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66: Record High Prices Are Here—But So Are the Risks · CattleUSA Daily

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  Welcome back to another episode of the Cattle USA Daily Podcast.
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  Today we are welcoming Dan Garahold with the Logic AG
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  marketing team and the Cattle USA partnership that we have
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  with them. Back to the podcast where we are
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  going to be discussing today's market report, what is going on
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  the markets, what we are seeing. We are talking a little bit of
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  consumer demand as far as the high beef prices that we are
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  seeing goes and just Dan and I thoughts on everything that we
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  are seeing in the market today. So without further ado, let's go
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  ahead and get into this episode with Dan.
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  Welcome to the Cattle USA Daily podcast, your go to source for
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  the latest livestock markets, industry insights and the
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  updates shaping agriculture today.
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  I'm your host, Lauren Moylan, a passionate advocate for
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  agriculture, here to keep you informed and connected.
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  Now let's dive into today's episode.
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  Things are good, things are good.
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  We're going to get some rain today, so can't complain too
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  much about that. Busy as always, getting back
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  into the groove of things still around here.
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  It feels like after my two weeks of travelling and all the
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  madness that all of that was. I travel a lot but it always
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  just knocks me off my rocker whenever I do.
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  Yeah, you've travelled a lot lately.
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  Yeah, I've been all over the country the past few weeks, but
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  it's been good. It's been good.
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  I'm used to traveling. I used to travel full time but
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  it's still, it just gets me out of my routine and I'm just like
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  I get back and I'm like running around like chicken with my damn
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  head cut off it feels like. But that's normal.
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  Yeah. It's normal, yeah.
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  It makes me feel better when like I'm in my routine and
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  running around like a chicken with my head cut off.
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  I'm like, OK, it's not just it's not just the fact that I was
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  traveling. Got it.
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  No, no. Get back to the routine.
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  Life gets good, Yeah. Yes, for sure, for sure how
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  things been otherwise for you. Just yeah, chicken with its head
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  cut off trying to get the corn in the ground and should have
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  that finished up and then record high markets so.
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  We love that. Do you want to?
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  Tell us about Tell us about the record high markets.
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  What's going on with the record high markets, Dan?
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  Yeah, big week last week getting that cash market to jump, you
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  know, two, 23224 in the North Southern trade knocking on 220.
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  Looks like they they bought some earlier this week.
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  Two, 17218 in the South. But you know, that's pretty
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  normal. They'll go chase some poor doing
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  cattle, make it appear like the market is topped.
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  Sounds like a lot of people were holding out for 225, possibly
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  2:30 this week in the north. Those are big numbers, Lauren.
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  I don't know, you know, they might get it.
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  We still have the leverage if possible.
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  Anything's possible up here? Yeah.
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  You know, it's feeder cattle side of things.
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  We have yet to touch that $3 mark.
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  Yesterday's high I was August fierce the I was screens here
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  29990 so. Really close.
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  We're right there. Either let's, let's do it and
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  blow through it or or we're in trouble.
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  So good. I don't know.
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  It's a lot of fun when you're setting records, but it puts me
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  a little bit on edge because I, I've been in this business long
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  enough to know that the record setting doesn't last forever.
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  So I think we're all fortunate that it's lasted this long and
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  I'm optimistic it could be good going through summer yet and
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  maybe in the early fall. It's a lot.
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  You're you're expecting feed yards to pay a lot for
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  replacement fears. I know they're selling fat
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  steers at 3435 hundred depending on if if the way UPS are good.
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  But you know, you're talking about a lot of dollars getting
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  played with. I mean a small feed yard, it's
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  nothing to get 2 1/2 three million borrowed on a small
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  yard. You talking big yard, you know
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  you're hundreds and hundreds and hundreds of millions.
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  It's just it's a lot and I know, you know, the banks aren't
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  enjoying that when you run your clothes out as much as as much
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  as feed has cheapened up. It's good to see, you know, feed
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  cost of gains have come down drastically compared to where
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  they were a year ago. But when you start applying all
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  the other costs, you know, yardage is not as cheap as
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  everybody thinks and interest is not as cheap as it once was.
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  I mean, you talk about a $2500 steer you're laying in or, you
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  know, $2400 calf. Your, your, your interest is
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  getting more expensive than your yardage per head per day.
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  So there's a pile of risk on these cattle right now.
