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Cattle Demand · 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.
• 0:23
  SPEAKER_01: Today is March 15th.
• 0:24
  SPEAKER_01: I've got Jeff with us here today.
• 0:26
  SPEAKER_01: How's it going, Jeff?
• 0:27
  SPEAKER_00: Good afternoon, Mike.
• 0:28
  SPEAKER_00: Happy to be here.
• 0:29
  SPEAKER_01: Good deal.
• 0:35
  SPEAKER_00: It's been an interesting week in livestock, been an interesting week in cattle.
• 0:40
  SPEAKER_00: Kind of a halfway interesting week in the beans, not.
• 0:43
  SPEAKER_01: Sure has been.
• 0:44
  SPEAKER_01: I mean, these grain markets here, soybeans bounced up against 12 bucks yesterday, kind of failed to break through there pretty hard, closed at 1191, so put on a cool 70 cents pretty much since that low we put in at the end of February.
• 0:58
  SPEAKER_01: Seen some short covering after last Friday having a record net short position on soybeans and on the corn market, 471 on the close today.
• 1:06
  SPEAKER_01: That one we've retraced about 30 cents back or so to this week's high from the low at the end of February.
• 1:13
  SPEAKER_01: So pretty good little rally here.
• 1:15
  SPEAKER_01: Still not exactly fantastic levels compared to what people are expecting, especially ahead of the growing season here.
• 1:21
  SPEAKER_01: But uh, you know, we're seems like grain guys are wanting just a little bit more.
• 1:26
  SPEAKER_01: We just finalized crop insurance uh decisions here as of today, and uh it created a little bit more of a short position for ourselves, Jeff.
• 1:35
  SPEAKER_01: And now, you know, it won't take much of a rally to probably s uh really start to see some risk getting off the table for these grain guys.
• 1:42
  SPEAKER_00: So I think I think the bean market was all about that this week.
• 1:46
  SPEAKER_00: I know that it was yesterday you had that big update going.
• 1:49
  SPEAKER_00: Obviously, it'd been nice to um kind of maintain that.
• 1:52
  SPEAKER_00: That thing failed pretty hard, and it couldn't help itself to be lower most of today, I think, on the um on the backside of uh a pretty disappointing day and from a technical chart standpoint.
• 2:05
  SPEAKER_00: But you can see quite a bit of buying action coming in here.
• 2:08
  SPEAKER_00: Um hopefully we're building on something a little bit and keep getting liquidating that massive short position they've got going on.
• 2:15
  SPEAKER_01: Definitely.
• 2:16
  SPEAKER_01: And one of the things we don't get to talk a whole lot about here uh on this podcast is the wheat market, and uh China's been incredibly active recently.
• 2:24
  SPEAKER_01: They've ch canceled uh another batch of U.S.
• 2:27
  SPEAKER_01: uh wheat export shipments here, and that's added to an already record number of cancelizations that have weighed on really Chicago futures greatly, Jeff, and that's helped hold this grain market back pretty hard throughout this week as we tried to rally.
• 2:42
  SPEAKER_01: And and those Chinese cancellized cancellations are really reaching towards like Russia to try to uh try to take advantage of some of their cheaper exports here.
• 2:51
  SPEAKER_01: Uh China's also canceled uh sales from both uh France and Australia this week as well.
• 2:57
  SPEAKER_01: So going forward here, uh I think that's been a pretty big talking point, and we'll see what uh you know how much wheat Russia has left to sale, uh, what Chinese stocks are looking like at this point for grains specifically, and then uh really kind of start to turn over talking about U.S.
• 3:14
  SPEAKER_01: weather and yeah, maybe Brazil even here a little bit now too, with uh uh their moisture index a little bit uh sub subpar going forward.
• 3:22
  SPEAKER_00: But let's talk about starting to be a topic again, isn't it?
• 3:25
  SPEAKER_00: It definitely is.
• 3:26
  SPEAKER_00: Yeah, we promised the listeners some cattle talk, Mike.
• 3:29
  SPEAKER_00: Let's not send them way hungry.
• 3:31
  SPEAKER_01: Not way hungry.
• 3:32
  SPEAKER_01: We are gonna talk about cattle, and I want to talk about uh demand pretty specifically here, Jeff.
• 3:37
  SPEAKER_01: But just give me the a quick synopsis of uh of the cattle industry and kind of like a one-minute time frame of what's going on.
• 3:44
  SPEAKER_00: Yeah, I think a little I think you want to start with the kills when you start this conversation, and you know, everybody knows we're getting into shorter and shorter supplies as 2024 goes on.
• 3:54
  SPEAKER_00: That's been well advertised, right?
• 3:56
  SPEAKER_00: So the marketplace is trying to compensate for that, and it's super interesting to watch.
