Latest / CattleUSA Daily / 129: Markets Are a Rollercoaster, Here’s How to Ride It with Dan Gerhold

Transcript

129: Markets Are a Rollercoaster, Here’s How to Ride It with Dan Gerhold · CattleUSA Daily

• 0:00
  Welcome back to another episode of the Cattle USA Daily podcast.
• 0:03
  Today we are welcoming back Dan Gearhold with the Cattle USA
• 0:06
  insurance team. And today we are talking all
• 0:09
  things what is going on in the markets, what is going on in the
• 0:12
  world as far as everything we talk cattle, we talk hogs, we
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  talk grain markets. We're, we're hitting on
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  everything today and discussing what has happened and not only
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  in the past week, but in the past month and how that has
• 0:26
  affected our markets and everything that we are seeing
• 0:28
  from our side. So that further for idea, let's
• 0:30
  go ahead and hop into this episode with Dan.
• 0:35
  Welcome to the Cattle USA Daily podcast.
• 0:38
  Your go to source. For the latest livestock
• 0:40
  markets, industry insights and the updates shaping agriculture
• 0:43
  today, I'm your host Lauren Moylan, a passionate advocate
• 0:47
  for agriculture. Here to keep.
• 0:48
  You informed and connected, now let's dive into today's episode.
• 0:57
  Dan, welcome back to the podcast.
• 0:59
  Happy Wednesday. How are you?
• 1:02
  How's life, how are the markets? What's going on in the?
• 1:04
  World doing well. Markets were exciting again this
• 1:08
  week. I think last time we talked you
• 1:10
  know we had tested limit down and and came back from it since
• 1:14
  then and put new eyes in yesterday.
• 1:16
  So can't beat that. Yes.
• 1:21
  This bull in this cattle market is pretty resilient.
• 1:24
  OK, are you wearing another shirt?
• 1:26
  Absolutely. You know, I just noticed that.
• 1:31
  That's amazing. Yeah.
• 1:33
  Everybody's pulling off grass. Yeah.
• 1:34
  Celebrate. I love this time of year.
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  Big, hard, stretched out yearling stairs.
• 1:39
  Gosh, they're fun. And they're fun to feed.
• 1:42
  My gosh, that one's a little bit more low key.
• 1:45
  It just kind of faded into the background for me.
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  It wasn't like bright pink and blaring in my face, but I'll be
• 1:52
  darn. There's cows and there's grass
• 1:54
  on it. That's right.
• 1:55
  Yeah. I got to represent.
• 1:56
  No, I got to celebrate the bull market every time.
• 2:00
  A quick talk. We won't wear them when the
• 2:01
  market's down hard. But yes, she's going strong.
• 2:05
  You got to celebrate. Heck yeah, Heck yeah.
• 2:09
  All right, breakdown. What's going on for us?
• 2:12
  Yeah, big push higher yesterday. You know, it's chopping around,
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  beating everybody up. Doesn't really matter what side
• 2:18
  of this this market you're on, whether you're long or short,
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  she's got something for everyone you know, saw a big open
• 2:25
  interest move yesterday makes me want to believe that the funds
• 2:29
  are are back and getting involved again in cattle when
• 2:32
  you start putting fears up 6 bucks and fats up three to four,
• 2:35
  an old limit if we needed reminders of that, but kind of a
• 2:39
  long day the way it trades anymore.
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  So I don't know, new month, new money, I don't know if that's
• 2:46
  why they're coming back in. But the prior two weeks they had
• 2:49
  been liquidating for a little just a few contracts and now
• 2:51
  they're back. So quite possible that they're,
• 2:56
  they're putting together their next Catalan feed numbers and
• 2:59
  they're realizing that placements were short again.
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  My guess is we we really don't have anything to talk about on
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  the marketing side because they're not ramping up kills,
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  but placements could have been bullish if they're putting those
• 3:09
  numbers together and they decided to be a buyer yesterday
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  in a big way. So equities are a mess or quite
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  the mess they were the week prior.
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  So that that might have given them a little bit of faith.
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  I need to get back on the long side of cattle.
