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Are Cattle Prices Sustainable at This Level? · Professional Ag Marketing Podcast

• 0:03
  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.
• 0:13
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: Today is September 4th.
• 0:23
  SPEAKER_01: I've got Jace with us here today.
• 0:25
  SPEAKER_01: We're going to talk the cattle market.
• 0:26
  SPEAKER_01: How's it going, Jace?
• 0:27
  SPEAKER_01: Pretty good.
• 0:28
  SPEAKER_01: All right, just a little outline here for you.
• 0:30
  SPEAKER_01: We're going to talk about some futures first, then we're going to talk about packer margins, then cash market, a little bit of a long-term outlook and how we're sitting right now compared to what we should be priced, objectively speaking.
• 0:41
  SPEAKER_01: And we'll talk about some feeder spreads.
• 0:44
  SPEAKER_01: So let's talk about the uh futures market and what I would call the bottom end of this downward channel that we've been in.
• 0:52
  SPEAKER_02: Yeah, so we've been we've been near the bottom end of this range, going on a couple weeks here now.
• 0:58
  SPEAKER_02: Have failed to break through the lows that we put on, put in on like the 27th of August there.
• 1:05
  SPEAKER_02: So just kind of hanging around that area.
• 1:07
  SPEAKER_02: We were oversold for a little period there.
• 1:10
  SPEAKER_02: We kind of lost some of our volatility in the downtrend, just just with the market trending lower.
• 1:16
  SPEAKER_02: But we're starting to see things shape up a little bit here.
• 1:20
  SPEAKER_02: Like we're we're definitely below break-even on a lot of these cattle.
• 1:24
  SPEAKER_02: So unhedged cattle, they're you know, they're struggling a little bit on these getting sold now.
• 1:30
  SPEAKER_02: But I will just say, with cutout doing what it's done, it had a pretty decent fall, I would say, compared to what people thought we were gonna have.
• 1:39
  SPEAKER_02: Um, and with these, with these close, with the closing of these plants in Jocelyn and other areas, that we s we've seen the Packer margins shift.
• 1:49
  SPEAKER_02: And that just that's just changes that just changes our futures outlook a little bit, I think.
• 1:55
  SPEAKER_01: How about uh any any headline news this week that was pushing things around pretty greatly?
• 2:00
  SPEAKER_01: I know President Trump, if you look on our first to know AI platform, it did look like there was an announcement coming out this afternoon, but not really market-moving impact from the looks of it.
• 2:12
  SPEAKER_01: What did you take?
• 2:13
  SPEAKER_02: Yeah, I don't know that I have all of the full details on it yet, but it was he's been taking a lot of heat recently from these groups like RCAF and other, you know, even just senators and congressmen on importing beef and the impact that's gonna have on American ranchers.
• 2:32
  SPEAKER_02: And so he was kind of wanting to give them a bone, is what it looked like a little bit.
• 2:37
  SPEAKER_02: And just what I saw come out of that was that ranchers can harvest their own cattle, sort of a deal.
• 2:43
  SPEAKER_02: But not nothing, you know, there is some expectation around M-Cool, and I don't know that that has taken any shape, but I that would require congressional approval, and that would take that that's not something that's gonna happen overnight.
• 2:57
  SPEAKER_01: What about on the tariff side?
• 2:58
  SPEAKER_01: Any news there this week?
• 3:01
  SPEAKER_02: No new news, just the same that there's that 300,000 metric ton of trim that can be imported that doesn't isn't above terror above quota tariff.
• 3:11
  SPEAKER_02: Um, but no, like we don't think that number's quite achievable with the amount of beef that's in Brazil and other places, so and the others haven't met their quota yet, but we we don't think that's gonna have as big, it's not gonna have a 300,000 metric ton impact.
• 3:28
  SPEAKER_02: It's going to have some impact, and you're seeing trim move lower, but no new news this week.
• 3:33
  SPEAKER_01: That makes sense.
• 3:34
  SPEAKER_01: Uh, how do you want to tie the cash market into the the packer margin story here?
• 3:39
  SPEAKER_02: Yeah, so the cash market at 220 there or three or three forty-five on the dress side, you've got a you've got the which was steady to a smidge higher this week.
• 3:52
  SPEAKER_02: Yep, yep.
• 3:53
  SPEAKER_02: I I would just call it steady, but it's it's at a level that's sustainable.
• 3:58
  SPEAKER_02: Like we look at the Packer margins here, and they're making over$100 ahead.
• 4:04
  SPEAKER_02: You're you're definitely at a spot where you're not talking about you're not talking about cutting more plants at this at this stage of the game.
• 4:13
  SPEAKER_02: So it just changes, it just changes the outlook a little bit, I think, on the sustainability of this market, which, you know, there's still reason to believe that we run into a few more cattle this fall and could see prices decline again.
• 4:29
  SPEAKER_02: But it it is getting to a point where the we've talked about it, we talked about it last week here, but the the right sizing of all of the infrastructure from the cow calf guy to the feedlot to the packing plant.
• 4:45
  SPEAKER_02: Like there was all the margin was in the cow calf guy's hands for a while there, and it's kind of shifted a little bit now.
• 4:52
  SPEAKER_02: You're making a little money on the packing side.
• 4:54
  SPEAKER_02: You're maybe even in some cases, you're able to break even or make a little bit on the feeding side at placement.
