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Cattle: Iran So Far Away · 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 June 20th, and I've got Jace with us here today.
• 0:19
  SPEAKER_00: How's it going, Jace?
• 0:20
  SPEAKER_00: It's going pretty good.
• 0:21
  SPEAKER_00: Good.
• 0:21
  SPEAKER_00: We're going to talk a little bit about cattle today.
• 0:24
  SPEAKER_00: We've had some really fun stuff here lately to talk about.
• 0:27
  SPEAKER_00: I'm excited to get you on the show for dang near what?
• 0:30
  SPEAKER_00: First time?
• 0:30
  SPEAKER_00: Second time, maybe?
• 0:32
  SPEAKER_01: I think it's probably the first time.
• 0:33
  SPEAKER_01: First time on the cattle one.
• 0:35
  SPEAKER_00: Well, Jace has one of our main cattle guys here in the office, so it's a really fun time to have him come on.
• 0:40
  SPEAKER_00: We're just going to talk a little bit about what the futures did and why it did it, deep dive into a couple items, and then uh just kind of what we're looking for from here on out.
• 0:49
  SPEAKER_00: So, Jace, ever since the high that we had on June 9th going back, what what have the futures done since then?
• 0:57
  SPEAKER_00: I mean, we've sold off a little bit, but then I want to talk about why some of the specific days were such hard down days, because it's not, you know, we've had a market that's just gone up and it's been pretty steady, not like huge swings back and forth all the time.
• 1:11
  SPEAKER_00: So this last week, 10 days has been pretty erratic.
• 1:14
  SPEAKER_00: And I just want to break down why.
• 1:16
  SPEAKER_00: So going all the way back to June 9th, our high that day, what happened and what's kind of followed up?
• 1:22
  SPEAKER_01: So kind of after those highs there, we've seen a managed money position record long on the feeders, and they trimmed a little bit off of the live cattle there.
• 1:32
  SPEAKER_01: But we've also seen choice box beef was climbing.
• 1:35
  SPEAKER_01: It climbed almost 28 bucks since the first of June here.
• 1:39
  SPEAKER_01: And last year we were 70 bucks lower and we gained five bucks there.
• 1:44
  SPEAKER_01: So a big difference in the in the rate of climb there.
• 1:48
  SPEAKER_01: But you have a few things that happened recently outside markets, and we've seen some ice raids on a couple packing plants down by Omaha, and that kind of got a little jittery in the markets, and then and then we saw the Iran situation develop, and it just had it just had managed money wanting to trim their position a little bit there.
• 2:10
  SPEAKER_00: So on June 9th, what we saw was we saw the ice rate on that day.
• 2:14
  SPEAKER_00: That was a high.
• 2:15
  SPEAKER_00: We've sold off since then.
• 2:17
  SPEAKER_00: Liquidation ahead of this cattle on feed report, maybe.
• 2:20
  SPEAKER_00: You go to Friday, that was the Iran, Israel first bombing.
• 2:26
  SPEAKER_00: That was a pretty big sell-off in the cattle market.
• 2:29
  SPEAKER_00: Monday was back up a little bit, and then Tuesday, Trump kind of went back on his word about immigration a little bit and ice.
• 2:35
  SPEAKER_00: And that was a big hard day sell-off before then Wednesday, and then uh we had the break Thursday.
• 2:42
  SPEAKER_00: So a lot of our big it's funny because a lot of our big sell-offs hadn't really had anything to do with internal fundamentals on cattle, so to say.
• 2:51
  SPEAKER_00: It was just uh, you know, threat against uh deporting uh packing plant workers and that sector, uh, Iran-Israel war, and then just outside markets and money flow on the way out.
• 3:02
  SPEAKER_00: So uh really, really jumpy lately, the futures markets have been.
• 3:07
  SPEAKER_00: It seems like you even throw just one one little bear, one teddy bear in the room, and it seems like the markets sell off really quick in this environment right now.
• 3:16
  SPEAKER_00: They seem really touchy, and that's maybe the first time we've seen that in quite a while on this cattle market.
