Episode Transcript
[00:00:00] Speaker A: All right, folks, you asked for it and here it is. This is part of our short miniseries here to finish off the month of June, but we have two more episodes. We got Brian with Bullseye Marketing. I got to record his session at the grower event with Cows in Control.
Great group of ranchers there down in Madden, Alberta. So this is it, guys. First of two cattle specific just for the podcast listeners. This one's not on YouTube. Let's get after it. Episode 131 coming at you right now.
Hey, folks, welcome to the what the Futures podcast, your quick guide to better farming decisions.
All right, folks, we continue our short series here.
Well, it's six episodes, a little shorter than what we usually do, but this one, this one, episode 131 is a little bit of a.
That's a good one, folks. We've got Brian Perla. I'm French, I want to say Perrier is what I want to say. But Brian, if you listen to this, he's from Bullseye Marketing. Hopefully I got that right one way or the other. Okay, buddy. But I got to hang out with Frank Copperthorne. He put on a great event down in, in Madden, Alberta here in the middle part of June.
And Brian was. We're thankful that Brian let us record his presentation.
This is an audio only podcast exclusive for what the futures. It's about cattle marketing. It's those of you on the, on the ranch, on the farm, you know, maybe you're a cow calf operator. This is for you. And so this is the first of two of these recordings again recorded what, June, what, 18th, I think it was in, in Madden, Alberta. And I'm going to just turn it over here and let Brian take it away.
So enjoy. And here we go. Brian with Bullseye Marketing.
[00:02:02] Speaker B: Under the most optimistic scenario, you're making 2,500 bucks. Right?
So basically there were bread heifers selling for $8,000.
So under the most optimistic scenario, you're gonna break even, is that kind of right? Right. So that's where back to these overhead costs and what you're paying.
There are heifers trading out there for significantly high prices. And you know, there's some bullishness out there, but just realize what that does to your probability of being profitable. Just goes down quite a bit more. So I just kind of an $8,000 bread heifer was kind of some tops and sort of funny how that number worked almost bang on to $8,000. So I got a little bit of, you know, it was good watching. Brennan obviously does a great job Covering a lot of stuff. Obviously there's going to be a little bit of overlap, so I'm going to maybe flip through a few things rather quickly and then I can light it up with those spreadsheets. Nobody can read here, so I'm just going to warn and apologize ahead of time. I got a few more of those, so hopefully I can explain them and such for you. But.
And then I got a few other notes I was making, so a little bit off script on my presentation, so I'll get into it. You know, Brenno talked a lot about Canada and myself, I really cover a lot about US When I give my outlooks, I sometimes get criticized or like, why is it all so much U.S. information? Well, realistically, like Brenna said, you know, we're the fly on, on the back of the US Industry. They have about eight times the number of beef cows, eight times as much beef production as US So assuming open trade and open borders, which, you know, cross our fingers, we're we're going to have for, for, for an ongoing future here. You know, they are the driver, they're the trends. I'm going to really talk about the, the supply trend is really what drives your price trend. So that's what I want to key in on a big part of this for our presentation. And so, you know, the beef industry, this, the blue bars, that's the number of cattle in the United States and the red bars production. So you can see we've done a phenomenal job of producing more beef from less cattle. You know, that's total cattle, that'd be beef and dairy cattle. And obviously, but the markets do work. We got, this is 2014 dip, this is our current dip, a little bit slower but still a, a fairly large drop.
But the markets work. You get less beef, less cattle, we get higher prices. So when the trend changes, we get more cattle, little more beef. We'll probably be looking at some price pressure here, but when is when is the key question.
And I talk about production here too. And things have changed a little bit around production versus supply. And I want to touch on that. But you know, as we come down, you know, the US hasn't grown their herd.
They're in a kind of a more stable position here, as Brenna said. But we are watching if they get the moisture, the market conditions are there for some expansion. And when that trend starts to change, that's the big beware thing. If we look at this 2014, 2015, also when we came down in production, US market futures peaked in the fall of 2014, our lowest production was still in 2050.
