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Cattle: Cash Is King · Professional Ag Marketing Podcast

• 0:00
  SPEAKER_00: Welcome to the Cattle Market Talk Podcast with Professional Ag Marketing.
• 0:04
  SPEAKER_00: Come here to get your fresh updates on what's happening week to week within the cattle market.
• 0:09
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:15
  SPEAKER_00: Today is September 11th.
• 0:17
  SPEAKER_00: I've got Jace with us here today.
• 0:19
  SPEAKER_00: How's it going, Jace?
• 0:20
  SPEAKER_01: It's going pretty good.
• 0:21
  SPEAKER_00: Good deal.
• 0:22
  SPEAKER_00: Well, the cattle futures charging back today after we took a little break there for a while.
• 0:28
  SPEAKER_00: What what do you want to start with today, Jace?
• 0:30
  SPEAKER_01: Yeah, I guess the big topic this week has been cash trade.
• 0:35
  SPEAKER_00: Yeah, so cash trade falling a little bit, even though futures are picking back up.
• 0:41
  SPEAKER_00: But uh what what do you see from from cash this week and what do you think it's telling us?
• 0:46
  SPEAKER_01: So I guess a little background cash on traded earlier in the week than normal, traded on Tuesday.
• 0:52
  SPEAKER_01: So we saw a limit lower move in the feeders on Tuesday, and then about six dollars on the fats, and that have brought us to a a leverage discussion on the on the cash trade.
• 1:06
  SPEAKER_01: So nothing has fundamentally changed really that we've seen yet, other than we're getting to the seasonal time of year where we where cash fails, and the northern the northern cattle feeder has seemed to be more interested in basis and even a little eager, more eager to sell now, even when it was weaker basis than it has been, but way stronger than seasonally normal.
• 1:32
  SPEAKER_01: And that's that's gave us we've almost given our leverage away with selling these on lower on a lower board.
• 1:40
  SPEAKER_00: Last week it was 245 in the north, something like that, not quite last week.
• 1:45
  SPEAKER_00: Yeah, last week would have been probably 242.
• 1:47
  SPEAKER_00: 242.
• 1:48
  SPEAKER_00: Week before that, 245.
• 1:50
  SPEAKER_00: This week early trade on Tuesday was like 235 to 237.
• 1:55
  SPEAKER_00: Now, wrapping up the week, we're back up to like 240, you think, after Yeah.
• 1:59
  SPEAKER_01: Today's Today there was trade in the north and south at around 240.
• 2:03
  SPEAKER_00: So a little bit better, but the that spread between the south and the north is completely gone now, pretty much.
• 2:08
  SPEAKER_00: Completely gone.
• 2:09
  SPEAKER_00: What what do you got to say about that difference?
• 2:12
  SPEAKER_01: Well, I think that's that's seasonal that we narrow here, but it has narrowed quicker than normal just with our with the lack of Mexican feeder cattle in the south there and our pretty much same fundamentals, you know, slightly smaller than a year ago up here, but exactly.
• 2:29
  SPEAKER_00: Okay, so cash trade probably been first and foremost one of the bigger talking points fundamentally in this market on the cattle side this week.
• 2:37
  SPEAKER_00: Uh keep an eye on that.
• 2:38
  SPEAKER_00: Well, okay, so now let's dive just a little bit deeper into that.
• 2:41
  SPEAKER_00: And you want to talk about like packer margins, what product values are doing?
• 2:46
  SPEAKER_01: Yeah, so product has been above four dollars here, and for the first time, aside from COVID, we're we're staying above this this level for a little bit here, and packer margins, especially on the lower cash this week, have really become profitable again.
• 3:05
  SPEAKER_01: So Packers making money, and they've been I guess this ties to our cash a little bit, but they've been buying some of these cattle with quite a little time, you know, four weeks out or so, and and they would indicate that they've got some of this meat sold already.
• 3:21
  SPEAKER_01: So it's uh it's an interesting picture there, I guess.
• 3:24
  SPEAKER_00: For sure.
• 3:25
  SPEAKER_00: So Packer margins decent, cut out way above four hundred still.
• 3:29
  SPEAKER_00: Uh cash has fallen a little bit, decent Packer margins.
• 3:32
  SPEAKER_00: What do you think about leverage going forward on that?
• 3:35
  SPEAKER_01: Yeah, I think I think we'll have decent leverage here.
• 3:39
  SPEAKER_01: I I think we have decent leverage now.
• 3:41
  SPEAKER_01: I think it's maybe been masked by the fact that the board was lower and the board has been able to force cash sales more than a fundamental change.
• 3:50
  SPEAKER_00: I was kind of surprised by that a little bit.
