Latest / CattleUSA Daily / 87: Cattle Prices Soar While Exports Struggle and Rumors Swirl with Dan Gerhold

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87: Cattle Prices Soar While Exports Struggle and Rumors Swirl with Dan Gerhold · CattleUSA Daily

0:00
Welcome to the Cattle USA Daily podcast.
0:02
Happy Tuesday y'all. Today we are bringing you your
0:05
weekly market report. Dan and I recorded this episode
0:08
early this morning so it is fully up to date for you guys
0:12
and very on time for what is happening in the cattle markets
0:16
right now. Today we are talking fats,
0:19
talking fears, talking kill cow markets and then we touch on
0:23
something that no one really wants to talk about right now
0:25
and that is the export markets at the very end of the episode.
0:28
So we talk about all the highs, all the lows, everything that
0:31
we're seeing right now, our opinions on all of that as
0:34
always. So let's go ahead and without
0:37
further ado, get into this episode with Dan.
0:43
Welcome to the Cattle USA Daily Podcast, your go to source for
0:46
the latest livestock markets, industry insights and the
0:49
updates shaping agriculture today.
0:51
I'm your host Lauren Moylan, a passionate advocate for
0:54
agriculture, here to keep you informed and connected.
0:57
Now let's dive into today's episode.
1:03
Now we can start the podcast. Now we're ready to rock'n'roll.
1:07
Yep. I thought you'd get a kick out
1:08
of that. It's golf day, so.
1:10
I love it. I love it.
1:12
No, I know exactly what shirt you're wearing.
1:14
I've seen those. I do not have that one, but I've
1:17
seen the ads for them. So.
1:19
OK, yeah, pretty awesome. I got some new shirts on order
1:22
so it's going to get fun, but they're not in yet.
1:25
I'm so excited. I cannot wait.
1:27
It's going to be a fashion show every single week.
1:29
Absolutely. That's what I'm here for.
1:32
Exactly what I'm here for. Feeling better.
1:34
Glad to see you're feeling better.
1:36
Yes, me too. I I'm glad to be alive and
1:40
functioning again. I don't know what the hell that
1:43
was, the doctors don't know what it was, but it sucked
1:46
nonetheless so don't wish that on anyone.
1:49
I was so sick and then I had to travel for I think it was 12
1:52
hours. The next day I was in the car.
1:55
That was not fun for anyone. That sucks.
1:58
But you know, we're here. I feel better.
2:01
I did go on a walk this morning and I was like, my lungs hurt a
2:04
little bit more than maybe they should from walking.
2:08
But you know, it's fine. It's fine.
2:10
We're we're on the mend. I I can at least function.
2:14
Glad it wasn't the screw worm. Yeah, yeah, yeah.
2:18
Good, good, good. Where do we go from there?
2:21
I, I don't even know where to go from there.
2:23
I that was yeah, yeah, yeah. OK.
2:28
All right. The screwworm is fun.
2:31
I'm glad it wasn't screwworm. Last time we talked, you and I
2:33
were all worried it was screwworm that we were getting
2:37
here in the States, which I'm still not convinced that it's
2:39
not here. But like, that's neither here
2:42
nor there. You know, everyone's entitled to
2:44
their own opinions on things. But yeah, the markets definitely
2:47
responded. And then they responded again.
2:49
And then it's been a wild couple weeks.
2:52
So I feel like we have a lot to talk about and everything that's
2:56
happened. Absolutely.
2:58
Yeah. I think today we caught a new a
3:00
new rumor. Ice raiding a packing plant.
3:03
Yes. Caused the market to drop and
3:05
then came right back. He just this market does not
3:10
want to die, which is good. It doesn't.
3:13
I'm glad fun time trading. If you're on the right side of
3:15
it, it's a lot of fun. Getting on the right side can be
3:19
a struggle for some, but yeah, we're having fun.
