattle.
• 8:13
  SPEAKER_00: Um, you know, there's the one caveat that's still out there, and why I'm a little bit surprised that we did indeed see a reduction in placements here is you know, a continued severe drought uh kind of in the southwest there and and on into that winter wheat country, you know, where it sounds like they're planting wheat um fairly aggressively, but planting it into some pretty dry conditions and not sure uh you know how much emergence and how much pasture we're actually gonna have.
• 8:41
  SPEAKER_00: So that's that's the newest thing that's kind of pushing a few things into the uh feed lot versus going out into pasture.
• 8:48
  SPEAKER_00: But as it sits right now, four percent uh lower than last year on the placements, you know, the the one percent lower inventory values, you know, we kind of take these cattle and feed reports and and you know pencil them in to uh grow them, basically grow them out uh until they're fat and kind of have a placed for graph, if you will.
• 9:10
  SPEAKER_00: Um but uh that it it's pretty consistent with the inventory values, you know.
• 9:14
  SPEAKER_00: Starting here right up front, we're kind of looking at 1% less placed for this October time frame, and and that's holding pretty true right up in through the first uh of next year.
• 9:26
  SPEAKER_00: So I think it's all kind of falling in place to make some sense here.
• 9:31
  SPEAKER_00: Um overall cash cattle activity this week was excellent.
• 9:35
  SPEAKER_00: Uh so maybe another pretty good signal that we're starting to see a few less numbers and and Packers being uh fairly aggressive on getting some cattle bought this week, Mike.
• 9:45
  SPEAKER_01: Awesome.
• 9:46
  SPEAKER_01: Anything you look forward to in the cattle market other than that, Jeff?
• 9:49
  SPEAKER_00: Well, I think uh I think the thing to talk about this week too is the uh meat movement and the demand side of the equation, both on the pork side and on the beef side.
• 10:00
  SPEAKER_01: So both were very active markets this week.
• 10:02
  SPEAKER_00: Yeah, and and the you know, the the pork side you see a lot more back and forth.
• 10:06
  SPEAKER_00: I went and looked it up before uh we put our heads together here, Mike, and I would have expected us to see kind of an improvement week over week on that pork cutout values, but it it's been a lot more uh up one day down than the next type of a thing.
• 10:21
  SPEAKER_00: So we're about flat on the week um on pork cutout.
• 10:25
  SPEAKER_00: Now last week we would have gained some ground over in that front.
• 10:28
  SPEAKER_00: So if you if you do look at a chart um on pork product values, you can definitely see you know, we were trending lower trying to uh get ourselves into those upper 90s type money here two weeks ago to ten days ago, and you know, we're we're definitely able to put a bottom in to start working a little bit higher.
• 10:47
  SPEAKER_00: But you know, over on the beef side of things, and I think these two are related and matter.
• 10:51
  SPEAKER_00: Um, so seasonally for the pork listeners, um seasonally beef would would make a uh a trend higher here going into uh basically holiday buying.
• 11:03
  SPEAKER_00: I think that's somewhat Thanksgiving, that's probably more so Christmas, of course, but a pretty strong tendency for choice meat to trend higher here until about the this first of December.
• 11:14
  SPEAKER_00: Um we were really concerned of whether we were going to see that happen or not.
• 11:19
  SPEAKER_00: The that market, similar to the pork market here two weeks ago, was just continuing to trend lower.
• 11:26
  SPEAKER_00: Um, so really encouraged with this week's activity.
• 11:28
  SPEAKER_00: We got choice meat seven bucks higher on the week, Mike.
• 11:32
  SPEAKER_00: So that's a pretty big win, and probably one of the bigger moves that we've seen on the product values.
• 11:39
  SPEAKER_00: So we're looking forward to, you know, maybe this demand thing isn't all busted up.
• 11:44
  SPEAKER_00: Maybe we can't.
• 11:45
  SPEAKER_01: And that should be a start to a trend, right?
• 11:48
  SPEAKER_01: From a seasonal perspective, that should kind of keep going up.
• 11:51
  SPEAKER_00: Yeah, I I think that I think you know that'll be tell I I don't dare uh jump to that conclusion just because that beef market has disappointed us so many times, right?
• 12:01
  SPEAKER_00: But um definitely be watching that, uh, whether you're on the hog side or on the beef side going forward here, because if we can put together a normal seasonal rally like you're indicating, I think that's uh that's a kind of a big deal in the face of all the um recessionary and money tightening strategies that are out there right now.
• 12:21
  SPEAKER_00: Maybe we're gonna be able to squeeze by here without getting uh um too beat up on some meat demand.
• 12:28
  SPEAKER_01: Well, this will not be the last time we talk about that on any of these podcasts or calls for sure.
• 12:32
  SPEAKER_01: If you need anything, uh you know, please call Jeff or I about the Cattle on Feed Report or any other risk management decisions.
• 12:40
  SPEAKER_01: Uh talk about, you know, should I store the beans, store the corn, should we uh should be selling a little bit here, etc.?
• 12:47
  SPEAKER_01: Please give us a call.
• 12:48
  SPEAKER_01: We'd love to chat and uh we would love to have some interaction.
• 12:51
  SPEAKER_01: Thanks for coming on the show today, Jeff.
• 12:53
  SPEAKER_01: Thank you, Mike.
• 12:55
  SPEAKER_01: And thank you to all our listeners.
• 12:57
  SPEAKER_01: Please reach out to us from our website at professionalagmarketing.com, or check out our newly added hog specific podcast named Hog Market Talk that's released every Thursday.
• 13:08
  SPEAKER_01: Trading commodity futures and options involve substantial risk and loss that is not suitable for all investors.