So the futures, the markets are kind of anticipatory in terms of if there's more, more beef on the horizon and you know, the markets may start turning that corner ahead of time. So just because we haven't quite hit our tightest supplies and tightest numbers doesn't mean the market's going to go higher. It's priced in all of the optimism into the market here. So just some food for thought because I know we are all a little bit hesitant about the 2016 kind of crash that that occurred there. And that was in a very, an extreme pullback in the market and in a cycle high to low to happen that fast or by that dramatic of a percentage. But, you know, this so far looks to be much more very moderate if any expansion occurring yet. But get a whole bunch of rain with these prices. We got to be aware that just how aggressive they may retain heifers. So a whole bunch of unknowns. I hate to be a guy talking about cattle markets based on a weather prediction because you've got two predictions that are two guesses. But those are just the big factors we got to watch. Talking a lot about, you know, we talk about cattle imports as beef on dairy sect semen. What does this do to our beef supply? So obviously, you know, the US dairy cow herd has responded. This is a 25, 26 here and this is 2014, 19. Hopefully you can read most of these numbers. But just to show, I think one thing actually to going into 2026, there was a feeling there may be a few more breeding animals in the United States. But we actually, if you take all of the beef and dairy heifers and cows expected to calve, they were just moderately lower. So basically a wash like flat. So that was a little bit of a market bullish, a little bit in the fact that, yeah, we didn't actually have more breeding stock coming into the year. The big jump was dairy cows, though. So they went from 9.38 million dairy cows to 9.56 or 9.57 million dairy cows. So they had one of their biggest jumps in dairy cows in years and years. And partly that's due to the beef on dairy and the economics on the dairy side. If you look at what their baby calves are worth and what their culled cows are worth. So we break that down into the number of females expected to calve. You know, this year, almost, almost 40% of these breeding females in the U.S. were dairy.
It's just a Reality, it's just a fact. It's you know our feedlots and all those, they like those catt it is, you know, they're probably going to continue to be a bigger proportion of, of the cattle numbers. If we go back to 2019, which was the peak in beef cow numbers in the United States, the dairy herd made up of 35%. So it's quite a big jump in just seven years. If we go back to the previous peak low, the 2014 kind of low in, in the breeding herd we were at 38% dairy. So from peak cycle to cycle, you know, they've gained a couple percent.
Just kind of some food for thought. But these dairy numbers are going to make a difference. And the other one that really adds to the supply, it's not just the dairy cows, it's the survivability of this. We deal, we have a dairy division and you know, the amount of research that goes into calf birth and colostrum and all of the process of saving a baby calf now, you know, when I was years at, when I was at Canfax or Texas, they euthanized baby bull calves, baby bull dairy calves, they were worth nothing.
So now they're worth 15, 18, $2,000 a piece. There's a lot more of them surviving and making it to, to the slaughter plant these days. And the veal industry shrunk. So that percentage has kind of boosted the amount of dairy cattle in the system obviously.
So and, and if you, and again not, not terrible. You know, we see every cycle we have less, we have the long term trend of beef cattle numbers declining is a fairly strong trend and likely to continue somewhat.
The other thing is Brenna said, you know, everybody's well aware we're growing these animals huge. You know, we feed them longer, we feed them bigger. If we look back at 2015 versus 2014, our breeding herd is down 4%.
Steer carcass weights are almost up 10%, 9.4% bigger. So again, despite less cattle around, our beef production was up quite dramatically. And now today our beef production is still down somewhat, but it's still, it offsets a significant proportion. It's beef production is not down nearly as much as the cattle herd.
Not really anything new. But that's, you know, when we look at the cycle, it's not just about cattle numbers but it's the supplies of beef. Couple little notes I will just throw in on top of cattle on feed. It is amazing. You know, if we look at Canadian Alberta cattle on feed, I think it was up 15%.
This is for June. This is May 1st. So our June, the reason I left is May is the US cattle. It just came out while Brenna was speaking.
It's up 2%. So the US has more cattle on feed. Canada has more cattle on feed. We've slowed down the system in terms of the throughput through these, through the turnover rate of the feedlots both on growing them bigger and more beef on dairy cattle. So again as we head into the second half of the year, we're going to have more cattle and that's a bit of a trend change as well.
