Latest / CattleUSA Daily / 318: Use the Rally or Risk It? A Producer Friendly Market... For Now with Dan and Samantha

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318: Use the Rally or Risk It? A Producer Friendly Market... For Now with Dan and Samantha · CattleUSA Daily

0:00
Once again on the podcast this week, we are welcoming.
0:02
Dan and Samantha back. To share the updated market
0:07
report with us and everything that we have been seeing on the
0:10
board and in the live cattle market since last Friday.
0:14
And what all of that means as we go into the month of May and as
0:18
we really start to ramp up spring grilling season, consumer
0:22
demand, all of these other things and some major decisions
0:26
that we have been seeing across the country, whether that be in
0:30
our government and our Packers in just our operations.
0:33
We are discussing all of those things today and what you need
0:37
to know as a rancher, as a farmer, to stay informed on what
0:42
is going on. In the cattle market currently.
0:45
Before we hop into today's podcast episode.
0:47
With Dan and Samantha if you're. Watching on YouTube, you guys
0:49
know the drill by this point. Make sure that you're subscribed
0:52
to the show and you like this episode.
0:53
If you're watching on any of our other podcast platforms, make
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sure that you go and you follow the show and go to our show
0:59
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1:25
Without further ado, let's go ahead and hear from Dan and
1:28
Samantha. Welcome to the Cattle USA Daily
1:33
podcast. Your go to source for the.
1:36
Latest livestock markets, industry insights and the update
1:39
shaping agriculture today. I'm your host Lauren Moylan, a
1:42
passionate advocate for agriculture.
1:44
Here to keep you. Informed and connected.
1:47
Now let's dive into today's episode.
1:54
Dan, Samantha. Welcome back to the podcast once
1:57
again. How have our weeks?
2:00
Been I know Samantha, you guys are itching to get back out into
2:03
the field today. Dan, you're probably still
2:05
living in a little bit of a swamp out in Iowa right now.
2:08
But however weeks been. Pretty good.
2:11
Sounds like some people got some good showers over the weekend.
2:14
We didn't, but it seems like you get to the dirt road off the
2:18
highway and it just stops. We're 2 miles off the highway
2:20
and it just stops. But sure, room for everybody
2:24
down the road or 60 miles in either direction that did so it
2:27
sounded like it was pretty spotty, but anything's better
2:29
than nothing. It's.
2:30
The same. We're sorry.
2:32
Completely opposite. Sorry.
2:34
Yeah, it's it's too wet. If I can bottle up all this
2:37
water we have and send it out West to everyone or or the
2:40
southeast that needs it, I do it in a heartbeat.
2:43
Not a lot of progress happening in eastern Iowa.
2:45
Yeah, I think a lot of people, it's in the one of the two boats
2:49
right now either too much or too little.
2:51
And we can't seem to find that sweet spot, well, anywhere in
2:55
the country right now. So thoughts and prayers are
2:57
definitely out to everyone right now.
2:58
But what have we been seeing over the markets this week,
3:01
guys? Give us the rundown.
3:03
Go ahead, Samantha. Markets have been good.
3:06
I've got a feeling Dan's going to really give us some good
3:09
technicals to go off of this morning.
3:11
You know, beef demands good, showing some strength, but
3:14
feeling some higher slaughter levels.
3:16
To be honest, I was really excited to come on today and
3:18
talk about just a straight up bullish market.
3:21
I mean, you couldn't really ask for a better day in the cattle
3:23
market than yesterday in my opinion.
3:25
Fed cattle market yesterday was phenomenal.
3:27
We came up short of 250 for two weeks in the Fed cattle market
3:30
on cash trade. Futures pretty much exhausted
3:33
themselves trading negative basis.
3:35
Kansas came out for a few weeks. There was some early trade last
3:38
week. They came up two to three bucks
3:40
lower right off the bat. And then Friday we gained some
3:43
traction and got a running start at some early trade this week.
