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Cattle: Keep Up · 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 you 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.
• 0:19
  SPEAKER_01: It's going good, Mike.
• 0:21
  SPEAKER_01: Good.
• 0:21
  SPEAKER_01: Well, we're gonna talk about the cattle market today, doing something that it just seems to do right now, Jeff.
• 0:27
  SPEAKER_01: We were green again today, feeder cattle up three to four bucks through most months.
• 0:32
  SPEAKER_01: Again, uh live cattle up over two for most of the months.
• 0:36
  SPEAKER_01: August is dead and gone now, it looks like.
• 0:38
  SPEAKER_01: So on to the October front month there.
• 0:41
  SPEAKER_01: Talk to us a little bit about the supply situation.
• 0:45
  SPEAKER_01: We got uh just a little touch of the cattle on feed report last week when we chatted, but what do you see year over year with supplies here and kill in the nearby Jeff?
• 0:55
  SPEAKER_00: Well, it's the part that's confusing us a little bit as we went and looked at the cattle and feed report again from last week, of course.
• 1:02
  SPEAKER_00: You know, that is indicating that we've got roughly 2% or supposed to have roughly 2% less cattle uh on feed today compared to a year ago, right?
• 1:13
  SPEAKER_00: But you know now we've put together a solid two months of significantly lower fed steer and heifer kills.
• 1:22
  SPEAKER_00: Uh so if you go back um basically over that eight to nine week period, you're gonna be running about seven percent lower than last year.
• 1:31
  SPEAKER_00: So naturally, when we try to put those two numbers together, that gets um pretty confusing.
• 1:38
  SPEAKER_00: You know, as you if we're supposed to have two percent less cattle around, we're killing seven percent less, there's just a huge gap there between you know what's supposed to be available and what's actually running through the plants, Mike.
• 1:53
  SPEAKER_00: And you know, normally in this situation, we would be looking at it um probably by now or or certainly soon and saying, okay, we must be backing up some cattle because it just and that is our opinion.
• 2:08
  SPEAKER_00: Um, you know, it just there's there's too big of a gap there between the number that we're supposed to have and what we're actually killing.
• 2:15
  SPEAKER_00: We almost have to be killing fewer animals than uh what's the baseline supply looks like.
• 2:23
  SPEAKER_00: So, you know, whether they went a little bit early or they're still around and and we're just making them bigger, that of course will be a huge question, right, Mike?
• 2:33
  SPEAKER_00: You've we know the basis and everything, as well as the flat price was really encouraging some cattle to be sold early, and we know some of that happened, but we also understand the motivation from a return over feed standpoint is absolutely huge, right?
• 2:51
  SPEAKER_00: So I think there's also a segment out there, and especially now as we've squashed that basis, as we've ran the cash price relatively flat here.
• 3:01
  SPEAKER_00: I gotta believe we're uh encouraging some folks to keep some cattle around for a longer period of time.
• 3:07
  SPEAKER_00: So, you know, it's gonna continue to stay very interesting.
• 3:11
  SPEAKER_00: The market today, I think it's always important to think about what's priced into the marketplace today.
• 3:17
  SPEAKER_00: Um I'm gonna argue that uh there's there's nothing in the futures market suggesting um we're gonna get into more cattle anytime soon.
• 3:27
  SPEAKER_00: Maybe you could argue, well, yeah, that's fine to say, but even today, after being up 270 on the October, we're still trading a discount to the cash.
• 3:37
  SPEAKER_00: And that's that's fair.
• 3:38
  SPEAKER_00: Um I think that's probably going to hang around in the three to five dollar range.
• 3:44
  SPEAKER_00: Um, but even with that, you know, you're you're getting paid even if you get a few dollars less for the cattle because of basis.
• 3:54
  SPEAKER_00: Um you're gonna be better off to keep them around for a few weeks.
• 3:58
  SPEAKER_00: So uh my argument's gonna be futures price, obviously, is very optimistic.
• 4:03
  SPEAKER_00: We don't have much bad news at all priced into it, as as you know, we've gone up a bunch again this week.
• 4:10
  SPEAKER_00: Um, if we do have some cattle laying around in the weeds that start to show up here in the near future, I think that does get uh hard on the futures market.
