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Cattle Market Challenging Multi Year Trends · Professional Ag Marketing Podcast

• 0:02
  SPEAKER_00: Welcome to the Cattle Talk Podcast.
• 0:05
  SPEAKER_00: Your weekly breakdown of cattle market fundamentals, key news, and the insights shaping the industry.
• 0:12
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:26
  SPEAKER_02: I think it's going pretty good, Mike, but that's it's always a question mark uh with this cattle market.
• 0:33
  SPEAKER_02: Never sure what's going to get you next.
• 0:34
  SPEAKER_01: I was we were just talking before the show started here, and I pulled up the quotes and I'm like, I couldn't believe cattle were green again now.
• 0:42
  SPEAKER_01: It seems like they are just erratic this morning.
• 0:45
  SPEAKER_01: We were way higher, then all of a sudden we were red and wondering what happens.
• 0:49
  SPEAKER_01: Now we're turning green again.
• 0:51
  SPEAKER_01: It's having a really hard time trying to decide what to do at the lower end of this uptrend we've had for six years now, Jeff.
• 0:59
  SPEAKER_02: So and then what's it called like on Tuesday there?
• 1:03
  SPEAKER_02: Is that a bear trap when it you and we might be doing it again today, like where you put that uh new low for the move in and then two days of recovery?
• 1:14
  SPEAKER_02: That thing had me so convinced going home.
• 1:16
  SPEAKER_02: I think that was on Tuesday.
• 1:18
  SPEAKER_02: Uh-huh.
• 1:18
  SPEAKER_02: Um that this thing was gonna be okay and we were gonna be able to recover a little dead cat bounce.
• 1:24
  SPEAKER_02: Yeah, and then Wednesday came along and four bucks lower off the lower cutout values and such, and it's just like wow.
• 1:30
  SPEAKER_02: I so that's that's what's gonna be interesting here.
• 1:33
  SPEAKER_02: We're not closing super good today, unfortunately, but um, we've got the same thing going on, put a new low in yesterday.
• 1:40
  SPEAKER_02: Um, and we're you know, hope well, we're definitely putting in a higher high and a higher low in today.
• 1:46
  SPEAKER_02: Um, so it still looks pretty decent from the chart.
• 1:49
  SPEAKER_02: But Monday will be interesting again, won't it?
• 1:52
  SPEAKER_01: It will be a little interesting.
• 1:53
  SPEAKER_01: I think some of it could be money flow today, too, just because you've got live cattle trading higher, feeder cattle are trading higher, the hog markets higher, and now the equities are up green today as well for the most part, which is a little change of pace.
• 2:07
  SPEAKER_01: Uh crude oil's down three bucks.
• 2:09
  SPEAKER_01: So they there might be some just money flow things going on there as well.
• 2:13
  SPEAKER_01: Jeff, I if Kate, if you pull it up, pull up that chart on August live cattle going all the way back to 2020.
• 2:22
  SPEAKER_01: I find it interesting because we found ourselves again at the bottom end of this uptrend that we've had for quite some time.
• 2:30
  SPEAKER_01: And in that chart, I think it really helps show that we're nearing prices that are getting very difficult for these fund traders to say, let's keep selling it.
• 2:39
  SPEAKER_01: And now this week, I would argue, as you can see, this uptrend just from a long, long time now, many, many years, uh, any correction we've had hasn't been that sizable really.
• 2:53
  SPEAKER_01: And this has been about it at this point, right about where we're at.
• 2:56
  SPEAKER_01: So it'll be interesting if we can continue that sell-off or not.
• 2:59
  SPEAKER_02: So what we're looking at there, and we don't do this very often, but it's really interesting in this cattle market right now.
• 3:04
  SPEAKER_02: And of course, we're thinking about the bigger picture, right?
• 3:06
  SPEAKER_02: Um, I think all of our opinions is someday that this cattle market will trade lower than where it's trading at today.
• 3:12
  SPEAKER_02: Um, but we got a couple charts that we've been staring at this past few days.
