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Cattle Inventories · 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 involves 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 July 22nd.
• 0:26
  SPEAKER_01: I've got Jeff with Pro Ag Marketing here with us today.
• 0:29
  SPEAKER_01: How's it going, Jeff?
• 0:30
  SPEAKER_00: It's going pretty good.
• 0:32
  SPEAKER_00: Unless you're feeding cattle for a living, then the tail end of the week kind of had a sour taste to it, Mike.
• 0:38
  SPEAKER_01: You know what?
• 0:39
  SPEAKER_01: Uh that goes a couple ways because uh grains were down about 40 cents on December corn this week.
• 0:44
  SPEAKER_01: But thank goodness we were up there a long way to do this from a seasonal aspect.
• 0:50
  SPEAKER_01: So rough rough week on the grain markets here.
• 0:54
  SPEAKER_01: Uh we'll talk about that in a little bit, but we're gonna start off today's show, mainly talking about the uh cattle reports today that came out.
• 1:02
  SPEAKER_01: So we're gonna talk about that a little bit, Jeff.
• 1:05
  SPEAKER_01: Uh, what was the consensus from the biannual cattle inventory report there?
• 1:09
  SPEAKER_01: They were looking for some more friendly numbers, but what did we find?
• 1:12
  SPEAKER_00: Yeah, I think that can that report came in uh real close to expectations.
• 1:17
  SPEAKER_00: Just for a real quick review, in case folks um haven't followed it closely.
• 1:21
  SPEAKER_00: So twice a year um the USDA puts together, you know, the total inventory that's a survey, of course, of cow numbers is the biggest thing we're watching there, both on the beef side and on the dairy side, of course.
• 1:34
  SPEAKER_00: Also, the other number that we pull out from there is going to be the total calf crop.
• 1:39
  SPEAKER_00: Um, that number might be a little more accurate at the end of the year than here in the July report.
• 1:46
  SPEAKER_00: But both of those kind of matching up to what we think the cattle industry looks like, um, very close to expectations.
• 1:54
  SPEAKER_00: We basically got about 2% less cows around this summer than what we had last summer.
• 2:00
  SPEAKER_00: Um, calf crop uh this past year being about 1% less than the year before, and that's been kind of a continued trend for about three years now, um taken away on the cow herd, taking a little bit away on the calf crop, and and the trend continues there and and probably will continue.
• 2:21
  SPEAKER_00: You know, we've really ran into some some weather challenges again in the southern states uh from a drought standpoint.
• 2:28
  SPEAKER_00: So I think these cattle are gonna continue to move to town, Mike, and long term we're gonna continue to have a few less critters around here.
• 2:36
  SPEAKER_01: So back about June 9th, we had a high 137.95 on the August contract.
• 2:44
  SPEAKER_01: We found our way up to 137.37 and a half today, which very very nice move up to the top end of the range.
• 2:51
  SPEAKER_01: Do we have any incentive at all to do anything new from the futures perspective up front here, or are we just gonna hit some resistance and pop back down?
• 3:00
  SPEAKER_00: I don't think we've got any incentive to push this thing any higher, Mike.
• 3:04
  SPEAKER_00: Um, it's the first time in well, really all summer that you can look at this and say, well, you've got uh the front month futures halfway close to cash.
• 3:14
  SPEAKER_00: You know, arguably cash in the north in the low 140s this week, a bit disappointing there.
• 3:20
  SPEAKER_00: Um South creeping just a little higher at 136, and the August board trading at 137 and some change.
• 3:28
  SPEAKER_00: So uh I don't see any motivation there from a fundamental standpoint.
• 3:32
  SPEAKER_00: You really don't have box beef doing anything special.
• 3:35
  SPEAKER_00: Um but you know, and then on the report, you know, I was impressed with today's trade, you know, trading back to those old highs, um, short-term highs at least.
• 3:47
  SPEAKER_00: Um, but you know, that's all gonna be depending on the report.
• 3:50
  SPEAKER_00: So you jump in and start talking about the cattle and feed report, which we also got here this afternoon after the close.
