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Cattle: Outside Fun · 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 involve substantial risk of loss and is not suitable for all investors.
• 0:15
  SPEAKER_00: Today is October 3rd.
• 0:16
  SPEAKER_00: I've got Jeff back with us here today on the Cattle Talk Podcast.
• 0:20
  SPEAKER_00: How's it going, Jeff?
• 0:21
  SPEAKER_00: It's going good, Mike.
• 0:22
  SPEAKER_00: How are you?
• 0:23
  SPEAKER_00: We are doing pretty good.
• 0:24
  SPEAKER_00: It's a weird stretch that we've had here, Jeff.
• 0:29
  SPEAKER_00: You put a low in on the grains here about the middle of August, and now you're harvesting a little bit, and markets have been putting their a little bit of an uptrend here together.
• 0:39
  SPEAKER_00: Ironically, the cattle market has been incredibly sideways through that same time frame.
• 0:45
  SPEAKER_00: So that's a little bit of a change of pace over what the last three years, two years?
• 0:49
  SPEAKER_01: Yeah, th three years for sure, I would say.
• 0:51
  SPEAKER_01: But yeah, there's not too many weeks where you're gonna run sharply sideways week over week and it goes back and check, but we must be within fifty cents of where we started on Monday.
• 1:00
  SPEAKER_01: Yeah.
• 1:01
  SPEAKER_01: Um so that that trading range has been incredibly narrow.
• 1:04
  SPEAKER_01: It's moved a dollar back and forth, dollar fifty back and forth, so there's been some volatility to it, but uh and a market that hasn't changed fundamentals that probably are coming in very similar to uh to what their expectations have been, I think.
• 1:20
  SPEAKER_01: Um but also kind of divorcing itself a bit from outside markets, huh, Mike?
• 1:26
  SPEAKER_00: A little bit.
• 1:27
  SPEAKER_00: By the way, September, the month of September, October live cattle opened the month at 231.45 or 239.45, Jeff.
• 1:38
  SPEAKER_00: You closed on the 30th at 234.77 and a half.
• 1:43
  SPEAKER_00: So you did close lower in October fat cattle during the month of September.
• 1:49
  SPEAKER_00: Now I know that's just a month for that contract, not necessarily the start of it to the end of it or anything, but that is something that we have not really seen a whole lot of, probably.
• 1:59
  SPEAKER_01: So very interesting.
• 2:01
  SPEAKER_00: Yes, we're gonna talk about a lot of fun things today.
• 2:03
  SPEAKER_00: We're gonna talk about outside markets, we're gonna talk about uh cutout going down here a little bit, cash where that's been sitting at, uh other than just some sideways futures.
• 2:11
  SPEAKER_00: Uh, what do you want to start with?
• 2:13
  SPEAKER_01: Some weaker fundamentals or I'd say let's jump into the outside markets, look at uh, you know, talk about that, Mike, talk about, you know, for a long time we've been on this podcast claiming a pretty solid relationship between you know the stock index futures uh and the cattle market futures.
• 2:30
  SPEAKER_01: They were kind of trading hand to hand, and that certainly has changed in the past three, four weeks.
• 2:35
  SPEAKER_00: Now, on the outside markets, we're seeing some very interesting things start.
• 2:40
  SPEAKER_00: And by this, I would like to just say that the stock market is still up and running fantastic.
• 2:45
  SPEAKER_00: New highs across NASDAQ, uh Dow, SP, basically the equities are all feeling really good today.
• 2:51
  SPEAKER_00: People are pumping money into them and they're at record levels.
• 2:54
  SPEAKER_00: So it we'll start with that.
• 2:55
  SPEAKER_00: That there's no immediate risk off I need to sell all of my equities type action going on today.
• 3:02
  SPEAKER_00: However, you are seeing a phenomenon where you are starting to become concerned that the U.S.
• 3:08
  SPEAKER_00: is printing too much money.
• 3:09
  SPEAKER_00: You're seeing people run away from the US dollar and diversify away from it, buying things like Bitcoin has been on a tear this week up to over 122,000 here now.
• 3:18
  SPEAKER_00: Uh you're looking at gold on a massive rally.
• 3:21
  SPEAKER_00: Uh they're using that as a safe haven investment to hedge against a recessionary fear at down the road, or the equities are worth more than they were at one point.
• 3:30
  SPEAKER_00: So we're buying gold just in case a recession does happen, that you're protected a little bit there.
• 3:35
  SPEAKER_00: So they're using that as more of a risk safe haven type of an investment for gold.
