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Trump Drops Ground Beef Tariffs to Lower Prices · Professional Ag Marketing Podcast

• 0:02
  SPEAKER_01: Welcome to the Cattle Talk Podcast.
• 0:06
  SPEAKER_01: Your weekly breakdown of cattle market fundamentals, key news, and the insight escaping the industry.
• 0:13
  SPEAKER_01: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 0:38
  SPEAKER_00: I'm doing really well.
• 0:39
  SPEAKER_00: Thanks for having me on, Lucas.
• 0:42
  SPEAKER_00: Well, I uh I really like your taste in shirts today, Nick.
• 0:45
  SPEAKER_00: I'm glad we're matching shirts.
• 0:47
  SPEAKER_00: But uh uh getting on to a few more serious topics here.
• 0:50
  SPEAKER_00: Uh this cattle market continues to offer uh a lot of excitement uh in various levels.
• 0:57
  SPEAKER_00: So we're gonna kind of step through a few different items today.
• 1:00
  SPEAKER_00: Uh first thing first, let kind of a review on what went on in the futures market uh here this week.
• 1:07
  SPEAKER_00: Uh last week, of course, was a pretty ugly week when we looked at live cattle futures and feeder cattle futures for that matter.
• 1:14
  SPEAKER_00: Uh this week a little bit quieter overall as we end the week, right, Nick?
• 1:18
  SPEAKER_02: Yeah, well, we we ended the week quiet, like it was pretty flat week over week on on what the price actually did, but it was certainly a wild ride in between there, right?
• 1:28
  SPEAKER_02: Like, I mean you you'd you'd look at the market, we'd be down for today, for example, down four bucks for a while, and and pretty soon we're green and deferred.
• 1:37
  SPEAKER_02: So definitely pretty wide trading range again this week.
• 1:40
  SPEAKER_02: You know, we were up in the low 220s and then down in the close to the low, you know, under the 214, 215 area.
• 1:49
  SPEAKER_02: So it definitely was a wild ride, but week over week it doesn't look like it did much.
• 1:54
  SPEAKER_00: Yep, and that's and and after the open this morning, we're gonna take that as a win.
• 1:58
  SPEAKER_00: Uh, how about cash?
• 1:59
  SPEAKER_00: Any reports uh uh cash out there in the countryside, Nick?
• 2:02
  SPEAKER_02: Yeah, so they they did buy, you know, Packers bought a fair amount of cattle earlier in the week at lower money, um, which was a little bit surprising, but basis was positive, and I think with everything going on, and as you guys well discussed last week, this leverage shift, there's been some willing sellers, so they were able to buy some lower now.
• 2:22
  SPEAKER_02: Today, cash um, and I think a lot of that trade was in that 223-224 area um earlier, even on Wednesday.
• 2:32
  SPEAKER_02: So, but now today cash bids out there up to 226, and not a lot of willing sellers.
• 2:38
  SPEAKER_02: I think uh um they you know the the cattle that were available got bought, and now everybody's kind of digging their heels in again.
• 2:45
  SPEAKER_02: But that 226 bid out there is also, I think, what turned the board around today.
• 2:50
  SPEAKER_00: Yeah, that's a good point.
• 2:51
  SPEAKER_00: That's uh uh kind of a little bit slower uh people to pull a trigger on the sales, and hopefully that helped us rebound.
• 2:58
  SPEAKER_00: And we well, it did help us rebound uh on the futures today versus where we opened at.
• 3:02
  SPEAKER_00: Um this afternoon we did have a catalon feed report come out.
• 3:06
  SPEAKER_00: That was you know probably the least exciting news of the day, as we'll get into here a little bit.
• 3:12
  SPEAKER_00: Um, most of everything was pretty much right on uh estimates on the cattle on feed.
• 3:17
  SPEAKER_00: Or what was your takes on on that information here?
• 3:20
  SPEAKER_02: Yeah, there's just so much going on in the cattle market right now.
• 3:23
  SPEAKER_02: It's it's hard to think that this cattle on feed report has much influence, but the the numbers still are important, right?
• 3:30
  SPEAKER_02: Like we we they reported 102.5 percent on feed uh right now, so two and a half percent more cattle on feed than a year ago.
• 3:39
  SPEAKER_02: And that was right even with the estimate, but that you know, certainly uh as we've made cattle bigger and marketing's down um substantially uh for the month of July, and also placements down, you know, are that's how we're getting to this two and a half percent higher than a year ago.
• 3:55
  SPEAKER_02: Placements was the friendly number in the in the report.
• 3:59
  SPEAKER_02: Uh the estimate I think was from around 93.5%, and that came in at 89.
• 4:05
  SPEAKER_02: So that was a substantial decrease from what they were thinking we placed.
• 4:10
  SPEAKER_02: Marketings was right in line with the estimate.
• 4:12
  SPEAKER_02: You know, if anything, we'd call this report slightly friendly with that placement number coming in at 89.
• 4:18
  SPEAKER_00: Sounds good.
• 4:19
  SPEAKER_00: So, you know, you mentioned the craziness in the cattle market, and you know, we look back at last week, and uh last week it was the Tyson announcement and the closures and and then trying to figure out what all that meant and uh uh the rip board's reaction with that, and maybe even some kind of forward looking into it.
• 4:36
  SPEAKER_00: Uh, and everything was relatively quiet this week until uh this morning.
• 4:41
  SPEAKER_00: Uh I know when we got uh into our early meeting, we start uh hearing about this and seeing the information on uh Trump's truth uh social uh post there um about uh waiving some tariffs on ground beef.
• 4:55
  SPEAKER_00: What uh give us the quick summary of the message uh uh that Trump sent out and what it kind of what it meant as we looked at it through the day here, Nick.
