Pasture to Pen – September 5, 2023

00:00:00:21 – 00:00:06:18
VOICEOVER
Future trading involves risk and it’s not suitable for all. Investor contact provided in the strike is meant for educational purposes and is not a.

00:00:06:18 – 00:00:27:16
MT
Solicitation to buy or sell commodities. Hello and welcome once again to Pastured to Pen, a new series from the Ever.Ag Insights Team. Each week we bring you news and updates on the cattle markets with the intention of helping cattle producers manage their risk. I am your host, Michael Todd Rowan, coming to you live from a home office in the Texas Panhandle.

00:00:27:18 – 00:00:48:17
MT
Before we get rolling, let me timestamp this episode. Today is September fifth 2023 at 3:03 in the afternoon. This episode’s guests will be none other than the connoisseur of all things Chicago Cubs and ever.ag’s Senior Director, Mr. Jim Sullivan. Jim, welcome to the show.

00:00:48:19 – 00:00:55:04
JIM
And thanks for having me, man. Cubs are currently in playoff contention, so I’m a happy, happy guy.

00:00:55:06 – 00:01:21:07
MT
That’s all you can ask for. Happy. Happy to have you here today. Kicking off this show, we will be looking at pasture conditions and whether pasture conditions have slipped since the last episode. We have 36% of the U.S. pasture condition in the good to excellent category, a decline from 40% since last episode. Some standouts in the good excellent range are Nebraska, 52%.

00:01:21:07 – 00:01:50:24
MT
Good to excellent South Dakota 54%. Utah a much improved 67%. Colorado at 73%. And category best is still Wyoming at 88%. Good to excellent. At the other end of the range, 37% of the lower 48 is in poor to very poor pasture condition, an increase of 5% since last episode. Not not a direction we want to be headed.

00:01:50:27 – 00:02:22:19
MT
Some standouts in the poor in a very poor range. Texas tops the list at a whopping 78% for the very poor. Persistent drought and heat in the central part of the state is is really leading that percentage to Washington. Comes in at 61%. Poor to very poor. Louisiana, surprisingly, is at 57%, poor to very poor. Arizona has had a dramatic turn of events with 53% of their pasture condition in poor to very poor category.

00:02:22:22 – 00:02:52:11
MT
And ending the list is actually in Minnesota at 49% poor to very poor. As we look at the seven day forecast, most of the plains could see some relief to the summer weather as most could get, oh, probably a quarter of an inch to some showers within the week. Up to an inch of rain from southern Nebraska all the way into north central Texas, where we are finally seeing a break from the summer.

00:02:52:11 – 00:03:24:27
MT
Stubbornness which looks great post-labor Day. Switching to the futures market, given that Trey is out, I will be giving the futures update for this episode. Since July, feeder futures have really been trading in a sideways channel, posting a low of 2.4365 and a high of 257 to October. Feeder futures have been higher five of the last 11 trading sessions and breaking through key resistance at 2502150.

00:03:24:27 – 00:03:53:12
MT
Live cattle futures have also been trading in the sideways channel since June, posting a high of 181 and a half and a low of 1.7815. Since August 7th October, live cattle futures have fared little better than feeder futures trading lower in ten of the last 21 sessions, however, after also gapping higher since the cattle on feed reports on 18 October, live cattle futures have been higher.

00:03:53:12 – 00:04:20:24
MT
Seven of the last 11 sessions breaking through key resistance around 1.7975. Typically, the month of August is a lull for futures as it is for cash. As we wait to see how the fall run takes shape, likely this week and wait to see how the corn harvest will fare as we get further into the fall, feeder futures will definitely take their cue from cash.

00:04:20:26 – 00:04:52:23
MT
A run up in cash prices will likely start more bullish sentiment on the feeder futures front. Any spike on the feeder board will trigger big gains in the deferred life cap contracts as the August live cattle contract has expired. Look for traders to lead the way with October fats. But in a non contract month of September, hedgers will likely remain on the sidelines as we continue to see live cash cattle above futures switching to the cash market.

