Latest / Professional Ag Marketing Podcast / Is the recent cash rally cutting into the packer's margins? | Cattle Market Talk May 1st 2026

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Is the recent cash rally cutting into the packer's margins? | Cattle Market Talk May 1st 2026 · 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.
• 0:22
  SPEAKER_02: Today is May 1st, and I've got Jeff with us here today for the cattle podcast.
• 0:28
  SPEAKER_02: Welcome to May.
• 0:29
  SPEAKER_02: Welcome to summer.
• 0:31
  SPEAKER_02: Or is that a little that a little stretch?
• 0:37
  SPEAKER_02: So it seems like a stretch.
• 0:39
  SPEAKER_02: I talked to a few people north of Brookings today and they had snow yesterday, Jeff.
• 0:44
  SPEAKER_02: So I they would also say it's probably a little early yet.
• 0:47
  SPEAKER_01: That doesn't really make you want to run out and buy a$35 steak, does it?
• 0:52
  SPEAKER_02: Not incredibly bad.
• 0:55
  SPEAKER_02: Not incredibly bad.
• 0:56
  SPEAKER_02: A few things we're going to talk about today.
• 0:58
  SPEAKER_02: We're going to talk about this crazy high cash rally that we've had in the cattle.
• 1:02
  SPEAKER_02: We're going to talk about futures a little bit.
• 1:04
  SPEAKER_02: We're going to talk about uh outbreak, and then we're going to talk about some packer margins and cutouts.
• 1:09
  SPEAKER_02: So let's get into it, Jeff.
• 1:11
  SPEAKER_02: What can you tell me about this setup going into this week on cash cattle and kind of how the week performed for those things?
• 1:18
  SPEAKER_01: Well, new highs on cash cattle this week and uh not just any high either.
• 1:23
  SPEAKER_02: Great.
• 1:23
  SPEAKER_02: Record high of all time.
• 1:26
  SPEAKER_01: Feels like we've said that a few times already on this podcast.
• 1:29
  SPEAKER_01: Only every day the last like two years.
• 1:32
  SPEAKER_01: So more of the same, I guess.
• 1:34
  SPEAKER_01: Yeah.
• 1:34
  SPEAKER_01: Um, you know what was probably more impressive about this one is the velocity and and how aggressive that the market chased to the to where it ended up as far as the cash market this week.
• 1:47
  SPEAKER_01: And you know, really all started happening on Tuesday already.
• 1:51
  SPEAKER_01: Which that in itself is really impressive.
• 1:53
  SPEAKER_01: Usually if you see this type of a push higher, even four or five bucks, that's happening on Friday afternoon as the Packers kind of hold out to the last minute and the feedlots are stubbornly asking for more money.
• 2:08
  SPEAKER_01: And that's what really started uh to impress us here on Tuesday, and obviously impressed the futures um most of the week here um is how aggressive that cash market went up.
• 2:20
  SPEAKER_01: Almost a nine or solid nine dollar increase, I would argue, um, from what the you know cash trade that we saw um kind of the back half of last week.
• 2:30
  SPEAKER_01: So less than a week later, all of a sudden we were at nine bucks and pushing into new highs.
• 2:35
  SPEAKER_01: Just incredible.
• 2:37
  SPEAKER_01: Um really it gets us thinking about you know, how does that happen?
• 2:42
  SPEAKER_01: You know, so I'm I'm I'm thinking to myself, man, all of these feed yards hold out for nine bucks higher, right?
• 2:49
  SPEAKER_01: Nobody's giving in at three higher, four higher, five higher.
• 2:53
  SPEAKER_02: Um which does sound like the cattle feeders I know.
• 2:57
  SPEAKER_01: That's fair, but it's also something to do with futures.
• 3:02
  SPEAKER_01: So there's a little bit of a debate going on here um whether the futures market is was chasing the cash market or if the futures market was creating the cash market.
• 3:15
  SPEAKER_01: So it's kind of like uh as it was the tail wagon the dog here this week.
• 3:19
  SPEAKER_01: And I kind of as it as the whole thing progressed here, um, and next week might be really interesting on this topic as well.
• 3:27
  SPEAKER_01: Get into that here in a second, but um it it it looks like because of how aggressively that market went up, I almost I were leaning towards the futures might have had more to do with that cash trade than maybe we'd like to think.
• 3:42
  SPEAKER_02: Last this week was interesting from the fact that the rubber had to meet the road too, right?
• 3:47
  SPEAKER_02: Because April cattle were coming off the board this week.
• 3:50
  SPEAKER_02: Yep.
• 3:51
  SPEAKER_02: So I feel like that it really had to come together.
• 3:54
  SPEAKER_02: Like June now's gonna be your front month.
• 3:56
  SPEAKER_02: You can, you know, cash and futures can do whatever the heck they want until basically you know a month and a half.
