Latest / CattleUSA Daily / 242: Inside the Cattle Market: Strong Cash, High Break-Evens, and Why You Can’t Get Comfortable with Dan and Samantha

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242: Inside the Cattle Market: Strong Cash, High Break-Evens, and Why You Can’t Get Comfortable with Dan and Samantha · CattleUSA Daily

• 0:00
  In today's episode with Dan and Samantha, we are breaking down
• 0:03
  the cattle market and what is going on in the world right now
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  as far as grains go to. We spend quite a bit of our time
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  today talking about the grain markets and just kind of the
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  absolute cluster mess that the grain markets are right now
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  because of some wonderful government reporting that we got
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  this week as well. So before we hop into this
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  podcast with Dan and Samantha and they explain everything that
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  is going on for you guys you're watching on YouTube, make sure
• 0:31
  you take a second to hit that like button and subscribe to our
• 0:35
  channel. And if you're watching on any of
• 0:36
  our other podcasting platforms, take a second to go rate and
• 0:39
  review it and make sure you're following the show as well.
• 0:41
  Without further ado, let's go ahead and hear from Dan and
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  Smith. Welcome to the Cattle USA Daily
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  Podcast, your go to source for the latest livestock markets,
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  industry insights and the updates shaping agriculture
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  today. I'm your host, Lauren Moylan, a
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  passionate advocate for agriculture, here to keep you
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  informed and connected. Now let's dive into today's
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  episode. Dan, Samantha, welcome back to
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  the podcast once again. How are our lives going in Iowa
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  and northwestern Kansas? Life's great.
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  It's windy. Holy moly, is it windy up here?
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  It's like 50-60 degrees yesterday and now all of a
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  sudden it's zero and under my amount of winds feels like.
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  Anyways, yeah, yeah, what a change.
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  Yeah, same here. We got, I think South of us down
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  in Dodge City, got 7-8 inches of snow.
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  The last week. We didn't get none of that.
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  We didn't get a single inch. So crazy. 7 or 8 inches.
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  Wow, that's quite a bit. We got some like sleet started
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  coming down one of the nights that we were here, but as soon
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  as it hit it was completely melted.
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  We have not had a single thing stick since December 1st.
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  Crazy. I don't want, I don't want to
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  wish it on anybody, but a winter weather on the plains typically
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  is good for the cattle market. I'm going to keep my mouth shut
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  on that one. Anywho, on based on the cattle
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  market, how? How is the cattle market doing?
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  Hopefully we don't need any winter weather in the Plains to
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  help bump it. The gold bump yesterday, futures
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  finally deciding it needs to follow the cash market.
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  I guess I'd say good $5 move yesterday.
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  So happy to see that. And for your cattle, fats are
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  dragging their feet waiting on cash.
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  But charts look healthy. So let's let's hope we can pull
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  through on the cash side of things this week and drag
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  features with us. Absolutely.
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  Yeah. The cash markets really, really
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  strong, especially for the grazing cattle.
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  They seem to be just absolutely on fire.
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  Those lights, middle weight soccer feeders just exploded.
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  Also notice there's a huge, huge demand for replacement efforts
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  right now. I mean, I caught maybe a couple
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  minutes of a video sale the other day.
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  Some of those 7 weight replacement efforts were
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  bringing just as much, if not more as some of those steers.
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  So definitely some demand for them.
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  I think people are still kind of looking at interest rates and
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  drought and other input as a pinch point, but hasn't really
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  started to slow demand any in the cash market.
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  You know, at the end of the day, people need cattle.
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  So as long as they've got them, they're going to buy them.
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  I think they're still concerned if they sit on their hands till
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  spring, there might not be any left.
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  Everyone's fighting for that same, same low inventory.
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  So that's probably going to keep cash prices up or at the very
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  least steady. I would agree, seeing the same
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  thing here in the same thing, yeah.
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  Very exciting, very exciting. It's great to see an up and up
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  cattle market and to not have a ton of like gloom and doom to
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  have to come on here and talk about.
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  I mean, gloom and doom gives us a lot to talk about.
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  But I am of the camp that I would rather rather not have to
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  talk about current events and what the news cycle is saying
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  this week about the cattle market and how that's affecting
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  everything. And I know we're all kind of
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  sitting here waiting for the shoe to drop because it will
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  inevitably, like, Lord knows, we've got the South border,
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  we've got this, we've got that, we've got all of these other
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  things that the shoe will drop eventually.
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  But I'm just going to sit back and I'm going to bask in this
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  nice cattle market that we've got right.
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  Now, honestly, we need this rally.