00:04:52:23 – 00:05:26:28
MT
The CME Feeder cattle index seven day average finished last week at 2.4874. Last week’s sale at Oklahoma National was filled towards the lighter side with 6000 head volume. Most of the volume looked to be heavier weight feeder cattle, with prices 1 to $3 higher than the week before. Live cash cattle prices have softened just a little bit, with prices in the north coming down well under 190 last week, northern cattle feeders traded at 184 to 187, live a dollar to $4 lower 292 to 295.

00:05:26:28 – 00:05:53:29
MT
Dressed again, 1 to $4 lower as well. In the south, cattle feeders treated cattle at 178 to 179, 1 to 2 softer week over week. These lower cash prices have brought the five area weighted average a couple of dollars lower to 1.8234. Cut out. Prices, however, continue to impress. Typically, July and August will bring lower cat out prices, typically dipping below 300.

00:05:54:01 – 00:06:30:25
MT
However, this year has presented more of a contract seasonal pattern, with July and August reinforcing prices above the 300 mark. The 300 mark has been in place since the month of April. Two days cut out, Prices posted even more gains. Choice remained above 312 at 31548 while select came in today at 28954. However, the choice select grade is not the only category Continuing to stay high and continuing to impress the nineties trim is on a historic run.

00:06:30:26 – 00:06:42:00
MT
And here today to talk with this more about the meat side of our industry is ever.ag senior director Jim Sullivan. Jim thank you once again for joining us today.

00:06:42:02 – 00:07:05:13
JIM
Hey thanks for having me. Always a pleasure to join this this spot. But I wanted to just touch out briefly today. You know, you mentioned the cut out, just being on a tear. It sort of diving into that a little bit more. We think about cheeseburgers right now, ground beef. Typically what you need is you need a blend of some fatty trim and some lean trim to get your perfect burger.

00:07:05:13 – 00:07:32:06
JIM
Patty Right. So nineties lean beef trimmings is one of the main prices that people watch. And what’s really impressive when you look at the chart only three times since this current report, since 2003 have we printed above $3 or one of the times was recently obviously Covid. We don’t need to rehash that one. The other time was in 2014 and the beginning of 2015.

00:07:32:08 – 00:07:51:15
JIM
Why bring that time period up is because I think some of the stuff that we’re dealing with right now is similar to what we were dealing with back then. And you had the herd contraction going on, you had the price of cattle going to sky high and so on and so forth. When we look at it even more deeply fresh nineties beef.

00:07:51:18 – 00:08:14:11
JIM
So when we look at this, this chart here, looking at the seasonal patterns for lean beef, typically you will see the prices rise. We start firing up our grills in the spring, we have our barbecues in the summer and then right around this time of year is when prices start to fall off throughout the fall and really sort of leveling out to end the year in the winter.

00:08:14:13 – 00:08:34:27
JIM
That has not been the case. So let’s take a look at, you know, what are these prices look like, the rise that we’ve seen this year versus 2014. And you take a look at this chart and it is similar right? We we saw prices rise rather dramatically in July and August in 2014, just as we have this year.

00:08:35:00 – 00:08:57:00
JIM
What we’re seeing right now, and which I think is going to continue, is a similar pattern that we saw in 2014. You’re not going to see this this seasonal break. Prices are likely to remain at or near this all time high level above $3. Again, we just recently set a new all time high on August 28th. It’s written about, which is a new all time high.

00:08:57:00 – 00:09:18:23
JIM
Buy, buy just a bit. Right. And then last week we continue to trade above $3. I don’t see that that breaking any time soon for for various reasons, which we’ll talk about in a little bit. But so we think about if we’re likely to continue seeing high prices for beef, particularly for lean beef through the end of this year, when might we expect to see them break?

00:09:18:28 – 00:09:40:15
JIM
That’s the burning question right now. It is that, you know, if we’re looking at the terms of what happened last time, okay, so we look at 2014, we stayed elevated through December. We were really high in January of 15, sort of leveled out and then sell precipitously with that normal seasonal break in 2015 price start to break in August, September.

