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Cattle: Trump Card · Professional Ag Marketing Podcast

• 0:00
  SPEAKER_01: Welcome to the Cattle Market Talk Podcast with Professional Ag Marketing.
• 0:04
  SPEAKER_01: Come here to get your fresh updates on what's happening week to week within the cattle market.
• 0:09
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:15
  SPEAKER_01: Today is October 17th.
• 0:17
  SPEAKER_01: I've got Jace with us here today.
• 0:18
  SPEAKER_01: We're going to talk about the cattle market, and this is going to be a fun one today because we've had a lot going on.
• 0:23
  SPEAKER_01: Let's start with the recent rally we had.
• 0:26
  SPEAKER_01: Jace, we had what eight to ten days higher of uh feeder and fat cattle closes.
• 0:32
  SPEAKER_01: What in the world drove that rally we had through that time frame before we get to today's madness?
• 0:38
  SPEAKER_00: Yeah, so it was it was kind of interesting there.
• 0:40
  SPEAKER_00: Yeah, ten days of up, and it was kind of led by led by the feeders at some points, led by the fats at others, but this index on the feeders just keeps really charging higher.
• 0:51
  SPEAKER_00: So that's been the catalyst there and the driver.
• 0:54
  SPEAKER_00: And then jumping over to the fats, it seems like we found a bottom on the on the cutout there in the 360s, and we're we're running cash higher again.
• 1:06
  SPEAKER_01: That seems like it helped, yep.
• 1:08
  SPEAKER_01: Cutout bottoming.
• 1:09
  SPEAKER_01: The feeder cattle cash sales have been fantastic, so those seem to really help out.
• 1:14
  SPEAKER_01: Now we get to today.
• 1:16
  SPEAKER_01: What in the world happened today with uh locked limit lower from November feeder cattle all the way out, basically?
• 1:23
  SPEAKER_01: Fat cattle, we even ended up limit lower on a well, we almost did, I guess.
• 1:28
  SPEAKER_01: Settlement wasn't quite limit lower, was it?
• 1:30
  SPEAKER_01: But it was pretty darn close.
• 1:32
  SPEAKER_00: Yeah, so I guess what I've been thinking about a little bit there is you go back to September 25th, 24th, 25th is when we first heard from Brooke Rollins about the heifer retention program, that sort of thing.
• 1:46
  SPEAKER_00: We saw the markets move lower on that.
• 1:48
  SPEAKER_00: This is kind of the beginning of it.
• 1:50
  SPEAKER_00: Yep, yeah.
• 1:50
  SPEAKER_00: Yep, and then it's been it's been quiet since then.
• 1:53
  SPEAKER_00: We hadn't heard much about it.
• 1:55
  SPEAKER_00: And then last night Trump was in uh answering some questions from reporters, and they asked him about beef prices, and he said that they've they've kind of got their got a deal together to lower these beef prices substantially, and no no indication as to what exactly that is.
• 2:14
  SPEAKER_01: Yeah, no details, but President Trump said his administration had struck an agreement to bring down the price of beef for consumers.
• 2:22
  SPEAKER_01: Trump conceded that the beef was one area where his efforts to fight inflation haven't paid enough dividends yet, and that the price is still a little high for what we want it to be at.
• 2:34
  SPEAKER_01: Doesn't mean it needs to go to zero by any means in Trump's eyes.
• 2:37
  SPEAKER_01: However, it is a bigger part of the inflation problem that he's got going on right now.
• 2:42
  SPEAKER_01: Particularly the hamburger.
• 2:44
  SPEAKER_01: I I see him really focused on ground beef lately, it seems like has been what he's been focused on.
• 2:50
  SPEAKER_00: Yeah, and I guess it's not verbatim, but it goes back to Ronald Reagan saying the I'm from the government and I'm here to help is the scariest threat.
• 3:00
  SPEAKER_00: I mean, that's how the market's trading it, I guess.
• 3:02
  SPEAKER_01: Very true.
• 3:03
  SPEAKER_01: Six dollars and thirty-one cents for a pound of ground beef in August on average for what shoppers paid.
• 3:09
  SPEAKER_01: Uh, that is is quite significant here.
• 3:12
  SPEAKER_01: I think something around 14% higher, I think I saw year over year on ground beef.
• 3:17
  SPEAKER_01: Uh quite the chart there too.
• 3:19
  SPEAKER_01: If you look at the uh Fred at the Federal Reserve Bank of St.
• 3:24
  SPEAKER_01: Louis, they they track some of these things and their average ground beef price.
• 3:28
  SPEAKER_01: That chart is very interesting to see all the way from the 1970s until today.
• 3:33
  SPEAKER_01: Uh you go back right around COVID time frame.
• 3:36
  SPEAKER_01: I mean, it was 380, kind of jumped up during COVID to 473.
• 3:42
  SPEAKER_01: Now, I mean, we're yeah, 631 after that.
• 3:45
  SPEAKER_01: So it it it's it's accelerated uh quite aggressively here as of late.
• 3:50
  SPEAKER_00: Yeah, you've seen you've seen a bit of a shift from the packer to the retailer on the profit margin side.
• 3:57
  SPEAKER_00: Yep.
• 3:58
  SPEAKER_00: And the retailer's finally having to make that up a little bit, and so the the cost is realized by the consumer now for the first time really in this rally.
• 4:07
  SPEAKER_00: Interesting, interesting.
• 4:09
  SPEAKER_01: Now these details that he did not provide, um part of the speculation or part of the rumor, Mill, has been that this has some connection with Argentina, correct?
