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Cattle: Overview · Professional Ag Marketing Podcast

• 0:00
  SPEAKER_01: Welcome to the Cattle Market Talk Podcast with Professional Ag Marketing.
• 0:04
  SPEAKER_01: Come here to get your fresh updates on what's happening week to week within the cattle market.
• 0:09
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:15
  SPEAKER_01: Today is December 4th.
• 0:17
  SPEAKER_01: I've got Jeff back with us here today.
• 0:18
  SPEAKER_01: How's it going, Jeff?
• 0:20
  SPEAKER_01: It's going pretty good, Mike.
• 0:23
  SPEAKER_01: I missed last week with Thanksgiving and the birth of my fourth kiddo.
• 0:28
  SPEAKER_01: So we are back at it here this week, Jeff.
• 0:30
  SPEAKER_01: What do you know about the markets this week?
• 0:33
  SPEAKER_00: Well they've they've been putting some strength on, as I'm sure everybody's well aware of, of course, um fairly you know, really impressive market.
• 0:40
  SPEAKER_00: We've only really had one one down day since we put that low in right after the plant announcement.
• 0:48
  SPEAKER_00: Um that must have been right at about a little over a week ago, I think.
• 0:52
  SPEAKER_00: Yeah, last Monday.
• 0:53
  SPEAKER_00: Yep.
• 0:54
  SPEAKER_01: That was a wild trade.
• 0:55
  SPEAKER_01: I mean, you were limit down Monday on that Tyson news.
• 0:58
  SPEAKER_01: Then by Friday, you were trading limit higher.
• 1:00
  SPEAKER_01: I mean, we were really higher, I guess, by Wednesday already after that.
• 1:04
  SPEAKER_00: Yeah, and I think what the you know good day uh for cattle futures again today as they work higher.
• 1:11
  SPEAKER_00: I think what they're kind of looking at, you know, is we we were able to stabilize the cash market.
• 1:17
  SPEAKER_00: And you know, it's still a little bit of a question mark, I think, to try to figure out well, is you know, cash have to be higher because it's the strong fundamentals, or is it higher because the futures are higher?
• 1:30
  SPEAKER_00: Um but and it's probably some of each, right?
• 1:33
  SPEAKER_00: So um I think the the actions of the Packer here this past week are pretty encouraging.
• 1:40
  SPEAKER_00: Obviously, we had a a slow kill week last week with a holiday.
• 1:43
  SPEAKER_00: We're a few weeks away from a couple more weeks of slow kills um because of the holidays, of course.
• 1:50
  SPEAKER_00: Um and they're they're pretty aggressive on looking for some cattle.
• 1:54
  SPEAKER_00: So whether the futures are dragging it up or not, I'm not sure if that matters completely.
• 2:00
  SPEAKER_00: The fact is of it is, is you know, packers are gonna be willing to pay um you know a good ten dollars higher than what they did last week as we look at some of these cash cattle in uh the Nebraska, Iowa, Minnesota area bringing uh in the 220 area, 220-221 here today.
• 2:19
  SPEAKER_00: Um haven't seen a lot out of the south, but I can assure you that they're gonna be bringing in um better money than we're getting in the north again and see some of that same appreciation and value there.
• 2:30
  SPEAKER_01: We've seen a pretty nice recovery, about 38% so far on this retracement, Jeff, for fat cattle.
• 2:37
  SPEAKER_01: There, a little bit more on feeder cattle.
• 2:39
  SPEAKER_01: Markets climbed back pretty nicely here.
• 2:42
  SPEAKER_01: We're not quite back to those gaps that maybe some of us are keeping an eye on on cattle, anyways.
• 2:47
  SPEAKER_00: But what price targets do you have there on the chart for like the February live cattle, Mike?
• 2:52
  SPEAKER_01: So February live cattle, we closed right at 224 today.
• 2:55
  SPEAKER_01: And some of those price targets, I'd argue, uh, if you look at like the 50-day moving average, right up along 230.
• 3:02
  SPEAKER_01: So another five, six bucks before we probably run into some crazy hard resistance there.
• 3:07
  SPEAKER_01: There's also a gap right there, right above 230.
• 3:10
  SPEAKER_00: Yeah.
• 3:11
  SPEAKER_00: So that also is gonna put us um really close to uh you know bidding for the fat cattle up to the same price as what the choice box beef is.
• 3:23
  SPEAKER_00: So that's really if you if you chase the front end of this market there um in the cash, and the futures will certainly go right with it, of course, or vice versa, like we talked.
• 3:33
  SPEAKER_00: But um that's gonna pretty much take away the margins that the Packers currently are experiencing.
• 3:40
  SPEAKER_00: Now, that's with a little bit of a depressed um box beef value, right?
• 3:45
  SPEAKER_00: We've we've kind of been struggling there a little bit.
