Latest / CattleUSA Daily / 119: Hot Weather, Hot Prices, and a Market That Won't Sit Still with Dan Gerhold

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119: Hot Weather, Hot Prices, and a Market That Won't Sit Still with Dan Gerhold · CattleUSA Daily

• 0:00
  Welcome back to another episode of the Cattle USA Daily podcast.
• 0:03
  Today we are welcoming back Dan Gearhold with the Cattle USA
• 0:07
  insurance team and we are talking all things markets
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  today. What is going on in the world
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  just from all standpoints. We are talking everything from
• 0:17
  kill numbers IT to the Catalan feed report to just everything
• 0:21
  else in between today, guys, there's a lot to cover and we
• 0:24
  cover a lot in 20 minutes. So without further ado, let's go
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  ahead and get in this episode with Dan and here it straight
• 0:30
  from him. Welcome to the Cattle USA Daily
• 0:35
  podcast, your go to source for the latest livestock markets,
• 0:39
  industry insights and the updates shaping agriculture
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  today. I'm your host, Lauren Moylan, a
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  passionate advocate for agriculture here to keep you
• 0:47
  informed and connected. Now let's dive into today's
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  episode. Dan, welcome back to the
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  podcast. How is everything?
• 0:59
  What's going on in the world? Like it's good, hotter than
• 1:03
  Hades, but life is good new it's.
• 1:06
  Hotter than Hades? It's.
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  Humid. I don't know if Hades is hot and
• 1:10
  humid, but it's both so. Absolutely.
• 1:13
  Yeah, it's pretty brutal hitting pretty much large portion of of
• 1:17
  well I would say all the feeding region, you know, from Texas all
• 1:21
  the way up, you know yeah, it's, it's hot all the way up.
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  I mean up here in eastern Iowa, 99% humidity and knocking on
• 1:29
  100°. So it's going to be pretty
• 1:31
  brutal. Could see might cause a little
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  bit of damage to the corn crop not not a massive amount, but
• 1:38
  might some guys might see the top under the yield taking off
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  the way it's going to be like this for the next 7 days cattle
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  feeding regions, cattle feeders, you know, feed yards are going
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  to be fighting like hell just to keep cattle alive over the next
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  seven days since we're not going to cool down at night.
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  It's it's something we're all accustomed to, but nonetheless,
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  it's not going to be enjoyable. Just a couple years ago we had
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  some major, major death loss was it Kansas, Nebraska, there was
• 2:04
  no wind major humidity, just freak deal just killed a pile of
• 2:09
  cattle. I'm hoping we can squeak by
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  maybe have some breezes to keep that away.
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  But yeah, that's that's for the weather man to talk about, not
• 2:17
  me. Got a?
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  Lot of what's happening in the markets.
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  Every day seems like we want to set set some new record highs,
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  especially in the feeder cattle market.
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  Just been absolutely on fire, justifiably so with what cash
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  feeders are bringing. Yesterday I was on the phone
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  with an order buyer and trying to get some some heavy 7 light 8
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  weights bought. Oh my unbelievable.
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  You can, you can see these things bringing this kind of
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  money compared to where we were just, you know, 345 years ago or
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  even just last year. You know how, how much they've
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  rallied. I mean, I looked at the August
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  feeder cattle chart. Lauren, I got to pull this back
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  up to give you exact numbers because this is pretty
• 2:58
  remarkable. So when August feeders were
• 3:02
  listed, the listing price back on August 29th of 2024 was
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  24220. Yesterday our high was 29 O 7.
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  It is unbelievable. We are knocking on putting $100
• 3:20
  on that contract in the last year.
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  I I don't think that's ever happened.
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  I mean add the third of the value in in a year's time.
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  Nobody saw it coming. Otherwise, I think everybody and
• 3:33
  their brother would have been long for this thing.
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  Likely then it probably wouldn't have happened.
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  But nonetheless, that is a remarkable rally.
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  Like I said, very, very justifiable given what these
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  fears are being. Seeing those 8 weights knocking
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  on 350 and you know, upper 8 weights 340, you're seeing 9
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  weights 3/23/30. You know, 10 weights are, are
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  now in the teens, three teens. Just mind blowing.
