Latest / CattleUSA Daily / 71: 5/14 Beef Prices Are Soaring—But Could the New World Screwworm Change That?

Transcript

71: 5/14 Beef Prices Are Soaring—But Could the New World Screwworm Change That? · CattleUSA Daily

• 0:00
  Welcome to another episode of the Cattle USA Daily podcast.
• 0:03
  Today we are bringing you guys your weekly market report with
• 0:07
  Dan Gearholt and the Logic AG Marketing team where we partner
• 0:11
  with them with our Cattle USA insurance to bring you guys this
• 0:14
  episode every single week to talk about the markets, the
• 0:17
  feeder cattle market, what we are seeing, the highs, the lows,
• 0:20
  the everything in between. And this week is a week for a
• 0:24
  lot of firsts. As Dan and I discuss on the
• 0:27
  podcast, we are seeing the things with the border where we
• 0:30
  are seeing just some insane highs all across the board and
• 0:34
  some pretty bullish reports that are coming out.
• 0:36
  So let's go ahead and get into this combo with Dan and we're
• 0:40
  going to let him explain everything that is going on in
• 0:43
  the markets. Welcome to the cattle.
• 0:48
  USA Daily Podcast your go to source for the latest.
• 0:51
  Livestock markets, industry insights and the updates shaping
• 0:55
  agriculture today. I'm your host Lauren Moylan, a
• 0:58
  passionate. Advocate for agriculture.
• 1:00
  Here to keep you informed. And connected.
• 1:02
  Now let's dive into today's episode.
• 1:09
  Girl in season Lauren. Let's go.
• 1:12
  Shut up, I love that. Let's go, Beef month.
• 1:20
  Come on. What are you talking about?
• 1:21
  Everybody should know what I'm wearing.
• 1:23
  Yes, this is amazing, right? I love this.
• 1:28
  You love this, you're gonna go buy one, aren't you?
• 1:31
  Yeah, I'm gonna go buy one for my husband.
• 1:33
  We're gonna buy one for myself. And then we can have matching,
• 1:36
  like matching shirts. Absolutely.
• 1:39
  Our weekly podcasts for Beef Month.
• 1:41
  Yep, A nice story about this shirt's debut is I was in a
• 1:48
  pretty big conference down in Florida and it was the end of
• 1:52
  day. We were just going out to hang
• 1:54
  out with some of the big wheels, and I come down in the elevator
• 1:59
  and I'm riding with Shane and Adam, and they're giving me
• 2:03
  shit. Like this is a dressy event,
• 2:06
  right? You can't wear that.
• 2:08
  And I'm like, Oh yeah, watch me. So I wore it.
• 2:12
  We get off the elevator. One of the big cheeses standing
• 2:14
  right there, he just blows up laughing.
• 2:16
  He said I love it, let's go. Yeah, doesn't matter.
• 2:19
  Everybody can relate. That's amazing.
• 2:22
  You can't be mad about a grilling summer shirt.
• 2:26
  You can't. Absolutely not.
• 2:28
  It's grilling. Let's go.
• 2:29
  It's grilling, Susan. Let's go.
• 2:31
  Oh my. Gosh, I love it this.
• 2:35
  I needed this little wake me up 1:30 in the afternoon.
• 2:40
  Well. You got humor to bring me back
• 2:43
  to life. Absolutely, absolutely steak.
• 2:48
  My gosh. Yeah, boy, I thought you'd get a
• 2:51
  kick out of that. I I did.
• 2:53
  Indeed I did. Now there's high expectations
• 2:56
  for the other fits that I'm going to need to start seeing
• 3:00
  weekly or monthly or. Yes, I got to top this.
• 3:04
  That's going to be enough. I am in a AG leadership group.
• 3:09
  It's a two year program with people here in Kansas and we
• 3:11
  have a guy in the group that he buys shirts like that and but he
• 3:16
  he doesn't wear him during the day.
• 3:17
  He'll like change into him in the evening.
• 3:18
  Like after all the people that are sponsors and all that stuff,
• 3:23
  Leaf and he'll change into them and they are.