• 4:19
  SPEAKER_00: Yeah, I think there's there he had Javier Melee at the White House a couple days ago and they discussed some trade deals, and it's not clear if it was directly involving cattle, but it was it was a trade deal, and that that is a potential place to import quite a little beef from.
• 4:39
  SPEAKER_00: What type of beef?
• 4:41
  SPEAKER_00: That would be ground beef, lean ground beef.
• 4:43
  SPEAKER_00: So that would be targeting your high-priced ground beef.
• 4:47
  SPEAKER_01: Now this goes back to what Rollins had talked about a ways back because they're trying to get us to kill less cows, essentially, right?
• 4:54
  SPEAKER_01: For ground beef, import the ground beef, we keep the cows, grow our herd, correct?
• 4:59
  SPEAKER_00: Yep.
• 5:00
  SPEAKER_00: Yep, it seems like you wouldn't be able to sell a cold cow for as much if the hamburger's not worth not worth much there.
• 5:07
  SPEAKER_00: And in turn, you'd return retain more heifers and herd.
• 5:12
  SPEAKER_01: Now, Brazil, it looks like Trump and Lula are gonna try to meet as soon as possible.
• 5:17
  SPEAKER_01: This would be the next phase of this um design to try to get lower beef prices, it looks like.
• 5:24
  SPEAKER_01: So watch out next week, a month, a year.
• 5:28
  SPEAKER_01: I don't know how soon is possible, how soon that really is, but at this point it does look like for trade perspective regarding beef, Brazil's gonna be the big one with the 50% increase on tariffs here lately.
• 5:41
  SPEAKER_01: That'd be a huge market to tap back into for the United States, wouldn't it?
• 5:45
  SPEAKER_00: Yes, it would.
• 5:46
  SPEAKER_01: So you've got Argentina trade deals, which would be bearish cattle, you've got Brazil potential trade deals, which would be bearish cattle.
• 5:53
  SPEAKER_01: Have we heard anything on the Mexican border situation lately?
• 5:57
  SPEAKER_00: Nothing's really changed there.
• 5:59
  SPEAKER_00: We've had a couple more cases close to the border, you know, 70, 80 miles south, but no real change there.
• 6:05
  SPEAKER_01: Gotcha.
• 6:06
  SPEAKER_01: So if that would be reopened at some point, which it does not sound like it is at this point, we have no new news, uh, that would be a bearish thing as well going forward.
• 6:15
  SPEAKER_01: So keep an eye on some of those things because this was a limit lower move today, doesn't mean it needs to continue either.
• 6:20
  SPEAKER_01: So keep an eye on this cattle market.
• 6:22
  SPEAKER_01: It's been pretty uh pretty volatile.
• 6:25
  SPEAKER_01: We had a really, really strong run, so I think it was easy to take these prices back off today.
• 6:29
  SPEAKER_01: However, we got some good news in the cash market to end out the week, didn't we?
• 6:33
  SPEAKER_00: Yeah, cash cash was really strong for the market trade today.
• 6:37
  SPEAKER_00: So what we really saw was a big basis shift.
• 6:40
  SPEAKER_00: You went from at best last week, negative three dollar basis, negative three to five dollar basis last week to close to even, and even some of the southern cattle were getting a plus one off the October.
• 6:54
  SPEAKER_01: But so we were about five bucks higher in the live market week over week in cash, weren't we?
• 6:59
  SPEAKER_01: Yep.
• 6:59
  SPEAKER_01: About almost ten, about seven to nine probably in the dressed.
• 7:03
  SPEAKER_01: Yep.
• 7:04
  SPEAKER_01: That's that's quite the move week over week, and especially when you talk about even today was two forty-one is what the bids in Nebraska were coming out at.
• 7:11
  SPEAKER_01: That was even a little higher than or just slightly higher than yesterday's prints, even with the down move we had today.
• 7:18
  SPEAKER_00: Yeah, there's definitely still some leverage on the on the cash side.
• 7:22
  SPEAKER_01: Yeah, so up front, nothing crazy changing up front, anyways, for uh for this cash market.
• 7:28
  SPEAKER_01: What about some of the other fundamentals you see in this cattle market before we wrap up today?
• 7:32
  SPEAKER_00: I guess I think the big one to keep watching is this cutout here.
• 7:37
  SPEAKER_00: We we've seen the Packers every time cutout starts to fall a little bit, they just backkills off slightly and they're able to stop the bleeding there.
• 7:46
  SPEAKER_00: We're at we're at kind of critical support on the in the 360s here on choice, and I guess that's a that's a big thing that we're watching here.
• 7:55
  SPEAKER_01: This past week's slaughter was 549,000 head.
• 7:58
  SPEAKER_01: That was down from 13,000 the prior week and down 36,000 from last year at this time, Jace.
• 8:05
  SPEAKER_01: Yeah.
• 8:06
  SPEAKER_01: Kill reductions are huge.
• 8:08
  SPEAKER_01: Very big at this point.
• 8:09
  SPEAKER_01: All right.
• 8:10
  SPEAKER_01: Well, thank you for joining us.
• 8:11
  SPEAKER_01: I think going forward here, uh there will be no LRP tonight since we had a locked limit lower on feeder cattle, for example.
• 8:19
  SPEAKER_01: So uh watch out here early next week for any futures moves.
• 8:23
  SPEAKER_01: Thank you for your time today, Jace.
• 8:25
  SPEAKER_01: I really appreciate it.
• 8:26
  SPEAKER_00: Thank you.