3:22
So now between the screwworm rumor, then we had a packing
3:27
plant closure rumor and that one we reversed within the same day,
3:32
and then today's ice raid, I'm wondering what next week's rumor
3:36
is going to be do. They just have like the wheel of
3:38
Fortune wheel and they're just like spinning it and it's just
3:41
some, some on there are like those $1,000,000, just
3:44
outlandish things. And I feel like we're on the
3:47
verge of, you know, hitting some of those every once in a while.
3:50
So what's, what's the wheel of fortune going to say next week
3:52
for us? How it's going to be right?
3:54
Good question. Throw something crazy out there,
3:57
it might stick. Yep, no crazy times.
4:01
Shoot all time record high fat cattle prices last week.
4:05
I'm in across the country. Our average ended up at just shy
4:08
of 240. So that's pretty, pretty pumped
4:12
about that. That's, that's a big number.
4:14
Obviously feeders are following right along.
4:17
Shoot, there's 8 weights, bring in 32339 weights at 3 bucks to
4:23
310. It's just a lot of money.
4:26
We're playing with a lot of money.
4:28
And Speaking of money, sorry, I just got looking today.
4:31
I had to look up the rate of inflation.
4:33
OK, so if you go back to 1965, the price of fat cattle was
4:39
ballpark $0.23 a hundredweight, or sorry, $0.23 a pound, $23 a
4:45
hundredweight. According to the government.
4:47
Since that time our average rate of inflation has been 3.8 to
4:51
3.9. If you run that against that $23
4:55
a hundredweight, in that 60 year period, fat cattle are worth 240
5:01
roughly. I found that awfully
5:02
interesting, given we're trading 240 fat cattle either side of
5:06
it. Yeah.
5:08
Kind of wild, right? That's crazy.
5:11
Now, does that mean that we should all make the assumption
5:14
cattle prices are here to stay at this level?
5:16
Absolutely not because there was an awfully long period during
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that 60, a lot of the time during that 60 year period where
5:24
we traded well below the price of inflation.
5:27
So I just perplexed. It's just it's unreal how close
5:32
that came in. Another number I had to look up,
5:35
you know, comparing all these numbers was 1965, the average
5:39
price of ground beef was $0.59. Today they're claiming it's
5:44
$5.80. So it's gone open price or the
5:48
value of your dollar has gone drastically lower.
5:51
At the same time, our herd numbers have dropped
5:53
substantially. But in 1965, the average weight
5:56
of a fat steer was 1000 lbs. And today, I mean, we're talking
6:02
15, sixteen 1700 LB fat steer. So it's unreal.
6:07
A lot of crazy stats I could throw out there, but sorry,
6:10
didn't mean to go off on a tangent.
6:11
Though it's. Just wild times.
6:14
It is wild times and that's that's really important though
6:17
too. I still think touch on and talk
6:19
about too, because I think sometimes we get so like narrow
6:24
minded and visioned on what we're dealing with right now.
6:28
And sometimes it's nice to look at the bigger picture and be
6:30
like, hey, since the 6th seas, this is what we've been seeing
6:33
and here's the numbers and we're actually trending kind of like
6:37
where we're supposed to be right now along the rate of inflation
6:40
and everything that goes along with that.
6:42
So no, it's it's interesting to hear about for sure.
6:46
Yeah, yeah. Another that's more long term
6:49
numbers, a more short term number.
6:51
Last year, last week or last year compared to last week, I
6:58
was selling 1500 LB fat steers for 2800 bucks a head.
7:02
Now we're buying yearling steers to replace those cattle at 2800
7:06
bucks a head. Yeah.
7:09
Do we see any risk in that right, not at.
7:12
All not at all. There's just crazy.
7:14
Everyday a new stack comes at me and I'm just.
7:18
It's a wild day to be in the cattle market.
7:21
It's a wild year. It's a wild year to be in the
7:23
cattle market. Dan and I were talking, gosh,
7:26
when was it? A few weeks ago.
