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FREE EPISODE: Fat Tuesday with Mike Sands | BIG NEWS IN BEEF · AG Bull

• 0:21
  SPEAKER_00: Welcome back to Ag Bull Media.
• 0:24
  SPEAKER_00: Jed Sidwell here.
• 0:25
  SPEAKER_00: We have your Fat Tuesday show.
• 0:28
  SPEAKER_00: It's a day late, but we needed kind of some time to digest and get all our slides put together after our Monday off.
• 0:35
  SPEAKER_00: And I'm glad we did.
• 0:36
  SPEAKER_00: We saw some interesting things and some compare and contrast in the futures from yesterday to today as of recording this right now at 11.19 October fats are at 215 and 42 cents.
• 0:51
  SPEAKER_00: October feeders are at 324 and about a half.
• 0:55
  SPEAKER_00: And we have had a plethora of news to digest, and I have the guy to do it.
• 1:02
  SPEAKER_00: He's recently been called the Hugh Hefner of the Cattle Analytics World.
• 1:07
  SPEAKER_00: He has some fans out there that think he's he looks like a Playboy.
• 1:11
  SPEAKER_00: Mike, how are you doing this fine afternoon?
• 1:13
  SPEAKER_02: Doing just fine.
• 1:14
  SPEAKER_02: I'm not sure I can stand the compliments, though.
• 1:20
  SPEAKER_00: Well, we'll leave that to the people that like to leave us some nice ones on TikTok.
• 1:25
  SPEAKER_02: There you go.
• 1:26
  SPEAKER_02: I do appreciate those compliments, however.
• 1:30
  SPEAKER_00: Well, here we go on to our discussion for today.
• 1:33
  SPEAKER_00: We had some executive orders, Mike, come out here recently, and man, it's sending shockwaves through everything.
• 1:40
  SPEAKER_00: You want to kind of diagnose those and give us your take?
• 1:44
  SPEAKER_02: Well, there was just a flurry of executive orders and proclamations that came out last week.
• 1:52
  SPEAKER_02: And it just seemed like a number of them, of course, were negative, but on the on the positive side, it certainly looks like an effort to maybe re-enkindle or ingratiate themselves back with the production end of the business, the cattle feeders and the cow calf segment of the industry, after, for the most part, kind of badmouthing the beef market since last October.
• 2:20
  SPEAKER_02: I think the first negative comments with regard to how high beef prices were came out about the middle of October last year.
• 2:29
  SPEAKER_02: And there just seems to have been a kind of a steady diet of that kind of an attitude.
• 2:36
  SPEAKER_02: And at the same time, it just seems not a very strong appreciation for the people in policy-making roles to connect the dots between beef prices and cattle prices.
• 2:53
  SPEAKER_02: If you're going to talk the beef market down, chances are pretty good you're going to put some pressure on the cattle market, whether it's fed cattle or feeder cattle or both.
• 3:05
  SPEAKER_02: And from that standpoint, some of the recent announcements with regard to the executive orders and that type of thing have been an effort maybe to provide a little bit more support to the ranching business.
• 3:20
  SPEAKER_02: How effective they're going to be remains to be seen, of course.
• 3:25
  SPEAKER_02: One of the key elements that that was announced here recently is the brand program, beef retention and national development.
• 3:35
  SPEAKER_02: It's intended to reduce some of the risk associated with heifer retention.
• 3:41
  SPEAKER_02: But for the most part, the primary factors that have been limiting expansion within the industry is drought and the lack of forage and pastures.
• 3:54
  SPEAKER_02: And there's nothing in that program for the most part that's really going to mitigate that.
• 4:00
  SPEAKER_02: We're still struggling with drought on a fairly large scale, all the way from the plain states to the far west and Pacific Northwest.
• 4:11
  SPEAKER_02: That's a huge part of the cattle industry.
• 4:14
  SPEAKER_02: And until that gets resolved, chances are pretty good other programs for the most part may not have much impact.
• 4:24
  SPEAKER_00: Yeah.
• 4:24
  SPEAKER_00: And like just like you said, the limiting factor hasn't been that it's been a great year the past couple years for the cow calf guy, and there's no reason to expand.
