Latest / CattleUSA Daily / 174: Cattle Market Highs and the Impact of the Government Shutdown with Dan Gerhold

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174: Cattle Market Highs and the Impact of the Government Shutdown with Dan Gerhold · CattleUSA Daily

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  In today's episode with Dan Gearhold, we are touching on the
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  commodities markets, what is happening in the world of the
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  cattle markets On the board. Dan covers everything that we
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  are seeing right now. We talk heavily about fats and
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  feeders today. Those are our main topics.
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  We're breaking all of those down, what Dan is currently
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  seeing, what we can anticipate for the rest of the year.
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  Then at the end, we also touch on the grain markets and hog
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  markets as well and how those are impacting demand for beef.
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  Without further ado, let's go ahead and hop into this episode,
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  Dan. But before we do, if you could
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  take a second to like subscribe, rate and review this episode, we
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  would really appreciate it here at the team.
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  Now without further ado, let's go talk to Dan.
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  Welcome to the Cattle USA Daily podcast, your go to source for
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  the latest livestock markets, industry insights and the
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  updates shaping agriculture today.
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  I'm your host, Lauren Moylan, a passionate advocate for
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  agriculture here to keep you informed and connected.
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  Now let's dive into today's episode.
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  Dan, welcome back to the podcast.
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  How is life in Iowa treating you?
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  I feel like those are the exact words I say every single week.
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  I maybe need to switch it up a little bit, but how's life in
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  Iowa treating you? It's.
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  Always great in Iowa. It's it's heaven.
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  I think there's a movie about that.
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  But yeah, life is great up here. Harvest is full swing and a lot
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  of people wrapping up beans and Honda corn and yeah, good times,
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  good time of the year, my favorite time of the year.
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  I love to hear it. I'd love to hear it.
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  Well, how are the markets going this time of year?
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  Are they still making it your favorite time of year?
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  A little stressful. I mean, Peter cattle made some
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  new highs yesterday. How about that kind of shrugging
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  off everything going in the fat going on in the fat cattle
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  world, just punching through the new eyes.
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  So that's certainly exciting for all the cow calf and
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  backgrounders out there, the feed yards, it's a little bit
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  nerve wracking because now we're looking at higher price
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  replacements again. So that's interesting as we
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  watch cash back cattle go down and replacement cattle to put in
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  the feed yards go up. So we're going to have some
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  tighter margins that looks like in 2026, but we'll see, we'll
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  see. There's always time to correct
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  that, especially now you're any anything you place now if you're
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  going to be selling it's fat during the middle of grilling
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  season. So optimistic, of course, for
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  that as I usually AM. You know, you get out there till
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  March, April, May, June, and it's a great time of year to see
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  the consumers really go through those metal meat.
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  So let's hope those 250 break even.
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  Cattle we're placing right now can make a little money out
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  there. Yeah, definitely.
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  I think that is a hope and prayer for everyone in this
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  market and what we're seeing. We love to see these highs, but
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  at the same time, it's like, let's let's hope that we can
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  catch that high on the other side of this as well.
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  Absolutely. Yeah, it's honestly the fat
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  cattle trade as far as futures are concerned has been pretty ho
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  hum and boring. Still stuck in that wedge.
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  Yesterday it tried closing out of it.
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  It's it's right there. It wants to bust out to the
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  upper side. Got a possibility of it today.
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  You know, if we see a bust out, you're probably going to go to
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  the old eyes up there 244 and these that that would certainly
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  be exciting. Oh, at the same time, we've got
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  to sit back and see what's truly going on here and we've got
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  negative bases now. So it's been a while since we've
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  seen some negative bases in the back out of the world.
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  It used to be pretty normal for this time of year.
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  And in fact, I I can make an argument that negative bases
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  normally exist during the long term bear markets, but I don't
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  know that I should be saying that when we're at the top of
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  all time highs. So nonetheless, negative bases
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  typically lead to deliveries against the board.
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  So we should start seeing those roll in here this week depending
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  on the bid Packers come out with.
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  The call right now is for cash back cattle in the country to be
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  steady at best. I'm in that same camp.
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  I think steady as possible, especially with boxes leveled
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  off so far this week. I'm not saying demand is right
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  back where it should or normally is, but I it's that time of
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  year, we've talked about how many times you're not going to
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  see a lot of metals, a lot of state demand and the, and the
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  retailers, they still haven't dropped their prices.
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  I've been watching, I've been watching the features, you know,
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  that £20 or $20 a pound for a steak hasn't changed.
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  Even though wholesale prices have dropped.
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  Retailers are improving their margins like they normally do.
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  So I don't see a huge amount of volume that we're going to plow
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  through and clean up all this meat on the floor that the
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  Packers are holding right now. So it's a little bit concerning
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  at the same time, you know, fast follow feeders very, very often.
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  Once again, you want to talk negative bases, look at where
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  that feeder cattle index is. You know, that's mid three 60s
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  and we're trading 369 1/2 on the board.
