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Screwworm and Rally · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_01: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: This is your host, Mike Miner.
• 0:22
  SPEAKER_01: Let's get started.
• 0:23
  SPEAKER_01: Today is November 29th.
• 0:25
  SPEAKER_01: I've got Jeff here with us the day after Thanksgiving.
• 0:28
  SPEAKER_01: How's it going, Jeff?
• 0:29
  SPEAKER_00: It's going pretty good, Mike.
• 0:31
  SPEAKER_00: It's a little chilly here to start our uh new holiday season, I guess, huh?
• 0:35
  SPEAKER_01: That it definitely is.
• 0:36
  SPEAKER_01: I would say it's starting to be a good time to go south for the winter, especially to Mexico.
• 0:41
  SPEAKER_01: But Jeff, it sounds like we've been bringing back enough problems from Mexico in the past couple weeks.
• 0:47
  SPEAKER_01: So let's talk about the screw worm, because I'm pretty sure we haven't really chatted about that yet on the old podcast.
• 0:53
  SPEAKER_00: Yeah, I think that's you're probably right.
• 0:55
  SPEAKER_00: And I don't know how big of a deal um we're gonna make out of this for sure.
• 0:59
  SPEAKER_00: So, you know, they've they've this parasite uh been kind of moving itself up through the uh central and Latin American area and uh was recently found in Mexico.
• 1:11
  SPEAKER_00: And um, you know, obviously the USDA jumped in front of that and started limiting and restricting some imports of cattle, um, and and I guess all livestock, but was it a dairy cow they found it in it?
• 1:24
  SPEAKER_01: Yeah, okay.
• 1:25
  SPEAKER_00: Yep.
• 1:25
  SPEAKER_00: And I you know, cattle is about the only thing that we care about as far as um movements.
• 1:30
  SPEAKER_00: And so we get a little over four percent of our cattle actually come from Mexico, um, imported as feeder cattle, uh for the large majority of that, of course.
• 1:41
  SPEAKER_00: So this this combined with the tariff discussion this week, Mike, is a really big deal um to the cattle world.
• 1:49
  SPEAKER_01: Actually, bullish for the cattle world.
• 1:51
  SPEAKER_00: Yeah, I would say okay, so it's kind of feeder cattle are weird.
• 1:56
  SPEAKER_00: I think you're right about that, Mike, but here's compared to the other commodities.
• 1:59
  SPEAKER_00: I mean right.
• 2:01
  SPEAKER_00: So what can happen here though is like we've talked about this on different commodities on this podcast of like, okay, if you're gonna have a tariff from Mexico, if Trump's gonna throw one of those on, they're gonna be retaliatory um tariffs go in place, and then you know, well, our pork, for example, wouldn't be able to flow into Mexico as easy.
• 2:19
  SPEAKER_00: So we've one of the things that we've been careful about and we'll need to continue to be very careful about, is our is the short-term trade being elevated, ramped up because of the concerns over the tariffs, right?
• 2:34
  SPEAKER_00: And the way we've thought about it that is pork going to Mexico, are they gonna ramp up that movement to get ahead of whatever retalitary um tariffs go in place?
• 2:45
  SPEAKER_00: Um, this is similar discussion, but complete opposite, of course.
• 2:51
  SPEAKER_00: So, you know, if we were truly gonna put a 25% tariff on anything coming from Mexico, Mike, that would pretty much stop the feeder cattle movement.
• 3:00
  SPEAKER_00: Uh 25% on a you know, eighteen hundred dollar an animal uh is just that's insurmountable as far as any sort of uh economics go.
• 3:10
  SPEAKER_00: Um, but what you can do in the feeder cattle world, unlike pork, is you can move that whole inventory pretty much whenever you want, right?
• 3:18
  SPEAKER_00: You just might move them 50 pounds or 100 pounds sooner than what you intended to.
• 3:23
  SPEAKER_00: So if you're truly going to have a 25% tariff starting in January, you would like to move all of the cattle from Mexico to the U.S.
