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Cattle Report · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_00: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_00: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_00: This is your host, Mike Minor.
• 0:22
  SPEAKER_00: Let's get started.
• 0:24
  SPEAKER_00: Today is February 2nd.
• 0:25
  SPEAKER_00: I've got Nick Bork with us here today.
• 0:27
  SPEAKER_00: How's it going, Nick?
• 0:28
  SPEAKER_01: Good.
• 0:28
  SPEAKER_01: How are you, Mike?
• 0:29
  SPEAKER_00: Very good.
• 0:30
  SPEAKER_00: Today we got some exciting things to talk about, Nick.
• 0:33
  SPEAKER_00: So we had a cattle report come out this week.
• 0:35
  SPEAKER_00: We're gonna solely focus on that.
• 0:37
  SPEAKER_00: It was uh a pretty big report, Nick.
• 0:40
  SPEAKER_00: What can you tell us about the uh background on it?
• 0:43
  SPEAKER_01: Yeah, so this is a biannual report.
• 0:46
  SPEAKER_01: Um, and so it just comes out in January and July, and it tells is you know it's kind of a macroscopic uh um picture of the cattle industry, and it kind of guides our our uh thought process for the year, at least on on what we're gonna have for Fed supply and kind of what uh what changes are kind of forecasted for the industry.
• 1:10
  SPEAKER_01: And and this was uh this report was very close to the estimates on on all aspects, um, but it just kind of did um further emphasize the you know the fact that we're gonna have quite a few less cattle around again this coming year.
• 1:26
  SPEAKER_01: So um actually on the total available supply uh we're gonna be close to a million head lower this year.
• 1:34
  SPEAKER_00: Um total available supply of what?
• 1:37
  SPEAKER_01: Yeah, so just the total available Fed supply.
• 1:40
  SPEAKER_00: Fed supply.
• 1:41
  SPEAKER_01: Yep, yep.
• 1:42
  SPEAKER_01: So the marketable cattle, uh excluding cows, of course, which contributes a lot to our domestic beef demand.
• 1:50
  SPEAKER_01: But um on the Fed supply, yeah, about a million head less for this year that that comes about from two different things.
• 1:59
  SPEAKER_01: Number one, we've we've lowered the cow herd um now the past four years, I believe, the cow herd has declined, and we still are not retaining heifers back to rebuild the cow herd.
• 2:11
  SPEAKER_01: So um uh you know, once we start re uh keeping heifers back, the number of Fed supply or the number of for the Fed supply will actually drop even more.
• 2:24
  SPEAKER_01: But this year it's expected to be around 25.2 million head for 24 um excuse me, 24.2 million head for 24.
• 2:36
  SPEAKER_01: That's down from 25.2 million head from 23.
• 2:41
  SPEAKER_01: And I think when we look at that number, you know, that's a that's a huge number, obviously.
• 2:48
  SPEAKER_01: Um the interesting thing about it too though is that currently we have you know about uh three percent more, or excuse me, a percent and a half more cattle on feed than we did a year ago.
• 3:01
  SPEAKER_01: So we uh the industry is a little bit backed up yet, we believe, here right now.
• 3:07
  SPEAKER_01: Um but you know the numbers suggest that uh if you know if we're 1.5% above right now and we gotta get to um basically 4% below, we we we're you know, by the end of the year we'll have a net six percent reduction of of Fed supply.
• 3:29
  SPEAKER_00: So how do those numbers look even going back further into history, Nick?
• 3:33
  SPEAKER_00: When you look at the the overall numbers, whether it's all the way back to the early 1900s or whether it's even back to this last cat cattle cycle, how would you compare that to history?
• 3:45
  SPEAKER_01: Well, going back to the last cattle cycle, you know, which when we would have saw our peak in the in price, at least in 2014, and then and then actually the low of supply came in 15, and we got down to 22 million head on the Fed supply.
• 4:01
  SPEAKER_01: So this year we're still, you know, or excuse me, in 24, we're still gonna be about two million head above what the lowest supply number was, available supply number was for 2015.
• 4:14
  SPEAKER_00: So that could have been one of the reasons that this market hasn't just exploded higher, like maybe some people thought it would have then, maybe.
• 4:21
  SPEAKER_01: Yeah, certainly.
• 4:23
  SPEAKER_01: Um the other thing that's going on today, obviously, is we have tremendous, tremendous beef demand um that that's really pulled us through uh the last couple of years here.
• 4:34
  SPEAKER_01: And you know, so that demand has contributed to even with more cattle than the last cycle, the last high of the cycle, we we you know we're making we're making higher prices.
• 4:49
  SPEAKER_00: When you talk about higher prices, I mean uh whether it's uh live cattle here, which has uh really had a really nice rally over the past couple months, but if you look at the feeder cattle market as well, Nick, we're pretty much pushing some record levels out there again, aren't we?
• 5:04
  SPEAKER_01: Yeah, for sure, especially in those deferred months.