I think We've gone a year or two of consistently lower cattle on feed. We now have more cattle on feed in both Canada and the US So something we've got to watch heading into the second half.
Brennan talked about Screwworm. I don't think too much more to add, just remain. You know, they, they did have a significant 4 to 5% of the US Fed slaughter was Mexican born cattle. So you think we had the tightest, smallest cattle herd in 60 or 70 years and we just took out 4%. You know that definitely was a positive shock to the market. Doesn't look that the border is going to change, but it could change. Well, likely will change the flow of cattle. You know, Canada banned, you know, we don't allow any cattle imported from Texas with screw worm while we only imported about 6 or 8,000 head I think came out of Texas last year. But as that screw worm moves north this summer, that could impact where we can import our feeder cattle from.
So just wanted to add that comment because given the wildlife and movement, it probably get to other states. I would my guess and the big one out of all this, I talked about, you know, beef production and I got to watch about beef supply. We talk beef production is down across North America, but production is not supply.
As Brandon said, we've become massive imports. Canada, the US So we look at that same red line here in terms of what we're producing. And 2022 was record large beef production in the U.S. there is more beef available in the United States today than, than ever or I don't know if you'd go back to the 70s, but anyways, in recent history we've got extremely massive amount of beef around. So what that talks about, we really focus on supplies all the time. How many cattle, how many around. But this is a demand story to look at where the retail price of beef is today. And we're consuming just as much on a per capita basis as you know, the peak in 2022. It is phenomenal, phenomenal demand. So I know Sean asked about, you know, what's the. One of the risks to this? It's absolutely is demand side of this.
And you know, with these. Brazil potentially looking to move more beef in here, we're going to continue to up supplies possibly.
And Brazil, you know, it becomes such a force. If we look at us forever or for years was, or maybe forever was the largest beef producer in the world.
And Brazil has just made phenomenal leaps and strides on their beef production. They surpassed the US and you know, there's some talk whether they're going to grow this year or shrink like Brennan was talking about. It's hard to tell of what's moving forward. But they've also become. They have a lot of opportunity for improvements in efficiencies.
You know, they've started more cattle get fed. They're not grain fed, but they're fed in feedlots. That speeds up or shortens their life from birth to being slaughter weight ready. And there's areas that aren't the heat and. And the hot weather. You know, there's areas that they're not very efficiency in terms of their results. They may only have 60% of their cows get bred in certain regions. So they can move some of those productivity factors forward. You know, they don't necessarily need to move or increase their cow herd a whole lot more and still get some pretty big beef production boosts out of there. So for a while, there's a lot of people saying, you know, that's not sustainable. You know, you're eating into the factory. But with some of those other improvements on the feeding side and herd efficiency, you know, it's not like they're going to have a crashing decline in terms of their beef production. So that's production, not numbers. That's production. This is the total. Yeah, yeah, sorry. That is production. Yeah, that'd be. That's good. Geez. The units aren't on there. I kind of cut and stole that. But it'd be tons, billions of tons, I guess.
So they have surpassed us. What happened in Brazil that made that mine do that? Well, someone. One of some of the reading I had was about the feeding side of it. They put cattle on. A large number of cattle were getting fed for about 100 days.
So that brought a whole bunch of those cattle that would have gone out on grass for like, I don't know how many months or whatever, they suddenly go on feed. And that can kind of help pull those cattle forward. In terms of getting, getting higher productivity out of that, you know from a herd productivity and a feeding side of it supposedly was a big part of that and trying to improve their herd efficiency. But yeah, it is massive. It's. Yeah, it's, it's, it's, it is a big, big shift. So, so hence, you know, in China all, you know, they were getting huge signals when China was pulling on, you know, so much of their beef, the signal was there to produce more. You know, even like Sean was saying how fast Brazil does stuff is pretty amazing. But would there have been like big subsidies, that sort of thing?
[00:15:09] Speaker A: You don't.
[00:15:10] Speaker B: I couldn't tell you. Yeah, I don't know.
Don't know. Could ask later. Let's see if the other guys have better answers than me.
No, yeah, I don't think it would be so. I don't know. There's the exp. But that's more Argentina and stuff, they put export tariffs and stuff. That really distorts trade. I don't think there's any of that in Brazil either. But get back to that or bring it up again.
