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Cattle on Feed · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Ed Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the edge 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 November 18th.
• 0:25
  SPEAKER_01: I've got Nick with us here today.
• 0:26
  SPEAKER_01: How's it going, Nick?
• 0:28
  SPEAKER_00: Pretty well, Mike.
• 0:29
  SPEAKER_01: Good.
• 0:29
  SPEAKER_01: Well, we're going to talk about the Catalon Feed Report that came out today.
• 0:33
  SPEAKER_01: That's going to be our main topic of discussion for this week's episode, but we are going to get started talking about some of the other things that went on this week here.
• 0:41
  SPEAKER_01: A couple of news stories just to kind of catch up on.
• 0:44
  SPEAKER_01: So one of the bigger main topics here this week, especially in the grain markets, was uh the Ukraine grain export deal got extended.
• 0:52
  SPEAKER_01: So the UN brokered a deal allowing exports of uh Ukrainian grain from the Black Sea.
• 0:58
  SPEAKER_01: Uh then that will be extended.
• 1:00
  SPEAKER_01: All sides confirmed on Thursday, so in yesterday's trade.
• 1:04
  SPEAKER_01: Uh, and that's helped ease some of the global prices here over the past couple trade sessions.
• 1:09
  SPEAKER_01: And you've really seen it happen in these grain markets.
• 1:12
  SPEAKER_01: They've pulled back significantly the past couple days here.
• 1:16
  SPEAKER_01: And that decision to renew uh the accord for the next 120 days, um, that's really putting some pressure on these markets here in the time being.
• 1:25
  SPEAKER_01: Ukraine shipped uh more than about 11 million tons of crops through the Black Sea since the deal came into force here, and uh that's mainly been all led by corn and wheat cargoes.
• 1:36
  SPEAKER_01: If you look at some of the other big events going on here this week, you'd look at spot crude oil futures.
• 1:43
  SPEAKER_01: Those have suffered the largest single-day loss since the end of September, dropping to the lowest level since we've had since October 3rd, it looks like.
• 1:52
  SPEAKER_01: Um a lot of pressure on some of these outside markets here this week and a couple of other big items too when it comes to China's economy, watching that a little bit.
• 2:03
  SPEAKER_01: The U.S.
• 2:04
  SPEAKER_01: economy having a major uh uh bankruptcy here, uh supposedly bigger than Enron, out of the FTX, which that's uh an own podcast all on its own for sure, that we could do sometime, but very interesting situation there.
• 2:17
  SPEAKER_01: Uh we've got a bunch of different things going on where you could see some money pulling out of some of these uh commodities and riskier incentives to have more of a risk-off attitude here in the near term.
• 2:29
  SPEAKER_01: So we are going into next week is Thanksgiving, but mainly here on the grain markets based, it seems like it's doing most of the work here.
• 2:37
  SPEAKER_01: In the meantime, futures have been pretty sideways here and uh kind of floating towards the bottom end of the range of expectations here.
• 2:45
  SPEAKER_01: And uh soybeans a little bit firmer here going into the end of the week there, had a nice bounce on that.
• 2:49
  SPEAKER_01: That's been a little bit more choppy, been uh been supported, and we've had some export purchases there on that, but uh a little bit choppier there on the soybeans, not quite as big as of a sell-off there with news about the Ukraine and Russia not having quite as much of an impact on the soybean market.
• 3:07
  SPEAKER_01: But what do you got for us on the cattle side of things uh here, Nick?
• 3:11
  SPEAKER_01: It was a big day.
• 3:12
  SPEAKER_01: We took out some pretty key uh resistance levels here, I thought, on the on the cattle futures at least.
• 3:18
  SPEAKER_01: We've been trying to take out 159 for a while on the April and really tried to rally again going into this cattle on feed report, which wasn't the first time we've kind of seen this out of the last few.
• 3:28
  SPEAKER_01: So what do you got to tell us about the report and kind of how the futures have been acting this week?