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  I mean, I was running some projections on some feed lot
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  stairs that I own and you know, I think they were, the majority
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  of them were bought in July. So before things got really
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  Western, you know, in August, September, October.
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  And even those cattle, it's incredible how fast those cost
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  of gains creeped up on us with interest with yardage.
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  I mean, feed costs, obviously we don't need to worry about that
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  right now. But yeah, there's still those
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  break evens are high. We need the cattle route to
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  rally in order to get some of these cattle to work.
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  It's cross your fingers, hope and pray because we're coming
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  into those really high break evens here towards the end of
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  January and February especially. Absolutely.
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  Dan mentioned that cheap feed and that's another thing not to
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  hit gloom and doom, but you know, there's a lot of focus
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  around. That was a report that came out.
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  Greens took that huge hit Monday down to a 4 1/2 month low.
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  Dan's probably wishing the government was shut down.
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  But you know, it was a little disappointing theaters didn't,
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  it didn't give feeders an extra boost in the market.
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  I guess it just took a day to catch up because then we rallied
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  yesterday. So, but I think that breaking
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  grains obviously like Dan was saying and that's uplifting your
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  feed lot guys with 250 or higher breakevens and fats are 228 to
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  234. So that doesn't exactly pencil
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  out. Yeah, I agree.
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  Suppose Lauren's going to ask me about that grain report here
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  next, isn't she? Oh yeah, Lauren is going to ask
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  you about that grain report and how you're feeling about that
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  grain report, Mr. Dan Boy. Well, the powers that be powers
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  that be or the powers that pee on the farmers here in America
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  up in Washington DC decided they would throw some bogus numbers
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  at us again. So last year this time for the
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  same report we will actually went out to DC or I did went to
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  DC with some local guys here that invited me and it was an
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  eye opening opportunity to sit in those reports.
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  Obviously they're entirely confidential.
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  You can't take your phones and they lock everything down.
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  So the the numbers aren't supposed to get out.
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  And last year I was really, really upset with them because
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  their fall numbers that they had put out the prior fall, it would
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  have been the fall of 24 were so far off.
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  And they corrected them on the January report.
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  So of course I was upset that all those guys that had to sell
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  poor grain prices during harvest, you know, they, there's
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  nothing that they do about them, but they screwed the numbers up
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  and then they fix them later. Fast forward to this year and
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  they did 180° the opposite thing.
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  We had the numbers that I still believe we're a little bit
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  screwed up and they decided to make them worse.
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  I mean, it's laughable because everything about that report on
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  the corn side of things was a joke.
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  I mean, you look at harvested acres were way up.
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  The anomaly against planet acres was just something we've never
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  seen before. So that was a joke number one.
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  Joke number 2 was the yield. Obviously, I live in one of the
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  I states. I pay attention to the I states.
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  The world pays attention to the I states.
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  Yeah, the fringe acres had a lot better yields this year, I
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  believe, than they did let last year.
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  But at the same time, it's not enough to raise the corn yield
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  half a bushel. What the heck?
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  I mean, we were. Our personal farm average was
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  down 5060 bushels from last year.
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  And that was a very common theme in the I states.
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  Well, how do you take that big a hit and raise the national
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  yield? OK, so that's joke #2 joke #3
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  how do you raise the feed number?
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  Feed and residual is a category on that WASDI report.
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  How do you raise that when we have less pork or sorry, less
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  hogs on feed because of disease pressure?
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  We have less cattle on feed openly.
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  The government admits that, and we also have less poultry
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  because of the bird flu. How can we be going through more
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  corn on the feed side? Thankfully they raised that
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  because it lowered the bound. It kept the balance sheet check.
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  Otherwise we would add a 2.3. But at the end of the day, when
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  you look at a 2.227 ending stocks or balance sheet is so
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  high now, it's very, very hard for me to get optimistic enough
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  to put the farmers back in the black ink.
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  We had a shot there, you know, had we hypothetically got a
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  nickel or a dime pop, a lot of people could have gotten good
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  hedges on, you know, going into the planting season.
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  It would have been all right thing.
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  And maybe that opportunity still comes.
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  It's seasonal. You know, typically we work
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  higher is a common deal. But now with the balance sheet
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  all the sudden getting raised to where it did, you know, well
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  over 2.2 billion bushels, now it's a struggle to get back to
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  that 470 break evens that we're seeing in that 11, you know,
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  1080 to $11.00 break evens on beans.
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  I mean, just sitting here looking right now, wheat's
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  actually one of the healthier looking charts I'm staring at.
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  It's I don't know, it's just sad.
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  But shut that government down, shut all that USDA reports, just
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  kill them. It just, it's not helping.
