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Cattle market has a SPOOKY Friday · 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_02: Today is October 30th.
• 0:23
  SPEAKER_02: I've got Jace with us here today.
• 0:25
  SPEAKER_02: I'll tell you what, this is a really rough day on the cattle market.
• 0:29
  SPEAKER_02: Let's just walk through what's been going on, Jace.
• 0:31
  SPEAKER_02: We're looking at cattle futures moving lower.
• 0:33
  SPEAKER_02: We've had softer cash trade this week.
• 0:35
  SPEAKER_02: You've got some lower box beef values, probably correcting from some oversold conditions.
• 0:41
  SPEAKER_02: Just tell us what in the world's going on today.
• 0:43
  SPEAKER_01: Yeah, it I think it's a lot of factors.
• 0:46
  SPEAKER_01: We've we've had this talk lots on the hog side of things, the death by a thousand cuts sort of a sort of a deal.
• 0:52
  SPEAKER_01: And I think that's what we're seeing today.
• 0:54
  SPEAKER_01: There's a few reasons for cattle being down.
• 0:56
  SPEAKER_01: Cash, it was probably just overbought, was was part of the futures trade.
• 1:01
  SPEAKER_01: But then you got lower cash this week when we expected to be probably steady.
• 1:06
  SPEAKER_01: Um that was a big surprise to everybody and how that developed.
• 1:10
  SPEAKER_01: And yeah, then you started you started going through so we were at negative basis, you started going through some moving averages, and you just made your way back down into the 221 area on D S, which just happens to be only four dollars higher than that gap.
• 1:24
  SPEAKER_02: Honestly, uh at this point, pretty much blew through every moving average on this cattle market.
• 1:31
  SPEAKER_02: I'd say technically speaking, uh it's um we'll see if there's some further correction downside on this thing.
• 1:39
  SPEAKER_02: It doesn't look like we're putting in a hard bottom by any means today.
• 1:43
  SPEAKER_02: So uh walk me through a little bit about what you're seeing um on some futures and technicals before I get us into some outside markets, because I think that's having an impact too.
• 1:53
  SPEAKER_01: Yeah, absolutely.
• 1:54
  SPEAKER_01: So the on the live cattle side, especially the December contract, you've seen you saw over the past three days we went through the we went through the 20-day, the 100-day, the 200-day, the 50-day moving averages.
• 2:08
  SPEAKER_01: Every moving average there is, we went through um and with with relative ease.
• 2:14
  SPEAKER_01: I mean, it had no it had no respect at the close for the 50 day, which is just slightly above where we closed.
• 2:20
  SPEAKER_01: So I I mean, just from a from a technical standpoint, that looks that looks pretty rough.
• 2:25
  SPEAKER_01: And there is maybe a little bit of fundamental news to back it up as we see.
• 2:30
  SPEAKER_01: I was caught a little off guard that our weights were going up.
• 2:32
  SPEAKER_01: You know, these past few weeks we've gone up on the cash side, kind of thinking we maybe had some leverage, and maybe, maybe we just had enough big cattle that we weren't we weren't as antsy as we should have been at getting rid of.
• 2:46
  SPEAKER_02: One of the other things I think going on right now is some added pressure from both end of the month, right ahead of midterms, pretty big risk off.
• 2:57
  SPEAKER_02: So I think those have helped amplify some of the sell setback that we've had in many of these commodities, whether it be on the egg side with cattle or equities, because the SP 500 and NASDAQ are down a lot today.
• 3:12
  SPEAKER_02: Uh, we're tumbling pretty hard.
• 3:13
  SPEAKER_02: It's a heavy tech uh-led sell-off here.
• 3:16
  SPEAKER_02: You've really had some pretty poor earning reports here.
• 3:20
  SPEAKER_02: You've got rising crude oil today as well, which I think is worth noting.
• 3:24
  SPEAKER_02: But the outside markets are struggling going into this next week's midterms as well.
• 3:29
  SPEAKER_02: End of the month, midterms coming up, uh, risk off play against many of these commodities, equities, etc.
• 3:35
  SPEAKER_02: And then that crude oil market just wants to kind of keep going up here.
• 3:38
  SPEAKER_02: And that's adding some longer-term inflationary pressures.
• 3:41
  SPEAKER_02: When I look um at some other things just worth noting outside markets, you know, it uh the consumer's already pretty tight the way it is.
• 3:49
  SPEAKER_02: And if we start to kind of pop or burst this uh tech bubble that we've had, uh really helping us out the whole way up, uh, that could be a little concerning.
• 3:59
  SPEAKER_02: So continue to keep an eye on that, Jace.
• 4:01
  SPEAKER_02: But walk me through a little bit of what you're seeing on the business side with Packers a little bit here.
• 4:07
  SPEAKER_02: I know you mentioned it just a moment ago, but their margins aren't quite as cushy as there were about a month ago, were they?
