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Cattle On Feed · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_00: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_00: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_00: This is your host, Mike Minor.
• 0:22
  SPEAKER_00: Let's get started.
• 0:24
  SPEAKER_00: Today is May 20th, and I've got Nick Bork with us today.
• 0:27
  SPEAKER_00: How's it going, Nick?
• 0:28
  SPEAKER_01: Really well, Mike.
• 0:29
  SPEAKER_00: Awesome.
• 0:30
  SPEAKER_00: Well, we're going to start off just a very quick macro overview here on some grains, and then we're going to dive into our main topic today, which is the cattle on feed report that we had today, Nick, at two here just 19 minutes ago.
• 0:43
  SPEAKER_00: It's going to be an interesting one.
• 0:44
  SPEAKER_00: That sound good?
• 0:46
  SPEAKER_01: Yes, sir.
• 0:47
  SPEAKER_00: Alright, well, the uh the wheat market was one of the leaders in the grains here as the corn kind of followed along for the week and a very up-down choppy all the way around kind of week for the wheat, which ended up about nine cents lower actually from last Friday's levels.
• 1:03
  SPEAKER_00: Uh we traded moderately lower here going into the end of the week after a really strong start.
• 1:07
  SPEAKER_00: Uh we started stronger on the week here after we saw limit up moves from India announcing over the weekend that it will no longer be exporting wheat due to some uh heat-related damages to their domestic crop.
• 1:22
  SPEAKER_00: So pretty much what has happened is because of the Ukraine uh war that we've been having here in the invasion, their uh exported bushels were likely gonna come from India instead.
• 1:34
  SPEAKER_00: And uh India said, you know what, maybe we don't have the crop to make up for it.
• 1:38
  SPEAKER_00: And then towards the back half of the week here, we had some other things kind of rise up with uh a better bumper crop in Russia uh pop up, so that helped to sell some of these markets off, and then a better weather outlook in the south that has helped sell off these uh wheat markets a little bit as well.
• 1:56
  SPEAKER_00: So very up, down, and around.
• 1:58
  SPEAKER_00: But the corn's been following that quite frequently this week.
• 2:01
  SPEAKER_00: We ended up down 17 on corn for the week, uh trading moderately lower there, had decent planning progress this week compared to probably what was expected.
• 2:10
  SPEAKER_00: We ended up at 49% there at the beginning of the week.
• 2:13
  SPEAKER_00: Um, still a ways back from normal levels, but uh you know we're we are uh catching up maybe just a little bit anyways, but still back.
• 2:22
  SPEAKER_00: So we'll see uh as this next Monday's report comes out.
• 2:25
  SPEAKER_00: They're looking for a big one.
• 2:26
  SPEAKER_00: On the soybean side to finish things off on the grains here this week, the uh July soybeans are trading higher again today.
• 2:33
  SPEAKER_00: They have already closed seven days out of the last eight higher.
• 2:37
  SPEAKER_00: Uh strong demand, pretty much the story there is support for the uh for this market is uh really helping out here, uh especially shrinking now, shrinking the ending stocks on those old crops up, and it looks like that's gonna continue next.
• 2:52
  SPEAKER_00: So uh we're seeing that on the uh soybean side and the both meal and oil kind of trading higher on the day as well after we saw some weird spread activity with uh soybeans trading higher and meal trading higher this week, and uh oil a little bit lower there for a while, so we hadn't seen that in a while.
• 3:09
  SPEAKER_00: But uh crush margins are still strong, and uh that'll be a main talking point going forward as well.
• 3:15
  SPEAKER_00: But for the grains this week, anyways, uh you know, soybeans were 23 cents higher is kind of how we closed out, but a very choppy week for those grain markets.
• 3:23
  SPEAKER_00: Equity is still struggling to get back uh on their feet, uh closing the day red here on the week, and uh we have seen some decent uh bumps there.
• 3:33
  SPEAKER_00: We kind of hit that 3,900 level on the SP, found some support, and then uh we've started to sell off again here as it can't quite get its uh feet under itself.
• 3:43
  SPEAKER_00: So that'll be interesting to watch going forward as well from the equities.
• 3:47
  SPEAKER_00: So energy market, crude oil just can't get out of its own way, kind of stuck at 110 in the summer months there, uh seems to be stuck in a pretty tight range across the board.
• 3:57
  SPEAKER_00: And then obviously uh one of the major talking points over the last few weeks, the US dollar.
• 4:02
  SPEAKER_00: We've seen uh an advance in that, and it's kind of got stuck around this 103, 104 level uh that we're sitting at currently today, and uh it can't quite get over that hump.
• 4:12
  SPEAKER_00: So that's been a major resistance point, and they're looking for some further support on that as well.
• 4:16
  SPEAKER_00: As we know as that goes up, it makes uh exports for commodities out of the United States uh a little bit less competitive.
• 4:23
  SPEAKER_00: And on the corn side, they have become a little bit less competitive in the world.
• 4:26
  SPEAKER_00: So we'll see how long that can take us.