Global meat consumption same same kind of globally, you know, beef's been pretty flat. But again the China effect of all of this, the wires, demand, you know, the demand for beef and, and supplies. We've been a big magnet into North America but certainly that demand picture from China where they're basically non existent even in the last cattle cycle to where they've been a big importer. So they've pulled beef again a lot of out of South America. But if anything happens around demand and partly those tariffs and imports of Japanese beef or Chinese beef, sorry, that impacts the demand side of things and puts us at a little bit of risk. That beef has to go somewhere. You know, here's just another chart same. This is just showing per capita consumption as I show in the previous chart. That's not the whole picture. Looking at total supply, you got to look at per capita basis. You know, 2022 we ate 59 point or we again, this is still us. Brenna covered Canada, but 59 pounds of beef per capita again in 2026 where prices are so high we've shrunk our herd, we're still eating just as much beef right around £59.
And here's what the prices are doing. You know, we're. This is from the index 50% or 150%.
So 100% is over double. Right. So in terms of what the price of beef has done since 2010 compared to pork and Poultry. So this is very much a demand function when we're eating just as much.
And again, we've got to be aware of just how strong demand is and what that's supporting our price wise. And we haven't seen much substitution. You know, luckily. Yeah, well, luckily we've, we've seen pretty consumers really have gone rather than go from a steak to a pork chop, they've gone from a steak to ground beef.
And realistically, some of these imports that help, you know, the lean trim as we grow these massive carcasses. There's a lot of 50% trim out there which is half fat, half, half lean chemical beef. So we've got to blend that in with imported beef. But that keeps the consumers eating beef.
So, you know, to a point imports. But we don't want to get completely flooded by imported beef either. And demand has been strong, as Brennan said. Yeah, the, the cutout this spring has been disappointing. We did not see much of a rally in wholesale beef prices into kind of the prime demand season. So there is a bit. Yeah. And retail basis prices were off slightly in, in May.
So again we're, we're, we're seeing some pushback at the consumer level in terms of where these retail prices are. So we basically, we've been on a very strong trend of higher prices is at the retail level. Is that trend potentially changing? Because that will have implications on all of us.
I guess I'll say it now is if we look at why we've had the perfect storm for producers is when you have a small number of cattle around, packers, everybody, feed lots, packers and the retailers are all aggressively buying limited domestic supplies. And on top of that they're getting extreme, well, record, record high prices. So when you have that tight supply and record high demand, the number, the amount of the consumer dollar ending up in the producer pocket is obviously record high. Hence we're getting $4,000 for our cabs.
So again we, it's hard to say how much more we can kind of stretch that elastic band of passing those dollars down because right now packers are not making money. Their margins are negative. And we may a lot of people say, oh, we don't good for the packers or we don't care about what's happening. They've shut two. There was just another packing plant closed in Pennsylvania in the United States. We don't really want to lose packing plants or feedlots.
And hopefully, you know, that was the, that plant that closed in Pennsylvania was a fairly big or an important outlet for Ontario fat cattle. So if they lose that buyer, they help. We know how important they are to have arbitrage for the Ontario guys to send fats, you know, otherwise they're, they're kind of stuck. Which is Guelph as the main buyer in Ontario. Ontario buyers have been aggressive on our calf markets this spring for or this summer for fall delivered calves. So any hiccups in losing that packing plant and you know, Ontario feedlot confidence could be negative to our markets here. So the packers losing money is not, is something we've got to watch and they will correct it one way or another by either closing them or getting prices down.
Especially where we're not. They're having hard time pushing the cutout up. So.
And hopefully in Ontario there will be another G that was a JBS plant if they could still divert some more cattle south because they do need that arbit to have that outlet. But got to be aware of all those things. And we've seen, you know, cull cow price is phenomenally strong. Ground beef, as I said, as good as beef demand is, usually ground beef is increasing even faster than the other beef products. So, you know, as long as ground beef stays strong, cow prices stay high. And there is that risk on the import side of how much of this lean beef is coming in and what will that do to. To lean 90s because if it does start impacting our lean trim prices, that will hit our cow prices.
