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Cattle on Hold: Screwworm Logistics & Quarantine Disruptions · Professional Ag Marketing Podcast

• 0:02
  SPEAKER_00: Welcome to the Cattle Talk Podcast.
• 0:05
  SPEAKER_00: Your weekly breakdown of cattle market fundamentals, key news, and the insights escaping the industry.
• 0:12
  SPEAKER_00: Trading commodity futures and options involves the potential risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_02: Alrighty.
• 0:22
  SPEAKER_02: I've got Jeff with us here today.
• 0:24
  SPEAKER_02: How's it going, Jeff?
• 0:25
  SPEAKER_02: It's going good, Mike.
• 0:26
  SPEAKER_02: Awesome.
• 0:27
  SPEAKER_02: Well, we are going to talk about the Cattle Market Talk podcast today, Jeff.
• 0:31
  SPEAKER_02: So just a few things.
• 0:33
  SPEAKER_02: We're going to talk about the plant.
• 0:34
  SPEAKER_02: We're going to talk about packer margins here a little bit, talk about screw worm a little bit, of course, and then talk about cash and uh a little bit of the product market.
• 0:43
  SPEAKER_02: How's that sound today?
• 0:44
  SPEAKER_01: Can't get enough screwworm, can we?
• 0:46
  SPEAKER_02: No, we just can't get enough of it.
• 0:48
  SPEAKER_02: So uh let's talk about some of the fresh news today.
• 0:51
  SPEAKER_02: Uh what this morning, all of a sudden it got really red in the cattle market.
• 0:56
  SPEAKER_02: We're down four bucks on fat cattle and feeder cattle.
• 0:58
  SPEAKER_02: We're wondering what's kind of going on.
• 1:00
  SPEAKER_02: Uh, this news did come out, but I was just curious what do you think this had anything to do with it today?
• 1:06
  SPEAKER_01: Yeah, I definitely think so.
• 1:08
  SPEAKER_01: Um, you know, so what the Mike, what you're referring to, of course, is uh JBS announcing that they're gonna close a um slaughter facility plant.
• 1:18
  SPEAKER_01: Um, that one happens to be out in Pennsylvania, and so what we're hearing on it is that we I think it's mostly gonna be a cow kill facility, um, out there killing dairy coal cows, I assume.
• 1:32
  SPEAKER_01: Um 2,000 had a day.
• 1:34
  SPEAKER_01: 2000 had a day.
• 1:35
  SPEAKER_01: It's pretty big plant for that type of a facility, obviously, and uh very uh one of the two in that region.
• 1:43
  SPEAKER_01: So as far as folks looking for a home for some um coal cows in the future, that's definitely going to be an impactful situation, unfortunately.
• 1:53
  SPEAKER_01: Um, so I'm sure they've ran some fat cattle through there too.
• 1:57
  SPEAKER_01: Most of those facilities do.
• 1:59
  SPEAKER_01: Um, but uh yeah, fairly big plant, but mostly on the cow side of things, and then uh kind of out off the beaten path, too, as we think about the actual cattle market and and whether or not we're going to you know affect the leverage, if you will, between um the feedlots and the packers.
• 2:20
  SPEAKER_01: I I don't think you're gonna have much of an impact on there.
• 2:24
  SPEAKER_02: Year date here, you can see in this chart here, pretty negative, just over$200 ahead.
• 2:30
  SPEAKER_02: Uh is what they've been losing on the Packers side so far this year.
• 2:34
  SPEAKER_02: Uh weekly numbers still pretty well in the negative category, there, aren't they, Jeff?
• 2:39
  SPEAKER_02: This pretty much explains the story, right?
• 2:41
  SPEAKER_02: Just not enough cattle around and yeah, product values haven't gone up enough.
• 2:45
  SPEAKER_01: No doubt about it.
• 2:46
  SPEAKER_01: Um, very similar economics over on that side of things is what we're seeing on the uh Fed cattle side, of course, right?
• 2:52
  SPEAKER_01: So even though this is not a Fed cattle um plant, it's it's the same economics and clearly in the market's mind and and uh should be in all our minds a little bit.
