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Cattle: Screwworm · 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.
• 0:15
  SPEAKER_01: Today is January 16th.
• 0:17
  SPEAKER_01: I've got Jeff here with us today, and I've got some very exciting stuff to talk about in the cattle market, however you want to look at it.
• 0:24
  SPEAKER_01: It was a rough day in cattle futures, Jeff.
• 0:26
  SPEAKER_01: I just want to talk about first and foremost what in the world happened out there today.
• 0:31
  SPEAKER_00: Well, it was a pretty rough day, but we you know there's some good things about it here too, Mike, or maybe that's a little too strong of a word, but um you know we've been pushing higher all week on these cattle futures, so you know, a little bit of a setback having a down day here maybe isn't the worst thing in the world, I would argue.
• 0:49
  SPEAKER_00: Uh also, you know, go back and look at the chart um a little bit bigger picture-wise.
• 0:54
  SPEAKER_00: We didn't do a ton of damage unless you're seeing something that I'm not here, Mike.
• 0:58
  SPEAKER_01: We're only fit this morning's high was only fifteen bucks off our old record high on feeder cattle.
• 1:04
  SPEAKER_01: Yeah.
• 1:04
  SPEAKER_01: I mean, we are getting back up there again.
• 1:06
  SPEAKER_00: Yep.
• 1:07
  SPEAKER_00: Almost a perfect uh you know retracement similar to what we did in the in the uh last cycle there 10 years ago.
• 1:14
  SPEAKER_00: You know, we got back to 75, 80 percent of where we came from, and that's that is kind of what we were able to do here again.
• 1:22
  SPEAKER_00: And I'm not saying this market's all over with or anything like that either.
• 1:26
  SPEAKER_00: You know, you look at the 100-day moving average here, we did push down below that, but we closed above it.
• 1:32
  SPEAKER_00: You know, you look at a little bit bigger trend here where we're closing here today, um, you know, really isn't outside of any um alarming indicators from a technical standpoint or anything like that.
• 1:44
  SPEAKER_00: So I'm you know, you look at a little bit bigger um$4 moves on the fats and uh you know seven, eight dollar moves on the feeder cattle, and unfortunately, that's maybe a little bit of the world we live in, right?
• 1:57
  SPEAKER_00: And so dive a little deeper into day.
• 2:00
  SPEAKER_01: Yeah, dive a little deeper.
• 2:01
  SPEAKER_01: Why did it happen today?
• 2:02
  SPEAKER_00: A lot, a lot of screw worm talk, of course.
• 2:04
  SPEAKER_00: Um, so that's back on the uh topic list.
• 2:08
  SPEAKER_00: Um we've got eight new cases just across the border into Mexico since December 30th.
• 2:16
  SPEAKER_00: So they kind of came out with a flush of test results today, updating the media on what's going on down there.
• 2:23
  SPEAKER_00: Um it comes in a lot of different uh test results.
• 2:27
  SPEAKER_00: We've got a pig down there, we've got some newly born calves.
• 2:32
  SPEAKER_00: So that the the idea is it's probably fairly prevalent just south of the border.
• 2:39
  SPEAKER_00: Um the fly population, you know, temperatures are warming up just a little bit.
• 2:44
  SPEAKER_00: So is the fly population positive down there?
• 2:48
  SPEAKER_00: Most likely is.
• 2:49
  SPEAKER_00: You know, how prevalent is it?
• 2:51
  SPEAKER_00: That's all those are all questions that we're you know continuing to try to answer, right?
• 2:56
  SPEAKER_00: But kind of some pretty big developments there.
• 2:59
  SPEAKER_00: Um I think the marketplace is starting to at least price in the possibility, and they it's maybe always been in there a little bit, but you know, the possibility of this pushing itself into the uh southern parts of Texas, I think in most people's minds went up quite a bit today, Mike.
• 3:19
  SPEAKER_01: Can you talk to me about the logistics of that?
• 3:21
  SPEAKER_01: So, like, okay, Texas, let's say at some point we get screw worm here and it announced it.
• 3:26
  SPEAKER_01: Do we just open the border then?
• 3:27
  SPEAKER_01: Or what uh what's the next steps in this that make it super bearish?
• 3:32
  SPEAKER_00: I don't yeah, I don't know that it is super bearish.
• 3:34
  SPEAKER_00: We we spent quite a bit of time on it today thinking trying to think through different scenarios, and I'm I'm sure there's a bunch of them we didn't think about today, right, Mike?
• 3:43
  SPEAKER_00: Um, but I don't think they just open up the border.
• 3:47
  SPEAKER_00: Um I don't I don't think that if you get a couple positive cases just inside of Texas here, um, I don't think they say, well, you know what, it's here now, let's let it spread all over the place and let's bring more of it in the middle.