• 4:34
  SPEAKER_00: Man, feed still costs something.
• 4:36
  SPEAKER_00: And with interest rates the way they are right now, going out and trying to find more pasture is harder than ever, especially since how there's less of it every day.
• 4:46
  SPEAKER_00: And then yeah, tack on the fact that right now trash trying to buy a bale of hay, that digs into your pocketbook pretty hard.
• 4:53
  SPEAKER_02: Absolutely.
• 4:54
  SPEAKER_02: And we we've known for some time, even going back to April and May, overall pasture and range conditions weren't that good at the beginning of the summer grazing season.
• 5:07
  SPEAKER_02: And as a result, I think a lot of summer grazing programs did cut back on their stocking rates to try and extend that, what at that point was less than favorable or ideal summer grazing conditions.
• 5:23
  SPEAKER_02: So those numbers kind of got paired back fairly early on.
• 5:28
  SPEAKER_02: And that's been an ongoing issue when you look at somewhere in the area of 55 to 60 percent of the hay acreage is currently in moderate or more serious drought.
• 5:42
  SPEAKER_02: And the same thing applies to the cattle inventory.
• 5:45
  SPEAKER_02: Almost 60% of that inventory in moderate or more serious drought.
• 5:51
  SPEAKER_02: That's a way bigger deal than in my estimation, the the adjustments or modest adjustments that might be made through the brand program.
• 6:03
  SPEAKER_02: I haven't seen a whole lot of detail on that yet, so that's something that we'll monitor fairly closely.
• 6:11
  SPEAKER_02: One big positive that did come out of the discussions here over the last week or so was to permit haying and grazing on set-asider CRP acres.
• 6:22
  SPEAKER_02: That's something that probably should have been done a long time ago, but it's one potential benefit to kind of augment that that forage supply.
• 6:32
  SPEAKER_02: May not be high quality, but by the same token, uh it's better than snowballs.
• 6:39
  unknown: Yeah.
• 6:39
  SPEAKER_00: Well, pasture hay still makes cow feed, especially if you let it sit there and ferment in a bale long enough.
• 6:45
  SPEAKER_00: I do know that.
• 6:45
  SPEAKER_00: And if you don't know what CRP is, it's when the government pays you to let things go fallow and kind of go back to natural grassland states, which are great from a conservation standpoint, but we kind of need those acres on years like this year when it has been that dry this dry.
• 7:03
  SPEAKER_00: And we talked about you talked about some on this morning call discussion after before the bell was recorded, that we have seen some more rains here in grazing areas, which I mean we're always gonna take it, but at this point, it's a little bit late with regards to getting any sort of grow back before things go dormant.
• 7:23
  SPEAKER_02: Yeah, we're we're heading very quickly into the middle part of September, and the grazing season for the most part in many areas is largely concluded.
• 7:33
  SPEAKER_02: A lot of the commercial grazing programs in the Flint Hills and the Osage area either terminate 1st of October or the 15th of October.
• 7:43
  SPEAKER_02: So we're rapidly coming to the end of the grazing season if we're not there already.
• 7:49
  SPEAKER_02: And as a result, it's simply too late to rejuvenate that program.
• 7:55
  SPEAKER_02: But it can make a big difference in hard-red wheat area, particularly in the southern plains, where those guys expect to have a little bit of wheat pasture as we get out into the fall months.
• 8:08
  SPEAKER_02: We really need some moisture there to get that wheat crop off to a good start.
• 8:13
  SPEAKER_02: Uh, it's still early, it can happen, but at least at this juncture, uh the clock is ticking.
• 8:20
  SPEAKER_02: We'd like to see it change pretty quickly.
• 8:23
  SPEAKER_00: Yeah, absolutely.
• 8:24
  SPEAKER_00: And the other thing that's been making headlines all over my social media feeds has been this meat inspection discussion that we've had that we're going to repeal meat inspection so that way we can go ahead, you know.
• 8:38
  SPEAKER_00: Mike, you and I can go and be meat salesmen on top of being cattlemen, because that sounds like a lot of fun.
• 8:44
  SPEAKER_00: Uh, you want to dig into that just a little bit more?
