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Cattle fall once again. Who has the leverage? · Professional Ag Marketing Podcast

• 0:02
  SPEAKER_00: Welcome to the Cattle Talk Podcast.
• 0:06
  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.
• 0:22
  SPEAKER_02: Well, today is July 10th, Friday, and I'm Jaden Housewell here stepping in for Mike Minor, and I got Jace Crocked with me.
• 0:29
  SPEAKER_02: How are you doing, Jace?
• 0:30
  SPEAKER_02: Pretty good.
• 0:31
  SPEAKER_02: Just a reminder to everyone, um, check out the description there in our comments to sign up for our daily market commentary.
• 0:38
  SPEAKER_02: But today, Jace, we're going to be talking about cattle.
• 0:41
  SPEAKER_02: So, Jace, what can you tell me what kind of went on in the cattle market this week?
• 0:46
  SPEAKER_01: Yeah, so we've seen futures heading lower for a while here.
• 0:50
  SPEAKER_01: We've got um we've had about 10 days in a row where it's just red by a little bit, and it's the market's not oversold, it's lost its some of its volatility, it's just on a March lower, which we haven't seen in a long time.
• 1:05
  SPEAKER_01: Like you can go back to the lows from even June, and we chopped around to get there.
• 1:11
  SPEAKER_01: And this time it's just been methodically lower.
• 1:14
  SPEAKER_01: And yeah, like I said, on the on the indicators, it's not it's not oversold, but we've just on the cash side, we've just kind of lost our leverage a little bit.
• 1:25
  SPEAKER_01: So we went from 255 last week to 248 this week in the cash market.
• 1:31
  SPEAKER_01: Um, just seeing that that soften up a bit.
• 1:34
  SPEAKER_01: And just I I kind of did this as a as a reminder to myself more than anything, but I was thinking about leverage a little bit and and these Packers here, and they've cut back on hours, so they could increase that and increase their kills again if they wanted to.
• 1:52
  SPEAKER_01: But we have we have seen we've seen the Tyson plant in Lexington, we've seen the JBS plant in Pennsylvania, we've seen now the two plants in Colorado that have had labor issues, and like Fort Morgan is still down.
• 2:08
  SPEAKER_01: So just just even for figuring a little conservatively, you'd be you'd be close to that 10,000 a day mark of of lost harvest there.
• 2:17
  SPEAKER_01: And so it it is starting to add up, and I think we're starting to see it become a little evident on the cash.
• 2:24
  SPEAKER_02: For sure, Jace.
• 2:25
  SPEAKER_02: Yeah, seeing a seven dollar lower cash week over week there.
• 2:28
  SPEAKER_02: What do you think about box beef?
• 2:30
  SPEAKER_02: Kind of see seeing just a seasonal decline there, or what are we seeing there?
• 2:33
  SPEAKER_01: Yeah, it's definitely seasonal.
• 2:35
  SPEAKER_01: The one the one piece of it that we didn't we didn't get this year is we didn't get that seasonal bump higher into June.
• 2:44
  SPEAKER_01: And so we're heading seasonally lower after counter-seasonally just being flat.
• 2:50
  SPEAKER_01: So that was a that was a little bit of a disappointment to the market.
• 2:54
  SPEAKER_01: I think you were anticipating having beef sales higher again this year, and you're just you're just not quite seeing it.
• 3:02
  SPEAKER_02: And it looks like we, you know, we kind of have some resistance around that$400 level there.
• 3:07
  SPEAKER_02: Uh it looks like you know, that's kind of been the top over the past year here as well.
• 3:11
  SPEAKER_01: Yeah, it's definitely it's definitely struggled to get above 400, and it it definitely matters where that is from an import standpoint, too.
• 3:22
  SPEAKER_02: Right, Jason and year over year, like what are we looking like on beef production with with these lower kills, but yet higher weights?
• 3:30
  SPEAKER_01: Yeah, so that that has got really interesting over the past, say, four or five weeks.