• 4:29
  SPEAKER_00: But main topic on the day, Nick, what do you got to say about the Catalan feed report that we just saw?
• 4:34
  SPEAKER_01: Yeah, so the the uh the traders and the surveyors continue to look for you know lower placements coming in these cattle and feed reports, and we're just not seeing it.
• 4:44
  SPEAKER_01: We uh today again uh the placement number was uh one percent less than a year ago, but then uh you know two and a half percent higher than the than the average trade guess.
• 4:55
  SPEAKER_01: Um so the May 1 catalog feed came in at 102%.
• 4:59
  SPEAKER_01: This is this is the highest inventory um that we've seen in the in the in these catalon feeder ports since this began in in 96.
• 5:09
  SPEAKER_01: Again, the placement number uh came in at 96.5%, uh excuse me, 99%, and the estimate was for 96.5%.
• 5:19
  SPEAKER_01: Um and then the marketings came in at 98%, and the uh and that was pretty close, right even with the estimate at 97.9.
• 5:29
  SPEAKER_01: Uh again, we continue to see these these higher placements um higher than kind of what we're expecting, I guess.
• 5:37
  SPEAKER_01: Um, you know, Colorado, Minnesota, Nebraska, Oklahoma, all states that showed higher placements, you know, quite a bit higher placements than a year ago.
• 5:47
  SPEAKER_01: Um we just we continue to to wonder uh you know how that's happening, I guess, given that we all thought we had a a lower calf crop coming.
• 5:58
  SPEAKER_01: And I just want to remind folks, I guess, you know, that that that that last cattle inventory report that we had, we did, you know, show uh a smaller calf crop, but certainly a lower degree of retained heifers.
• 6:14
  SPEAKER_01: And so the way that's kind of all working out, you know, is we're we're expected to have a very similar supply of of slaughter clap cattle for the year.
• 6:24
  SPEAKER_01: And uh we saw lower placements, you know, last fourth quarter of 21, uh, but now significantly higher placements for this first quarter of this year than a year ago.
• 6:36
  SPEAKER_01: So that's kind of all averaging out to a very similar available supply for for the year.
• 6:43
  SPEAKER_01: Um and but in these next few months, given the placements that we've had, when you kind of dissect the placement numbers over the last four months, you know, we're expected to have about 300,000 more cattle come into town or being available May through August now, kind of spread out between those four months.
• 7:05
  SPEAKER_01: Um, about 50,000 had more in May, 120,000 had more in June, 100,000 more head in July, and 50,000 more head in August.
• 7:16
  SPEAKER_01: All uh those numbers all representing more than a year ago.
• 7:21
  SPEAKER_01: Um, and that's that's kind of the way the supply picture looks going forward.
• 7:25
  SPEAKER_01: Now that does not take into account any carryover cattle, of course.
• 7:29
  SPEAKER_01: That's just accounting for for what we're seeing in this placement data.
• 7:34
  SPEAKER_01: Um and it is it is kind of alarming.
• 7:37
  SPEAKER_01: I mean, the we've all been looking for for the supply situation to kind of correct here, and and it looks like it's gonna stay really strong going forward, given, and I think you tie that in with the cattle inventory report, and it uh you know it it does kind of tie itself together there.
• 7:58
  SPEAKER_01: Um we've obviously got really you know strong futures yet relative to the two year ago levels um in these deferreds, and and I know that this thing is well off its highs there, but um, but I think we need to be looking at that yet, you know, because the fact of the matter is there still is a tremendous amount of dollars at risk today in in the inventory that we have in the yards and the feed inventory, and by the time them cattle are actually gonna be ready to go, um yeah, we're just gonna have quite a bit more dollars than what we've seen the last few years at risk.
• 8:36
  SPEAKER_01: And uh and the board, you know, even out there on the Oc Dis board, you know, uh up in the high 130s uh to 140, I think we we really ought to be protecting yet that you know for fourth quarter cattle to be kind of in that range, we um those are prices that we really haven't seen for some time, and and we can't lose sight of the fact that uh yeah, we're not where we were, but we're still high.
• 9:01
  SPEAKER_01: Um and I think when you look too at the at the cattle inventory report and and this and this degree of um or the the amount of supply that we're expected to have for this year versus a year ago being very similar uh because we we are keeping uh or excuse me, not keeping as many heifers back, you know, that's it what it really comes down to is this is a is a one-for-one industry, right?
• 9:31
  SPEAKER_01: I mean, if you're we're uh we are killing a lot of cows, we know that the calf crop was reduced, but if you're keep if you're not keeping another heifer back or or less heifers, um that that that's a net change of zero, right?
• 9:46
  SPEAKER_01: That's a net change in the supply of zero.
• 9:49
  SPEAKER_01: And um so we do think, you know, going forward, obviously late 23 and 20 even into 24, I mean, right?
• 9:58
  SPEAKER_01: That's when we really start to see this lower supply because you you you got the decline in cows today and keeping less heifers back.
• 10:06
  SPEAKER_01: That's that's where this really catches up to us, and where we where we you know, where we were where we're wanting to see really good numbers this year, I think uh it's possible, you know, we're just um eight eight months to a year too early on that deal.