3:46
So we're already seeing 250 trade up to 252 trade out of the
3:51
five very feeding regions. Personally, I think much to do
3:54
with these fed cattle auctions and just raw transparency, you
3:57
don't typically have a lot of that.
3:59
Futures encouraged. Like I said, futures encouraged
4:01
250. We fell short for two weeks and
4:03
then these Fed catalog auctions really came in and filled in the
4:05
gap. So we don't have much
4:08
transparency through the Packers.
4:09
Even these USDA reports are somewhat manipulated and skewed.
4:13
Kind of a broken system when you've got utter competition in
4:16
the feeder cattle market and none in the fat cattle market.
4:19
But man, these auctions have really seemed to pick up the
4:22
slack. Dan, what do you got?
4:24
It's. Been an epic, Yeah.
4:26
I think I looked it up yesterday.
4:27
We put, oh shoot, what was it $9 on?
4:31
Yeah, we went from 24092 and a half last Thursday to 25375 on
4:37
June Yesterday, the $13 on fat cattle and four trading days.
4:41
Feeder cattle, $18.00 on feeder cattle and four trading days.
4:45
So I don't know if that's not epic.
4:48
I don't know what epic is. The cash space was a ball of
4:51
fire. It actually I felt yesterday
4:53
like it was a race to get the cattle bought before they were
4:57
truly gone because they came out 250 beds early yesterday morning
5:02
before the board open. Pretty much nobody took it.
5:06
Then they jumped it to. There were a few trades there
5:09
and then about noon it really started rocking and rolling into
5:12
the close and after the close traded 255 FoB, some 250 sevens
5:17
delivered. Pretty epic stuff.
5:19
I have not seen the tally yet to see how many actually traded.
5:23
You look at two weeks ago we traded, what was it 80 some
5:28
thousand head. Last week we traded another 50
5:30
some thousand head and I, I would expect yesterday was
5:33
probably 25 to 35,000 head trade day.
5:37
So I there might still be more left in the tank.
5:40
This week. It is mainly obvious 429 is the
5:45
date and we're coming into the month of May.
5:48
We had a lot of pack of contracts written for the meat,
5:51
you know, not on the cattle side, but the meat.
5:54
They wrote a lot of contracts for this May grilling weather.
5:57
Now all of a sudden O shoot, we need to find the cattle to make
5:59
the meat. I think that's a big part.
6:01
If you look at the kill on Monday, it beat last year's
6:04
kill. It beat last week's kill.
6:06
Yesterday was a good kill. It wasn't as epic as Monday's
6:10
kill. But either way, it's got me
6:12
thinking this Meg grilling season is is coming and it's it
6:16
started about right on time this last week of April and I think
6:21
it's really going to get going. I cannot, I can't consumer
6:24
demand, even though they're high prices because we're moving
6:27
volume. We're we're getting the floors
6:30
and the racks and the shelves cleaned up.
6:32
Consumer is, is coming out of the hibernation and, and going
6:36
right for the grill. So when that happens, you need
6:38
the cattle, you need the cattle, you need the cattle.
6:41
So it's hard to say where this thing peeks out.
6:44
I would love to throw estimations out there, but when
6:47
you're in clear blue sky breaking a new record, you know,
6:49
every week or every other week, it's it's pretty unpredictable
6:54
to say the least. I mean, we could trade $10
6:56
higher again next week or we could be 10 lower basis and
6:59
spreads have been screwed up. If you actually look Monday in
7:03
the newsletter, there was quite a bit of aggression from my side
7:07
of things. I was, you know, pissed off at
7:09
the spreads and pissed off at the bases and just normal
7:12
things. Market wasn't acting normal.
7:14
I'll come to find out. I'm going to make an assumption
7:16
here, OK? There's nothing proving it yet.
7:20
I mean, I can, I'll be able to look at old data on Friday, but
7:24
I'm going to make the assumption that the Packers were buying the
7:26
board from last Thursday, Friday and Monday.
