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Cattle and Weather · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_00: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_00: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_00: This is your host, Mike Miner.
• 0:22
  SPEAKER_00: Let's get started.
• 0:23
  SPEAKER_00: Today is June 23rd.
• 0:25
  SPEAKER_00: I've got Jeff with us here today.
• 0:26
  SPEAKER_00: How's it going?
• 0:27
  SPEAKER_01: Good afternoon, Mike.
• 0:28
  SPEAKER_01: It's going pretty good.
• 0:30
  SPEAKER_01: Good.
• 0:30
  SPEAKER_01: An interesting week in the markets, haven't it?
• 0:32
  SPEAKER_00: I I think that just doesn't even cut it.
• 0:36
  SPEAKER_00: A huge week in the in the markets here.
• 0:38
  SPEAKER_00: We're going to start off talking about the grain markets a little bit, talk about weather, how they're moving around, and then we're going to talk about the cattle on feed report today.
• 0:46
  SPEAKER_00: And uh I want to get your opinion on this cattle market because we have seen some interesting things developing over the last couple weeks.
• 0:53
  SPEAKER_00: So that's what it sounds.
• 0:55
  SPEAKER_01: Should we jump into some weather first, Mike?
• 0:58
  SPEAKER_01: That's pretty well what the uh grain market's focused on, isn't it?
• 1:02
  SPEAKER_00: For the most part, you know, I would say some additional info this week was centered upon the EPA's decision to ease their mandates on uh biofuels going forward.
• 1:12
  SPEAKER_00: So that maybe put a little bit of a bearish tilt on the markets kind of to get started through the middle of this week when we really started to dip lower.
• 1:20
  SPEAKER_00: Um, but that was uh I still think that's like a drop in a bucket.
• 1:24
  SPEAKER_00: I I think the main influence of these prices had to do with we rallied so hard at the end of the week last week, Thursday, Friday.
• 1:32
  SPEAKER_00: We put some more premium on to start off the week, so it was just a very vertical chart.
• 1:37
  SPEAKER_00: We were very overbought technically, and then we went into the end of uh end of the almost the end of the month this week, but we went into option expiration.
• 1:46
  SPEAKER_00: I think that played into a part of it as well with liquidating some long positions, and then I think just the weather forecast, you know, we've had some additional rainfall fall in the Western Corn Belt over this week, the last couple days in particular, but very sporadic, a little bit here, a little bit there, nothing crazy.
• 2:05
  SPEAKER_00: But then you go into this weekend, and uh, you know, I'm mainly focused on the EU uh weather model at this point.
• 2:11
  SPEAKER_00: It's a little bit more accurate.
• 2:13
  SPEAKER_00: So yeah, if you're following along with me on uh forecast here going forward, that's kind of what I'm looking at.
• 2:18
  SPEAKER_00: And when I see the next uh really the next couple days progressing, you know, you get to Sunday night around 7, and most of the rainfall fallen will be or will supposed to fall in South Dakota, Minnesota, Nebraska on the eastern side, um, you know, most of Iowa, but nothing too crazy yet.
• 2:41
  SPEAKER_00: But Illinois really isn't supposed to get too hit too hard, maybe just a little bit by um Sunday evening at 7 by the time we open.
• 2:49
  SPEAKER_00: So we're mainly gonna be focusing on our weather here in the Western Corn Belt over the weekend, unless Illinois and Indiana happen to find some additional rainfall this weekend.
• 2:59
  SPEAKER_00: But really, their forecast uh to watch is gonna be some increased rainfall through about there's some chance on Sunday, Monday, but the hard stuff out east really starts to come around even next Saturday, so a week out.
• 3:13
  SPEAKER_01: So as far as the weekend goes, they're really not expecting any activity for the worst part of the growing region currently is in northern Illinois.
• 3:23
  SPEAKER_01: Yep.
• 3:24
  SPEAKER_01: Northern part of Indiana.
• 3:26
  SPEAKER_00: They're not expecting much out of it, at least.
• 3:28
  SPEAKER_00: They're supposed to get a little bit.