• 4:14
  SPEAKER_01: No, they weren't.
• 4:15
  SPEAKER_01: So they made money for, I think it was about six weeks there, which is the longest stretch in quite a while.
• 4:22
  SPEAKER_01: Um, but that has turned that's turned negative again.
• 4:25
  SPEAKER_01: And, you know, there there is a little bit of a balance there that even even for a cattle producer, as much as they hate to admit it, it's probably in their best interest that the packer does make a little money for a bit here.
• 4:38
  SPEAKER_01: So you see those, you see those start to dip into the negative, and maybe that's another reason why the why the board traded the way it did today, too.
• 4:46
  SPEAKER_01: Just with, you know, if if if the throughput isn't there, you've got a little bit of you've got a little bit of trouble.
• 4:52
  SPEAKER_01: So I think um them facing negative margins isn't great.
• 4:57
  SPEAKER_01: We've seen beef cut out heading lower here, which is seasonal.
• 5:00
  SPEAKER_01: Um, it would be seasonal now to head a little lower into the end of the year.
• 5:04
  SPEAKER_01: So it's it is going to be a little tougher for them to pay up for cattle, but also just one piece of this that I've been looking at has been the ribs.
• 5:14
  SPEAKER_01: I mean, we talked about it a couple weeks ago on here, but the rib values are 7% above where they were last year.
• 5:22
  SPEAKER_01: So you've got you've got ribs really carrying this this whole cutout complex.
• 5:29
  SPEAKER_01: And so I I I don't know how sustainable that is.
• 5:32
  SPEAKER_01: We saw a big drop-off in ribs towards the end of 25.
• 5:37
  SPEAKER_01: And I'm not saying we're necessarily in the in for the same thing, but you do you do tend to do that towards the end of the year.
• 5:44
  SPEAKER_01: You rally towards the end of the year, and then mid-decent, you decide to start selling it off.
• 5:49
  SPEAKER_01: So we could be in for a little bit on the cutout side, but packers packers are going to want to continue to make a little money here, or you you do risk the another plant closure thing, which you're getting close on capacity-wise to that being a relatively big deal.
• 6:05
  SPEAKER_02: So last week at the end of the week, we had a somewhat friendly, bullish catalog on feed report.
• 6:11
  SPEAKER_02: Uh folks really held off on some cash trade towards the end of last week, especially after that.
• 6:16
  SPEAKER_02: They were thinking, let's see how the good next week gets with some of this new news, whether it be futures and or the cash market.
• 6:22
  SPEAKER_02: So sales kind of stopped a little bit.
• 6:24
  SPEAKER_02: Going into this week, we're three to five dollars lower on this cash market.
• 6:29
  SPEAKER_02: So walk me through a little bit of uh what's going on, you think, on the cash side of the business.
• 6:35
  SPEAKER_01: Yeah, I think I think we thought we had leverage and probably didn't on the cash side is is part of the problem.
• 6:42
  SPEAKER_01: And kind of back to what I was saying about the weights earlier, that our weights have been climbing here.
• 6:48
  SPEAKER_01: So we've we've been we've had this illusion of leverage, of more leverage, and maybe we've had a little bit more leverage, but we are making these cattle a little bigger, and we're getting to a point, especially up north here, where there's some calves that just have to go.
• 7:03
  SPEAKER_01: And now you get into an environment where it's four to five dollar negative basis and you don't feel like doing that anymore.
• 7:09
  SPEAKER_01: So I think that was I think the north was a little quicker to realize that the south wasn't because they don't have the big cattle.
• 7:17
  SPEAKER_01: So, but you know, we play enough of a factor in that that it matters on their cash side.
• 7:22
  SPEAKER_01: But for them down there, they were they were offered 230 last Saturday after the report.
• 7:29
  SPEAKER_01: Nobody really took that.
• 7:30
  SPEAKER_01: Um, kind of thought that 230 would be the floor this week with the bullish cattle on feed report.
• 7:35
  SPEAKER_01: And then, you know, the first bid they got, the first bid they got was 226, and they were asking 228 at that point, got bid 225 the next day, and now they're at a 226 asking level with the no bid on the other side.
• 7:49
  SPEAKER_01: So it is it it has turned bearish here in a in a hurry, and we'll see how long it lasts.
• 7:55
  SPEAKER_01: Maybe it is just a one or two-week deal, but this time of year, you can't write off the the fact that it could be it could be a four or five week trending lower deal.
• 8:06
  SPEAKER_02: Well, pretty good change in direction this week after the cattle market felt like uh, you know, good old cattle market.
• 8:12
  SPEAKER_02: We were just taking a nice steady uptrend, not violating it at all.
• 8:16
  SPEAKER_02: Uh last few days, we've really put that uptrend to the test here.
• 8:19
  SPEAKER_02: So thank you for your time today, Jace.
• 8:22
  SPEAKER_02: I appreciate it.
• 8:22
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• 8:47
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• 8:59
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