7:29
They all the sudden realized they didn't have the cattle to
7:31
make the orders. Calf feds are not ready yet.
7:34
And these big yearlings are tight.
7:35
You know, pretty standard May stuff, right?
7:37
But all of a sudden they get to buy June futures, run the
7:41
spreads up our butt on the basis of our butt.
7:43
And all the sudden everybody and their brother is like what is
7:47
happening? It was the perfect scenario for
7:49
the Packer and it played out glorious for them.
7:51
Not great for the hedger, but yesterday's traded 255.
7:55
Flip that basis on a dime. We went from a -, 4 on Monday to
8:00
you know a + 1 1/2 against the June yesterday's.
8:03
It was a good trade, really pumped.
8:05
Would like to see what next week brings.
8:07
That basis continues to straighten out.
8:09
I think we go closer to plus 10. The hard part is, is we don't
8:13
know does that mean futures are going to go down or cash is
8:15
going to rally or a combination of both to make that base
8:18
straighten out to to that normal first week of May type basis?
8:23
I personally don't think it's over yet, but we'll see.
8:25
We're up here in clear blue sky again.
8:27
It is wonderful to be in clear. Blue sky again.
8:30
But I know a lot of people are probably sitting back clutching
8:33
their pearls right now, kind of waiting for that second ball to
8:36
drop of like, OK, this is great right now, really enjoying this,
8:40
but what's going to happen with it?
8:43
Kind of like what you were just talking about Dan, of what does
8:47
this mean and what does this mean for the next month?
8:50
What is going to? Happen over the next.
8:52
Month and especially like you said, as we go into spring
8:55
grilling season, we're seeing a lot of positivity go into that,
8:58
which I know was one of our concerns that we had talked
9:00
about a few weeks ago of really needing that positive, that
9:05
positivity going into spring grilling season and our consumer
9:10
demand to continue to push this market and continue to drive
9:14
what we're doing every single day.
9:15
But it is still a lot of uncertainty as we go into it
9:20
with how quickly things are changing in this market.
9:23
Yeah, yeah. Use the rally, get some
9:25
protection out in the back. You know, I think August is
9:27
priced at 2:49 where we closed yesterday at 2:00.
9:31
Yeah, 249 change just shot up to 50.
9:34
If that's not a good place to set a floor, I'm salmon feeder
9:37
cattle. You look at August feeder
9:38
cattle, 370 plus, that's not a good place to set that floor and
9:41
protect. I don't know what's good, what's
9:43
bad anymore. It's wild times.
9:45
This thing is, I get tired of using the word vault, volatile
9:49
or volatility because it's just it's on repeat lately.
9:52
But it's the case in every commodity market right now.
9:55
Commodities are just raging. I think we find out today if the
9:58
feds going to lower interest rates or you know, state current
10:03
levels. I guess I'm not expecting them
10:05
to lower them, but we'll see what happens there.
10:07
Energies are raging. Equities are still up there.
10:11
They've had an iffy week, Not not terrible bad, but just not
10:15
really moving. You look at the last two weeks,
10:18
equities needed a cool off week. So yeah, it's it's just been
10:22
epic all the way around and everywhere.
10:24
Samantha, any continuing thoughts?
10:26
Yeah. I mean, really all I've got to
10:28
say, we get beef demand on the uptick and that looks pretty
10:30
positive. We start speeding up the chain
10:32
floors and that kind of speeds up the cycle all around, speed
10:36
up slaughter and that increases the demand for cattle and that's
10:38
exactly what we need in this low supply market, right.
10:41
So Dan talked about a little bit of volatility and I think it's
10:44
been pretty impressive that we've been able to shrug off
10:47
what would have been bearish tones and past.
10:49
Not to say that that's weeded out forever, but it's been
10:52
refreshing the last week or so. You know, we heard some whispers
10:55
of a potential plant strike at that Fort Collins plant.