• 3:33
  SPEAKER_00: Yeah, the m the report certainly uh wanted to see kind of a friendly report or the report, um, which is kind of what we got.
• 3:42
  SPEAKER_00: Um, you know, cattle on feed now 98% of a year ago.
• 3:46
  SPEAKER_00: That's kind of where where we've been now um the last couple months here, just with numbers kind of declining.
• 3:53
  SPEAKER_00: Placement numbers coming in at 94% of a year ago, that certainly is friendly.
• 3:59
  SPEAKER_00: Um if you kind of extrapolate the the weight categories in that placement data.
• 4:05
  SPEAKER_00: The uh the February available supply is about 3% less than a year ago.
• 4:12
  SPEAKER_00: Um also had another big marketing month there in October with 101% of a year ago, which that's very evident in the in the slaughter numbers that we're seeing.
• 4:22
  SPEAKER_00: So uh, you know, have been killing 15 to 25,000 head more per week uh than a year ago for for quite some time now on the Fed supply.
• 4:33
  SPEAKER_00: The cow kill is obviously still elevated as well.
• 4:37
  SPEAKER_00: Um so, all in all, a pretty friendly report.
• 4:40
  SPEAKER_00: Uh you know, this the the these lower placements and and lower supply numbers going into the end of the spring should continue.
• 4:50
  SPEAKER_00: Uh choice beef has kind of slipped a little bit here in this last week, but uh still relatively high.
• 4:58
  SPEAKER_00: Um and cash cattle obviously still moving upward this week.
• 5:02
  SPEAKER_00: Um did see some 155 stuff, but one of mostly gonna be in that 153, 154 area, up a buck or two from last week.
• 5:13
  SPEAKER_00: The south is gonna be running in that$1.50 to$1.52 area.
• 5:18
  SPEAKER_00: That'd be up a couple bucks from last week as well.
• 5:21
  SPEAKER_00: Uh they the what we're hearing though, they're buying here now for the week after Thanksgiving.
• 5:28
  SPEAKER_00: Um and like I said, choice is down a little bit, so these Packers margins uh are are decreasing here um as we go forward, which certainly is uh has some bullish momentum to this cattle deal.
• 5:41
  SPEAKER_00: Um weights, however, though, are on the incline.
• 5:44
  SPEAKER_00: We're now uh, you know, five pounds, I think above a year ago, and and um uh certainly the weather that we've had all this last fall, you know, fairly dry, fairly cool.
• 5:58
  SPEAKER_00: I mean, it's been very good growing weather for cattle and and um and we've managed to put gains on very well.
• 6:07
  SPEAKER_00: We do feel that we're very current in this cattle market right now today, and uh and uh should continue to be can you know current uh October and November we had quite a few less um well about three percent less available supply as well than a year ago, and and so uh even though December and January numbers for the available supply not considering carry over are uh were you know about similar to a year ago, it looks like February start that lower supply again.
• 6:40
  SPEAKER_00: So, all in all, I think this report was was friendly and and and uh you know the market has certainly traded it late this week.
• 6:49
  SPEAKER_00: Um hopefully we've kind of put a bottom in these futures here for now.
• 6:53
  SPEAKER_01: How high is high you think going forward here?
• 6:56
  SPEAKER_01: Like we've been running this thing a buck higher, it seems like every other week for how long now?
• 7:02
  SPEAKER_01: Out of all the commodities, uh this is very abnormal, but cattle seems to be more of a tighter traded, boring commodity here compared to things like uh Russia-Ukraine impacting the grain markets, the hog market's been extremely volatile, a lot of choppiness in that.
• 7:18
  SPEAKER_01: This slow grind higher, it nothing's telling you today that that shouldn't continue with tighter numbers going forward and steady demand here in the meantime, isn't it?
• 7:29
  SPEAKER_00: Yeah, I think so.
• 7:30
  SPEAKER_00: I think uh, you know, the the the the the market action of the of the cattle market has been very friendly, and the board does have some premium out there, but there just is some resistance to really get this board fired up, I think, even though we have had this very long um grind higher in cash.