7:28
We were like, this is going to be one of those years that, like
7:30
AG econ kids are going to have in their history books.
7:33
And they're going to have to, like, run reports on this and
7:35
write papers on this year for the economy and AG and markets
7:39
and everything. And God, I pray for those kids
7:42
because it's been a hell of a confusing year.
7:44
Yeah. Just unreal.
7:46
I mean, yeah, just sit back and try and figure out what they're
7:49
going to do with interest rates. You know, that's a big factor
7:52
when it comes to cattle, grain, all of it, you know, overall
7:56
economy. You know, I look at inflation
7:59
and where it's where it's at compared to where it was, you
8:02
know, pre COVID. Yeah.
8:05
Looking at that chart, we should be raising interest rates right
8:08
now. Looking at other charts and
8:11
other numbers, I kind of hope that they lower them pretty soon
8:14
or we might be in for some trouble.
8:17
But nonetheless, domestic demand, given the price levels
8:22
we're at right now is absolutely unbelievable.
8:26
If if we had a larger supply of beef, I would highly doubt we're
8:32
at these price levels. But given the fact that our
8:35
supply is is lower than it was last year, consumers are still
8:39
going through it. I love it.
8:41
Bring out that beef month. I mean beef month's over but who
8:44
cares? It's beef for life.
8:45
But. It's actually.
8:47
It's, it's good to see. I mean, Americans are figuring
8:50
out it's a healthy, it's, it's the healthiest product to eat.
8:53
I'm glad that the ranchers finally getting to profit off.
8:56
Yeah, at the end of the day, taste is still king.
8:59
I'm going to steal the beef check off slogan on that.
9:02
That beef is still king and flavor is king on that.
9:05
Like people are still purchasing for the taste of beef and we're
9:10
we're grateful for it. We're very grateful for it.
9:13
And continuing that demand as we go through for our consumer
9:17
population, I think is so vital for these volatile markets and
9:21
everything like that. As far as markets go, what are
9:24
we seeing? We saw obviously a scare this
9:27
morning with just the rumor mill.
9:29
And I think that that goes into absolutely the fact of how
9:32
volatile these markets are and how one news report can make
9:36
people absolutely pull and go running for the hill.
9:41
But it recovered quickly. So what's what's happening in
9:44
the markets right now, Dan? Yeah, one, one small packing
9:47
plant got quote UN quote possibly rated and we took $2.00
9:51
out of fat cattle that like you said, that goes to show how
9:55
tipsy this thing is, how volatile it is.
9:58
You know, overall, like I mentioned, feeders are just
10:00
absolutely on fire. Then you know, I've been pushing
10:04
coverage since and before $3, you know 300 it just it seems
10:09
high, right? We've gone over why this that,
10:12
but the market just doesn't give up fat cattle, you know,
10:16
depending if we're talking cash or the board like right now I'm
10:20
very, very concerned about the board.
10:22
The last two days of trading we've seen a lot of open
10:25
interest drop more than 20,000 contracts.
10:28
So, you know, historically speaking, 400,000 contracts in
10:32
the fat cattle market is a lot. That's usually where we, you
10:36
know, see a peek out right around that number.
10:38
So then your traders start taking profit and the market
10:41
slides back and has a correction.
10:44
We got over 400,000 I think went to 416,000 and in the last from
10:49
Friday and Monday, we dropped more than 20,000 contracts in a
10:52
higher market. So typically that would lead you
10:55
to believe shorts are blowing out of their positions, not a
10:59
good sign for a healthy market. So definitely concerned when it
11:03
comes to futures when I look at the cash market, how do you get
11:07
bearish? I mean, the feed yards have the
11:09
leverage they know they do, even though kill numbers are down and
11:13
possibly going to drop more. There's new plants coming
11:16
online. You brought North Platte online.
11:19
I believe Saint Louis is online. There's a couple still coming
11:22
down the pipe later. How do you get bearish?