• 4:01
  SPEAKER_01: They they can, but it's really unusual for us to put in a zero or negative basis against the June board.
• 4:10
  SPEAKER_01: Like that is super disappointing for anybody that would have hedges on in place against June to get a negative basis.
• 4:18
  SPEAKER_01: Um I'm not saying it can't happen because it definitely can, especially in this type of market, but that's that's really disappointing from a futures perspective, performance perspective, from a hedging perspective.
• 4:31
  SPEAKER_02: So even right away here, because we're at 253 on June board today, and you're trading 257 cash cattle.
• 4:38
  SPEAKER_01: Yeah, so that's a more normal relationship, right?
• 4:41
  SPEAKER_01: $4 increase in cash or premium to cash trading compared to where the uh June board is.
• 4:48
  SPEAKER_01: But coming into Tuesday, that was not the case.
• 4:51
  SPEAKER_01: You know, you had um June pushing up into that uh, you know, 253, 254, and then some on Wednesday, 255 plus.
• 5:03
  SPEAKER_01: Yep.
• 5:03
  SPEAKER_01: Um, so it was starting to look like a major um negative basis considering you know the 246 type money that we traded last week.
• 5:12
  SPEAKER_01: So that's why I'm I'm saying it's almost like the futures went up first.
• 5:18
  SPEAKER_01: Cash kind of got traded by the basis traders potentially, and that's maybe the reason why the feed yards hung out and waited for as high as prices as they did, because they were looking at the April board, which trading 255 plus, and looking at the June board, trying to put some sort of normal positive basis against the June in here.
• 5:40
  SPEAKER_01: That relationship was fun to watch this week between cash, April, and June.
• 5:46
  SPEAKER_01: Well, and then fast forward to today, Mike.
• 5:48
  SPEAKER_01: New highs on June, but we're closing lower.
• 5:52
  SPEAKER_01: So now we're 253 again after chasing this thing up to 255 earlier this week.
• 5:58
  SPEAKER_01: Um, that could start to get really interesting as you start thinking into the cash trade for next week.
• 6:03
  SPEAKER_01: If we do get softer on that June trade, I gotta believe we're gonna we're gonna see that affect the cash market.
• 6:11
  SPEAKER_02: That's you would think people people would just play the basis then, right?
• 6:15
  SPEAKER_02: And just sell the cattle.
• 6:16
  SPEAKER_01: That's what I think is happening.
• 6:18
  SPEAKER_01: Um it's it's it's a little unusual for this time of year for this stage of the cycle, meaning like we're really short cattle.
• 6:25
  SPEAKER_01: Yeah.
• 6:26
  SPEAKER_01: Um, many of the cattle um that were placed kind of have a hard time working, um, you know, much under 250.
• 6:34
  SPEAKER_01: Um, but what I'm wondering if would happen if a lot of people shoved um positions or took positions against the June board um and just made them bigger again.
• 6:45
  SPEAKER_02: Yep.
• 6:45
  SPEAKER_01: So therefore you might enter into a little bit larger percent hedged um as far as the inventory goes than maybe what we're accustomed to as we roll off the April and into the May contract.
• 6:57
  SPEAKER_02: Interesting.
• 6:58
  SPEAKER_02: So what can you tell me about the Texas, Iowa situation that we just had with pseudo rabies?
• 7:05
  SPEAKER_01: So that's mostly a hog conversation.
• 7:08
  SPEAKER_01: Um learned a lot about pseudo rabies this week, Mike.
• 7:11
  SPEAKER_01: Don't get it.
• 7:11
  SPEAKER_02: That makes two of us uh you gotta remember, like the last time we had this in the US, basically, I was like five.
• 7:18
  SPEAKER_02: Okay, so we you're gonna have to walk some of us listeners through this, Jeff.
• 7:22
  SPEAKER_01: Well, I don't know what you're really trying to get at.
• 7:24
  SPEAKER_01: I wasn't raising a bunch of pigs either, Mike.
• 7:27
  SPEAKER_01: All right, all right.
• 7:28
  SPEAKER_02: You you were only 20.
• 7:29
  SPEAKER_01: Right, yeah.
• 7:30
  SPEAKER_01: Um, yeah, so pseudorabies came up this week in the or just yesterday in the hog business, of course.
• 7:35
  SPEAKER_01: Um, pretty minimal situation, I think.
• 7:38
  SPEAKER_01: Um uh back in 2004, we eradicated pseudabies from the swine herd.
• 7:43
  SPEAKER_01: Um, it has still been in the uh wild hog herd this entire time.
• 7:50
  SPEAKER_01: Um was that through vaccination?
• 7:52
  SPEAKER_01: Yeah, through maxivation and and eradication, both of them.
• 7:55
  SPEAKER_01: Yeah, yep.