• 3:57
  SPEAKER_00: And I think you gotta be pretty disappointed in these numbers.
• 4:00
  SPEAKER_00: Um, placements is gonna be the number that we focused on the most there.
• 4:04
  SPEAKER_00: 2% less than than last year on the re on the placements for June.
• 4:10
  SPEAKER_00: Um it's it's not terrible, but we're really looking for some lower placements than than that, even at some point.
• 4:17
  SPEAKER_01: We've been waiting for a good report for a while out of this.
• 4:20
  SPEAKER_00: Yeah, this has not been our first merigold ride here.
• 4:24
  SPEAKER_00: Uh, we go around and round on this deal, but and it's it's uh, you know, again, we we pulled the smaller weight bracket, um, pulled more of those calves into the feedlot, is what we've done.
• 4:37
  SPEAKER_00: Um, and some of that could be weather related, as we mentioned on the cow herd, them same folks are gonna be a little bit more willing to ship some calves, but in general, they were expecting about 6% less placements.
• 4:51
  SPEAKER_00: We got 2% less placements.
• 4:53
  SPEAKER_00: We rallied this futures market uh into the close today.
• 4:58
  SPEAKER_00: I think we're gonna be a little disappointed come Monday again, Mike.
• 5:02
  SPEAKER_01: Speaking of uh disappointment, feeder cattle have been uh pretty hard to come by here as of late for guys to fill up some of these empty lots.
• 5:09
  SPEAKER_01: But November getting into those backfall months, 188.50, Jeff, that is getting up there quite a ways again.
• 5:16
  SPEAKER_00: That's a pretty that's a pretty steamy number, no doubt about it.
• 5:19
  SPEAKER_00: I think you gotta look at those really hard for our cow calf friends out there.
• 5:25
  SPEAKER_00: Um, no question, things are very optimistic from a supply standpoint.
• 5:30
  SPEAKER_00: Um, I think you know, even moving some of these additional feeders into the marketplace, I gotta believe that means there's just fewer available later.
• 5:38
  SPEAKER_00: But look at how much good news is priced into these uh feeder cattle markets.
• 5:43
  SPEAKER_00: You're pushing, yeah, you're exactly right.
• 5:45
  SPEAKER_00: So you're pushing new, or not new highs, but you're pushing the old contract highs here within a buck as I stare at like these October, November charts.
• 5:53
  SPEAKER_00: So let's talk about LRP real quick on the feeder cattle.
• 5:57
  SPEAKER_00: I think that's probably a few more of our listeners would be interested in that.
• 6:01
  SPEAKER_00: Um once a month, these uh LRPs, the expirations date come along, come around and match up with the CME options, and that's happening again as we go into um this this happens around the end of the month.
• 6:16
  SPEAKER_00: Uh so we're entering into that time frame next week.
• 6:19
  SPEAKER_00: I think you know, huge rally on feeders again today and most of this week.
• 6:24
  SPEAKER_00: I think it's a great time to start executing some LRP on some feeder cattle.
• 6:28
  SPEAKER_00: Um maybe the thing can get higher than these type of prices, but this is kind of like the corn market a few months ago, Mike.
• 6:34
  SPEAKER_00: It's it's just really high.
• 6:37
  SPEAKER_00: There's a lot of good news out there for it, but it's just really high right now.
• 6:41
  SPEAKER_01: So let's say corn backs up under$5 for December.
• 6:44
  SPEAKER_01: Just a fun scenario here.
• 6:46
  SPEAKER_01: How bullish can those feeder cattle get, even if uh live cattle don't want to take off here?
• 6:52
  SPEAKER_01: Because we do have some really strong resistance on the cattle market if we do end up having a recession or something like that in the United States by Q4, and which by now they're thinking like a 50% chance it's maybe cons uh impacting consumer sentiment a little bit.
• 7:07
  SPEAKER_01: They've also talked about how the lower beef demand uh will keep pressure on the market, beef demand's being pressured by inflation.
• 7:14
  SPEAKER_01: I don't know.
• 7:14
  SPEAKER_01: It's how bad can that get, I guess, to the upside on the beef cattle if corn do drop?