• 3:29
  SPEAKER_00: So if they do get more than expected and they get like half inch or an inch, that could be pretty bearish on these prices going forward.
• 3:35
  SPEAKER_00: But if they're bone dry and then maybe they change a forecast or something for the next weekend, then we probably get some support back in this market.
• 3:44
  SPEAKER_01: But coming back to the markets next week, you'd be looking for some rain Monday, Tuesday in the Illinois part of the region.
• 3:52
  SPEAKER_00: Where I'm going with this, it doesn't necessarily mean that we get to Sunday night at seven and we're gonna know all the answers to next week in the markets.
• 4:01
  SPEAKER_00: So that's kind of what I'm getting at with the weather there.
• 4:04
  SPEAKER_00: So it uh be ready for maybe a little bit of a roller coaster next week.
• 4:07
  SPEAKER_00: Because we could recover a little bit right away in the early part of next week, but if something changes and they do get a heaping amount of rain in that eastern corn belt by the end of next week, then uh that's gonna put some resistance back on this thing.
• 4:20
  SPEAKER_00: So or vice versa.
• 4:22
  SPEAKER_00: Who knows?
• 4:22
  SPEAKER_00: But all I'm trying to say is that basically Sunday night, we're probably not gonna know all the answers to say the least.
• 4:31
  SPEAKER_00: That uh the drought in the corn belt this week, I thought it was quite interesting.
• 4:36
  SPEAKER_00: I posted it on our team's chat anyways yesterday after that drought map came up.
• 4:41
  SPEAKER_00: But I I think something worth focusing on here is that over the past week, we did expand uh corn production located within a drought to 64%.
• 4:52
  SPEAKER_00: So that was up another 7% week over week.
• 4:55
  SPEAKER_00: And if you would go back like the end of May, that that chart or that percentage was only in about 26% category.
• 5:02
  SPEAKER_00: So it it has significantly got uh worse for drought in the corn belt.
• 5:07
  SPEAKER_00: And the funny thing is, right here in southwest Minnesota, southern half of Minnesota, if you look at a drought map, we're pretty much the only spot that's white in the corn belt.
• 5:17
  SPEAKER_00: So I think things around here look really good.
• 5:20
  SPEAKER_00: Um I think we've got key rains.
• 5:22
  SPEAKER_00: We even had some last night again in some key areas.
• 5:25
  SPEAKER_00: Um really at this point the focus is gonna be that eastern corn belt, and I'm gonna look to see over the next week here, maybe Thursdays even.
• 5:33
  SPEAKER_00: I'd like to see that northeastern part of Nebraska maybe get some healing done in that drought.
• 5:38
  SPEAKER_01: So Okay, they're they'll be drying up again by then, I suppose.
• 5:42
  SPEAKER_01: Cooler temperatures as well going into next week.
• 5:46
  SPEAKER_01: Highs in a lot of lower eighties, even a couple days of upper 70s, depending on what part of the uh corn belt that you're sti that you're um living in, I guess.
• 5:55
  SPEAKER_01: So that that'll also make a difference too.
• 5:57
  SPEAKER_01: I know even some of the areas that we live in.
• 6:01
  SPEAKER_01: We're fortunate enough to get some rain here a week ago.
• 6:04
  SPEAKER_01: Quite disappointed uh some of these afternoons.
• 6:07
  SPEAKER_01: Um the corn's still, you know, starting to protect itself at least, and and some of the lighter spots uh starting to show up in the cornfields.
• 6:16
  SPEAKER_01: But definitely so, Mike, this all this all brings me to really the baseline question, I guess.
• 6:22
  SPEAKER_01: I mean, what's uh on yield?
• 6:24
  SPEAKER_01: What do you think the marketplace is doing from a yield perspective?
• 6:29
  SPEAKER_01: You think they've made some big adjustments um in their mind, or is it more just we're we're we put a bunch of premium into the market and now we're sucking a little bit of that premium out in the last couple days?
