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Pearson: This is the Friday, October 14, 2016
version of the Market Plus segment.
Joining me now is Walt Hackney and Elaine Kub.
Guys, welcome back.
Thank you, thank you, Mike.
Pearson: Now, Walt, our first question goes to you
and it is an issue that I'm sure you're very
familiar with.
This is from Lee Reichmuth in Nebraska from Twitter.
Lee wants to know, what does the cattle industry
need to do at this point because anyone unhedged
for the last two years is close to bankruptcy?
What can producers, what should producers be doing
from today going forward to stave off bankruptcy
for these independent producers?
Hackney: Many of them cannot and bankruptcy is
going to be a way of life as we approach the deep
fall of this year.
There's a syndrome out there right now among
cattle feeders that the feeder cattle, if you
will, are unhedgeable, there's nothing they can
do, they're paralyzed and they are a victim of the
marketing process that's going to take them into
And I know how that sounds but it is a basic fact
that there's too often these producers have an
opportunity to get away from that attitude but
they've got to go now finally to a professional
trader that can give them the proper techniques to
get their hedging program done.
I've got a customer in Saginaw, Texas and he's a
huge operator, he is so big that you would think
that he cannot, his exposure has got to be
phenomenal in regard to his cash flow needs and
his risk protection.
He called me last night and we had a long visit.
Every hoof of cattle he buys, which is annually
about 35,000, maybe 40,000 head of cattle a year,
every hoof of cattle he buys he hedges and is
easily done and he hooks a $60 a head tag to their
tail and quits.
He doesn't go for the big money, he's not going for
the gold ring off the carousel.
He's going for $60 a head and that's all he wants to
make on them.
He made it when the other cattle feeders were losing
He made it last year when they were losing $400 to
This year they're losing anywhere from not quite
break even to a couple hundred bucks a head.
He has made money all the way through this.
And there he is, hedgeability of these
feeder cattle if they'll take advantage of a
professional marketer in the commodity end of it.
Pearson: Elaine?
Kub: I'll weigh in on this because there may be some
scenarios where the size of the contract it might
be easier to do it if you're at a large scale,
in some cases, than it is at a small scale, but in
that case I would suggest that people go talk to
their crop insurance agent about the livestock risk,
the LRP, there's livestock crop insurance, it's not
really crop insurance but it is a risk protection.
It is effectively a put of any size.
And the details of it, you should speak to your
agent, but I just wanted to point that out that it
can be done at any size.
Pearson: It is out there at any size operation and
it's effectively a subsidized put.
That's what it is.
Hackney: Elaine, since this is part of your
business, do you understand, which I do
not, but do you understand what Pete Bond was telling
me in regard to his techniques of putting
these -- he's got a daughter your age and she
does 100% of that by herself in his business.
Kub: Sounds like you guys need to get a new analyst
on here, yeah.
Hackney: She has designed a hedge program that is
phenomenal and that's what they use and it's unlike,
he'll explain it to me every time I talk to him
and when we get done I couldn't repeat him.
Do you see the potential of a hedge in cattle
through the techniques you're aware of?
Kub: Sure.
You would lock in your selling price through a
put or a short futures that can be done.
And in the cattle industry, and I don't know
exactly what your friend is doing in Texas, but if
he's feeding in that instance he has also got
to lock in his input costs, which is primarily
feed, that's the easy part especially now when corn
is $3.
This is a no brainer.
Pearson: How far ahead are you locking in feed costs
here at $3 cash corn?
Kub: Twelve months or more.
You look to December 2017, those futures are $3.90 so
that is an opportunity for everybody to look at this
and say, if I'm going to be producing corn in 2017
at $3.90 that doesn't sound so bad and if I need
to be feeding cattle for the next year and I can
buy it now for $3, that sounds pretty darn good.
So there's opportunities here.
Pearson: I didn't mean to interrupt.
He's locking in inputs, locking in his selling
price, but there have been times over this past year
with the incredible volatility where there is
no place you can hedge and find a $60 profit, but
there are other options you could use.