• 3:21
  And at the same time, boxes move tires.
• 3:23
  You know, I think when we talked last week, we mentioned that the
• 3:28
  Packers had cut the kills. And the depressing part was we
• 3:32
  were not seeing boxes move higher on lower kills yet to
• 3:35
  boot. So that that had me a little bit
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  concerned about demand side of things.
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  You know, the retailers got the ball, they're in control.
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  But at the end of the day, you know, you can write up a
• 3:46
  newsletter about it, explaining it and USDA comes out, revises
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  their cut out sheet and all of a sudden we put what, 6-8 bucks on
• 3:56
  the cut out this week already. So choice box is really coming
• 3:59
  on strong. I think just that the fewer
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  amount of cuts available because of that lower kill domestic
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  consumer still resilient even amidst, you know, $20 stakes.
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  But someday it's going to start cutting in and hurting.
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  But yesterday was not the day. So a little softer this morning
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  on the open. Not not surprised.
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  A little bit of a hangover. You know, you have a big move
• 4:21
  like that in theaters, you're going to pull her back a buck.
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  Not the end of the world. So we'll see.
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  Long term. Yeah.
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  It's it's kind of nerve wracking for anybody and everybody.
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  But when they're selling, you know, I saw some 80s, you know,
• 4:35
  355, just absolutely unreal. You start talking those kind of
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  prices, you know, I thought it was crazy when we started buying
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  steers and you know, are even the heifers, you know, a lot of
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  break evens pushing up in that 220.
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  I thought that was high enough. Now all of a sudden we're 23235.
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  You know, evidently there's some of these feed yards, think corns
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  going to be free. So I don't know either way,
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  grass man's enjoying it, the cow calf man's enjoying it, Feed
• 5:03
  yard man's a little worried. But at the same time, cash is
• 5:07
  expected higher again this week. I really didn't think so,
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  Lauren. I'd I was calling for a lower
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  cash market this week just from the standpoint hackers weren't
• 5:15
  aggressive last week and and they have some inventory around
• 5:19
  them that they could get by another week.
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  But Long story short is they're expecting higher cash this week.
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  It's going to be great. You know hoorah, take it when we
• 5:27
  can get it right. Percent.
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  I'm not going to complain. Like you said, we're going to
• 5:32
  take it when we can get it. Yeah, absolutely.
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  Yeah, It sounds like maybe shooting for that two 48250 in
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  the north-south is kind of at a crossroads here for me right
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  now. I really think that they could
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  push pretty hard and, you know, try and narrow that north-south
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  spread. So far it's, you know, the, the
• 5:51
  last couple weeks have been a little bit disappointing.
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  They haven't been lower, but they just haven't done the work
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  I thought they could. We'll see, you know, this week.
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  If they're able to narrow that spread up and, you know, get up
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  in that 240 money, that's a big ask for me.
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  But it might be 238. Either way, the basis is still
• 6:07
  positive. Encouraging hedgers to stay
• 6:11
  current. So what a time to be alive.
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  Yeah, honestly, like this is going to be one of those years
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  that we've said it multiple times, or at least I've said it,
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  that like the AG economics textbooks that our kids are
• 6:23
  going to get in school are going to talk about this crazy year
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  that we've had and just every. You couldn't have guessed this
• 6:32
  on a crystal ball even if you had one that worked like it is.
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  It's been crazy. It's been crazy looking.
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  Just looking out at the past six months in the past year.
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  And then what in the heck could potentially happen in the next 6
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  months? My gosh.
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  Yeah. Yeah, for sure.
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  I think, well, just yeah, six months for sure.
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  But even in the last month, the month of July, you know, August
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  feeders went from three O 9 up to, you know, the highest they
• 6:58
  traded in July was 340. So you put $31.00 on August
• 7:02
  feeders and what's where August feeders are trading right now up
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  at that 340 from where they got listed a year ago they put $100
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  on. I mean, it's just absolutely
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  remarkable. I, you know, we all want to
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  celebrate and whatnot. Obviously the hedgers are
• 7:18
  getting burned pretty hard. You know, one contract, if you
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  would have just shorted one contract of August feeders on
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  the when I got listed, you'd be down 50 grand.