Brandon talked about Canadian inventories slaughter chart. Feedlot capacity is very interesting one. You know, if you look at our, our cow chart, you know, here's our. These are cattle numbers. We had 4.2 million beef cows prior to BSC. You know, we got over 5 million an hour, closer to three and a half million beef cows. So we've. But it's been a disappointing, you know, run in the beef and it's been over 20 years of a declining herd. You know, hopefully we can change that. But despite the fact of what these cattle numbers and cow numbers have done, we've done our feedlot sectors about as big as it's ever been. It's interesting, as cattle feeding has moved north, the question was asked about, you know, competitive advantage or supply or how we're importing all these feeders and it is a head scratcher, to be honest. Yeah, you're importing cattle and you're importing feed. It's, it's. Yeah, it's not a real easy answer. I know some people in the US have asked what's going on and it's really hard to say how much Are we speculating because they've made a bunch of money? Are we just speculating that much more than the US Feedlots? Maybe a little bit too. I asked the feedlot guy that. That very question and his answer was because they're cheaper down there. The cows are cheaper. Yeah, well, yeah, that's the very simple. Yeah, but why are our prices so much higher than the US Is the, the, the question there? So. And it's more complex than just the currency exchange. Yeah, no, we're, we're comparing in Canadian dollars because you can go down and pay the. You convert it all, bring them back. Yeah. You land them cheaper in Canada or. Sorry. Well. Or they're cheaper landed in Canada than the local cabs are.
It is a. It's. Yeah, it's. It's a head scratcher for sure. You know, some of the big Canadian feedlots that have moved south, the reason they've moved to the U.S. is they say the U. S. Market is a more disciplined market.
It's easier to make money feeding cattle in the U.S. that's why they move their money down there. One of the biggest feedlots being built is being built in the US By Canadians. And what. Yeah, the one, the one US Guy I was talking to, he's like the only thing I can see is just one big speculative game in Canada. And it kind of is. So we just need to be aware of, of that and the discipline. Are we counting our cost? I think there's a little bit of that. Those US Feedlots are much more.
I got to be careful what I say here. But you know, they're very.
I don't know, they're more business oriented. Some of those big feedlots just want to make that little bit of margin, but if the margin's not there, they back off the market. The futures go down in the U.S.
the feeder market's fairly responsive and it goes down in Canada, has this mark. As our futures go down, our market just stays flat. So go ahead. Would you say that they're more comfortable leaving a pen empty?
I don't know if I know that good enough. You know, I can't honestly say I have talked to a feedlot. Good. Really good question.
Really good question. Are they willing? In Canada we have more of like a. Like I got pens, I got silage, but I gotta. We gotta go. Yeah, I think they're more. I would say so because you just see they're more disciplined because I stuff. I was reading some big feedlots that had yard, had More a lot of empty pens. But they'll go do the math, buy the cattle, buy the corn, buy and do a. If it doesn't work, they, they step back till the market corrects. So I guess indirectly I would say that. But it's, it's a, it's a head scratch. Because look at our feedlot capacity here is growing. Now we got to remember beef on dairy. These guys that bring.
Is there an efficiency there? They love them. If you're a feedlot and you fill up with beef on dairy calves, you're good for a year, right? Those calves are on feed or that pen is good for a year. A lot of those cattle have a birthday in their feedlot.
So we do need more feedlot space. You know, traditionally a big feedlot would want to turn their feedlot at least twice a year. So you've got a 20,000 head feedlot turning it twice a year, you're going to kick out 40,000 fats, you're bringing in 20,000 beef on dairy, you're only kicking out 20,000 fats.
So that's half as many. Right. So you're going to need more feedlot bunk space. That's part of it. Feeder imports required. Obviously we talked about that. Half a million came up last year. And that corn game is big. You know we, the. Some of these large. If you got 70,000 head of cattle on feed and you're, you know, you don't necessarily know where you're bringing in that barley from day to day or month to month, that's, that's a pretty big risk. Now that we've got line companies bringing in corn year round. These feedlots have, you know, some of them put in steam flakers corn steam flakers, they're 100% corn. That's, that's the, that's the go to. But that takes that risk away from them for having a procure, procure grain and they can hedge corn better than barley because there's no futures market. So that business mentality there. But we'll have to see how much is speculative to this point or what kind of basis deals they're doing or whatever's going on. But it's a very interesting phenomena. But the beef industry, it's a bit of a good news story. We'll have to see how we weather the storm when the market changes. Any idea where the percentage of calves that end up as grass cattle as opposed to in the pilot is changing?