• 10:20
  SPEAKER_01: The board already is offering significant premium, though.
• 10:23
  SPEAKER_01: But uh that's kind of where we're at with with tying those two reports together.
• 10:30
  SPEAKER_01: Um again, we we we do got a fair amount of cattle coming at us here over the next four months.
• 10:36
  SPEAKER_01: It is a little bit hard to believe that this cash deal wants to stay up above a buck forty yet with the amount of cattle that are coming at these packers with you know with the show lists as big as what they are, and the fact that Packers got cattle procured now till you know the end of June, mid to end of June, and yet uh cash you know is not really declining that rapidly here.
• 11:00
  SPEAKER_01: It's it's kind of a win.
• 11:02
  SPEAKER_01: Um so basis levels really strong.
• 11:05
  SPEAKER_00: We're continuing to sell cash cattle on this deal, and uh but are the weights uh you know the weights have started to really tip off as they do seasonally this time of the year, but uh are they uh are they keeping keeping where they should be on that or are they starting to get slowed up a little bit on their decline?
• 11:23
  SPEAKER_00: What do you think?
• 11:24
  SPEAKER_01: Yeah, I think they are slowed up.
• 11:26
  SPEAKER_01: I mean, relative to what we expected, you know, we really expected these weights to be on a sharp decline now with with just some you know anecdotal evidence of of cattle wanting to come to town, and it's just not it's just not happening as quick as what we thought.
• 11:41
  SPEAKER_01: Um and uh hopefully these weights do continue to decline kind of past the seasonal.
• 11:47
  SPEAKER_01: You know, it would be June that we start to see weights kind of creep higher again.
• 11:52
  SPEAKER_01: Um hopefully that we stay kind of in the downtrend, keep this industry current.
• 11:57
  SPEAKER_01: Uh the certainly the the the grain market uh is doing its best to keep the industry current.
• 12:03
  SPEAKER_01: Um but until then uh it looks like we're gonna have a a very good supply of cattle uh being presented to the packer.
• 12:11
  SPEAKER_00: Overall view of the uh cattle fundamentals going forward.
• 12:15
  SPEAKER_00: Uh are you discouraged again, a little bit more discouraged after today's report than uh on these price levels in 2022, like you said.
• 12:23
  SPEAKER_00: It's it's maybe a little different story once we get out into 23 and 24.
• 12:28
  SPEAKER_01: Yeah, definitely, definitely a little discouraging here on these front end cattle on feeder ports and the and the cattle supply that we got coming at us.
• 12:37
  SPEAKER_01: Um but yeah, would just remind folks we still do got some very good offerings yet in the deferred months to get get some floors on these cattle and uh go from there.
• 12:50
  SPEAKER_00: Yeah, very similar levels for December 22 right now on the futures uh compared to some of those other prior years where we saw 1415 at this time of the year, kind of the same levels, but other than that, we spent a lot of time in the in the mid-120s at this point for that December contract.
• 13:08
  SPEAKER_00: Yeah, last year, as you mentioned that we did come off near that.
• 13:12
  SPEAKER_00: We kind of worked our way higher up towards 139 through the year and we ended up there.
• 13:16
  SPEAKER_00: So um, you know, we've spent most of the year after that now um above that for December 22, but looks like we're kind of working our way back down to it in the meantime.
• 13:26
  SPEAKER_01: Right, right.
• 13:27
  SPEAKER_01: And I think certainly too the you know, the box beef helped um keep some of them levels charging higher and keep you know kept the thing going here this spring.
• 13:36
  SPEAKER_01: But now in the last month, month and a half, these when seasonally boxes should be kind of on their on a sharp incline higher.
• 13:44
  SPEAKER_01: With you know, that deal has kind of got compressed here too.
• 13:47
  SPEAKER_01: And uh little bit concerned about demand going forward, um quite concerned about supply.
• 13:54
  SPEAKER_01: So, all in all, I think uh um, you know, this is the time of year when we ought to be adding fourth quarter coverage, and uh nothing's really changed about that.
• 14:05
  SPEAKER_00: Awesome.
• 14:05
  SPEAKER_00: Well, I'll add those to Mike's likes, and in the meantime, it has been a while since we've had you on the podcast here, Nick.
• 14:12
  SPEAKER_00: Uh, what's been your favorite podcast that I've done lately?
• 14:16
  SPEAKER_01: Well, I really did I like that last one with Luke and uh um you know the hog commentary there.
• 14:22
  SPEAKER_01: Certainly learned a lot, um, had some good points there.
• 14:25
  SPEAKER_00: Thank you, Nick.
• 14:26
  SPEAKER_01: Thank you.
• 14:27
  SPEAKER_00: And thank you to all our listeners.
• 14:29
  SPEAKER_00: Please reach out to us from our website at professionalagmarketing.com, or check out our newly added hog specific podcast named Hog Market Talk that's released every Thursday.
• 14:41
  SPEAKER_00: Trading commodity futures and options involve substantial risk and loss that is not suitable for all investors.