Latest / CattleUSA Daily / 122: Cattle Market’s Still Strong but Grain’s Not Looking Great with Dan Gerhold

Transcript

122: Cattle Market’s Still Strong but Grain’s Not Looking Great with Dan Gerhold · CattleUSA Daily

• 0:00
  Happy Wednesday, y'all, Welcome back to the Cattle USA Daily
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  podcast. Today we are welcoming back Dan
• 0:05
  Garrahold on to the podcast to give us a market update report
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  on what is happening in the world as far as markets go and
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  just everything else in between. So without further ado, let's go
• 0:16
  ahead and jump into this episode with Dan.
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  Welcome to the Cattle USA Daily podcast, your go to source for
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  the latest livestock markets, industry insights and the
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  updates shaping agriculture today.
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  I'm your host, Lauren Moylan, a passionate advocate for
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  agriculture here to keep you informed and connected.
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  Now let's dive into today's episode.
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  Cash cow, yes. My gosh, you found is that
• 0:50
  actually that's cash? That's cash.
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  What back roads of the Internet did you have to go to to find
• 0:58
  that? Hey, hey, you scour the Internet
• 1:02
  and now if you can find anything, I still haven't found
• 1:06
  the Epstein list, but yeah, we found all the fun shirts, so.
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  My. God, yeah, it's.
• 1:12
  Amazing. It's cash cattle week, Lauren.
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  We've got to represent, you know, Come on, let's go, boys.
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  That's amazing. I don't know why I ever doubted
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  you in your shirt finding abilities because I will never
• 1:26
  do that again. Yeah, yeah.
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  We've got more where these came from, so I'm pretty palmatic.
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  Yeah, absolutely the. Closet at the office is starting
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  to overfill now, huh? Yeah, my wife mentioned I ran
• 1:40
  her out of hangers. Need to need to hold up for a
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  little bit, maybe run a repeat on a few shirts.
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  There you go, there you go. We can have a good cycle going
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  every few weeks. Just cycle them through.
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  Absolutely. But that shirt is only allowed
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  to come out if the cattle markets doing good.
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  If it's not, then it's it's not here.
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  It's not allowed to come out. Yeah.
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  Yeah. We're going to, I don't know,
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  find a shirt with some swear words if cattle are going down,
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  I guess. Yeah.
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  Be like, OK, before you even like, start listening to the
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  podcast, you're going to know how today's going based off of
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  what Dan's wearing. I like it.
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  That's great idea. I'm here for it.
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  I'm here for it. Yeah, absolutely.
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  So did you get all recovered from big Trip to Dodge?
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  I did. I did indeed got back on
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  Saturday. I had to stop on the way home
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  and get myself several energy drinks.
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  I was exhausted leaving. Like, I don't know why, but I
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  was just. I was exhausted.
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  Got home and got back pretty much walked in the door said hi
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  to my husband. He said you smelt like a sail
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  barn. I said I wonder why.
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  Went and took a shower and went to bed.
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  And then Sunday we didn't do a whole lot either got up went to
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  church and I was lazy the rest of the day and it was great.
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  It was great. How was how was your your trip
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  back? I got pulled over in northern
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  Kansas. Yeah, I don't get pulled over
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  very often, but by rights, he had me.
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  I was, I was substantially breaking multiple laws, so we'll
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  leave it at that. Nice guy, though.
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  He was just doing his job. I deserved it.
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  But yeah, got home late, just went right to bed, same thing.
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  And then Sunday was really, really hot, so I didn't get much
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  recovery time. Had to go do some farm work, but
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  yeah, no, it was a good trip. Great event.
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  I can't believe you got pulled over.
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  Note to self don't speed in Kansas.
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  You can speed in Kansas. There's just certain towns you
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  can't speed in or certain counties.
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  Maybe you don't speed in. You can speed on I-70, get on
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  I-70 and I roll 85 the whole way, like solid 10 over.
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  They're not touching you like you're totally fine.
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  You could pass cops all day long like, and that's like state
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  troopers, they're they're not going to touch you.
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  You're fine. But if you get into some of
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  these small towns in Kansas and you're going 5 over, you're
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  getting pulled over. So I don't He didn't get me in
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  town. I came out of a town and I was
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  behind several semis. The cruise control was set at 85
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  before I hit town. I don't remember ever setting it
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  after town. So I really don't know where he
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  clocked me. The Long story short, as he
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  walked up to the window, do you know why?