• 3:30
  SPEAKER_00: in a very short period of time.
• 3:32
  SPEAKER_00: So I think you may have you would have started to see that, but enter this screw worm parasite, now you can't move feeder cattle.
• 3:42
  SPEAKER_01: That shuts that down.
• 3:43
  SPEAKER_00: Right.
• 3:44
  SPEAKER_00: So that's that's where this is gonna get uh really interesting, and and probably, you know, for folks that don't study the cattle market as much, this is gonna be a bit of a canary in the coal coal mine, I think, as to how this market kind of unfolds because the screw arm goes away, 25% tariffs on, you will you'll ship a lot of um animals in a very short period of time into the US in front of the tariffs.
• 4:09
  SPEAKER_00: Obviously, tariffs go away um or look like they're gonna go away, this whole thing becomes much less relevant.
• 4:17
  SPEAKER_00: But it's been a you know, it's been an exciting market here this week, and it it's really been pushing the uh last two weeks really, it's really been the driver of the cattle complex in my mind, Mike.
• 4:30
  SPEAKER_00: You know, it's just a lot of days where that thing is the strongest compared to what the corn and what the live cattle is.
• 4:37
  SPEAKER_00: Um, and it seems like you know, the shorter supply that we're starting to see here in the US um driving that feeder cattle market higher and live cattle kind of reluctantly following is the way I would observe the cattle complex.
• 4:54
  SPEAKER_01: Those feeder caps, are you starting to retain those a little bit in certain geographies or not?
• 4:58
  SPEAKER_00: Sure, a lot of lot of things pointing in that direction.
• 5:02
  SPEAKER_00: Um, you look at what some of the sales activity's been compared to you know heifers versus steers.
• 5:07
  SPEAKER_00: Um a lot of that is you're kind of trying to piece together um you know some information that isn't super solid, right?
• 5:16
  SPEAKER_00: So we're trying to gauge that.
• 5:18
  SPEAKER_00: It sure looks like we are starting to retain some heifers.
• 5:21
  SPEAKER_00: That's what we're hearing from the countryside for sure, and we're starting to see it in some lower numbers as far as feeder cattle available to be to be purchased here, too.
• 5:32
  SPEAKER_01: It's an interesting chart too.
• 5:34
  SPEAKER_01: You look at some of these price levels that that feeder cattle is getting up to, like in the January here.
• 5:38
  SPEAKER_01: I mean, you're at almost 260.
• 5:41
  SPEAKER_01: You can that pretty much takes you back to where we spent a lot of the high time frames here this past spring, doesn't it?
• 5:47
  SPEAKER_01: So there's some really strong resistance levels, I think, within another couple bucks, probably on feeder cattle, which you can easily do that in a day, uh, you know, recently here on the cattle market.
• 5:57
  SPEAKER_01: So I I'm gonna keep an eye on this this area for sure.
• 6:01
  SPEAKER_01: We're just ahead of where we're at, Jeff.
• 6:03
  SPEAKER_00: The the other thing we look at is anytime we've been able to sell live cattle in the 190 area, Mike, and it really hasn't really mattered, is then our saying.
• 6:11
  SPEAKER_00: It doesn't really matter which month it is, um, selling 190 feeder cattle or live cattle futures has been a good idea.
• 6:18
  SPEAKER_00: And we're we're up there again on some of these February and Aprils.
• 6:21
  SPEAKER_00: What's kind of important and impressive, and I think it's because of the feeder cattle market, is the way back months next fall, next February of 26, trading in the 188-type area and trying to push up into that magical 190 area.
• 6:37
  SPEAKER_00: So historically, these have all been uh good sales to make, even if you just consider the past couple years.
• 6:44
  SPEAKER_00: So it's uh but this feeder cattle inventory, I would argue, is a whole different um metric right now, and it'll be interesting if we pushed kind of above some of these levels that have been pretty solid, or if we stumble here once again.
• 6:58
  SPEAKER_01: For sure.
• 6:59
  SPEAKER_01: Uh just a very, very quick recap here before we talk about the soybean market.
