Latest / CattleUSA Daily / 178: The Cattle Market Rally We Didn't See Coming and the Feeder Cattle Market Push with Dan Gerhold

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178: The Cattle Market Rally We Didn't See Coming and the Feeder Cattle Market Push with Dan Gerhold · CattleUSA Daily

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  In today's episode with Dan Gearholt, we are breaking down
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  the cattle markets, what is going on in the world of
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  commodities, live cattle, everything else in between.
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  Dan is breaking that down for all of us today and we
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  specifically spend a lot of time on the feeder market this week
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  as well, touching on what is going on there, the feeder
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  market, just pushing the rest of the markets and how that's
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  looking over the past few months and what we anticipate that to
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  look like going into the rest of fall and even into January as
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  well. After that.
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  We also hit on the corn markets. What is happening now that
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  farmers are actually getting in the field and seeing what the
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  crop product is actually coming out to be and what are yields
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  are for this year and how it is affecting our global markets as
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  well. We touch on all of those things
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  today in this podcast. Before we jump in, if you guys
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  could take a second to like subscribe, rate and review this
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  podcast, I really appreciate it here at the team.
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  And without further ado, let's go ahead and jump into this
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  podcast episode with Dan. Welcome to the Cattle USA Daily
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  Podcast, your go to source for the latest livestock markets,
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  industry insights and the update shaping agriculture today.
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  I'm your host, Lauren Moylan, a passionate advocate for
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  agriculture here to keep you informed and connected.
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  Now let's dive into today's episode.
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  Dan, welcome back to the podcast.
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  How is life in Iowa? How's harvest going?
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  Are you, are you surviving up there right now?
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  Yeah, it's going. It's busy time of year, as you
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  can imagine. Yeah, weather's cooling down,
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  getting a little bit of that October drizzle, so the calf
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  fusion is definitely taking full effect.
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  Yeah, harvest is busy. A lot of beans getting wrapped
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  up got wrapped up last week and pretty heavy in the corn right
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  now. You look forward to it every
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  year to see what's out in the field.
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  And then you get about 1/3 of the way in or or halfway into
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  harvest and you're like, when will it end?
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  Yeah. So no, it's just it's that time
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  of year. Everybody's tied up, busy, busy,
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  busy. So life is good, though.
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  Life is good. Absolutely, absolutely.
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  It's great to hear. Well, how are the markets doing
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  this week? We've had a little bit of a
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  little bit of change since we talked last week.
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  So break it all down for us. What's going on?
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  Yeah, ever since coming on here and and telling you how nervous
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  and bearish I was, you know, because all the indicators were
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  pointing possibly lower, the market's done nothing but go up.
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  So the last thing I want to do is switch and tell you I'm
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  bullish and make the market go down.
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  So I think we'll just hold off on that.
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  Yeah, just remain a little bit nervous.
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  This has been quite the rally. We put more than 20 bucks on
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  feeders in the last week. You know, well, 10 days, 10
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  trading days, we've gone more than 20 bucks.
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  So been pretty impressive. Now you got the feeder cattle
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  index jump and you know, it's Southern sales were really,
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  really strong early this week and now you're up into the
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  northern sales to finish off the week and and prices are
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  extremely strong. I'm in 4-5 way caps unbelievable
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  knocking on, you know, 2627 hundred bucks a head.
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  It's just, it's incredible what these, what these markets have
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  done that cattle Long story short, cash bids jumped last
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  week. I don't know where really did
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  not see that coming. Not a lot of people did that I
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  that I know of. But I think what it came down to
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  is the board moved and put, put the cattle feeder in a negative
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  basis scenario and they just flat out told the Packer, so you
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  improve the bids, we're not selling them.
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  So I was surprised I didn't see any deliveries last week, but we
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  did get some tender down in Texas yesterday.
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  So that should historically you would you would have the long
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  running for the fat, you know, when, when they're getting those
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  deliveries tendered. So we'll see how today acts.
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  Overall, they're still expecting cash higher this week with what
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  the board's done. I I don't disagree with anybody
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  thinking that. I mean, we should be able to put
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  a couple bucks on even admits kill cuts, even admits, you
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  know, flat box is not moving higher.
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  It's just it's one of those deals, Lauren, where it used to.