• 6:42
  SPEAKER_00: They've um they've put plenty, most of this move has been weather premium added, I think.
• 6:47
  SPEAKER_00: Uh it's got to stay dry to have a huge, huge impact on yield to bring it down to something like 170.
• 6:53
  SPEAKER_00: But if I if I really start to dig into this too, you know, let's say you get perfect weather from here on out, how much is it of the top side has really taken off?
• 7:03
  SPEAKER_00: You know, even if it's like one percent off a record production number we've ever posted, which would be like 176 and a half, then you're bringing it back down to a 174, 173, somewhere in there.
• 7:15
  SPEAKER_00: Yep.
• 7:15
  SPEAKER_00: Um, not even first trend line, I would argue.
• 7:18
  SPEAKER_00: You know, trend line's one eighty-one.
• 7:20
  SPEAKER_01: That's a pretty that's a pretty high level at this point.
• 7:23
  SPEAKER_00: Yeah, and we kind of argued right away that maybe we should have been one seventy-eight to start with, anyways, realistically, uh, especially since the highest yield we've had was one seventy-six and a half historically.
• 7:33
  SPEAKER_00: So I think uh you're probably trading something like that today, um, if if we do get perfect weather from here on out.
• 7:40
  SPEAKER_00: But uh they've got plenty of weather premium in it today, I think, with uh what potential's already taken off.
• 7:46
  SPEAKER_00: But it's really gonna depend on what weather looks like during pollination, still is what I'd argue.
• 7:51
  SPEAKER_01: Which is probably coming around the corner here uh tail end of next week, maybe the I suppose more of the week after.
• 7:58
  SPEAKER_00: There's a lot of short corn out there still with just shut down during the drought.
• 8:02
  SPEAKER_01: Yep.
• 8:02
  SPEAKER_01: Nope, that makes sense.
• 8:04
  SPEAKER_00: Yep.
• 8:05
  SPEAKER_00: So how about um, you know, when I look at the futures price today, uh we closed 588 on the December corn.
• 8:11
  SPEAKER_00: Last week on Friday, we closed at 597.
• 8:14
  SPEAKER_00: That the last two days have been a little discouraging, but when I look at it from that perspective, I I don't think that today's close was as bad as it looks because uh we're only about nine cents lower than where we closed last week, and that was a heck of a run.
• 8:27
  SPEAKER_00: We had Thursday, Friday anyways.
• 8:29
  SPEAKER_00: So guys, try not to get too discouraged after the last couple days with prices.
• 8:34
  SPEAKER_00: Uh don't be afraid to try to lock something up, still is what I'm getting at.
• 8:37
  SPEAKER_01: You can't put 20 to 30 cents on it in a in you know every day for three, four days in a row without taking thirty cents off it once in a while, can you?
• 8:45
  SPEAKER_00: No, it's a good time of the year to uh add some coverage.
• 8:48
  SPEAKER_00: So how about uh the cattle market here, Jeff?
• 8:50
  SPEAKER_00: What are you looking at on the uh one?
• 8:53
  SPEAKER_00: You know, that western cornbelts really been getting a lot of rain.
• 8:56
  SPEAKER_00: I talked to a producer uh that knew a guy out by like Cant Valley, Western South Dakota.
• 9:01
  SPEAKER_00: They were uh they were saying they had two plus inches the other day.
• 9:05
  SPEAKER_00: A lot of these western cornbelt and then even further west have caught some nice rains.
• 9:11
  SPEAKER_01: Yeah, really been a wild weather year, you know, outside of the cornbelt as well.
• 9:15
  SPEAKER_01: And if you look at that same drought monitor map that you were discussing on Corn Acres, Mike, um, you know, you can go right down the cow country, honestly, um, you know, from Texas, obviously that's been in the news plenty of the past couple weeks, all the way up to Canada, even into Canada.
• 9:33
  SPEAKER_01: Um, right up and down the you know, Montana, Wyoming, Colorado, they've always gotten well above normal um rains this past year, and and that started pretty early.