11:25
These numbers only get tighter. We can all drive around going on
11:28
vacations, going on work trips and see all the empty feed
11:31
yards, empty pens, custom yards, begging on social media to get
11:35
filled up, dropping yardage rate.
11:36
I've seen it all. The numbers aren't there at the
11:39
same time. We're seeing the weights drop.
11:41
You know, if you see slaughter numbers drop and you see weights
11:44
fall at the same time, there is not a larger sign that says
11:47
we're current than that right there.
11:50
So we're into the calf slaughter already.
11:52
The weights are dropping, the gratings are dropping.
11:55
You know, we're slaughtering last year's calf crop.
11:58
OK. So what is there to get bearish
12:00
about as far as cash is concerned?
12:01
As long as the feed yards, in a concerted effort continue to
12:05
work together, they could drive fat cattle price much higher.
12:10
These Packers have these formulas.
12:11
They're booked on meat. The consumers still going to the
12:14
grocery store, they don't have a choice but to kill cattle and
12:18
lose money. Do I like it that they lose
12:21
money verdicts out? No, I don't.
12:23
I want them to make money so they keep the doors open.
12:26
But I also want them to have tight margins so that the the
12:30
actual producers getting a larger portion of that consumers
12:33
checkbook they're losing, you know, call it 140 to 200 bucks a
12:38
head depending on the Packer. I don't like that it puts me on
12:42
edge, you know, will we drop a plan?
12:45
Who's going to go dark first? You know, my, my money would
12:48
normally be on a southern plant with their numbers getting
12:51
tighter because of the border. When that happens, is anybody.
12:54
But as of right now, other than the volatility, the cash market,
12:58
just sorry, other than the volatility in the futures
13:00
market, cash seems to want to go higher.
13:03
So full steam ahead. Don't step on the tracks when
13:06
the trains coming through, Lauren.
13:08
Oh yeah, I will be staying far away from those tracks, that's
13:11
for damn sure. We'll tell you all about it, but
13:13
you will not catch me anywhere near those tracks when that
13:16
train does eventually, inevitably come barreling
13:19
through. So any other highs, lows in the
13:23
markets? How are kill cow markets?
13:25
How are how's everything else looking outside of fats and
13:29
feeders right now? Yeah, absolutely.
13:31
That's another good indicator. You know, I was told a long time
13:34
ago, watch that Kill Cow market. If that starts to drop, your
13:37
fats might get in trouble. That's through the roof too.
13:40
I mean hell. Yeah.
13:42
Look at the choice select spread.
13:43
People are switching a little bit to that select mate, you
13:46
know, more burger. It's also seasonal.
13:49
The deeper you go into summer, you start seeing more burgers
13:52
and brats and less steaks. Yep.
13:55
But nonetheless, there's not a lot of cows to kill out there
13:58
because the dairies didn't retain enough heifers.
14:01
The beef cow herd, they're holding on to the old cow trying
14:05
to get one more calf out of her. We just don't have the cows to
14:07
kill. These markets are strong.
14:09
Why would they # cows? I don't see that changing.
14:12
Typical. You don't see, you know, cow
14:14
slaughter ramp up until the fall when people people are preg
14:17
checking. So I you know, same thing with
14:20
pound bowls. They're sky high 2/10 2:15 for
14:24
for a fat fed bowl. This is just nuts.
14:27
I mean, a lot of these guys pounding bowls out right now are
14:31
getting more for them than what they bought them as yearling
14:34
bowls for to turn out and breed with.
14:36
I it's just how many firsts can you see in this market?
14:39
You know, it's crazy when you can take a purebred great
14:44
quality bowl just to the sale barn and get just as much for
14:48
him as you would going and selling in private treaty these
14:52
days. Like it's it's craziness out
14:56
there right now. And I think that it's just
14:58
really speaks to we can sit here and we can talk about the
15:02
markets all day and we can try and predict this and try and
15:04
predict that and rub our crystal ball and talk real sweet to it.
