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Cattle Market Talk - Cattle on Feed Report Update · Professional Ag Marketing Podcast

• 0:02
  SPEAKER_00: Welcome to the Cattle Talk Podcast.
• 0:06
  SPEAKER_00: Your weekly breakdown of cattle market fundamentals, key news, and the insights shaping the industry.
• 0:12
  SPEAKER_00: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_02: Today is October 23rd.
• 0:23
  SPEAKER_02: I've got Kyle with Professional Egg Marketing here.
• 0:26
  SPEAKER_02: We're going to talk about the cattle markets today.
• 0:29
  SPEAKER_02: How's it going, Kyle?
• 0:30
  SPEAKER_01: Good.
• 0:31
  SPEAKER_01: Thanks for having me.
• 0:32
  SPEAKER_02: Awesome.
• 0:33
  SPEAKER_02: Well, let's just go through the rundown.
• 0:35
  SPEAKER_02: We're going to talk about a few things.
• 0:36
  SPEAKER_02: We're going to start off talking about futures today.
• 0:39
  SPEAKER_02: Then we're going to talk about the cash and basis market right now.
• 0:43
  SPEAKER_02: And then let's talk about demand a little bit and pack our margins.
• 0:46
  SPEAKER_02: Then we're going to talk about our highly anticipated cattle on feed report as that threw a very interesting twist at us today.
• 0:54
  SPEAKER_02: So on the cattle futures market, I'll have Jake pull up the chart here.
• 0:58
  SPEAKER_02: You can see cattle markets been ripping on us.
• 1:01
  SPEAKER_02: We've had a really nice recovery.
• 1:02
  SPEAKER_02: In fact, this week we filled a gap at 230 on December fat cattle on the chart.
• 1:08
  SPEAKER_02: You can see there, uh, that was put in on July 13th, I believe.
• 1:12
  SPEAKER_02: Back you can see that little circle.
• 1:14
  SPEAKER_02: So a very interesting gap got filled there.
• 1:17
  SPEAKER_02: Uh we've made our way with some really nice supportive trade.
• 1:21
  SPEAKER_02: We pretty much are above every moving average at this point put on the chart.
• 1:26
  SPEAKER_02: Uh this cattle market's been uh climbing slowly but steady, hasn't it, Kyle?
• 1:32
  SPEAKER_01: Yes, it's been uh been a good move.
• 1:34
  SPEAKER_01: It got through that gap that it left, like you mentioned, and then it's kind of just been hanging out here, I think, looking for some fresh news.
• 1:43
  SPEAKER_01: We don't have a whole lot of resistance above us for another eight to ten dollars.
• 1:47
  SPEAKER_01: So it's kind of been waiting for something.
• 1:50
  SPEAKER_01: Maybe the catalyst was the on feed report today.
• 1:54
  SPEAKER_02: Very much so.
• 1:55
  SPEAKER_02: Let's see if uh the next eight dollars can come easy here as we get uh towards some of those old high levels that we've had on these contracts.
• 2:03
  SPEAKER_02: Really not much retracement uh anywhere to draw resistance until that point.
• 2:10
  SPEAKER_02: Uh what can you tell me about the cash side of the business?
• 2:13
  SPEAKER_02: Been pretty quiet this week, hasn't it?
• 2:16
  SPEAKER_01: Yeah, it has been quiet.
• 2:18
  SPEAKER_01: We've heard bids in the mid to upper 220s and asks, of course, are 230 or better.
• 2:25
  SPEAKER_01: Um, but doesn't seem like there's been anything trade yet.
• 2:28
  SPEAKER_01: We'll have to see if this on feed report breaks some of that loose, or if the Packers dig in their heels and have enough inventory that they can wait till next week to see if they can mute the placement number in this report.
• 2:43
  SPEAKER_02: What can you tell me about uh the December futures and the basis that we're looking at to the cash market then?
• 2:50
  SPEAKER_02: Is that will become our our new crop or our new month?
• 2:54
  SPEAKER_01: Yeah, so that's been been weaker than what we've been selling cattle for the last several months or even years.
• 3:02
  SPEAKER_01: Uh, but when we look at the chart, we get into the first part of November here.
• 3:06
  SPEAKER_01: We should be getting back to even basis and even a few dollars above if we look at the seasonal chart.
• 3:14
  SPEAKER_01: So hopefully we can get that to come here.
• 3:17
  SPEAKER_01: And yeah, maybe with this again going back to the report, I feel like there's some some good news there that can maybe maybe help us get back to where we feel we should be with even the basis level.
• 3:32
  SPEAKER_02: Seems like we've got some pretty strong conviction right now on that chart versus the uh uh really old levels there on basis.
• 3:40
  SPEAKER_02: It looks like we could be into the positive territory here by the first of November.
• 3:44
  SPEAKER_02: So something to be a little bit happier about on basis levels going forward, at least here.
• 3:49
  SPEAKER_02: Uh, what can you tell me about the demand side of cattle?
• 3:52
  SPEAKER_02: Because at this point, it seems like demand has still been there on cattle.
• 3:57
  SPEAKER_02: Cutouts held pretty high, even with the consumer in the U.S.
• 4:01
  SPEAKER_02: that seems a little bit more pinched.
