Cattle Call: Historic cash rally pushes industry into uncharted territory

Added: 2026-05-15

[00:00:00]Welcome to Cattle Call, an original production of the Nebraska Rural Radio Association. I'm Chad Moyer. Cattle Call is brought to you by uh Blue Chip Herofords, the Baldy Maker. And thanks again to the McGee there at Oxford, Nebraska, uh for joining us and in sponsoring the Cattle Call program here again this week. All right, joining me once again, it's Brad Ka and Varlick at Sous Iowa as we break down the markets.

[00:00:24]And boy, do we have a few things to talk about. We've got international meetings.

[00:00:28]We've got a bit of a rebound in the futures, a a cash market that all of a sudden decided to go on fire. But, um, I I wanted to start first of all, when we recorded this last week, we were in the midst of kind of a a hiccup or uncertainty in the futures. Uh, futures were not following cash. Did we ever figure out what spooked the futures market last week, Brad?

[00:00:54]>> Chad, thanks for having me on. It's um yeah, it's buckle up, you know, put your seat belt on um for the ride for sure.

[00:01:02]Um but we're being part of history here.

[00:01:06]Uh never had a a cash market this high before. Um to your question, uh because it's relevant today yet, I think. Um so, um last Thursday, uh we were looking at um this meeting between uh the president of Brazil and President Trump. Um and the market quickly jumped to the conclusion that this was going to um end up in a in a change in policy in terms of so there's a quota system when you're doing import export business uh and and whether bananas or beef, okay? I mean there's there's a there's there's many different kinds of quotas. Uh there's a quota there. We might as well just come out. It's Brazil that we're worried about in terms of the the cattle thing.

[00:01:52]Uh because we import so much beef from them already and they're a huge beef producer, bigger than us, by the way. Um and and um so the worry was that we were going to come out of that with the the kind of the leak of the story was is that um and that was I think a real leak uh came out of the Wall Street Journal uh that the administration was considering um moving taking the quota thing taking dropping the quota system alto together which would mean that you could then drop the 26.4% tariff that is being charged for beef that gets imported from Brazil.

[00:02:25]26.4% 4% to be exact. So, you know, we're getting a bunch of it already, Chad. I I I in my own in my stomach, I'm going like, is that even going to make a lot of difference? Because we're taking it no matter what the price was. But I would suppose the market within was worried about the uncertainty and algorithms uh fund manager dude that's sitting in New York City, you know, he's going like, "Wow, geez, I don't know if I want to go swimming in this playground here anymore, right? I mean, I I you know, all of that uncertainty." So then the administration came back and said no no no we're not nothing immediate you know and then then they came back the following day and said well he's going to explore all possibilities of maybe an executive order uh to try to u uh bring the price of domestic beef in line. I this is all in play and this is probably still in play for this weekend too. So uh that was last week's fiasco but at the end of the day cash proved itself once again last week and again yesterday. Wow smoky.

[00:03:21]>> Yeah. So, this discussion about the quota system in Brazil, does that have any connection to the trade discussion that's happening this week with uh with Japan or excuse me, with with China?

[00:03:34]>> Well, I'm I'm probably reading between the lines here, Chad, but I I'm going to anyway. Okay. So, I these trade negotiations, right, everybody wants to come out and look like they're the winner uh or look like they've done something. Uh I think President Trump recognizes that he certainly absolutely needs to have some sort of a win for agriculture. Um you know between the cost of fertilizer or the lack thereof because of the inflation created by energy cost um low commodity prices for grains. Um I I think that certainly he would understand that he needs to have a have a win of some sort. I that's why I wonder I you know the the it sounds like the context of the thing with China is is that they are going to relic these plants. I think there's almost 400 of them um so that they can reissue the ability to buy beef from those plants specifically but from the US in general. Um now and I think that that is the done deal. There's it's some ambiguity with Re Reuters reporting it and stuff but I think that that's where we're at. So I'm wondering whether, you know, on the one hand if if you would look at if Trump would say, okay, that see look at look at this good deal I've got. We're going to be able to export beef to China, which we don't have enough of. So I don't think we're going to export very much. Okay, not right now until we have some more. Uh but on the other hand, we got to do something to control this domestic price, especially of hamburger. uh and and whether that might be a you know, do those two stories fit together then that then we're going to maybe look at formalizing exactly what we're going to do with maybe relaxing some of this stuff with Brazil? I'm guessing. Uh but that's uh that's kind of where my my mind turns into here. We'll see.