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  Do you know what speed limit is? Well, my dash is saying 70, so
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  I'm going to tell you 70. He's like, you know how fast
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  you're going? I'm like, honestly, no.
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  He's like, well, probably because you were on your phone.
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  I'm like, yeah. He's like, well, your dash says
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  you were going to 85. I'm like, OK, I mean, you're
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  really not going to argue with that type of stuff or just,
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  yeah, just going. To bite my tongue and dawn my
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  head. And yes, Sir.
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  Yes, Sir. Yep.
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  There's no arguing. No, nothing.
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  Yeah, sorry, officer. Yeah.
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  Did you at least have your seat belt on?
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  I did. I did.
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  Yeah, He. Didn't go for a seat belt.
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  That is that bad down there, I mean.
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  Yeah, they will. They will nail you for a seat
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  belt if you're not wearing it, which my dad has gotten multiple
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  times, multiple times. He's one of those people that's
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  like he'll get into my brand new car that's like it's a 2020 and
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  he'll get in. And these newer cars don't shut
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  up about the seatbelts. Like solid 15 minutes.
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  And I'm like, boat, could you put your seat belt on like at
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  least buckle it behind you? Like, I'm just sort of listening
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  to the damn thing. I don't blame they are.
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  They're obnoxious. Jeez Louise, such a fun trip
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  back. Learned my lesson.
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  Yeah, yeah, learned it for sure. So I don't know, Let's hope we
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  can get this cattle market to continue rally and so we don't
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  add insult to injury. So a couple loads of cattle and
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  yeah, it's a good time down to dodge.
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  Oh yeah. You know, great, they do a great
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  job putting that on. It was a blast, it was a lot of
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  fun. I am happy to be home though and
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  back into the groove of things. So hurrah, how's the cattle
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  market doing? You know, yesterday gapped
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  higher, big gap higher. No surprise to be completely
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  honest. I think a lot of that was
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  hedgers blown out. I don't like to see that type of
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  action cuz that's how highs get get made.
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  Shorts blowing out causes open interest to drop.
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  We saw the open interest report this morning.
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  So we lost, you know, 1000 contracts, I believe inevitably
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  drop back down filled the gap. Some of that could have been the
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  algo, some of it could have been lack of buying.
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  Once we lost those hedges blown out, but inevitably ended up
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  closing back near our open, both fats and feeders.
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  So it's it's one of those things you look at these charts and
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  like fat cattle to me, have have an opportunity to go push a
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  touch higher. They didn't quite touch June's
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  old high, but they were close enough that I think we've got an
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  opportunity to probably bust it today or this week at the
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  latest. Same time, cash cattle, you
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  know, they're talking higher money this week.
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  So if we get some sustained cash moving higher, I think we could
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  see some more buying on the fat cattle side.
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  Feeders on the other side have me really, really nervous right
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  now. You know, I don't know if I
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  mentioned it on the podcast last week or, or the week prior, but
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  332 to 333 was my target. Coincidentally, that's right
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  where we settled yesterday and that was after a big move,
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  higher gap, higher turn around, reverse went lower and then came
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  right back. So we've got a premium to where
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  the index is right now. I think as we get, you know,
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  into deeper into August and September, you know, it wouldn't
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  surprise me guys pull off grass with heavier yearlings.
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  You know, we're not selling 8 weight, 758 weight yearlings
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  like we used to off grass. They're 995010 weights.
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  That's not going to help the case for the index pushing
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  higher. In fact, that would help to drag
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  it down. You know your your 9 weights are
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  down in that three 10320, while you're 8 weights are up at
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  33340. So if we see more of those 9
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  weights, you're going to pull that index down harder.
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  Right now there's no incentive to pull off grass early.
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  You've got plenty of rain in the markets telling you we want the
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  heavy cattles. Inevitably, I think a person
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  needs to look at that October LRPS protect us 333 number
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  because it wouldn't surprise me by the time we get out to
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  October, I wouldn't be shocked if if the index is down closer
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  to that 320 money, you know, it's a seasonal sell for feeder
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  cattle. Just from the standpoint there's
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  more supplies increase the deeper we get into August,
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  September. And at the same time your
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  farmers are out in the field, they're not buying cattle still
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  hot, nobody's excited. So I think we do have to look at
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  some coverage here. Fears like I mentioned have more
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  risk for a 10/20. Let's just call it a 10%
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  correction. Definitely reasons to be a
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  little cautious there. Overall fundamentals haven't
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  changed post report. USDA didn't make some revisions
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  and drop the size of the cow herd substantially.
