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Transcript

Heifer Retention is Real · 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.
• 0:21
  SPEAKER_01: Today is September 25th.
• 0:22
  SPEAKER_01: I've got Jace with us here for the cattle podcast.
• 0:25
  SPEAKER_01: How's it going?
• 0:26
  SPEAKER_01: Pretty good.
• 0:27
  SPEAKER_01: We're gonna talk about a few different things.
• 0:29
  SPEAKER_01: We're gonna talk about cattle on feed, heifer retention, cutout, cash cattle, calves be in place.
• 0:34
  SPEAKER_01: Let's get after it.
• 0:35
  SPEAKER_01: A few other things.
• 0:36
  SPEAKER_01: Just start off with uh Santa Teresa.
• 0:39
  SPEAKER_01: That crossing did get a reopened yesterday, had about 400 head cross there.
• 0:43
  SPEAKER_01: So that would be some of the newer, fresh news as well this week.
• 0:48
  SPEAKER_01: Where do you want to start with, Jace?
• 0:51
  SPEAKER_02: Well, I was kind of thinking the cattle on feed report from last Friday is kind of important after the trade we've seen this week.
• 0:57
  SPEAKER_02: We've got we had lower placements there.
• 1:00
  SPEAKER_02: I think the lower placements matter quite a bit as we start to think, start to look towards heifer retention.
• 1:07
  SPEAKER_02: You know, with where we're at in the cycle, the economics have made sense for guys to retain some heifers.
• 1:13
  SPEAKER_02: So placements being 10% lower or 9% lower than last year, and then the previous year was 9% lower than that.
• 1:21
  SPEAKER_02: So a really no low placement number.
• 1:23
  SPEAKER_02: We hadn't seen that dating back to 2015.
• 1:27
  SPEAKER_02: So that that starts to matter quite a bit.
• 1:29
  SPEAKER_02: And then you've got and then if you're on the heifer retention side, you just look at the recent harvest and you've had you've had quite a few less heifers being being killed there.
• 1:42
  SPEAKER_02: So that that's starting to shed some light on the fact that we are retaining heifers.
• 1:46
  SPEAKER_02: So we're kind of we're kind of trying to get um in the right mindset there that we know we know that's happening at this point.
• 1:54
  SPEAKER_01: So before about 37, 38 percent of our heifer slaughter was a heifer lately here.
• 2:00
  SPEAKER_01: The last what three months you'd call it.
• 2:02
  SPEAKER_01: It's been somewhere sub-35-ish.
• 2:05
  SPEAKER_01: It got as low as 32.
• 2:07
  SPEAKER_01: That'd be pretty evident that yeah, we're probably retaining a few heifers.
• 2:12
  SPEAKER_01: It bounced up here a little bit, but it's still at a level where it's pretty significantly lower year over year, anyways.
• 2:18
  SPEAKER_01: Absolutely.
• 2:20
  SPEAKER_01: What can you tell us about uh about some other things on that cattle and feed report before we get to the uh demand side?
• 2:27
  SPEAKER_02: Well, you know, kind of the the little bit of a joke around around that is that we don't have any cattle to place, but it's because we don't have anywhere to place them.
• 2:37
  SPEAKER_02: You know, our cattle catalon feed number was a little bit above last year, um, or or right around last year's number.
• 2:44
  SPEAKER_02: So we're we're very similar on the catalon feed number, not a big change there.
• 2:48
  SPEAKER_02: Marketings are lower as well, so the placement number doesn't matter as much.
• 2:52
  SPEAKER_02: It would matter if marketings were at 100% of last year and placements were at 90, but that's not the case.
• 2:58
  SPEAKER_02: So we're not really there's not as much demand for the feeders as we speak.
• 3:04
  SPEAKER_01: That makes sense.
• 3:06
  SPEAKER_01: So uh let's talk a little bit more about the demand side because I feel like for both protein markets it's been very demand center with we've had lower numbers for both pork and and beef, you know, lower cattle and lower hog numbers, but the demand just doesn't seem to really be there uh yet.
• 3:25
  SPEAKER_01: So tell me a little bit about what you're seeing with cutout, and then we'll take a little bit more of a macro play at it too.