[00:05:13]>> All right. Uh so let's go back to last week's markets and then connect it with what's going on this week. Uh last week you told us, hey, we have to be cautious. it it feels like the uh futures were running out of gas and uh you know the cash market the basis was going to do a lot of work. Do you think uh now where we sit this week um was that a a fake to the downside? Do you still feel that way? Uh especially with uh again early week trade and a lot of trade that's being put on the books for quite a few weeks out, huh Brad?

[00:05:45]>> Correct. Well, um, yes, we talked about the the that a lot of the work here is going to be done with basis. In other words, cash is going to probably outperform futures. And, uh, you not not not that I want to be that guy, but June cattle are a long ways from the well, June cattle have not made new contract highs at the same time that the cash market has basically put on what five to eight dollars in the last week and a half. Um, so, you know, we were right.

[00:06:10]Okay. This last part of this move, well, I've been saying a lot. Yes, I think we're toward the end of this move. Yeah.

[00:06:18]Um I I look at a 388 box beef deal and and 265 cash and I I think well somebody's going to have to give here.

[00:06:27]You know, I can't imagine that that that a Packer is going to and I don't feel sorry for them, don't get me wrong, but you know that they're going to look at their bottom line and have to decide who's going to close next. Um or you've got this whole thing about, you know, potential screwworm case or maybe this Brazil news is more than than than the market can bear. And so then you chase the long speculator. That's, you know, from a future standpoint, that's what I worry about that he loses confidence in the uncertainty and he gets tired and beat up. I mean, if you're trading this thing every day, you you go home beat up. I mean, it is volatile uh from one day to the next in huge trading ranges.

[00:07:01]So, but cash thing feels extremely good.

[00:07:04]I love the fact you mentioned it, but we had cattle yesterday that got sold for the week of June 12 for 265 almost a month out. Now, if you're a packer and if you think you got any chance of buying those cattle cheaper, you don't go a month out. You know, I mean I mean I don't think you do. Uh so it looks to me like the perception the reality is is that there's still enough cattle to go around and uh you know I think we the leverage remains in the in the in the firmly in the hands of the feedard. Um, and this kind of uh lends to our first question, this uh listener question that we had over the last week. You mentioned it before. You know, we're we're getting up here into kind of the nosebleleed section where we haven't been before.

[00:07:44]Um, the question that we received over one of them was uh with inflation and all of the things tied to that, fuel, fertilizer, interest, labor, all of that. Uh, where we're at today, uh, if you factor inflation and all of that, is is that where we were in 2014? Can you call it an all-time high when you factor all of these other things in? Brad, >> over my skis here. I I you know, I I I apologize for maybe not having done a a little more uh research. Exactly. I we used to keep track of a and and we quit doing it because I guess the relevancy of it seemed to be lost, but it would have been a perfect answer to this question. We used to keep a graph of of um and I can't even remember what the what the all the components were. One was a new pickup. by now. And then one was the price of diesel fuel um seed um and then what cattle were worth. There was like six or seven different deals and uh you know at in 14 was the really the first time that we'd actually kind of gotten to a fair value um compared to a lot of the other stuff.

[00:08:54]Now, um, one of the more interesting and more probably more, um, uh, fundamental, uh, ones that some of us cattle people used to and still do is, how many cabs does it take to buy a new pickup?

[00:09:09]Uh, maybe that's the maybe that's a a fair, uh, you know, 2014 representation.