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  I think about it, what was it four 500,000 head from back in
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  2023 since we didn't have a 2024 report.
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  So you know, that was good to see a revision there.
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  Overall, I, I still not sure I believe all the numbers, but at
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  the same time they also showed us that we didn't place that
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  many cattle in June. I think that's going to continue
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  here in July. In the travels I did notice a
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  lot of empty pens here and there scattered everywhere, especially
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  I would say especially in the South.
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  And that report showed it. It looks like Iowa, Nebraska,
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  South Dakota, Washington, maybe they were the ones really loaded
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  the boat last month on placements.
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  But your other states, you know, close a Mexican border run
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  feeders drastically higher and and you're, you're going to
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  limit how many these guys are willing to play.
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  So especially in the summer heat.
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  So All in all, seeing some remarkable video sales for these
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  fall cattle. A common question around the
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  LRP's is if, if I get these video cattle bought and their
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  October deliveries, what can I do with them?
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  Well, thanks to the rule change from RMA, you can now LRP those
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  cattle, you know, that night after you buy those cattle.
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  So you do have the risk once you sign a contract to, to forward
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  to take delivery later on. Excuse me.
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  So you need to protect that risk.
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  So let's step out there, you know, look at that January,
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  March figure contract, you know, you're talking 320-4320 in those
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  months. That's still one hell of a price
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  that that we need to be covering.
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  So like I mentioned, I'm All in all, I'm still slightly bullish
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  obviously because supply side we're in the dog days of summer
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  on on demand. So it's not a not a ball of
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  fire. I think we're getting closer and
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  closer to putting a bottom in the boxes.
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  So we'll say kind of rambling here, sorry, Lauren, but.
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  Go for it. Going back to early last year,
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  the hog industry experienced something that just completely
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  wrecked them. I mean, it was all the way
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  through the industry. The Packers were losing money,
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  the finishers, you know, the the Sal units, they were losing
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  money and it was all caused by the retailers.
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  So inevitably what happened was retailers were forced to raise
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  their prices because the cut out was screaming higher on the
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  hogs. So they raise their prices.
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  All of a sudden the consumer starts cutting it back a little
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  because of those prices. We saw 55 and a half $6 bacon
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  and what happened was the the consumer and the exports cut
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  back. Now all of a sudden that cut out
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  starts dropping at the wholesale level, but the retailers kept
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  their prices at the grocery store where they were.
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  So they held that 5 to $6 bacon there.
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  Inevitably, the consumer kept cutting back the the retailer
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  wanted to improve their margins. They really didn't care how much
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  they moved. They just wanted to make money
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  At at one point, I think I did the math, they were making like
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  2 1/2 to 3 1/2 bucks a pound. I mean, just not not enjoyable,
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  but inevitably it wrecked the hog market.
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  I'm a little bit concerned we could see that right now because
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  the retailers are doing the same thing in beef.
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  It's very, very normal this time of year for them to try and
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  improve their margins. So you're seeing choice box beef
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  slip back. You're seeing, you know, your
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  your primals pull back and get more realistic as the cut out or
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  you know, the beef cut out looks.
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  But at the same time, those grocery prices at the at the
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  meat counter are not changing. So they're still charging that
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  2025 bucks a pound for the rib eye.
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  So they're working on their margins.
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  Inevitably that could slow down demand.
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  Now, as I mentioned, it's a dog days of summer.
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  Not a lot of people grill rib eyes every other night, you
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  know, and in this type of heat. But at the same time, let's,
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  let's hope and pray that those that we get some relief at the
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  grocery counter, you know, as we come into late August and and
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  September, October when we normally see that thing bottom
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  and start grinding higher. Yeah, 100%.
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  How is the grain market doing? Grain stock, they kind of do.
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  They do. They do not a lot of relief.
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  You know, I think a month ago we were kind of in a seasonal buy
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  for for wheat markets and that's gone nowhere.
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  Corn crop looks great other than guys that have been twisted up
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  and storms the last several weeks.
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  You know, looks great from the road.
