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Bird Flu · 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.
• 0:23
  SPEAKER_01: Today is April 5th.
• 0:24
  SPEAKER_01: I've got Jeff here with us today.
• 0:26
  SPEAKER_01: How's it going, Jeff?
• 0:27
  SPEAKER_00: You know, it's going pretty good, I think, Mike.
• 0:30
  SPEAKER_00: It's been a it's been an interesting week when you think about the livestock markets, that's for sure.
• 0:36
  SPEAKER_01: Doesn't cut it, does it?
• 0:37
  SPEAKER_01: Uh we started the week out how we ended it here.
• 0:41
  SPEAKER_01: We were down about 380 on the June today.
• 0:44
  SPEAKER_01: That puts you at 172 on the fat cattle.
• 0:47
  SPEAKER_01: On Monday there, we were down about 492 and a half.
• 0:51
  SPEAKER_01: So in between here and there, we had some flat days, but uh some pretty rough trade overall this week, Jeff.
• 0:58
  SPEAKER_00: Yeah, the week before, the Monday before that, um, we would have been putting pretty well new highs in, you know, in that 186 area.
• 1:07
  SPEAKER_00: So now we're talking about 14 bucks off the highs on most of these cattle futures.
• 1:12
  SPEAKER_01: Can you tell me why?
• 1:13
  SPEAKER_00: We got lots of reasons, I guess.
• 1:16
  SPEAKER_01: Um let's start with the big one.
• 1:18
  SPEAKER_00: The big one, so we're we're probably not giving as much credit to the bird flu situation in the in the dairy cattle and whatnot um as some others are, Mike, um, as we've you know kind of kicked that round quite a bit.
• 1:34
  SPEAKER_00: I we think it's maybe more of a bit of a catalyst of some things that were starting to pile up a little bit, anyhow.
• 1:42
  SPEAKER_00: So um, you know, that's there's a lot of money moving around in between these markets, and that's what's probably been one of the more interesting things this week.
• 1:52
  SPEAKER_01: So explain the bird flu situation to us.
• 1:55
  SPEAKER_00: So just simply um as as you guys have probably caught on different news articles, um, you know, we've got the bird flu getting into some dairy cattle.
• 2:04
  SPEAKER_00: Some of those um dairy cattle were transported around, of course, into some different states and and uh seen some more positive results, and then had the one uh human case.
• 2:16
  SPEAKER_00: Boy, I don't remember if that was mid of the middle of this week or um tail into last week where you know it certainly wasn't proved that uh that it came from the cattle, it could have come from um a bird of some sort as well.
• 2:31
  SPEAKER_00: But one one of the workers on a dairy tested positive for the same strain.
• 2:37
  SPEAKER_00: Um and that's you know, then from there you have to try to decide how big of a deal do this does the neat news media media make it out to be right.
• 2:47
  SPEAKER_00: And we've seen man, I've we've seen some crazy stories coming across our desk this week that are really concerning.
• 2:54
  SPEAKER_00: Um so, you know, even some that are out there indicating that this is has the potential to be way worse than COVID-19 and you know, talking about pandemics and all that stuff.
• 3:06
  SPEAKER_00: So it's hard to know, you know, we just keep saying this week, let's be careful not to underestimate crazy, right?
• 3:14
  SPEAKER_00: I mean, we've seen that over the past couple of years, this thing's gone out of proportion quite a bit more than what uh you would think it'd be possible.
• 3:23
  SPEAKER_01: So uh what are some of the other things that have piggybacked along with this, Jeff, then?
• 3:28
  SPEAKER_00: Well, I think as this week comes to a close and we've reflect back over you know this week as well as a chunk of last week, some there this might be the one of the first times in this kind of part of the or or you know, half of the cattle cycle, if you if you will, that we're seeing some, potentially seeing some change in consumer activity.
• 3:52
  SPEAKER_00: So what I'm talking about there is obviously the consumer starting to trade down as far as their protein choices and where do they spend their protein dollar, right?
• 4:02
  SPEAKER_00: So that list um you know is really starts with the high priced choice meat and and some of the high priced uh cuts on that choice, um, suffering a little bit in the past week.