• 3:25
  Hawaiian shirts. But they're like next level
• 3:28
  Hawaiian shirts and they're all off of TikTok shop, every single
• 3:32
  one of them. So he's spending like $2.00 on
• 3:34
  these matching outfits. And there's like shorts and
• 3:36
  shirts to match and sometimes a bucket hat too.
• 3:39
  And it has become like a whole thing with our group.
• 3:42
  And we're going to Brazil in March.
• 3:44
  And his job is to get the entire group matching full outfits off
• 3:49
  of TikTok Shop. Awesome, yes.
• 3:52
  That give the same vibes as the shirt that you are wearing.
• 3:55
  I'm actually going to send this podcast to him and be like, hey
• 3:58
  Mike, I actually need you to go find these shirts.
• 4:00
  Yep. I need you to find shirts like
• 4:02
  this that have beef on them. Thank you, appreciate it.
• 4:04
  Yep. You are an aggrove.
• 4:06
  Got to represent let. Me write a note here that I got
• 4:09
  to step it up. More shirts.
• 4:11
  More shirts? See.
• 4:13
  Could that be considered a tax write off?
• 4:15
  Can you put that on the company card?
• 4:17
  Everything is a tax write off as long as you're using it.
• 4:20
  Exactly, exactly. I like that mentality.
• 4:23
  So look at that. It's just a tax write off.
• 4:25
  I am not a professional tax accountant so do not use what I
• 4:29
  just said not. Take our advice seriously,
• 4:31
  because we actually don't know what we're doing.
• 4:34
  I send. Everything to my tax person and
• 4:36
  I say write off what you can. Let me know how much I owe the
• 4:39
  government this month. Exactly.
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  Exactly. Who wrong?
• 4:45
  Well, markets. Unreal.
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  Unbelievably real. Unreal.
• 4:51
  Uh huh. Yes.
• 4:54
  Wow, Old Brooker Allen surprised us with that one.
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  Yeah, big gap in the feeder cattle thrown in yesterday
• 5:02
  morning when we opened up close the thing, you know, up 6 bucks
• 5:06
  on its highs. Unbelievable.
• 5:08
  I'm just I'm trying to figure out what other bullish news they
• 5:11
  can throw at this market, right. It's beef month.
• 5:13
  You got 350 boxes or not quite. We're trying today.
• 5:18
  We'll see if we can close it at 3:50.
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  But I'm optimistic we're going to we're going to hit that
• 5:23
  target and hopefully breakthrough it if we can hold
• 5:26
  the demand. Yeah, cash feeders in the barns
• 5:29
  are just unbelievable. I mean, every day I pick up the
• 5:33
  phone and talk to different guys and well, what'd you buy?
• 5:35
  This and that every day it seems like it's a new record high for
• 5:40
  every single weight class. I mean, it's, it's not like it's
• 5:43
  just yearlings or just stairs. It's all of them.
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  They're all crazy. I mean, pick your number, throw
• 5:50
  it out there. You might get it if you're, if
• 5:52
  you're selling cash feeders right now.
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  Same with fat cattle. I mean, you know, $20 on the
• 5:58
  cash back cattle market in three weeks.
• 6:00
  I've seen a lot, but I hadn't seen that yet.
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  So this is and you know, normally I would say we're about
• 6:06
  peaked out. It's still it has room to go if
• 6:09
  producers want to play hardball. Some of the Packers have some
• 6:12
  inventory, not all of them. So they're still going to have
• 6:16
  to be in the market today or this week.
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  So anybody's guess. You got abnormally wide positive
• 6:21
  basis. You know the deeper we get into
• 6:24
  May, the more that basis is supposed to narrow up, you know
• 6:27
  14-12 dollars whatever depending where you're at.
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  It's still wider than it normally is.
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  So a lot of, a lot of first for me going on in the market right
• 6:38
  now. Another one I just caught a
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  yesterday or today was there's a $96 spread, sorry, a $96 spread
• 6:46
  between August feeder cattle and February fats 4%.
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  If you. Go back to the let's just use
• 6:54
  the 26th through 2019 period. That spread very casually hung
• 7:00
  out around 30 bucks. When you get above 40, you'd
• 7:04
  start selling the spread, you know, a $96 spread.