• 3:06
  SPEAKER_01: Um this could happen at any time.
• 3:07
  SPEAKER_01: That you know, Packer Margins, this negative with um not a lot of hope to see improvements.
• 3:16
  SPEAKER_01: I I pause with that just a little bit because um where we are in the camp, that numbers probably get to be a little bit um uh more plentiful.
• 3:25
  SPEAKER_01: That's probably too strong of a word, but I think we'll have some more numbers um of market ready animals as we go into even August potentially.
• 3:33
  SPEAKER_01: But um either way, doesn't seem like there's a lot of optimism out there for the future for Packer Margins.
• 3:41
  SPEAKER_01: So I gotta believe some people are making some pretty tough decisions today.
• 3:45
  SPEAKER_02: That would make sense.
• 3:46
  SPEAKER_02: Uh speaking of tough decisions, let's talk about the screwworm map a little bit here.
• 3:51
  SPEAKER_02: Uh, probably even since last week, we've seen a few more cases develop it.
• 3:56
  SPEAKER_02: I it just for whatever it's worth.
• 3:57
  SPEAKER_02: We're gonna talk about the kind of what's going on, what protocol is, how the quarantine works, all those things here on the podcast today, Jeff.
• 4:05
  SPEAKER_02: But uh, let's talk a little bit about the blip in New Mexico now because that's the outlier a little bit, and that one probably doesn't matter quite as much because that was a dog, right?
• 4:18
  SPEAKER_02: And it was transported there.
• 4:19
  SPEAKER_01: Yeah, that's what we're hearing when that originally came out.
• 4:22
  SPEAKER_01: You know, we looked at this map and it's like, wow, this thing is moving fast.
• 4:26
  SPEAKER_02: Yeah, exactly.
• 4:27
  SPEAKER_02: So that was it otherwise, it seems like that South Texas mainly it is, but uh so yeah, let's just hit on the New Mexico one real quick.
• 4:36
  SPEAKER_01: Um, what we're hearing on that is that's a dog um actually was transported um from Mexico um up into that part of the world.
• 4:45
  SPEAKER_01: So probably what we have going on there.
• 4:47
  SPEAKER_01: Um but but even that aside, this thing is certainly moving at a pretty fast rate.
• 4:54
  SPEAKER_01: Um we've got four other positive cases throughout the state of Texas here, um, moving around, you know.
• 5:02
  SPEAKER_01: Whenever you get into Texas and you look at one spot versus the other, there's a lot of miles between those two points.
• 5:07
  SPEAKER_02: Yeah, that's a long drive.
• 5:09
  SPEAKER_01: Yep.
• 5:10
  SPEAKER_01: So uh I there's so it is moving pretty rapidly, and I don't know.
• 5:17
  SPEAKER_01: It sure seems to us like uh it's gonna continue to happen.
• 5:20
  SPEAKER_01: I mean, we've only been um talking about this for a week, right?
• 5:24
  SPEAKER_01: That is officially into the state.
• 5:26
  SPEAKER_02: So so let's talk about the process of it.
• 5:28
  SPEAKER_02: Yep, like let's say you get it in a county, let's say you find one case of it.
• 5:33
  SPEAKER_02: What happens?
• 5:34
  SPEAKER_01: Well, so you find one case and you draw a circle about 12 miles around that positive event, right?
• 5:40
  SPEAKER_01: And then 72 hours, um, you can't move any livestock out of that area.
• 5:46
  SPEAKER_01: So three days can't move anything out, and what they're really trying to do is get the uh is get some state vets and and veterinarians and such into that area, so get some boots on the ground, if you will, because what they want to do for the next three months is uh inspect every animal that comes out of that 12 mile radius.
• 6:06
  SPEAKER_01: Um, so anything if you so you can move them after that, they just gotta be inspected and cleared of the screw worm.
• 6:12
  SPEAKER_02: It would seem like that's a bottleneck, right?
• 6:14
  SPEAKER_01: Well, that's what we're worried about.