• 3:48
  SPEAKER_00: We're we're bouncing right off the lows that we've been playing with here, the back half of uh 2025.
• 3:56
  SPEAKER_00: Um, and I would just note that we're we're doing that in a time frame.
• 4:00
  SPEAKER_00: We'd we'd like to see some strength there because we're going into the holidays.
• 4:03
  SPEAKER_00: So from a seasonal perspective, hey, we'd like to see a bounce in meat value.
• 4:07
  SPEAKER_00: It should be going up.
• 4:08
  SPEAKER_00: Yeah.
• 4:09
  SPEAKER_00: Um, but the other side of it is this year's definitely um not uh not associated with normal by any any stretch of the imagination.
• 4:18
  SPEAKER_00: So you've got an increase in kills here recently.
• 4:21
  SPEAKER_00: We're speeding up the shackle space outside of the holiday, of course.
• 4:26
  SPEAKER_00: So maybe that's what's causing a little bit of pressure on the meat values.
• 4:31
  SPEAKER_00: Um I gotta believe they're looking a little bit skinnier on the supply going forward, especially as you cross into the um January and into February timeframe.
• 4:43
  SPEAKER_00: So um we might start seeing those kills slow down a little bit.
• 4:46
  SPEAKER_00: That might spark the meat.
• 4:47
  SPEAKER_00: You know, those are all be things that we watch in the coming weeks.
• 4:51
  SPEAKER_01: What else are you thinking on this cattle market, Jeff?
• 4:54
  SPEAKER_00: Well, we had a good meeting last night.
• 4:56
  SPEAKER_00: A lot of us attended, Mike, and I knew you I know you were there too, so we'll get your thoughts on it as well.
• 5:00
  SPEAKER_00: We had Brett Stewart from Agri Trends in.
• 5:03
  SPEAKER_00: Um he does a really nice job of uh you know looking at the bigger picture, and I think that's a good lesson for all of us is to take a step back once in a while, think about the really big picture.
• 5:17
  SPEAKER_00: You know, I know a lot of times even on this podcast, we can get pretty focused on where's the next spot in the charts, what's the you know, yesterday's packer margins, right?
• 5:27
  SPEAKER_00: And so we talked a lot about the cattle cycle and meat demand, beef demand on a pretty big picture, and you know, he painted a pretty rosy picture um for the cattle business, and you know, I think it's debatable as to you know, did we already start to retain some heifers?
• 5:46
  SPEAKER_00: I think that's our shop's opinion.
• 5:48
  SPEAKER_00: Um we had some information that would support that, that we're starting to maybe see some uh activity on the retained heifer standpoint.
• 5:57
  SPEAKER_00: Um, but you know, his thoughts are we're gonna get into that more aggressively in the coming 12 months, but of which of course will take um the the next 12 months of supply even lower than what we've seen this past year.
• 6:12
  SPEAKER_00: Um so he's looking for a pretty friendly uh supply outlook, um, beef demand as as we all know, you look at you know the prices that we're seeing today versus what we saw last year, you know, very much through the roof.
• 6:25
  SPEAKER_00: And and one thing that really struck me on that topic, and I think we've pointed this out before too, is um you know per capita usage here in the US really hasn't gone down.
• 6:37
  SPEAKER_00: We've we've reduced our kills uh to six to seven percent lower than last year, but we've put three to three and a half percent more weight on, we've imported a good four percent more product.
• 6:50
  SPEAKER_00: Um so the US consumer continues to eat what they did a year ago, um, even with some much higher prices, right?
• 6:59
  SPEAKER_00: So kind of talked through all that.
• 7:01
  SPEAKER_00: Um really not seeing any uh fly in the ointment so far as far as consumer demand goes.
• 7:08
  SPEAKER_00: Um, you know, he would talk about inflation and and that argument of uh, you know, beef's really not that expensive if you consider all the rapid inflation that we've seen in the past five years.
• 7:21
  SPEAKER_00: Not sure if we're fully on board with that discussion, but hey, you know, certainly get the argument, right?
• 7:28
  SPEAKER_01: Yeah, some very interesting things, uh, you know, to go back to the consumer sentiment portion of it.
• 7:33
  SPEAKER_01: We just got through a major spending holiday, which was Black Friday, and a lot of people spent money, even money they didn't have, which is truly the American way, Jeff.
• 7:42
  SPEAKER_01: But they've been doing that with beef too, right?
• 7:44
  SPEAKER_01: No matter how high the price has got so far, they just still seem to keep buying it.
• 7:49
  SPEAKER_01: So from a demand perspective, it it seems like, in his opinion, demand had to really uh hold on here, and it looks like it can.
• 7:56
  SPEAKER_01: And price would really have to incentivize them not to choose beef over another competing protein, it sure looked like.
• 8:03
  SPEAKER_00: Which I would certainly argue that we're doing that.