• 3:16
  SPEAKER_02: Um, one of them was on the screen there that Mike, you were talking about.
• 3:20
  SPEAKER_02: You had it's a hundred-week moving average.
• 3:23
  SPEAKER_02: That's a really long time, right?
• 3:25
  SPEAKER_01: That is a long time, especially for charts.
• 3:27
  SPEAKER_02: Yes, but that's the point, is this thing has been going up for uh three and a half years or better.
• 3:33
  SPEAKER_02: I suppose you could almost go well, you could go back to 2020 and call it a six-year run, right?
• 3:38
  SPEAKER_02: Um, so we're getting we're uh nearing that hundred weight week moving average.
• 3:44
  SPEAKER_02: Um, you know, we're it's a pivotal point, I think, in the industry right now for several reasons, and we'll click through them here.
• 3:51
  SPEAKER_02: But that's one of them.
• 3:52
  SPEAKER_02: This next chart that Kate has up is the other one.
• 3:54
  SPEAKER_02: That's just drawing a long-term trend line uh back to 2020, of course, kind of induced by COVID there on the live cattle.
• 4:03
  SPEAKER_02: And both of those have held up pretty nice.
• 4:06
  SPEAKER_02: Um multi-year trend lines so far.
• 4:10
  SPEAKER_02: We've hit them and we've bounced up really nicely.
• 4:14
  SPEAKER_02: Um and I think that's what that mark the marketplace is trying to decide today, right?
• 4:20
  SPEAKER_02: We've got a lot of folks um feeling like the low could be in, trying to pick a bottom, trying to get along this market, and that's where you see things happen.
• 4:30
  SPEAKER_02: Like Tuesday had that nice, nice trend going, if if you will, and and along came some negative fundamental markets and switched all that, right?
• 4:40
  SPEAKER_02: And and we punished it for a couple days here.
• 4:42
  SPEAKER_02: So we're trying it again today.
• 4:45
  SPEAKER_02: Um, and we'll see what the first part of next week is going to be pretty important in in my mind, if we're gonna be able to recover this market a little bit or not.
• 4:55
  SPEAKER_01: It can make it really tough for these traders here at the bottom end of this uptrend because we're getting really volatile action.
• 5:01
  SPEAKER_01: So it's scaring them both ways a little bit, right?
• 5:04
  SPEAKER_01: They get long, then it starts to go down pretty hard, then they get scared, stops hit a couple bucks below where they get in, and they're forced out, and then the market goes back up, and then they feel like they missed their opportunity.
• 5:15
  SPEAKER_01: So I feel like just from a psychological perspective, anyways, we're getting pretty good whips at the bottom end here.
• 5:23
  SPEAKER_01: You're also seeing some things fundamentally that I want to touch on too.
• 5:27
  SPEAKER_01: One, you've got a couple of reports coming out this afternoon, which a little trend change, probably you could argue that we've seen in those chart or in those uh reports here the last what three months out of the Catalon feed.
• 5:38
  SPEAKER_01: It seems like we're having a little bit higher placements numbers now.
• 5:42
  SPEAKER_01: Uh it'll be interesting to see if that continues.
• 5:45
  SPEAKER_01: I don't know if you have a bias on that, for example, or not, Jeff, but I don't really have any disagreements with the pre-report estimates.
• 5:52
  SPEAKER_02: You know, we're talking two percent less placements, like you said, that's significantly higher compared to a year ago than what we've seen um certainly in the first half of this year, really.
• 6:03
  SPEAKER_02: Um so yeah, that's that's all kind of an interesting trend.
• 6:07
  SPEAKER_02: Like uh the year-ago comparisons are harder, right?
• 6:10
  SPEAKER_02: So that's what makes some of the you know, two percent lower.
• 6:14
  SPEAKER_02: Maybe that's not um as I don't know if concerning is the right word, but maybe it's not as close as what you think, right?
• 6:20
  SPEAKER_02: We're still gonna be pretty low on placements, no doubt.