• 8:47
  SPEAKER_02: Yeah, it almost sounds like uh as a cattleman you're underemployed and you're looking for more work to do, right?
• 8:53
  SPEAKER_02: Oh, yeah.
• 8:54
  SPEAKER_02: So you're gonna sell meat.
• 8:55
  SPEAKER_02: Uh big challenge, uh, no question about that.
• 8:59
  SPEAKER_02: I think the intent is to make it a little bit easier for folks in in the livestock business, in the cattle business, to merchandise their own meat direct to consumers if they want to, reduce some of those regulations, but it's uh I think it's still very much in place that if you're gonna sell meat into interstate commerce, that meat's gonna have to be either federal federally inspected or an equivalent state inspection program.
• 9:33
  SPEAKER_02: I don't think those types of things have have changed or will change as we go forward, but maybe reducing the inspection regulations for smaller sales to local areas, that type of thing.
• 9:51
  SPEAKER_02: I'm always a little concerned when we start messing around with inspection regulations.
• 9:58
  SPEAKER_02: And uh, I don't think anybody ever wants to think about merchandising something less than wholesome food.
• 10:07
  SPEAKER_02: So that's where meat inspection comes in and it's got a huge role to play.
• 10:12
  SPEAKER_00: Yeah, yeah, it does.
• 10:13
  SPEAKER_00: And I think repealing those inspections doesn't necessarily make that big of a change to kind of, you know, the small local markets because those are already happening.
• 10:22
  SPEAKER_00: Custom places have been booked out for a long time.
• 10:26
  SPEAKER_00: You know, people are already selling, you know, halves, quarters, and holes to, you know, local friends and families and FFA auctions and fundraisers and things like that.
• 10:35
  SPEAKER_00: And it was already happening.
• 10:37
  SPEAKER_00: I don't think changing this maybe changes anything other than Mike, you might want to get a medium instead of a medium rare when you get your steak these days.
• 10:46
  SPEAKER_00: But I at the same time, I still think our food production is fairly safe.
• 10:50
  SPEAKER_02: Well, for some operations, maybe it it opens up an opportunity to do some direct-to-consumer merchandising, but the other part of it is selling meat is a whole different ball game than raising and feeding cattle.
• 11:06
  SPEAKER_02: Uh, and as a result, uh, it may not be something that's going to apply to broad segments of the industry.
• 11:16
  unknown: Yeah.
• 11:16
  SPEAKER_00: Well, cotton farmers aren't underwear salesmen, Mike.
• 11:19
  SPEAKER_00: And, you know, cattle ranchers, I don't think, are T-bone salesmen, but I guess maybe we'll see a change there.
• 11:25
  SPEAKER_00: Our last thing before we tear into our slides, we got 800 head yesterday, Mike, of cattle across the border.
• 11:32
  SPEAKER_00: They're still coming in at a real small trickle, but the Mexican border is still a topic.
• 11:38
  SPEAKER_02: Yeah, I think it's it's going to be an ongoing topic of discussion.
• 11:42
  SPEAKER_02: Of course, the first full week that the border was open, I think we brought in something like 2,500.
• 11:48
  SPEAKER_02: Then apparently there were some mechanical issues last week where numbers were reduced to only 100 head, and this week we're off to a much better start.
• 11:59
  SPEAKER_02: I think Tuesday, they reported about 800 head crossing the border.
• 12:04
  SPEAKER_02: Historically, that Douglas, Arizona facility has been able to handle kind of on average around 4,000 or so a week, but with the New World Screwworm Protocols, that capacity has been reduced by almost a third.
• 12:24
  SPEAKER_02: So that probably means that somewhere in the area of 2,500 to 3,000 a week is about all we can really expect.
• 12:34
  SPEAKER_02: We haven't heard anymore about also opening the Santa Teresa and Columbus, New Mexico facilities.
• 12:43
  SPEAKER_02: My understanding is that that's still part of the game plan at some point in the relatively near future.
• 12:50
  SPEAKER_02: When you put those two together with the Douglas, Arizona facility, I still believe that we're looking at something less than 150,000 head that may clear the border between now and the end of the year.
• 13:06
  SPEAKER_02: So it's it's not like it's a game changer uh for some cattle feeders and backgrounding operations.
