Latest / Professional Ag Marketing Podcast / Cattle and WASDE with Nick Bork

Transcript

Cattle and WASDE with Nick Bork · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_01: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_01: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: This is your host, Mike Minor.
• 0:22
  SPEAKER_01: Let's get started.
• 0:24
  SPEAKER_01: Today is March 11th.
• 0:27
  SPEAKER_01: I've got Nick Bork out of our office here today.
• 0:30
  SPEAKER_01: How's it going, Nick?
• 0:32
  SPEAKER_00: Pretty well.
• 0:32
  SPEAKER_00: How are you, Mike?
• 0:33
  SPEAKER_01: Not too bad.
• 0:34
  SPEAKER_01: So I've got a couple of topics here for us to talk about today.
• 0:37
  SPEAKER_01: We're going to talk about the cattle market and uh what that's been going on lately here.
• 0:42
  SPEAKER_01: We've uh had quite a sell-off from the April cattle here from about the 17th of February from that 147 area on April down to this 137.
• 0:51
  SPEAKER_01: So taking off 10 bucks here in a little bit of a hurry over uh just a couple weeks, and uh, I'm gonna have to hear what you've got to say about that, and then uh we're gonna wrap up the show talking a little bit more about the uh Russian-Ukraine action this week and then the WAST airport as well and its impact on the grain markets.
• 1:09
  SPEAKER_01: How's that sound?
• 1:11
  SPEAKER_00: Yeah, that sounds real good.
• 1:13
  SPEAKER_00: Yeah, the the certainly the cattle complex this week has really, or yeah, over the past four weeks has really struggled.
• 1:21
  SPEAKER_00: Um there has been some fun liquidation, obviously, going on um up frontier, and and and cash really has kind of kind of stalled out.
• 1:32
  SPEAKER_00: Obviously, there's a lot of willing sellers out there with this with this corn market doing what it has done.
• 1:39
  SPEAKER_00: And um and a lot of cattle want to come to town.
• 1:42
  SPEAKER_00: We've also had you know extremely good growing conditions this winter, by and large, across the majority of cattle feeding country, you know, uh uh Kansas, Oklahoma, Nebraska all has have had really good cattle growing conditions.
• 1:59
  SPEAKER_00: Cattle have put on weight well, and and I think there's a lot of cattle up, you know, that were probably meant for even uh you know, even this April-May time frame here that that are wanting to come to town early because of of this corn market.
• 2:15
  SPEAKER_00: And um uh I think as we go forward here, we're gonna see more and more of that as long as long as this as these feeds stay high.
• 2:25
  SPEAKER_00: But um it it could certainly make for a nice rally coming in May, June, too, if we can if we can uh you know eat up a lot of supply through this time frame.
• 2:38
  SPEAKER_00: This week is gonna is going to end up being quite a monstrous um cash negotiated cash volume week.
• 2:46
  SPEAKER_00: Not sure where exactly that number is gonna come in at b uh uh for the week, but it certainly was good sales this week, even with um steady money.
• 2:55
  SPEAKER_00: So again, a lot of a lot of uh willing sellers, and uh, you know, that's gonna keep keep a lid on this cash market here for now.
• 3:06
  SPEAKER_00: Uh and I think uh I do think going forward though, uh with what the April contract has done and and and the June as well, that um we're gonna keep cattle moving.
• 3:21
  SPEAKER_00: And and even though we're not getting much of a bounce in cash, um staying current and and and shipping cattle at lighter weights is is gonna be you know a benefit here yet for the so a little bit of a basis play then right now, probably right, with what April Futures did compared to cash being at what 140-ish they're just under Yeah, certainly a a positive basis here through this time frame would be kind of expected.
• 3:50
  SPEAKER_00: Um and uh uh but but you know, good, very good basis levels here to be to be moving cattle.
• 3:58
  SPEAKER_01: Nice.
• 3:59
  SPEAKER_00: Does feel like too, you know, like these these uh box beef deal has kind of bottomed um now uh you know around that around that 250, 255 area on the choice beef.
• 4:12
  SPEAKER_00: Hopefully we can keep that market moving higher here now going into summer as some of these uh retailers maybe start to to feature beef again getting ready for the grilling season.
• 4:25
  SPEAKER_00: The one long-term thing I think that's on all of our minds here going forward is is this is this and these energy prices and and that's a effect on the on the on the high selling price of beef.
• 4:41
  SPEAKER_00: You know, beef has has never really had good demand when when or solid demand when crude is above a hundred bucks, and that's kind of what we got going on today.
• 4:53
  SPEAKER_00: We do got some other interesting dynamics going on though too.
• 4:56
  SPEAKER_00: You do have chicken, chicken breast is extremely high, you know, for this time of year, pork is also relatively high.