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  Obviously the big talk of the town is tassel wrap and all the
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  heat messing with pollination. Inevitably we won't really know
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  what type of damage that causes until we get some combines in
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  the field. So I think, you know, we've got
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  a potential here over the next month to two months to probably,
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  I shouldn't say probably I should say hopefully put a low
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  in this corn market so we get those combine, drown and see
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  what these yields are like. It seems like everywhere I
• 13:54
  traveled, Missouri looks great. Kansas looks great.
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  I mean, especially for this time of year when it's usually hot
• 14:00
  and dry everywhere and you're starting to see those southern
• 14:03
  states burn up and a lot of green corn out there.
• 14:05
  Iowa looks great. I know there's some issues in
• 14:07
  Illinois, you know, with delayed plantings and and Northern
• 14:11
  Illinois kind of being dry here a month ago, but inevitably it,
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  it just seems like the path of least resistance is lower, even
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  though we're selling all the grain we're making.
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  I mean, it's just, it's unreal with these export sales are
• 14:24
  coming through like and and we just continue to drift lower.
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  So I'd like to see some deliveries happen, get those
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  shipments on the books, get them, get that grain gone.
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  But inevitably it's just the path of least resistance is
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  lower. Yeah.
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  Makes total sense. Did we miss anything today,
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  anything else that we need to head on within the markets?
• 14:45
  Sounds like a bunch of trade deals getting done with all
• 14:48
  these countries. A lot of excitement.
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  I'm going to briefly give my opinion that.
• 14:54
  I think. They're not a not anything to
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  write home about. I mean, inevitably we're not
• 15:00
  going to sell beef to Australia, we're going to sell some to
• 15:03
  Japan. But IE you, I mean, they're
• 15:07
  good. I'm glad we're getting deals and
• 15:09
  nobody's raising tariff rates. Inevitably that's good for the
• 15:12
  economy. But so far we haven't seen a lot
• 15:15
  for AG. It's and that's I think part of
• 15:18
  why grains keep drifting lower. So yeah, just get those feeder
• 15:22
  cattle covered, get the feeder covered.
• 15:25
  Yeah, No, I can then agree more on that.
• 15:28
  And I think like the sentiment about trade deals and everything
• 15:31
  going on, we need them. We need them done.
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  We need them to not be in limbo I think is the biggest thing.
• 15:37
  But I'm not freaking out about them either because like you
• 15:40
  said, we're not going to sell beef to Australia.
• 15:42
  The beef that we're selling to places like Japan is going to be
• 15:46
  our special finished beef, like our Wagos.
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  And like everything else in that standpoint, we're not, for the
• 15:53
  most part, going to be selling just traditional beef to Japan.
• 15:56
  Yeah, I it's great that they're done.
• 15:59
  It's great that they're signing paperwork and getting things
• 16:03
  figured out. And we're not in limbo and we're
• 16:05
  not, like, all freaking out anymore.
• 16:07
  But it's also like it's not that impactful for the American
• 16:13
  agriculturalist. Yeah.
• 16:15
  In the long run, I like to remind myself that, you know,
• 16:19
  even if it doesn't initially give us a big pop and eggs,
• 16:22
  because, you know, there's nothing major in there for eggs
• 16:26
  to turn these markets around or push them higher.
• 16:29
  At the end of the day, if it does bring money back to our
• 16:32
  country in the long term, that is good for eggs, you know,
• 16:36
  bring jobs back, you know, push wages higher.
• 16:39
  Inevitably that's going to especially for the livestock
• 16:42
  industry. You know, rising tide raises all
• 16:44
  ships. So it just might take a little
• 16:46
  bit. And then sometimes we have to be
• 16:47
  patient. Not easy to do, but yeah.
• 16:51
  Kind of agree more and I think that's a great place to in the
• 16:53
  podcast for today. So Dan, as always, thank you for
• 16:56
  your time. Thank you for your insight and
• 16:59
  everything else that you bring to the podcast.
• 17:02
  All of you listeners out there, make sure that you like
• 17:04
  subscribe, rate review, do all of the things.
• 17:06
  And if you are looking at what we talked about today and the
• 17:11
  rest of the year and then talked over and you're saying I need to
• 17:14
  be covered, check out those show notes down below.
• 17:17
  And we've got that Cattle USA insurance link for you guys so
• 17:20
  that you can check that out. Without further ado, have a
• 17:23
  great day y'all, and we'll see y'all tomorrow.