• 7:56
  SPEAKER_01: Um, pushed it out of the country.
• 7:58
  SPEAKER_01: Pretty pretty major success.
• 8:00
  SPEAKER_01: Um, but obviously can't get rid of it in the wild herd.
• 8:03
  SPEAKER_01: So the wild herds out there running around Texas, it's it is mingling with cattle.
• 8:07
  SPEAKER_01: So this has not been a big cattle issue by any stretch.
• 8:11
  SPEAKER_01: And there's vaccines and things like that, right, too, to help mitigate it.
• 8:15
  SPEAKER_01: Um got into some boards in Texas, those boars got sold um to somebody up in Iowa.
• 8:22
  SPEAKER_01: Um, and and at that point they determined that they were positive for pseudorabies.
• 8:27
  SPEAKER_01: Um, today, all indications, you know, this was the information was out yesterday.
• 8:32
  SPEAKER_01: I I think folks uh have been in the know since you know almost a week here.
• 8:36
  SPEAKER_01: So it's I don't think it's a developing story.
• 8:39
  SPEAKER_02: But the market didn't know until this last night after the close yesterday.
• 8:44
  SPEAKER_02: So this morning's 8:30 open, likely a reflection of that right off the bat before the rest of the day's trade.
• 8:51
  SPEAKER_01: No doubt about it.
• 8:51
  SPEAKER_01: No doubt about it.
• 8:52
  SPEAKER_01: Um the big questions here is twofold.
• 8:56
  SPEAKER_01: It it looks very much like it's uh you know quarantined to one small area.
• 9:01
  SPEAKER_01: Um, the two big questions over the weekend into next week are gonna be is it gonna spread?
• 9:05
  SPEAKER_01: Are we gonna find it in other spots?
• 9:07
  SPEAKER_01: Um, are there is there gonna be uh an export partner of ours on the pork side that's gonna come in here and say, Yeah, we're gonna take a pause on taking meat from you.
• 9:16
  SPEAKER_01: Those are the two questions.
• 9:17
  SPEAKER_01: I think very both of them very small probability of happening.
• 9:22
  SPEAKER_02: Because this is not like something like ASF where it's it is mandatory it's a foreign animal disease that you shut off exports and you gotta r re-establish or open it that can other country to get that back to this.
• 9:34
  SPEAKER_01: This is not a foreign animal disease.
• 9:36
  SPEAKER_01: This is not a lot of our customers have pseudorabies also in their own herd.
• 9:41
  SPEAKER_01: So I think for those reasons it's probably not gonna be a non-event.
• 9:44
  SPEAKER_01: Um, as far as the cattle market cares, you know, if we were to start to cattle can get it.
• 9:50
  SPEAKER_01: They can get it.
• 9:51
  SPEAKER_01: I don't they that hasn't really changed throughout the events here recently.
• 9:55
  SPEAKER_01: If we would happen to lose some export business on the pork side, pork would get cheaper in the US.
• 10:01
  SPEAKER_01: And I'm saying these are if-ifs, yeah, you know, one percent chance to happen type things.
• 10:06
  SPEAKER_01: Um, that's really the only link to the cattle world as far as um what you know what you folks should care about there.
• 10:12
  SPEAKER_01: It is in the news, it is interesting.
• 10:14
  SPEAKER_02: Yeah, it is interesting.
• 10:15
  SPEAKER_02: You never know what kind of black swans can enter in this market on overnight events to really shake things up.
• 10:21
  SPEAKER_02: You've got massive long positions in the corn or in the in the hogs and in cattle and feeder cattle.
• 10:26
  SPEAKER_02: So it something like this, right, comes in.
• 10:29
  SPEAKER_02: It's always a little scary, just given the fact that the funds may bail.
• 10:32
  SPEAKER_02: They just, you know, give them a good reality check.
• 10:35
  SPEAKER_02: The market didn't seem to care after about 8 32 this morning, probably.
• 10:39
  SPEAKER_02: So uh from that perspective, I don't think it cared at all on the cattle side at all the whole day.
• 10:43
  SPEAKER_02: So uh not much of a story there, anyways.
• 10:46
  SPEAKER_01: Agreed.
• 10:47
  SPEAKER_01: Agreed.
• 10:47
  SPEAKER_02: What can you tell me about?
• 10:48
  SPEAKER_02: We'll we'll finish off this conversation just talking about our our favorite friends, the Packers and and the meat price.
• 10:55
  SPEAKER_02: We we don't seem to hear a whole lot of life out of that meat market yet.
• 10:59
  SPEAKER_02: What can you tell me you're hearing?
• 11:01
  SPEAKER_01: Well, yeah, we're nothing, no good news um for sure.
• 11:05
  SPEAKER_01: You know, we're we're definitely getting into the time of year where we would sure like to see some life out of those product values, right?