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  Hope guys are, are looking into some sort of risk protection.
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  It's just yeah. And and the other thing with
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  that is the deferred futures aren't giving us a lot of
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  opportunity just yet. I think that's coming here
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  towards the end of this week. But when you look at two O 6 and
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  you're trading at 225 cash market everybody, especially
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  with break evens being at 2:10, it's hard for people to want to
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  pull the trigger and and protect this price.
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  So if we get it up to our break evens, I think we got to push
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  hard and and really get some coverage in place because the
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  higher we go, the harder we fall is the old saying, right?
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  I was just about to ask that, is this a situation where you're
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  kind of thinking that, you know, we're, we're soaring pretty high
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  above the clouds right now? Are we going to be falling
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  pretty hard as fall comes around?
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  Potentially. Yeah, it's, I mean, all eyes on
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  boxes, all eyes on kill numbers. You know, Packers already have
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  the kill cut just about as far as they can.
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  The unions have them locked into so many hours a week.
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  So it it becomes this game of chicken, will they lose money?
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  Yeah, but how much are they willing to lose before they make
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  some drastic changes? You know, it seems like beef is
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  plateaued here at this 34345 to get it to push up much above
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  that into that 350 and beyond. That's a big ask on the consumer
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  that's already strapped. I don't know, I struggle to
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  struggle to see it. You're we're in the first week
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  of of beef month. Yeah, boxes are strong.
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  I'm happy. You know, it's this thing's not
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  a mess. Don't let me play it off like
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  that. But there is reasons to be
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  concerned as we work into the into the end of the second
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  quarter and into third and 4th. Well, and we've discussed it on
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  here before too, that we have to play that line between, yes, we
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  want to be paid well for our beef, but we also need to still
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  be providing an affordable protein source for consumers.
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  Because if consumers are strapped and they're looking at
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  the grocery store shelves and beef is the most expensive thing
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  on there, but it's expensive by a long shot, they're going to
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  turn to chicken and they're going to turn to pork, which is
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  great. They're still having a really
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  awesome protein source. But at the same time, we have to
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  play that balance between beef being charged well and us as
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  producers getting paid, but then also still being an affordable
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  to learn more today. Correct.
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  Yeah, It reminds me of a chart I saw, I think it was last week.
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  Beef compared to pork or chicken, mostly porky.
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  Yeah, it was beef compared to pork at the retail counter.
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  There's only been I think over 5 periods over the last 10-15
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  years where beef has been this, you know, the ratio, just the
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  price ratio, beef has been this out of whack.
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  That puts me on edge because I, the people I talked to that
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  don't have meat in their freezer, that don't buy halves,
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  quarters, holes, you know, the people that go to the grocery
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  store are not enjoying the beef price right now.
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  So numbers are tight. There's plenty of places out
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  there, you know, they're starting to talk about this
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  drought is the real deal out West.
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  It'll be interesting how that plays out.
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  Historically, a drought is short term bearish to the cattle
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  market because you're gonna flood it with cows.
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  You're gonna pull those calves off the cows early and ship
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  them. But it becomes long term more
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  bullish if you do kit end up slaughtering those cows.
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  So how that all plays out in this talk about a a picture to
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  paint record high prices and then throw a drought in the mix.
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  So praying for rain for those guys out West. 1000% it's, it's
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  crazy to discuss things like that with consumers sometimes
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  because I also have friends and family that they don't have a
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  freezer full of 1/2 beef or a full beef or something like
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  that. And that they are purchasing
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  their beef at the stores. And a lot of people are turning
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  to, they're still looking at beef, but they're turning to
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  cheaper beef alternatives. They're getting their ground
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  beef in bulk whenever they can. They're like, they're getting a
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  lot of ground beef still, but you're not seeing people going
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  and picking up a bunch of rib eyes or a bunch of briskets or
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  those higher quality meat purchases that we always say
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  that we export the shit and we import the good.
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  And it's one of those situations where we keep the good, right?
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  And it's one of those situations that if we don't have a consumer
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  market that is willing and able to purchase our higher quality
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  cuts, what is that gonna look like for the beef market as we
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  go around to fall and stuff? It's one of those situations
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  where we want people as grilling season kicks up, to not only be
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  grilling hamburgers, we also want them grilling their buys
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  and putting some brisket on the smoker and things like that as
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  well. Yep, absolutely.
