Latest / CattleUSA Daily / 333: China’s Trade Deal Could Send Cattle Prices Exploding This Summer with Samantha Cozza-Wright

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333: China’s Trade Deal Could Send Cattle Prices Exploding This Summer with Samantha Cozza-Wright · CattleUSA Daily

• 0:00
  Today on the podcast with Samantha Kozarite, we are
• 0:02
  breaking down at the current cattle market and everything
• 0:05
  that we are seeing as far as the board is concerned and also how
• 0:08
  the live cattle market is influencing everything that
• 0:11
  we're seeing as well. We are talking about world
• 0:14
  markets, we're talking about trade deals with China.
• 0:16
  We're talking about pretty much everything in between and what
• 0:20
  that all looks like for you as producers here in the United
• 0:23
  States as of now. Before we hop in today's podcast
• 0:26
  episode with Samantha, if you're watching on YouTube, make sure
• 0:28
  you take a second hit that subscribe button and like this
• 0:31
  episode. If you're watching on any of our
• 0:33
  other podcast platforms, make sure that you take a second to
• 0:35
  go follow the show, rate and review it and share it with a
• 0:37
  friend. If you enjoyed today's episode.
• 0:39
  Now without further ado, let's go ahead and hear from Samantha
• 0:42
  Koza Wright. Welcome to the Cattle USA Daily
• 0:48
  podcast, your go to source for the latest livestock markets,
• 0:52
  industry insights and the updates shaping agriculture
• 0:55
  today. I'm your host Lauren Moylan, a
• 0:57
  passionate advocate for agriculture, here to keep you
• 1:00
  informed and connected. Now let's dive into today's
• 1:03
  episode. Samantha, welcome back.
• 1:10
  How has life in Northwest Kansas been treating you?
• 1:14
  I mean, so off the air guys, we were just talking about like
• 1:17
  snakes for some God forsaken reason.
• 1:20
  And I've like got the Hebrew Jeebers over here and I, I need
• 1:24
  us to talk about cattle markets and things that aren't Slytherin
• 1:29
  and sliding and all of those terrible things.
• 1:32
  So I hope you haven't seen any rattlesnakes over the past few
• 1:35
  days where you live. And did you guys get some rain?
• 1:38
  Like, let's give us the slowdown.
• 1:40
  We did. We only got about 20 points over
• 1:42
  the weekend, but it sounds like every direction of us, per
• 1:45
  usual, got inch, inch and 1/2. So, you know, we missed the
• 1:49
  Tornadoes, the hail missed us. So we, you know, can't complain.
• 1:53
  But it knocked us out of the field for a few days and we're
• 1:56
  racing to June 1 to try and get corn in.
• 1:58
  So same old, same old. But you know, I've heard of all
• 2:01
  these fires down southwest Kansas and oh, my gosh, yeah.
• 2:04
  It just leaves a pit in my stomach.
• 2:06
  I heard 115,000 acres burned in two counties.
• 2:09
  I had a couple of producers calling me saying they're
• 2:11
  evacuating people in Mead. It's just crazy stuff.
• 2:14
  I I was hoping we were past that.
• 2:16
  But maybe this summer heat, maybe we're not.
• 2:18
  Yeah, I know. And I mean, like Ashland burned
• 2:20
  again too. It got hit the last time and
• 2:23
  then it burned again. And there were people at the
• 2:25
  Mead fire and I, it's just they can't catch a break.
• 2:30
  They cannot catch a break. And our hearts go out to all of
• 2:32
  those families and producers and everyone in the area that's
• 2:36
  dealing with all of this because it does just leave a pit in your
• 2:40
  stomach of especially with how dry you guys are.
• 2:43
  I'm sure it's a very surreal moment of like crap, one wrong
• 2:47
  thing happens. And that could have been US type
• 2:49
  of situation too. So I know it just really puts it
• 2:52
  all into perspective and right, Our hearts go out to them.
• 2:56
  I mean, one strike of lightning, because they said that was the
• 2:58
  cause of a lot of it was dry lightning.
• 3:00
  So it's like it could have easily been us or anybody else.