Kub: Well, and what I'm suspecting he's doing or
his daughter is doing is that, you're right, not
every day you can go to the market and find your
$60 but the days that you can find it he's not
getting greedy and waiting for $75, he's locking it
Hackney: He catalogues an inventory of cattle, as
you suggest, cannot be worked into that program
and as that market moves he takes portions or all
of those catalogue inventory and he puts them
into that $60 a head program.
That's what he does.
Kub: That would be a minimum size.
Hackney: Possibly, I'm sorry I brought that into
your program here, Mike.
Pearson: That's helpful news for a lot of us.
Hackney: I get an incessant parade of cattle
feeders calling me asking me how they can, if there
is a hedge potential.
I'm not smart enough in the marketing in regard to
commodity to be able to give them any advice.
Kub: Well and like you say, Mike, some days
there's not and you wouldn't make money.
Pearson: Well now, Elaine, next question to you and
this one you kind of talked about on the show.
This is from Ben on Twitter in Jesup, Iowa.
He wants to know, where do you see the low in these
Kub: Well, I'm on Twitter so I saw Ben's question in
advance and I knew I was kind of spoiling it in the
And to be honest the numbers that are the dates
that I said in the show are just me looking at a
What he's referring to is earlier in the summer I
did this statistical analysis of what date of
the year would you be most likely to see a corn
market high and it was June 18th and that worked
out great this year which was fantastically lucky
and I feel fantastic.
And I haven't done the full statistics about what
date of the year would you be most likely to see a
But in these normally abundant years it looks
like there have been some lows in very late August
and then the crop size gets trimmed and then that
was the low, which that may very well be what
happened this year.
And some years there's kind of a low in November
if perhaps the crop gets bigger and bigger through
harvest, which is not the case this year.
Pearson: Right, but we're seeing a divergence where
corn that August low, we hit that $3.18 or $3.17
and change and the crop gets smaller.
Beans, we did hit a low or kind of a low in August,
now the crop has grown so do you expect that
November low or are we going to grow this bean
crop all the way through January?
Kub: I think beans are going to continue to have
some good news with continued buying.
There's going to be commercial business
actually going in there and buying those beans on
the futures.
Anyway, so I'm not too worried about beans.
Pearson: Okay.
But you're not yet reowning?
Kub: Oh no, I'm not - Pearson: If I'm selling
cash off the combine I just let those sales go.
Kub: Yeah.
Well, I haven't followed my own advice in that
matter but I'm just saying I'm not real optimistic,
but I'm not real pessimistic.
I'm neutral.
$9.60 is I think maybe the best we can expect but I
haven't sold my beans.
Pearson: Alright.
Put our money where our mouth is.
Hackney: Mike, I can't help but sit here and
think if I'm a producer and one of the fans of
Iowa Public TV and Market to Market how valuable
this conversation is to me.
I'm learning more sitting here than I came to the
party with.
I am.
Kub: I think Walt is being sarcastic.
I just said, I don't know, sell your beans, maybe,
maybe not, I don't know.
Pearson: You haven't though.
Kub: I have not.
Pearson: So Elaine is holding her beans, that's
her market advice for everybody.
Kub: But I'm not holding them for very long.
I've paid 5 cents for this month of storage but I'm
not doing that for very long.
Pearson: So harvest is done in your part of the
Kub: In my acres it is.
Hackney: On the beans.
Pearson: On the beans.
Corn in progress?
Kub: Corn, nationwide we are going to hit the
halfway mark right about now.
More or less we're at halfway.
Pearson: Okay, in corn harvest.
Final question, and this is a big one.
We're delving into all sorts of issues with this
question was emailed to us.
We invite you to email us questions too.
[email protected] I think is our email.
This one is from Brian.
He wants to know, what do we have to do to make the
consumer, our legislative bodies and the feds
understand the dire circumstances our
independent beef producers are in?
What if anything do we have to do?
Do we need to make the consumer or the feds
understand the potential road to bankruptcy for a
lot of cattle feeders in particular?