• 7:03
  SPEAKER_01: You know, I we've been talking about that choice cutout, showed some really strong signs of demand here pre-holiday buying, nice spike up, dropped back down, kind of headed higher now.
• 7:12
  SPEAKER_01: So really nice, really nice chart movement and demand out of the choice cutout.
• 7:16
  SPEAKER_01: Uh really good signs there, but the weights all of a sudden just poo, just really dropping on us here.
• 7:22
  SPEAKER_01: I don't know if you have a comment on that or not.
• 7:24
  SPEAKER_01: Uh cash cattle have been rising a little bit here for the fat cattle, and then weights have just tanked.
• 7:29
  SPEAKER_01: So I don't know if you have a comment on that.
• 7:31
  SPEAKER_00: Yeah, I think it's a combination of uh is a mostly centered around really good market here short term, I think.
• 7:38
  SPEAKER_00: And you know, the the northern supply uh we has been kind of feeding the southern uh packing plants a little bit.
• 7:47
  SPEAKER_00: And packers have really been pulling on this northern supply pretty aggressively.
• 7:52
  SPEAKER_00: It seems like they're getting the job done, which uh what I mean by that is maybe getting a little bit more current as we you know continue to have good weeks like this week where you pop back up to 190, 191.
• 8:05
  SPEAKER_00: That that starts to move quite a few market ready cattle in my mind.
• 8:09
  SPEAKER_01: All right.
• 8:10
  SPEAKER_00: But yeah, two pretty exciting markets.
• 8:12
  SPEAKER_00: One's the feeder cattle, the other is the soybean.
• 8:14
  SPEAKER_00: I've kind of written that market off as kind of a dead dog, Mike, but just when you do that, she gets a little bit of life to her, doesn't it?
• 8:21
  SPEAKER_01: Yeah, it does.
• 8:22
  SPEAKER_01: You know, this morning, uh day after Thanksgiving, you get a couple flash sale announcements just uh, you know, got posted near 36 million bushels uh to the unknown on the soybean sales flash this morning.
• 8:36
  SPEAKER_01: Uh the sales report that was released this morning was above expectations, and the soybean oil uh as well, way above expectations.
• 8:44
  SPEAKER_01: That one is interesting to me, kind of backwards of what we've been seeing, but nonetheless, I'll have to dig into that one a little bit more, Jeff.
• 8:51
  SPEAKER_01: But the soybeans themselves here, all of a sudden, exports when you start looking at the pace that we've been on and uh the outlook that the USDA has for us, we are actually pretty much caught back up.
• 9:03
  SPEAKER_01: Now, now that's that's for the time being.
• 9:06
  SPEAKER_01: We have a lot of unknowns ahead of us the rest of this marketing year, as we uh definitely know, but we're starting to see some lower prices help us out here a little bit, I think, on the export side.
• 9:16
  SPEAKER_00: You're able to catch up when uh the weather in South America has been nothing but bearish and and indicating that uh there's probably a decent amount of supply coming down the pipe, maybe a slightly delayed, so you could make an argument that's why you're moving a few more beans, but you've got a really good um prospect as far as crop size in South America going on, and you've got a dollar index that's been doing nothing but go up.
• 9:43
  SPEAKER_00: Um so currency's been working against you, weather's been working against you.
• 9:47
  SPEAKER_00: We've been able to put some sales on the books.
• 9:50
  SPEAKER_00: I guess I think that's pretty impressive.
• 9:52
  SPEAKER_01: The uh soybean market, other than that, really hasn't had a lot of bulls to really build off of.
• 9:59
  SPEAKER_01: You know, the the complex is pretty bearish in general.
• 10:02
  SPEAKER_01: We still have half a billion bushel ending stocks that we took a little hit.
• 10:06
  SPEAKER_01: I mean, uh yield was down a little bit in the last report, so we'll want to watch that.
• 10:10
  SPEAKER_01: It seems like the crop size is getting a little smaller out of the US than getting larger into that January final crop report.