• 3:04
  Yeah, absolutely. It's it's been a rough, rough
• 3:08
  couple days for Cattle Country. But really our hearts and
• 3:12
  prayers go out to all of those producers that are battling what
• 3:16
  has been and then what will continue to be over the next few
• 3:19
  months as well. I hope that we're putting fire
• 3:21
  season behind us. But again, Mother Nature never
• 3:24
  likes to tell us what she has in store for weather and for what
• 3:28
  we have coming down the road. Lots of thoughts and prayers out
• 3:32
  to that. But as far as the cattle market
• 3:33
  goes, Samantha, what have we been seeing over the past week?
• 3:36
  Give us the rundown A. Little bit of a rocky start this
• 3:38
  week, but you know, I think we've still got plenty of fuel
• 3:41
  left in the tank, especially as we're going into Memorial Day
• 3:44
  here on Monday to kind of kick off that summer grilling season.
• 3:48
  I mean I've said before, we're to a point in time now where
• 3:51
  beef demand is really going to be the backbone is specifically
• 3:54
  of this cash market for the next couple months and hopefully
• 3:56
  futures will start to play off of that.
• 3:59
  But with all the focus on direct trade to the Packers, that's
• 4:02
  really going to be our strength. Last weeks market topped out at
• 4:05
  266. The weighted average settled
• 4:08
  just shy of 263. I think to this point, 270 is
• 4:13
  the next benchmark. At the start of this week, I
• 4:15
  think steady to higher was the expectation for cash this week.
• 4:18
  I'd say at this point we're leaning more steady just with
• 4:21
  some early trade out of the North at 264.
• 4:24
  But there's still a lot of week left yet.
• 4:26
  We haven't seen a lot of high volume traded.
• 4:28
  I really don't think 270 is unrealistic.
• 4:30
  Like I said, going into this Memorial Day holiday, just
• 4:33
  acknowledging how short the Packers are to fill these meet
• 4:36
  orders. And when you look at formula
• 4:38
  trades in specific, they're next to nothing.
• 4:41
  Compared to what they were a year ago, you're talking a 25%
• 4:44
  drop from what they were last year.
• 4:46
  And that's really going to what is what's keeping us current
• 4:49
  that what is what keeps the Packers aggressive in the spot
• 4:52
  market as long as beef demand stays strong and supports that.
• 4:55
  And I mean even in the afternoon report on Tuesday, choice box
• 4:58
  beef cut out values ticked up to 396 just shy of 396.
• 5:02
  So we're we're $4.00 off of four or we're $4.00 off of $4.00 box
• 5:06
  beef. So that's encouraging.
• 5:08
  You know, I tell you this is $10 basis sitting, we're about 1011
• 5:13
  eleven days away from June 1 positioning into that June live
• 5:16
  cattle contract month and we're still sitting at a $10 basis to
• 5:20
  June. I mean just off of cash.
• 5:22
  And to me that is crazy. I know there was that concern
• 5:24
  that is futures going to take up to cash, is cash going to pull
• 5:29
  back to futures, but there's no indicators now that cash is
• 5:32
  going to break late and just kind of waiting for futures to
• 5:34
  pick up in the next week here. But I mean, you'd have to be
• 5:37
  absolutely blind to not see this spot market and make many cents
• 5:42
  out of Futures Trading and basis levels.
• 5:44
  But everyone's eating it up. And, you know, we've had some
• 5:47
  bearish speculation weighing on the futures markets lately.
• 5:50
  And you had John talking about this the other day.
• 5:52
  And I thought it was really interesting and just crazy.
• 5:55
  But to some degree, you have to figure over half of that is
• 5:58
  algorithm and probability training.
• 6:00
  So we always kind of joke about people trade headlines like it's
• 6:03
  their job, but it kind of is. I mean, when you figure 70% of
• 6:06
  algorithm trading into it. But if this cash market stays
• 6:09
  solid like many of the outside indicators suggest, I really
• 6:13
  just couldn't imagine what would stand in the way of a strong
• 6:15
  futures market as we start to transition into June to kind of
• 6:19
  accommodate for what we're seeing now.