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  I think everybody's hoping it kind of cools down a little bit
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  except for of course, the guys selling, but nonetheless, either
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  buybacks going to be high too. You know, when they look at the
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  next next turn, they've got to load up with, you know, seeing
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  those five and six weight, 5 weights bringing 4 plus.
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  I think I saw there's some mid five ways bring 4/4 and 1/2
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  video sale season out West. So a lot of stuff getting sold
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  for forward delivery, September, October, November delivery, it's
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  kind of wild. You know, people really believe
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  in this bull market hanging around.
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  I don't blame them. They a big part of it is the
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  demand factor. Demand has just done
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  outstanding. So you've had a normal dog days
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  of summer correction here in the beef market.
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  But at the end of the day, we can hold.
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  I said if we could hold 3:55, we'd be comfortable.
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  And here we are, you know, kind of sold out at 370.
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  So maybe once we get past these, these next 4560 days and we
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  could start seeing it put some money back on that beef market.
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  That tariff talk resuming, I would assume late this week,
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  next week, August 1st, the deadline.
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  I was happy to see we, we made an agreement with Japan.
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  So pretty excited. They're a big partner when it
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  comes to the beef business. So hopefully they're going to be
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  willing to buy some beef at these high prices.
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  Overall, there's there's some good things happening in the
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  industry. We've got the tariffs, some
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  added tariffs on Brazil, so that could help slow down the imports
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  a little bit, which would be positive.
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  You know, I think we're running about 9 or 10% higher year over
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  year on beef imports. So don't want to see that, you
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  know that it does nothing to help us when we're important
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  beef. But at the end of the day, when
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  our cow slaughter has been this low, we're not going to make
• 5:43
  enough burger for the amount that Americans consume.
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  So it's kind of one of those deals.
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  I, I don't like it, but it's just part of the industry
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  overall. Like I said, we get past these
• 5:54
  next 60 days. I'm, I'm hopeful RPS can respond
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  and start moving higher. Retailers got some margin back,
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  especially on the states. Good to see them make a little
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  bit of money. You know, everybody gets their
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  turn in this industry. So what I don't want to see is I
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  don't know if you remember, it would have been last early last
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  year. It was an absolute bloodbath in
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  the hog market That was caused by a big part of it was caused
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  by the retailer. So Long story short, wholesale
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  pork prices dropped as they should have going into fall and
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  winter. Retailers improved their
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  margins, but they held their their retail prices, especially
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  on bacon. So they were charging, I believe
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  it was 5 1/2 to 6 1/2, seven bucks a pound on on bacon.
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  They didn't let that go. Bacon wholesale prices were
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  falling apart. The retailers were taking
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  advantage of it to make money. Like I said, everybody gets
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  their turn, but at the end of the day, it really slowed that
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  consumption. So it, it did cause a backup.
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  I don't want to see that happen here with steaks.
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  You know, these retailers, you know, if you've been to the to
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  the grocery store, 2425 bucks a pound for rib eye steak, maybe
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  more it, it's not costing them that.
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  So it's that time of year where they don't move a lot of those
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  high end steaks, but inevitably they've got some improved
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  margins here to work with for the next 4560 days.
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  Hopefully we don't completely crush demand with that 20 plus
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  dollar state, you know, getting thrown at the grocery counter.
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  So I'd like to see that, you know it, You just got to be
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  patient. It's just that time of year, you
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  got to be patient, be optimistic.
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  It's hard for me to get bearish, you know, third, fourth quarter,
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  especially during the middle of the summer when people aren't
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  grilling a lot of steak, They're not growing much of anything
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  other than hot dogs, grass burgers.
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  So, yeah, just kind of in limbo sitting waiting for that.
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  Other than that, I mean, it's cash.
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  Last week, I guess I would call a little disappointing.
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  It wasn't drastically lower by any means, but it was mostly
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  steady. I thought we had a chance to be
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  a buck or two higher. But inevitably, hackers weren't
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  interested in buying a bunch of inventory, you know, coming into
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  the seat. So the fact we held steady is
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  good. The question is, what are we
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  going to do this week? You know, it's really counting
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  for for feed yards to want more money going through this heat
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  because the shrink is so high. You know, their, their way UPS
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  are going to be horrible. If if they sell this, we can
• 8:21
  ship next week. So I'd like to see feed yards
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  hold out, maybe wait another week.
