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Cattle: Lord of the Flys · Professional Ag Marketing Podcast

• 0:00
  SPEAKER_00: Welcome to the Cattle 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 cattle market.
• 0:09
  SPEAKER_00: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 0:15
  SPEAKER_00: Today is August 18th.
• 0:17
  SPEAKER_00: I've got Jeff with us here today.
• 0:18
  SPEAKER_00: How's it going, Jeff?
• 0:20
  SPEAKER_00: Good afternoon, Mike.
• 0:21
  SPEAKER_00: Thanks for having me.
• 0:22
  SPEAKER_00: It's been a while since we did a cattle talk podcast, so we're just gonna chat about some of the fundamentals here, some of the recent news, and what's been going on.
• 0:31
  SPEAKER_00: But let's talk about the demand category first to get started with here, Jeff.
• 0:36
  SPEAKER_00: Last week we saw a little bit of a change here in the boxed beef.
• 0:40
  SPEAKER_00: We had a little rally that took place.
• 0:42
  SPEAKER_00: Can you explain what we saw there?
• 0:44
  SPEAKER_01: Yeah, so we started uh, you know, did our kind of normal seasonal thing.
• 0:47
  SPEAKER_01: That's well, I think we've mentioned that a few times, but real quickly, you know, as we try to look for holes on the demand side of the equation here, one of the things that we're big believers in is, you know, is the market or is it not rallying uh in the seasonal times when it's supposed to, right?
• 1:05
  SPEAKER_01: So it obviously did a really nice job of doing that as you went through the May and June and basically into the 4th of July, very seasonal pattern there, topped out in the you know 395-ish area or sale, and then started coming down as you went through July and into the first part of August again.
• 1:25
  SPEAKER_01: Very normal.
• 1:26
  SPEAKER_01: Um, and the next seasonal is about right here.
• 1:29
  SPEAKER_01: We maybe started just a tick early, starting to go back up again.
• 1:34
  SPEAKER_01: Um, and as of yesterday and the day before, starting to post numbers that are over 400 bucks.
• 1:41
  SPEAKER_01: And uh I believe that is going to be a record it's since the COVID days, Mike, when we shut down the plants.
• 1:49
  SPEAKER_01: Um, so he obviously makes some obs and it's going at a really rapid pace is something that's maybe just a little unusual.
• 1:56
  SPEAKER_01: Um but obviously demand is well in tack as far as any of the uh uh information that we're collecting, Mike.
• 2:04
  SPEAKER_00: But it's a cheap meat pushing it.
• 2:06
  SPEAKER_00: So yeah, it's cheaper meat, right?
• 2:09
  SPEAKER_01: Yep, that's right.
• 2:09
  SPEAKER_01: I don't know if any of it's cheap at these prices.
• 2:11
  SPEAKER_01: That's a good point.
• 2:12
  SPEAKER_01: Yeah, one thing that we're looking at that's maybe just a little bit different.
• 2:16
  SPEAKER_01: It's the the lower end um steak cuts uh look like they're got some really good energy behind them.
• 2:24
  SPEAKER_01: And then uh maybe no big surprise to anybody, but you know, the chucks and the roasts, um, you know, a lot of grinding meat there that seems to be getting a lot of attention, and that's kind of driving the whole complex here the way it looks to me.
• 2:38
  SPEAKER_01: And there's some reasons for that.
• 2:40
  SPEAKER_01: Obviously, you know, all kills are running about bare bones, right?
• 2:45
  SPEAKER_01: Whether you're looking at the steer and heifer kill, um, but especially the cow kill.
• 2:51
  SPEAKER_01: So cow kill you're extremely low on, uh been the trend for a while now.
• 2:57
  SPEAKER_01: You know, then we come in and we slapped those tariffs.
• 2:59
  SPEAKER_01: What was that two weeks ago, Mike?
• 3:01
  SPEAKER_01: Or August 7th, I guess.
• 3:04
  SPEAKER_01: Uh the tariffs went in place for Brazil, putting another 50%, I believe, is the number on top of the 20-something that was currently there.
• 3:12
  SPEAKER_00: So you gotta enough to actually stop their meat from coming here now.
• 3:16
  SPEAKER_01: It seems at least it's gonna sure be slowing it down, don't it?