• 6:21
  But the feeder cattle market is kind of been overlooked lately
• 6:24
  with all this stuff going on in, in fats.
• 6:27
  You know, they're hanging right in there with the index levels
• 6:29
  kind of around high three 60s, low three 70s.
• 6:33
  And really I won't lie, as strong as this live cattle
• 6:36
  market has been, I really thought 380 would have been a no
• 6:38
  brainer. I think that anticipated $5 corn
• 6:42
  is part of it. Obviously it's a huge, huge
• 6:44
  input and one of the biggest inputs and feeders took a hit
• 6:48
  from that on Monday after that rally in grains.
• 6:51
  But your ROI, you know is so high at these prices still.
• 6:57
  And so that gives plenty incentive to keep feeders
• 6:59
  strong. And when you look at that August
• 7:01
  feeder cattle futures month, some things, I mean, people are
• 7:04
  obviously very optimistic as we transition and do late summer,
• 7:07
  early fall. And I think the drought and fire
• 7:09
  map has a has a lot to do with that too, in the sense that
• 7:12
  people are very, very speculative on true expansion
• 7:17
  going forward. Yeah, absolutely.
• 7:19
  It has been a wild couple weeks in the cattle market.
• 7:22
  And I mean, last week when we talked, we were kind of saying
• 7:25
  the same song and dance that it had been a little bit of a
• 7:28
  volatile week to start out the week.
• 7:30
  And luckily we were able to see some good recovery near the end
• 7:33
  of the week. And then I think we're in the
• 7:35
  same song and dance again this week of where it's been a little
• 7:38
  bit of a rocky start to the beginning of the week.
• 7:40
  And we'll see how it can can use to unfold as we go into the next
• 7:44
  few days. I mean, it's 8:00 AM on
• 7:46
  Wednesday when we're recording. So we'll see how it continues to
• 7:50
  unfold as we go into it. But I know a lot of producers
• 7:53
  are really trying to keep their eye on it, hoping that as we go
• 7:55
  into some pretty important months of summer that we're able
• 7:59
  to maintain at the very least the levels that we're at right
• 8:02
  now, especially when we're looking at the cash market,
• 8:05
  right. And so making sure that cash is
• 8:08
  continuing to drive what decisions are being made and the
• 8:11
  board is going to do what the board is going to do.
• 8:13
  But hopefully a cash market that is strong and stable can
• 8:17
  continue to influence that board and we're able to maintain some
• 8:22
  semblance of a little bit of a less of a roller coaster ride.
• 8:26
  And I mean, when we're talking a commodity, there's only so much
• 8:29
  of A of a level playing field you can kind of work with.
• 8:32
  It's always a little bit of a roller coaster, but definitely
• 8:35
  something that we're going to continue to keep our eye on as
• 8:37
  we go into the summer months. And as a lot of producers
• 8:41
  continue to make some decisions as cattle are coming off of the
• 8:43
  mountains, it is encouraging that we have seen some retention
• 8:48
  start to happen again, that not as many cows are being sold as
• 8:51
  we thought that they were going to as far as the live market is
• 8:53
  concerned. And there's some other drought
• 8:56
  indicators that we're like, OK, we we might be OK for a little
• 9:00
  bit longer. I know a lot of cow country got
• 9:02
  some rain recently. And so that's a big part of
• 9:05
  what's going to continue to drive this cash market as we go
• 9:08
  into the hot months of June and July supply and hopefully
• 9:13
  continue to persevere through those.
• 9:15
  Yeah, absolutely. And and like you said, I am
• 9:17
  shocked about the level of retention that we're seeing.
• 9:19
  And I don't know that it's specifically expansion mode, but
• 9:23
  I think more so sustainability because everybody's holding
• 9:25
  those cattle back for another high-priced calf crop and things
• 9:28
  like that. But it is impressive to see that
• 9:30
  happening with all odds not in our favor in that sense.
• 9:34
  But it sounds like a lot of people are going to be holding
• 9:36
  cattle back to at least dry lot through the summer and kind of
• 9:40
  get them through this in the summer months once and on to the
• 9:43
  next hardship. I guess hopefully that's not the
• 9:45
  case, but it's not looking very clear as we move forward into
• 9:48
  this year, just looking at the actual drought map and fire maps
• 9:52
  and stuff like that and high, high levels of heat too.