• 13:15
  SPEAKER_02: Those cattle are going to be welcome additions, but for the most part, it's not going to be anywhere close to the volume of cattle that we brought prior, brought from Mexico prior to the new world screw worm outbreak.
• 13:35
  SPEAKER_02: I've made the comment probably on to this group at some points in the past, where we did bring somewhere in the area of a million two hundred thousand had in 2023 and 2024.
• 13:50
  SPEAKER_02: I'm pretty skeptical about whether we're going to get back to those kinds of levels anytime soon, maybe never.
• 13:57
  SPEAKER_00: Yeah.
• 13:58
  SPEAKER_00: Well, right now that seems to be the trend, at least in the present.
• 14:02
  SPEAKER_00: Now that we got through our weekly news, Mike, let's get into the meat and potatoes of the show to talk about some Catalon feed stuff.
• 14:09
  SPEAKER_00: The Catalon feed report and monthly trade data, projected August feedlot placements continue to slide.
• 14:15
  SPEAKER_00: August feedlot marketing pace is slow with a record the sales being record small.
• 14:21
  SPEAKER_00: Feedlot inventories exceed last year with the same old, same old front-end supply that's record large, like we've been talking about.
• 14:29
  SPEAKER_00: And the beef imports are record large and exports trend lower.
• 14:33
  SPEAKER_00: Let's tear into this first one here.
• 14:35
  SPEAKER_00: Mike, August feedlot placements are historically small.
• 14:39
  SPEAKER_02: Yeah, we've been talking about small placements for an extended period of time, and uh it looks like the data that will be released on the 18th of this month will confirm just another observation in that long-term decline in overall feedlot placements.
• 14:57
  SPEAKER_02: I'm gonna project those August placements at around 95% of last year.
• 15:03
  SPEAKER_02: We know that January through July placements were record small.
• 15:08
  SPEAKER_02: And if we add those August numbers to it, January through August placements are going to in fact be record small.
• 15:17
  SPEAKER_02: And I think that does give us an indication that overall Fed cattle supplies late this year and on into next year are going to be pretty limited.
• 15:29
  SPEAKER_02: If we don't have them on feed now or put them on feed here in the relatively near future, we're rapidly in the process of establishing our Fed cattle supplies for the first half of next year.
• 15:45
  SPEAKER_02: And with these small placements, even though the marketing pace has been relatively slow with these small feedlot placements, then the beef production potential or fed beef production potential that we see going forward is still pretty limited.
• 16:04
  SPEAKER_00: Yep.
• 16:05
  SPEAKER_00: And it's kind of plays into our next slide pretty well as well.
• 16:09
  SPEAKER_00: The marketing's a record small.
• 16:11
  SPEAKER_00: And for those of you that are, you know, not listening to this as you're driving, that hopefully, well, maybe you are driving and looking at your phone, don't recommend that you do that.
• 16:19
  SPEAKER_00: But the blue line down there at the bottom is our current year, and the red dot is always our last report, just so that way you can follow along as we go through these charts as a host.
• 16:31
  SPEAKER_00: I should probably do a better job of explaining that, but they're pretty worthwhile stats to look at.
• 16:37
  SPEAKER_00: So I figured I'd I'd clear that up real quick.
• 16:39
  SPEAKER_00: But Mike, yeah, August marketings are record small.
• 16:42
  SPEAKER_02: Yeah, that red dot that you see down there for August is a projected number.
• 16:47
  SPEAKER_02: That's my estimate for what the USDA report will show us when it's released on the 18th.
• 16:54
  SPEAKER_02: And obviously, that marketing number in terms of absolute volume of marketings during August is record small.
• 17:04
  SPEAKER_02: And in addition to that, marketings as a percent of Catalon feed during August is also record small.
• 17:12
  SPEAKER_02: That's just a continuation of what we've seen in recent months.
• 17:17
  SPEAKER_02: If you compare that blue line running across the bottom of the chart with the black line running across the top, that black line at the top is a long-term average prior to COVID, of course.
• 17:33
  SPEAKER_02: But by the same token, it gives you a pretty solid indication that overall marketings in May and June tend to be the biggest months of the year.