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  It might get us closer to the knife than what we are right
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  now. And inevitably, you know, we
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  could start working this thing higher once we get past the
• 8:35
  seat. But at the same time, I remind
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  myself 45 to 60 days of the dog days of summer left.
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  So we've got to be a little patient there.
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  Yeah, just got to keep push and make it through August.
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  The light is at the end of the tunnel.
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  Once September 1st hits, we're all going to be partying and
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  it's going to be great. We just got to make it through
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  August because unfortunately the way that just like weather has
• 8:56
  shifted over our lifetime, it used to be like August was kind
• 9:01
  of like mid August was the start of fall.
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  Right now it's like definitely the last week of August, end of
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  August, you're maybe starting to get a glimpse of fall.
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  So yes, I going back to box beef prices, I think like my one
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  concern right now is I think we're finally starting to see a
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  consumer population that is noticing the big shift in their
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  prices as far as like what is on the counter for them and what is
• 9:29
  available to them. I know I had a friend this week
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  do an interview with CNN about beef prices and what it is.
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  So we're seeing our major news networks are picking it up.
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  And I'm just, I don't want that to be something that our
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  consumers are then like now really noticing and like, Oh my
• 9:46
  gosh, I heard on the news, beef is so expensive.
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  And then now they're like not purchasing beef, right?
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  Because it's one of those things, sometimes you can like
• 9:54
  skate by and a few dollar changes every once in a while
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  can, can be fine and people aren't really going to notice
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  like you're still going to purchase it.
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  But then when everyone starts talking about it, it's like, OK,
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  well, we, we can't get away with this anymore.
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  So it's like we've talked about a million times.
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  It's playing that balance because everyone needs their
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  share within that dollar at different points in time.
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  But it is playing that very, very tricky pendulum of demand
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  versus cost and everything that we're going through right now.
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  Absolutely, yeah. The retailers, like I said,
• 10:27
  their it's their turn here. You know, this time of year it's
• 10:29
  normal for them to make money. As you get into, you know,
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  September, October, it's pretty normal for the Packers to make
• 10:35
  some money, you know, and, and they need to, you know, because
• 10:39
  it's that late fourth quarter, you know, and early second
• 10:42
  quarter, they typically don't make a lot of money.
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  So they need to make a little money.
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  Right now. The Packers margins are really
• 10:48
  tight and that's why you're not seeing a high kill number.
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  They don't want to be aggressive, fight for the cattle
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  and and make their margins worse.
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  So inevitably, when it comes down to the to the actual
• 10:58
  livestock producers, the biggest number for us to watch is that
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  kill number. You know, it's all about that
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  slaughter Yesterday I was very, very disappointed in that
• 11:06
  slaughter number, but at the same time, I got to remind
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  myself, hey, we're in the dog days of summer.
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  Boxes are slowed down, but it and a big part of that could
• 11:15
  have been the heat. You know, guys aren't willing to
• 11:18
  push the envelope in these packing houses.
• 11:20
  So it's, you know, you got to be patient, you got to be
• 11:25
  optimistic. But there's definitely some
• 11:28
  cause for concern, You know, watching the reef, watching the
• 11:31
  consumer notice how expensive beep is.
• 11:34
  So it's, it's nearly every day somebody picks up the phone and
• 11:37
  tells me they bought pork loin for, you know, under $2.00 a
• 11:39
  pound. And like, yeah, yeah, I I
• 11:42
  understand. But let's not forget, let's not
• 11:46
  forget our rib eyes and our T bones and come back eventually.
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  Yeah, it's that time of year. Yeah, go give our pork producers
• 11:54
  some love. That's fine.
• 11:55
  You're still eating an animal product.
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  But don't forget about us. Just just come on back.
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  We, we would love to have you in, you know, 45 days again when
• 12:05
  you're ready to start purchasing beef and we're out of the dog
• 12:07
  days of summer and maybe there's some sales going.
• 12:10
  I don't know. I don't care.
• 12:11
  Just just come on back. We we would love to have you
• 12:13
  still. Yeah, absolutely.
• 12:16
  You know, and the other thing I'm watching right now, and
• 12:18
  it's, it's partly due to seasonals, you know, cow
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  slaughter has been running low this year.
