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Cattle: Leverage · 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 July 3rd.
• 0:16
  SPEAKER_01: I've got Jace with us here today.
• 0:18
  SPEAKER_01: How's it going, Jace?
• 0:19
  SPEAKER_00: Going pretty good.
• 0:20
  SPEAKER_01: Alright, we're gonna talk about cattle today.
• 0:22
  SPEAKER_01: A decent day.
• 0:23
  SPEAKER_01: We had a little bit of a green day, but Jace, when I look back at the cattle market here, we're gonna talk about what the futures did, why they did it a little bit, then we're gonna talk about just cutout and pack our margins a little bit, and then kind of wrap up with a broad range of uh vague fundamentals there.
• 0:40
  SPEAKER_01: So this August cattle, let's start there, live cattle, 214.05 at the close up a buck and a half today.
• 0:47
  SPEAKER_01: We've been putting a little bit on here.
• 0:50
  SPEAKER_01: If you look back at where we closed out Friday last week, we closed on a big up day on Friday up four bucks.
• 0:56
  SPEAKER_01: But this week, kind of choppy sideways, not a whole lot of action going on, was there?
• 1:01
  SPEAKER_00: No, we've got we've got them a little higher here this week, but what we've continued to see is this cutout continues to be really, really strong.
• 1:11
  SPEAKER_00: So stronger cutout here, cash was weaker for a little bit these past few weeks, and now you've started to see these packer margins turn possibly even in the green a little bit, but probably a change of about 300 bucks ahead on their end.
• 1:27
  SPEAKER_00: So you've you've seen a packer that is wanting to kill a few more head, and and we've struggled they've struggled to push cash lower this week.
• 1:38
  SPEAKER_00: We've seen it about steady or steady with the top of last week so far.
• 1:42
  SPEAKER_01: Yeah, in uh the last week we were down probably three bucks, the week before we were down three bucks.
• 1:47
  SPEAKER_01: So we had we were on a little streak of lower cash there, and you saw futures pulling back through that time frame, kind of starting back in the beginning uh second week of June there, uh, until this last week, where it looks like before Friday, anyways, we we finally bottomed that thing out for the time being.
• 2:04
  SPEAKER_01: So uh it's some decent cash here.
• 2:06
  SPEAKER_01: Packer margins, like you talked about, could be improving with cutout still near$400, just shy of it.
• 2:12
  SPEAKER_01: It's been pretty strong there.
• 2:13
  SPEAKER_01: I it sure seems like, Chase, when I look at the consumer in this environment, I may not have the money or I may not have the interest rate capable of uh buying a new house or buying a new car, for example, making major uh major capital purchases, but I definitely have more disposable income as a US consumer, and I'm gonna eat a ribeye with that, or I'm gonna eat a really good T-bone steak rather than the cheap sirloin, even.
• 2:41
  SPEAKER_01: So I it seems like the American consumer still has plenty of money left around to buy some steaks.
• 2:47
  SPEAKER_00: That's that's very true, and we've seen the equities back at their record highs this week.
• 2:53
  SPEAKER_00: So a little bit of consumer confidence there, and then also I would note that we have this make America Healthy again stuff going on, and we've seen observations or things talked about there on the beef side with with the health benefits to beef.
• 3:10
  SPEAKER_00: And I think I think it's kind of the motto is you know, in invest in your health, buy beef, and it's that's kind of carried over into this market a bit.
• 3:19
  SPEAKER_01: Yeah, that whole make America Healthy thing again, uh a big push behind it is getting away from processed foods, right?
• 3:25
  SPEAKER_01: Which it seems like if you wanted a picture perfect plate, it'd be eggs, it'd be steak, and it'd be, you know, potatoes or something.
• 3:31
  SPEAKER_01: So it it really seems like that is pushing and helping, uh, if it is gonna, at least on uh on the consumer side of agriculture.
• 3:40
  SPEAKER_01: Uh so let's talk a little bit more in depth about packer margins.
• 3:44
  SPEAKER_01: What can you say there with cutout where it's at and uh and cash pulling back?
• 3:48
  SPEAKER_01: Do you think they're sitting okay today?
• 3:51
  SPEAKER_00: I think they are.
• 3:52
  SPEAKER_00: It's hard to tell exactly where they're at.
• 3:54
  SPEAKER_00: They don't report a lot of their off-all sales and that sort of a thing, but I think you'd be getting real close to in the black there on the packer side.
• 4:03
  SPEAKER_01: A big turnaround from probably losing a hundred or two hundred dollars, not real reason ago, right?
