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Cattle: Cash Spark · Professional Ag Marketing Podcast

• 0:00
  SPEAKER_00: Welcome to the Capital Market Talk Podcast with Professional Ag Marketing.
• 0:04
  SPEAKER_00: Come here to get your fresh updates on what's happening week to week within the Capital Market.
• 0:09
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:15
  SPEAKER_00: Today is December 12th, and I've got Nick Bork back with us in the office here after he had been driving through cattle country, middle of nowhere, South Dakota the last couple days, visiting some folks through what I would imagine was probably absolutely awful weather to try to slide and slide into the ditch.
• 0:33
  SPEAKER_00: So we are happy to have you back here today, Nick.
• 0:35
  SPEAKER_01: Thank you, Mike.
• 0:36
  SPEAKER_01: Yeah, it's good to be back.
• 0:37
  SPEAKER_00: I bet it is good to be back in an office.
• 0:40
  SPEAKER_00: So I just wanted to talk about cattle today.
• 0:42
  SPEAKER_00: We've got a few things we can go over here.
• 0:45
  SPEAKER_00: I just want to talk about some current fundamentals, the cash and uh and uh futures markets kind of tying together here a little bit.
• 0:52
  SPEAKER_00: I wanted to talk about uh a potential plant closure out in uh California and clear up some of that.
• 0:58
  SPEAKER_00: And then I wanted to talk about this Mexico rumor.
• 1:00
  SPEAKER_00: So let's get started.
• 1:01
  SPEAKER_00: What do you see in the cash and futures fundamental side of things?
• 1:05
  SPEAKER_01: Yeah, some nice improvement in cash again, Mike, this week, right?
• 1:09
  SPEAKER_01: And it does really feel like now cash is leading the way again.
• 1:13
  SPEAKER_01: Futures are trying to catch up to this cash market.
• 1:17
  SPEAKER_01: Um packers are having to get out there and bid for cattle again.
• 1:21
  SPEAKER_01: Um so and those the you know packer margins are narrowing again, right?
• 1:25
  SPEAKER_01: And um and that's kind of leading you to talk about this plant closure again here in California, although we don't think that um this will be a big deal in the grand scheme of things, you know.
• 1:38
  SPEAKER_01: This is a this is a further processing or value added plant, so they're not actually harvesting cattle um at this particular plant.
• 1:47
  SPEAKER_01: But just another sign of the times, right?
• 1:49
  SPEAKER_01: Another um another another major packing company is is is gotta tighten their belt a bit here and and um and and not seeing the beef margins that they are.
• 2:01
  SPEAKER_01: Uh this uh this is kind of the low-lying fruit that they gotta shut down, right?
• 2:05
  SPEAKER_00: That makes sense.
• 2:09
  SPEAKER_01: Yeah, so I think uh as you know, just going forward here, we could hear of more of that.
• 2:14
  SPEAKER_01: You know, Cargill has come out and said that um they have they're doing I mean they have no intentions of shutting anything down or or closing the doors, and and so so far, you know, this week we're not losing more capacity, but um there could be more of that coming yet because uh just this week again, packer margins continue to get worse, and that that likely will continue into well into 26, you know, as supplies get tighter as we start to keep heifers back.
• 2:43
  SPEAKER_00: All right, that makes a lot of sense.
• 2:44
  SPEAKER_00: It uh keep an eye on packer margins, took a big step back again this week, and uh keep an eye on just packing capacity here as uh the Packers try to uh tighten the reins up just a wee bit more.
• 2:57
  SPEAKER_00: So the the cash really leading the way here, it looks like had a really big week.
• 3:02
  SPEAKER_00: What are we week over week higher?
• 3:03
  SPEAKER_00: Are we like 10 bucks a year after the last 10 days or so higher, you think, in the cash market?
• 3:07
  SPEAKER_01: I'd say at least eight or nine, Mike.
• 3:09
  SPEAKER_01: You know, just big moves.
• 3:11
  SPEAKER_01: I mean, you know, eight or nine dollars in cash.
• 3:13
  SPEAKER_01: Yeah, you're right.
• 3:14
  SPEAKER_01: I mean, we we I talk about it like it's kind of just ho hum, but that is a major move in the cash market, right?
• 3:20
  SPEAKER_01: And we shouldn't discount that one bit.
• 3:22
  SPEAKER_01: Um but it it's it's you know it's well under where we've been.
• 3:25
  SPEAKER_01: It's kind of where on well under where we think we should be.
• 3:29
  SPEAKER_01: Um you know, really in a seasonal time frame.
• 3:32
  SPEAKER_00: That's probably not a normal time for that to happen, is it?