• 3:37
  SPEAKER_01: It's gone from it's gone from being quite a bit lower.
• 3:39
  SPEAKER_01: You know, we were running three, four percent lower on our beef production to now like last week was 99.5% of what it was a year ago.
• 3:48
  SPEAKER_01: So we are seeing we are seeing that creep up and getting really close to a year ago, and and then imports on top of that imports are quite a bit higher, higher by about 5% of our production.
• 4:02
  SPEAKER_01: So we're seeing, and this contributes kind of to that beef cutout number, but we're seeing more beef available to the U.S.
• 4:11
  SPEAKER_01: consumer right now.
• 4:12
  SPEAKER_01: So the demand's still there, it's just there is actually contrary to what people think about the small beef herd and everything, there's actually more beef available to the consumer right now.
• 4:24
  SPEAKER_02: And our are basis levels for farmers kind of playing in roll roll for that for for guys pushing cattle you know to the pack or sooner, maybe than normal?
• 4:32
  SPEAKER_01: Yeah, I I don't know that many guys are pulling ahead just because this market has definitely lulled people to sleep on that.
• 4:40
  SPEAKER_01: But if you were a basis seller this week to get a positive$13 basis works just fine.
• 4:47
  SPEAKER_01: So I I think I mean if you're if you're hedged, it it's really not it's not a terrible situation this week, even with the lower cash.
• 4:56
  SPEAKER_02: How about on the feeder cattle side of things there, Jace?
• 4:59
  SPEAKER_02: I mean, I look at the August chart, you know, 10, call it 10 of the last 11 trading days.
• 5:04
  SPEAKER_02: We've been read, bringing August down to 354.
• 5:07
  SPEAKER_02: What are we seeing on the sales side of things there?
• 5:10
  SPEAKER_01: Yeah, that that feeder market, like it doesn't, it doesn't have to care a whole lot for the next month and a half, but it it is pretty impressive.
• 5:20
  SPEAKER_01: Last year we were running nine to ten dollars above the index with the futures, and this year with an index in the low two set or low three seventies, we're seeing a discount of you know close to twenty dollars there.
• 5:35
  SPEAKER_01: So it's very very interesting that they're pricing that discount in, and maybe more maybe more intriguing is just why why guys are willing to spend four dollars on feeders and just keep buying them, but this market's proved to be to be a bullish market.
• 5:54
  SPEAKER_01: So what we did see this week, we saw Bassett had a sale on I think it was Tuesday or Wednesday, where they brought an average of 401.
• 6:03
  SPEAKER_01: So, I mean, there's a lot of there's a lot of 250 break-even cattle getting placed right now against a board that's mid 220s to 230, and it's that's gonna be a little bit of a struggle.
• 6:17
  SPEAKER_02: Right, Jason.
• 6:18
  SPEAKER_02: And for any producers out there that are buying these high-priced cattles and you know, looking out in the defers in the fat cattle months, is there is there any strategies you're really looking at to help maybe um ensure some profit or or maybe not not lose so much going forward?
• 6:35
  SPEAKER_01: Definitely.
• 6:36
  SPEAKER_01: It's it's more one of those things that we're we feel like we're getting closer to the end of the cycle than the beginning, and feels like we need to be protecting a break even more aggressively than we than we had been in the past.
• 6:51
  SPEAKER_01: So I uh the insurance products are that offer basis protection.
• 6:57
  SPEAKER_01: Um they're they're very favorable and they can help soften the blow or at least keep things together for the next for the next while here, and hopefully the next turn can can come into some profitability.
• 7:10
  SPEAKER_02: Well, sure, Jace.
• 7:11
  SPEAKER_02: Well, thanks for all of your info today.
• 7:13
  SPEAKER_02: If if anyone has any questions, please feel free to reach out to us here at Pro Egg and we can go through some scenarios for you guys.
• 7:19
  SPEAKER_02: Thanks for watching.