• 8:05
  SPEAKER_00: I mean that it there's it it's gone up a lot.
• 8:08
  SPEAKER_00: Um and pork and chicken really hasn't.
• 8:11
  SPEAKER_01: But chicken and poultry specifically have been huge benefactors of high beef prices, is kind of what he said through this process.
• 8:19
  SPEAKER_01: Every year that beef price goes up, we eat more and more and more and more chicken every single year.
• 8:24
  SPEAKER_01: So um he he did talk about that trend a little bit too.
• 8:28
  SPEAKER_01: Um very uh interesting points, just about we took 21% off the cattle prices for virtually no reason.
• 8:35
  SPEAKER_01: Fundamentally, it was basically fear, uh funds just getting out, and his argument that basically we flushed the the long positions out of this to an extent where the the weak longs aren't really in it anymore.
• 8:48
  SPEAKER_01: Um so downside fear maybe wasn't as great as what uh I was worried about, um, from his speech at least and and his statements.
• 8:57
  SPEAKER_01: Um and then going forward just the small supplies.
• 9:00
  SPEAKER_01: You know, we're getting into a smaller supply next year, and it's really gonna be the next couple years.
• 9:05
  SPEAKER_01: So um the fundamental picture was, like you said, very rosy to the cattle guy yesterday.
• 9:11
  SPEAKER_00: Absolutely.
• 9:12
  SPEAKER_00: There's uh obviously a long list of things that can go wrong and um whether that's political or from a demand uh situation, um, and the obvious one as we've thought it through it here in the past couple weeks continues to be the uh screwworm situation and whether the border's gonna open.
• 9:31
  SPEAKER_00: Um they did make an announcement there yesterday afternoon, probably helping some of our futures contracts today, too.
• 9:38
  SPEAKER_00: Um I believe they had eight cases uh show up positive.
• 9:42
  SPEAKER_00: Um and what and they kind of had a delayed release for some reason.
• 9:46
  SPEAKER_00: So these these cases uh they're showing up positive.
• 9:49
  SPEAKER_00: I better finish my statement on the Mexican side of the border, but close to the US, right?
• 9:55
  SPEAKER_00: Um so more of the same there for a bit, but the a lot of these um positive tests were coming back here really throughout last week and kind of released all that information yesterday.
• 10:07
  SPEAKER_00: So we'll see.
• 10:09
  SPEAKER_00: I I know uh there's been some different people thinking we're getting pretty close to opening the border, just looking for a solid date and a solid plan.
• 10:17
  SPEAKER_00: To me, that maybe that here in December or push that more.
• 10:22
  SPEAKER_00: Yeah.
• 10:23
  SPEAKER_01: Not not as many headlines here locally about uh about that reopening.
• 10:28
  SPEAKER_01: And then the other one, obviously being other than the border reopening, uh Trump, his campaign to basically get cheap food prices, uh that continues to run on.
• 10:37
  SPEAKER_01: He's increasing subsidies to farm programs.
• 10:40
  SPEAKER_01: Obviously, he's gonna announce a big big old check here next week, it sounds like to Jeff.
• 10:44
  SPEAKER_01: So uh nonetheless, anyways, yeah, political uh border opening and then the fear of demand.
• 10:53
  SPEAKER_00: So, I mean, with this break, I think something to to be asking ourselves and and looking at is you know, take a hard look at our position.
• 11:02
  SPEAKER_00: Can we get some creative ways to you know, we we like to lean pretty hard on the insurance products, Mike, because they do come at a discount to the other options, right?
• 11:12
  SPEAKER_00: So you can do some things to get yourself some less intrusive coverage, all right.
• 11:17
  SPEAKER_00: So for for carrying hedges today or and short futures, we are actively looking for some opportunities to maybe um still keep that baseline very solid.
• 11:28
  SPEAKER_00: We're not really willing to take a ton of risk here at these price levels, um, but we obviously are off the highs.
• 11:34
  SPEAKER_00: So can we do some adjusting?
• 11:36
  SPEAKER_00: Um we got feeder cattle lineups that were just you know finished with those.
• 11:43
  SPEAKER_00: Um we got LGM here coming tonight and uh and next Thursday again.
• 11:49
  SPEAKER_00: So take a look, see if we can't, you know, maybe make the current um coverage just a little bit more bullish and and have some uh upside available here on some of these cattle.
• 12:00
  SPEAKER_01: All right.
• 12:01
  SPEAKER_01: Well, thank you for your time today.
• 12:02
  SPEAKER_01: Thank you for everyone who joined us last night.
• 12:04
  SPEAKER_01: It was a great time.
• 12:05
  SPEAKER_01: Packed house hundred and some people there, so it was a fantastic time.
• 12:09
  SPEAKER_01: I really appreciate it, and uh it was a great presentation.
• 12:13
  SPEAKER_00: Thank you, Mike.