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  My old rule of thumb was if the beef was higher and the bar the
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  sale barn cash was higher and the board was higher, if you get
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  all three of those BS, we could expect one heck of a rally in
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  the country cash cattle market. I'm not getting all three BS, so
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  I don't want to step out and tell you that you should lock
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  the gates or anything. I I think we should just kind
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  of, you know, given the negative basis, I think we should
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  probably fights for some higher cash, but I don't know if I want
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  to get necessarily wildly bullish at this point.
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  So at the end of the day though, feeders are the leaders and
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  feeders have been dragging us higher and higher and higher.
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  So kind of incredible April live cattle futures like a lot of
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  people were buying, you know, cattle that broke even for that
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  March, April time frame at 2:50 here we are trading 250.
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  So it'll be interesting how we go through the day today and and
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  see what kind of fall through we get so.
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  I think feeders being the driving push of the market this
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  fall has been the trend for sure.
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  It has been absolutely wild to watch how much feeders are
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  affecting the entire market right now and how they're
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  pushing, how they're doing everything that they're doing in
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  the market. I mean, a lot of that is due to
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  just demand for them right now. We don't have a ton of foreign
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  products coming in from Mexico as far as feeders go.
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  So the American like raised feeders are higher commodities.
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  People want them. People are like, hey, we need to
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  fill our lots. We need to fill our pastures.
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  We need to. So they're pushing more, they're
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  pushing for higher prices. They're finding them in
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  different areas. Those southern guys are having
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  to come NA little bit for them and all of the things that go
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  along with that. So it's been absolutely wild to
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  see it, but it's definitely been the trend of this fall.
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  Yep, Absolutely. Yeah.
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  You know what, a couple months ago I started hearing rumblings
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  that people are, you know, pulling calves off cows early,
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  selling them on weaned, you know, not even cut bulls.
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  You know, we're moving cattle a lot sooner because people were
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  nervous about missing out on the market.
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  It it, it obviously is coming around that that is probably
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  true because supplies are are very, very tight right now at
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  the sale barns. And typically the month of
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  October is not a strong demand month.
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  You know, as far as feeder cattle, just everybody's in the
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  field, you know, it's the calf season.
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  So nobody wants to really take that risk.
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  But this year it's different. You know, it's just I swear to
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  God that it seems like people think we're going to run out of
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  feeder cattle the way they're selling.
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  So pretty incredible. Pretty happy for the cow calf
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  producer for the backgrounder, they're they're making good
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  money. That's good to see.
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  Yeah, it absolutely is. It absolutely is.
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  It's one of those situations that for the longest time, years
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  and years and years, it's always like, let the farmers get out of
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  the field, let people catch up a little bit in the fall, then
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  start selling them. And if you can wait, you're
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  going to get a better price for them this fall.
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  It definitely hasn't been that. And it's just been really crazy
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  to watch how the markets have been affected by that.
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  I'm curious to see how the next few months are going to go with
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  starting CAF run and everything like that, what that's going to
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  look like and kind of how that affects our numbers a little bit
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  as well. I'm curious to see.
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  We're obviously going to have a little bit of a drop in historic
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  numbers because people have been selling a little bit earlier.
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  But I'm curious to see what that is going to look like, if
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  there's going to be a significant one and just how
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  that all kind of balances out for people as we go into the
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  next few months. Yeah, yeah, I know.
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  I agree. If if the farmer was any kind of
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  indicator on what cattle prices, prices are going to do, I think
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  they're going to stay strong. I talked to a lot of farmers who
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  want to walk the corn off the farm because it flat out doesn't
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  work. 363-8390 cash corn does not work.
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  So what are they going to do? Try to add value with your
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  cattle so you get guys out of the combine here in the next
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  month. I think there's going to be some
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  more renewed interest in those feeders.
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  That should be interesting, depending on location.
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  I know there's dry pockets in the South, there's a lot of feed
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  that got put up this summer up north, you know, and guys are
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  willing to feed it this winter. So I think that demand for
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  feeder kettle is going to remain strong all the way through
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  December and into January. It's pretty incredible market.
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  It truly is. It had every opportunity to
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  completely get wrecked, you know, the week before last week
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  and into last week and did they complete screaming higher.
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  So love to see it. Yeah.