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  Cow prices are high. Obviously.
• 12:26
  You know, we don't like I mentioned, we're not making
• 12:28
  enough hamburger in this country.
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  At the same time, the rancher is pretty profitable.
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  So what are they going to do if that calf, if that cow is bred?
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  Let's hold on to her. She might, you know, have a bad
• 12:38
  quarter, but she she can still raise, you know, a 1800 to $2500
• 12:43
  calf for one more use. So until we get into fall, I
• 12:46
  don't expect to see anything just completely full out of bed
• 12:50
  when it comes to fat cattle or coal cow prices.
• 12:53
  You know, you start getting into this fall.
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  If we see a big slug of coal cows come to the market, that's
• 12:58
  going to change things possibly, you know, in that September,
• 13:01
  October market. But overall, there's also plenty
• 13:04
  of reasons to be pretty bullish. You got big cattle on feed
• 13:07
  report this Friday. You also have your biannual all
• 13:11
  cattle inventory report, early estimates, all cattle report is
• 13:16
  pretty blah. Nothing really.
• 13:20
  We're not expecting, you know, reductions in the coward size.
• 13:24
  The only surprise there I thought was odd is analysts are
• 13:28
  thinking we're going to see an increase in the very herd, but I
• 13:30
  don't believe it. I think it probably just stays
• 13:35
  the same. The Catalan feed report, no big
• 13:38
  surprise. One disappointing thing is we
• 13:41
  have an extra slaughter day compared to last year and our
• 13:45
  marketing number is expected to be lower than last year even
• 13:48
  with that extra marketing day. So that's not bullish by any
• 13:50
  means. But placements are still down
• 13:52
  and continue to drop. You know, especially as we get
• 13:55
  into the next Catalan feed report, eventually they're not
• 13:58
  going to have a choice. They're going to have to report
• 14:00
  the lower placements, lower on feed numbers because the cattle
• 14:03
  aren't there. They can't just keep coming up
• 14:05
  with them. Mexico borders still shut down.
• 14:08
  You know, we're, we're seeing feed prices reflect that.
• 14:12
  Eventually they're going to have to probably go back and revise
• 14:15
  some numbers. But inevitably, at the end of
• 14:17
  the day, the market's telling us how many cattle are on feed.
• 14:20
  Yeah, 100% it. It's definitely been reflected.
• 14:23
  Everything that the cattle market has gone through over the
• 14:25
  past six months to a year has is being reflected now and we're
• 14:30
  going to continue to see that. And unfortunately all of the
• 14:33
  situations that we're going through this year there, we're
• 14:35
  not going to see just like a nice little trickle down where
• 14:37
  we're going to see the effects continue to be affected for
• 14:41
  multiple months. We know how long cattle are on
• 14:44
  feed. If we're not getting feeders
• 14:45
  right now from Mexico and we're not supplying that early part of
• 14:49
  the supply, we're going to see those effects come into play
• 14:52
  especially in the winter and into next spring and everything
• 14:55
  that that's going to look like. So definitely something to keep
• 14:58
  our eyes on. And like you said, the market,
• 15:00
  the markets tell the truth. The markets are the Catalan feed
• 15:04
  report may be able to hide a little bit of it right now.
• 15:07
  It's not going to be able to forever, but the markets tell
• 15:09
  the truth and we're able to watch those and get our insight
• 15:13
  there. So any other highs, lows,
• 15:15
  anything else we need to touch on today, Dan?
• 15:17
  You know, grains have kind of once again been struggling here
• 15:19
  for a while. A lot of eyes on corn and wheat.
• 15:22
  Grains really need a bounce back.
• 15:25
  You know, we had some short recovering by the funds I
• 15:28
  believe. Was it last week or the week?
• 15:31
  Yeah, it was last week. But inevitably we failed to do
• 15:35
  anything with it. You know, when I when I speak to
• 15:38
  that, you're looking at moving averages in the fact we couldn't
• 15:40
  break, you're looking at overall downtrend and the fact we
• 15:43
  couldn't break that downtrend. You know, at the moment it seems
• 15:47
  like path of leaf resistance is lower.
• 15:49
  Inevitably you're you're in a seasonal buy time for wheat.