10:59
Sounded like, you know, the way they were talking, it was going
11:01
to be a little more severe and a less, little less solution
11:04
oriented than the plant strike in Greeley.
11:06
About the same slaughter capacity of about 5000 head.
11:09
Doesn't really matter. They're not running at full
11:11
efficiency anyways, but roughly accounts for 5% of total
11:15
processing capacity. Like I said, so far it's nothing
11:18
but a rumor. Haven't heard much more about
11:20
it. We've heard some the Spurs again
11:22
of Secretary Rollins coming out and talking about the South
11:25
border possibly opening again. Spurs that we have.
11:28
They threw out that July date of it opening that was utterly
11:31
false. Still kind of keeping an eye on
11:33
that as far as just being very on your toes as far as if
11:37
there's anything that could break this market.
11:39
We tend to want to really ride out the rallies and absolutely
11:42
so. But like Dan said, get some
11:43
protection on and reward the route.
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12:45
Yeah, definitely. I couldn't agree more.
12:46
There always seems to be kind of something creeping over the
12:49
horizon of another news break, another something that is going
12:53
to try and come at this market as we go into a really vital
12:57
season for. A lot of producers as we.
13:00
Start to get some more people in those sale barns and get cattle
13:03
moving across the country and different things like that.
13:07
So definitely something to keep our eyes on.
13:09
Dan Grains, what are we seeing there?
13:12
Grains bring up something you probably talk about on your
13:14
other other podcast with the meteorologist, the drought and
13:18
the floods and her wet weather in different areas.
13:21
I think grains are both trading a little bit of energy prices in
13:26
the front. But if you look out at new crop,
13:28
you know, these corn, no beans. I think we're more trading the
13:31
weather that we have right now and possibly the weather this
13:35
summer that we're starting to put some money on back in the
13:37
new crop. It's good.
13:38
It's giving edgers opportunities.
13:41
You know, you look at, you look at these corn right now, 497 and
13:44
1/4 with where we were last year, you know, I'm dipping down
13:47
into the threes, didn't stay there very long.
13:50
I'm very inclined to be very protective of this very close
13:53
number to $5 core. Buy a put, sell a call up at at
13:56
6 bucks or something like that. I, I don't necessarily think
14:00
today I want to go with this thing with straight edges just
14:03
from the standpoint that drought is bad.
14:05
It's bad in a lot of places and the wet weather is bad in the
14:08
places that that exists. You know, we can't get the feel.
14:11
So there's a lot of issues going on.
14:13
I can't predict the weather, so I can't tell you exactly what
14:15
you should be doing. But I do think protecting $5
14:18
corn, you know, on an election year, on a, a, a war year, you
14:23
know, there is so many things that could put a stop to this
14:27
grain rally. Does that mean it has to be
14:29
stopped or it won't poke into the fives?
14:31
Absolutely not. You know, like I said, there's
14:33
enough reasons to get it up there.
14:35
And it's been trending that direction.
14:36
Manage money's behind it. Trading grains is kind of sexy
14:39
right now. Again, so and then that flips
14:41
over and it spills into the feeder cattle market.
14:43
You look at the big rally and the fats and yeah, it will big
14:46
rally and feeders too. But what happens if, you know,
14:48
say we trade some 260 cash cattle next week and then that
14:51
becomes the temporary high. What happens if corn all of a
14:54
sudden goes to 550 next week? Do feeders stall out here at 370
14:59
and then fast come down in a couple weeks?
15:01
A little. We finally have to start
15:03
watching the corn market again when we're figuring what our
15:07
risk is in the feeded cattle side of things.
15:08
The last couple years, you didn't have to.
15:11
Corn was cheap cost, the game was cheap.
15:13
It didn't really matter what corn costs.