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  Let the market do the market things.
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  I mean, the market was trading in a sideways pattern.
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  Basis was doing its job. I mean, it was negative in
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  areas, it was firming in other areas.
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  You know, the corn was funneling where it needed to go.
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  Now all of a sudden you wrecked the futures market.
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  Well, hey, that's great. For the guys that had their
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  hedges on, they can all we might have an opportunity to see Basis
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  improve a little bit. But for the guys that didn't,
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  that had targets working, like I said, maybe a nickel or a dime
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  higher, you know, at profitable levels, finally that doesn't
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  work. Let's just send some more
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  mailbox money out and try and, but inevitably those are the
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  numbers we have to work with. So that's what we're going with.
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  Grant, do you have a countdown in your office, Dan, of how many
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  days until the government next government shutdown if they
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  don't agree on this next spending bill I.
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  Do not I should. That's a great idea.
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  Maybe that would help with just your mental mental well-being a
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  little bit. We wouldn't want to give me all
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  optimistic on something like that happening.
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  And I get let down on that too by the government.
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  But yeah, no, it was just aggravating.
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  I wish I would have been there again this year for that release
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  last year. It was it was kind of awesome.
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  I believe Seth, Seth Meyer was the guy in charge that day and
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  he stood up and just started ripping those guys for having
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  their numbers so far off. I was happy to see it.
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  I would like to see what happened in that meeting this
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  year. Somebody should have been
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  ripping heads off for having this large of anomaly on this
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  type of report. I mean, we've been looking
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  forward to the January report since October, and then they
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  come out with this garbage. It's just garbage.
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  It's laughable. Once again, laughable.
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  Yeah, it that's, that's the only thing you can say on it is that
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  it's laughable. It's embarrassing, honestly,
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  that we can be so far removed from what is actually happening.
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  And I think all we want on a basis of everything is
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  transparency, honesty and just do your damn job.
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  Like it's not that hard. I've you wouldn't think that
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  those three things would be that hard as far as it comes where
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  it's like grains, beef, anything like.
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  You know, the, IT just makes me scratch my head because the way
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  they work that is there's a group of individuals that go
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  into a locked board room early, early in the morning.
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  I believe it's 3 or 4 O clock in that that very morning.
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  And they pull all their numbers together because they're all
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  working on different categories, right?
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  So you've got industry experts and there's probably a couple
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  commodity brokers that go in there.
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  You have all the USDA, you know, different people that go in
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  there. And then they sit there with
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  some mathematicians to make all this stuff meshed together and
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  make it make sense. And they sit there and play with
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  the numbers. At the end of the day, somebody
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  should have stood up and said, hey, this just doesn't look
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  right. This doesn't sit right.
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  Yeah, the numbers are saying this.
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  But guess what? Those numbers come from pulled
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  farmers that are getting pulled for that information.
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  You're talking, what was it, 6070?
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  I think short of 80,000 farmers actually got pulled for that
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  data. Something's off.
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  I don't know. Yes.
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  The math isn't mapping. Once again, somebody should have
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  stood up. I hope somebody did.
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  And I don't know, I always look for heads to roll and it never
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  happens in DC so here we are. But like I said, those are the
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  numbers we have to trade at. 2.22 looks pretty nasty going
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  into an already unprofitable year.
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  Yeah, for sure. As far as other markets are
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  concerned, just cattle market in general, was there anything else
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  that we missed today that we need to hit on?
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  Any other heavy hitters? Anything else that you guys are
• 13:08
  kind of keeping your eye on or watching right now as we go into
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  halfway through January? You know, I'm just hoping that
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  cash fats can gain more momentum towards the last part of this
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  week. They're pretty sloppy last week,
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  a little uneven to start this week.
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  Think we had a couple loads out of Iowa and Kansas spring 233.
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  It's a $5 gain off last week's lows, but still a dollar back
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  off that 234 high. Like I said, a lot of the bulk
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  of the trade is going to come towards the end of the week, but
• 13:37
  at this point it's considered uneven.
• 13:39
  I'd be interested to see how this Tyson's, Tyson's Lexington
• 13:42
  beef plant closure has to affect this knocking out that Nebraska
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  plant. I mean that puts the producer in
• 13:48
  a tight spot, but it also takes slaughter back by about 15% for
• 13:52
  the state of Nebraska. So it'd be a little bit
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  different if the closure, the plant closure was down in the
• 13:58
  South, you know, where there isn't as many cattle.
• 14:00
  But taking into consideration Nebraska on feed numbers, you
• 14:04
  know, placements, they've been trending higher year over year.