• 4:21
  SPEAKER_01: It's an interesting one because a lot of the time when you start to come into a time frame with lower supplies like we are right now, a lot of the time you start to import a lot of beef or encourage imports of beef to uh to help take advantage of that difference, or import mm live cattle, uh, for example, feeder cattle.
• 4:39
  SPEAKER_01: Um so what we've done recently is we have the smallest supply and how long of cattle.
• 4:44
  SPEAKER_01: And then we also put 50% tariffs on our largest importer into our market, Brazil.
• 4:49
  SPEAKER_01: And then we also won't let any Mexican feeder cattle in that are supposed to.
• 4:53
  SPEAKER_01: So it's like, yeah, we really went backwards with that whole thing recently, didn't we?
• 4:57
  SPEAKER_01: From a supply perspective.
• 4:59
  SPEAKER_00: Yeah, I mean, you've had perfect storm from a lot of different angles, of course, like and you've mentioned them all there, Mike, and uh, you know, uh, each time you think, well, this is a political issue, probably won't last all that long, especially when you consider the the Mexican border closure.
• 5:18
  SPEAKER_00: Matt Bugger's weight lasted way longer than what we're now.
• 5:23
  SPEAKER_01: I mean, that's gonna be approaching a year at some point here.
• 5:26
  SPEAKER_00: Well, the that's exactly the point is the cattle that we're marketing today, uh, some of them didn't show up because they didn't come from Mexico.
• 5:34
  SPEAKER_00: Yeah.
• 5:34
  SPEAKER_00: And that that's probably part of what we're seeing from a supply shortage standpoint.
• 5:39
  SPEAKER_00: But you know, why doesn't the cattle on feed numbers represent that?
• 5:44
  SPEAKER_00: Um maybe maybe that's uh you know within the possibility or the realm of um, you know, the estimates on the cattle on feed, maybe there are a few percentage points off.
• 5:57
  SPEAKER_00: Um, and maybe we're not pushing cattle back like I think is possible.
• 6:03
  SPEAKER_00: Um but yeah, that's a big deal.
• 6:04
  SPEAKER_00: With down south, you're gonna see those prices continue to improve in my mind, compared to the north at least, because you're starting to see less supply from a seasonal perspective there.
• 6:16
  SPEAKER_01: So one of the things we talk about from a seasonal perspective as well is we're going into Labor Day this week.
• 6:22
  SPEAKER_01: No markets on Monday, the a big meat consumption, kind of what I would call, Jeff, the last hoorah when it comes to the grilling season here.
• 6:31
  SPEAKER_00: For sure, in the cattle world or beef world, yep, for sure.
• 6:33
  SPEAKER_01: Well, what do you think about this weekend, what you've heard, what Choice has done ahead of this with its big rally?
• 6:40
  SPEAKER_01: What do you think?
• 6:41
  SPEAKER_00: Well, I think the the reason Choice is rallying is probably a lot to do with the supply and not as much to do with the demand side.
• 6:50
  SPEAKER_00: And even though uh, yeah, from a seasonal perspective, you like to see the beef rally this time of year is exactly what happened.
• 6:56
  SPEAKER_00: Um, and it probably would have gone up some without the kills dropping to the levels that they have, but we are rock bottom on the kills right now, and that is what's um been driving the meat prices up, that combined with the Labor Day, and still being in a in a pretty w decent time of year from a demand standpoint.
• 7:17
  SPEAKER_00: So, what's gonna get really interesting is what happens now.
• 7:20
  SPEAKER_00: So we've seen the Packers speed up kills just a little bit because they actually got some margin back so that's really interesting um from the levels that they're at.
• 7:34
  SPEAKER_00: I I would suspect they can they would be interested in increasing those kills a little bit.
• 7:39
  SPEAKER_00: And we saw that happen here this week, uh, right in front of Labor Day.
• 7:43
  SPEAKER_00: Still ultra low, don't get me wrong, but higher than um last week by 10 or 15,000 head.
• 7:50
  SPEAKER_00: So will they increase that just a little bit?
• 7:54
  SPEAKER_00: Uh I think they're gonna kind of wait and see what happens to the demand after Labor Day here, Mike.
• 7:59
  SPEAKER_00: I I don't think they're gonna get super aggressive with it.