• 6:25
  SPEAKER_02: But then the on-feed numbers are been running higher than a year ago for several months in a row, like you know, to your point.
• 6:32
  SPEAKER_02: So um it's just that's another one of the signals in my mind that hey, this cattle cycle is probably hit its peak on numbers available.
• 6:46
  SPEAKER_02: Um, there's a lot of debate.
• 6:47
  SPEAKER_02: I know there'd be some people that disagree with me, and I think for good reasons, that where next year we could see some a few uh areas of some smaller numbers than what we saw this year, even.
• 6:58
  SPEAKER_02: So that that is very debatable.
• 7:00
  SPEAKER_02: I think you gotta put that in the back of your mind, especially as how much this market's come down here, right?
• 7:05
  SPEAKER_02: But um a lot of these other fundamentals that the cattle on feed being one of them, um, I think you're suggesting, hey, we've seen the shortest numbers that we're gonna see in this 10-year cycle.
• 7:18
  SPEAKER_01: We're seeing pretty interesting cash trade this week, to say the least.
• 7:23
  SPEAKER_01: We've seen a pretty weak cash trade trend here as of recent.
• 7:27
  SPEAKER_01: Some folks have been able to take advantage of really good basis opportunities up until this point, but now that opportunity's shrunk here a little bit.
• 7:34
  SPEAKER_01: Can you walk me through what you're seeing in the cash market here this week?
• 7:38
  SPEAKER_02: Yeah, I think you're and we traded some here at 230 um yesterday, 263 to 265 in the meat.
• 7:47
  SPEAKER_02: Um I think we had a few bids out in eastern Iowa that were 232.
• 7:52
  SPEAKER_02: Uh we didn't trade a lot of numbers yet, not hearing a lot um so far today.
• 7:57
  SPEAKER_02: I don't know if if we'll have just a quieter week and and call it a 230 to 232 type of a trade.
• 8:03
  SPEAKER_02: That's my gut, but we'll see how the rest of the day progresses here um and maybe into tomorrow, even.
• 8:11
  SPEAKER_02: But um, yeah, it it's it that's one of the kind of disappointing things.
• 8:16
  SPEAKER_02: Um, you know the the futures have really been pushing around the cash a bunch.
• 8:22
  SPEAKER_02: So you know, that's even last week was pretty apparent as the board changed in value, and the prices on the cash cattle changed pretty rapidly, and that's that's simply because there's enough people that are hedged in either August or even October that are pretty interested in taking care of these basis levels, right?
• 8:41
  SPEAKER_02: But that opportunity has drifted away from us a little bit.
• 8:45
  SPEAKER_02: Um, you know, if you're gonna call the cash at 230, then you're only looking at a three-dollar positive basis against the August.
• 8:52
  SPEAKER_01: Um and we're just getting 10.
• 8:55
  SPEAKER_02: Yep.
• 8:56
  SPEAKER_02: Yep.
• 8:57
  SPEAKER_02: So I guess that's a bit of a signal from the marketplace.
• 9:01
  SPEAKER_02: Either that's saying, hey, the futures are trying to find a bottom here, or maybe the cash is a little bit weaker than what it has been the past few weeks.
• 9:10
  SPEAKER_02: And and this week I would probably play, I would probably say you got some of each going on there, Mike.
• 9:14
  SPEAKER_01: That would make sense here, Jeff.
• 9:16
  SPEAKER_01: Uh, what else do you want to cover on the production side?
• 9:18
  SPEAKER_01: I know it's gonna be hot this weekend again.
• 9:22
  SPEAKER_01: Has the recent pretty hot weather before the last few days here has that impacted weights or marketings at all?
• 9:28
  SPEAKER_01: You think?
• 9:28
  SPEAKER_01: I mean, it's all fun and games feeding an animal till it's eighteen hundred pounds until you walk out there and find one dead.
• 9:34
  SPEAKER_01: I mean, that uh really all of a sudden now we're gonna need 50 of these things to pay for that loss of that uh of that one.
• 9:41
  SPEAKER_01: So tell me what you're seeing with the impact that weather's had on this cattle market lately.