• 4:14
  SPEAKER_00: We've now got choice down under 300 bucks, and then what's interesting about that, of course, is you're gonna get you're basically right on top of where the select is.
• 4:25
  SPEAKER_00: So that you know that spread came in basically right at a dollar yesterday after afternoon between choice and select.
• 4:32
  SPEAKER_00: So um, you know, that's always uh it's obviously obviously very narrow.
• 4:37
  SPEAKER_00: Um ten dollars is not crazy uncommon for this year, so there's a seasonal factor to that as well, but um I think we just see a lot of signals, you know.
• 4:47
  SPEAKER_00: You look at what the 90s lean trim has been doing, that's crazy high.
• 4:53
  SPEAKER_00: Um, there's a lot of signals to show that the really expensive cuts get a little weaker here.
• 4:59
  SPEAKER_00: Some of the cheaper beef, grinding beef, select grade beef has really been holding its own.
• 5:06
  SPEAKER_00: Um, so you look at that, you also then switch over and look at what pork product values have done this week, and they've outperformed our expectations once again.
• 5:17
  SPEAKER_00: Um you know, probably going to end the week here at$98.
• 5:23
  SPEAKER_00: Um, and that's that's obviously gonna be more than what we would have expected.
• 5:28
  SPEAKER_00: Um that's so you start to wonder, are we seeing you know, some of that consumer dollar move from those expensive beef cuts even trickle down into the pork arena?
• 5:39
  SPEAKER_00: And that's something it's obviously not a new idea, right?
• 5:42
  SPEAKER_00: We've been talking about that for probably more than a year.
• 5:45
  SPEAKER_00: Um, I would just say this is the first time that maybe we're starting to see some evidence of that.
• 5:50
  SPEAKER_00: Now, caution, that's you know, five, six, seven days worth of data, right?
• 5:57
  SPEAKER_00: So I would be really careful to make any huge assumptions there.
• 6:01
  SPEAKER_00: But like I said, what's important to us or what's interesting is first time that we can really see that maybe start to be a thing.
• 6:11
  SPEAKER_01: From a seasonal perspective, it's probably a little bit disappointing that it's supposed to be cutouts supposed to be going up quite aggressively here, too, isn't it, from this time frame?
• 6:20
  SPEAKER_01: And we're going the wrong way in general.
• 6:22
  SPEAKER_01: We're just headed the wrong direction on it.
• 6:24
  SPEAKER_00: I think that's a fair point.
• 6:26
  SPEAKER_00: Um we've been watching that for a while.
• 6:28
  SPEAKER_00: We we we do think we've had a early start to the uh I don't know if I dare call it grilling season, but you know, the weather has been really conducive.
• 6:38
  SPEAKER_00: I think there's a little extra protein consumption here.
• 6:41
  SPEAKER_00: Um and that's we've we've been watching that.
• 6:44
  SPEAKER_00: That's been our opinion.
• 6:45
  SPEAKER_00: Didn't really think beef would have to actually suffer and and take some lower prices, you know, week over week because of that early start.
• 6:53
  SPEAKER_00: But basically what I'm suggesting is you know, we need to expect less of a less than normal seasonal bump.
• 7:01
  SPEAKER_00: Um, and obviously on the beef side, that's actually turned into a bit of a decrease here.
• 7:05
  SPEAKER_00: So maybe there's something there.
• 7:08
  SPEAKER_00: I mean, what's interesting about beef demand is, and I always thought it was maybe more heat, but you get to the back half of summer, Mike, every year you start to see a pretty decent decrease in beef demand.
• 7:20
  SPEAKER_00: I always we always kind of chalk that up to, you know, it's a hundred degrees instead of eighty-five, right?
• 7:25
  SPEAKER_00: When you go into July and the first half of August.
• 7:27
  SPEAKER_00: But maybe there's something to this run out the first couple times you start the grill and you spend money on uh expensive steaks and all this fun stuff, and the third or fourth time you go back to the store you start paying a little bit more attention to price tags that you're that of the stuff you're purchasing.