• 5:07
  SPEAKER_01: Um looks like live cattle, cash cattle are gonna be up a couple, two, three bucks here again this week.
• 5:14
  SPEAKER_01: Uh looks like the dress trade is gonna top out around 280 in the live trade in that 178-179 area.
• 5:21
  SPEAKER_01: So that'd be up two, three bucks week over week.
• 5:23
  SPEAKER_01: So things are rolling there.
• 5:25
  SPEAKER_01: Um got some storms projected kind of maybe to hit Nebraska, Iowa next week.
• 5:31
  SPEAKER_01: Um, so that could that could move some things a little quicker here, I think, this next week, too.
• 5:37
  SPEAKER_01: Um also weights, weights took another hit, big hit lower here yesterday.
• 5:43
  SPEAKER_01: Um, that data, of course, is always two weeks old, but yeah, two weeks in a row now of pretty significant dives in weights, probably weather related, and uh, and I think you know eventually the you know Kansas, Nebraska will kind of start to dry out here and those the you know those weights will start to level out, but we're certainly starting out the the first half the first uh couple months of this year.
• 6:08
  SPEAKER_01: We're taking some after seeing a you know record high weights, we're taking them off really quickly here.
• 6:15
  SPEAKER_00: How do we look for other uh outlooks of this cattle market, Nick, for market reaction going forward direction?
• 6:24
  SPEAKER_00: This report uh it didn't seem to get traded too much.
• 6:28
  SPEAKER_00: I know yesterday there we had quite a strong reaction, but you just illustrated some of the reasons why that was not necessarily the report.
• 6:36
  SPEAKER_00: But looking forward, what do you see this cattle market uh doing for a direction?
• 6:41
  SPEAKER_01: Yeah, it's really tough to say.
• 6:42
  SPEAKER_01: I mean, we're the the industry is likely gonna make cattle bigger in the next year, right?
• 6:46
  SPEAKER_01: And um because we know that the supply out there of feeders is going to reduce significantly.
• 6:53
  SPEAKER_01: Um and that that's part of the reason why the feeder board is showing what it's showing out there next fall, too, with the you know,$30,$40,$100 um premiums to the nearby feeder cattle months.
• 7:07
  SPEAKER_01: But I think uh, you know, the obviously we saw it in 15 and 16, right?
• 7:12
  SPEAKER_01: Where we uh you know we exported more beef and we made cattle bigger and and that's all a dynamic thing.
• 7:18
  SPEAKER_01: It's gonna be really interesting to see how this shakes out.
• 7:20
  SPEAKER_01: But from the supply side of things, just the supply as it as it stands today and as the industry is uh, you know, what the the cattle weights that they're targeting today, we would be significantly lower in beef production year over year.
• 7:36
  SPEAKER_01: But like I said, I think uh exports and and our ability to make cater cattle bigger these days will will trump some of that and uh hopefully not all of that.
• 7:47
  SPEAKER_00: Any final thoughts for our listeners on the cattle markets?
• 7:52
  SPEAKER_01: Um just I think uh you know, as we've stated all along throughout this whole cycle, we were at really high prices that um we just simply got a lot of risk out there.
• 8:04
  SPEAKER_01: I think there is, you know, even a heightened risk level um this year bec uh you know with um the lack of replacements, I guess, the lack of of heifer retention, and then this projected very large downturn in supply.
• 8:24
  SPEAKER_01: Um, you know, w one of the most common sayings around here, right, is well perceived problems seldom actually occur.
• 8:32
  SPEAKER_01: And uh that's kind of what we got looking us in the eye right now, is we believe we're gonna have a a very large reduction in beef, and uh some way, shape, or fashion, um oftentimes that doesn't happen, right?
• 8:47
  SPEAKER_01: What what we what we perceive today as the most likely outcome doesn't happen.
• 8:52
  SPEAKER_01: So just another reason why we're we continue to especially on this rally we've la had of as of late, you know, we've we've we've bounced above that 50 percent retracement level.
• 9:05
  SPEAKER_01: We're seeing some good cash.
• 9:07
  SPEAKER_01: Um we think it's definitely time to get get some more cattle covered up, especially for that fall time frame.
• 9:15
  SPEAKER_01: And then also um just the fact that you know from the from the cattle and feed reports, you know, the monthly cattle and feed reports that we see every month, they're showing actually uh, you know, by um or these next couple months we're supposed to have a few more uh ca you know cattle available relative to last year, too.
• 9:36
  SPEAKER_01: So so that could kind of soften out this cash deal, I think, eventually, and um and another reason why it might be a good time to get some hedges on now.
• 9:48
  SPEAKER_00: All right.
• 9:49
  SPEAKER_00: Well, thank you for your time today, Nick.
• 9:51
  SPEAKER_00: And thank you to all our listeners.
• 9:52
  SPEAKER_00: Please reach out to us at professional eggmarketing.com.
• 9:56
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 10:01
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 10:07
  SPEAKER_00: See you next time.