• 17:44
  SPEAKER_02: This year in May and June may very well have been the biggest months of the year, but not anything close to the seasonal pattern that we've seen from a longer-term perspective.
• 17:58
  SPEAKER_02: Now, I believe that marketings going forward from here, starting with the small numbers in August, should be larger as we move into the September, December time frame.
• 18:12
  SPEAKER_02: But I also thought that August marketings could very well be equal to year-ago levels.
• 18:19
  SPEAKER_02: And it turns out they were down 4%.
• 18:22
  SPEAKER_02: So I'd say the forecast, even those forecasted seasonally larger numbers over the next three or four months, the risk to that forecast is that those Fed cattle supplies are going to be smaller, not bigger.
• 18:38
  SPEAKER_00: Yeah.
• 18:39
  SPEAKER_00: Well, it just seems to be that maybe we've just got used to feeding them for longer.
• 18:44
  SPEAKER_00: And that kind of plays into this next one here.
• 18:47
  SPEAKER_00: Seasonally larger feedlot inventories remain over last year.
• 18:51
  SPEAKER_00: That red line there at the bottom caught my eye.
• 18:55
  SPEAKER_00: Cattle on feed over 180 days is a record large.
• 18:59
  SPEAKER_02: Yeah, overall feedlot inventories, at least the last few years, does typically increase a little bit going from August into September.
• 19:10
  SPEAKER_02: Uh, and this year is no exception.
• 19:12
  SPEAKER_02: So we're up about 125,000 on a projected basis compared with a month ago.
• 19:19
  SPEAKER_02: Uh, and we're pretty close to 160,000 head larger than a year ago.
• 19:25
  SPEAKER_02: And seasonally, those on-feed numbers do increase into the fall months.
• 19:32
  SPEAKER_02: Typically, our feedlot inventory will top out on a seasonal basis, either in late fall or very early the following year.
• 19:42
  SPEAKER_02: So the seasonal pattern is still very much in play.
• 19:46
  SPEAKER_02: And at least at this point, it looks like those year-over-year increases in feedlot inventories are going to continue to be with us through the end of the year.
• 19:59
  SPEAKER_02: I think going back a month ago or two months ago, we were looking at on-feed numbers up two to two and a half percent.
• 20:06
  SPEAKER_02: This September one inventory looks like it's up about one and a half percent.
• 20:12
  SPEAKER_02: And as we get out toward the end of the year, those numbers are going to get back closer to year-ago levels.
• 20:20
  SPEAKER_02: But as you alluded to, part of the issue is that these on-feed numbers over 180 days are still historically large, and that means a large front-end supply of fed cattle that may hamper um overall feed yard marketing flexibility.
• 20:42
  SPEAKER_02: With those longer days on feed, record heavy carcass weights, maybe there's a little bit less flexibility available to the cattle feeder to simply walk away from a bid that he doesn't like and tell the packer to come back and talk to me a week or two weeks or three weeks down the road.
• 21:04
  SPEAKER_02: When we're looking at this big front-end supply and record heavy carcass weights, maybe to some extent we've hampered a little bit of that cattle feeder leverage and his marketing flexibility.
• 21:20
  SPEAKER_02: I suspect that's one of the things that's contributed to this decline in Fed cattle prices.
• 21:28
  SPEAKER_02: When we stop and think, back in mid to late June, we were looking at a Fed cattle market that was trading at 260 or better on a very short-term basis.
• 21:39
  SPEAKER_02: And more recently, we've been around 220 or as low as 218.
• 21:44
  SPEAKER_02: So pretty close to a$40 drop.
• 21:47
  SPEAKER_02: Not going to blame all that on this front end supply of cattle, but that is part of that overall picture.
• 21:56
  SPEAKER_00: Yeah, it is.
• 21:57
  SPEAKER_00: And like you said, it really hampers the flexibility that we have for a lot of reasons.
• 22:05
  SPEAKER_00: And the big thing that we hold on to them for so long is the opportunity to.
• 22:09
  SPEAKER_00: Cost to replace these cattle, especially if you're feed yard feeding customer cattle, you know you've you make your 75 cents a day on yardage and you go ahead and empty that pin, you don't make them 70 cents per head per day because they just can't find the cattle to fill in their spot.