• 3:19
  SPEAKER_00: Because they were just eating it before basically and sending it here.
• 3:21
  SPEAKER_01: Anyway, that was nothing new.
• 3:23
  SPEAKER_01: They they've had that tariff on forever.
• 3:26
  SPEAKER_01: Um, but it's uh seems to be making a difference today as far as what some of that uh the lower end meat is worth, and and that's kind of pushing that whole product value higher.
• 3:37
  SPEAKER_00: Packer margins with a little jump in box beef, a little bit better than we were.
• 3:42
  SPEAKER_00: I mean, not good by any means, but maybe not losing two hundred dollars ahead either anymore.
• 3:47
  SPEAKER_01: Right, yeah, not not terrible.
• 3:49
  SPEAKER_01: Um, you know, for a few weeks there when we had meat prices going down and cash market being steadied even a little bit higher.
• 3:58
  SPEAKER_01: Obviously that got really dicey for them when they were, you know, selling the choice meat for lower than what they're paying for them.
• 4:04
  SPEAKER_01: But now, you know, if you're in the 380s um on the meat side of things and you're selling it for 405, then that's nothing special, I'm sure, but at least there's some margin there when they've spent the last month without anything between those two numbers.
• 4:19
  SPEAKER_00: I noticed folks like Cargill and a few others came out and just talked about after their earnings report.
• 4:24
  SPEAKER_00: Basically, what they've been saying is they're losing money on the beef, but they're making enough on the poultry side to kind of make up for it.
• 4:30
  SPEAKER_00: So that is something I've noticed on the Packer margin side too.
• 4:33
  SPEAKER_01: And I I don't think the higher packer margins will drive additional kills.
• 4:38
  SPEAKER_01: I don't think, unless the Packers looking down the road a little bit, thinking, okay, there might be just a little bit more supply out there, then maybe they would ramp their kills up a little bit.
• 4:49
  SPEAKER_01: But otherwise, I think they're gonna look at this as a seasonal flash in the pan and and probably not take a lot of action off it, it'd be my guess.
• 4:58
  SPEAKER_00: What'd we figure out last week?
• 5:00
  SPEAKER_00: End of the week, Miss Brooke Rollins there, Secretary of Agriculture, she met with Greg Abbott, had this huge press conference.
• 5:08
  SPEAKER_00: Uh there the rumor was they're gonna talk about the Mexican border.
• 5:12
  SPEAKER_00: What did we find out about that?
• 5:14
  SPEAKER_01: Well, I think I think the real learning here, so you know, nothing really changed, right?
• 5:18
  SPEAKER_01: She she came out and said that the border w is closed and it's gonna stay closed.
• 5:24
  SPEAKER_01: Um so in itself, very little in new information and they sure built that press conference up though.
• 5:30
  SPEAKER_00: Holy cow.
• 5:31
  SPEAKER_01: Right, right.
• 5:31
  SPEAKER_01: So, you know, and that's my opinion.
• 5:33
  SPEAKER_01: I mean, there's probably some others out there saying that.
• 5:35
  SPEAKER_00: I watched it live and that was a snooze.
• 5:38
  SPEAKER_00: Yeah.
• 5:39
  SPEAKER_01: So the m the message here, or the lesson, if you will, Mike, that you well know, you know, since you trade corn off and on from time to time, is you know, it's it's about what the market's expectations are, much more than what the report or the the in this case the press conference actually said, right?
• 6:00
  SPEAKER_01: And and that's where you've seen some pretty big down days, or just one big down day, I guess, in front of that announcement.
• 6:07
  SPEAKER_01: The trade uh out there was got themselves pretty convinced that we were gonna open up the border to Mexican feeder cattle and Mexican fat cattle, and obviously that's not what took place, and that's where you've seen the pretty pretty aggressive trade around.
• 6:21
  SPEAKER_00: Well, it was fun to watch because it was like 1110, 20 minutes before the press conference, and all of a sudden futures started going up a little bit, then a little bit more, and then we were up a lot by the time she basically started talking.
• 6:34
  SPEAKER_00: So interesting.
• 6:35
  SPEAKER_00: There was there were some hints out there, at least, that things needed to trade a little bit green uh before she really got going.