• 3:22
  SPEAKER_00: So that's definitely worth noting and some of the key events that surrounded this key uh timeframe.
• 3:28
  SPEAKER_00: I do believe we're at a very supportive level in this cattle market on the futures right now, Jace.
• 3:33
  SPEAKER_00: So it'll be interesting to see if we break lower here.
• 3:36
  SPEAKER_00: But uh, I think from a technical perspective, we're at a pretty strong support point, don't you?
• 3:40
  SPEAKER_01: Yeah, we've we've seen that trend line lower here that we bumped up against today at the highs, but we are very supportive on the on the bottom side too.
• 3:48
  SPEAKER_01: We're running into some moving averages and that sort of a thing.
• 3:53
  SPEAKER_01: But also, to your point, the outside markets affecting this cattle market is something we haven't seen in a while.
• 4:01
  SPEAKER_01: You know, a few weeks ago we had the screw worm little story there, and that that sent the market lower, but a related related thing, and now we've we've seen it get uneasy over outside markets, so would would suggest some managed money trimming, I guess.
• 4:19
  SPEAKER_00: Yeah, so what's something you want to take a deep dive in today on the cattle market for either fundamentals or a developing story you think that that's worth noting and talking about today in the cattle industry?
• 4:30
  SPEAKER_01: I guess I find I find the August board to be interesting here versus our cash.
• 4:35
  SPEAKER_01: So currently in the north this week we got some 376 in the meat, so that's close to a 238 there live bid, and that's 28 bucks ahead of the August board there.
• 4:48
  SPEAKER_01: So just interesting spread, and we have a about a$10 spread north to south with a few cattle trading at$228 in the south, about$1,200 head.
• 5:00
  SPEAKER_01: That's seven bucks lower for them on the week.
• 5:03
  SPEAKER_01: But I guess it's just interesting when when last year we we were about ten bucks lower from June expiration or June cash to August expiration, and we're we're sure trading this board like we've got like the Packers gonna get a bit more leverage back before then.
• 5:22
  SPEAKER_00: So that that's interesting talking about that August board, just because it's a it's at a massive discount to where cash is, right?
• 5:29
  SPEAKER_00: And from a historical perspective, you think that what should that normally be versus what it is today, you think?
• 5:38
  SPEAKER_01: It's normally about about ten back.
• 5:41
  SPEAKER_01: It depends it depends on the year we've been making these cattle bigger, so it'll be yeah, it remains to be seen when we when we actually sell those cattle.
• 5:51
  SPEAKER_00: So it's a big take-home note on August futures today, in your opinion.
• 5:56
  SPEAKER_01: August continues to be undervalued as it as you look at spot fundamentals here, but also the the deferred months are also discounted compared to our fundamentals here.
• 6:11
  SPEAKER_01: You know, we usually see a October-April spread or a normal spread there would be about seven and a half to eight bucks, and we're currently right around zero on either side of zero there.
• 6:22
  SPEAKER_01: So the market is is trading some sort of bearish news that we haven't we haven't seen in a few years here.
• 6:31
  SPEAKER_01: It's been a pretty good uptrend, and it's trading like we could have a plant closure or that sort of a thing.
• 6:37
  SPEAKER_00: Trading a black swan at some point for sure, just waiting for that market to crash.
• 6:42
  SPEAKER_00: What's something you're looking for out of uh cattle here going forward that you're gonna be following closely and you think will be worth watching from both a seasonal perspective, cycle perspective, anything that's gonna be catching your eye here in the next couple weeks?
• 6:58
  SPEAKER_01: I think cash is the thing to watch here.
• 7:01
  SPEAKER_01: You know, it seems like if we do get a little lower cash this week, which we could get some late trade that bumps it up, but we could see the Packer get a little more leverage for a little bit with their smaller kills.
• 7:13
  SPEAKER_01: You know, they've killed about seven and a half percent less in the Fed cattle slaughter in the past six weeks.
• 7:19
  SPEAKER_01: So they're really trimming their kills there.
