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Cattle: Tech Moves · Professional Ag Marketing Podcast

• 0:00
  SPEAKER_01: Welcome to the Cattle Market Talk Podcast with Professional Ag Marketing.
• 0:04
  SPEAKER_01: Come here to get your fresh updates on what's happening week to week within the cattle market.
• 0:09
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:16
  SPEAKER_01: Alright, this week we got Jeff with us.
• 0:18
  SPEAKER_01: How's it going, Jeff?
• 0:19
  SPEAKER_01: Good afternoon, Mike.
• 0:20
  SPEAKER_01: It's going pretty good.
• 0:21
  SPEAKER_01: Real nice.
• 0:22
  SPEAKER_01: Well, from now on, we are going to do three podcasts a week.
• 0:24
  SPEAKER_01: We're going to do a hog market talk podcast on Wednesdays.
• 0:28
  SPEAKER_01: Then we're going to do a uh cattle market talk podcast there, hopefully Thursdays, and then Fridays, we're going to do the Friday Market Talk Podcast, just a broad overview.
• 0:38
  SPEAKER_01: So you guys get three podcasts a week now and get to see a lot more of Jeff on the cattle side.
• 0:44
  SPEAKER_00: Well, do the best we can to keep up with the market.
• 0:47
  SPEAKER_00: I tell you, it's uh that's definitely a full-time job, isn't it, Mike?
• 0:51
  SPEAKER_01: Why did something change the last three days in the cattle market, Jeff?
• 0:54
  SPEAKER_00: Yeah, just about everything, I think.
• 0:56
  SPEAKER_01: Now, if you didn't keep track of what's been going on there over the past three days, just to make it extreme on the feeder cattle side, feeder cattle yesterday were down six dollars fifteen cents and four dollars the day before that.
• 1:09
  SPEAKER_01: So, where do you want to start with cattle market?
• 1:11
  SPEAKER_01: Because I I I say that, but yet we were at all-time highs.
• 1:15
  SPEAKER_00: Yeah, no, I think that's the place to start.
• 1:17
  SPEAKER_00: It's it's been a very interesting market this week.
• 1:20
  SPEAKER_00: Um, you know, I'd go back to the live cattle market and look at that chart, of course, and uh, you know, we just we started uh what was that Wednesday off quite a bit higher, busted out to the top side.
• 1:33
  SPEAKER_00: You know, this was just really a perfect example of a of a key reversal type of a formation and in a big way, right?
• 1:43
  SPEAKER_00: Um so and and I think that's important to the cattle market.
• 1:48
  SPEAKER_00: Um where the technicals in my mind, such as this one, come into play a little bit more, is when you do have um a lot of money flow.
• 1:57
  SPEAKER_00: Um I think that was another thing that was pretty evident this week.
• 2:01
  SPEAKER_00: We've we had a lot of money flow in be between different commodities, you know, largely out of the cattle, of course.
• 2:07
  SPEAKER_00: So when you get into some technical moves like we saw there on Wednesday, that becomes a much bigger factor when you you know have a large open interest, really high volume those couple days, especially.
• 2:20
  SPEAKER_00: But like you said, you know, leading into that those trading sessions, um, we also had an increase in in volume and open interest.
• 2:29
  SPEAKER_00: So the money flowing into that cattle market coming the tail end of last week and into the first half of this week, I think was a big part of why we set back so aggressively basically Wednesday and Thursday, Mike.
• 2:44
  SPEAKER_01: The way I've been looking at it technically there, Jeff, after putting in those new highs, really a nice high spike there, and then caught a couple days, bad news technically, a lot of fundamental trading or uh technical trading, it looked like filled some gaps there on like the feeder cattle, for example.
• 3:01
  SPEAKER_01: Um normally here over the last couple of years on this on this cattle market.
• 3:06
  SPEAKER_01: If I look at the August cattle, for example, each one of these peaks on the highs ended up being 15 to about 17 bucks higher than the last.
• 3:14
  SPEAKER_01: So going from the last peak that we saw in the end of March or April, it kind of pointed you towards about 312 on August feeders.
• 3:21
  SPEAKER_01: We almost got there.
• 3:22
  SPEAKER_01: Pretty similar point to put a to put a high in here on the move.
• 3:26
  SPEAKER_01: And then when I look at the setbacks, a really nice way to look at this is the trend is or the range in this trend channel is getting bigger.