• 3:40
  SPEAKER_00: Also, they're just using it as a another way to pull away from the US dollar, Jeff, which is the most recurring theme that I continue to see across all of these um uh uh equity type hedge fund, outside money, you know, where people are putting money and concerns in the broad global economy.
• 3:59
  SPEAKER_00: They're worried about the US dollar.
• 4:01
  SPEAKER_00: Um so those are some things I think that worth noting.
• 4:05
  SPEAKER_00: But in general, here, I I really believe that that's something that's gonna continue.
• 4:10
  SPEAKER_00: I think Bitcoin's gonna continue to gain steam, gold's gonna continue to gain some steam here, and the second largest position on a lot of fund managers' desks right now is a US short US dollar.
• 4:21
  SPEAKER_00: That's probably gonna continue here for a little bit.
• 4:23
  SPEAKER_00: So just for outside markets where they're all sitting at today, they're not worried really.
• 4:29
  SPEAKER_00: They're not worried about their equities, they're not worried that the U.S.
• 4:32
  SPEAKER_00: is gonna go into a recession or anything.
• 4:34
  SPEAKER_00: They're just like, well, my equities are worth more, and now the government's shut down.
• 4:40
  SPEAKER_00: Um I need to diversify and hedge against if something bad did happen for a little bit, that we can kind of ride this thing out, Jeff.
• 4:47
  SPEAKER_01: So nothing crazy alarming from that perspective that, hey, we're heading into a recession, uh anything like that, but maybe also not as robust of economy as if you just um stared at the the uh stock indexes and and seen that they were hitting records high, it's maybe maybe not as robust as that would indicate either.
• 5:07
  SPEAKER_01: Am I reading the situation correctly?
• 5:09
  SPEAKER_00: Exactly.
• 5:09
  SPEAKER_00: Your labor situation's probably not where it should be.
• 5:12
  SPEAKER_00: Uh you're cutting rates for a reason in the United States right now.
• 5:16
  SPEAKER_00: So you start to add up some of those things, it's it's maybe not as good as it could be, but yet uh I'm not gonna really p move my money around too much because of it.
• 5:26
  SPEAKER_00: Now, the one thing I have noticed, Jeff, is that we're putting in nice record highs, putting a lot of money into the S ⁇ P 500.
• 5:33
  SPEAKER_00: We've divorced ourselves a little bit in the cattle market from the equities lately, haven't we?
• 5:37
  SPEAKER_01: Yeah, and that you know that could uh be a signal of you know beef market being the tip of the spear as far as the health of the uh US consumer, right?
• 5:48
  SPEAKER_01: That you could maybe draw that connection.
• 5:51
  SPEAKER_01: Um I and that's possible.
• 5:53
  SPEAKER_01: I think I would back away from that argument pretty rapidly.
• 5:57
  SPEAKER_01: Uh, you know, one of the things, and we've talked about it a lot, and is uh we're pushing those retail prices higher on the beef.
• 6:04
  SPEAKER_01: And we're doing that pretty aggressively here.
• 6:07
  SPEAKER_01: Um and we're also entering into a time of year where uh from a seasonal perspective, it's it's easy for the consumer to back away from protein and back away from the expense of beef protein.
• 6:19
  SPEAKER_01: And I think that's more what we're potentially seeing in the beef market.
• 6:24
  SPEAKER_01: You know, we've pulled the almost sixty dollars, um, well a little more than sixty dollars off the uh choice cutout, for an example, in basically one month.
• 6:34
  SPEAKER_01: Um and I I think uh that's that's more of a signal of hey, prices are getting plenty high.
• 6:40
  SPEAKER_01: Also, some of that was a seasonal drop, and probably not really referencing you know the greater economic situation in my mind.
• 6:49
  SPEAKER_01: Um, I think it's gonna allow some of these competing proteins to come in and and replace some of that beef demand.
• 6:55
  SPEAKER_01: You know, we keep looking at our uh pork cutout for an example, and those prices remain very high compared to what they normally would from a seasonal perspective.
• 7:05
  SPEAKER_01: Chicken's the one that is getting beat up a little bit, but they've also are pushing more supply out the door already.
• 7:11
  SPEAKER_01: So they're kind of coming after the pork and the beef guys with a little bit more supply and and some cheaper product.
• 7:18
  SPEAKER_01: So, you know, initial reaction here of how well is the US consumer taking the higher beef prices as we go into fall, Mike, um, is kind of negative.
• 7:30
  SPEAKER_01: Doesn't it it I'm not ready to completely jump on the bandwagon of you know it's too high and it's all over and that sort of thing.
• 7:38
  SPEAKER_01: Um, because so far we've just done a somewhat normal seasonal drop.