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  Obviously, it goes without saying that none of these fat
• 7:12
  cattle pencil on paper haven't for a while.
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  But at some point, wow, you just sit here and scratch your head
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  because you're setting every kind of record every day.
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  It's just, what a time to be alive, Lauren.
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  What? A time to be alive.
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  What a time. Did you really think that, like
• 7:31
  going into this year that you'd be like, oh, we're scratching
• 7:33
  that off the bingo card. Oh, we're scratching that off
• 7:35
  the bingo card. Oh, I didn't even have that one
• 7:37
  on the bingo card, but here we are.
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  Never dreamed of any of it. I never did.
• 7:43
  I I bought some yearlings last year that I swore up and down I
• 7:46
  was going to lose money on them. Nope.
• 7:48
  Happy man right now. Few 100 bucks a head, profitable
• 7:51
  and you know on to the next turn.
• 7:54
  Yeah. I swear, the ones we're buying
• 7:56
  right now are probably going to lose money again.
• 7:59
  If they make 300 bucks a head, we're going to have two 4250 fat
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  cattle. Do I anticipate that?
• 8:05
  No. Is it possible?
• 8:06
  Anything is possible. But yeah, what a time to be
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  alive. What a time, what a time.
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  So on Brooke Rollins announcement and the border
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  shutting back down, can you explain what that could be
• 8:20
  potentially doing to the markets and specifically what it did
• 8:24
  already on your last report and that gap that you're talking
• 8:27
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• 8:58
  So Long story short, if you look back at what we import from
• 9:02
  Mexico on an annual basis, you're usually in that, you
• 9:05
  know, 1.21.31.4 million head of cattle annually from Mexico.
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  Obviously with January and December, you know, being shut
• 9:14
  down, that dropped it. They opened it back up.
• 9:17
  The numbers were not, the cattle weren't flying across the
• 9:19
  border, you know, they were, they were slow.
• 9:22
  There's inspection points now where they're having to check
• 9:24
  cattle for the screw worm. But Long story short, you know,
• 9:28
  I, I talked to a guy down close to the border.
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  He said that rumor has it that every time they find another
• 9:35
  screw worm, they're going to shut the border down for another
• 9:37
  month. If that's the case, and the fact
• 9:39
  that screw worms probably not going to go away that easy,
• 9:43
  we're probably going to see this open up, shut down, open up
• 9:46
  repeatedly throughout the year. And there's a lot of speculation
• 9:49
  out there right now that, you know, the screw worm might be in
• 9:53
  the southern states of the US already.
• 9:56
  I don't know if that's the case. It might be an announcement
• 9:58
  coming, who knows. But if that's the case, it's a
• 10:02
  pest that, you know, we don't want to see over here.
• 10:05
  It can cost our industry huge, but nonetheless, it is close to
• 10:09
  that border and it's getting closer by the day.
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  It goes without saying that there's also wildlife beyond
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  just cattle that are Criss crossing the border that can
• 10:20
  carry this as well. So I'm, I'm a little concerned
• 10:24
  that I think it inevitably does end up here.
• 10:27
  So if we look at at last year, you know, the first quarter of
• 10:30
  2024, we imported 320 some thousand head of feeder cattle
• 10:35
  from Mexico, OK, they're going either out on wheat, they're
• 10:38
  going out grazing, you know, summer grasses or they're going
• 10:43
  to feed yards. If you look at the first quarter
• 10:45
  of this year, we're at 96,000, that's pretty close to 30% of
• 10:50
  the numbers we did last year. So we were already down, you
• 10:53
  know, not only because January would we were mostly shut down,
• 10:56
  but also because our numbers were so low in in February and
• 10:59
  March. Now if you continue that path
• 11:01
  where you open, shut, open, shut and we don't see those big runs
• 11:05
  of feeder cattle crossing, that's a big problem because now
• 11:09
  instead of importing 1.2 to 1.4 million out of feeders, we might
• 11:13
  only get to the point where we only import 400,000 or 500,000.
• 11:18
  You know, if we if we get to even half of what we normally
• 11:22
  do, that's a 600,000 head a year drop somebody sitting empty down
• 11:27
  South because that's where those cattle are fed.