• 4:00
  SPEAKER_01: See, yeah, that doesn't make sense to me either.
• 4:02
  SPEAKER_01: I don't I don't think that's the case.
• 4:03
  SPEAKER_01: The way it traded today, I feel like that was part of it.
• 4:06
  SPEAKER_01: Or is it more with the demand side that it's just nasty and maybe that hurts speed band.
• 4:12
  SPEAKER_00: I think that could I think number one most um the the biggest excuse I would have, um, and I'll get to your demand question because I think you're probably hitting on something there, but it's just the uncertainty, Mike.
• 4:23
  SPEAKER_00: So that's why I I started this podcast talking about you know what we've been up to this week, what we've been up to the past few weeks.
• 4:30
  SPEAKER_00: We've been pushing this thing higher, higher, higher.
• 4:33
  SPEAKER_00: It is overbought in a pretty big way.
• 4:37
  SPEAKER_00: Exactly.
• 4:39
  SPEAKER_00: So we do have a long position that continues to build on itself a little bit, if I can say it that way.
• 4:47
  SPEAKER_00: People keep adding some contracts, right?
• 4:49
  SPEAKER_00: Yeah.
• 4:49
  SPEAKER_00: As the market goes up.
• 4:50
  SPEAKER_00: So your natural tendency for sure when something like this comes out is um let's shed some of this of what we put on the past three weeks.
• 4:59
  SPEAKER_00: I think that makes perfect sense.
• 5:00
  SPEAKER_00: That's exactly what I would be doing too, if I was sitting uh in the upper office of someplace downtown New York and talking to my folks that were trading cattle for me.
• 5:10
  SPEAKER_00: That makes sense.
• 5:11
  SPEAKER_00: Um so I think that's number one of what you got going.
• 5:14
  SPEAKER_00: Uncertainty.
• 5:14
  SPEAKER_00: And it's a three-day weekend too, Mike.
• 5:16
  SPEAKER_00: Yeah.
• 5:16
  SPEAKER_00: So you gotta get all the way to Tuesday before you can adjust your position.
• 5:20
  SPEAKER_00: I think that didn't help the cause any today.
• 5:23
  SPEAKER_00: Um, so I think that's what's happening.
• 5:25
  SPEAKER_00: Now, let's go back and think about demand.
• 5:28
  SPEAKER_00: If it comes into Texas, you most likely are gonna start, you know, doing there'll be some process, I don't know exactly what that looks like, but there'll be some process that limits uh movement.
• 5:41
  SPEAKER_00: Um there'll be a lot of uh you know vet work taking place with state vec vets and things like that.
• 5:47
  SPEAKER_00: So the media is going to blow that up.
• 5:50
  SPEAKER_01: Oh, it's gonna be awful.
• 5:51
  SPEAKER_00: All over the place.
• 5:52
  SPEAKER_01: Um so and the logistics, like this calf has to get killed or brought in this area, but now it can't move because in that area they had something.
• 6:01
  SPEAKER_01: So it just screws up like packing plant logistics, it screws up moving feeder cattle around.
• 6:06
  SPEAKER_01: It just it screws everything up.
• 6:08
  SPEAKER_00: Yep, and that's part of the uncertainty I think they're worried about.
• 6:11
  SPEAKER_00: And and I don't it's not gonna it's not gonna be a good guy on the demand side.
• 6:15
  SPEAKER_01: No.
• 6:16
  SPEAKER_00: I don't know what's gonna crush demand, but it's not gonna it's not gonna increase it.
• 6:20
  SPEAKER_01: The only thing would be as if like, okay, let's say a county that has a packing plant in it gets it, then what?
• 6:27
  SPEAKER_00: Yeah, and that that's I don't know the answer to that either.
• 6:30
  SPEAKER_00: I'm not gonna pretend to now you know that's a different story.
• 6:32
  SPEAKER_00: You're bringing animals to that plant.
• 6:35
  SPEAKER_00: Now you gotta get the trucks out of there.
• 6:36
  SPEAKER_00: Yeah.
• 6:37
  SPEAKER_00: Um so I don't know how they would treat that.
• 6:39
  SPEAKER_01: If that would certainly be a few years, but if you were able to shut off, but then you don't but I mean but but look, then you don't get as uh get as uh much uh beef on the way out.
• 6:49
  SPEAKER_01: So I mean that's bullish, technically, if you're not able to kill the thing.
• 6:53
  SPEAKER_00: Well if you're not able to if if you're sh if you limit some shackles, and again, I think we're you're stretching away from reality a little bit here, but who knows?
• 7:02
  SPEAKER_00: Crazy times, um that that will be hard on the cash market in a pretty big way.
• 7:09
  SPEAKER_00: Um I don't think that will happen either, Mike, but you know, I think we gotta kind of keep our eyes open to maybe all possibilities here.