• 9:44
  SPEAKER_01: Um, so as far as grass conditions go, um, we're in very good shape out there in really you know all of the western part of the the cattle producing areas or cow um cow calf areas.
• 9:57
  SPEAKER_01: And that's even if you go into the southeast, the same thing happens there if you're Tennessee, Georgia, um, into the Carolinas.
• 10:04
  SPEAKER_01: So there's gonna be plenty of feet out there, the way it looks right now.
• 10:09
  SPEAKER_01: Um, so we're talking about you know, we we in the coming weeks here, I guess about a month out, we'll do another um cow and and calf inventory report, so that will be interesting.
• 10:20
  SPEAKER_01: But we've definitely been trying to follow the cycle through, right?
• 10:24
  SPEAKER_01: Of okay, when we really get short numbers, it's when we're retaining heifers and trying to figure out okay, are we starting to enter into that uh mode of this supply cycle or not?
• 10:36
  SPEAKER_01: Most of the data would suggest that we are not, you know, um, and we've got a cattle and feed report again this afternoon that probably helps support that.
• 10:46
  SPEAKER_01: But you know, you look at cow slaughter, that's starting to reduce a little bit, so that's probably that's that'd be one indicator to say, all right, we're slowing down the rate, at least what at what we're uh reducing the cow herd.
• 10:58
  SPEAKER_01: Um, but you know, as far as the percent heifers going out of the packing plants, the percent heifers going into the feed yards, as far as the surveys are concerned, aren't really showing any large heifer retention.
• 11:13
  SPEAKER_01: And so we look at that and think, okay, that that doesn't really match what I think we're observing in the country place, right, Mike?
• 11:21
  SPEAKER_01: But um you gotta so we're we're taken with a little bit of a grain of salt, I guess.
• 11:26
  SPEAKER_01: We're we're kind of basically if you know they're suggesting we're not retaining heifers, um, which will won't allow us to um increase the cow herd.
• 11:36
  SPEAKER_01: And we're saying I you know, we're we're gonna fade that a little bit, right?
• 11:40
  SPEAKER_01: And we're gonna suggest that maybe we can uh start to build this cow herd a little quicker than what the data is suggesting.
• 11:46
  SPEAKER_00: All right, let's dive into the cattle on feed numbers here, Jeff.
• 11:50
  SPEAKER_00: The report we had this afternoon at two on feed was 97.1% versus 96.8 expected, so that was pretty close to expectations.
• 12:00
  SPEAKER_00: But the placements number I think was a biggest surprise of the report coming in at 104.6% versus 101.7 expected.
• 12:09
  SPEAKER_00: And then the marketings 101.7, so that was right at expectations.
• 12:14
  SPEAKER_00: And then on feed uh May 1st, obviously, uh that number as well.
• 12:19
  SPEAKER_00: You knew at 96.6.
• 12:20
  SPEAKER_00: So tell me a little bit about this report and what you saw.
• 12:24
  SPEAKER_01: Yeah, so it you know it's a good example um of you know the the ability of the cattle industry to kind of fluctuate um from a supply standpoint, and we try to track these um the cow um or or better said calf herd sizes or calf crop sizes as we place them.
• 12:44
  SPEAKER_01: And you know, I'm I'm surprised.
• 12:47
  SPEAKER_01: I don't think this this report is um certainly isn't bullish, probably on the bearish side.
• 12:52
  SPEAKER_01: You know, I'm I'm surprised at the 5% or almost 5% more placements this may compared to a year ago.
• 13:00
  SPEAKER_01: Um, but I think it can be explained in a few different fashions.
• 13:04
  SPEAKER_01: Um, that you know, when you're marketing a little bit more cattle, of course, you're gonna have uh extra pen space available, right?
• 13:12
  SPEAKER_01: And we've seen a huge increase in Nebraska placements, so it'd be more and more commercial yards coming into that part of the world.
• 13:20
  SPEAKER_01: Not as many as like Kansas and Oklahoma, of course, those were higher year over year as well.
• 13:25
  SPEAKER_01: But simply, you know, moving some cattle through the feedlots, I think, is probably encouraging some placements.