• 11:29
  So what do they do if they still want to participate in the
• 11:32
  market? They're going east, you know
• 11:34
  they're coming N they're trying to find those cattle anywhere
• 11:36
  they can. That's one thing I'm catching
• 11:40
  right now. Some of your southern yards are
• 11:42
  going east, while a lot of your, you know, like where I'm from,
• 11:45
  will feed western cattle, will feed eastern cattle, will feed
• 11:48
  southern cattle. We're finding that some of these
• 11:51
  eastern cattle are high enough where they're catching up to
• 11:54
  what the value of the westerns are.
• 11:56
  Well, that's because there's more competition coming from
• 11:59
  those southern yards out east. So now we're having to shift our
• 12:02
  game plan it today's or not today, but if you look at the
• 12:07
  feeder Cattle index, which settles LRP and also settles
• 12:12
  futures, today is the first day since, I apologize, not today's
• 12:17
  quote, but feeder cattle on the 12th.
• 12:19
  So yesterday's feeder Cattle Index price was the first time
• 12:23
  we broke that $300.00 mark. We're a three O 1 and I'm seeing
• 12:28
  the cattle from Oklahoma City all the way up north still going
• 12:32
  up in price and not softening. What does that mean?
• 12:35
  So we start looking out at these deferreds, the August board
• 12:37
  three O 6, you know, further out beyond that, are we going to see
• 12:41
  a reduction or a softening in price to where we see that
• 12:45
  feeder cattle index start dropping?
• 12:48
  Well, eventually when numbers get tight, it you know, or
• 12:50
  sorry, when numbers get higher available numbers, that index
• 12:54
  should drop. Right now the demand is so
• 12:57
  strong, even if numbers were huge, I don't think it'd drop a
• 13:00
  lot. When is the when is that demand
• 13:02
  going to stop? Tell me when the feed yard start
• 13:04
  losing money and I'll tell you when that feeder cattle index is
• 13:06
  going to drop. So when it comes back to the gap
• 13:08
  we left on the chart, all that can either be an extension gap,
• 13:12
  meaning this market's undervalued, and we're just
• 13:15
  going to go to the, I guess we're already at the moon when
• 13:17
  maybe we go to Mars, Jupiter on whatever planet.
• 13:20
  But is that an extension gap, meaning the market's still going
• 13:23
  to go higher? Or is that an exhaustion gap?
• 13:26
  So when I talk about an exhaustion gap, is the market
• 13:29
  tired? Are the hedgers finally blown
• 13:31
  out of their hedges, thrown in the towel and the market gap
• 13:34
  tire on big news. Well, when I look at open
• 13:37
  interest, that shows me the amount of contracts traded in
• 13:40
  the futures market, feeder cattle, open interest is still
• 13:43
  rising. So we're still bringing new
• 13:45
  buyers into the market. That's a strong market, a
• 13:49
  healthy market. When I look at the fat cattle
• 13:51
  board, open interest dropped in the last two days.
• 13:55
  You know, I think like 7000 contracts, they gapped higher
• 13:59
  yesterday as well. That's an exhausting gap.
• 14:01
  So fat cattle are getting exhausted at these levels, but
• 14:04
  feeder cattle seem like they want to keep going.
• 14:07
  What happens? Flip a coin if you tell me what
• 14:10
  you think and I'll probably start trading it.
• 14:12
  That makes. Sense, excuse me, I think the do
• 14:14
  you think that this situation, if we're going to be seeing an
• 14:17
  opening and closing of the border for the rest of the year,
• 14:20
  we're obviously not going to be reaching those numbers that we
• 14:23
  had last year. It's not going to happen.