• 6:16
  SPEAKER_01: Um, and I think that's maybe a little bit what the market uh, you know, it gets some jitters whenever we start talking about screw screw worm a little bit, um, whenever there's more cases announced, um, for an example, and maybe justifiably so, because we've highlighted that red zone, of course, um in the panhandles of Texas and Oklahoma on this map.
• 6:39
  SPEAKER_01: And that's really where you got to get into the bottom side of that red square, kind of in that Lubbock, Texas area, um, really where the concentration starts to happen.
• 6:52
  SPEAKER_01: And uh, that's true for dairies, that's true for feedlots, of course, and it's even true for some hog farms down in that part of the world.
• 7:00
  SPEAKER_01: Outside of that, you're talking about cow calves, you're talking about um some stalker cattle out on some wheat pasture and some grass and some things like that, so somewhat limited in numbers.
• 7:11
  SPEAKER_01: But let's say you get up into that area, you start drawing 12-mile circles with a couple of these really big feed yards inside of them.
• 7:21
  SPEAKER_01: Um, the concern is how are you going to well, first of all, you're gonna limit the movement for three days, which doesn't sound like much, but most of those places are shipping, you know, multiple loads a day out of there, right?
• 7:34
  SPEAKER_01: Um how are you gonna inspect that many cattle trying to move outside of the quarantine zone and into the packing facilities?
• 7:44
  SPEAKER_01: So I I definitely think we have the the probability of uh creating some um bottlenecks in flow here.
• 7:53
  SPEAKER_01: Uh, I don't know that any of that's super bearish.
• 7:57
  SPEAKER_01: Um, it's been a little bit hard for us to think through what happens to the packing plant within that 12 mile circle.
• 8:04
  SPEAKER_01: It doesn't seem like it's gonna be affected too much, but you know how this goes.
• 8:09
  SPEAKER_01: Whenever you get uh the inspection inspectors into an area, get the government involved.
• 8:15
  SPEAKER_01: I just am not confident any of that's gonna move super fast, right?
• 8:20
  SPEAKER_01: So um I think that's why the futures markets gets a little jittery.
• 8:25
  SPEAKER_01: We've seen this in a lot of different cases.
• 8:27
  SPEAKER_01: Um, you know, we start impacting um commodity flows, uh, it's usually met with some uh pessimism or some concern and whether quite often it can turn into something bullish.
• 8:43
  SPEAKER_01: I'm thinking of the straight of her moose at this point in crude oil, of course, right?
• 8:48
  SPEAKER_02: But especially when you have a long futures position like we've had in the cattle market for so long, the funds uncertainty, they're probably just thinking easiest way is out right now.
• 8:59
  SPEAKER_02: And uh with that uncertainty, we don't know how far this thing's gonna spread, how big it can get, but we don't know the uh the uncertainty that's regarding the media aspect of it, too.
• 9:09
  SPEAKER_02: That's very true.
• 9:10
  SPEAKER_02: Yeah, uh whatn are they gonna come out with something about like, oh, we're uh you know, uh putting nice flesh-eating worms in people's food, stuff like that, right?
• 9:19
  SPEAKER_02: That could be bad.
• 9:20
  SPEAKER_02: So um it really doesn't matter.
• 9:22
  SPEAKER_02: It probably more bullish than anything when it regards to actual fundamental supply.
• 9:27
  SPEAKER_02: It's just how is the media gonna turn this on us?
• 9:30
  SPEAKER_02: And they haven't really yet, it's been pretty quiet.
• 9:33
  SPEAKER_01: I'm glad you brought that up because yeah, they I've we've been kind of pleasantly surprised in the last week.
• 9:38
  SPEAKER_01: Yeah, we haven't seen any a lot of media attention on this, so that's that's probably a good thing.
• 9:45
  SPEAKER_01: But you're right, most of the scenarios that we've worked through in in-house here, Mike, that you've been part of, it's like it doesn't seem like this is bearish.
• 9:53
  SPEAKER_01: Um, so I'm sure the marketplace will probably find one before we're done.