Good. Like just from our domestic supply?
I don't know. That's a good fire chart. We'll save that for the fireside because I'm not. I'll give me some time to think about it and I.
They're not very grasslands I was going to say probably declining hey a little bit and. But you know, I don't know, 10 years ago there's all these guys were getting out of cow calf to run yearlings.
So you know, it's. I'm not sure we can think about that for a few minutes here. Brenne. It's covered grain. Yeah, bark corn sure has tanked. You know they're basically the end of the day. There's a lot of feed grain around out there. So that bodes well for our, our cattle market for sure.
Canadian dollar, obviously that's a, you know, it's a huge part of the market but we hardly talk about it because it's just boring and not doing anything because it sits basically between 70 and 74 cents which is not a bad level from the cow calf perspective. You know, we took a bit of a hit with kind of the recession talk in Canada and a lot will depend on the US dollar and politics and war. But basically, you know, it's interesting with the, the war went on, oil shot up and our darling, our dollar barely budged. So the whole oil currencies become a little less, less connected. And that's been happening for a while. But just I think I have a slide or a few numbers on just how big that dollar is. But just to keep in mind it's been friendly to this market as well. So I do have a few charts futures markets. You know, usually I ask how many people follow futures. I'm sure with Ryan's guys, he's got everybody's mostly following futures. But you can't stress enough about. Again back to the trend.
The trend is your, I might say it but the trend is your friend. Until it stabs you in the back basically is how I look at the markets because it sometimes takes a pretty harsh turn on you when after it's been going up for so long. But just remember, you know, here's feeder futures and these are calf prices. I think the cattle industry is, is getting a little more, more familiar with futures but they do, they're based, they're traded in Chicago, they're US currency. You know anybody in the dog can go trade futures but they do are a huge tool to be used for, for marketing for outlooks, maybe some risk management side of it, doing some price projections obviously. And I like to use the futures because again there's no emotion. These, this isn't really my opinion. This is thousands of people trading futures what their opinion is on. For the futures for September 2026 what's an 850 weight steer going to be worth? You know the feeder futures and this is where you know we have. There's different opinions out there and you, you may say this is too low or too high but we just do the math with no emotion. Feeder futures just yesterday were 366 almost Canadian dollar was 71 and 3 quarters.
I used a minus one basis. Come fall our 850 weight steers are pretty close to par with the US in terms of our cash to futures. Our cash price relative to futures is pretty close. So that gives you a 509 price on, on those 850s. Definitely lower than you know the seasonal like Brennan was talking about.
But again this is the futures what they're projecting based on supplies and demand in their, their scenario. Just remember though.
Oh gosh. Not gonna have a. What just happened a couple weeks ago.
Yeah it would have been the screw worm announcement and God you, you lose track of the big events but yeah I think it was the one. Futures were 335. So they hit this low. They had a crazy. Yeah it was a screw room got announced.
Futures had come off with the speculation that or worry of it coming across.
So okay when it actually got announced it came down and now we've just fired back up basically. Not, not a whole lot is really changing because of it. And you know Brenna said the media, everything's gone over quite smoothly but just by doing some math around that those futures that day would have been at 335 kind of that low was 466.
So there's. That's a $365 per head shift in the projected prices if you're using futures. So you might say well why are you using futures? It's, it's a guide, it's a tool. But I think the big part of this is be prepared for some volatility. I think Ryan's going to talk about some risk management stuff. So that's huge. 365 bucks ahead swing there. And yeah there's going to be a lot of volatility and at these kind of prices, at these kind of high levels of prices the percentage change has become huge. When we're talking a four thousand dollar calf, a 10% change, it's 400 bucks.
Used to be 10% change was 60 bucks or $100. So changes you From a profit to a loss in a hurry. Interesting one on, on.
