Latest / Professional Ag Marketing Podcast / Kyle Kracht on the Cattle Market's Continued Slide

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Kyle Kracht on the Cattle Market's Continued Slide · Professional Ag Marketing Podcast

• 0:02
  SPEAKER_01: Welcome to the Cattle Talk Podcast.
• 0:05
  SPEAKER_01: Your weekly breakdown of cattle market fundamentals, key news, and the insights shaping the industry.
• 0:12
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_00: Good afternoon.
• 0:22
  SPEAKER_00: Today is July 17th.
• 0:24
  SPEAKER_00: It's Friday after the close.
• 0:27
  SPEAKER_00: I have Kyle Crock here with us with Professional Ag Marketing.
• 0:30
  SPEAKER_00: How's it going today, Kyle?
• 0:32
  SPEAKER_02: Very good if I can find a place out of the sun.
• 0:36
  SPEAKER_00: It is a steamy one out there.
• 0:38
  SPEAKER_00: It's gonna be for a while this weekend, so uh it'll be nice to uh get some shade.
• 0:44
  SPEAKER_00: But however, I wanted to learn a little bit more about who you are, Kyle, what you do at professional ag marketing, and just give the folks a little intro to you.
• 0:54
  SPEAKER_02: Yeah, I'm I live out in South Dakota now in Bowdel, um trying to work with uh insurance products with cattle producers mainly, but in general, trying to get the brand of ProAG out there in South Dakota, Western South Dakota.
• 1:13
  SPEAKER_02: I'm originally from the Edgerton, Minnesota area, where I farmed and fed cattle.
• 1:19
  SPEAKER_02: Um, so I've been with ProAG since 2025 and enjoying the job of working with producers and trying to secure their bottom line.
• 1:31
  SPEAKER_00: Awesome.
• 1:32
  SPEAKER_00: Well, we are happy to have you on.
• 1:33
  SPEAKER_00: This will not be the only time we do, it's gonna be a bit here as well.
• 1:37
  SPEAKER_00: So uh tag along with us.
• 1:39
  SPEAKER_00: But uh I want to talk about the cattle market here a little bit.
• 1:43
  SPEAKER_00: Let's take a look at August futures, what a few key points are that we have in mind this week, and kind of what you're seeing and why we've seen so many red days here, Kyle.
• 1:56
  SPEAKER_02: Well, it's pretty amazing how many days in a row we've been lower, but we often see this in the cattle market that it takes a while to get to our highs, and and we can lose ground in a hurry.
• 2:09
  SPEAKER_02: We've seen a lot of these sell-offs over the few last few years, and hopefully we can rebound like we have in the past.
• 2:16
  SPEAKER_02: But it feels like maybe we're losing a little bit of leverage to the Packers here, as um they don't have as many shackles available now with plant closures and strikes and hours cut.
• 2:33
  SPEAKER_02: So I feel like that's maybe a little of it, and then manage money maybe disappearing a little bit, maybe feeling like we're having a little trouble selling the product any higher than this.
• 2:48
  SPEAKER_02: Um looks like 16 16 days in a row and 20 out of the last 21.
• 2:54
  SPEAKER_02: We've been lower, but we did leave a gap in there, kind of in that 234 and a half area.
• 3:01
  SPEAKER_02: So hopefully we can catch here somewhere and and go back and fill that and get an opportunity to get some floors a little higher than where we are today.
• 3:13
  SPEAKER_00: Absolutely.
• 3:14
  SPEAKER_00: Hopefully, we can find a little support here because on this run lower, like you've said, really hasn't shown any signs of a recovery, uh, really hasn't tried to retrace at all here.
• 3:24
  SPEAKER_00: So after a substantial sell-off, the cattle market is just begging for good news at this point.
• 3:30
  SPEAKER_00: Let's go on a little bit deeper into some of these fundamentals.
• 3:33
  SPEAKER_00: Let's talk about just on the supply side first, then we're gonna work into the demand side.
• 3:38
  SPEAKER_00: But uh, let's start at the beef production numbers.
• 3:41
  SPEAKER_00: What do you see for just overall beef production here out of the United States?
• 3:46
  SPEAKER_02: Well, as you can see on this graph, we're we're below the five-year average and by quite a ways and below last year.
• 3:55
  SPEAKER_02: But the thing to keep in mind with that is our imports, our net imports are greater than last year.
• 4:02
  SPEAKER_02: Uh last year we were roughly 11% of our production was imports, and this year we're closer to 15.