• 9:58
  SPEAKER_01: But yeah, everything we've seen is probably in the bullish sector from the supply side of things.
• 10:02
  SPEAKER_02: That's so.
• 10:03
  SPEAKER_02: Uh let's talk a little bit just about some of the other numbers we're looking at here.
• 10:08
  SPEAKER_02: Uh, let's start with the rib here.
• 10:10
  SPEAKER_02: I I just wanted to focus on what are you seeing in the product market here before we get to cash?
• 10:16
  SPEAKER_01: The first time in quite a while that we've got maybe some good news in the underlying uh product side of things.
• 10:22
  SPEAKER_01: So the rib meat's gonna be mostly on the ribeye, um, gonna be more of the expensive meat.
• 10:27
  SPEAKER_01: Um, we're seeing a nice uptick in that.
• 10:30
  SPEAKER_01: And you can see it actually looks quite seasonal, which you know, we've talked about quite often.
• 10:36
  SPEAKER_01: You know, we're looking watching cut out values on the composite side of things, you know, we're not seeing the seasonal increase that we'd like to see.
• 10:44
  SPEAKER_01: It stays flat.
• 10:45
  SPEAKER_01: Yep, it stays flat at some high levels, at a high level, record high levels for this this time of year.
• 10:51
  SPEAKER_01: Um, so as we peeled that back here in the past uh 10 days or so, you do see them some of these middle meats starting to gain some traction.
• 10:59
  SPEAKER_01: I think there's a little bit of good good news in there um as you think about consumer demand.
• 11:05
  SPEAKER_01: Um, maybe this is just another indicator of uh the folks you know that have maybe some discretionary income.
• 11:14
  SPEAKER_01: Uh they're not letting go of their their high-end stakes, and they're gonna continue to spend money on that.
• 11:21
  SPEAKER_01: And and maybe the the there's a segment of the consumer um that it's backing off a bit.
• 11:28
  SPEAKER_01: And and maybe everybody's backing off a little bit, but just if we're gonna go do it, we'll go spend the big money um just a little bit less often.
• 11:35
  SPEAKER_01: I'm not sure.
• 11:36
  SPEAKER_01: I think it's a bit of a win um so far.
• 11:39
  SPEAKER_01: We'll see where this kind of leads.
• 11:40
  SPEAKER_01: I I we're we're definitely toning down the optimism as far as consumer demand um internally here, uh, based on you know past few weeks of data that we've seen.
• 11:51
  SPEAKER_01: So I'm not expecting this thing to just scream high or anything like that.
• 11:55
  SPEAKER_02: This is worth mentioning, I think.
• 11:57
  SPEAKER_02: You've seen cutout just choice side.
• 12:00
  SPEAKER_02: It stayed pretty high, relatively flat, makes sense.
• 12:03
  SPEAKER_02: But the one that's caught my interest here a little bit is more the select slide side, Jeff.
• 12:08
  SPEAKER_02: And I find this interesting because choice, your more expensive meat.
• 12:13
  SPEAKER_02: Like if I go on a date once a month with my wife, if I'm lucky, because I have four kids under five, I'm still getting that steak.
• 12:20
  SPEAKER_02: I don't care how much it costs if I get that every now and again.
• 12:23
  SPEAKER_02: But the the lower income families that are buying burger every day or whatever, you know, they can shift away from that probably when they're more expensive, like this.
• 12:31
  SPEAKER_02: And I think is that what we're seeing here?
• 12:33
  SPEAKER_02: And then you couple that with a few other dynamics of like maybe we're importing a bunch of crappy meat from Australia and Brazil.
• 12:41
  SPEAKER_02: Well, is there any other takeaway on product?
• 12:44
  SPEAKER_01: I I don't think there's much to add around that, Mike.
• 12:46
  SPEAKER_01: I think you're hitting it on the head.
• 12:48
  SPEAKER_01: And and in the back of my mind, and don't laugh at me, but I I also bring back and think, okay, this is what the um administration has been focused on.
• 12:59
  SPEAKER_01: They do want some lower beef prices.