00:09:40:15 – 00:10:14:18
JIM
And they broke very hard to end 2015. I’m not sure that I see a similar scenario playing out next year. Right, because I think that we still have some contraction to deal with. And, you know, we look at the kill numbers here, they’re behind. So I think in terms of beef prices, especially on the lean, these trimming side here, we’re looking at some expensive cheeseburgers from here on out and it bears watching to see how we develop through the rest of this winter and then into next year, see when we might expect some relief.

00:10:14:21 – 00:10:47:27
MT
Right. Thank you, Jim, to to kind of move into, you know, what we’ll call a coffee shop talk between you and I, even though this episode has strictly just been you and I, I find it interesting what you’re showing. I find it interesting. What you’re saying is we are having some of the very same topics of conversation on the producer side of the industry, as you very well know, and as you have already stated, we are in a very bullish market and that bullish market is due to tight supply.

00:10:48:00 – 00:11:09:11
MT
Obviously, a tightness in cattle supply will lead to a tightness in meat supply. On the producer side, we keep trying to look at things that will turn this market. We keep trying to find things that will turn this market, but only seem to be stating bullish facts are some of the dynamics that we face on the producer side.

00:11:09:15 – 00:11:12:14
MT
So the same dynamics that are driving the trim?

00:11:12:17 – 00:11:34:00
JIM
You know, I think so. All right. I was thinking about it from from the global perspective. You look at us Australia and what they’re dealing with in terms of drought and their their cattle situation. You know, we, we source a lot of the lean beef trim here in the U.S. from Australia. Well, when you look at that, that’s not showing you any relief.

00:11:34:00 – 00:11:59:23
JIM
In fact, that is likely to contribute to prices continuing higher. Right. So no relief there. You know, another thing that I mentioned before is domestically, our our our kill numbers are down. That’s not going to improve any time soon. I don’t think so. Keep your eye on that as well. Right. It’s dairy cow slaughter drops off. That’s another thing that that’s likely to continue to add fuel to this fire.

00:11:59:25 – 00:12:18:19
JIM
The one thing that I sort of where, you know, it could we could see divergence between what happens on the producer side versus the end user side where things get really bad, particularly next year and it forces perhaps a plant to close because it’s just not worth it anymore. It just didn’t work out. That’s where things can get disconnected, right?

00:12:18:19 – 00:12:42:20
JIM
It is, as we saw in the past, like I said, with COVID, that was the last time we traded in this $3 range with a plant going down or closing. That’s going to put pressure on downward pressure perhaps on the animal side, whereas since it’s again, we’re heading up. So, you know, the last thing I’ll say, you know, perhaps the solution for high prices is high prices.

00:12:42:22 – 00:12:56:13
JIM
Now, perhaps we can see some some demand destruction playing a part here. I’m not sure because again, I keep coming back to the fact that we just don’t have the supply to get prices to move lower right now.

00:12:56:15 – 00:13:33:05
MT
At that at this point, it’s going to be something very catastrophic. And I don’t like to use that word, but it’s going to be something very catastrophic that’s going to turn this market on on both sides. I mean, a plant closure, like you said, will have a bigger impact immediately on the producer side. As far as cattle prices, live cattle prices, but as far as affecting our meat cattle economy as a whole and collectively it’s going to be something pretty catastrophic that would that would turn this market.

00:13:33:05 – 00:13:37:21
MT
So, Jim, again, thank you very much. Happy again to have you.

00:13:37:23 – 00:13:39:03
JIM
It’s fun to be here. Thanks. Empty.

00:13:39:07 – 00:13:59:29
MT
That is a wrap for this episode of Pastor to Pen. Thank you to all of our viewers for watching this episode. If you have not done it yet, hit the Like button. Hit the subscribe button and click the bell to be notified of future episodes. Thank you again to Jim for joining us on this episode. A big thank you to Paige for always making us sound our best.

00:14:00:01 – 00:14:08:19
MT
Thank you to Korri, Hattie and the entire ever.ag insights team for making this show a reality. It’s our next time. Stay safe. And pray for rain.