• 3:31
  SPEAKER_02: Yeah, so cutout, like if you look at you look at choice cutout, it actually looks pretty good.
• 3:36
  SPEAKER_02: You know, we're at about the same level as we were last year, but the the weekly change would be in every primal except the rib would be lower.
• 3:45
  SPEAKER_02: So um I I guess aside from the the loin being 70 cents higher, but the only one that's higher significantly is the rib.
• 3:53
  SPEAKER_02: So kind of the discussion about the K-shaped economy sort of a deal, like the trim's lower, trim's lower, and all the cuts that would could potentially get ground, they're lower, ribs being higher.
• 4:06
  SPEAKER_02: There's still high demand for the for the middle cuts of meat.
• 4:09
  SPEAKER_02: There's high demand for good stakes, but lower demand on just the your basic beef protein.
• 4:15
  SPEAKER_01: Yeah, so when I start to look at this consumer, we've had pretty persistent cost of living pressures here.
• 4:22
  SPEAKER_01: You've got high borrowing costs, you've had massive tech investments, so the market fluctuates pretty greatly with that.
• 4:29
  SPEAKER_01: But uh, let's just talk about a few things.
• 4:31
  SPEAKER_01: You know, diesel fuel, we're at a record high price.
• 4:34
  SPEAKER_01: Uh, you've got global supply disruptions that are tied to both the US Israel, uh, Iran conflict there.
• 4:41
  SPEAKER_01: Uh you've got a situation where 20% of the global refining capacity has been taken offline because of the Russia-Ukraine war.
• 4:49
  SPEAKER_01: Uh, you've got energy prices that have skyrocketed with uh longer-term supply disruptions that probably aren't going away.
• 4:57
  SPEAKER_01: Uh you've got a persistent price fatigue.
• 5:00
  SPEAKER_01: I mean, consumers just continue to be told that inflation is a problem, things are too expensive, uh, you know, wage growth has really failed to keep pace here with the a few of the hikes over the recent years and inflation with just the cost of living.
• 5:17
  SPEAKER_01: So um when we start to talk about that impact, I mean, you've got negative sentiment, very poor consumer sentiment.
• 5:24
  SPEAKER_01: People are being told they're broke, and so they're probably gonna feel like it, right?
• 5:28
  SPEAKER_01: Um, retail slayout sales and consumer spending have held pretty stable.
• 5:33
  SPEAKER_01: People haven't ditched things because they don't need them so far yet.
• 5:37
  SPEAKER_01: Um, we'll want to keep an eye on that, but at this point, uh it feels like people are still gonna keep spending money if if they can at this point.
• 5:45
  SPEAKER_01: They're gonna just keep it really uh close to the knife, essentially.
• 5:49
  SPEAKER_01: So uh borrowing costs, that'd be one of the more recent ones as well, Jace, lately.
• 5:54
  SPEAKER_01: Uh the 30-year mortgage, that rate jumped to almost 7.5% here.
• 5:58
  SPEAKER_01: So they'll locking up some residential, uh, uh some uh some pretty big construction, residential uh ag loans, things like that.
• 6:08
  SPEAKER_01: It's gonna be a little bit more expensive here.
• 6:10
  SPEAKER_01: Uh just minute tweaks to it, but that market is inflating there as it knows inflation is a problem if energy stays this high priced.
• 6:18
  SPEAKER_01: So uh that that would be uh a problem going forward inflation-wise, and the market is showing that with the rate environment that we're seeing here.
• 6:26
  SPEAKER_01: And the Fed they did their save face thing, which is we're gonna hike the rate one time, 25 basis points, and uh just to say they did something, I think.
• 6:36
  SPEAKER_01: But the impact that's gonna have on energy prices, for example, going down.
• 6:40
  SPEAKER_01: I mean, it's not a demand thing, that's a supply situation.
• 6:43
  SPEAKER_01: So uh it'll yeah, they probably won't have any more rate hikes going forward, but um the consumer's gonna be a little squeezed here.
• 6:51
  SPEAKER_01: And uh what can you say looking at like cutout, looking at ground beef prices?
• 6:56
  SPEAKER_01: What do you think the consumer's showing us with those things?
