Latest / Professional Ag Marketing Podcast / Cattle: Cyclist

Transcript

Cattle: Cyclist · Professional Ag Marketing Podcast

• 0:00
  SPEAKER_01: Welcome to the Cattle Market Talk Podcast with Professional Egg 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.
• 0:16
  SPEAKER_01: Today is May 30th.
• 0:18
  SPEAKER_01: I've got Nick Bork with us here today on the Cattle Talk Podcast.
• 0:22
  SPEAKER_01: How's it going?
• 0:22
  SPEAKER_00: Good.
• 0:23
  SPEAKER_00: Thanks for having me, Mike.
• 0:24
  SPEAKER_01: Good.
• 0:25
  SPEAKER_01: Well, we're going to talk a little bit about the cycle for cattle, then we're going to wrap up with some supply and demand talk, but I want to talk about heifer numbers.
• 0:32
  SPEAKER_01: First, Nick, what do you got for us today?
• 0:35
  SPEAKER_00: Well, we are seeing, you know, that placements of heifers in these feed yards based on the last cattle and feeder ports is lower.
• 0:43
  SPEAKER_00: It's probably about two and a half points lower than a year ago, and probably about a point and a half lower than the five-year average.
• 0:51
  SPEAKER_00: You know, we're down under that 37% as far as as far as uh percentage of placements going into these feed yards.
• 0:59
  SPEAKER_00: So we do think that um heifer retention is underway.
• 1:04
  SPEAKER_00: Um and and there is noise in all that, obviously, with the amount of of crossbred heifers that are now in the yards coming out of the dairy industry.
• 1:12
  SPEAKER_00: But we've you know that's that's been happening for the last 15, 10, 15 years, right?
• 1:18
  SPEAKER_00: Where that that program has been steady growth every year.
• 1:22
  SPEAKER_00: So it's it's it's always hard to get a an exact handle on it, but we definitely do think based on just year-over-year numbers, we definitely think that we are retaining heifers today.
• 1:34
  SPEAKER_00: And we also know that from previous uh cycles, you know, the the the the you know the the drop off in price tends to happen the year prior to the low in supply.
• 1:47
  SPEAKER_00: So so um we'll see if that all carries out here yet this year.
• 1:52
  SPEAKER_00: And if so far the the you know this stage of the cycle has l lasted longer than what was expected, and and so therefore maybe there might be some other changes in the cycle, but we're kind of sticking to our guns that that this um year will kind of shape up to be to be like it it was in the last time we were in this stage of the cycle.
• 2:14
  SPEAKER_01: Because a titus supply probably won't occur until what probably 2027 at this point, if a heifer retention's just starting here in the United States?
• 2:24
  SPEAKER_00: Yeah, I think I I think uh possibly twenty-six, but uh but likely twenty-seven.
• 2:30
  SPEAKER_01: Not tomorrow or the summer by any means.
• 2:32
  SPEAKER_00: So it Yeah, it takes a long time for this for for us to actually expand the you know to increase the the amount of cattle that are coming from the feed yards.
• 2:42
  SPEAKER_01: What do you view supply like currently, Nick?
• 2:45
  SPEAKER_00: Well, we're definitely tight.
• 2:46
  SPEAKER_00: I mean we can see it in the cash number again this week.
• 2:48
  SPEAKER_00: We're definitely tight on supplies.
• 2:50
  SPEAKER_00: We knew that was coming.
• 2:51
  SPEAKER_00: We know that uh, you know, from the cattle and feeder ports that the numbers were gonna be tight going into June, look like they're gonna be tight even into July and August.
• 3:01
  SPEAKER_00: Um, and that's part of that's being driven too by the fact that we're making cattle big, so we're shifting a lot of these calf feds further out.
• 3:08
  SPEAKER_00: Um, but yeah, we're we're and you know, packers are reducing kills, they're reducing harvest schedules, and and still we're seeing, you know, seven, eight dollars uh increase in these dread dress bids.
• 3:20
  SPEAKER_00: So we're definitely tight on supply.
• 3:22
  SPEAKER_00: We also know that there's you know about as the highest percentage-wise of contracted cattle that we've seen in a long time.
• 3:28
  SPEAKER_00: So even though packers have a lot of contracted cattle to pull on, um, they're still uh, you know, the the they still need to bid up for the the the few cash cattle that are out there yet.