• 5:04
  SPEAKER_00: Um pork cutout, you know, trading over a hundred bucks right now, too.
• 5:08
  SPEAKER_00: So how that all interacts, I don't know going forward, but what we do know from history is that anytime crude is over a hundred bucks, um, we do lose beef demand.
• 5:18
  SPEAKER_01: So with the rise in pork prices coupled with the reports of bird flu and some chicken operations, beef may kind of move back into play at the meat counter here, it kind of sounds like.
• 5:29
  SPEAKER_00: Yeah, I think that's right.
• 5:30
  SPEAKER_00: I think that's right.
• 5:31
  SPEAKER_00: Um, you know, I you know, we can already see it in the grocery stores, you know, the the the prices on some of these cuts and hamburger is is is pretty high, and and when people start having to pay four bucks for gas, um they're gonna have to look to other proteins.
• 5:48
  SPEAKER_01: Are you worried about the cattle uh futures going forward and cash cattle, or do you think we're gonna find some support here?
• 5:55
  SPEAKER_00: Well, I do think uh short term here we do we will find some support.
• 5:59
  SPEAKER_00: You know, there you know, through the next couple months here, I think there is we're gonna kind of maintain this uh, you know, this this supply and demand going forward.
• 6:10
  SPEAKER_00: But but long term, I mean the deferred contracts now use you know, October cattle are actually trading above the cash market today, and I just don't think that that's as sustainable as what it was a month ago.
• 6:23
  SPEAKER_00: I think uh with what crude oil has done over a hundred dollars a barrel, I just don't think that that we're gonna be able to support a dollar forty and above October cattle at like we maybe had a chance of it um you know earlier in the year.
• 6:38
  SPEAKER_01: Very nice.
• 6:39
  SPEAKER_01: Do you got any other closing c uh comments on cattle or do you want to get into the WASDI report?
• 6:45
  SPEAKER_00: I think that kind of wraps it up for cattle.
• 6:47
  SPEAKER_00: Um if yeah, if you want to uh discuss some things on that WASD, that'd be great.
• 6:53
  SPEAKER_01: Awesome.
• 6:54
  SPEAKER_01: Well, we had a WASD report here this week.
• 6:56
  SPEAKER_01: Uh for the most part, uh, we've had a lot of volatility surrounding the grain markets in general with the uh uh with the war situation right now.
• 7:05
  SPEAKER_01: So the report maybe didn't have as big of an impact as what we would typically see out of a WASD report, which uh uh was quite expected for the most part.
• 7:14
  SPEAKER_01: And we didn't get anything too out of the ordinary.
• 7:16
  SPEAKER_01: Things came in pretty close to expectations for the U.S.
• 7:19
  SPEAKER_01: balance sheet.
• 7:20
  SPEAKER_01: The uh U.S.
• 7:21
  SPEAKER_01: balance sheet increased some soybean exports, uh, which renewed reduced nearly all of the uh move lower and ending stocks for this month on the uh soybean side of things, pretty down pretty close to what they were expecting, anyways, going into the report.
• 7:37
  SPEAKER_01: And on the U.S.
• 7:38
  SPEAKER_01: supply side, they didn't change anything there on the soybeans.
• 7:41
  SPEAKER_01: For the U.S.
• 7:41
  SPEAKER_01: corn balance sheet, they did show some uh show no change in supply, but uh ethanol demand and exports were both increased in the report for uh corn demand.
• 7:52
  SPEAKER_01: And then corn futures, uh, you know, right after the report, they're trading a little bit lower post-report, and then soybeans there were trading a little bit higher on the day, and then uh wheat markets continued their hard sell-off.
• 8:04
  SPEAKER_01: So uh overall, when we saw the Brazil soybean numbers come out, that was kind of the big uh mover and shaker that people were keeping an eye on.
• 8:13
  SPEAKER_01: Estimates were kind of ranged between 121 to 134.
• 8:17
  SPEAKER_01: Uh they were at 134 million metric tons last month, and they came in at 127, uh, just below what they were expecting there.
• 8:25
  SPEAKER_01: So a good sizable decrease in the Brazil soybean crop, and I think uh funds like to see that, but it was uh pretty expected for the most part as a lot of the private analysts are pulling into the lower 120s at this point for their crop.
• 8:39
  SPEAKER_01: Argentina came in very close as well on their crop estimates, so no major changes out of the Waz Airport this this go round.
• 8:47
  SPEAKER_01: A lot of the uh lot of the um talk was still about the war situation going up.
• 8:54
  SPEAKER_01: Uh, you know, we um we had both sides of the warring factions kind of met and uh met this week and afterwards formally announced they were unable to uh negotiate a ceasefire with the Russians who are unwilling to really accept anything short of a total surrender by Ukraine.