• 10:17
  SPEAKER_01: And uh from a uh from a demand side, maybe we're starting to pick up a little bit here, but it seems like the top side is is somewhat limited there to say the least, with both uh tariff talk and with uh Brazil now expecting 170 million metric ton out of that crop, a massive crop, you know.
• 10:33
  SPEAKER_01: So uh last year was only 153.
• 10:36
  SPEAKER_01: So it really looks like uh them and and Argentina, fantastic crop uh uh ratings there, you know, uh versus normal.
• 10:44
  SPEAKER_01: So when I look at kind of the outlook here, there's not a lot of bulls in the room, other than maybe we might get some good signs of demand here just from some of these exports, which uh take that as as you will.
• 10:55
  SPEAKER_01: But the outlook going forward from a seasonal perspective, Jeff, is you normally do put a low in here kind of around Thanksgiving and you rally or put a rally in at least uh somewhat through Christmas January 1 timeframe.
• 11:10
  SPEAKER_01: And you know, over the last 10 years or so that average uh has been like 90 cents that you put on from from the low to the high, which you tell me exactly when that day is, Jeff, uh, of when we put those two in.
• 11:23
  SPEAKER_01: But nonetheless, from a seasonal perspective, you uh you can find some strength in the soybean market.
• 11:28
  SPEAKER_01: Now, a lot of that is normally on the back of all of a sudden it's a little bit too hot and dry in Brazil at a very critical time frame for them.
• 11:35
  SPEAKER_01: But at this point, they're they're looking exceptional.
• 11:38
  SPEAKER_01: And the dry areas here now again look like they're gonna get some rain, Jeff.
• 11:42
  SPEAKER_00: So probably a very much um sell-on rallies type of a market if we get some.
• 11:48
  SPEAKER_00: I know we're we're throwing a little bit of an optimistic picture out there as far as short-term information on these beans, but and they're trading very close to the low end of what they've traded so far, and you know, technically that thing has built some nice support here.
• 12:02
  SPEAKER_00: We we kind of dodged a bullet, was that about a week ago when it was looking like it was trying to break into some new territory, didn't get that job done.
• 12:10
  SPEAKER_01: Still not that far off.
• 12:11
  SPEAKER_01: Yes, I mean it's yeah, that's right.
• 12:12
  SPEAKER_00: One bad day that can change that whole outlook in a hurry.
• 12:15
  SPEAKER_00: So don't get too uh don't get too bullish on this thing.
• 12:19
  SPEAKER_00: Maybe sell on rallies, pick your targets and and get them executed is kind of what I'm hearing you say, Mike.
• 12:25
  SPEAKER_01: And something from a local geography here.
• 12:27
  SPEAKER_01: I mean, we had really small crops to the east of us, so when it comes to basis, when you're looking at Brewster at 10 under, you know, you're getting to that point where normally you you get a zero out of them or something this time of the year.
• 12:39
  SPEAKER_01: Um there might be some good basis opportunities that you don't have to get too excited about here right away or get pushed into something.
• 12:47
  SPEAKER_01: So keep an eye on those two, but it it sure seems like the producers got a little bit of leverage when you start talking about the cash market side of things too, from a local geography, I'd say.
• 12:57
  SPEAKER_00: Perfect.
• 12:58
  SPEAKER_00: Well, we'll uh hopefully everybody had a great Thanksgiving.
• 13:02
  SPEAKER_00: Have a good weekend, and next week should be kind of interesting on a few of these markets.
• 13:07
  SPEAKER_01: All right.
• 13:08
  SPEAKER_01: Thank you so much, Jeff.
• 13:09
  SPEAKER_01: Uh short day today.
• 13:10
  SPEAKER_01: Let us know if you got any questions.
• 13:12
  SPEAKER_01: Uh, hope you had a good Thanksgiving.
• 13:13
  SPEAKER_01: And thank you to all our listeners.
• 13:15
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 13:19
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 13:24
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 13:30
  SPEAKER_01: See you next time.