• 3:40
  SPEAKER_01: So how about if you look at the demand side of the category?
• 3:45
  SPEAKER_01: We just wrapped up a major holiday Memorial Day weekend there.
• 3:49
  SPEAKER_01: Uh what does demand look like as we restock the shelves after the holiday?
• 3:54
  SPEAKER_01: And what do you think it looked like before the before the holiday with how buying was?
• 3:59
  SPEAKER_01: I mean, it looks like boxed beef just keeps kind of going here.
• 4:02
  SPEAKER_01: I mean, we've got a nice upward trend, which would be nice seasonally too, but when's S thing stop?
• 4:08
  SPEAKER_00: Yeah, it's a good question, Mike.
• 4:09
  SPEAKER_00: I don't have the answer for that.
• 4:10
  SPEAKER_00: It just looks really strong here again, right now.
• 4:12
  SPEAKER_00: You know, boxes are going up about as much as cash is every week.
• 4:16
  SPEAKER_00: Looks like it's tailing the cash always a bit, but um, you know, there is some forward book on the meat too.
• 4:22
  SPEAKER_00: So I think uh all in all, there's just no end in sight for where this choice can get to.
• 4:28
  SPEAKER_00: Clearly there is an end, but I don't know where that is yet, Mike.
• 4:31
  SPEAKER_00: And uh we we haven't found it.
• 4:33
  SPEAKER_00: We demand continues to be phenomenal, and uh we're it it's gonna be really interesting where this choice ends up topping out uh this year or maybe next, but uh likely this year.
• 4:46
  SPEAKER_01: The Packers are probably losing a pretty decent amount of money on this.
• 4:51
  SPEAKER_01: Little uh run here, I guess.
• 4:54
  SPEAKER_01: So at this point it seems like either the consumer or the packers gonna have to say enough is enough from from these losses, isn't it?
• 5:01
  SPEAKER_00: Yeah, I think that's right, Mike.
• 5:03
  SPEAKER_00: Um one thing that's different, I think, in this stage of the cycle, though, is the Packer has lost money for a long time here, but not to the extent that they did in 14 and 15.
• 5:14
  SPEAKER_00: In 1415, they're actually losing, you know, on the index, uh 250 to 300 dollars.
• 5:20
  SPEAKER_00: Um, but they changed that in a hurry, right?
• 5:22
  SPEAKER_00: Now they've now they're losing 100 and 250, and that's gone on for quite some time.
• 5:27
  SPEAKER_00: So um yeah, they're they're they're they're eager to change that, you know.
• 5:32
  SPEAKER_00: But as long as choice beef can keep uh can can keep climbing right along with the cash, um, you know, there's noise in all those in all of our measurements of that index, too, right?
• 5:43
  SPEAKER_00: I mean that meat, the meat that's bought this week isn't uh potentially not sold here for a few weeks down the road, too.
• 5:50
  SPEAKER_00: So so it's but possible that that that those packer margins aren't quite as good as what they look from the index, but uh uh certainly they're wanting to change things relatively rapidly here.
• 6:01
  SPEAKER_01: What else are you thinking about this week uh in the cattle market here, Nick?
• 6:06
  SPEAKER_00: Well, I just think uh, you know, we're we're we're we're bouncing right up against our old highs here on the live cattle side.
• 6:13
  SPEAKER_00: Um guys are you know, as we're moving cattle in this very extremely strong basis environment, guys are wondering what to do, you know, what to fill up with and and um and and what to find for calves to go to crossbreads or or um or or start looking at these online sales and and seeing what they can pay.
• 6:32
  SPEAKER_00: And we just you know, eyes wide open out there.
• 6:36
  SPEAKER_00: We continue to manage risk.
• 6:37
  SPEAKER_00: Some obviously we are at the the highest uh capital requirements we've had for for um just overall cattle feeding, and that's uh we would say that's not a time to start ignoring risk management.
• 6:51
  SPEAKER_00: You know, start um we should have we should continue to have on the highest percentage of coverage that we've that that we've had on.
• 6:59
  SPEAKER_00: Um this is the stage of the cycle to do that and uh um just keep after it.
• 7:05
  SPEAKER_01: All right.
• 7:05
  SPEAKER_01: Well, thank you for your time today, Nick.
• 7:08
  SPEAKER_00: Thank you, Mike.