• 4:10
  SPEAKER_02: So that puts us pretty close to equal with last year as far as the beef that's available.
• 4:17
  SPEAKER_00: What do you have to say for heifer retention at this point?
• 4:20
  SPEAKER_00: Is there any signs of rebuilding going on at all yet, Kyle?
• 4:25
  SPEAKER_02: Well, it feels like it to me.
• 4:28
  SPEAKER_02: Um, this chart wouldn't suggest that it's overwhelming by any means, but as we've talked in the past, the B Fundary kind of puts a little noise in this chart, so we're not quite sure what that means, but it does feel like we are keeping a few heifers, and with that in mind, that would lend a little more hope to later in the year that if we have kept heifers back, that our market ready cattle numbers should be a little lower than what we would expect later in the year.
• 5:01
  SPEAKER_02: So hopefully that can help us to catch and to rebound a little bit.
• 5:07
  SPEAKER_00: Well, from a forecasting standpoint, it looks like from this point on, we're just going to be running into a few more cattle each week, uh, just from a seasonal perspective.
• 5:16
  SPEAKER_00: And then also pretty hot weekend here, like we talked about, uh, should start to lighten that uh those temps up a little bit as well, get a little bit heavier weights again.
• 5:26
  SPEAKER_00: So uh almost to that uh seasonal time frame where we start to find some more beef uh anyway.
• 5:32
  SPEAKER_00: So it'll be interesting to see if we've been keeping any of those cattle back and we start to notice that down the line.
• 5:39
  SPEAKER_00: But it's gonna take a bit here uh if it's early signs of it.
• 5:43
  SPEAKER_00: What can you tell me about the Packer and how they're managing their way through this with some awful Packer margins here still, Kyle?
• 5:51
  SPEAKER_02: Yeah, well they've as they've been doing for quite a while, they're running 32-hour work weeks for the most part, and um we've lost some plants, and we have the plant in Colorado yet that's not killing.
• 6:05
  SPEAKER_02: Uh, so there's a lot of a lot of room for them to kill more, but as we're seeing here with these great basis opportunities that feeders have, the Packers are taking advantage of that with the lower futures to buy cattle, not so much to kill more, but just to get them out further and get closer to the time of year where the the basis usually is tougher.
• 6:35
  SPEAKER_02: So I feel like they're they're getting a little bit of an upper hand here, and until until they can get the meat to sell where they can make money, I feel like they're going to be a little hard to work with as far as adding kill capacity.
• 6:54
  SPEAKER_00: Absolutely.
• 6:55
  SPEAKER_00: To go on the demand side of it, because we just talked about the supply side, choice here showing weakness.
• 7:01
  SPEAKER_00: Obviously, from a seasonal perspective, it looks like we continue to trend lower here for the next couple weeks.
• 7:07
  SPEAKER_00: What can you tell me about the demand side of the category and what you're seeing uh with numbers there, Kyle?
• 7:13
  SPEAKER_02: Well, it's kind of tracking right with last year at this point.
• 7:18
  SPEAKER_02: We came into the spring and summer grilling season at a pretty lofty level, levels we hadn't really seen before.
• 7:26
  SPEAKER_02: Uh, didn't get a spike in the early summer like we would have wanted, but yet we stayed kind of up there with last year's level, and now we're kind of selling off with that.
• 7:39
  SPEAKER_02: So hopefully we can kind of replicate last year and find a bottom here in the next couple weeks and into the late summer here that we could rally this thing.
• 7:51
  SPEAKER_02: Last year is when in the late summer is when we put in our all-time high on the boxes.
• 7:57
  SPEAKER_02: So hopefully we can follow that trend again.
• 8:00
  SPEAKER_00: Hopefully, we've got a couple more down weeks, it looks like, if we track close to last year.
• 8:05
  SPEAKER_00: Just running the math here, uh, about 360-ish on the bottom of that line from last year, uh, 63 or so percent of that.
• 8:14
  SPEAKER_00: And you start talking about going from dress to live, somewhere around the 220 to 225 type area, 226 uh cattle there for next fall.
• 8:23
  SPEAKER_00: So hopefully that means we don't got a whole lot more to take off on this cattle market in those futures there for early fall time frame, anyways.
• 8:30
  SPEAKER_00: I'm hoping, anyways.
• 8:32
  SPEAKER_00: Uh, any other final fundamental thoughts on cattle before we get into some of these uh insurance offerings, Kyle?