• 9:54
  So it's a little bit concerning, but another thing that has been
• 9:59
  really weighing on the market, good or bad, depending on if
• 10:02
  you're trading grains or cattle, is our import export market that
• 10:05
  has gained a ton of press coverage over the last week
• 10:08
  after Trump's trip to China. So I mean, everyone's probably
• 10:12
  pretty up to speed by now. This was released late last
• 10:15
  week. But for those of you that maybe
• 10:17
  aren't, they announced that China would be buying another 17
• 10:20
  billion in new AG purchases through 2028 prorated for 2026
• 10:25
  since we're already into May here.
• 10:27
  But that is on top of the 25,000,000 metric tons of
• 10:31
  soybeans they agreed to last fall.
• 10:33
  Now, I know a lot of people are skeptical of this deal and I
• 10:36
  understand it from the sense of they're skeptical because China
• 10:39
  has had poor follow through in the past, specifically in that
• 10:42
  October deal. But I do think that if we do see
• 10:45
  some follow through, this is going to be a good deal.
• 10:46
  There wasn't a ton of specifics release, but it definitely, I
• 10:51
  mean grains lost their mind on Monday over it.
• 10:54
  I mean they rallied huge and beef obviously was also included
• 10:58
  in that deal and China renewed 425 export licenses for USB
• 11:03
  processing plants and added a another 77.
• 11:06
  So this is obviously still in the early stages.
• 11:09
  And like I said, not a ton of specifics have been lined out as
• 11:12
  far as tonnage and things like that, but definitely a step in
• 11:15
  the right direction for sure. And you know it's important to
• 11:18
  keep in mind that China and Hong Kong in and of themselves
• 11:22
  accounted for 68% of that decline in US beef exports last
• 11:27
  year. So I think in important that
• 11:29
  we're going to be opening up those markets again.
• 11:31
  You look back at at COVID years, Asia's middle class was able to
• 11:35
  absorb that that higher cost of beef prices and you think, Oh
• 11:39
  well, you know, it's not as important this is variety meats.
• 11:41
  But by being able to actually have a market for those
• 11:44
  underused cuts in the United States that essentially serve
• 11:48
  Pretty Little purpose to us as Americans, they're predicting an
• 11:51
  added $165 of carcass value right there just being able to
• 11:55
  find a market for those underused cuts.
• 11:57
  So I really, I really, really think that is going to be good.
• 12:00
  I think it's a step in the right direction.
• 12:02
  And I think by opening up that window you're, you're also
• 12:05
  expanding on exports markets as a whole in all of Asia.
• 12:10
  I mean you know, South Korea, Japan, you're not talking
• 12:13
  sirloins and rib eyes specifically, but short rib,
• 12:16
  short plates, maybe some brisket, things like that.
• 12:19
  So I think that will be good to open that market back up again
• 12:23
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• 12:26
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• 12:30
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• 13:01
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• 13:15
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• 13:25
  Absolutely. I can then agree more.
• 13:26
  And we were talking off camera a little bit just about the world
• 13:30
  and agriculture and how so often we can get kind of just put our
• 13:35
  blinders on and be like this is what we're dealing with back
• 13:38
  home. This is what we need to be
• 13:40
  focused on right now. But having a conversation about
• 13:44
  the world market and how beef, especially US produced beef,
• 13:49
  plays a role in that is so important, especially when we're
• 13:52
  looking at those off cuts and different things that we can go
• 13:56
  to these foreign markets and drive higher beef demand for
• 13:59
  something that we're not consuming at the same rate as
• 14:02
  other countries are. They have a variety of ways that
• 14:06
  they are cooking different off cuts.
• 14:09
  I mean, gosh, Samantha, I'm embarrassed to say this, but I
• 14:11
  tried to cook short ribs here one time and my husband's going
• 14:15
  to listen to this and he's going to send me a text message right
• 14:17
  now and be like, yeah, and they sucked.
• 14:20
  They were terrible, Lauren. And that's, I will admit that is
• 14:23
  because my cooking method on them was questionable at best
• 14:27
  and they were absolutely terrible.