• 3:35
  SPEAKER_01: No, probably not, no, but but definitely is time where we see some appreciation in cash, but we didn't, you know, to see the drop-off like we did certain certainly wasn't very seasonal.
• 3:45
  SPEAKER_00: So very true.
• 3:47
  SPEAKER_00: In this cattle market, it it's no it it is it is not shy to have a lot of volatility.
• 3:53
  SPEAKER_00: And this is a little bit more of a normal cattle market here the last month or two, I would argue, than what we saw the last four or five years, which was just a very steady, slow, gradual climb higher.
• 4:05
  SPEAKER_00: Now it's bigger swings each and every other way uh throughout the trading session.
• 4:10
  SPEAKER_00: We had a big setback.
• 4:11
  SPEAKER_00: Now we've clawed about half of it back.
• 4:14
  SPEAKER_00: Um I'm gonna really keep my eye on the gap that's just ahead of us if we can get that filled here in this cattle market.
• 4:19
  SPEAKER_00: And that's gonna be about the right retracement there, around 61% as well.
• 4:23
  SPEAKER_00: So keep an eye on this cattle market in the next few dollars to see if this is all the legs it has in it for the time being, because uh I am still one of the things that really makes me mad about the whole shutdown of the government thing is that I still don't know exactly where funds are sitting at for the commitment of traders.
• 4:39
  SPEAKER_00: And for both soybeans and cattle, I feel like that's a huge thing right now that we're missing still, at least for us to observe how committed are the funds to the positions that they've either got on still or have got rid of.
• 4:52
  SPEAKER_00: And I think that'll be very interesting to see as we catch up towards the back half of this month.
• 4:56
  SPEAKER_00: To wrap up here, I wanted to talk about a little bit more of a rumor conspiracy theory, however you want to spin it.
• 5:03
  SPEAKER_00: This week, Brooke Rollins was down at the border.
• 5:06
  SPEAKER_00: It sounds like nothing really happened so far for any market-moving news, Nick, from from that situation.
• 5:13
  SPEAKER_00: Now, what we did see was Mexico is going to impose tariffs as high as 50% on Chinese imports, basically just replicating what the United States has done to China.
• 5:23
  SPEAKER_00: The rumor on the street is that the United States has been pushing Mexico to take an action like this against China to help back our efforts basically against China.
• 5:34
  SPEAKER_00: Two countries is better than one, kind of a deal, right?
• 5:37
  SPEAKER_00: So that's been the influence there.
• 5:39
  SPEAKER_00: The rumor is that if they would do something like this, this could help them have the ability to reopen the border going back into the United States.
• 5:47
  SPEAKER_00: This news that came out here in the last 24 hours was a little, or I guess two days now, this would be a little bit bearish on the cattle market potentially uh down the road.
• 5:57
  SPEAKER_00: There are some fears about this border reopening uh somewhat soon here.
• 6:01
  SPEAKER_00: If this was one of the items on their checklist that said, hey, if you guys do this, I bet I'll be uh reopening this border in a in a quicker manner.
• 6:10
  SPEAKER_00: So a little bit of a conspiracy theorist story there, Nick, but I found that very interesting that those two are getting tied together uh in the last couple days trade.
• 6:19
  SPEAKER_00: So any comments on that?
• 6:21
  SPEAKER_01: No, I don't think so, Mike.
• 6:23
  SPEAKER_01: I think you hit that really well.
• 6:24
  SPEAKER_01: Other than I do think that unfortunately, if that does happen, if they do reopen the border, it is gonna be pretty bearish to the market.
• 6:32
  SPEAKER_01: Um I think we're gonna see some pretty significant drops yet to this market.
• 6:36
  SPEAKER_01: Not necessarily warranted because you know it's gonna take a long time to get them cattle back coming into this country.
• 6:42
  SPEAKER_01: Um, but you know, the market is just gonna play into that and and and be bearish for a while if that happens.
• 6:48
  SPEAKER_01: I mean it's gonna it it over the long haul that's gonna bring a lot of cattle back into this country.
• 6:53
  SPEAKER_00: So that is why I want to know how many managed money longs are sitting in this market right now that they will have to shed.
• 7:00
  SPEAKER_00: So all right, thank you for your time.
• 7:01
  SPEAKER_00: I appreciate it.
• 7:02
  SPEAKER_00: Stay safe out there, drive safe through the weekend here.
• 7:05
  SPEAKER_00: Uh we've got Christmas activities starting up here, so a lot of people on the road with this bad weather.
• 7:11
  SPEAKER_00: Uh, I appreciate your time today, Nick.
• 7:13
  SPEAKER_01: Thanks for having me, Mike.