• 8:39
  SPEAKER_02: Well, I guess it's just in my mind, it's good to see that we're holding that beef price where we are.
• 8:46
  SPEAKER_02: I mean, we don't like to see it ever go down, and we don't like the way it's gone down, but uh in light of having as much beef as we had last year and to hold in these levels feels feels pretty good.
• 8:59
  SPEAKER_02: So hopefully we can get the futures to catch and and get a little more demand here late summer.
• 9:06
  SPEAKER_00: Not a ton to get excited about at the time being for uh a lot of risk management opportunities.
• 9:12
  SPEAKER_00: We've been placing some very expensive cattle lately.
• 9:15
  SPEAKER_00: But what can you tell us about if we are to do something?
• 9:18
  SPEAKER_00: What do you see out of the insurance products, some changes we've seen since July 1st, and some unique opportunities that you think folks really need to be paying attention to?
• 9:29
  SPEAKER_02: Yeah, well, that's a a good point.
• 9:32
  SPEAKER_02: Uh, we should really be looking at at least having some sort of a floor.
• 9:36
  SPEAKER_02: I we talk at the office or amongst us about having something in place to protect the balance sheet.
• 9:42
  SPEAKER_02: So we feel like these insurance products can offer that with some upside.
• 9:48
  SPEAKER_02: We've done quite a bit of the LGM in the past, and that can offer a cheaper floor.
• 9:56
  SPEAKER_02: Uh given uh spelling a call or something to pay for part of it or all of it.
• 10:02
  SPEAKER_02: We can do varying things, but have a window as wide as$20.
• 10:07
  SPEAKER_02: So even if we're spooked by this market today, we can have a floor that we're not gonna let it get away from here and have quite a bit of upside.
• 10:17
  SPEAKER_02: We like that.
• 10:19
  SPEAKER_02: Or even looking into the LRP since the new crop year started July 1, there's some great basis opportunities offered there in next spring and summer.
• 10:31
  SPEAKER_02: We've been have guys taken advantage of that.
• 10:34
  SPEAKER_02: Um not the it's the LRP settles against the cash.
• 10:41
  SPEAKER_02: So when in the past we haven't had those basis opportunities, now they're giving that to us.
• 10:47
  SPEAKER_02: So we want to take advantage of some of that to to raise our floor a little bit and and just give us that peace of mind that we aren't gonna wash out from here, but that we can have some upside as well.
• 11:03
  SPEAKER_00: The big punchline is they are offering a significant opportunity for producers to take advantage of basis levels like we've seen here in the last year at some relatively high amounts versus what normal is.
• 11:16
  SPEAKER_00: They're giving us that all the way into next summer, aren't they, Kyle?
• 11:21
  SPEAKER_02: Yeah, it's uh feels like they're trying to get you more utilization out of these products and trying to make it our mimic this year the way it seems to us, as far as a strong basis through the spring and summer.
• 11:37
  SPEAKER_00: And if you are going to be using some of those products, it's it's very expensive, just straight up on their own.
• 11:42
  SPEAKER_00: So please contact us about using some products to go along with this on the option side and uh manage these positions accordingly.
• 11:52
  SPEAKER_00: So, any other final thoughts out of you, Kyle, here today for the cattle market?
• 11:58
  SPEAKER_02: No, I guess not, other than just on these insurance products.
• 12:01
  SPEAKER_02: I think one huge advantage that we have with them is the premium is not due till the cattle are sold.
• 12:08
  SPEAKER_02: So if we're in a position where we've got to get something on, but it doesn't feel good with the market being lower, we don't have to pay for it until we have the cattle check in hand.
• 12:18
  SPEAKER_02: So that's a plus.
• 12:22
  SPEAKER_00: That it is.
• 12:23
  SPEAKER_00: Well, thank you for joining us here today.
• 12:25
  SPEAKER_00: For everyone else out there, please click the link in the description below to access things like our daily market commentary, other interesting market research.
• 12:34
  SPEAKER_00: Please go to professional eggmarketing.com to get a hold of one of us about helping you manage some marketing risk there.
• 12:41
  SPEAKER_00: So thank you for joining us, Kyle.
• 12:42
  SPEAKER_00: It's been a pleasure today.
• 12:44
  SPEAKER_00: Thank you, Cade.
• 12:45
  SPEAKER_00: We'll see you next week.
• 12:46
  SPEAKER_00: Thank you.