• 4:03
  SPEAKER_00: And we've just slowed these kill speeds to an absolute idle here.
• 4:08
  SPEAKER_00: Um, we're gonna be, you know, 580,000 again here, I think, this week.
• 4:14
  SPEAKER_00: Um, that's gonna put us about 5% lower than where we were a week or uh last year at this very same time.
• 4:23
  SPEAKER_00: Um, and that's been true here for about three weeks in a row now.
• 4:27
  SPEAKER_00: So I'm not sure that you can kill much fewer animals than that in a given week, Mike.
• 4:35
  SPEAKER_00: So I don't that's gonna be interesting to watch.
• 4:38
  SPEAKER_00: I know there's some people that have taken some Fridays off, and obviously they're reduced kill hours throughout the week in this all Saturday, but one thing that's starting to really be glaring to us is watching the weights.
• 4:50
  SPEAKER_00: Weights are up absolutely huge in the last two to three weeks, and they've completely um they've completely moved away from their normal seasonal.
• 5:02
  SPEAKER_00: Their normal seasonal is obviously to work lower through these spring months as the supply situation gets tighter and tighter.
• 5:10
  SPEAKER_00: Um, we've completely reversed that.
• 5:12
  SPEAKER_00: We've put in three data points now with higher weights.
• 5:17
  SPEAKER_00: And that's I think the trend there is just you gotta recognize that and you have to say, hey, we are not killing enough cattle.
• 5:27
  SPEAKER_00: Now that's probably all on purpose, right?
• 5:30
  SPEAKER_00: The producers are very willing to keep them around for another week or two, put some more weight on them.
• 5:37
  SPEAKER_00: Margin over feed cost is absolutely huge, of course.
• 5:40
  SPEAKER_00: Packers are very interested in stretching out this supply as long as they can, trying to keep the lid on the cash market as long as they can, filling in what they think uh you know is gonna be a hole fair further down the line.
• 5:55
  SPEAKER_00: So this we're gonna talk a lot about this very subject this entire year.
• 6:01
  SPEAKER_00: And I think it could be the reason, you know, if we put a top in here someplace, um, the first part of 2024, major top I'm talking about in prices now, um, I think it very well could be for this reason that we just kept pushing animals back, kept pushing animals back and making them bigger.
• 6:22
  SPEAKER_00: So that's I think a real quick synopsis is where is how we see the industry.
• 6:28
  SPEAKER_00: It's all about the supply side, um, shackle speed.
• 6:32
  SPEAKER_00: That's a big portion of what we're looking at right now.
• 6:36
  SPEAKER_00: Maybe no new information there, um, you know, as far as how many cattle are available or anything like that.
• 6:43
  SPEAKER_00: But you know, you mentioned the demand side, and um that's getting really interesting also.
• 6:49
  SPEAKER_00: You know, we looked at all right, we've killing, you know, depends what time frame you're looking at, four to five and a half percent less animals.
• 6:57
  SPEAKER_01: Um that's been the major talking point, right?
• 6:59
  SPEAKER_01: It's been supply this whole time, uh at least that people have been wanting to focus on, it seems like you can see it coming.
• 7:06
  SPEAKER_00: And justifiably so that's a big move, right?
• 7:08
  SPEAKER_00: Four to five percent less cattle.
• 7:10
  SPEAKER_00: That's huge in the worlds that we live in.
• 7:12
  SPEAKER_01: Yeah.
• 7:12
  SPEAKER_00: Um, the problem is there's a bunch of other stuff going on, too, that's uh helping combat that increasingly shorter supply.
• 7:20
  SPEAKER_00: And we talked about two major things, right?
• 7:22
  SPEAKER_00: We got weights um and imports.
• 7:25
  SPEAKER_00: And imports.
• 7:26
  SPEAKER_00: Now the third one, which absolutely are not seeing any of it right now, is demand.
• 7:31
  SPEAKER_00: Um so we've got um you know, January information out for imported meat, and it's through the roof.
• 7:41
  SPEAKER_00: Um and you look at okay, we got fewer cattle being killed in January, but they were a little heavier.
• 7:47
  SPEAKER_00: Yep.
• 7:48
  SPEAKER_00: And then you pull in the imported meat, and it's like number then.
• 7:53
  SPEAKER_00: Right, you've produced more meat or the can US consumer chewed through more beef in January than what they did a year ago.
• 8:00
  SPEAKER_00: And but yet prices were considerably higher.
• 8:02
  SPEAKER_01: So meat available to U.S.
• 8:05
  SPEAKER_01: consumer, not any different really versus last year.
• 8:08
  SPEAKER_00: That's exactly right.