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  So what's going on here? Well, plain and simple, the news
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  came out again that they found screw worm down I believe 170
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  miles from the border again. So that gave traders the, I
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  would say confidence to put long positions back on.
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  We've seen open interest go up in a rising market that's very
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  strong, that's healthy for a bull market and you're setting
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  new highs. So now the the question becomes,
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  is cash going to follow the futures higher?
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  So you're putting premium on the board.
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  The cash cattle on the sale barns have been steady a touch
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  higher, but not as high as the board.
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  So are we going to see the cash feeders start ramping up?
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  You know, there is a case that could be made.
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  A lot of people, a lot of sale barns I talked to say a lot of
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  cattle moved early this year. People didn't want to miss out
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  on the market. I mean, if if that happened, we
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  should hold these feeder price then, you know, at least through
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  the fall. Another thing I'm seeing and
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  hearing from different people is, you know, there's a lot of
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  farmers that are interested in walking their corns town this
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  year instead of hauling it. So if that happens, you know,
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  once we get harvest wrapped up, should be a lot of farmers
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  sitting in the sale barns wanting to buy cattle.
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  So that might keep prices high too.
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  So, you know, it's hard to kill this bull market in the feeder
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  market the way, you know, every opportunity we've had to wreck
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  cash feeders, we can't. You know, the board would lead
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  it lower. This thing would look like a
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  train wreck. And all of a sudden, gas peers
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  in the barn would stay steady. Now all of a sudden, the board's
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  like, OK, we're too cheap, let's go lead the way higher.
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  So now the question is, will, will the feeders in the barns
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  follow? That's the big question.
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  Yeah. Definitely.
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  How would that just impact the market and a broader standpoint?
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  So if the feeders in the market like in the auction houses do
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  follow, how does that then trickle back to the board and
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  what we're seeing there? I guess you'd say sustaining
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  power, keep it here. Like I said, open interest is
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  going up in a rising market. You know, we don't have our
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  commitment of traders report right now with the government
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  shutdown. So we don't know what the funds
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  are doing, but volume has been light.
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  So there hasn't been a lot of trading.
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  But the fact open interest is going up in a higher market, you
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  know, when you put 3/4 on a day that's, that's a bull market.
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  That's what you want to see in a bull market.
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  So it's all about a bull market needs to be said every day,
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  right? We've all heard that saying.
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  Well, right now you gave it some big news on Monday to go along
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  with it. You've got open interest going
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  up. So new traders are coming to the
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  Peter Kettle market. The last thing you need to
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  really sustain this market is those those feeders in the barns
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  going higher. If you don't have that, then I'm
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  afraid the board's going to see a, you know, a decent sell off
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  the closer we get to the end of October and and when we have to
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  settle up with that index. Is there anything else that is
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  being affected right now by the government being shut down in
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  your world of things other than that report that you're just
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  talking about? Just different reports.
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  They're not coming out with a lot of the day-to-day data that
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  we watch. Open interest report, obviously
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  that's not done by the government, your box, your
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  wholesale meat prices that is, but that's still coming out.
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  A lot of the data, the kill numbers, you know, the important
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  things, those are still coming out.
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  I believe there was a Wazi report scheduled for today that
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  got cancelled. I believe there's a Catalan feed
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  report scheduled for next week Friday.
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  If it's like the Wazi, they're probably going to cancel that.
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  That is a bullish looking report, looking at early
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  estimates, you know, low placements, higher marketing
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  than the placement. So it's bringing the Catalan
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  feed number down, but inevitably if we don't get that report,
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  we're kind of in the dark. Not the end of the world in my
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  opinion. I don't mind it.
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  So other than that. So the government shutdown
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  really, it's not phasing cattle, it's not phasing commodities.
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  I think I looked at a stat, most government shutdowns actually
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  are bullish for commodities. So it's just a matter of every
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  trader out there anticipates eventually the government's
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  going to open back up and I guess everybody gets their back
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  pay and moves on with life. So it's not a big deal, yeah.
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  Yeah, exactly that, that caveat of at the end of yet hopefully
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  it's we can figure something out and it's not 39 days or 33 days
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  or whatever it was in 2019 and all over again and one of those
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  situations. So anything else in the markets
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  that we need to head on today, any other highs, lows, things
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  that are standing out? How are grains doing?
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  And then how's the hog market holding up as well?
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  Yeah, cranes are trading sideways for the most part,
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  pretty standard stuff during your harvest pressure got a lot
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  of selling going on. They're not falling out of bed.
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  They're not going to new highs. It's just kind of ho hum, you
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  know, wheat looks like it it looks like a market that wants
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  to go nowhere but down. I still want to be optimistic.
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  You know, let's turn this calendar and get into a wood new
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  wheat crop. They're train trading something
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  new, but so far there's just nothing to trade.
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  Corn I still think has a a possibility of going to that 440
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  number here post harvest. The way the weather is in the
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  Corn Belt, I would like to make an assumption here in about 3
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  weeks there's going to be a lot of people wrapped up with
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  harvest. If we stay dry.
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  It's just been a been a good harvest going fast.