• 7:18
  SPEAKER_01: Well, that's why I asked a question, just because obviously we don't know, but I think these are some of the questions and and concerns being brought up, especially regarding the trade today.
• 7:26
  SPEAKER_00: Yep.
• 7:26
  SPEAKER_00: And that's everybody's asking a lot of the same questions, Mike.
• 7:29
  SPEAKER_00: That's why they're reducing their position.
• 7:31
  SPEAKER_00: Yep.
• 7:32
  SPEAKER_00: In my mind.
• 7:33
  SPEAKER_01: Alright, what else you got on cattle here?
• 7:35
  SPEAKER_01: Just to wrap up last minute.
• 7:37
  SPEAKER_00: The other thing I got, um, and I want to talk about it this week because it might not be true next week, Mike, is the choice select spread.
• 7:43
  SPEAKER_00: So incredibly narrow this week.
• 7:45
  SPEAKER_00: Um started last week a little bit, got inverted, just dismidded um a couple different times.
• 7:50
  SPEAKER_00: Uh that's something that we're watching.
• 7:52
  SPEAKER_01: And we've choice was higher usually than select.
• 7:56
  SPEAKER_01: This week, select was higher than choice.
• 7:58
  SPEAKER_00: Briefly from day to day, it kind of matters.
• 8:02
  SPEAKER_00: Let's call it about zero.
• 8:04
  SPEAKER_00: Why?
• 8:04
  SPEAKER_00: Okay.
• 8:05
  SPEAKER_00: So a lot of question marks around that too.
• 8:08
  SPEAKER_00: And I I think it will be short term.
• 8:10
  SPEAKER_00: Um, but that you know, that's gonna be uh the story still being written there.
• 8:14
  SPEAKER_00: It's not uncommon for it to get squashed really rapidly for a short period of time.
• 8:19
  SPEAKER_00: Um this time of the year.
• 8:21
  SPEAKER_00: Yeah, this time of the year.
• 8:22
  SPEAKER_00: And and we're getting rid of the tail end of some of them really long fed old crop animals, Mike.
• 8:28
  SPEAKER_00: So that's usually when it happens if it happens.
• 8:30
  SPEAKER_00: Now, a few interesting items.
• 8:32
  SPEAKER_00: So it very well could be a supply situation.
• 8:35
  SPEAKER_00: We just got into a bunch of meat here as we went through uh December, and that's weighing on that choice select spread some.
• 8:43
  SPEAKER_00: Um now, and it could be a volume thing too.
• 8:46
  SPEAKER_00: About 20% of the meat is choice these are uh select these days, so it is a more thinly traded marketplace, especially in the negotiated volume.
• 8:55
  SPEAKER_00: Um, but let's think about the other side of the coin here, real quickly, and I think this has got a small chance of happening, but worth keeping our eye on is is it a demand story?
• 9:05
  SPEAKER_00: So, do have we seen some reduction of choice meat demand?
• 9:10
  SPEAKER_00: Um and and those folks have pushed themselves a little bit more into the select grade.
• 9:17
  SPEAKER_00: Now to me that's scary.
• 9:19
  SPEAKER_00: Yeah, and I I think from these price levels, it's just another thing that we're watching.
• 9:24
  SPEAKER_00: The reason why the choice meat is is where it's at today, which would be you know you know higher than a year ago, but to the low end of the range is the middle meat expensive um steak meat is a little lower than what it was this time last year.
• 9:40
  SPEAKER_00: Everything else is higher.
• 9:42
  SPEAKER_00: And and that's why we're trying at the bottom end of the range on that choice um values in in general, and probably why you know it could be part of the reason why we are experiencing the the tightness in that spread.
• 9:56
  SPEAKER_00: So another there's a lot of things that we talked about this week, last week that hey, we're gonna keep our eye on in the coming weeks um and probably making some bigger picture observations on.
• 10:07
  SPEAKER_00: So that's gonna be the one of the things on the list.
• 10:09
  SPEAKER_01: And we learned last time around, something can happen, trade starts trading it, and by the next week that we do this podcast, your move may already be in.
• 10:18
  SPEAKER_01: I mean, this market wants to move very fast these days.
• 10:21
  SPEAKER_01: I mean, it was an eight, eight, nine dollar day down most of the day on feeder cattle.
• 10:26
  SPEAKER_01: So it just uh being on top of this daily is required right now in the cattle industry.
• 10:31
  SPEAKER_00: That's why I wanted to quick bring that one up this time, Mike, because we've most likely be on to talking something else next week.
• 10:37
  SPEAKER_01: Yeah, well, a few concerns, a few things to really chat about that are brand new in this cattle market.
• 10:42
  SPEAKER_01: Thanks for joining us today, Jeff.
• 10:44
  SPEAKER_01: I appreciate it.
• 10:45
  SPEAKER_00: Thank you.