• 13:01
  SPEAKER_01: I don't think they care about ribeye steaks, they want lower grinding meat, they want lower staples.
• 13:08
  SPEAKER_01: Um, so that I'm definitely a little alarmed with this chart right here.
• 13:12
  SPEAKER_02: Very much so.
• 13:13
  SPEAKER_02: First time we've seen it since really back early spring there when we saw it start to dip a little bit before the next pop.
• 13:20
  SPEAKER_02: And it looks seasonal.
• 13:21
  SPEAKER_02: This does not look seasonal uh versus the last few years or just normal patterns.
• 13:27
  SPEAKER_02: So it's something to definitely watch out for there.
• 13:29
  SPEAKER_01: I think it's worth getting into next week some more, Mike, but I see a little bit of an impasse coming here in the future where um you can look at where where kill levels are and where they go from a seasonal perspective.
• 13:42
  SPEAKER_01: They like to go up later in the year.
• 13:44
  SPEAKER_01: You start thinking about where you know the imports that we're putting that we're bringing into the country right now, and then this lower select.
• 13:51
  SPEAKER_01: Let's let's put that on the agenda for next week.
• 13:53
  SPEAKER_01: So I think it's gonna be interesting to watch.
• 13:55
  SPEAKER_01: We may see a point where all that comes together, um, maybe more out into that August time frame.
• 14:02
  SPEAKER_02: Very much so.
• 14:02
  SPEAKER_02: Let's talk about the cash side a little bit, Jeff.
• 14:05
  SPEAKER_02: What do uh you gotta say about cash cattle here this week?
• 14:08
  SPEAKER_02: Uh, pretty quiet.
• 14:09
  SPEAKER_02: Uh end of the week here looks like pretty steady, maybe a tad higher if I don't say so myself.
• 14:15
  SPEAKER_01: I yeah, we'll we'll see once um we haven't quite got all the trades in um for the day yet, but yeah, it looks like it's taking place here today on Friday.
• 14:24
  SPEAKER_01: That's good news, right?
• 14:25
  SPEAKER_01: Like most of the time, if you're gonna hire have a higher market, uh it drags in towards the later end of the week.
• 14:31
  SPEAKER_01: Um, futures were down pretty hard.
• 14:33
  SPEAKER_01: Packers really weren't coming out with any lower bids than what they had the rest of the week.
• 14:37
  SPEAKER_01: I think that's all good news.
• 14:39
  SPEAKER_01: Um, so we're hearing maybe getting this thing jacked up into that 255 area.
• 14:44
  SPEAKER_01: Um, we'll see what the rest of the day brings and how many cattle moved and uh what kind of volume that we've got and and and what was the high price.
• 14:52
  SPEAKER_02: That makes sense.
• 14:53
  SPEAKER_02: One of the things I wanted to mention here as well, uh, we've seen a few good days tied together here on uh the futures market, three or so in a row before maybe a little bit of a pullback today, down a buck, buck and a half here, uh coming back okay here through the day after some weakness this morning.
• 15:11
  SPEAKER_02: Uh what do you got to say?
• 15:12
  SPEAKER_02: Just wrapping everything up and have the futures up on the board there.
• 15:16
  SPEAKER_01: Well, it's it's I think it's a different looking chart than what we saw a month ago, right?
• 15:23
  SPEAKER_01: Like we would have these breaks, but we would get the top end of the trade range right back towards the old highs.
• 15:29
  SPEAKER_01: Yeah.
• 15:29
  SPEAKER_01: And I'm very suspicious.
• 15:31
  SPEAKER_01: And I think today's a you know, we had some things come out and and uh push this market lowers, and it's a Friday, so maybe it, but with cash as strong as it is, um, you know, we're we're performing fine, I guess, but when you put it all together on a chart, it it's not gonna look like we're gonna come back to the old highs anytime soon, and we might be slipping into this kind of um lower highs, lower lows type of a trend uh going forward.
• 16:02
  SPEAKER_02: All right.
• 16:03
  SPEAKER_02: Well, thank you for your time today, Jeff.
• 16:04
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• 16:08
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• 16:13
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