• 8:09
  SPEAKER_00: Yep, a little bit bigger picture, you know, because January's a bit of an abnormal month.
• 8:13
  SPEAKER_00: Yeah.
• 8:14
  SPEAKER_00: We're kind of we're gonna average out similar.
• 8:16
  SPEAKER_00: Now that's right now.
• 8:17
  SPEAKER_00: I do think that that will probably drop, but so then you flip so then you say, well, that's not a big deal, but flip over and look at some of these meat prices.
• 8:26
  SPEAKER_00: Select meat 302 this afternoon, choice up over 310.
• 8:32
  SPEAKER_00: Um, those are very impressive numbers for March.
• 8:36
  SPEAKER_00: And we're also seeing similar type of activity on the pork side.
• 8:41
  SPEAKER_00: So, you know, you look at some of the products that that historically you would contribute to nicer weather.
• 8:48
  SPEAKER_00: Um, the middle meat's on the beef.
• 8:49
  SPEAKER_00: There's nothing super special going on right there.
• 8:52
  SPEAKER_00: Select meat, grinding meat, trim, that's all through the roof.
• 8:56
  SPEAKER_00: I think that is very possibly attributed to just warming the weather up well ahead of schedule.
• 9:03
  SPEAKER_00: You look over in the hogs, how you look at ribs, for example, I think is a good one.
• 9:07
  SPEAKER_00: That thing's through the roof.
• 9:08
  SPEAKER_00: I think that's there's a lot of these products that are performing very well that would be associated with uh kind of warmer temperatures, and and usually would we'd see these spikes come in May.
• 9:19
  SPEAKER_00: I think we're seeing them in March today.
• 9:21
  SPEAKER_01: So, what does that mean for meat prices kind of longer term than when we look for it, Jeff?
• 9:26
  SPEAKER_00: Well, the way I look at it is you know, we're getting some additional demand today in in February and March, and that demand is still it's gonna, it's a good guy.
• 9:38
  SPEAKER_00: So it's like you you eat an extra burger today, it's not like you're gonna you know eat fewer of them in May and June, is my opinion.
• 9:46
  SPEAKER_00: So the way I would look at it, say this is demand, it's all additional demand, it's helping us keep everything very current, especially in the hog world.
• 9:56
  SPEAKER_00: It's helping us you know extend this uh summer market, if you will.
• 10:00
  SPEAKER_00: That's super important when you think about profitability over a 12-month time frame.
• 10:04
  SPEAKER_00: Um, I would just say when you get to May, don't expect that same huge bump.
• 10:09
  SPEAKER_00: If you got$310 cutout now, don't assume it's gonna go to$345 or$350 as soon as we get to May.
• 10:17
  SPEAKER_00: Okay.
• 10:18
  SPEAKER_00: It's it I think there'll still be a bump there.
• 10:20
  SPEAKER_00: It's just gonna be smaller than normal.
• 10:22
  SPEAKER_00: Over a long period of time, when you get all done with this summer, I think you're gonna look back and say, hey, demand was very good.
• 10:29
  SPEAKER_00: Um maybe it wasn't quite as great as maybe some of what the you know futures markets are starting to look at today, especially on the hog side, but we're gonna get through and say, hey, this was definitely a good guy, really got us through started early there in March and continued to be pretty strong through the summer months.
• 10:47
  SPEAKER_01: That's a good point about demand being good and warm weather being good at this time of the year is just kind of like gravy on tie.
• 10:54
  SPEAKER_01: It's just an added bonus.
• 10:56
  SPEAKER_01: We're not gonna have to make up for that later, really.
• 10:58
  SPEAKER_01: I think so.
• 10:59
  SPEAKER_01: Yeah, that's a good point.
• 11:00
  SPEAKER_01: Because even if it gets really super cold compared to normal in like May, June, or July or something, I I mean it's still pretty nice.
• 11:07
  SPEAKER_01: You're gonna have demand in that time frame no matter what.
• 11:09
  SPEAKER_00: Yep.
• 11:10
  SPEAKER_00: Makes sense.
• 11:11
  SPEAKER_00: That's that's hard.
• 11:12
  SPEAKER_00: We'll find out when it all shakes loose, right?
• 11:14
  SPEAKER_01: But yeah.
• 11:15
  SPEAKER_01: All right.
• 11:15
  SPEAKER_01: Well, thank you for your time.
• 11:16
  SPEAKER_00: Thank you, Mike.
• 11:17
  SPEAKER_01: And thank you to all our listeners.
• 11:19
  SPEAKER_01: Please reach out to us at professional eggmarketing.com.
• 11:23
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing.
• 11:26
  SPEAKER_01: That's released every Friday.
• 11:28
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 11:34
  SPEAKER_01: See you next time.