• 14:30
  And then like we have in our freezer all of our organ meat
• 14:33
  and things like that because my dad is of the philosophy that,
• 14:37
  yeah, we're going to take it all.
• 14:38
  If we don't take it, the pack of the processing plants going to
• 14:41
  take it and they're going to sell it.
• 14:42
  So of course we'll take it. And then now we have like 3
• 14:45
  tongues sitting in our freezer. And one of my favorite things to
• 14:49
  get is we have a Mexican food truck here in Manhattan and
• 14:52
  their beef tongue tacos are phenom like absolutely to die
• 14:57
  for. That's what I get every time I
• 14:58
  go there that are some quesa Bereas and they're just
• 15:01
  absolutely phenomenal. And I told wait them the other
• 15:03
  day, I was like, do you think I could just like go take the
• 15:07
  tongue to them and be like, I will pay you to cook this for
• 15:11
  me, but I'm not doing it myself. Like I can promise you.
• 15:14
  And that goes to say that like that is not a skill I have.
• 15:18
  That is not a market that we're really focused on here in the
• 15:22
  United States. And so when we're looking at the
• 15:24
  success of our local producers and what we're getting for our
• 15:29
  animals, at the end of the day, I need $165 per carcass is
• 15:34
  significant. When you're talking at the vault
• 15:37
  volume that a lot of these producers are producing at.
• 15:39
  When in the numbers that we're at right now, we really need to
• 15:42
  be relying on these foreign markets to continue to drive our
• 15:45
  beef demand because there is going to come a point in time
• 15:49
  where our consumers aren't going to look at a steak at a
• 15:53
  steakhouse menu for $100 for a choice cut and say it's worth
• 15:58
  paying that. And so we really need to
• 16:00
  continue to, and I mean we're not there yet.
• 16:02
  It's not something we're concerned about right this
• 16:04
  second. But it is the reality of it that
• 16:06
  we need to continue to look at these foreign markets as a place
• 16:10
  for our beef and as something that we should care about as US
• 16:14
  beef producers and take a little bit less time to put our
• 16:18
  blinders on and open up our horizons every once in a while.
• 16:22
  Because, hey, someone might get on a plane and go make a deal
• 16:25
  with someone. And all of a sudden the markets
• 16:29
  are reacting to it. And I mean, that's the whole
• 16:31
  conversation that we're having today of a deal gets made in
• 16:35
  foreign markets and all of a sudden we're really talking
• 16:38
  about our boxed beef and what we're doing as far as our export
• 16:42
  markets are going because that's what's driving the board right
• 16:44
  now. Yeah.
• 16:45
  And like you mentioned steak demand, that has really been the
• 16:48
  huge focus dating back to April and how that translates to are
• 16:53
  consumers willing to pay $25 for a steak when we know that a lot
• 16:57
  of the consumers palate is swaying towards burgers and
• 17:01
  ground and things like that. But I think that also is going
• 17:04
  to be a huge focus as we move into June, specifically as we go
• 17:07
  into Memorial Day. And I think it's going to be
• 17:10
  interesting to see where we gauge that.
• 17:12
  Dan made a really good point last week, and he was talking
• 17:16
  about how, you know, you could see both sides of it.
• 17:18
  I think for one, May has actually been pretty
• 17:22
  unseasonably cool compared to what we expected.
• 17:24
  I mean, this whole last week we've been 60s, some people have
• 17:28
  been getting showers. So maybe as we transition into
• 17:30
  June, we start to get into those hotter summer months.
• 17:34
  People are going to start pulling out their grills.
• 17:36
  On the other end of that retail a little bit reluctant to
• 17:39
  contract meet and fear that maybe they aren't going to be
• 17:42
  able to get product move, specifically those higher end
• 17:45
  cuts that we typically see a bigger demand for as we go into
• 17:49
  grilling season. But like I said, I'm going to
• 17:51
  push that to the side for now and hope that come June, we do
• 17:55
  see the surge in stakes. But I think it's also important
• 17:57
  to note that we have put such a heightened focus around gas
• 18:01
  prices and discretionary spending and how that pulls the
• 18:04
  consumer dollar away from the beef counter or if it does it
• 18:07
  all. And I thought it was interesting
• 18:09
  all those, this isn't super current up to date with May.