• 15:53
  Corn is just Co hum typically a seasonal sell here and it's hard
• 15:57
  to sell it this low because it's below produces cost production.
• 16:01
  There's a lot of corn. Corn looks great field pretty
• 16:04
  much everywhere. You know all the top talking
• 16:06
  tassel wrap and you know there's a dry pocket here there a wet
• 16:11
  pocket here and there. Inevitably the corn looks great
• 16:14
  from the road. I think that's what trigger
• 16:16
  you're going to trade. And so we actually see some
• 16:17
  pound mine rolling in the field and get some yield data closer
• 16:20
  we get, I should say, the closer we get or possibly lower if we
• 16:26
  could get December corn, you know, to bounce down to that 4
• 16:29
  bucks. I think it's a good time for
• 16:31
  feed lots backgrounders to book some feed needs.
• 16:36
  All your other feed needs are super, super cheap.
• 16:39
  Lots of hay. After this week's rainy spell,
• 16:41
  there's going to be a lot of grinding hay for these feed
• 16:43
  yards. You know, distillers, wet gluten
• 16:47
  cake, soybean mail, all of that super, super cheap.
• 16:51
  So it's kind of, it's good to see cattle producers are getting
• 16:55
  their turn with cheap feeding, high prices, very much deserved,
• 16:58
  deserved. But inevitably there's still
• 17:01
  risk to managing the other direction as well, not just
• 17:04
  against the down in the cattle, but also in the up in the grain.
• 17:06
  So you're looking for that? Yeah.
• 17:09
  For sure. How are LRP rates looking?
• 17:11
  Yeah, they've been expensive. There was a week there where
• 17:14
  they got relatively cheap, but they've ramped back up.
• 17:18
  You know, we've talked before Lauren, that LRP it, it's
• 17:21
  similar to a put option. It's not the same per SE, but
• 17:25
  it's close. But when you look at the
• 17:27
  volatility in this market and the fact that it's set new all
• 17:30
  time record highs, you know, 2-3 four days in a row, these LRPS
• 17:34
  are going to be expensive. If you want to step into a, you
• 17:37
  know, a steer contract and go up and LRP, you know, your, your
• 17:41
  spring cash crop for February, March delivery is a yearling.
• 17:45
  You know you're going to spend 1011 bucks under not cheap.
• 17:49
  At the same time you're also insuring, you know, 3/13, 3:15
• 17:54
  you know, come on guys, that 60-70 bucks a head is not so bad
• 17:59
  when you're insuring 25 twenty $800 a head.
• 18:04
  Just that's it's what I'm trying to say is it's very warranted
• 18:09
  that these LRPS are expensive. We can't deny that when I come
• 18:12
  in and compare to a put option, you know, that put's going to
• 18:15
  run you 1213 bucks. So it's still more expensive
• 18:18
  than your LRPS Inevitably, I think it's a great time.
• 18:22
  I mean, when you're you're setting new all time highs.
• 18:24
  We're always believers in rewarding the rally and step in
• 18:27
  add coverage, you know, keep moving your coverage up.
• 18:31
  Inevitably this market's going to pull the rug out someday and
• 18:34
  nobody's going to catch it. There's there might not be a
• 18:37
  massive warning sign. These rallies don't always have
• 18:39
  to end on a big Black Swan telling you it's the party's
• 18:42
  over, we're not going to have a party and say, see you later,
• 18:45
  bull market. It's just reward this market.
• 18:48
  Let's get some coverage in place.
• 18:50
  Absolutely perfect. Perfect.
• 18:51
  Well, Dan, as always, thank you for your time today.
• 18:54
  We appreciate it as always and you're sharing some of your
• 18:56
  insight and knowledge and everything like that.
• 18:58
  To all of our listeners out there, make sure that you check
• 19:01
  out those show notes where we have that link where you guys
• 19:04
  can go check out our Cattle USA insurance and see all of the
• 19:08
  current rates and everything that we are offering as a team
• 19:11
  between Cattle USA and Dan and his team team over there as
• 19:14
  well. So make sure you check out those
• 19:16
  show notes and as always like subscribe rate review.
• 19:19
  We appreciate it all here at the team and we will see you all
• 19:22
  tomorrow on another episode. Have a good one y'all.