• 22:25
  SPEAKER_00: And that makes, you know, just your day-to-day operations run just a little bit tighter when you try and push them ahead a little bit earlier these days.
• 22:33
  SPEAKER_00: And I think that's why we're in this trend we're in.
• 22:37
  SPEAKER_00: And, you know, forward looking, it'll be interesting to see if we continue to see this kind of rally that we've seen on the grain side, if that pushes enough pressure on concentrate feed prices to maybe get them out the door just a little bit sooner.
• 22:53
  SPEAKER_02: Well, from a feed yard manager standpoint, as you alluded to, uh, empty pens don't pay very well.
• 22:59
  SPEAKER_02: And that's certainly part of it.
• 23:01
  SPEAKER_02: The other part is that the investment costs on feeder cattle, while price levels are down pretty substantially from where we were 90 or 120 days ago, they're still relatively expensive compared with deferred fed cattle prices and the cost of cost of gain to get those cattle there.
• 23:23
  SPEAKER_02: So from an overall standpoint, uh there's still a little bit of an incentive, I think, from a cattle feeder's perspective, to maintain a relatively slow marketing rate.
• 23:36
  SPEAKER_02: One thing that that those slow marketing rates do uh contribute to is some improvement in overall grading and the grade premiums.
• 23:48
  SPEAKER_02: So with Fed cattle prices having declined over the last two or three months, those grade premiums are really more important now than they were even back then.
• 24:02
  SPEAKER_02: So it's one of the reasons why we're probably not going to step up those turnover rates very much.
• 24:10
  SPEAKER_02: The grade and quality premiums, along with the other grid premiums that are are part of the cattle feeding industry now simply aren't going to go away.
• 24:20
  SPEAKER_02: So I guess I'm a little skeptical about going back to business as usual.
• 24:26
  SPEAKER_02: The industry has changed, and I don't think we're going to give all that back.
• 24:31
  SPEAKER_00: Yeah, I I don't either.
• 24:33
  SPEAKER_00: I think we'd have to see a change.
• 24:35
  SPEAKER_00: You know, we've seen a recalculation in the yield grade equation.
• 24:39
  SPEAKER_00: That's been a kind of a talk from some of my, you know, academic friends that are maybe in the meat sciences or getting their masters or things like that at certain universities, and they've asked me about that and my thoughts there.
• 24:52
  SPEAKER_00: And I thought, well, you know, maybe it'll affect, you know, we talk about this equation a lot in the animal science, not equation, but chart a lot on the animal science side of things that eventually, you know, muscle flattens out while fat continues to rise and bone levels out, and it eventually hurts our percent yield on a set of cattle.
• 25:13
  SPEAKER_00: But at this point, Mike, those premiums of being, you know, above choice or higher than you know, getting into like upper two-thirds prime, which is a crazy thing to talk about, are kind of pretty valuable still.
• 25:28
  SPEAKER_02: Absolutely.
• 25:29
  SPEAKER_02: Well, and I think there's uh there's been a kind of a shift away from utilizing the old yield grade formulas in in the past, in the sense that maybe with today's cattle, they're not as accurate as they used to be in forecasting lean meat yield.
• 25:47
  SPEAKER_02: And as a result, they needed to be they needed to be updated to match up with the kind of cattle that um we genetically produce and feed nowadays.
• 25:59
  SPEAKER_02: And that's I think a huge step in the right direction.
• 26:03
  SPEAKER_02: Obviously, the grid premiums that are available to the cattle feeder have become an important part of the profitability of the cattle feeding business.
• 26:13
  SPEAKER_02: That's not going to change, but having a more accurate forecast on yield grades and an improvement in that yield grade estimate is going to be a big step forward.
• 26:27
  SPEAKER_02: Absolutely.
• 26:28
  SPEAKER_00: Well, we've made you know U.S.
• 26:30
  SPEAKER_00: beef so valuable that it's making others look in, and that's our next slide here.
• 26:36
  SPEAKER_00: The record high beef prices draw product to the U.S.
• 26:41
  SPEAKER_02: Absolutely.
• 26:42
  SPEAKER_02: U.S.