• 4:08
  SPEAKER_00: Yep, yeah.
• 4:08
  SPEAKER_00: But uh a few weeks ago in the cash high, they were probably losing two hundred bucks ahead gross, and now they'd be yeah, probably a hundred positive on the gross side, but what all comes out of that or goes into that is a little bit up to the planter.
• 4:24
  SPEAKER_01: Very much so.
• 4:25
  SPEAKER_01: We'll see what cutout does here.
• 4:26
  SPEAKER_01: At this time of the year, you're nearing fourth of July.
• 4:29
  SPEAKER_01: It seems like that's a typical peak in this market anyway, so we'll see if that can hold on here for a bit, or if we're gonna see our normal seasonal decline from here on out uh on that cutout.
• 4:39
  SPEAKER_01: So that'll be something to watch.
• 4:41
  SPEAKER_01: But uh what else do you got to talk about today, Jace, around this uh cattle market?
• 4:46
  SPEAKER_01: Any any final thoughts here or anything you want to dive into?
• 4:50
  SPEAKER_00: Well, I guess one thing would be this August board here at 214.
• 4:55
  SPEAKER_00: We do have a gap at 216.50 to 216.72.
• 5:00
  SPEAKER_00: So would look for that if we have a little stronger cash here to get filled, but would look for that to narrow a little bit to the cash.
• 5:10
  SPEAKER_00: We've got got cash starting to hold steady here, and maybe we'll see that board start to appreciate and narrow that basis, which in the north is currently sitting at about$17.
• 5:19
  SPEAKER_01: But it's not as wide as it was, right?
• 5:21
  SPEAKER_00: That's correct.
• 5:22
  SPEAKER_01: Yeah, it's come together a little bit.
• 5:23
  SPEAKER_01: So from a technical picture, really another two bucks on this live cattle market isn't too much to ask for, at least.
• 5:30
  SPEAKER_01: We'll try to go up and get some of those uh gaps filled.
• 5:33
  SPEAKER_01: If you look at the 20-day moving average, we're right on top of it right now for live cattle, for example, on the August futures.
• 5:40
  SPEAKER_01: So it that might be a major resistance right around this 214 that we're struggling to kind of get past.
• 5:46
  SPEAKER_01: Just keep an eye on that 20-day moving average.
• 5:49
  SPEAKER_01: But it seems like we've consolidated somewhat tight.
• 5:51
  SPEAKER_01: Uh the bottom bull and Japan really held in as a support area there.
• 5:56
  SPEAKER_01: Uh feeder cattle back up just shy of 310 here after a half a dollar move higher.
• 6:01
  SPEAKER_01: That one's been pretty choppy lately as well.
• 6:04
  SPEAKER_01: It sure seems like the corn doesn't have an impact on the feeder cattle market.
• 6:08
  SPEAKER_01: I used to always say that uh feeder cattle is just a derivative of corn and live cattle futures, but it sure seems like the live cattle futures matter a whole lot more on that complex today, just because corn price is pretty cheap and really uh you're gonna need a big move in corn to really influence that feeder cattle market, it looks like.
• 6:27
  SPEAKER_01: So a nice uptrend there, still holding.
• 6:30
  SPEAKER_01: Nothing seems violated, in my opinion, from the chart perspective on cattle.
• 6:35
  SPEAKER_01: Um, yeah, fundamentals still look pretty good, not like we expanded the herd at all.
• 6:39
  SPEAKER_01: Demand is still really good.
• 6:41
  SPEAKER_01: I at this point it's just gonna be more talking points about well, for now the equities, yeah, we got the SP at a record high, don't we, Jace?
• 6:49
  SPEAKER_01: And the funds haven't bailed out yet, but uh it seems like they've been a little bit more shaky lately.
• 6:54
  SPEAKER_01: You give it a bearish day news, and they sure seem to trade it hard, don't they?
• 6:58
  SPEAKER_00: Yeah, they do.
• 7:00
  SPEAKER_01: Alright, any other final thoughts for us before we uh kick off the day?
• 7:04
  SPEAKER_01: Alright, well, we're going into the into the weekend here.
• 7:07
  SPEAKER_01: It's a long weekend, three days.
• 7:09
  SPEAKER_01: Uh Trump's gonna talk tonight at 7.30 at the Iowa State Fairgrounds about the potential Chinese trade deal that uh they're wrapping up there.
• 7:17
  SPEAKER_01: So keep an eye on those headlines tonight going into the Fourth of July weekend.
• 7:21
  SPEAKER_01: Uh thank you for joining us today, and we'll catch you next time.