• 7:19
  SPEAKER_00: So I I think uh I think you know, from a straight feeder can't standpoint, um I think you probably put another five bucks on these feeder cattle, something like that, if we want to take corn down.
• 7:31
  SPEAKER_00: I guess I quickly just punched in a dollar lower, that'd be that'd be more in that 460 mark, I suppose.
• 7:38
  SPEAKER_00: It's um you know, figuring that your 550 more like today.
• 7:42
  SPEAKER_00: So that might be a little on the cheap side, but I'd say that that'd chase you about five bucks higher.
• 7:47
  SPEAKER_00: So if you're thinking five dollar corn this fall, you know, you're only you're talking two, three dollars higher on the feeder cattle.
• 7:54
  SPEAKER_00: Um I you know that's to my mind that when you're talking$1.87 versus$1.90, I think go ahead, take the floor at the dollar eighty-seven and call it good for the year, Mike.
• 8:06
  SPEAKER_01: To get any more than that up into the twos, you're probably gonna need some help on the live cattle board.
• 8:10
  SPEAKER_00: You're definitely gonna need some help.
• 8:11
  SPEAKER_00: We've we've been in the twos before once, right?
• 8:14
  SPEAKER_00: Um the last big cycle change here, but that's gonna take retaining heifers in my mind, and some help on the live cattle board.
• 8:23
  SPEAKER_01: Well, we'll keep waiting for that, I guess.
• 8:25
  SPEAKER_01: On uh the grain side, Jeff, it was a really rough week here.
• 8:29
  SPEAKER_01: Today's pressure was felt from uh we felt the pressure mainly from the Ukraine-Russian deal uh that dropped uh the wheat market about 40 to 50 cents across to all three classes there.
• 8:40
  SPEAKER_01: So what do you got to say about the grain markets this week and kind of what you're seeing out of that?
• 8:45
  SPEAKER_00: Well, I as I've sat down and thought about this throughout this week, and and you know more about the grain stuff than I do, Mike, but um I look at it and I say I think we're changing from a weather-based market.
• 8:59
  SPEAKER_00: I think we're slipping away from watching the two-week forecast as this week has progressed.
• 9:05
  SPEAKER_00: I watch this action compared to forecast, and I don't see the direct correlation anymore between the two.
• 9:12
  SPEAKER_00: And obviously that's gonna be a part of it.
• 9:15
  SPEAKER_00: I think we're more slipping into a technical driven market.
• 9:20
  SPEAKER_00: I think we've got traders that are looking more at the calendar today than they are the the two-week forecast.
• 9:27
  SPEAKER_00: Um, could be wrong, and certainly if something big develops I'm in the in the extended forecast, I'm gonna be wrong, right?
• 9:34
  SPEAKER_00: But if you're gonna have somewhat normal weather moving forward, I think it's just it's hard to get the grain markets to rally, especially the corn market, to rally late July.
• 9:46
  SPEAKER_00: So I think you look at this and say, okay, your your rallies are smaller and fewer and further in between as you get into late July.
• 9:55
  SPEAKER_00: August the market likes to trend lower.
• 9:57
  SPEAKER_00: Um, I think this market's, I mean, we've obviously taken a lot of money off it already, so I don't know how low low is here, but it's the wrong time of year to catch any big rally, in my opinion.
• 10:08
  SPEAKER_01: Estimated managed funds kind of coming into the end of the week, 134,000 contracts of corn left, about 80,000 longs on soybeans.
• 10:17
  SPEAKER_01: I would say about 10 cents uh for every 10,000 contracts there.
• 10:22
  SPEAKER_01: The uh as the longs liquidate here, if you take that to a zero on the corn, that'd be about a buck thirty-four.
• 10:30
  SPEAKER_01: And those as they sell off here at the end of July, we gotta realize it's easier for them to push the market down.
• 10:36
  SPEAKER_01: There's not as many willing buyers to step in here and stop this market from going down at the end of July when we're at, you know, 90 plus percentile on uh prices.
• 10:46
  SPEAKER_01: So yeah, I think that's one thing to look at too.