• 7:52
  SPEAKER_00: But there is just some resistance, I think, with with what we got going on in the economy, and if we can really hold um this beef demand for the you know over the next 12 months.
• 8:04
  SPEAKER_00: Um otherwise, I think we you know, out with without that outside pressure from the market, and um we probably would see some some higher board prices for this spring already.
• 8:17
  SPEAKER_01: But um I'm very curious to see if these cattle on feeder ports, these last two, if this is a start of a trend now or if this is what the futures have been waiting for um to help break to uh to some new levels to the upside here, because really before these last two, they haven't been quite friendly, have they, Nick?
• 8:36
  SPEAKER_00: Right, right.
• 8:37
  SPEAKER_00: This certainly is one that's that's uh you know of the friendlier ones we've seen.
• 8:42
  SPEAKER_00: And I think that's very possible that maybe this does start a new trend kind of for for upward momentum in the futures.
• 8:48
  SPEAKER_00: We'll just have to see.
• 8:49
  SPEAKER_00: I do think there's gonna be some resistance to that yet though, um, with how high the you know the board is already relative to last year's cash cattle prices.
• 9:00
  SPEAKER_01: So once are you waiting just for supplies to really start to fall off there, see some retention of heifers, and is that what's gonna get the markets finally excited, you think, or are these back months high enough already for for most of this to just ease into?
• 9:15
  SPEAKER_00: Well, I'm not sure that they're really high enough yet relative to what we could see in the cash market in this coming year, especially this spring.
• 9:23
  SPEAKER_00: But I do think that you know it's it it could be we could be going through one of these years where the where the each uh you know traded month kind of makes its high, you know, during delivery.
• 9:35
  SPEAKER_00: Um we'll have to see how that goes um outside of any you know major um black swan event that would happen in this cattle deal.
• 9:45
  SPEAKER_00: But uh it's very possible that we got these markets moving higher late in in delivery because uh we don't have as much you know buying power from the from the funds here uh with with kind of the the worriness of the economy.
• 10:01
  SPEAKER_01: And maybe that's what it is.
• 10:02
  SPEAKER_01: Maybe it's as simple as just that there's a lot of balls in the air that could be potential black swan events and the funds haven't had the full opportunity to really get behind this thing yet.
• 10:11
  SPEAKER_01: So it'll be interesting.
• 10:13
  SPEAKER_01: It's always fun uh predicting the future, isn't it, Nick?
• 10:16
  SPEAKER_00: Yes, it is.
• 10:16
  SPEAKER_01: Yes.
• 10:17
  SPEAKER_01: If uh any final any final thoughts for our listeners this week.
• 10:22
  SPEAKER_00: I don't think so.
• 10:22
  SPEAKER_00: I think we you know we obviously the the cattle deal uh as we've all talked about here right now, you know, is it does look friendly and and as we know it today, the fundamentals are really aligning to paint a pretty good picture for next year.
• 10:39
  SPEAKER_00: Um we would just echo what we've said all along, though, the dollars at risk in these cattle and the amount of the amount of dollars that we're gonna have in feeding these cattle really points us to getting some floors on these cattle yet by way of either putz or lrp, just because uh yeah, we got a tremendous amount of dollars at risk in eat each individual animal, and we want to make sure we preserve some equity during this this time as well.
• 11:04
  SPEAKER_01: So thank you for checking in, Nick.
• 11:06
  SPEAKER_01: Uh we'll probably be having a little bit different schedule next week with Thanksgiving, but we'll still be around.
• 11:12
  SPEAKER_01: Thanks, guys.
• 11:13
  SPEAKER_01: And thank you to all our listeners.
• 11:15
  SPEAKER_01: Please reach out to us from our website at professionaleggmarketing.com or check out our newly added hog specific podcast named Hog Market Talk that's released every Thursday.
• 11:26
  SPEAKER_01: Trading commodity futures and options involve substantial risk and loss that is not suitable for all investors.