• 26:43
  SPEAKER_02: beef prices, of course, are the highest in the world for the most part, and as a result, it's a huge magnet attracting product into the U.S.
• 26:53
  SPEAKER_02: The bulk of those imports in January through July data, which the July data was just released late last week.
• 27:03
  SPEAKER_02: July imports were up pretty close to 19%, somewhere in the area of 500, 550 million pounds on a carcass weight basis.
• 27:13
  SPEAKER_02: Those are some historically large numbers.
• 27:17
  SPEAKER_02: But keep in mind a good bit of that.
• 27:20
  SPEAKER_02: In fact, um, far and away, a majority of it is lean manufacturing beef, 85% or 90% lean beef trimmings that go into the manufacturing and ground beef segment of the industry.
• 27:37
  SPEAKER_02: And of course, something on the order of 50% or more of what we consume is either ground or processed.
• 27:46
  SPEAKER_02: So it's a really important part of the overall picture.
• 27:51
  SPEAKER_02: My point is uh that despite the program directive of a few weeks ago to allow in an additional 30, 300,000 metric tons, roughly 660 million pounds on a carcass weight basis without the over-tariff TRQ, which amounts to 26.4 percent.
• 28:17
  SPEAKER_02: My point is through the first seven months of the year, imports were up 13 percent.
• 28:24
  SPEAKER_02: I think most people were looking for August through December imports to also be up by a similar amount.
• 28:33
  SPEAKER_02: So my point is that a good bit of that additional potential import of 660 million pounds was already on people's balance sheets.
• 28:46
  SPEAKER_02: So, in my estimation, it's not like we're simply adding another 660 million.
• 28:54
  SPEAKER_02: Some of that was already accounted for in terms of projected imports during the balance of the year.
• 29:01
  SPEAKER_00: Yeah, business business as usual.
• 29:03
  SPEAKER_00: Um, say there.
• 29:06
  SPEAKER_00: Beef exports continue to slide the opposite side of that equation.
• 29:11
  SPEAKER_02: Yeah, that's just the flip side of big imports.
• 29:14
  SPEAKER_02: The things that facilitate big big imports also restrict exports.
• 29:21
  SPEAKER_02: That is, U.S.
• 29:22
  SPEAKER_02: beef is historically high priced domestically, and that makes it a challenge for foreign buyers to maintain their same quantities purchased.
• 29:34
  SPEAKER_02: And as a result, overall exports have simply slipped relative to year-ago levels.
• 29:42
  SPEAKER_02: I think January through July, our overall exports are down about 15%.
• 29:48
  SPEAKER_02: The declines during the last half of the year are going to be compared with some pretty small numbers last year, so I don't think we're gonna continue to see that kind of consistent decline.
• 30:00
  SPEAKER_02: In fact, the July monthly data was down a more moderate, say 6% compared with a year earlier.
• 30:09
  SPEAKER_02: So we're getting back to some pretty small numbers during the last half of last year.
• 30:15
  SPEAKER_02: And I don't know that I really want to argue that our overall exports this year are going to be dramatically lower.
• 30:22
  SPEAKER_02: Our biggest declines were through the first half of the year.
• 30:26
  SPEAKER_00: Yeah.
• 30:26
  SPEAKER_00: And as as we look forward, Mike, I keep on thinking that at some point the European countries will develop a pallet for U.S.
• 30:35
  SPEAKER_00: beef.
• 30:36
  SPEAKER_00: I feel like that is the one market we have not tapped into yet, is you know, the Northern European palate just doesn't, you know, have an appreciation for highly marbled beef.
• 30:48
  SPEAKER_00: Maybe that'll happen at some point, but I think at this point we have to hold on to our own market share here internally that we don't give up the foothold that we have.
• 30:58
  SPEAKER_02: The challenge with Europe is to break through some of their restrictions in terms of allowing U.S.
• 31:10
  SPEAKER_02: exports of meat into Europe, whether it's beef, pork, or chicken, they have a set of requirements that I have been pretty restrictive relative to US meat, whether it's whether as I alluded to, whether it's beef, pork, or chicken, they're they're highly protective of their domestic markets.
• 31:34
  SPEAKER_02: And for all practical purposes, they make it really tough to get U.S.