• 7:44
  SPEAKER_01: In fact, uh back in the first of August, we came down to this uh 362 level on choice.
• 7:52
  SPEAKER_01: Um, we're gonna be playing right around that type of a level here on this afternoon's report.
• 7:58
  SPEAKER_01: So we haven't done anything too special yet.
• 8:00
  SPEAKER_01: We've just taken a lot of shine off it, and of course, it's uh very high on everybody's list as to how we're gonna start seeing this consumer back off.
• 8:08
  SPEAKER_01: There's just there's a lot of things that would point towards, you know, yes, we probably will see them back off here a little bit.
• 8:15
  SPEAKER_01: So we're waiting for some more evidence to really draw some large conclusions on that.
• 8:21
  SPEAKER_00: Uh so this could continue here a little bit.
• 8:24
  SPEAKER_00: 361 type area was our low at what the end of July there, Jeff.
• 8:30
  SPEAKER_00: Uh, we're approaching that quite quickly, like 362 there.
• 8:33
  SPEAKER_00: It it doesn't appear like this level is really gonna hold it at this point, does it?
• 8:37
  SPEAKER_01: I think I think that story will be written here, you know, next week.
• 8:41
  SPEAKER_01: Um I I wouldn't be surprised if we push to lower levels than that.
• 8:45
  SPEAKER_01: I totally agree.
• 8:48
  SPEAKER_00: From a cash perspective, how the Packers reacting to this.
• 8:52
  SPEAKER_00: Um I was just doing some quick math here, Jeff.
• 8:54
  SPEAKER_00: It doesn't really look like the Packers in too fantastic of a spot, but I don't see any alarms ringing at this point.
• 9:01
  SPEAKER_00: They've been able to bring cash right down with this, haven't they?
• 9:04
  SPEAKER_01: Yeah.
• 9:04
  SPEAKER_01: Well, we've been it's not a spot where they're they come unaccustomed to, right?
• 9:09
  SPEAKER_01: Uh also true.
• 9:10
  SPEAKER_00: They're losing money for the last few years at this level.
• 9:13
  SPEAKER_01: Yeah.
• 9:13
  SPEAKER_01: So it's if you look at the past three two to three year history, this would be pretty close to normal.
• 9:18
  SPEAKER_01: Uh, I'm not I'm I'm not suggesting they're like it.
• 9:21
  SPEAKER_01: I'm sure they're showing some red ink for sure.
• 9:24
  SPEAKER_01: Um, but the fact that they can grab some profitability from time to time like they did back um early September and late August, I I think that's a pretty major win for them.
• 9:35
  SPEAKER_00: Especially when they can make money on other sectors like Tyson uh explaining how they're making money on the pork or the chicken side, right?
• 9:43
  SPEAKER_00: Yeah.
• 9:43
  SPEAKER_00: On poultry.
• 9:44
  SPEAKER_01: For sure.
• 9:44
  SPEAKER_01: And you know, a lot of the from a retail standpoint, uh through the month of August into the first part of September, they're willing to lose a little bit of money on beef too.
• 9:53
  SPEAKER_01: And that's one of the things from a seasonal perspective that changes, right?
• 9:56
  SPEAKER_01: They're they're not gonna be as willing to run those features um as a lost leader, so to speak, to get people in the stores as you cross into the month of October here.
• 10:05
  SPEAKER_01: Um, and October is pork month, so there's gonna be some funds that are pushed onto the retail front here uh also from a seasonal standpoint to run some more features uh and to and to move some pork.
• 10:16
  SPEAKER_01: I think that's possibly part of the reason why they're gonna compete um a a little bit better.
• 10:22
  SPEAKER_01: Now you mentioned the cash market, Mike, and I think there too, there's that that market's kind of soggy.
• 10:28
  SPEAKER_01: Um, and they've been able to work that price down right with the product values, which is really thankfully.
• 10:33
  SPEAKER_01: Something new.
• 10:34
  SPEAKER_01: Yes, for sure.
• 10:35
  SPEAKER_01: And some of that could be seasonal, some of that also for those up of us in the northern part of the cattle feeding world, we have to remember, you know, we're not all the cattle are up here.
• 10:45
  SPEAKER_01: Larger percentage of the negotiated ones are, and that that definitely can matter.
• 10:49
  SPEAKER_01: But you know, the south is getting along better um than what we are up in the north side of things.
• 10:54
  SPEAKER_01: So you have to keep that in mind a little bit.
• 10:56
  SPEAKER_00: Is that all because they don't have Mexican feeders?
• 10:59
  SPEAKER_01: They yes, the Mexican feeders um are you know they're missing from the fat cattle supply at this point down there for sure.