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  It's a big, that's a big number. Start adding some size to that.
• 7:29
  It gets pretty painful. So, you know, inevitably a lot
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  of guys are still holding that, holding those hedges, which,
• 7:36
  which is good if they've got the cattle to back them up.
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  But you know, the shorts still holding it, not blowing out like
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  crazy, the markets, like I said, giving everybody a little taste
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  of pain here and there. You know, the lungs felt some
• 7:47
  pain last week. Now the shorts are feeling pain
• 7:50
  this week. So it it's something else.
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  It volatility is, I don't know if I want to say it's at Max
• 7:57
  right now, but it feels like it's getting pretty close to
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  that that level. So it's like we don't.
• 8:03
  Want to say that it's at Max, but it's it's getting close.
• 8:07
  It's getting really close and we're we're not testing anything
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  here. Like we're not, we're not saying
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  that we need to push it any harder.
• 8:13
  But yeah, it's. There no, no, we don't need to
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  see limit moves yeah that with these with these limits we have
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  you know, 7 bucks fats 8 bucks fingers.
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  We no, I don't want to fit those in either.
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  Direction. We're good.
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  It's not good for the market up or down.
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  So we want slow steady climb higher, but that's, you know
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  they broke out yesterday out of their trend channel that they've
• 8:37
  been riding in for the last four years.
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  So it'll be interesting to see, you know, if we get that higher
• 8:42
  cash, are we going to maintain and continue on outside of that
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  trend channel? Are we going to pull back within
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  it? Little bit concerned about that,
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  but overall, you know with the way the bases and the
• 8:54
  expectation cash is going to be higher, we should continue and
• 8:57
  make make that next leg higher, you know staying outside of that
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  trend channel. So it'll be interesting to see
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  what traders do you know to finish the week.
• 9:05
  Yeah, as always, what's happening in the grain markets
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  right now? Same old puke.
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  It seems like path of least resistance is lower and it it's
• 9:15
  probably going to continue that way.
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  You know, I would think for another week or two.
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  We got some crop tours going on here in the coming weeks.
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  You know, we're going to start seeing some scouting getting
• 9:24
  done. Colonel counts.
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  Inevitably the funds keep putting pressure on the sell
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  side. So until they decide to start
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  liquidating, it's just going to keep going lower.
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  You know, there's we've got the sales on the books.
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  We just don't have the shipments.
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  A lot of lot more grain sitting around old crop than I thought
• 9:42
  there would have been. I think a lot of people were
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  holding on to that grain, you know, with the expectation we
• 9:47
  were going to what, what was it 89 year drought we were expected
• 9:50
  to have here this year? You know, that would have made
• 9:52
  for a a pretty epic August, September corn market.
• 9:57
  Old crop wise didn't get it, you know, got the rains.
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  Crop looks great. Yeah.
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  Of course you're hearing issues everywhere like you do every
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  year, you know, pollination or too wet or you know, a pocket
• 10:07
  here that's too dry or here and there.
• 10:09
  But overall, you know it. I think the market's going to
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  probably, I guess I'm shooting for a low here late August,
• 10:17
  sometime in September. I don't yet quite know what my
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  number is, but I think I'll be pretty aggressive buying, buying
• 10:25
  corn in the three 70s. It just seems like, you know,
• 10:29
  hey, guys, let's be realistic. You know, there's people
• 10:31
  expecting $2.00 corn now, but come on.
• 10:34
  It's they said that back during COVID and all of a sudden demand
• 10:39
  just goes to the rough. Low prices cure low prices and
• 10:42
  they do it by bringing new demand in.
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  So let's just hope that yeah, we find that bottom soon and get
• 10:49
  these traders to blow out of their shorts.
• 10:53
  We markets been mostly sideways, had a big move lower yesterday,
• 10:57
  but I'm hoping that maybe that was the beginning of the end.
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  So we really need to see that we have market turn around.
• 11:05
  Yeah, for sure. Anything else that we missed
• 11:08
  that we need to head on for this week or anything else that's
• 11:11
  happening in the markets right now?
