Welcome back to the table for the Friday, January 31st, 2025 installment of marketplace.

Jeff French, Ross Baldwin are here.

Jeff, I say January 31st.

Come February 1st, this could be a completely out of date episode, given that there is such change.

Up down 10% 25%.

How do I at home protect myself?

Take advantage of movements that may or may not happen that the market's responding to?

How do I respond?

Well, potential change Paul I mean we don't have.

That happens any day.

We don't have all the answers right now.

But I mean, what we do know is corn and beans have rallied very nicely here in the last 2 to 3 months.

you know, we got a 90, 95 cent rally off the low in the corn.

It's got up to some resistance level in the market.

You know that $5 key number a big number.

So we've been selling into this rally.

We've been catching up on some cash sales.

but then also we've been putting some downside protection, especially through the weekend here.

Just because the wild card is what does Mexico and Canada, how do they respond to the 25% tariffs that are set to begin tomorrow?

So that's a wild card.

You know hopefully you know we can get a deal done here in a few days.

but if you know a trade war last several weeks or months, I mean, personally, I think it's going to be pretty negative on commodity markets.

All right, Jeff, you're done.

because I'm gonna talk to Ross now for the rest of the time.

no, it's a serious situation that management of risk is probably at a time unlike any other.

I mean, I shouldn't say any other, but, I mean, it's a time to make sure to know how to protect yourself.

Right.

And the cattle markets.

Yeah.

Or in commodities in general.

Both commodities in general.

Yes.

But the cattle markets.

Absolutely.

These are unprecedented prices that we've been at.

I mean, it's all time highs.

You've got cash, cattle that have had just a monster rally over the last few weeks even.

We've we've got cash trading 210 last week was 212.

The futures markets went on a huge rally.

And the the cattle market is in full on bull spreading mode.

And you think about when the corn market gets a bullish mark and goes to $8.

What happens.

They bull spread that market.

Well that's great.

And that shows how bullish everything is.

And when you're bull spreading in a bull spread market generally producers are very profitable.

The the risks though that bull markets and bull spreading creates is on the backside of where the deferred contracts are at.

And so and the example the cattle market's feeder cattle that are being sold across the country for record high prices, a lot of feeders are being priced where the nearby cash cattle market is.

And so right now there's a lot of cattle that are selling with, oh, well over $2 tight break evens.

And when you look at where the August boards at and beyond, you got a lot of months that are at $1.95.

And so it's very difficult to manage your risk when you're buying a feeder or feeder.

Cattle that break at, say, 205.

I know of cattle that are breaking above 205, but you got to have some puts if nothing else, if you're going to go out and buy cattle like that.

I mean, whether you're buying cattle, they're that expensive or not.

You've got to have some puts underneath this market because with where the funds are, they're all time record long in fat cattle.

They're record long and feeder cattle.

It might this thing could rollover with them record long and it might not make any fundamental sense at all.

But if it does, it can get extremely aggressive.

And and the sell off can just be so fast and violent that if you don't have any puts in place, you really could just be sitting there watching it unfold.

Well, let's do Aaron's question then, because that's a little bit of a follow up to one of the things you said there.

So Aaron and I will wants to know what price break will make enough last minute longs dump us into a major correction in cattle or will cash be enough to save the day?

When you say last minute longs, I think of people that have gotten long above this $2 level for the last week.

Yeah, over the last week.

I mean really people have been bullish.

But in the last week when we just screamed above $2, people started getting really bullish.

I would say if you started seeing a break below $2, that's where these last minute longs are going to have a hard time.

If you look at the the continuous weekly chart, I think it takes more down into the low one 90s for the nearby contract before you would start to get capitulation by the manage money crowd.

It's really it's on a perfect uptrend.

This is coming from the April 2020 Covid lows.

And if you look at a continuous weekly chart, we have tested it.

We've traded just briefly below that trend line, but we have not spent any time below that going all the way back to April of 2020.

And that trend line keeps.

It's were steep now where this trend lines coming up.

But it's in the low one 90s for the nearby live cattle month.

You got fab above two bucks April above $2.

So there's room there, but I think you would have to see a weekly close below low one 90s before you really be concerned that cash couldn't save the day.

Do you hear or see any flashing red signs with some of these charts?

Technically.

I mean, it's overbought, but it's been overbought.

I mean we're.

Up for months.

Yes.

And I think it's nine weeks in a row where we haven't taken out the previous week's low.

So I looked at that April chart this week.

And I think you could see some longs throw it in.

If we get a close below 196 I mean that would be my number.

But yeah, I feel that a lot of calls here once this market got above $2, you know, everybody wanted to drop their hedges and get long this market.

And you know as their advisor I said, well, you can do whatever you want.

But at the same time, you know, if this market does sell off, we got to have something down below in case it turns into a disaster.