[00:09:15]Um, you know, new pickup now is over 80 grand, at least one that's that's um, equipped, you know. Um, so even with a $2,500 calf, you're looking at a lot of calves. Uh, and and I and I don't know that that is uh quite even comparable to where we were in 2014. So I I I think it's a fair question, but my problem as a as a someone that's trying to guess where the market's going is is I gently would remind us that it's not up to me.

[00:09:47]It's it's it's if if I if I'm selling cavs, it's up to those 10 people in the sail barn that are bidden deciding what they're going to be worth, right? Um and and if if I'm selling fat cattle, I'll guarantee you I'm going to try to sell them as high as I can, you know? Um and the packer is going to try to buy them as cheap as he can. And and and and where the two meet, that's what the market is. And so we're price takers.

[00:10:11]We're not price makers. I'm I'm not a trucking company, okay? That can say, "Ah, shucks. I didn't buy any fuel ahead. Now it's too high. So, you know what, Brad? I'm going to charge you an extra 30 cents a mile because that's what it's going to cost me because fuel went up. Shoot. I mean, there are industries that have the ability to just tack on this cost, right? I mean, and and uh that isn't the way the cattle thing works. Uh but it's understandable question and and I think worthwhile talking about, but at the end of the day, we're going to try to sell them as high as we can. I mean, that's kind of the way it works.

[00:10:43]>> Sure. A and then the second question we have uh kind of goes right along with that. You know, you talk about fuel prices hitting the pocketbook as hard as they have over the last few weeks here.

[00:10:52]Uh and um you know, what what does the future look like? So, what is this going to mean for the restaurant trade and premium beef and and things like that?

[00:11:01]What is that going to mean for us in the country? Um are are boxes an indication that there is a break point here? You know, what do you what do you think of how beef is going to be treated in the marketplace? I think I think you're spot on. I think this is a very good question and I think you're you're you're you're touching on what it's important. Excuse me. Yes, boxes were down $2 yesterday.

[00:11:26]388.68 on choice. 38858 on on select. A dime difference between choice and select spread at a time when the choice select spread always gets wider in May.

[00:11:36]Always. Uh at a time when the boxes always rally in May, unless you got something wanky like CO or something.

[00:11:43]Okay. Well, it actually went up then that too a lot. But um so yeah, it if this this I think the energy thing is is is is a significant problem in terms of the demand because most people have to put gas in their vehicle to go to work. Okay. I know, you know, I know people in Chicago that ride the train.

[00:12:04]Yeah. I blah blah blah blah. But I mean this is still a part of uh whether it's going to work or whether it's making vacation decisions or whether it's making all these things and and and when you're talking about something on a fixed income that's that that that uh the first one of the first things to go typically is something that is uh is elastic demand and elastic demand would you know a high price trip to a steakhouse. Um, both the trip there is high priced and more high priced than it used to be, but the what what it cost to to to do to do that there too, it's I think that's part of the push back on this choice demand um that you're seeing a consumer that's that's stepped away from it early. Um, now the one thing I would tack on here though that does soften this blow just a little bit is that and that's the one positive thing that I can think of that happened with CO and that you move the the needle a long ways from HR trade, hotel, restaurant trade back into the the the the typical consumer uh where you go to your favorite grocery store or whatever big box store, you buy your steak, you cook it at home. That changed a lot during COVID. So, you know, I I on the other hand, I saw New York strips advertised uh here choice for $11.

[00:13:21]That's not high, you know, but that's also a little scary, Chad, because that would tell me that they'll sell it also as high as they can, you know. So, I I >> And if it's not selling for 14, it's they're going to try and sell it for 11, right? Yeah.

[00:13:33]>> Exactly. Because it's it's a perishable item. Absolutely.