• 18:12
  And since it's, it's released a month out, but, or a month
• 18:15
  behind, excuse me, but they released the April CPI report,
• 18:19
  consumer pricing index. And it goes in depth of about
• 18:22
  like inflation and food prices and all the things.
• 18:25
  And it's, it's really interesting to see that if you
• 18:27
  want to pull it up month to month basis.
• 18:28
  But it started talking about things that actually went down
• 18:32
  specifically in the retail level.
• 18:34
  Groceries, groceries, all groceries except for produce and
• 18:38
  protein. I think it was alcoholic
• 18:39
  beverages, which is kind of funny.
• 18:41
  All except for those three things, grocery prices actually
• 18:44
  went down. And I could see it.
• 18:46
  I mean, in our local grocery store, just here in small town
• 18:48
  Colby, Kansas, you see stuff on rollback all the time.
• 18:51
  Inflation is highly fixated around apparel, which is closed.
• 18:55
  And honestly, they are super overpriced.
• 18:57
  Lauren, I'm sure you can attest to that, like women's clothes
• 19:00
  especially. And then housing, I mean
• 19:02
  mortgages and things like that, those are highly inflated.
• 19:05
  But grocery prices have actually went down.
• 19:07
  Now, what puts the spotlight on beef is that it is a protein.
• 19:11
  And like I said, that is one of the things that didn't go down.
• 19:13
  And beef in specific month over month, month went up 2.7% and
• 19:18
  16% year over year. So everybody wonders why there
• 19:21
  is such a big spotlight on beef prices at the government level.
• 19:24
  Well, we're getting a red target on our head because everything
• 19:27
  else is going down and beef is going up, which don't get me
• 19:30
  wrong, absolutely is justified by supply and demand because if
• 19:34
  it's high on the hoof, again, justified by supply and demand,
• 19:37
  it's going to be high at retail. But I think that's really what
• 19:40
  is giving that big red target on our head of why beef is gaining
• 19:43
  so much attention. But there's the demand for it,
• 19:46
  even if it is for ground and patties and not so much steak
• 19:50
  currently, there is the demand for it.
• 19:52
  And like I said, I hope come June we start to see that surge
• 19:55
  in steak demand. I did see a lot of people
• 19:57
  pulling out their boats. The gas station was packed with
• 20:00
  pickups and boats and pulling boats and headed to the lake.
• 20:04
  So fingers crossed, eat a steak. Yes, screw we.
• 20:08
  Hey, you know what? As long as you're eating beef no
• 20:10
  matter what, we're happy. Get some all beef hot dogs.
• 20:13
  Get some burger, but maybe throw some steaks on the grill this
• 20:15
  weekend too and really try and support the beef market.
• 20:20
  And I mean, but The thing is Samantha, the people we're
• 20:22
  talking to on this podcast, they're going to go pull up in
• 20:24
  the freezer. They're not getting them from
• 20:26
  the beef counter. So they'll be like, yeah, I'll
• 20:28
  go, I'll go to one of my 5 freezers and I'll go pull some
• 20:31
  steaks out of there. And that'll, that'll really
• 20:33
  affect the market for everyone this week.
• 20:36
  So encourage your friends that don't have a freezer full of
• 20:39
  multiple stairs to go buy some steaks this weekend and really
• 20:44
  lean into that. But it's going to be a great
• 20:46
  Memorial Day weekend. It looks like the weather is
• 20:48
  going to be awesome for a lot of people out there.
• 20:50
  So I hope that everyone's able to enjoy it and eat beef as we
• 20:54
  go throughout it. But Samantha, anything else that
• 20:56
  we need to cover as far as the markets go this week?
• 20:59
  I. Don't think so.
• 21:00
  Awesome, awesome. Well, as always, thank you for
• 21:02
  your time and to all of our audience members.
• 21:05
  We will see you all next time on another episode of the Cattle
• 21:08
  USA Daily Podcast. Have a good one y'all.