• 6:42
  SPEAKER_00: So uh Lord of the Flies there, I guess, for the reference there with this week, because she had talked about what they are gonna do around the border at a military base, releasing some sterile flies in that program there to try to combat or slow it uh or it spread into uh into the United States.
• 7:00
  SPEAKER_00: So I would say on that front too, doesn't look like anything alarming right now.
• 7:04
  SPEAKER_00: Just watch out for when these hurricanes come through.
• 7:06
  SPEAKER_00: Uh, you know, the last time we got it was basically because a hurricane threw it into uh a small, small portion in Florida there that we saw it and carried it up here.
• 7:13
  SPEAKER_00: So keep an eye on uh on this these hurricanes going through and uh the potential risk that would have for bringing screw worm up here, Jeff.
• 7:22
  SPEAKER_01: Well, it's interesting that some of her comments were, you know, she she knew that we have a supply issue here in the US of on around beef and this wasn't gonna make it any better.
• 7:32
  SPEAKER_01: Yep.
• 7:33
  SPEAKER_01: Um, but that th this would be less impactful than if the screw worm actually got up here.
• 7:39
  SPEAKER_01: So I'm not exactly sure what she's indicating with that, you know, if if we would do some regional closures or or how aggressive that they would be as far as um disrupting the protein flow into the plants here.
• 7:55
  SPEAKER_01: But I thought that was an interesting comment.
• 7:58
  SPEAKER_00: Brazil needs to learn what their allies are doing, uh BRICS countries specifically, so like Russia, India, China.
• 8:04
  SPEAKER_00: What they need to do in in their in my opinion of them is they should just start doing what they've been doing on crude oil all this time and saying that calf comes from some other crazy country and not Brazil, and ship that thing halfway across the world.
• 8:18
  SPEAKER_01: That's a Honduras Peter's deer right there.
• 8:22
  SPEAKER_00: I would not be surprised, uh at least they uh that might be a little bit harder to switch onto a ship in the middle of the ocean, though, than crude oil, I will say that.
• 8:33
  SPEAKER_00: Any final thoughts on where futures are today, other than just clicking higher, following the trend line higher?
• 8:39
  SPEAKER_00: I mean, it's a very tight range.
• 8:40
  SPEAKER_00: We uh don't break below the 20-day, it seems like, and we trade right to the top end of the Bollinger Band about every day in these feeder hand fat cattle.
• 8:48
  SPEAKER_00: So what do you think about this right now?
• 8:50
  SPEAKER_01: Well, that has been the range, and that and you know, we're not the biggest uh technical gurus as history would have it, but that's been incredible, and I think that's all uh you know as far as the range that the both the feeder and the live has been in here and and the technical indicators that have stopped it on both sides.
• 9:08
  SPEAKER_01: But you know, I I think that goes to continue to suggest that we just got a lot of momentum traders, uh a lot of outside money that's kind of floating around here trying to pick up on where the next trend's gonna be to see if they can grab a few dollars out of this market.
• 9:24
  SPEAKER_00: All right.
• 9:24
  SPEAKER_00: Well, we've got a few events this week.
• 9:26
  SPEAKER_00: We've got Green Key Egg tomorrow down at Boyden.
• 9:29
  SPEAKER_00: We've got the Dakota Fest starting tomorrow, Wednesday, Thursday there.
• 9:33
  SPEAKER_00: Secretary Brooke Rollins is actually gonna be in attendance at Dakota Fest this year.
• 9:37
  SPEAKER_00: I can't tell you if there's ever been a Secretary of Egg at Dakota Fest before.
• 9:40
  SPEAKER_01: That's pretty impressive.
• 9:41
  SPEAKER_00: So that's pretty crazy.
• 9:42
  SPEAKER_00: She's gonna talk there.
• 9:44
  SPEAKER_00: Um other than that, uh yeah, basically we've got ProFarmer started today in the West in the Eastern Corn Belt.
• 9:51
  SPEAKER_00: So we'll check in back later this week.
• 9:53
  SPEAKER_00: Uh today's findings, just really good corn in the Western Corn Belt, like we knew they were gonna kind of find with where the route went, and then the eastern corn belt, I think they're seeing some tip back they maybe didn't expect.
• 10:04
  SPEAKER_01: Very interesting.
• 10:05
  SPEAKER_00: All right, thank you, Jeff.
• 10:07
  SPEAKER_00: Thanks, Mike.