• 31:39
  SPEAKER_02: product into Europe in total.
• 31:43
  SPEAKER_02: Uh, and that that challenge is is ongoing.
• 31:47
  SPEAKER_02: I think there were some breakthroughs made earlier this year where they agreed to allow a limited quantity of US beef into Europe.
• 32:00
  SPEAKER_02: Maybe that's the initial stages of of finally breaking uh some of those barriers down, but it's been a long struggle uh and it's been in place for a long time.
• 32:13
  SPEAKER_02: So I like everybody else, you're probably not gonna hold your breath in terms of big exports to Europe, but maybe we are finally starting to see some progress in that direction.
• 32:25
  SPEAKER_00: Yeah, I hope you're right.
• 32:27
  SPEAKER_00: And yeah, like you, I kind of, you know, and maybe just yeah, hold my breath just a little bit.
• 32:32
  SPEAKER_02: But I thought they are a part of the world that can of uh more likely afford US beef than than some other areas.
• 32:43
  SPEAKER_02: Now, we ship a lot of beef to Japan, South Korea, uh, and and some other countries as well.
• 32:50
  SPEAKER_02: But Europe is has been a difficult nut to crack.
• 32:54
  SPEAKER_00: Yeah, well, they're still living in kind of you know the stone age over there with regards to protein consumption and even you know the way that they raise beef over there.
• 33:03
  SPEAKER_00: Uh, you gotta appreciate their attention to detail, I guess you can say, but in terms of you know generating a lot of quality, it's somewhat to be desired yet.
• 33:13
  SPEAKER_00: But, you know, maybe something to look forward to into the future at some point.
• 33:18
  SPEAKER_00: This was a great show, Mike.
• 33:20
  SPEAKER_00: I I really enjoyed it.
• 33:21
  SPEAKER_00: We got maybe, I keep on saying every week we get more and more covered.
• 33:24
  SPEAKER_00: And this week, you know, in 34 minutes, we got through about everything that we about can talk about.
• 33:30
  SPEAKER_00: Maybe, yeah, if we get bored at some point, we're gonna have to talk about swine, but I'm not feeling like it today.
• 33:36
  SPEAKER_00: They've been an absolute roller coaster here recently.
• 33:39
  SPEAKER_00: But yeah, I I think we got a lot covered.
• 33:42
  SPEAKER_00: Do you have anything else weighing on your mind as we work towards the close here?
• 33:46
  SPEAKER_02: No, we covered a number of things.
• 33:48
  SPEAKER_02: Obviously, a number of these uh executive orders and proclamations are going to continue to affect the market.
• 33:56
  SPEAKER_02: Some extremely strong basis levels have have been important in that regard as well.
• 34:02
  SPEAKER_02: Uh, and we started to see just a little bit of a basis shift.
• 34:06
  SPEAKER_02: We started out uh Tuesday morning with regard to the October contract with the uh futures trading almost a nine or a ten dollar discount to cash.
• 34:17
  SPEAKER_02: So uh I think that was critical uh to um see an adjustment in terms of futures prices the early part of the week.
• 34:26
  SPEAKER_02: It remains to be seen whether we can sustain that through the end of the week.
• 34:30
  SPEAKER_02: But these basis levels have been really strong.
• 34:33
  SPEAKER_02: Uh, and if we are finally finding a bottom in this summer Fed cattle cash market, then the board certainly has some upside potential going forward.
• 34:44
  SPEAKER_02: Well, awesome.
• 34:45
  SPEAKER_00: Well, yeah, I'm excited to see what happens in the next few weeks.
• 34:50
  SPEAKER_00: Uh, not because of what the board does, but also just because of hopefully the temperature and barometer starts to break just a little bit, and we can see some cooler fall temps as we work towards harvest time here.
• 35:02
  SPEAKER_00: Well, Mike, thanks for coming on.
• 35:04
  SPEAKER_00: I always appreciate all the content that you bring.
• 35:07
  SPEAKER_00: You're a plethora of knowledge as always.
• 35:09
  SPEAKER_00: I'm excited to talk to you next week.
• 35:11
  SPEAKER_02: Good to visit with you, Jed.
• 35:13
  SPEAKER_02: Looking forward to getting together again next week.