• 5:04
  SPEAKER_02: Yeah, the announcement was that he is gonna reduce tariffs on 300,000 tons of beef um and and also price that beef at a 25% discount to the market, and that'd be on ground beef.
• 5:20
  SPEAKER_02: So that is the domestic demand.
• 5:23
  SPEAKER_02: Um that equates that the that tonnage equates to about a week and a half's worth of our harvest, of our cattle harvest.
• 5:31
  SPEAKER_02: So it's a big number, it's a big deal.
• 5:33
  SPEAKER_02: Uh, and then of course, this is all ground beef, right?
• 5:37
  SPEAKER_02: So it's actually when you look at just you know the US ground beef consumption, it's actually about three weeks worth of our supply, and then of and that's on an annualized number, and then and this beef is all gonna come over the course of 90 days.
• 5:52
  SPEAKER_02: So you're so you're gonna take in three works weeks worth of an annualized number within 90 days.
• 5:58
  SPEAKER_02: That's a lot of beef to come in all at one shot.
• 6:02
  SPEAKER_02: That's why the futures market was was getting beat up pretty hard this morning.
• 6:06
  SPEAKER_02: It definitely was a bearish announcement uh to beef and cattle.
• 6:11
  SPEAKER_02: But we rebounded well.
• 6:13
  SPEAKER_02: And I like I said earlier, I think that cash market sparked it a bit.
• 6:16
  SPEAKER_02: Well, we're gonna have to see how this all goes, if that's even really possible to get that kind of that you know, that kind of number you know into the country over the next 90 days, but it definitely is is creating some concern.
• 6:28
  SPEAKER_00: Yeah, you bring up a good point of you it's one thing to put a number out uh on a tweet and and then now it's the follow-up to make sure it gets done.
• 6:36
  SPEAKER_00: Like we've seen that on many things.
• 6:38
  SPEAKER_00: Uh however, if you are waiving tariffs, I bet there are a lot of willing sellers out there uh in the world that are kind of saying, hey, here's our chance to sell beef into the U.S.
• 6:48
  SPEAKER_00: uh a little higher dollar amount than they're probably receiving in their home country.
• 6:52
  SPEAKER_00: So this is one of those, unfortunately, for the producer that might actually get done.
• 6:56
  SPEAKER_00: Um And so I I know last week on the cattle podcast and and something we've talked a lot about in the office, and this message this morning kind of continued.
• 7:06
  SPEAKER_00: Uh this momentum we have uh uh on the Packer side of the leverage equation, right?
• 7:13
  SPEAKER_00: Um it seems like we're the uh for the longest time it was the opposite.
• 7:18
  SPEAKER_00: The the producer probably had more leverage, and now we've seen a relatively short um time period here.
• 7:24
  SPEAKER_00: The packer, the packer has a leverage now.
• 7:27
  SPEAKER_00: Um that kind of continued again this week with this announcement, Nick.
• 7:31
  SPEAKER_00: What what else are your thoughts on that?
• 7:33
  SPEAKER_02: Well, yeah, I mean I know you guys talked a lot about it last week.
• 7:37
  SPEAKER_02: The the leverage has shifted, um, but the whole thing is really snowballing, right?
• 7:42
  SPEAKER_02: I mean, you the before all this funds were quite long, they weren't record long, but you start to incorporate all this news that's coming at the cattle market, heavy weights and and and plant losses, and now we're importing way more beef, and that snowball effect is is gonna get the funds out, and or at least it looks like that you know they're gonna be running for the door, and and and that that's when you really start to take um uh you know this market lower.
• 8:11
  SPEAKER_02: And we saw it all this week, right?
• 8:13
  SPEAKER_02: I mean, the m the cattle market would open a buck or two higher, and you know, within a couple hours we were two bucks lower, and that most of the week that's where we close.
• 8:22
  SPEAKER_02: Now, again, we ended up being fairly close to where we closed last week, but but this snowball effect, you know, we've seen it in past cycles where uh once it gets going, it it, you know, we're not exactly sure where this thing kind of will bottom out seasonally, but when we got all these heavy cattle around us going into fall, and then you know, these loss of these plants, which we're buying a high percentage of negotiated cattle, uh that it the the writing's kind of on the wall there.
• 8:52
  SPEAKER_00: Yep.
• 8:52
  SPEAKER_00: No, you bring up a lot of good points, Nick, and and I think it reiterates uh for a lot of our producers, you you never know when the next news is going to drop, right?
• 9:01
  SPEAKER_00: And so working in we're with Pro Ag Marketing, working with guys like Nick uh to make sure you have a plan in place so that when these news events hit, uh you aren't woke up with a a giant surprise or a bad feeling in your stomach because you didn't have a plan in place.
• 9:17
  SPEAKER_00: Uh, I think it also goes to show the importance of having a an LRP or an LGM policy in place, right?
• 9:25
  SPEAKER_00: Uh a lot of these news events are coming out after market hours, and sometimes that is a a nice opportunity uh to use those insurance products uh when the market isn't open.
• 9:35
  SPEAKER_00: Uh, like I said, it doesn't mean that the market's always gonna go uh down when we when we put the insurance on, but at least it gives you an opportunity uh to lock in a price before the market opens and get yourself protected if you need more protection.
• 9:50
  SPEAKER_00: So uh good call-outs there.
• 9:52
  SPEAKER_00: Uh I have a feeling that uh we are not done with the excitement in the cattle market based on the last two weeks.
• 9:59
  SPEAKER_00: And uh you can bet that we have ProAg will keep you uh informed on what's going on the best we can uh on the Cattle Talk Podcast and through lots of our uh ways of communication to you.
• 10:10
  SPEAKER_00: So, Nick, thanks for coming uh into the podcast studios today and have a great weekend.
• 10:14
  SPEAKER_00: Thank you, Lucas.