You know Brenna had some terrain changes I think 25, 26%. You know they're historically from a cattle cycle perspective.
You know one of the things we look at, you know typically we talk about a cattle cycle 10 year cycle can run eight to 12 years. Well we've been on a six year uptick in prices. We've been running higher for six years. That's kind of a, a pretty long time from a cycle perspective. Again just putting that out for cautionary notes. You know the trend is higher but you think, think about from a technical perspective the old highs of the futures become the new lows. And quite often when you're up here, I hate the word new normal. I'll never use new normal. I don't think this is a new normal either. I will still argue that we have quite a lot of risk to come back to those old highs sometime in this cycle. The old previous high was 240 futures. And if you take the previous high where we pushed up to 380 and you take that high, if that is the high, we may go higher yet. But if we use that high and we go back to the old high of 245, that's a 35% drop.
So when you're buying these high priced bred females banking on six seven dollar cabs, this would bring us back to like those 450 kind of caps as a cycle low. It's a tool, it's a projection but it's actually not a bad, not a bad indicator to use. And we did that certainly in 2014 when we had three bucks there was new normal.
Well we had three dollar calves and by the fall of 2016 we were at a buck 82 I think was our low that fall which was, look at that line. Right, right. Besides Covid, the old highs became our new lows. So food for thought on that part of it.
Any questions on this stuff?
This time's different though, right? Yeah.
So you know the answer to that. It's perfect how you ask that.
So here's, I don't want to be all doomy and gloomy here either but you know these are some other commodity charts that you know they go up slow although this one was pretty wild. But you know they take, they kind of say they take an escalator up and, and the elevator down. In terms of these markets had a little bit of that in 2015. Sixteen, you know, chocolate cocoa. They had some production issues and challenges globally and you can see in this case they actually traded sideways for a couple of years, year and a half, which is when I looked at some of these other charts. That's, that was kind of a longer time maybe we hopefully we have a little bit extended time in our cattle charts up here. But here was orange juice and again they hit some demand walls there where they had some production issues and they could just keep selling juice, keep selling or cranking the price until consumers kind of quit and maybe they had some production come on.
I don't know the whole story but I know there was some demand destruction up there and that was pretty ugly in terms of how fast they correct. So you know, I know Ryan's going to talk about risk management.
You know, we don't know when that's going to occur. But you know, some compounding things that, you know, we think, oh, it's different this time.
It's probably not that different than it's been.
Just wanted to run some numbers and again they change so fast. So I ran this number on some forward sold calves on that sold on team. You know there were £600 steers at 660 a pound. Just understand, you know, from a market risk. So I ran the numbers on finishing these cattle, fed them for 300 days and they went out at 1578 pounds. Cost gain a buck 62, break even 352. So those calves lost $737.
So that's where you know, guys were talking, oh, should I forward sell some cows? I'm like probably. It's not a, I'm not an all or nothing guy when it comes to marketing. Like sell, sell some steers, sell some calves. Price goes higher, well you'll get a better price for the rest of your calves. Price goes down. At least you got those locked in. And there's a lot of speculation in that market when the feedlots have made a lot of money and you know if there are 20,000 heads, so if they buy two or five couple thousand head at these prices, they'll average it in there. But you know there, there was some, they were, they were taking on a pile of risk to buyer caps.
Fast forward here till just this week when we had the prices shoot up. So same exact scenario brought them up to 15. Same price 1578. Nothing really changed except the futures went up. Unfortunately it says 229 instead of the 223. And the Canadian dollar is now at 72 cents instead of 73 cents. Those steers now all of a sudden they're only offside. 538 bucks.
So here's part of that gamble. I'll buy them and it's going to work out. That's what we've been doing the last two years. And they're getting closer. And here's the power of why. Why do we grow cattle bigger? So we did the exact same scenario, but I fed them for another month, another 38 days. They're now 1700 pounds outweigh. Didn't really change anything else. Left the price the same way I did. I did take up the dressing percentage. See some of these cattle with bigger dressing percentages, those deers are only. They only lose 285.