• 14:07
  So if the Packer backs up fats again in the north, given these
• 14:10
  lower slower capacities and we've been down that road, it
• 14:13
  doesn't paint a pretty picture, which just puts us toe to toe
• 14:16
  with Packer leverage and less aggressive cash bids.
• 14:19
  So another thing that I was reading on the other day, taking
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  into consideration of imports on demand, that's been a really
• 14:26
  heightened focus all around in the media for producers,
• 14:31
  especially after that removal of Brazilian beef tariffs.
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  You know, I think a few months ago, everyone was sitting on the
• 14:36
  end of their seats seeing how that panned out.
• 14:38
  Surprisingly, we've already hit that quota 3 days into the new
• 14:42
  year when it was projected to take three months.
• 14:44
  So from this point, that implements a 26.5% tariff on any
• 14:50
  Brazilian beef imports moving forward.
• 14:53
  I think that's pretty optimistic in a sense.
• 14:55
  You know, we don't have imports majorly flooding the markets,
• 14:58
  but since the government wasn't successful in getting beef
• 15:01
  prices down, we knew they wouldn't be that route.
• 15:04
  Makes me wonder if they have something up else up their
• 15:06
  sleeve. If it's a $1600 dairy cow
• 15:09
  buyout, that gives me deja vu to October's crash.
• 15:13
  So no confirmation one way or the other on that.
• 15:17
  Hopefully we don't see it. But definitely brings you back
• 15:20
  to that old saying, you know, never sleep on a rising tide.
• 15:23
  Don't don't ever get too comfortable because as we've
• 15:26
  seen with that Wazzi report, you know they'll pull the rug out
• 15:29
  from under. You absolutely and start looking
• 15:31
  out in the back. I mean, back month figures of
• 15:34
  350 plus, use it. I mean it find it simple.
• 15:38
  Use that 350. It's a big number in my head.
• 15:41
  So yeah, we might go to 400, but we might also go back to 310.
• 15:45
  So yeah, I use that. I agree 100% with Samantha.
• 15:50
  Dan, is there anything else that you're kind of keeping your eye
• 15:52
  on as we move forward, anything else that we need to head on
• 15:54
  today before we close it up? I was a little bit nervous
• 15:57
  there. For the last several days we had
• 15:59
  lower open interest in fat cattle, but yesterday's move
• 16:02
  higher brought a little higher open interest.
• 16:04
  So managed money's been going along, feeders and fats and
• 16:08
  hogs. So evidently they're still
• 16:11
  bullish protein. So that's good.
• 16:13
  I mean, where else they're going to stick their money?
• 16:15
  They're not going to go to grains.
• 16:16
  But yeah, it if we can keep that continuing that trend, keep them
• 16:22
  in the on the buy side, keep open interest rising.
• 16:25
  That's a healthy market. So looks good but use it cover
• 16:28
  the back. Absolutely wonderful.
• 16:31
  Wonderful. Well.
• 16:32
  Point out real quick before we close, there is a landmine of
• 16:36
  inaccurate information on the web when it comes to LRPI.
• 16:40
  Was looking just last week and and it's insane.
• 16:43
  I mean I haven't started a second my second guess myself.
• 16:46
  I start asking Adam questions. But if you have any questions
• 16:49
  it's better to just pick up the phone, call one of us, get in
• 16:52
  contact with one of us. Seriously, there's no stupid
• 16:55
  questions and if there is, I probably already asked him to
• 16:58
  Adam and Dan, so don't feel bad, but that's worth noting.
• 17:03
  Yeah, absolutely. It definitely is a very good
• 17:05
  point worth putting out there. And the fact that every single
• 17:09
  person's operation is different, every single person's cattle
• 17:14
  scenario, what they need to cover, what they don't is
• 17:16
  different. And so it's best to not even
• 17:19
  talk to your neighbor down the road or talk to a friend or
• 17:22
  anything like that. It's best to literally call
• 17:23
  someone and see what is going to work best for you in your
• 17:26
  operation because Dan and Samantha are honestly on your
• 17:29
  guys's side when it comes to all of this and working with you
• 17:33
  guys. They want what is best for you.
• 17:34
  So it is best to just pick up that phone, give them a call.
• 17:38
  All of that information is going to be down in the show notes for
• 17:41
  you guys down below. So if you are interested in
• 17:43
  giving them a call, contacting our team, all of that
• 17:46
  information is down below where you can do that.
• 17:48
  And Dan, Samantha, as always, thank you for your time to all
• 17:52
  of our listeners out there. We will see you all next time on
• 17:54
  another episode of the Cattle USA Daily Podcast.
• 17:57
  Have a good one y'all.