• 7:22
  SPEAKER_01: They could get a little leverage back and push cash lower for a bit.
• 7:25
  SPEAKER_01: It's just a matter of how long they can maintain that for.
• 7:28
  SPEAKER_00: Last week at the end of the week, it sure seemed like cash got a pretty good bump right at the end.
• 7:33
  SPEAKER_00: The high trade of the week was like, what, six o'clock on Friday?
• 7:37
  SPEAKER_00: I mean it was late in the week, right?
• 7:39
  SPEAKER_00: It kind of got saved from that perspective.
• 7:42
  SPEAKER_00: This week here, so far up until this point, uh, on Friday at three o'clock, it has traded lighter volumes and and a little bit weaker here.
• 7:50
  SPEAKER_00: So I agree, a lot more volatility, a lot more uncertainty with cash.
• 7:53
  SPEAKER_00: You're waiting for any producers to continue to try to take advantage of these uh interesting basis levels, to put it that way.
• 8:00
  SPEAKER_00: And uh it'll be uh a true indication here to see if this lowers lower futures market will end up being the one that is right or not.
• 8:09
  SPEAKER_00: Any other final thoughts for our listeners here today, Jace?
• 8:13
  SPEAKER_01: Well, you did mention that about basis, and we do see about a$28 basis, so it's nothing to it's nothing to look lightly on there, and it's interesting that we do, even though the the Packer might be gaining a little bit here, it is interesting to look at how much leverage we've maintained for a while in this market, and it'll remain to be seen as we go forward.
• 8:35
  SPEAKER_00: Chase to wrap up here, I got two other things.
• 8:38
  SPEAKER_00: I want to talk about the cattle on feed, and then I want to talk about what cash trade is doing for calves out there.
• 8:44
  SPEAKER_01: Yeah, so we got a cattle on feed report this afternoon.
• 8:47
  SPEAKER_01: It was not anything crazy, nothing out of the range of estimates, but we did get a little higher estimate on the on feed numbers for June 1st, so 99 there versus estimates of 98.8, just a little difference there.
• 9:02
  SPEAKER_01: And then placements were down two percentage points for the month, month of May there, versus 92 versus a 94.2 were the estimates there, and then marketings were right on at 90% of last year, so not a whole lot going on there, but a little little light on the placements, but a little heavier on the on-feed numbers.
• 9:24
  SPEAKER_00: How about on the calf trade there?
• 9:26
  SPEAKER_00: What are you seeing out of that?
• 9:28
  SPEAKER_01: Yeah, so this week we've we're starting to get into some of these summer sales, and we've looked at a few different types of calves.
• 9:35
  SPEAKER_01: So, like the yearlings, the yearling steer calves are bringing about 295 to 316 for a little over 900 pounds there.
• 9:45
  SPEAKER_01: So break-evens on those are pretty high, and that's that's typical for this time of year.
• 9:51
  SPEAKER_01: You see, the feeders getting excited about these good quality calves, and so you're you're breaking even at like 223 on some of those some of those calves there.
• 10:01
  SPEAKER_01: So a real high break-even, and then and then going to the calves, this year's calves weighing about five and a half out of say South Dakota, they're bringing about 380 to 420.
• 10:14
  SPEAKER_01: So looking at a few groups there weighing just over five, they break just below two bucks there for they come in October, and then they'll be they'll be fat next late summer, early fall.
• 10:27
  SPEAKER_01: So, you know, at that discount in the board, those those two types of calves are probably about the same, you know.
• 10:34
  SPEAKER_01: None of them work real well yet, but heifers are about twenty dollars back there, and and it it just looks like the normal summer excitement that we've that we've seen in the past few years.
• 10:46
  SPEAKER_00: All right.
• 10:46
  SPEAKER_00: Well, thank you for your time today, uh Jace.
• 10:49
  SPEAKER_00: I appreciate it.
• 10:50
  SPEAKER_00: We'll catch all of you next week on the Cattle Market Talk podcast.
• 10:53
  SPEAKER_00: Thank you.