Hackney: Very briefly in my case I don't think that
it's necessary to have a formal effort to educate
the consumer in regard to using the agricultural
They've got to eat and they've got to be able to
pay the price.
If you're going to the dance you pay for the
And that is what they've got to do.
What I'm trying to say is, we have every kind of an
educational process in effect as we speak that
will cause your friend there on the email to do
what he's, he wants someone to spoon feed him.
That's not out there.
You've got to get busy with the evidence that is
available and take advantage of the programs
that are already out there.
Pearson: Utilize the Farm Bill, utilize the
livestock risk marketing program.
Kub: Which is still kind of a raw deal compared to
crop insurance.
There's no death loss coverage.
It's not the same.
Pearson: Is there opportunity in the policy
realm here?
We're in an election year, Elaine, let's get
Kub: I do have a couple of thoughts, not really
political, but in terms of policy realm for the
livestock sector beef is better off than sheep
right now.
Think of the poor sheep, they're not even going to
be able to use their over the counter medicated
feeds when the New Year starts.
Beef at least has some crazy overregulated system
to get their antibiotics, but at least they have a
Last I heard you can't even get, you cannot get a
feed directive for any of those -- Hackney: And
they have no subsidy for the wool.
The government has quit that.
Pearson: And you're stuck working with sheep.
Just kidding.
Bless you sheep producers.
I do respect them.
Kub: One more thing about the consumer education.
I think you're right that people should just be
smart but I will point out that there is a story that
we should be telling or at least a myth that we
should be somehow busting because I was just
listening to some podcast about global warming, the
best way an individual person can fight global
warming is by changing what you eat and eating
less meat and specifically if you're going to eat
meat, eat chicken or something, don't eat beef
because it's bad for global warming.
Well, I think that people, consumers apparently don't
realize how much conservation of American
grassland depends on the beef industry.
Chicken industry, not to pick on, I like the
chicken industry too, they buy corn and soybean meal,
but there's a conservation story about the beef
industry that consumers are apparently not aware
Pearson: You don't have chicken on open range in
Kub: No, that's not, yeah so there is a nice
environmentally friendly feel good story about beef
that people apparently don't know and they're
more worried about methane farts, which is silly.
Pearson: Did California ever do anything with
their methane regulation?
They were going to tamp down on cow farts but I
haven't followed up on it.
Hackney: Jack Harris has made a glorified effort in
his nutritional input to the cattle to lessen the
amount of methane but there's no visible
potential in it.
He's able to lose a lot of money if he wants to.
Kub: Yeah, who would pay for that?
I wouldn't pay for that.
Pearson: Are you going to go in and buy global
warming friendly beef specifically labeled at
the store?
Kub: Me?
Hackney: You go to Gelson's in LA and that's
a higher level than Whole Foods and all of those
outfits and you can sit there like I was stupid
enough to do here two weeks ago and my
son-in-law is a tree hugger and so it my
daughter and I said I'll buy the beef for this
party we're going to have in their home.
My son-in-law went down there and I didn't go with
him and he came home and he had a rib, a 16 pound
standing rib roast and so I said, okay, Larry, how
much do I owe you here, I'm buying.
And it was $285.
Pearson: Wow.
Hackney: Now, how many people are going to do
If I'd have gone I wouldn't have done it.
I'd have went over here to Vaughn's and I'd sit down
and bought the same damn thing for $100.
Kub: Maybe it was fed with flax.
Pearson: Maybe, flax fed beef.
That's a potential market.
But, ladies and gentlemen, Walt and Elaine, we're
going to let you go.
We're going to let our audience go.
But I want to thank you both so much for taking
the time to share your wisdom.
Kub: It's been a pleasure.
Hackney: I'm not sure how much wisdom but --
Pearson: We learned a lot.
Thanks to all of you for sending in questions via
Twitter and Facebook.
Please continue to do so and we will get profound
answers for you every week.
Thanks for watching and have a great one.
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Market Plus - Elaine Kub and Walt Hackney

2084 Folder Collection
哈維 published on October 18, 2016
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