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  Well, like you said last week when we were talking, all of the
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  indicators were pointing that it was going to be bearish, like
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  every single one of them. And that I think is the theme of
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  this market as well, is the fact that like we think one thing is
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  going to happen and then ass backwards is what actually
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  happens like. Absolutely.
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  It's crazy. Yeah.
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  And, and honestly, Lauren, the indicators haven't changed a
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  lot. Open interest is still dropping.
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  I mean, yesterday was the first day we saw a lot of cattle open
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  interest go up. And the fact that it was going
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  lower in that entire rally, that's not a bullish market.
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  Yesterday all of a sudden open interest going up.
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  You know, it it could have been a little bit of spreading off,
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  could have been a little bit of buying in the front, people
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  reeling cattle if they sold, you know, last week thinking hey,
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  you know, this thing seems like it's going higher yet.
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  Let's buy some of these front month feeder cattle.
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  They're the opposite. You know, feeder cattle open
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  interest was going up last week and now all of a sudden feeder
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  cattle open interest yesterday went down a few contracts.
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  So I don't know there is the market's arguing with itself.
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  We don't need to step in the middle of the fight.
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  But at the end of the day, it's going higher.
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  The trend is your friend and the trend is still higher.
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  You broke out, you know it. It certainly seems like it'd be
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  easy to touch 385 feeders today. And, you know, there's a lot of
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  talk, You know, maybe we go touch that 400 here pretty
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  quick. I wouldn't doubt if some of
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  these feeders are high enough that we could start pushing that
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  index on 380-380-5390 and all of a sudden the board wouldn't be
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  too out of line, you know, screaming up to that 400.
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  Pretty crazy stuff, honestly. It's just, yeah, pretty fun,
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  pretty exciting for most cattle country, but pretty crazy.
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  You touched on earlier how a lot of farmers are wanting to walk
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  their corn off instead of driving off this year.
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  Can you touch on what we're seeing there and then what we're
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  seeing just in the crop markets right now as well?
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  Yeah, to be honest, I mean, the big, the big issue making that
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  happen is capital. You know, the fact that we've
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  got guys that haven't fed cattle in years and all the sudden, you
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  know, they've got an empty concrete slab and they're like,
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  hey, let's add some value through cattle.
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  Let's get some menorah back. You know, all of a sudden
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  they're going to their bank and their bank is like, wait a
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  minute. You know, now is not necessarily
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  the time to be jumping at the cattle market.
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  But it's interesting. Capital is is an issue right
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  now. You know, even for the guys that
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  have stayed in and fed through all of this, capital still an
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  issue. You know, if they're straight
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  cash to cash, you know, buying, buying feeders, selling fats,
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  buying feeders right back, no problem.
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  The guys that have been hedging, they're screaming up and down
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  about these margin calls and everything that goes with it
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  because they're paying hedge line of credits.
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  They've got interest against that.
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  And now the basis is flipped. So it's, it's not the easiest
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  situation in the cattle market right now just because the
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  market's going higher. It's also making this market
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  somewhat of a struggle for some producers, farmers included.
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  You know, if they, if they want to go out and buy a potlot of
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  feeder cattle, it's quarter $1,000,000.
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  So say you make, you know, just just 100,000 or a couple 100,000
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  bushels of corn. That takes a lot of capital to
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  fill that yard and burn through all that corn.
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  So it's, it's going to be an interesting year, but
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  nonetheless, you're still going to have some farmer interest
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  once we get these combines, you know, wrapped up to the year put
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  away. I think you still bring the
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  farmer in here and there they decide, you know, let's let's
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  feed some cattle. So we should have that interest
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  coming here. I the way harvest has gone up
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  here in my neck of the woods, I wouldn't be surprised.
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  You know, most guys are wrapped up by the first week, you know
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  of November possibly, you know, it might drag into the second
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  week, but you get those guys wrapped up, cleaned up that
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  demand here in December and January is going to be pretty
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  strong. Yeah, absolutely.
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  That's great to hear. Great to hear.
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  Any other things that we missed or that we need to touch on
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  today in the market? So we kind of kind of hit all,
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  all areas that are at least worthy of talking about right
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  now for the most part. I guess I'd probably touch on
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  corn a little bit. There's been a lot of questions
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  from people outside of the Corn Belt.