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  The weather's cooperated. So you know, it, it could be a
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  year where a lot of people are done by November 1st instead of,
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  you know, December 1st. So that's one thing, you know,
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  if we get that harvest wrapped up sooner, another before I go
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  to that, a lot of these corn moistures are coming in lower.
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  You know, last week was a big dry down week.
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  So a lot of corn dropped 5-6 points last week.
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  If people are wrapping up beans and just starting in corn and
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  then they got 2-3 weeks of that, are we going to see something
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  similar to last year where we've got a lot of corn coming out of
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  the field of 12/13/14 percent instead of that 18/19/20?
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  Well, that affects yield. So if you look back at last
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  year, you know the USDA had to revise their numbers lower and
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  one of their excuses was well, it came out of the field dryer.
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  So maybe, maybe they do a repeat of that, I don't know.
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  But Long story short is grains are going to trade sideways here
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  in my opinion for the next 2-3, maybe 4 weeks.
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  And then I guess I would look for some post harvest rally
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  there to take us up to, you know, that 200 day moving
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  average. So the hog market, it's not a
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  ball of fire and it's actually a little bit concerning.
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  I don't like the formation on December hog chart.
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  It's actually a setup that looks like it could push us lower.
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  The cut out is just kind of ho hum, you know, very slowly
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  trickling lower. I I still want to believe
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  there's that hole out there in December because we saw some
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  disease pressure. So if we can hold some key
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  support levels, I think we got a shot to to do another counter
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  seasonal rally the closer we get to December.
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  It's just a matter of right now there's, there's plenty of hog
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  slaughter's high weights are high, there's plenty of product
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  and and at the same time beef plenty of product it there too.
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  So it wouldn't surprise me if both the beef and pork products
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  see some more selling pressure as far as wholesale prices and
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  and that's going to reflect poorly on the hogs here for the
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  next, I would say month and a half, probably a full two
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  months. Awesome, awesome.
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  Anything else that we missed within the markets today that we
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  need to touch on before we wrap it up?
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  The last thing I'd probably throw out there, Lauren, is you
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  know a lot of talk about beef demand and a lot of consumers
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  are, sorry, a lot of wondering have we finally dipped into the
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  pocket too hard on, you know, the consumers pocket?
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  Well, that's a great question. Well, it's kind of a double
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  edged sword. So if you look at domestic
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  production drastically lower, a lot of that has to do with the
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  cow kill being drastically lower as well as our slaughter pace on
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  fat cattle being lower. So that's dropping domestic
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  production and you have to factor in the imports.
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  Well, that's all your lean and your grindings and then take out
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  your exports. If you actually combine all
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  that, we're throwing more beef in front of the domestic
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  consumer than we have in the last five years and they're
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  taking it. It's pretty incredible what how
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  beef demand has really, I would say drastically going up
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  compared to what it used to be. A lot of those, you know, high
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  diet, you know, high protein diet, those are the ones they're
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  doing a lot of us a lot of good. The consumer is they're in love
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  with beef, right? The other thing to go along with
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  that and the reason why beef got so high to that four 10417
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  number this summer was because those slaughter numbers were so
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  low. Well, OK, so if you kill let's
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  just say 20,000 head less a day, now all of a sudden you have
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  40,000 less rib rolls that day available to the consumer.
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  So we prop up that beef price because of those metals and then
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  all of a sudden, oh hey, we're throwing more burger in front of
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  you. So it's a double edged sword at
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  the tug of war. Call it what you want.
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  I could say that we are going through more total pounds, but
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  now that prices are higher on those middle beats, we're seeing
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  the demand slow for those. But it's also part of that time
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  of year when it normally slows. So we have to be forward
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  thinking in this business. What is it going to be like
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  around Christmas? Is the consumer going to be able
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  to pay 20 bucks a pound or more for that prime rib?
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  Once we get past that, then, then the next thing we have to
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  look for is spring grilling weather.
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  So that's the big question I think is on all of our minds.
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  In the meantime, I don't expect beef to be a ball of fire.
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  I think eventually we probably build a base here.
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  I want to say it was at this 36365 level.
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  I'm optimistic until the retailers drop their price.
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  And though I I cannot stay confidently that that's the case
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  though. So but either way, we're making
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  a great product. Americans love it.
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  Demand is still good considering how much people are putting in
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  front of them at these prices. Let's just hope we can squeak
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  by, stay above 350 all the way until we get, you know, March
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  and then I hopefully do another rally, you know, up, up around
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  that 400 again. Yes, precisely.
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  I think that is what we are all praying for right now as we go
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  into round out the year and finish out the rest of 2025,
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  which is crazy to even think about the fact that we are
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  already in October of 2025 and we're talking about rounding out
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  the year and pushing into 2026. So absolutely, I could not agree
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  with you more on any of those sentiments.
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  Dan, thank you for your time today and your insight on the
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  markets and everything else that is going on in the world of
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  commodities these days. So as always, to all of our
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  listeners, thank you for listening to another episode of
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  the Cattle USA Daily Podcast. We will see you all next time on
• 16:40
  another episode. Have a good one y'all.