• 14:25
  Are we going to start looking into other markets to fill that
• 14:29
  gap or are we just going to be in a high demand year
• 14:33
  personally? And I think a high demand year,
• 14:35
  I mean you know, you start importing feeder cattle out of
• 14:38
  other countries, I'm sorry, Canada is another one where we
• 14:41
  don't normally import a lot of calves to get placed into feed
• 14:44
  yards. If you look at the first quarter
• 14:47
  out of Canada compared to the first quarter of last year,
• 14:49
  we're almost double. So we've got a few more cattle
• 14:52
  coming feeders to go on feed coming out of Canada, but that I
• 14:55
  don't, I don't think that we stayed double there to make up
• 14:58
  for the the drop in Mexico. I think that's just our first
• 15:01
  quarter because of our markets. Personally, I think it's just
• 15:04
  tight supplies, high demand. I don't think we're going to
• 15:07
  load boats out of Australia and out of South America like crazy
• 15:10
  and start pounding these things into our ports to place on feed.
• 15:14
  I guess it's a year of first everywhere.
• 15:16
  So maybe it's possible but not expecting it.
• 15:19
  I think you're just going to see some very, very resilient
• 15:21
  prices. Until we start seeing, you know,
• 15:25
  some outside factor making beef demand drop, making fat kettle
• 15:29
  prices drop, you're just going to have high-priced cabs.
• 15:32
  That makes sense. Anything else within the market?
• 15:35
  We've had a little bit of a crazy week.
• 15:36
  We spent some time talking about the southern border and
• 15:39
  everything that's going on there.
• 15:40
  But anything else that we need to head on for the craziness
• 15:44
  that we've been seeing or anything that we're looking at
• 15:46
  for the future? LRP gave us this opportunity up
• 15:50
  above 3 bucks, you know, after premium, you can set a floor at
• 15:53
  $3. I'm I'm not waiting.
• 15:56
  I'm pulling the trigger now. I just, I know I just said that
• 15:59
  this market could stay strong all year, but it just takes 1
• 16:03
  hiccup somewhere and all of a sudden we're losing a lot of
• 16:06
  money on these calves. These turn out cattle, they're
• 16:09
  all high price, you know, bowling calves at £600 worth 20,
• 16:12
  four, 2500 bucks a head. It's unreal.
• 16:15
  I mean, yeah, you could buy a house right now for what single
• 16:20
  load of feeder cattle costs. It's just remarkable.
• 16:24
  Love seeing it. Another thing, I had a corn
• 16:27
  report yesterday. I should say all grain report
• 16:30
  had some bullish numbers come out, but the market still
• 16:33
  trended lower today. Personally, I think that's just
• 16:35
  a money flow problem. Equities are shooting higher
• 16:38
  with this potential trade deal getting sorted out with China.
• 16:41
  So with equities going higher, money flows away from grains.
• 16:45
  It's just very common for those two to move inversely.
• 16:49
  As soon as you get into, I would say late May and we really start
• 16:53
  trading some of these weather markets.
• 16:54
  We're experiencing dryness out West, sloppy wet E Eastern Corn
• 16:59
  belt. I think the corn market really
• 17:01
  has a chance to pop here if that, that those type of weather
• 17:04
  issues persist. So I'm I'm buying corn.
• 17:08
  I told myself if it gets any cheaper, I'm just going to keep
• 17:11
  on buying. We'll see how that works out in
• 17:13
  the long run, but that's the plan.
• 17:14
  Perfect awesome awesome. And as always we have that LRP
• 17:18
  insurance link link down in the show notes for you guys to go
• 17:20
  check it out. Again, like Dan said it's better
• 17:23
  to just have your butts covered and not need it then be talking
• 17:27
  to us in two months and say well shit I wish I would have grabbed
• 17:30
  it when I was at 3 bucks. So as always go check that out
• 17:34
  and we will. Thanks.
• 17:36
  Thanks for listening to another episode.
• 17:38
  I hope if you guys enjoyed Dan's outfit, I'm going to need y'all
• 17:40
  to let us know so that we can hype him up for bringing some
• 17:45
  more fits to the show. Yes 1000% it's grilling season,
• 17:50
  it's beef month. It's a great time to be doing
• 17:53
  it. I think I'm going to need to go
• 17:55
  Amazon or TikTok shop it up and go find myself something to one
• 17:58
  up this because I I just, I feel so boring over here and just my
• 18:02
  red, but you know, it's fine. But anywho, as always, thank you
• 18:06
  to all of our listeners for listening to Dana and I's
• 18:09
  conversation today and we will see you all tomorrow on another
• 18:12
  episode. Have a good one y'all.