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  What's this corn crop? What's price going to do?
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  When we look at the corn crop compared to last year, it's,
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  it's pretty discouraging to see US 5060, you know, some cases
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  100 bushels back as a whole, I would say 4050 bushel back,
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  especially here in the state of Iowa, Illinois is similar that
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  they don't have a record crop. It's discouraging to see that
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  there's pockets where the crop is better than last year just
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  because, you know, they were too wet last year.
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  You know, southern Illinois or southern Minnesota, southern or
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  sorry, Northern Iowa, northwest Iowa, they were super, super wet
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  last year. So they had a better year this
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  year on the corn crop. But other than that, the corn's
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  been kind of disappointing because last year was such a
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  phenomenal year. Fast forward, what's that going
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  to do to price as well? You got a double edged sword.
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  You got a farmer that's bleeding right now losing, you know, 100
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  and 200 bucks an acre right now. Corn, soybeans, both.
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  It's just not a good situation. So they're going to need capital
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  to finish up this year's rent here towards the end of the
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  year. They're also going to need
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  capital to start out next year. You also have the bankers
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  breathing down their necks. Hey, what are we going to do
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  about going backwards like we have?
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  You know, if the government passes out the money when they
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  reopen, let's say, that'd be great, but that's going to give
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  the farmer a little bit of staying power to hold out,
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  possibly wait for a higher market.
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  Does that eventually turn into that higher market?
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  I don't know. Some, some years it does, some
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  years it doesn't. But inevitably when I look at
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  what we have on the books for export sales, we have some
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  really strong sales on the books.
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  We've got some of those shipments taking place.
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  So that's strong. I'm happy to see that.
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  All of a sudden, now you have a shorter crop, OK.
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  So the feed and residual number always needed to come down just
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  because there's less hogs and cattle on feed.
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  But now all the sudden you have a shorter crop compared to last
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  year and hey, do we have the potential to rally this corn?
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  Are we going back to $5 corn? I personally don't believe so.
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  Do we have the chance to run to 44450?
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  Absolutely, in my opinion. At the same time, you know, the
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  market really had a shockwave last Friday.
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  I think every market had a shockwave last Friday with Trump
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  coming out and saying, you know, to China basically is what he
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  said. That hit all the markets pretty
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  hard except for cattle. So if if we don't sit down at
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  the table and talk with China, these markets might just trade
• 15:16
  sideways until they wake up and realize we don't need China.
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  You know, soybeans. There's a lot of sales on the
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  books to other countries. We don't historically sell a
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  pile of corn of China. We just need to get these sales
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  shipped. So personally, I'm a buyer of
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  corn here. I'm not going to throw all my
• 15:33
  eggs in one basket and buy all the corn day one.
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  But you got corn down here at 410 beef corn.
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  I'd probably step out maybe on a little bit of the March, little
• 15:42
  bit of the May. And then if we do trickle lower,
• 15:45
  I'd probably add to that position, bring your average
• 15:47
  down and hopefully we get that run this winter up to that 440.
• 15:50
  450 Wonderful, wonderful. It's crazy how the corn market
• 15:54
  has been the past few months and we've been talking about this
• 15:57
  potential possibility for a little bit now.
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  When we were talking a couple months ago, everyone was like
• 16:03
  driving by the fields, things look good, get in the fields.
• 16:06
  People aren't so hopeful as far as yields go and everything like
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  that. So it's, it's interesting to see
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  how things have been affected as our farmers have been starting
• 16:16
  to actually get in the fields, see what our yields actually are
• 16:18
  coming out to be this year and how that all is affecting our
• 16:22
  markets and our global just reach with our corn product as
• 16:27
  well. So definitely something to keep
• 16:30
  our eyes on as we go into the next few months and finish up
• 16:33
  harvest and see where we kind of land as far as all of that goes.
• 16:38
  Any other things that we need to head on today, Dan?
• 16:42
  Absolutely awesome. Awesome.
• 16:43
  Well, thank you for your time today.
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  As always, to all of our listeners out there, thank you
• 16:48
  for watching another episode of the Cattle US Say Daily podcast.
• 16:51
  We will see you all tomorrow on another episode.
• 16:54
  Have a good one y'all.