• 4:02
  SPEAKER_02: So, what can you tell me about the cattle uh cutout here?
• 4:06
  SPEAKER_01: Yeah, well, it's been good to see it hanging close to well, it's been above last year's levels and at record levels.
• 4:13
  SPEAKER_01: Now the last week or so it's kind of dipped a little below that, but still at really good levels.
• 4:19
  SPEAKER_01: It seems like it hits its head though.
• 4:21
  SPEAKER_01: It doesn't want to get up too much above 380 on the choice cutout.
• 4:27
  SPEAKER_01: But we can see the the rib and the loin, those higher end cuts are really holding strong at record levels, most of them.
• 4:37
  SPEAKER_01: Uh where the trim is is good, but that's probably the weaker element of this, and it's forty to fifty percent of our consumption, so that's something to watch.
• 4:51
  SPEAKER_01: But for now, it seems like we maybe can't push this a lot higher, but I would like to think we can keep it in this area.
• 5:02
  SPEAKER_02: What's that make packer margins look like then?
• 5:06
  SPEAKER_01: Well, that's a different story again, as from the last few weeks, the last eight, ten weeks, they've they've been in the black finally.
• 5:15
  SPEAKER_01: They haven't had many of those weeks in the last few years, but last this last week now that turned negative, and if we push cash much more and can't get these boxes to go, that's that's gonna be a concern that they'll be deep in the red again.
• 5:31
  SPEAKER_01: And yeah, I guess the concern there is that we lose another plant or something because of their lack of profitability.
• 5:41
  SPEAKER_02: Yeah, first time that chart's turned negative since about the end of August, there it looks like.
• 5:46
  SPEAKER_02: So a little change in direction, anyways.
• 5:48
  SPEAKER_02: Uh let's get on to the Catalon feed report here.
• 5:51
  SPEAKER_02: Today we had a report come out that a little shocking, even with some pretty wide estimates in there.
• 5:57
  SPEAKER_02: What can you tell me about this report and what it implies for the futures trade going into next week?
• 6:04
  SPEAKER_01: Yeah, well, I guess the the big number that jumps out at everybody is the placed number.
• 6:10
  SPEAKER_01: Um 87.9, it's below the range, and it's the lowest September number since they started doing this in 96.
• 6:19
  SPEAKER_01: So it is a it is a low number.
• 6:22
  SPEAKER_01: We know we have short numbers of cattle, but this was maybe a little bit of a surprise to some of us.
• 6:30
  SPEAKER_01: Not sure if the wheat pasture situation could have any bearing on this yet.
• 6:35
  SPEAKER_01: It seems like that rain that helped those pastures didn't hit till the end of September, so I'm not sure if there would have been people buying cattle for that, you know, in September or not.
• 6:49
  SPEAKER_01: So it's a few months in a row now, though, of lower placements, and it's yeah, it's going to mean lower numbers.
• 6:58
  SPEAKER_01: Yeah, as we can see, we're below 100% now this month against last year.
• 7:04
  SPEAKER_01: So it's yeah, the numbers the numbers remain tight.
• 7:09
  SPEAKER_02: Any indication what this could mean for Monday's trade coming up?
• 7:14
  SPEAKER_01: Well, I think it could be it could be a catalyst to a a good jump.
• 7:22
  SPEAKER_01: My concern is what we do with cash this week.
• 7:25
  SPEAKER_01: If we get the Packers to bid something that will turn some cattle loose, or if they can hold out till next week, that that could maybe dampen it a little bit.
• 7:37
  SPEAKER_01: So I think a lot's gonna rest on how how the cash trades this evening.
• 7:45
  SPEAKER_02: What can you tell me about the current situation with Mexico and uh the border reopenings there?
• 7:51
  SPEAKER_02: Has progress really picked up there?
• 7:52
  SPEAKER_02: Are we importing a lot of feeders from Mexico?
• 7:55
  SPEAKER_02: What have you heard?
• 7:57
  SPEAKER_01: Well, it's there are cattle coming across.
• 8:00
  SPEAKER_01: We've about 39,000 so far have come since they've reopened it.
• 8:04
  SPEAKER_01: Uh this next week they're planning to open another crossing in Columbus, New Mexico, and another again in Arizona, the 30th of November.
• 8:16
  SPEAKER_01: So I think this is going to be a big deal going forward is how many cattle come in, especially when we look at our numbers, our cattle numbers here, and the numbers we have to place.
• 8:29
  SPEAKER_01: I think it's going to help a lot in that regard if we can get get more of those crossings open and speed up the process so we can get some of those cattle here.
• 8:41
  SPEAKER_02: All right.
• 8:41
  SPEAKER_02: Any other final thoughts for our listeners here this week, Kyle?
• 8:46
  SPEAKER_01: No, I guess I think we've covered it, other than I'm just I'm glad we get to go home on a weekend with a report like this that that makes it feel friendly and hopefully the cash can follow suit today and make Monday and next week a good day and week.
• 9:04
  SPEAKER_02: All right.
• 9:05
  SPEAKER_02: Well, thank you for your time today, Kyle.
• 9:07
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• 9:10
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• 9:16
  SPEAKER_02: Thank you.
• 9:16
  SPEAKER_02: Have a great weekend, everyone, and we'll see you next week.