So we've cut that loss in half pretty much on. On these kind of performance things. So why are we growing them bigger? What kind of things can you do? Guys can manage around, you know, feed conversions. I didn't even really change. Well, I left feed conversion the same, which is still aggressive given we're growing into 1700 pounds. But that's just how much the market changes. Just kind of wanted for the cow calf sides, seeing those kind of numbers, but kind of getting to the summary bit here. So I think, Brenna, you know, so the trend's starting to change. What am I looking at? You know, my big one is the trends.
Supply drives the price trend. Demand drives the magnitude in the price change. So we were kind of anticipating higher prices starting in 2020, you know, after Covid and that when the herd had started to shrink, prices should trend higher. We probably didn't. I didn't expect them to get this high. But demand store has been phenomenal. But are we starting to see our more numbers in sight? You know, we do have more on feed this fall weather. Be interesting to see. It's a 2027 calf crop going to show much more growth at this point. Not much. But is the trend changing much lower herd rebuild, imports seen as a solution. Talked lots about imports, drought, feedlot margins at risk. You know what changes that, Mark? You know, Sean, you're asking about what that outlook looks really good. Well, what if you get into the scenario where the consumer demand pulls back or you've got, you know, you've got more cattle on feed, you got a little maybe weaker demand. You start to have feedlots lose money.
So far, basically, the longer you feed them, the more money you make. You got these great big cattle that the longer I feed them, the more I lose. Or they start to get that nerve about them. Then they get done. Then suddenly you've got a whole pile of fat cattle on the market at that point in time and you get the price reaction. So feedlot profitability going into this fall I think is a big one for that. We've got to watch on that. So they've got some pretty high break evens going forward and if they start to lose money or even if they feel some pinching there, they're not going to bid, you know, 500 losses in 20. In the fall of 2015 we were selling cattle at a 300 offside and come spring some of them are losing 800 hundred bucks. Like I said last fall they bought cattle 300 bucks offside and made 100 or 2. But at some point that changes and that's what escalates that price decline.
Southern US border that's not really, I don't think relevant. We weren't sure with screw Worm coming north but yeah, Mexico closed the border of the U.S. that's pretty hilarious. But they did. And then yeah, the Brazil change in terms of that whole trade flow thing is you know US isn't the biggest producer of beef in the world. They are by far grain fed to specify that. But you know what's that import flow going to look like if China does cut back on their imports? Where does that beef go?
Talked about the yeah, it's been a six year bull run. That in itself is, is a, is a cautionary flag consumer dollar. So I talked about supplies, dry supply drives a trend.
Ozempic glp Brandon talked about yeah, demand was kind of in limbo this spring. Prices were good, very good. Packers took it on the chin but they did not, were not able to push that cut out higher. So that's a change that we haven't quite seen in this bull run for the last little while.
I was going to tell you, I didn't, I must have had that slide in. Was going to mention Canadian dollar just for interest.
When you run the numbers, if you run you know on some of these projections on, on what they can pay for calves on a 550ish weight, 550 weight steer, if you leave, you leave everything same the cost of production in the futures and a packer is going to go contract some fats and let's say you know if they can break even at X dollars or at this current market but the Canadian dollar goes down one cent now his fat price just went up. He can almost go pay about 12 or 13 cents more per pound for a 5, 550 weight calf. So that's how big that dollar is. If it jumps around 10 or 20 cent, 1 or 2 cents, that can change. Calf prices 20 cents a pound and, and the feed costs as well, 50 cents a bushel can I think it's about 10 cents a pound on those calves. So these green markets have been pretty volatile. You've got to keep a keep an eye on that. But that's pretty much my part for now.
[00:40:51] Speaker A: Well, I hope you guys enjoyed that one. And again, big thanks to Brian for letting us use that audio here this week. Of course, you know, big thank you to our show sponsors. We do some great work with John Deere each and every week on our farm, using products like John Deere Operations center and Harvest Profit. Now we've got a little egg in motion thing going on with John Deere as well. I'll talk about that in future episodes. But if you like the episode, please tell your friends, please tell your neighbors, of course we talk all things crop marketing, all things farming here from a farm business perspective, give our show a like and we certainly do appreciate it. So for the what the Futures podcast, my name is Ryan and I'm out of here.