[00:13:37]>> Yeah. Huh. Interesting. All right. So, I I guess we've kind of got to the point maybe we can uh what the the what was the feel of the cash trade for this week, you know, uh because we we had a few unique things happen, right? And we touched on a couple of them, but um as we wrap up the conversation for today, I guess what's left to take care of?

[00:13:57]What's kind of the feeling as uh we're in the last couple of trading days for the week here?

[00:14:03]>> Well, it feels like the actually the trade is is maybe not done. Um, even though it was pretty explosive yesterday, I think there's probably going to be a little more business. I I don't think it'll certainly don't think it'll be any worse than than 265. Maybe even get a little bit better. I get a sense that one of the majors still needs quite a few cattle. Um, so maybe we're even going to, you know, approach 66 or something like that. I The one thing that I thought did change a little bit this week, Chad, you know, you and I have talked about a lot about, you know, this holding action type rally. you know, I mean, where we're making these cattle bigger, the replacement costs are high, and you know, these calves that are just barely fat that we probably weren't going to be very aggressive in May. Well, I feel like we we might have we might have changed that a little bit here this week because I mean, especially with the guys that are selling cattle for the week of June 12, you know, I mean, so I feel like we've maybe moved our needle to being a little more current. Um, which is also positive. Um, I guess I'll go into next week, call the market higher. I don't know if we can keep jumping five bucks at a crack here. Uh but until you get some other, you know, bad news whether either a slowdown in the kill or something else. Um I would guess that we'll onward and upward on the cash market here for a little bit. Chip.

[00:15:15]>> Yeah. Well, and you mentioned the kill too because I've been noticing that you know we've always been just slightly below the week before. I think was it last week and this week maybe we were actually just a little bit higher in the kill number. And uh uh again that goes back to the high numbers. The consumer is being very thrifty with their dollars, but the packer is still out there filling a demand, aren't they?

[00:15:41]>> Well, if you're and and again, you you know, I'm I'm not I'm not a I'm not a packer lackey, okay? Uh but if if you're if you're a backer right now, this is a problem because you've got to be a reliable supplier to these people that you've been a supplier for forever, right? You know, whether it's a steak, restaurant chain, or whether it's Costco or whatever it is. So, they're in a bad deal here. I mean, they they they've got to get some blood on the floor because they want to be a reliable provider of beef for their consumers. And on the other hand, they know that everything they're killing is going to lose them money. So I I uh uh especially in May, it's very unusual.

[00:16:20]So, but at this point, I think, you know, we've talked about it so much, but you know, really when you're talking about a market, you can you can take it down to one word, and it's leverage, and that's where it's at right now. Uh there's not enough to go around uh until somebody slows it way down. I I thought it was interesting, too, the uptick in the kill because you had a couple of packers not so very far from where you are, uh that were killing four days a week, and then they went to five days, uh for for a couple of weeks there. And that's reflective of the kill now. I think they're going to go back to four four days a week next week again. But so stay tuned, buckle up. It's a wild ride.

[00:16:53]>> Sure. And we're just on the beginning of the summer grilling season, too. So, uh, this is going to be an interesting story. For folks that want to talk to you and kind of go over what's going on, certainly love to reach out. Right.

[00:17:03]>> Absolutely. The website's kkbtrading.com.

[00:17:06]Uh, but, uh, we'd prefer you call uh, either me or one of the three other brokers here, 712-7220023.

[00:17:14]Boy, there's a lot of storylines that we got to follow. We're going to keep doing that. And uh by all means, put your questions in the comments below and we'd love to uh visit about that, talk a little bit about some of these things on the cattle call program. Thanks again, Brad Kimma, Koma Koma and Varlick there at Sue Center Iowa. And uh thanks to Blue Chip Herfords, Blue Chip, the Baldi Maker, again the McGee in Oxford.

[00:17:36]Appreciate the sponsorship of the cattle call. Again, make sure you put your comments in the uh in the uh uh uh comments below. Put your questions in there. We'll come back and answer it on Cattle Call. Have a great week. We'll see you next week on Cattle