• 7:45
  SPEAKER_01: Definitely a theme.
• 7:47
  SPEAKER_01: Uh what else can you tell me about the uh livestock markets today?
• 7:51
  SPEAKER_00: Well, we mentioned the money flow, that's also been really interesting this week.
• 7:54
  SPEAKER_00: Um, we do think the cattle market and the hog market is pretty well connected at the hip.
• 8:00
  SPEAKER_00: Um, you know, and and money has been trying to flow out of the cattle, and today we saw it again.
• 8:06
  SPEAKER_00: I I don't think the hogs, you know, they got some pretty positive fundamentals in the last couple days when you think about product and cash values, but I think they were getting a little extra help as this money wants to exit the cattle market on a day like today, being you know, a good three dollars lower.
• 8:23
  SPEAKER_00: Um still want to be along some protein, so they're coming into the hog market.
• 8:28
  SPEAKER_00: Um that's gonna be, you know, there's some there's some money that can switch hands there, but um, I don't know how much longer we can really trade that.
• 8:39
  SPEAKER_00: You know, we've we've seen open interest decreasing in the cattle, increasing in the hogs.
• 8:44
  SPEAKER_00: Um, obviously the spread itself, it's got a long ways it could go.
• 8:48
  SPEAKER_00: You know, cattle are still crazy high compared to hogs, even though how much we've adjusted that here recently.
• 8:55
  SPEAKER_00: But um be interesting.
• 8:57
  SPEAKER_00: I would expect to see some more of that as you go into next week.
• 9:01
  SPEAKER_00: And you start looking at some of these cattle charts for an example, and you know, we're we're down like if you I think the June would be the most important.
• 9:09
  SPEAKER_00: We had some consolidation, maybe some support on the way up in that dollar seventy range.
• 9:14
  SPEAKER_00: We're at dollar seventy-two today, so it seems like it wouldn't be too tough to take another two bucks out of there now that we've broken it this hard.
• 9:21
  SPEAKER_00: And then you know, I'm I'm probably gonna start looking really hard at those lows from December.
• 9:26
  SPEAKER_00: They were in the mid-160s, so you got another six to eight dollars to go um to kind of hit some of those spots.
• 9:34
  SPEAKER_00: But anything can happen in this kind of market, that is for sure.
• 9:38
  SPEAKER_01: The important part I think on this is basically we need 70 degree weather.
• 9:42
  SPEAKER_01: At the end of the day, the bird flu problem goes away as we get hotter here, the birds stop migrating, things like that.
• 9:50
  SPEAKER_01: So if we can get that, uh it'll become a non-factor.
• 9:54
  SPEAKER_01: We should be able to get beyond this.
• 9:56
  SPEAKER_01: It's just if it's opened or shown us an underlying problem uh other than just uh the bird flu situation, Jeff.
• 10:05
  SPEAKER_00: The other thing that's gonna happen if we get 70 degree weather, Mike, is we're gonna want to plant some corn.
• 10:10
  SPEAKER_00: Is that gonna happen next week?
• 10:11
  SPEAKER_01: The market sure thinks so.
• 10:13
  SPEAKER_01: April 15th on this week, uh, it looks a little bit better on uh availability for planting.
• 10:18
  SPEAKER_01: So the corn futures did step back there a couple days uh looking at that weather forecast for better planting window.
• 10:25
  SPEAKER_01: Uh that'll be coming up real fast.
• 10:27
  SPEAKER_01: We're probably gonna get to talk a heck of a lot more about United States weather coming up here and the impact that's gonna have on prices, along with planning progress, which we saw this week has started a phenomenally fast pace compared to normal, what, two percent versus one?
• 10:42
  SPEAKER_01: Things like that.
• 10:42
  SPEAKER_01: So twice as fast as normal.
• 10:44
  SPEAKER_01: Yeah, we'll uh keep talking about that here in the future.
• 10:47
  SPEAKER_01: Thanks, Jeff.
• 10:48
  SPEAKER_01: And thank you to all our listeners.
• 10:50
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 10:53
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 10:59
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 11:05
  SPEAKER_01: See you next time.