• 3:35
  SPEAKER_01: So if you look at it, we have almost a 7 to 8% almost every time on this August cattle contract going back for a retracement or correction lower.
• 3:45
  SPEAKER_01: So every time here, this last one, the one before, about 8 to 10 percent or 7 to 8% that we pulled back to the bottom end of that range.
• 3:53
  SPEAKER_01: And ironically speaking, about that same setback would put you right at that lower gap on the chart between August uh in August feeder cattle futures, and that'd be right at about 284 and change, Jeff.
• 4:06
  SPEAKER_01: So I'm really looking at the bottom end of that range.
• 4:08
  SPEAKER_01: We'll see if we can get there or not.
• 4:09
  SPEAKER_01: We're settling out right at about that 200-day moving average or two 20-day moving average there.
• 4:15
  SPEAKER_01: I'm very curious to see uh uh where this cattle market technically is going to be headed for us.
• 4:20
  SPEAKER_00: So on the lower side of the range, I think that's a that's a good thing to look at.
• 4:23
  SPEAKER_00: Um, where could this thing reasonably head towards um without really you know doing that much damage from a chart standpoint?
• 4:32
  SPEAKER_00: And we're we're talking a lot about charts today, Mike.
• 4:35
  SPEAKER_00: You know, I think in the future of this podcast we won't hear nearly much as much about it, but I think it matters quite a bit in this past week's um discussion.
• 4:43
  SPEAKER_01: So that's and that's a good and why I think that matters is because nothing's really faint changed fundamentally, has it?
• 4:49
  SPEAKER_00: That's a good way to that's exactly right.
• 4:50
  SPEAKER_00: That's exactly right.
• 4:52
  SPEAKER_00: So you're talking what, maybe twelve, fourteen dollars lower on feeders.
• 4:58
  SPEAKER_00: Um I think you can go back to live cattle and look at a very similar type of a trend.
• 5:03
  SPEAKER_00: That's probably another eight bucks lower over there, and uh and you can make an argument, hey, we really didn't change anything, we just set back, you know, what would that be?
• 5:13
  SPEAKER_00: Just about twenty bucks in the live cattle world from the very high, of course.
• 5:18
  SPEAKER_00: And you might just call that kind of a minor setback.
• 5:21
  SPEAKER_00: And that's one of the things I kind of wanted to talk about is this we have to remember like percentage-wise and chart-wise, uh,$10 and$20 moves in the live cattle fashion are not that big.
• 5:34
  SPEAKER_00: Obviously, in our business sector, uh,$10 and$20 moves are a really big deal as far as profitability goes.
• 5:41
  SPEAKER_00: So that's a reminder, that is the type of market that we're in.
• 5:44
  SPEAKER_00: Um, the other thing that I was very much reminded about this week is how much money Mike is on the sidelines waiting to grab a hold of this cattle market and see if they can write it down.
• 5:57
  SPEAKER_00: See, you got a lot of headline traders, you got momentum traders that are just sitting on the sidelines waiting for a chance to jump on board and see if they can capture that$10 to$15 type of setback that we've been talking about.
• 6:13
  SPEAKER_00: So, another thing to be mindful.
• 6:15
  SPEAKER_00: Now, moving on from that discussion, uh, this cattle market ran into some issues today as far as being able to push itself lower.
• 6:24
  SPEAKER_00: Um, and those of those issues, of course, are the fundamental side.
• 6:27
  SPEAKER_00: So, nothing wrong on the fundamental side as as far as we can tell.
• 6:32
  SPEAKER_00: Um, we had just one day where the PM choice meat box meat print ended up just over 250.
• 6:40
  SPEAKER_00: That's the first time that's haved happened since COVID prices.
• 6:44
  SPEAKER_00: So there's absolutely nothing wrong there.
• 6:46
  SPEAKER_00: Um, not surprising to have that show up in May.
• 6:50
  SPEAKER_00: Not surprised to have that show up about two weeks before the Memorial Day holiday.
• 6:55
  SPEAKER_00: So it's a really kind of one of those peak times for beef demand here, but still, certainly nothing to poke holes in on that front.
• 7:04
  SPEAKER_00: Yesterday's cash price in the north coming at 229-ish.
• 7:08
  SPEAKER_00: Um, that is gonna be a couple bucks better than what it was last week.
• 7:13
  SPEAKER_00: Not sure they're done there yet, Mike.