15:07
But at the end of the day, like none of us saw this coming.
15:12
Like, I don't think we could sit here and say that we ABCD we
15:16
knew this was going to happen and this is how it was going to.
15:19
Go it truly goes back to the consumer.
15:21
You know, demand is just rock solid.
15:23
I've mentioned the carnivore diet, I mentioned the keto diet,
15:26
but when people are eating this much, you know, great healthy
15:32
protein, whether it's beef, pork, chicken, even the pork
15:35
cutouts been on a tear lately. They probably have cattle
15:38
producers to thank for that. But nonetheless, pork's gone up
15:42
in price as well. So that should continue into the
15:46
1st of August. So you know, honestly the way
15:49
we're the way the cattle markets current in the feed yards and
15:53
the way pork and beef are right now.
15:55
Like I say, I I'm not overly worried about cash just yet.
15:59
I don't see a wall of cattle coming.
16:01
How are? The international markets and
16:04
box beef prices and all of those looking right now.
16:07
That's do you want to talk about depressing stuff?
16:09
We don't need to talk about the export markets, OK.
16:11
We have talked about so many great things for 17 minutes.
16:15
I think people can hear one negative thing from us for like
16:19
2 minutes. Exports suck.
16:22
They suck and they're going to they suck.
16:26
They're going to, I mean, I think last week's export number,
16:29
would that come in at like? It was bad.
16:32
Metric tons. Yeah, it was really bad.
16:35
Not even really worth mentioning.
16:37
Like it. Yeah, they suck and they're
16:39
going to. I mean, you have, you have a 110
16:43
hog cut out. You have 360 knocking on 370
16:49
choice boxes. I mean, we all know that America
16:52
is known for shipping or exporting our best high quality
16:56
beef, right? That's what they come here for.
16:59
They're not coming for lean beef.
17:01
When you put the prices up that high, you're going to cause some
17:04
demand destruction. Fortunately, and I this is the
17:08
way I would prefer to be honest with you, I would rather keep
17:11
that demand at home, keep the American consumer eating it and
17:15
not be reliant upon those exports.
17:18
Now when the price slips, I hope those exports and they should
17:20
come back and help level off the prices so we don't have these
17:26
huge mountaintops and valleys in demand.
17:28
But nonetheless, you're not going to get that major export
17:32
business coming in here and with these prices, plain and simple
17:36
China, you know, they've they've been a decent beef buyer in the
17:39
last couple three years and they're not buying anything.
17:43
And I'm not surprised. They're value shoppers and beef
17:46
is not on sale. Yeah, When you can go to one of
17:50
our foreign partners and that is high in beef production and get
17:53
it for half the price than what we're selling it right now, I
17:57
can't blame them if we're speaking economically like it's
18:00
just a smart move on their parts.
18:01
And I do agree with you in the sentiment that I would rather
18:05
keep a lot of it here. But they have always said that
18:07
we export the great and we import the shit like the things
18:11
that we're going to put in the dog food, the things we're going
18:13
to put in the McDonald's beef burgers, stuff like that to
18:16
continue to cycle that production.
18:18
And so I think there's an important balance that we need
18:21
to play of still exporting so we can continue to import and some
18:25
lower quality beef cuts. But then at the same time, we do
18:28
want the American consumer eating American beef.
18:31
We don't want them eating Brazilian beef or like beef from
18:35
other countries when we have it right here and we can provide it
18:39
still at that demand at that price that we're able to do
18:43
right now in the markets. Exactly.
18:45
Yeah. I mean, 384 million people in
18:47
this country should have no problem eating all the beef
18:50
grown in this country. Let's keep it that way.
18:52
A. 1000% Any other highs, lows, things to watch out for the rest
18:57
of the week? Anything else you're putting
18:59
your finger on the pulse on? Anything else?