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  Odd markets been something else of late defiably so considering
• 11:17
  that you know, the cutouts up there 110 well roughly cash hogs
• 11:22
  110 to 115 a little bit of 117 last week I believe overall, you
• 11:28
  know, hogs can do some work if if the consumer is strapped for
• 11:32
  cash on beef, you know they're going to go to pork is the next
• 11:35
  best, best thing. You know, they can only eat
• 11:38
  chicken so much. So you know, it's kind of tough
• 11:40
  because pork belly makes up a big chunk of that cut out on the
• 11:44
  hog side. So it's not really the best time
• 11:47
  of year for the bellies to make a huge rally much further than
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  what they have. I think last I checked, what was
• 11:54
  that? There was a brief spell.
• 11:55
  We punched over 200 on the belly.
• 11:57
  But yeah, we're back at 190. Really solid numbers.
• 12:00
  I mean, your, your poor cut out likes to peek out last week of
• 12:04
  July, 1st week of August. Here we are, you know, and we're
• 12:08
  running 118. Sorry, it wasn't 110, but 118.
• 12:10
  You know, depending where we go over the next 2-3 weeks, it's
• 12:13
  probably going to decide what we need to be doing with this fall
• 12:16
  and winter time hogs. Overall kill numbers have been
• 12:20
  low. So it's hard for me to hit the
• 12:23
  sell button on an $85 December, you know, hog price.
• 12:27
  So if we can keep, if those kill numbers stay low, it proves that
• 12:31
  the disease pressure was more than what the USDA had reported.
• 12:35
  So maybe that continues on through October and and end of
• 12:38
  December. And if that is the case and that
• 12:41
  kill number stays low, I would think you could put four or five
• 12:43
  bucks on hogs as long as we don't wreck the band.
• 12:46
  Amazing, amazing. How's the insurance, LRPS, all
• 12:49
  of those things looking? I mean if you ask me, it's great
• 12:52
  opportunity. I could set new all time highs
• 12:56
  really, you know, a common thing right now, Lauren is well, two
• 12:59
  things really. Guys that have been doing LRPS
• 13:02
  the last couple three years, you know, some of them had that
• 13:05
  claim in, in 23 when the board puked, you know, managed money
• 13:09
  jumped out in a quick hurry and I think we lost 40-50 bucks on
• 13:12
  futures and and cash prices dropped with it.
• 13:16
  But they claimed then and that was the last time.
• 13:19
  So one common thing I'm hearing this guys are all mad because
• 13:22
  LRP is not claiming. They're just writing checks.
• 13:24
  Let's go back and remind people we just put $30 on August feeder
• 13:29
  cattle in the last month. Your LR PS are not going to
• 13:32
  claim and there is absolutely nothing wrong with giving up,
• 13:35
  you know, six, $810 a hundredweight to realize that
• 13:40
  that $30 or more rally. You know, a lot of those guys
• 13:43
  put on those August LR feeder LR PS back when, you know, we
• 13:48
  traded 290 or three dollars. Well, now you're talking a $4050
• 13:53
  rally since they did those. Of course they're not going to
• 13:55
  claim. But at the end of the day, I
• 13:57
  mean, do you get mad? You buy pickup insurance every
• 14:01
  year and don't wreck your truck and now you got to pay that
• 14:03
  premium too? I wake up people.
• 14:07
  I'm, I'm not trying to be mean or crude, but sometimes we need
• 14:11
  a wake up call. Yeah, you're, you're just not
• 14:13
  going to get these $4050 rallies forever.
• 14:16
  It's awesome. It's here.
• 14:18
  I, I don't know that we've ever seen this happen this fast, you
• 14:21
  know, 2-3 months put on 4050 bucks.
• 14:24
  Just be happy you bought LRP and didn't sell futures otherwise
• 14:27
  you'd have been giving up a lot more than that, You know, $810
• 14:31
  premium. So I guess I, I get it.