• 10:49
  SPEAKER_01: This week, the observation you said about weather, it's right on the money, but I will say that you really saw it today because soybeans, they were bullish a lot of the day.
• 10:57
  SPEAKER_01: We were green, and that was because of a more friendly August weather pattern for soybeans.
• 11:02
  SPEAKER_01: Now, if that really was going to impact corn, that would have felt a little bit more friendly, at least up until maybe some more of this Russia-Ukraine news or how big of an impact that had on the grain market for corn specifically is hard to tell.
• 11:15
  SPEAKER_01: But I will say their time's running out.
• 11:16
  SPEAKER_01: By the time you get to the end of the first week of August, you're getting a pretty good idea of whether or not you're Borton kernels at that point or not, or what your fill was like.
• 11:25
  SPEAKER_01: So yeah, time's running out on the grains here, I would say, uh, from a seasonal perspective.
• 11:30
  SPEAKER_01: Any weather rallies from here on out, any rallies on the grains should be somewhat limited.
• 11:35
  SPEAKER_01: So if you get back above six bucks on corn, you know, uh, or get a another nice pop in the soybean market, uh, that could be one of your last two raws here on the grains, I think.
• 11:45
  SPEAKER_01: On basis, that's been a really talked-about discussion as well this week.
• 11:49
  SPEAKER_01: We saw soybean processors pull back a lot on bids.
• 11:53
  SPEAKER_01: That'll be something to watch for the corn market as we get closer to new crop and uh elevators mills get really close to their uh new crop book, anyways, and can make it out there, you're gonna see them bids disappear pretty quick as well.
• 12:08
  SPEAKER_01: So that's something to watch going forward on the grains.
• 12:10
  SPEAKER_01: Jeff, any finishing comments for these guys?
• 12:14
  SPEAKER_00: I don't think so.
• 12:15
  SPEAKER_00: Um you know, I think especially in the cattle world, there's gonna be some tough decisions going forward, and I think in on the grain um markets as well, you know, we're we're faced with some tough ones right now.
• 12:27
  SPEAKER_00: Um I absolutely hate marketing grain this time of year, right?
• 12:31
  SPEAKER_00: You know, the thing feels you feel like you need to be selling something, but you've already lost a couple bucks on that market.
• 12:36
  SPEAKER_00: But my my parting thoughts on both of these, you know, I'm thinking, you know, the buy side on the cattle, um, as well as hedging opportunities in the live cattle and feeder cattle for that example for that matter, and hedging corn especially.
• 12:52
  SPEAKER_00: I think you know, let's not do anything too too knee-jerky.
• 12:57
  SPEAKER_00: Um, don't let our emotions get ahead of us, type of a thing.
• 13:01
  SPEAKER_00: I think you know, small methodical moves uh start to matter.
• 13:05
  SPEAKER_00: So if we feel like we better sell all of our the rest of our corn today, maybe at least sell some of it.
• 13:11
  SPEAKER_00: I know it's a tough thing to do.
• 13:13
  SPEAKER_00: Um we are very concerned about buying these feeder cattle at these kind of prices, but let's do a little bit of it.
• 13:19
  SPEAKER_00: Let's start to kind of get an average accumulated, would be my advice.
• 13:23
  SPEAKER_01: Well, if the grain markets can't get fired up about hot and dry weather at the end of July going forward, it's gonna take a lot to get them pretty fired up going forward.
• 13:32
  SPEAKER_00: I think you're on to something there.
• 13:34
  SPEAKER_01: Yeah.
• 13:34
  SPEAKER_01: Well, if you need anything, please check in at Professional Egg Marketing with Jefferai.
• 13:38
  SPEAKER_01: Uh we would love to chat.
• 13:39
  SPEAKER_01: Thanks, guys.
• 13:40
  SPEAKER_01: And thank you to all our listeners.
• 13:42
  SPEAKER_01: Please reach out to us from our website at professional eggmarketing.com, or check out our newly added hog specific podcast named Hog Market Talk that's released every Thursday.
• 13:54
  SPEAKER_01: Trading commodity futures and options involve substantial risk and loss that is not suitable for all investors.