• 7:15
  SPEAKER_00: Which is huge.
• 7:15
  SPEAKER_00: Yeah, that's and that's gonna be a new high, of course.
• 7:18
  SPEAKER_00: So not sure we're done there yet.
• 7:21
  SPEAKER_00: We may see a few higher bids yet before uh Friday here is over with.
• 7:26
  SPEAKER_00: We'll see once.
• 7:27
  SPEAKER_00: Um, but and then the the South, you know, kind of a more of a mixed bag down there, maybe gonna see that average out about a dollar higher.
• 7:35
  SPEAKER_00: So fundamentals challenging this, the psychology of this lower market the past couple days.
• 7:42
  SPEAKER_00: Um, so we ended up you know not quite a dollar higher on a lot of these cattle contracts.
• 7:49
  SPEAKER_00: So we will see um who wins out next week, I guess.
• 7:53
  SPEAKER_00: The market's got in an interesting spot for sure.
• 7:56
  SPEAKER_01: So it's big because we pulled off eight bucks about on these live cattle futures, and in the meantime, cash is gonna finish the week out higher.
• 8:04
  SPEAKER_01: I was really worried we were gonna see some panic selling on the cash side with that good a basis, but now it really shows the cattle producer isn't getting pinched or leveraged at all on this.
• 8:15
  SPEAKER_01: I mean, they they have the packer right where they want to, basically, at this point.
• 8:19
  SPEAKER_00: That is an interesting point and really impressive.
• 8:22
  SPEAKER_00: So if you've followed the cattle market a lot in the past few years, we have found these different environments where lower futures can actually drive cash.
• 8:33
  SPEAKER_00: You know, the marketplace is supposed to work the opposite direction.
• 8:36
  SPEAKER_00: But like you just mentioned, if you've got enough people that have cattle hedged on the front end that are making a basis play, if you have$5 lower futures, you can have three, four dollars lower cash.
• 8:48
  SPEAKER_00: And around and round we go for three, four weeks in a row.
• 8:51
  SPEAKER_00: Um the futures drop a little bit more because they got the confidence from the lower cash the week before, and then the base traders sell more aggressively once again.
• 9:00
  SPEAKER_00: But that is absolutely what is not happening in this marketplace, to your point.
• 9:05
  SPEAKER_00: I mean, we've got two twelve June futures.
• 9:07
  SPEAKER_00: Now that doesn't have to settle against cash until you get to the end of June, so we've got some time left there, but very impressive basis levels, very high cash prices, the feedlots are holding extremely strong.
• 9:21
  SPEAKER_01: Alright, well, any final thoughts for our listeners going into the weekend?
• 9:25
  SPEAKER_00: I just I just want to encourage everybody to take take a hard look at inventories.
• 9:28
  SPEAKER_00: Um, let's be honest about ourselves on how many cattle we have around.
• 9:32
  SPEAKER_00: This is really a a a marketplace I don't think um we can be too rash about.
• 9:40
  SPEAKER_00: I think we've got to do the right things, make the right decisions as far as hey, let's let's not stick our neck out there any further than really that than we can either handle from a personal standpoint or from a financial standpoint.
• 9:53
  SPEAKER_00: Um it's an excellent reminder at how easily we can lose value in these cattle futures.
• 9:58
  SPEAKER_00: You know, the old days from three, four years ago, we used to watch this market run up until towards the end of March, and we would easily get rid of two months worth of gains and about four or five days worth of trading.
• 10:12
  SPEAKER_00: And that's a lot what this uh Wednesday-Thursday felt like.
• 10:15
  SPEAKER_00: So it can go down for no good reason, and it can go down quite a ways.
• 10:20
  SPEAKER_01: All right.
• 10:21
  SPEAKER_01: Thank you for your time, Jeff, and I I appreciate it.
• 10:24
  SPEAKER_01: We'll be on next week there on the Cattle Market Talk podcast.
• 10:27
  SPEAKER_01: If you have any questions, please reach out and also give us a call on things like LGM and LRP, because we saw some very interesting opportunities there this week, too, on the Cattle, Jeff.
• 10:37
  SPEAKER_00: Well said, thank you, Mike.
• 10:39
  SPEAKER_01: And thank you to all our listeners.
• 10:41
  SPEAKER_01: Please reach out to us at professionallegmarketing.com.
• 10:44
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.