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  Yeah. You've got about 60 days of
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  strong beef demand here. If we don't see a push to that
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  350, it's going to be hard for me to imagine the price is much
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  higher than where they're at now.
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  So like I say, step into that third and fourth quarter start
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  getting coverage if we if we get up to your breakevens, I know
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  nobody wants to cover a break even and you know it'd be a lot
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  more fun covering a profit, but it might be time in this market
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  to start looking at it. And you can always up your
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  coverage, like start now, just put it in there, put your cards
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  on the deck right now. And you know what, if the market
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  gets great, then call the team again and you can up your
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  coverage up to that. But at least right now, if
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  you're covering yourself at a break even, you're breaking
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  even. Like it's one of those
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  situations that if you were a banker talking to me right now,
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  I wouldn't be super happy about that.
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  But at the end of the day, at least we're not in the red,
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  right? Like it could be worse.
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  We don't need to go backwards on these cattle.
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  It would hurt in a hurry. I, I just got done writing a big
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  check for LRP myself, Lauren. It was a big one because it was
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  a big pen of cattle. And you know, you sit there and
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  you're like, gosh, I wish I wouldn't have done that.
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  But at the same time, those cattle made a lot of money.
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  And at the end of the day, I, I thought to myself, well, if I
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  wouldn't have just set that floor, stayed in the cash market
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  and fought for higher cash here, it could have turned out a lot
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  different. So I'm going to keep pounding
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  that, pounding it that, you know, we work higher, keep
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  layered in that coverage. 1000% And I think it's a business
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  mindset shift for people, right? Because LRP has not been a thing
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  for a long time. And for a lot of people, they
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  look at it and it's a use it when you have to or it's an
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  option that's there. But I'm not even really going to
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  look into it. And it's still very new in this
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  industry. And so for a lot of people, it
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  can be scary to look at that and be like, I am writing a check
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  for how much money just in case. What do you mean?
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  But if you've really got to like switch your business mindset
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  too, right, of like, we are playing a game of risk.
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  And So what is the risk and reward ratio that you are
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  willing to play with your business?
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  And I truly believe that the people that aren't going to
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  start reshaping their mindsets to that place in the cattle
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  industry are going to start to see themselves in some pretty
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  tough situations as we go about in the years forward, especially
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  in comparison to their neighbors who have made that mindset
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  shift. Yep, absolutely.
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  You know, I'm fortunate to work with a lot of farmer feeders.
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  I'm fortunate to work with a lot of ranchers.
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  None of them really balk about buying crop insurance or buying
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  PRF, but at the end of the day the the LRP premium drives them
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  nuts and I just hope they don't give up on the LRP.
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  At the market highs. There will be a time where
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  market prices are depressed and maybe it's worth the risk of not
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  using it, but at the same time, when you're at record high
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  prices, it's time to really get into.
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  It percent well as far as the market goes, are there any other
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  things that we missed today, anything else that we need to
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  hit on that you've been seeing in the past week?
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  You know, it's cattle have been following equities up and down.
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  Equities recovered off their low.
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  So cattle did the same. If equities stay strong here for
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  the month, I would anticipate cattle stay strong.
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  So I'm optimistic there. I'm I'm hoping these grains make
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  a bottom here. They're getting pretty scary low
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  below cost of production. So I'd like to see a bounce,
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  maybe get some managed money buying you know it's especially
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  with the drought going on out West, it'd be a good time to
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  step in and start looking at feed needs A. 1000% Dan, as
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  always, thank you for your time today, your wealth of knowledge.
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  We always appreciate it here at the podcast and the team.
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  And I mean, I just enjoy my spending, my mornings talking
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  about all of these things with you.
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  So thank you as always. And to all of you listeners out
• 13:29
  there, make sure you like subscribe, rate review, do all
• 13:32
  of the things. We really appreciate it.
• 13:34
  And if you want to get in touch with our insurance team here at
• 13:38
  Cattle USA and see what that looks like to get some LRP
• 13:42
  coverage, we are going to have that Cattle USA insurance linked
• 13:44
  link down below where we partner with Dan and his team to provide
• 13:48
  that for you guys. So make sure you go check out
• 13:50
  those show notes, get that link, go get your coverage, and we
• 13:53
  will see you all tomorrow on another episode.
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  Have a good one y'all.