• 11:13
  SPEAKER_01: And and by the way, the the entire cash or almost the entire cash increase that we saw week over week pretty much came out of the Packers pocket, right?
• 11:22
  SPEAKER_01: So definitely seeing some decreased in margins again.
• 11:25
  SPEAKER_01: Those margins aren't gonna be as as bad as they were uh was that about six, seven weeks ago, I think.
• 11:32
  SPEAKER_01: Um you know, kind of before the Greeley shutdown.
• 11:35
  SPEAKER_01: Uh, we're not gonna quite get to those levels this week, uh, the way it looks, but we are definitely K chart here's gonna get updated.
• 11:44
  SPEAKER_01: Um, we're gonna be down in that$250 area as far as losses, what's uh as our proxy goes here.
• 11:52
  SPEAKER_01: Um, so no question we're taking a big chunk out of the other interesting side note there is alfalfa values, Mike, have increased a bunch in the past three weeks, and that's because oil prices are going up.
• 12:05
  SPEAKER_01: So they are in our calculations.
• 12:07
  SPEAKER_01: Here is um the chart that Cade's got on the on the screen.
• 12:11
  SPEAKER_01: But uh that's an interesting topic, both on the hogs and the cattle.
• 12:15
  SPEAKER_01: Um, there's a good$35-40 increase in alfalfa value going on in the background of of the that oil's being used for what specifically?
• 12:24
  SPEAKER_01: Uh beef tallows going up a bunch because um oil's going up, soil oil is going up.
• 12:29
  SPEAKER_02: And beef tallow has been a growing product through a lot of health space for sure.
• 12:33
  SPEAKER_01: Yep, yep.
• 12:34
  SPEAKER_01: So anyway, Packer Margins um hitting a pretty tough spot here again.
• 12:38
  SPEAKER_01: Um, I think we talked about on this podcast before, but I'm just gonna say it again.
• 12:42
  SPEAKER_01: You know, go back to that Packer Margin chart, see those three weeks where it turned to be positive.
• 12:47
  SPEAKER_01: That is when Greeley went on strike.
• 12:50
  SPEAKER_01: So what a lesson learned um, in our opinion, on this uh Packer Margin thing, even though the math would suggest we could lose a plant and we'd still have plenty of shackle, the market activity would argue against that.
• 13:04
  SPEAKER_01: When Greeley went down, um we lost leverage in a hurry, um, even though it was a temporary strike.
• 13:12
  SPEAKER_01: So that little lesson would suggest to us we are one packer away.
• 13:17
  SPEAKER_01: They're probably not gonna do it now until what August.
• 13:20
  SPEAKER_02: I don't it Why would they want to bail out now?
• 13:23
  SPEAKER_01: Well, the pet your your seasonally time frame um has all shifted because of the weights again.
• 13:28
  SPEAKER_01: The days on feeds have continued to increase, so they aren't gonna see a lot more supply until you get to August, um, September probably even.
• 13:38
  SPEAKER_01: Um much different than what what the their normal seasonal is starting to see some additional supply in June already.
• 13:44
  SPEAKER_01: So they've got a long summer ahead of them.
• 13:46
  SPEAKER_01: Um who knows, but that's a little lesson that the market kind of gave us here in the past six weeks or so.
• 13:53
  SPEAKER_02: So they're gonna want to see the American consumer who this week was noted to have the lowest consumer sentiment score ever from the University of Michigan.
• 14:02
  SPEAKER_01: Uh, you gotta go out there and buy some buy some steak because we need this thing go up, otherwise uh we're gonna want to see our normal seasonal increase from this 390-ish type level on choice uh box beef um through May and into June.
• 14:18
  SPEAKER_01: And that's what we're gonna be watching.
• 14:20
  SPEAKER_02: I mean, normal is it makes that number extreme because we're at such high levels, right?
• 14:24
  SPEAKER_01: You're talking 450 plus.
• 14:26
  SPEAKER_01: Yes.
• 14:26
  SPEAKER_01: Yep.
• 14:26
  SPEAKER_01: We have 440, 450.
• 14:28
  SPEAKER_01: Yeah.
• 14:29
  SPEAKER_01: I don't know if we'll get that job done or not, but that's what the market's gonna be trying to pay attention to.
• 14:33
  SPEAKER_02: Interesting.
• 14:33
  SPEAKER_02: Thank you for your time today, Jeff.
• 14:35
  SPEAKER_02: I appreciate it.
• 14:35
  SPEAKER_02: Thank you.
• 14:36
  SPEAKER_02: And everybody else, thank you for tuning in today.
• 14:38
  SPEAKER_02: Please click the link in the description to get a hold of our daily market commentary and other marketing info.
• 14:44
  SPEAKER_02: Thank you so much for tuning in.