• 14:35
  Nobody likes writing checks to insurance, especially when they
• 14:38
  didn't need it. But the problem it, it's
• 14:40
  insurance. You know, it's better to have
• 14:42
  it, not need it than it is to same thing I've said before,
• 14:45
  need it and not have it. So the one thing I don't want to
• 14:50
  see is the guys get frustrated that it's that it hasn't
• 14:53
  claimed, you know, since that 2023, you know, like it was
• 14:56
  fall, winter time of 23. So we haven't seen anything in
• 15:00
  two years. I don't want to see guys give up
• 15:02
  on it and all of a sudden this market turns around and we take
• 15:04
  40-50 bucks off in 2-3 months. So that's a little bit
• 15:08
  concerning. Premiums, of course, they've
• 15:10
  gone up, volatilities gone up. These things are somewhat based
• 15:13
  off put option premium. So when, when the market pukes
• 15:17
  7-8 dollars in a single day, you're going to see puts go
• 15:19
  through the roof and that's going to make your LR PS more
• 15:22
  expensive. So it's just one of those things
• 15:24
  we have to deal with it at all time record highs.
• 15:28
  At the end of the day, I, I still think it's a great tool.
• 15:31
  I'm still using it on my cattle. I'm not going to stop.
• 15:34
  It's, it's one of the better tools out there.
• 15:37
  You know, I, I can walk them through.
• 15:39
  Well, I'll just give you an example. 100 head and say it
• 15:43
  cost you 90 bucks a head. You're talking about $9000 worth
• 15:46
  of premium. Pretty simple.
• 15:48
  If if you were a short feeders, I mean you're talking 234 times
• 15:54
  that. Just use that tool for the way
• 15:57
  it's meant to be used. Be happy that the market went up
• 15:59
  and you're making some pretty solid money on these cattle.
• 16:02
  So someday, someday we're going to miss these days.
• 16:05
  Yes, let's let's enjoy it while we can for sure.
• 16:09
  But going back to what we were talking about, like the market
• 16:11
  is volatile right now. It is it's all over the place
• 16:15
  and Lord, we are not testing it. But I mean, highs can only last
• 16:20
  for so long. And it's one of those situations
• 16:22
  that we don't have that crystal ball.
• 16:23
  We can't sit here and be like, this is what's going to happen
• 16:26
  in the markets and know exactly when you need to be like backing
• 16:30
  yourself and covering yourself and all these things.
• 16:31
  And so it's just like do it now. Do it now because we we don't
• 16:35
  know, unfortunately, like, and if we did, trust me, Dan and I
• 16:39
  probably wouldn't be doing this. We would probably be sitting on
• 16:41
  a beach in Cabo, like, sorry guys.
• 16:45
  Exactly. I mean, you take four and five
• 16:47
  way cabs that, you know, some guys are going to, you know,
• 16:50
  turn out on that second turn of grass, step out.
• 16:54
  Look at that November, look at that January, 330-5330.
• 16:58
  You know, there's profit. You can ensure.
• 17:01
  Nobody knows what's going to happen in the next 6-8 months.
• 17:04
  It might go to four. It might go to back to, you
• 17:06
  know, 280. You got to do something here at
• 17:09
  record high prices in my opinion.
• 17:11
  Yeah, Yep, 100%. Anything else we missed that we
• 17:15
  need to cover today? Are we good I.
• 17:17
  Think we hit on all of it. Wonderful, awesome, awesome.
• 17:21
  Well, Dan, as always, thank you for your time and for all of
• 17:24
  your knowledge and information that you bring to all of our
• 17:27
  listeners out there. Make sure that you like
• 17:29
  subscribe, rate review, do all of the things.
• 17:31
  Check out our show notes down below where we have that
• 17:33
  exclusive Cattle USA insurance link.
• 17:35
  So if you listen to today's podcast and you want to get a
• 17:38
  hold of the team and start discussing, discussing what
• 17:41
  options you might have, make sure you head down to those show
• 17:43
  notes and follow that link and you'll be able to see all of
• 17:46
  that information that we have there for you.
• 17:48
  And as always, we will see you tomorrow on another episode.
• 17:51
  Have a good one y'all.