• 7:00
  SPEAKER_02: Yeah, I think especially on the ground side, I think that's gotten quite a bit cheaper over the past couple weeks, and that I would I would say that shows us a little bit of a fatigued consumer.
• 7:11
  SPEAKER_02: So I I we are definitely facing a little economic pressure on that front too.
• 7:16
  SPEAKER_02: And just to add to the macro talk there is just Bessent a week and a half ago or so said that we were in an illiquid period for U.S.
• 7:27
  SPEAKER_02: treasuries, and U.S.
• 7:28
  SPEAKER_02: treasuries are held 80% by our own citizens or entities.
• 7:32
  SPEAKER_02: So just kind of saying that we're strapped for cash a little bit for lack of better term.
• 7:38
  SPEAKER_01: Yeah, I think we're in a market now where pretty much the Fed and the traders are gonna control this market going forward.
• 7:44
  SPEAKER_01: I think Essent has had his time.
• 7:47
  SPEAKER_01: Um, only so much you can do, and I think he's done it.
• 7:50
  SPEAKER_01: So uh we'll see how that looks going forward.
• 7:52
  SPEAKER_01: But let's get back to the cattle here.
• 7:54
  SPEAKER_01: Uh, I want to talk about the cash activity we've had this week and just where we're ending up this week because Fridays are always a very interesting day for that.
• 8:01
  SPEAKER_02: Yeah, so we're getting we're getting bids somewhere in the 218 to 220 range today.
• 8:07
  SPEAKER_02: Um, there's some there was a little bit of uh conflicting data yesterday with some packers not bidding at all.
• 8:15
  SPEAKER_02: Some were a bit lower.
• 8:17
  SPEAKER_02: They've kind of come up today, but we still have a couple that aren't in the cash market.
• 8:21
  SPEAKER_02: So we've had a lower we had a lower harvest last week at like 500 or 529 the week prior, I guess was 505 and 505,000 that week.
• 8:31
  SPEAKER_02: Um, and I think we'll be somewhere similar to that this week.
• 8:35
  SPEAKER_02: We've faced some ice raids down in a couple plants in Kansas.
• 8:38
  SPEAKER_02: So that's that's gonna keep that lower this week.
• 8:41
  SPEAKER_02: Yeah, so a little lower, lower harvest there.
• 8:44
  SPEAKER_02: I wonder if we'll see a little reaction from the cutout, maybe a little bit higher on that front.
• 8:48
  SPEAKER_02: But we've seen that lower, so I think a little uncertainty and just the Packers not as willing to bid up or stick their neck out to buy some cattle, is kind of what we're seeing.
• 8:59
  SPEAKER_01: How about on the uh feeder cattle side of things?
• 9:01
  SPEAKER_01: These calves being placed right now, is there any opportunity in those?
• 9:05
  SPEAKER_02: Yeah, so these these cattle being placed now, especially for like the first week of May or second week of May, there's a little bit of an opportunity there um with some of the insurance, but it's uh it's better than it has been.
• 9:19
  SPEAKER_02: I mean, we haven't been able to place cattle at break-evens or slight profits for a while, so that's that's a little refreshing to see.
• 9:27
  SPEAKER_02: All right.
• 9:27
  SPEAKER_02: Any other final thoughts for our listeners this week?
• 9:30
  SPEAKER_02: Um, yeah, the basis change this time of year would have this us trending more towards a negative basis.
• 9:37
  SPEAKER_02: We've been at a strong positive basis for the past few weeks, few months really.
• 9:41
  SPEAKER_02: Um, just being a little cautious on that front, making making sure that you're thinking through the um what the basis normally does here, and we've lost a couple plants.
• 9:51
  SPEAKER_02: So being diligent on taking positive basis makes sense.
• 9:55
  SPEAKER_01: All right.
• 9:55
  SPEAKER_01: Well, thank you everyone for tuning in today.
• 9:57
  SPEAKER_01: Please hit the subscribe button.
• 9:59
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• 10:05
  SPEAKER_01: Thank you, Jace, for hopping on today.
• 10:07
  SPEAKER_01: Thank you, Cade.
• 10:08
  SPEAKER_01: We'll see you next week.