I mean, I don't see that the fundamentally it we can continue to be strong.

But again these futures markets sometimes it's just the perception and it happens so quickly.

Is there outside money coming into this again.

Oh yeah.

I mean and not just a reestablishment of of people already here.

No.

You you see it in the commitment of traders report.

You have fat cattle and feeder cattle at all time.

Record longs in the fund position.

So that's your investment.

That's your investment coming in to these futures.

So yeah it's it's incredibly strong right now.

And where that can get concerning is you you start to get players in the cattle market that are not your normal participants.

And so my guest today is that, manage money crowd is probably long 160,000 live cattle contracts.

The previous all time record long was back in 2019.

They went long 155,000.

So we are getting this band stretched further and further.

And like Jeff said, the fundamental are fine.

The fundamentals are bullish.

The the inventory report today said that we're probably going to get tighter and the fundamentals stay bullish.

But when you get when you get the amount of outside money that's in the market and you start throwing in new money, that's not used to the cattle market.

And if a wrench gets thrown at this thing, it can be Katie, bar the door.

I mean, and it's not a very big door in the cattle market.

The doctors and dentists, when they start buying, beware.

Well and and if they see a $3 sell off someday, that might be.

That's not what we're used to.

I mean, I'm just we saw it this week.

We saw it this week.

And that's why that didn't cause a spook that didn't spook anybody out.

You had some short term.

I think short term panic when you make new contract highs at these levels, all time record highs and you start to get reversals, it causes a little bit of unease.

But like Jeff said, we haven't taken out previous week's lows.

We haven't closed below those.

I mean, there's some indicators to watch.

I mean, I would be if we have a reversal, a weekly reversal, I would be very mindful of the further downside that we could have, but we just haven't had those lately.

And I mean, the fundamentals should continue to support it.

But pay attention.

I mean, if there's weekly reversals off new contract highs, you don't want to go to sleep on that.

You've kind of covered this.

But Scott, Wisconsin's question, guys, is when will cattle future prices align with cash?

And you kind of talked a little bit about that and how some certain things.

But is that in play here.

Live cattle rallied up to a new contract high all time high this week of 209 35.

And I a lot of that was getting up to where cash was.

And the northern trade has been 210 to 212.

It's been run a premium to the southern trade.

The futures market focuses more on the southern cash trade.

Right, wrong or indifferent, that's what it does.

Last week southern trade was reported around 202.

This week it's back up.

they jumped up to 207208.

I believe there was some trading down there.

So the the fib market did get out ahead of it and has converged with it.

Feeder cattle, they have been converging with where the feeder indexes right now March has run.

It is a little bit of a discount, but.

I completely agree.

I look at Western Kansas cash prices.

That's where you tend to see I mean, there's delivery points all over the Midwest, but you tend to see that cattle that fat cattle contract, aligned with the western Kansas cash price.

And right now we're sitting at 208, but we still have four weeks before they have to converge at the end of February.

So we could see a lot of movement up here.

Let's do one last question.

And this one's about tariffs.

But it's in relationship to the fertilizer market.

Tom wants to know will tariffs affect fertilizer prices.

I think absolutely.

Is there anything that's not going to be impacted.

Well, unless they make exemptions and they've they've kind of hinted that they've, you know, put some exemptions out there that countries can, request exemptions.

So again, we don't know all the answers, all the questions I mean we're learning this.

We're going to learn a lot here over this weekend.

but yeah fertilizer prices absolutely will be impacted.

All right, Ross, last thing you are about to head to a conference a lot of farmers are going to want to hear what your headline story is.

What's your headline for, in the next few days?

I think the biggest, the biggest headline over the next few days is going to be back to these tariffs and what impacts it could have with feeder cattle more than anything.

You know, we we import a lot of feeder cattle from Mexico.

a lot of feeder cattle from Canada.

We actually import quite a bit of beef from Mexico and Canada more than what we export to them, especially as we've had a shortfall over the last couple of years.

So any imports, tariffs coming in on feeder cattle or beef could have a major impact on the beef industry.

And I hate to try getting all bulled up here with where we're at, because I think you need to be more in the cautionary camp at these levels than bullish.

But these tariffs could have a bullish impact for a tight cattle market that we already have.

What's your headline.

Well besides the tariffs that's going to what is going to dominate the headlines.

you know it would be the Brazilian harvest.

I mean it's really just getting started.

And you're going to have a lot of beans hit the market here in the next 30 to 60 days.

Jeff French, good to see you.

Great to be here, Paul.

Thank you.

Ross Baldwin, thank you so much.

Thanks, Paul.

All right.

Thank you for watching.

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We do hope, we do update the hope for the decimated Florida citrus industry.

And Ted cipher will join us.

He'll be back here to talk about the commodity markets.

Thanks for joining us.

Have a great week.