• 3:52
  SPEAKER_00: Yeah, most of the recent setbacks, it hasn't been able to do that.
• 3:56
  SPEAKER_00: So this time around, forcing a few cash sales, I was a little bit more concerned about that from a fundamental standpoint.
• 4:02
  SPEAKER_00: But we're gonna wrap up most of the individual uh fundamentals here with the kill.
• 4:07
  SPEAKER_00: Any comments on numbers here lately?
• 4:10
  SPEAKER_01: Yeah, so we've we've had sub 550,000 kills for the past three weeks here, you know, the two prior to Labor Day, and then Labor Day kill with the holiday was just uh 487,000.
• 4:22
  SPEAKER_01: But it's looking like the Packers are buying cattle to fill out a more full week, and we would suspect that that would probably climb above 550,000, and maybe you get you get worked through this if there is any additional supply, you get through it, work through it a little quicker here.
• 4:40
  SPEAKER_00: Nice.
• 4:40
  SPEAKER_00: And there's been a lot of volatility lately in this cattle market.
• 4:43
  SPEAKER_00: We talked about the setback we've had.
• 4:45
  SPEAKER_00: Uh, you could accompany some of that probably too.
• 4:48
  SPEAKER_00: Some of the recent jobs data we had.
• 4:50
  SPEAKER_00: I know that got passed on.
• 4:52
  SPEAKER_00: You also heard about a statement from President Trump on Monday morning just talking about how beef prices are really high.
• 4:59
  SPEAKER_00: He plans with his policies to fix that essentially, which I thought was ironic because some of their policies up until this point, whether it be closing the Mexican border for feeder cattle, which was bullish, and um putting massive tariffs on Brazil beef, that was also pretty bullish.
• 5:15
  SPEAKER_00: So, I mean, basically reverting those two things would basically help uh beef price at least come down a little bit.
• 5:20
  SPEAKER_00: So I'll be watching that.
• 5:22
  SPEAKER_00: But a big day, big rally again out of this.
• 5:25
  SPEAKER_00: We saw um bad news in the jobs reports that came out equate to uh six days from today, we're gonna get a Fed meeting result come out with how they're gonna treat basis on uh uh interest rates going forward.
• 5:41
  SPEAKER_00: They're supposed to cut, it's like a hundred percent chance they cut now, is what is expected, at least 25 basis points.
• 5:47
  SPEAKER_00: So that's a positive for the stock market and investments there.
• 5:51
  SPEAKER_00: Um, but at this point we're seeing uh very interesting data uh in today's uh equities at least, big ramp up, up another 50 on the equities here, Dow jumped 600 today.
• 6:04
  SPEAKER_00: Uh uh basically a a pretty nice rally again.
• 6:08
  SPEAKER_00: What do you think about outside market influence and the cattle market and how those two have reacted with each other, Jace?
• 6:14
  SPEAKER_00: Have they been pretty tied together, you think, or did they disconnect there for a couple days?
• 6:19
  SPEAKER_01: They've they've definitely disconnected for a little bit here, but it goes it kind of goes in spurts.
• 6:24
  SPEAKER_01: I mean, we saw what Trump said on on Monday there about high beef prices, and we've seen retail prices climb like over nine percent this year on beef and just just around two on pork and chicken.
• 6:39
  SPEAKER_01: So, I mean it is a that that maybe is more of a fundamental issue than just uh than just an outside market deal, but yeah, we have definitely seen we've seen the outside markets affect it for short periods of time and then kind of make its way back out.
• 6:54
  SPEAKER_00: Interesting.
• 6:55
  SPEAKER_00: Well, that outside market influence seems pretty big these days.
• 6:58
  SPEAKER_00: A lot of fun money flow have uh went into this cattle market.
• 7:02
  SPEAKER_00: Gotta be tough to find new buyers at these price levels, I'd sure think, for uh funds at least, but they sure haven't bailed up until this point.
• 7:09
  SPEAKER_00: So had some CPI data came out uh today as well.
• 7:13
  SPEAKER_00: Uh showed uh consumer prices ticked up in August.
• 7:16
  SPEAKER_00: Uh jobless claims rose to their highest level in nearly four years, uh really just setting us up for uh some interest rate cuts later on this year, it looks like so.
• 7:25
  SPEAKER_00: Alright, any final thoughts on the cattle market and what guys are kind of looking at today?
• 7:31
  SPEAKER_01: I think that covers it.
• 7:32
  SPEAKER_00: Alright, that sounds good to me.
• 7:34
  SPEAKER_00: Thank you for your time today, Jace.
• 7:35
  SPEAKER_00: If you guys need anything at all related to cattle needs, cattle help, should we be doing something, please call this man right here at Pro Ag.
• 7:43
  SPEAKER_00: We appreciate your business.