19:02
Kind of nervous watching this grain market.
19:04
It's not trading the best. I'd like to see it bounce here.
19:06
You know, I'd not mentioned a couple weeks ago how I'm a buyer
19:09
and the lower it goes, the more I'm going to be a buyer.
19:12
It's not trading the best. It's, I think we closed settled
19:15
today off of our lows and yeah, we did.
19:18
So we might see a bounce over the next couple days, but some
19:21
of the patterns on the charts are not looking healthy.
19:24
We might see some more down before this thing really builds
19:27
a base. Hopefully that happens and the
19:29
farmer can get a little relief. If you're a feed buyer, it's not
19:33
a bad time once again to add some more of your get some more
19:37
of your core needs booked. Also like mail, soybean crop
19:41
should be drastically smaller this year with fewer acres and
19:44
not even talking about potential weather, but like buying soil,
19:48
soybean mail down here about 300.
19:51
All I can say is give us a call, talk through it.
19:54
Yeah, absolutely. As far as LRP rates go, what are
19:57
those looking like right now? And take a minute to discuss
20:00
what insurance looks like right now.
20:03
You know, here recently in the last couple weeks with that
20:05
volatility on all the rumors, the prices have gone up a little
20:09
bit. Not going to lie.
20:11
At the same time, I look at the insurance rate when I'm
20:13
comparing the dollars I'm insuring in total compared to
20:16
what I'm paying in premium and it's still super, super cheap.
20:21
You know you're talking about it 2 1/2% insurance rate.
20:24
If you go look up your your house insurance or your pick up
20:27
insurance, those are 3% or more. So Long story short, get out
20:33
here, get some floors set and then just sit back, go to sleep.
20:36
You know, don't worry about what the markets are going to do
20:39
because as volatile as this thing is, you know, a 10%
20:44
correction in the feeder cattle market anymore talking about 30
20:47
bucks a hundredweight folks, that's $240 a head on an 8
20:52
weight steer. Just once again, huge numbers,
20:56
just unfathomable numbers. So I, you know, it, it's just
21:02
interesting. We got up to that $300 mark and
21:04
everybody started plowing into the LRPS and then we got above
21:07
it and it slowed down. Then the market pulled back and
21:10
crashed and everybody's like I'm freaking out and now it's back
21:14
up. We're setting a brand new all
21:16
time record high today. Let's let's add to your coverage
21:20
as the market goes higher. That way you don't have to panic
21:24
by LRP on the down days so. Let yourself be able to sleep at
21:28
night. End of story, plain and simple.
21:32
It's a stressful time to be in the cattle industry right now.
21:36
It's a great time, but it's also a stressful time because of how
21:38
volatile everything is. And so it's one of those
21:41
situations that you know what, allow yourself to kick back in
21:45
the evenings, go to sleep at night and not have to worry if
21:49
you're even going to be able to break even this year and just
21:52
keep yourself covered because it's, it's one of those things
21:55
that you'd rather have it and not need it than not have it.
21:58
And like you just said, Dan, be scrambling when they're down and
22:02
be stuck in a tough situation. So on that note, make sure you
22:06
go check out our show notes. We do have that exclusive cattle
22:09
USA insurance link where we partner with Logic AG marketing
22:12
for you guys where you can go check that out.
22:14
Get those current LRP rates, get a hold of Dan's team and
22:17
everyone over there to get yourself covered, be able to
22:20
sleep at night and do all of the things in between.
22:23
We also have both of our newsletter links down below.
22:25
So we got Dan's newsletter link and we've got our newsletter
22:28
link. If you want some humor, go to
22:30
Dan's. If you want daily, a little bit
22:34
of everything, come running over to ours.
22:36
They're both great. Make sure you check those out
22:39
and just like subscribe, rate, review, do all the things.
22:41
We really appreciate it here at the team.
22:42
And as always, we'll see you all tomorrow on another episode.
22:45
Have a good one y'all.