15:14
Everybody was bullish and they were buying figures at new
15:16
highs. But Fast forward to where we are
15:19
now, I think we got to pay attention to this corn market,
15:22
to this wheat market. What's this going to do to, to
15:24
our cost of gains? You know, it's just a big
15:26
driver. I don't, I'll just being
15:28
blatantly honest, I don't like buying a 32 to $3400 yearling
15:31
steer right now and staring down the barrel of, you know, $1.10
15:35
to $1.30 cost of gain scares the shit out of me.
15:39
So you know that that takes a big fat cattle market to make
15:43
that pencil though. I think I would, I would
15:46
strongly encourage protecting this 370 numbers actually going
15:49
into September, October and even even your summer yearlings, you
15:53
know, July, August, it's all relative.
15:56
It all packages together with the cattle crush all, it all has
16:01
to make sense when we get out to expiration, right?
16:04
370 feeders and five and a half dollar corn does not make sense
16:07
to me. So I'd get those floors on if
16:10
you don't use them. Hallelujah.
16:12
I know nobody likes paying premium, but there's enough
16:14
things they could throw at this thing.
16:16
And now, all of a sudden, corn's another one.
16:17
Yeah, definitely something we need to keep our eyes on as we
16:21
go into feeding season and people starting to buy more
16:25
feeders, get more things moving and start making those decisions
16:29
for what they're going to be doing on their operations.
16:32
Definitely something we want to keep our eyes on.
16:33
Any other highs? Lows.
16:35
Things in the market that we missed today that we need to
16:39
make sure that we head on Dan or Samantha.
16:41
I mean, Dan talked about a lot of environmental factors going
16:43
into it, whether it's drought or flood and all these different
16:46
things. And just brings up kind of a
16:48
closing thought, leave it to the cattle producer, the resilient
16:51
cattle producer to push against all odds and really push for
16:54
expansion in a trying time, I guess would be the word.
16:57
Just thinking back to that slaughter split last week, we
17:00
had 48% slaughter steers, 33% slaughtered heifers.
17:04
And as an industry would become very, I guess, expansion
17:07
oriented in the midst of super low numbers against really all
17:10
odds. You know, we look at the steer
17:11
heifer ratio as a percentage of the feed yard and we analyze the
17:15
crap out of it, right? We're all guilty of it because
17:17
that's really the only transparency we have that route.
17:20
But I do believe expansions on the uptick.
17:22
I, I want to be optimistic about that.
17:24
I think we get into some pretty tight numbers this summer as we
17:27
go into kind of a transition phase before we see that hit.
17:30
But in some form or fashion, I, I don't think it's going to be
17:33
easy, but I think there could be, I think there could be a lot
17:35
of headwind, but I think it's safe to say that absolutely
17:38
nothing in the cattle industry is easy and we aren't a stranger
17:41
to tough realities. So don't ever underestimate the
17:44
gal gal producer when you've got a phenomenon bread cattle market
17:48
like we do, There's so much, I guess, incentive for expansion
17:51
on top of just bringing that heifer to the sale barn and
17:54
getting money for it right off the bat.
17:55
I've talked to a lot of people in the last few weeks who've
17:58
bought replacement efforts, maybe kept 20 or 30 head back
18:02
out of their own herd to breed and sell as bread cattle, more
18:05
bread cattle. So I think there's a huge market
18:08
for it. Something I also want to touch
18:10
on here before we close kind of weighing on my mind as far as
18:13
you know, we talk so much about how the industry has has
18:17
contracted for decades, right? It's a known factor and we
18:22
talked about all the reasons for it.
18:23
But something that I want to hit on, it's just a lot of the
18:26
reason too is just us pushing kids away from the ranch.
18:29
You know, when I was younger, I knew from the start I wanted to
18:32
pursue a career in AG and every strength I had, I was constantly
18:36
trying to relate that back to the industry, how I could
18:39
utilize it, put it into agriculture is never a big fan
18:42
of school. I was good at school, but my
18:44
heart was not with a four year institution.
18:46
I was always the person and that strongly valued experience over
18:49
everything, right? I still do.