• 13:32
  SPEAKER_01: Um certainly supply would have been tight, so that's that's the part that maybe um is a bit of a head scratcher, but I can understand why we'd have the desire to place a few more cattle compared to last year from that standpoint.
• 13:45
  SPEAKER_01: The other thing that we've been looking at is, you know, we we felt like the placements were lower the first three, four months of of 2023 here so far, based on what we thought the calf crop side was was.
• 13:58
  SPEAKER_01: So this this is actually helping our data get a little bit more right size that maybe we placed or didn't place very aggressively the first few months of the year.
• 14:08
  SPEAKER_01: Now maybe we're gonna have a couple months um where we place a little bit at a little higher rate um and get some of these cattle on feed.
• 14:17
  SPEAKER_01: So you know, month over month we did increase the number on feed 3% less.
• 14:22
  SPEAKER_01: I mean, that's you got some dollar eighty type futures out there, um, three percent less supply.
• 14:28
  SPEAKER_01: You're you're gonna have your hands full a little bit as far as keeping these prices up at the levels that that we're at here, Mike.
• 14:37
  SPEAKER_00: Jeff, was the cattle market actually peaked on the 7th of June on futures and last two weeks here, down a handful of dollars last week and down a couple this week in the cash market.
• 14:48
  SPEAKER_00: Uh, what expectations do you have for the cattle futures and cash going forward, really?
• 14:53
  SPEAKER_01: Yeah, I I think the supply thing will probably not be as quite as attractive as what it has been.
• 14:59
  SPEAKER_01: Also, I think we might start getting a little bit of pushback from the demand side on this from the competing proteins.
• 15:05
  SPEAKER_01: You know, it's it's really easy to sell beef in May and June, and it gets a lot tougher as you get into July and August as you go through the the higher consumption months of the year.
• 15:15
  SPEAKER_01: So I think that might be kind of a bit of a pushback on this market as well.
• 15:20
  SPEAKER_01: And you know, if we're gonna have a few more on feed than what we were maybe hoping, um, it's gonna be a s it's gonna be a struggle to keep into these upper 170s and and low 180s.
• 15:32
  SPEAKER_01: But on the flip side of that, you have to look at it and say, okay, yeah, we peaked on the 7th of June.
• 15:38
  SPEAKER_01: That's mostly when we peaked the cash market as well.
• 15:41
  SPEAKER_01: And you know, even this week we're a little bit weaker week over week, but we're still probably arguably a$10 um discount down to that August board.
• 15:51
  SPEAKER_01: So there's a lot of bad news in this market already, which you know this type of markets makes it really tough to try to figure out where it needs to head next.
• 16:01
  SPEAKER_01: But I think some caution is definitely warranted, as always, honestly, in in this cattle market anymore.
• 16:07
  SPEAKER_01: Um, as we push forward and and see our break evens continue to climb on the on the animals on feet.
• 16:13
  SPEAKER_01: I think we've got to be very cautious of this market.
• 16:16
  SPEAKER_00: Difficult to really manage risk when you've got that big of a discount in the August there compared to where cash is, isn't it?
• 16:23
  SPEAKER_00: It makes a tough sale.
• 16:24
  SPEAKER_01: That's hard to that's hard to get all excited and say we should lock up a bunch of August cattle.
• 16:29
  SPEAKER_00: That might be the right decision for your business, but it still doesn't make it any easier, does it?
• 16:33
  SPEAKER_01: That's correct.
• 16:34
  SPEAKER_01: Yep.
• 16:34
  SPEAKER_00: Yeah.
• 16:35
  SPEAKER_00: All right.
• 16:35
  SPEAKER_00: Well, thank you for uh taking the time to chat today, Jeff.
• 16:38
  SPEAKER_00: It's been a while.
• 16:39
  SPEAKER_01: Thank you.
• 16:40
  SPEAKER_00: And thank you to all our listeners.
• 16:42
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 16:45
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 16:51
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 16:57
  SPEAKER_00: See you next time.