• 11:06
  SPEAKER_01: It's also a little bit seasonal, um, and especially in an environment, you know, we talked about this the past few months as well.
• 11:13
  SPEAKER_01: You know, as we go through July and August, we just weren't killing very many cattle.
• 11:18
  SPEAKER_01: We're rock bottom as far as the speed at which we're running these shackles, right?
• 11:22
  SPEAKER_01: And you know, 7% less than last year.
• 11:25
  SPEAKER_01: And it's it's the the math shouldn't add up to be that large of a drop year over year.
• 11:30
  SPEAKER_01: Um, so the question was continually out there.
• 11:33
  SPEAKER_01: Are we killing too few?
• 11:35
  SPEAKER_01: Are we backing a few up?
• 11:37
  SPEAKER_01: And I think, you know, in this part of the world, if if that's true, and I think it sure might be, um that's gonna be more evident than the northern part of the belt than the southern.
• 11:47
  SPEAKER_01: So as you push a few cattle back from the summer, um, get to larger, heavier weights, uh, you're you're gonna see that more in the north.
• 11:55
  SPEAKER_01: That's gonna put the northern feedlot in a little bit uh less competitive position compared to the southern feedlot.
• 12:03
  SPEAKER_01: And I think, you know, historically, I'm talking really big picture here, um going back ten or twenty years, you're gonna say, well, if you have a big cattle problem, and that's probably too strong of a word, but those lows would come more in November.
• 12:19
  SPEAKER_01: Um, November to maybe even December in in today's situation.
• 12:23
  SPEAKER_01: So I think we could be uh up against um some tougher markets here for a little bit.
• 12:30
  SPEAKER_01: The other thing that we have going on is the Packer has a higher than normal uh number of contracted cattle for October.
• 12:38
  SPEAKER_01: Um so they're gonna come in here, they're gonna have more committed loads than normal uh as a percentage of their supply, and that gives them an extra tool, right?
• 12:48
  SPEAKER_01: So they're able to uh you know hold their ground a little bit stronger and put a little bit more pressure on the open market cattle that are out there.
• 12:58
  SPEAKER_01: Now, I don't know that that lasts all month.
• 13:01
  SPEAKER_01: Um the first two months is gonna be it's where it's most powerful until they work through some of those loads, um, but they do have a lot of those.
• 13:08
  SPEAKER_01: So I think you know, expect kind of some weaker fundamentals as we move forward here.
• 13:13
  SPEAKER_01: We watching the beef price pretty hard.
• 13:16
  SPEAKER_01: I think next week's gonna be really important.
• 13:18
  SPEAKER_01: Are we able to kind of stabilize in this 360 area, or we do we have to take another leg lower?
• 13:24
  SPEAKER_01: Um, and then you know, almost either way, I would dare say fundamentals as far as the cash probably have a weaker uh week in front of them.
• 13:34
  SPEAKER_00: All right, any final thoughts for our listeners this week?
• 13:37
  SPEAKER_01: And we keep kind of pushing the idea of let's be very careful here.
• 13:41
  SPEAKER_01: Um, you know the b biggest question I get every day, of course, is you know, is the cattle market all over with or not?
• 13:48
  SPEAKER_01: And that's an incredibly hard one to answer.
• 13:51
  SPEAKER_01: Um, but we know from the levels that we're trading, uh the the path of least resistance is probably lower, right?
• 13:58
  SPEAKER_01: So uh let's be a little careful that we don't get uh kind of lulled to sleep here.
• 14:03
  SPEAKER_01: We've had a bit of a break, we've had a sideways market.
• 14:07
  SPEAKER_01: It can kind of lessen your sense of urgency, if you will, but let's make sure we got our eyes wide open on you know what's our inventory look like, how many of them do we have hedged, um, how many did we have hedged a year ago, last year.
• 14:22
  SPEAKER_01: Let's try to keep that same number of p head on the books, so to speak, and and uh make sure we've got enough contracts in place in case this thing is all over and and wants to take the big leg lower.
• 14:34
  SPEAKER_00: Alright, that sounds good to me.
• 14:35
  SPEAKER_00: I know I'm keeping an eye on that trend line just from those last few loads, uh lows we had kinda in April, and then again in June.
• 14:43
  SPEAKER_00: So just keep an eye on another five to ten bucks lower here on this cattle chart.
• 14:47
  SPEAKER_00: If you do go grab some of those levels, we might have this uh trend a little bit in trouble, Jeff.
• 14:53
  SPEAKER_01: Perfect.
• 14:54
  SPEAKER_01: Thank you, Mike.
• 14:54
  SPEAKER_00: All right, thanks, have a good weekend.