18:51
Went to school in a small rural community with a class size of
18:53
five. Through most of junior high and
18:55
high school. All boys find you.
18:58
And when we left for summer, it was a running joke that Friday,
19:02
4:00 PM, school's out. Samantha went off the grid.
19:05
Nothing personable, personal, but you likely weren't going to
19:08
hear a word from her for three months unless you showed up to
19:10
the farm. So don't get me wrong, I think
19:12
it's really good to get out, but don't discourage the kids that
19:15
want to stay on the ranch and go that route.
19:17
You know, so many rural America kids are taught that college is
19:20
the only golden nugget to success and you're not going to
19:23
succeed unless you leave the ranch.
19:24
But that is not true. And that's a big reason the
19:27
cattle industry is shrinking. You've got kids that want to
19:30
stay and that's where their heart is.
19:32
That's where their mind is. But society isn't super
19:34
supportive of that mentality. And I do believe a certain level
19:38
of education is important, but I truly think the advantage to
19:41
experience is that there's no limitations and it doesn't have
19:44
to cost you a cent. I mean, open your eyes, there
19:47
differences, new things you can learn every day, whether it's
19:49
from an old timer in the sale barn or your neighbor down the
19:52
road. Experience, advice, lectures,
19:55
got plenty of those. It's all free knowledge all
19:57
around you. You know, it doesn't have to
19:58
indict you the rest of your life.
20:00
If you want to go to college, go to college, you want to stay on
20:02
the farm or the ranch, stay and just ignore society's opinion of
20:06
success. But it's not the gospel and
20:08
everyone has a different version of success.
20:10
But like I said, something I just wanted to touch on, I see
20:13
so much of it on my feet and kind of wanted to just put it
20:16
out there. I could not agree more Samantha.
20:18
I have nothing to add to that. Because you hit.
20:21
Every single nail on the head there and really covered a lot
20:25
of bases. Is there, Dan, the face that you
20:27
gave of Samantha's graduating class?
20:29
Yes. That is a reality.
20:30
In northwest Kansas. There are.
20:33
Schools that have a entire school population of 20.
20:36
At their entire school. And Samantha obviously graduated
20:40
from what is very much considered A1A school.
20:44
I don't even know if you can consider it A1A school.
20:46
A little village. So it was a village.
20:49
Was basketball the only sport you guys can play?
20:51
We know Dan, but we did have to Co-op with a school 30 miles
20:56
down the road to have enough for a team.
20:59
Yeah. OK, OK.
21:00
Yeah. Nevertheless.
21:02
Eastern. Iowa mine did not comprehend
21:04
that. What's the average class size?
21:07
Their day. I graduated with like 125 or
21:10
130. That's that was a little school
21:13
that's just three AI think you want to cedar rap as they're all
21:17
like 3-4 hundred yeah, Yep, and you're better.
21:19
Crazy Hallelujah. Yep.
21:24
And here we are. Here we are.
21:25
Well, Dan, any other closing comments or remarks before we
21:29
wrap it up? Just saw the market open.
21:30
Gap Tire, Giddy up. And I like hogs.
21:34
Yeah, I really like the hog market where it's at.
21:37
I might might get after them this morning.
21:39
Have fun with those pigs, Dan. Have fun with them.
21:42
Well, thank you all for. Tuning into another episode of.
21:45
The Cattle. USA Daily.
21:46
Podcast Dan and Samantha, thank you for coming on and sharing
21:49
your insight, thoughts, knowledge as always.
21:52
To. All of our listeners.
21:53
Out there make sure you check out the show notes down below we
21:55
have. All of our links.
21:56
Where you can get a hold of Samantha or Dan or anyone else
21:59
on the Cattle USA insurance team, get yourself protected for
22:02
those coming months. Like we have been talking about
22:05
on the podcast. Today.
22:07
Thank you all for tuning into another episode.
22:08
And we will see you all. Next time have a good one.