• 9:12
  SPEAKER_01: Uh kind of expected.
• 9:14
  SPEAKER_01: I would say today, uh seeing the price action in these grain markets, I was a little bit surprised on the lack of support.
• 9:21
  SPEAKER_01: You know, we saw a lot of really hard up days, then saw some really hard down days after they saw some ceasefire, evacuated some cities, and had some negotiations.
• 9:32
  SPEAKER_01: I figured uh news like that would have really sent some markets soaring higher here to end the week, but you know what, uh soybean the soybean market here closed out the week pretty much unchanged to a little bit lower, corn up a little bit here, uh no major changes there.
• 9:48
  SPEAKER_01: And then the soybean market, you know, 10 to 10 to 30 higher across all the futures months there for the majority.
• 9:54
  SPEAKER_01: Uh a little bit uh interesting uh reaction on that, I thought.
• 9:58
  SPEAKER_01: The energy market has been uh interesting trade as well.
• 10:01
  SPEAKER_01: We're closing the week up about three here, uh going into about 230 on this Friday, uh closing the week with 109 as the front month there.
• 10:11
  SPEAKER_01: Um it was interesting to me how the three separated themselves from each other, Nick.
• 10:16
  SPEAKER_01: Uh you had a couple days there where you saw like crude oil trading lower, wheat trading limit lower all the way across to all three uh types, and then corn was up like thirty.
• 10:28
  SPEAKER_01: So that day I thought was really interesting yesterday, where we saw the separation of those three.
• 10:34
  SPEAKER_01: And um, you know, the other set the other interesting thing I've been waiting for, and uh we fin finally saw a little bit more of it this week was you know uh the uh green fuel initiative that this uh administration has moved towards and uh in trying to get uh more of a renewable energy source uh to take over the United States, um, move away from uh fossil fuels and how that's kind of biting them right now because they're stuck in between a rock and a hard place.
• 11:06
  SPEAKER_01: So you see someone like Aramco or uh, you know, OPEC, uh other countries are ramping up their oil production as a lot of them announced here this week.
• 11:15
  SPEAKER_01: And uh, you know, Aramco is uh supposed to pretty much be the biggest company in the world market cap-wise by the end of this week or next, pretty soon anyway, especially with the stock market sell-off.
• 11:26
  SPEAKER_01: Um other countries are taking advantage of this uh of this m high crude oil prices uh trying to ramp up oil production here while Russia's kind of sitting on the sidelines as people are uh putting sh sanctions against them.
• 11:40
  SPEAKER_01: And then you've got the United States, which uh we're kind of sitting on our hands, I feel like, as uh this administration is afraid to get away from that green fuel initiative.
• 11:50
  SPEAKER_01: And uh I think it's put us in a in a really tough spot.
• 11:53
  SPEAKER_01: And maybe looking forward, you know, the dramatic development uh that we're seeing when it comes to the the renewable diesel industry, you know, maybe that's gonna be huge for us.
• 12:02
  SPEAKER_01: Maybe that will be a change like we saw ethanol had in the corn industry.
• 12:07
  SPEAKER_01: Um but as we move forward here, uh I've been disappointed in um in the big oil's ability in the United States to take advantage or at least make market moves to take advantage of making uh the U.S.
• 12:21
  SPEAKER_01: a little bit more self-sufficient here.
• 12:23
  SPEAKER_01: And uh well, you could say things like, you know, a couple of years we were exporting uh oil, things like that.
• 12:29
  SPEAKER_01: Um just look at the price of gas at the pumps today and the reaction they've had as we approach now the highest uh national average gas prices in the United States ever, and you talked about that correlation with uh spending habits between beef and uh, you know, the consumers at the counter.
• 12:48
  SPEAKER_01: Um so it impacts all of us, and uh I think um, you know, we've got the ability and the resources uh right here in the United States to fix a lot of those problems and be self-sufficient, but uh I I think our government's been holding us back here a little bit or that uh go green uh mentality anyways.
• 13:07
  SPEAKER_01: But I'll get off my uh soapbox here a little bit, anyways, and we'll wrap up the podcast here for this week.
• 13:13
  SPEAKER_01: We'll look for another big week next week as we try to get these grain markets to recover a little bit, look for the crude oil market to try to get some recovery there as well after a decent setback in both of those.
• 13:25
  SPEAKER_01: Um found some support finally, as Nick mentioned, in that cattle complex, and uh we'll keep an eye on the rest of these ag markets as well.
• 13:33
  SPEAKER_01: So thank you for all listening uh today, and thank you for coming on the show today, Nick.
• 13:38
  SPEAKER_00: Yeah, thank you, Mike.