• 8:02
  SPEAKER_00: Um, maybe you'll see them tick just a little bit higher, like we saw here this week, but that's gonna be really interesting to see what happens with the choice meat.
• 8:12
  SPEAKER_00: How much is it was just a holiday?
• 8:14
  SPEAKER_00: Uh let's see what kills, you know, what do they want to do with the kills?
• 8:17
  SPEAKER_00: Are they gonna ramp them up a little bit because they've got some margin and their pack and their customers are saying they need some meat?
• 8:23
  SPEAKER_00: Because I'm sure that's all happening.
• 8:25
  SPEAKER_00: And then uh, you know, what happens on the cash side of things?
• 8:28
  SPEAKER_00: That's the next couple three weeks here is gonna be very interesting, similar to every other three-week period we've been through.
• 8:34
  SPEAKER_01: So, at least with cattle, sheesh.
• 8:36
  SPEAKER_01: Yeah, it's been a crazy market.
• 8:38
  SPEAKER_01: Uh, any final thoughts for our listeners this week?
• 8:40
  SPEAKER_00: I was just I was really impressed with the futures action today, Mike.
• 8:44
  SPEAKER_00: Uh, you know, going in, you got a super long position.
• 8:47
  SPEAKER_00: Um, anybody that's been long the market has got a ton of profit in those positions, and they didn't bail on those going into month end.
• 8:55
  SPEAKER_01: Uh red day yesterday, too.
• 8:57
  SPEAKER_00: Right.
• 8:58
  SPEAKER_00: I thought they were maybe just getting warmed up yesterday and they would take a chunk of positions out of it again today.
• 9:03
  SPEAKER_00: Uh so yeah, sold off a little bit yesterday on Thursday and had an excellent day today.
• 9:09
  SPEAKER_00: So you have to be impressed with that.
• 9:12
  SPEAKER_00: Um, the chart looks a little bearish if you just look at the past few days.
• 9:16
  SPEAKER_00: You know, we put in some lower highs and some lower lows after putting in some in a big uh contract high there, but you know, nothing crazy alarming as you look at any sort of trend line or 20-day moving average, anything like that is still pretty positive, obviously.
• 9:33
  SPEAKER_01: Well, D S Hogs today, 87.40, up 42 and a half there, too, so that's on a heck of a run recently.
• 9:40
  SPEAKER_01: Uh, I would almost argue you could think that the beef side choice cutout is probably helping that a little bit at this point, couldn't you?
• 9:48
  SPEAKER_01: I mean, cutout for the pigs this afternoon was up 283 buck fourteen going into the weekend.
• 9:54
  SPEAKER_01: That pretty nice holiday buying going in there.
• 9:57
  SPEAKER_01: Uh I mean most of that's all done, right?
• 9:59
  SPEAKER_01: But I mean it uh pretty good little bump ahead of the holiday here.
• 10:02
  SPEAKER_00: Well, I'm I'm glad you brought that up because that's the other thing that uh could be taking place here so far as we've reduced the supply uh and arguably much more than what I anticipated, um, the pressure of that supply shortage has all been on the Packers' lap.
• 10:21
  SPEAKER_00: And we talked about that's what created those uh negative margins, right?
• 10:24
  SPEAKER_00: They really didn't push the higher prices into the uh box beef and into the wholesale and retail world until just recently here.
• 10:34
  SPEAKER_00: So they've slowed their kills enough, and that's just how the cycle goes, right?
• 10:39
  SPEAKER_00: First one that gets pinched, it's a packer.
• 10:41
  SPEAKER_00: Next one, they're gonna try to lower their kills enough to get meat to go up, and that's what they've done recently.
• 10:47
  SPEAKER_00: So now we are actively pushing the supply problem and the higher prices because of the supply into the wholetail, wholesale, and retail environment.
• 10:59
  SPEAKER_00: So it'd be very interesting to see what they do with that, Mike.
• 11:03
  SPEAKER_01: All right.
• 11:03
  SPEAKER_01: Well, thank you for your time.
• 11:05
  SPEAKER_01: Uh, everyone have a great weekend here at No Markets on Monday.
• 11:08
  SPEAKER_01: We'll see you next week.