• 5:01
  SPEAKER_02: So there is a little bit of a shift happening there, and it'll continue to, but it's it's getting somewhere.
• 5:06
  SPEAKER_01: And I mean, given where the futures are at, you're already at a little bit of a discount.
• 5:10
  SPEAKER_01: You've got a five or seven dollar positive basis off the October today.
• 5:14
  SPEAKER_01: That could be one of the reasons why we've kind of held these levels steady on the futures market, just already having pretty decent discounts priced in even further out.
• 5:23
  SPEAKER_01: Would a hundred percent agree.
• 5:25
  SPEAKER_01: So, where's that put us long-term outlook then?
• 5:27
  SPEAKER_01: Is this sustainable?
• 5:28
  SPEAKER_02: I I think it is.
• 5:30
  SPEAKER_02: It'll it'll depend on what we see from demand going into the fall here.
• 5:34
  SPEAKER_02: If we see a demand impact from the imported beef or that sort of a thing.
• 5:39
  SPEAKER_02: And I also, I mean, like we were just talking, the the herd size, like the number of the number of calves available for harvest, will that'll matter here.
• 5:50
  SPEAKER_02: And it it corn has a little bit of an impact on this now.
• 5:54
  SPEAKER_02: Higher corn, you're probably not taking them as heavy.
• 5:58
  SPEAKER_02: You probably don't plug that in your projection.
• 6:00
  SPEAKER_02: So you could see added supply just by drawing your weights down to a more normal, historically normal level.
• 6:08
  SPEAKER_01: Well, Thursday on September 3rd, I thought was a weird day yesterday on futures.
• 6:13
  SPEAKER_01: We were up really strong on cattle.
• 6:15
  SPEAKER_01: Some of it might have been maybe it wasn't supposed to be down the day prior with what cash was doing.
• 6:21
  SPEAKER_01: Um, so that that was an odd day.
• 6:23
  SPEAKER_01: But part of me wanted to say, well, we're down double digits on corn at that moment, that morning.
• 6:28
  SPEAKER_01: I like maybe weakness in the corn market is helping out cattle, actually, at this point.
• 6:34
  SPEAKER_01: But later on in the day, we saw corn come back and cattle still stayed high.
• 6:38
  SPEAKER_01: So uh that made me question that theory a little bit.
• 6:42
  SPEAKER_01: On a seasonal outlook here, it looks like cutout from a demand perspective that you talked about earlier.
• 6:47
  SPEAKER_01: Uh seasonal incline into Labor Day, then it kind of falls off here for a little bit.
• 6:52
  SPEAKER_01: So hopefully we don't have to fall off too long.
• 6:54
  SPEAKER_01: But it seems like that incline happened a couple weeks earlier than what we normally do ahead of Labor Day, didn't it?
• 6:59
  SPEAKER_02: Yeah, it did.
• 7:00
  SPEAKER_02: And ribs staying where they are, they're at last year's levels again.
• 7:05
  SPEAKER_02: So that that is kind of interesting that we're still seeing demand on the expensive cuts.
• 7:12
  SPEAKER_02: So if you have if you have money for beef, you're still eating beef is sort of the takeaway.
• 7:16
  SPEAKER_01: What can you tell me about that dynamics with feeder cattle in the north and south now with the border being back reopened?
• 7:22
  SPEAKER_02: Yeah, so the border border being open maybe changes it a little bit, not a lot yet, just because the volume's pretty light, but corn going up and the corn crop being mostly in the east, you know, Kansas is struggling, western Nebraska, anything that's not irrigated is uh is probably a zero.
• 7:42
  SPEAKER_02: And even even into this area a little bit, you know, our our basis is probably gonna narrow up from what from the wide levels that we've seen, but they're gonna they're seeing positive basis in Kansas and that that sort of that part of the world where they're feeding a lot of cattle and uh the spread it probably in some cases makes more sense to truck those cattle to the north than it does to feed them down south, where you're paying a dollar over basis on corn.
• 8:10
  SPEAKER_02: So it's a little bit of an interesting shift.
• 8:12
  SPEAKER_02: Like we were looking at a couple barns in uh Oklahoma that were bringing like 330 on an eight-weight, and they were bringing like 360 in in Nebraska.
• 8:23
  SPEAKER_02: So definitely a divergence there, and I think a lot of that has to do with corn.
• 8:27
  SPEAKER_01: All right.
• 8:28
  SPEAKER_01: Well, any final thoughts for our listeners this week on the livestock side of things on cattle?
• 8:33
  SPEAKER_02: Yeah, I would say on this basis opportunity in October here, it's it's never a great idea to sleep on it.
• 8:41
  SPEAKER_02: You know, we we saw it last week where you had a really good positive basis, eight, nine dollars, and that disappears quickly on a day like yesterday where cash stays steady and the board goes up.
• 8:52
  SPEAKER_02: But that is very seasonal.
• 8:53
  SPEAKER_02: So just just being careful not to not to take that for granted and maybe take advantage of some of that basis.
• 9:00
  SPEAKER_01: All right.
• 9:01
  SPEAKER_01: Well, thank you everyone for tuning in.
• 9:02
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• 9:10
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• 9:13
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• 9:17
  SPEAKER_01: Thank you, everyone.
• 9:18
  SPEAKER_01: Thank you, Jace.