• 9:46
  SPEAKER_02: Yeah, we haven't heard anything uh really scary from a death loss standpoint um through the heat, uh, which we can often get into.
• 9:55
  SPEAKER_02: Um I do think you'll see trend, you know, weights trend fairly aggressively lower for a week or two here, maybe close that gap between um you know what we're experiencing this year compared to last year.
• 10:08
  SPEAKER_02: Some um obviously, you know, that's all pretty extreme numbers, right?
• 10:12
  SPEAKER_02: Like we're still gonna have way less uh production by the time you look at numbers and you look at weights and what we did a year ago.
• 10:18
  SPEAKER_02: Um but keep in mind we've been talking about this plenty too.
• 10:21
  SPEAKER_02: The imports are making all that difference.
• 10:23
  SPEAKER_02: Uh shortfall this year on production um is being more made up with uh by imported meat.
• 10:29
  SPEAKER_02: And I think that's that's what we're struggling with on the product value side.
• 10:33
  SPEAKER_02: You know, so a quick update there, kind of week over week, if you will.
• 10:37
  SPEAKER_02: Um we're down just about 10 bucks.
• 10:41
  SPEAKER_02: Um so I mean we're we're continuing to see that lower um composite uh values, you know, week over week.
• 10:50
  SPEAKER_02: Um we are getting really close to the number that we've been kind of watching here.
• 10:56
  SPEAKER_02: You know, last year we put a low in about 360 um just under.
• 11:02
  SPEAKER_02: Um so we're gonna it's gonna be really interesting going forward into next week.
• 11:07
  SPEAKER_02: Did we uh will we find a bottom similar fashion what we did last year?
• 11:12
  SPEAKER_02: Um we've got a a bit of a seasonal um that you know shows a nice little bump as you go through Labor Day.
• 11:20
  SPEAKER_02: And so that's gonna be the next question in our mind is hey, did we are we gonna be able to see that rally like we normally do this time of year?
• 11:29
  SPEAKER_02: Um, or are we just gonna keep trending lower on beef?
• 11:32
  SPEAKER_02: If we keep trending lower, that's gonna create real problems.
• 11:36
  SPEAKER_02: Um because you just we just that's why we're watching these long-term trends so closely.
• 11:41
  SPEAKER_02: I think if you start to sell off again and and go below some of those um long-term chart numbers, the fund money, it's gonna be another trigger for those guys to say, okay, the fund's over in this market, let's continue to sell this thing off.
• 11:58
  SPEAKER_01: That would make sense.
• 11:59
  SPEAKER_01: Any final thoughts for our listeners here this week, Jeff?
• 12:02
  SPEAKER_02: No, I don't think so, or just, you know, let's not give up on the market, right?
• 12:07
  SPEAKER_02: Um, I know everybody wishes we had more cattle sold than what we do.
• 12:12
  SPEAKER_02: Um let's not just ignore it, put our hand in the our head in the sand, let's get stay focused on our positions, stay focused on our inventory.
• 12:21
  SPEAKER_02: Um, if nothing else, we can we can throw some LGM under some of these cattle really cheaply.
• 12:27
  SPEAKER_02: Maybe that's the right answer.
• 12:29
  SPEAKER_02: Maybe it's some LRP out there.
• 12:31
  SPEAKER_02: Let's just, you know, we can work on just some floors here.
• 12:34
  SPEAKER_02: I wouldn't be I wouldn't be aggressively selling calls, um, but let's at least continue to focus on you know the balance sheet, maybe more so than the profitability of the next group of cattle.
• 12:46
  SPEAKER_01: All right.
• 12:46
  SPEAKER_01: Well, thank you for your time today, Jeff.
• 12:48
  SPEAKER_01: Thank you, everyone, for tuning in.
• 12:50
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• 12:53
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• 12:56
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• 13:01
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• 13:04
  SPEAKER_01: Have a good weekend and thank you, Jeff.
• 13:06
  SPEAKER_02: Thank you.