The Derivative - Beef Prices at All-Time Highs: Inside the Meat Markets with Jeff Apel of Wharton Capital

Episode Date: July 31, 2025

In this episode of The Derivative, Jeff Malec sits down with Jeff Apel, principal at Wharton Capital Management, to dive deep into the current cattle market. With beef prices hitting near-record highs, Apel shares his extensive experience from the trading floor to today's futures markets, explaining the complex dynamics behind rising meat prices. From drought impacts and herd sizes to consumer demand and seasonal trends, this conversation offers a comprehensive look at what's driving the beef market and what investors and consumers can expect in the coming months.Chapters:00:00-00:50=Intro00:51-13:35 = Pit Trading Memories: A Family Legacy in Cattle Markets13:36-29:15 = Beef Prices Unleashed: Understanding the Current Cattle Market Surge29:16-38:35 = Wharton Capital's Approach: Fundamental Trading in a Complex Market38:36-45:31 = Market Intelligence: Tracking Cattle Trends in a Global Economy45:32-52:27 = Trading Psychology: Discipline and Adaptability in Commodity Markets52:28-58:43 = From Steakhouses to Chicken Chains: Evolving Eating Habits in AmericaFrom the Episode:RCM Blog post:Beef Is the New Egg? Why Meat Prices Are SkyrocketingRCM Blog post - The picture from Space that shows why Commodities are non-correlated to the Stock Market:For more information on Wharton Capital & Jeff Apel visit whartoncapitalmgmt.com!Don't forget to subscribe to⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Derivative⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, follow us on Twitter at⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@rcmAlts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and our host Jeff at⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@AttainCap2⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, or⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ , and⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, and⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠sign-up for our blog digest⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠.Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.rcmalternatives.com/disclaimer⁠

Retail prices is at or near all-time record high. Demand has held up excellent. You know, the consumer hasn't really cracked when it comes to beef yet. Production has been low. You know, slaughter is down quite a bit on the year there. And so that's led into this higher retail price. Welcome to the derivative by our sales. Sam Alternatives. Send it.

And this is Jeff Aple, principal at Wharton Capital Management. I'm here to talk about our program and the price of beef and cattle prices here on the derivative. How are you, Jeff? Good. How are you doing, Jeff? Good. Jeff and Jeff. Back again. There you are out in the western suburbs, Chicago. Chicago? Mochina.

Mochina. All right. That's kind of by Tinley Park. Okay. Most of the way towards Cancaciquee? Well, it's about a 45 minutes from Kankakee. We're north at Kankakee. Mochina. I'm sure I've played in a baseball

or softball tournament there. So start us out. How you got in the business when you joined Wharton, all that good stuff. Give us some background. Oh, boy, I got in the business probably in 1998 after coming out of college started in the cattle pit my dad was a trader in there kind of got me started I moved into floor brokerage around 2003 and ended up partnering up with Bob Wharton on some

floor business that we had together and then as we saw the market move into electronic trading we decided to try to start up a CTA and leverage some of our contacts and experience into that space. And that was in Bob started in 2011. And then in 2014, I joined up with him. Nice. And give us some, so was your dad a local or he was trained for himself? He was a personal trader. Yeah, he was a local, I guess you could say. He was a floor broker for a long time. And then a local, he probably started on the floor of the CME in about 1968. So he saw it all he was in he was in the egg egg pit and then moved into the cattle when it started when that contract became, you know, the new new hot thing.

Right. First, first live deliver contract, that kind of stuff. And talk a little bit. So he was filling paper and he was trading his own account. And then when you got there, both doing the same thing. All right. Oh, me and me, yeah, you could you could do both back then. you could fill paper and trade for your own account in that pit.

And for my buddy, George, tell the audience what filling paper means. Oh, fill in paper? Well, that's like if somebody gives you an order. A customer calls up and says, buy 10 August cattle. Well, then you write it on an order and you walk in and there's a whole group of people and there you say, what's here in August cattle and they give you the bid offer and you buy them. Right. So you're physically filling orders, basically.

basically fill in paper for customers. Yeah, it'd be called execution now. Yeah, right? It's the computer. You were the human computer in the middle of the pit. Yeah, it's called execution. Yeah, and back in the days, that was the kind of delineation. I guess a lot of people did both, but there was paper filling brokers, guys filling orders,

and then ones who didn't do any of that and just traded for their own account. Correct. Remember both. And then what were the the meats were like notoriously ill-liquid back in those days? Yeah, I mean, they had low open interest for a long, long time. You know, it was, there wasn't a great story for a lot of years. And there were other products that people were more interested in that had a bigger volume, bigger open interest, you know, the S&Ps or Euro dollars or something like that. And so, yeah, they were, you know, they're always kind of illiquid.

I mean, they're not the most liquid contract we've got. Even though open interest has grown to record, it's, it still can be a little bit tricky on the liquidity side. Do you ever dabble in the pork bellies? Sure, I've traded pork bellies when they were available, yeah. In the pit? Yeah, absolutely. But that came and went, right? Like, when did pork bellies go away?

Yeah, I don't remember the year, but they had a problem. Ten plus years ago, yeah. Yeah, quite a while ago. but they had a problem with liquidity for one. And I think the information changed. They didn't make bellies to fit that contract expect anymore. There's something with the contract that kind of made it obsolete. Like a pork cutout versus the pork belly versus, yeah.

Yeah, I think the Packers stopped making them that way, or fresh or frozen. Got it. I don't remember what it was. And give us what some of your favorite floor trading stories. Got any good ones? Well, I mean, I've got a few. I mean, you know, the ones that are appropriate. This is, it can be R-rated.

Go ahead. Whatever you go. No, I mean, it was just a great place to be. I mean, there was a lot of, there was a lot of collaboration. There was a lot of bouncing ideas off each other. There was an informality that we really liked is, you know, you could, once you got down there, you could talk anyway, you know, there was a certain vernacular that you could use and talk, You could talk loud, you could yell, you could be quiet.

Obviously, language, you know, didn't matter what you said as long as it was, you know, didn't really hurt anybody or wasn't totally inappropriate, but you just had a lot of freedom down there. And that was really what ended up being, I think, the best part for me was that type of environment was it was allowed a lot of creativity. You know, you could sit there and stare at these numbers. All those walls had numbers on it. And you could just stare at them and pick something out and say,

I wonder why that's doing that, or I've been watching that, or you also could trade with your hearing more, too. Like, now you have to see something's moving on the screen, where there you were kind of using all your senses. You could hear a loud yell go up from, let's say, the belly pit, and be like, oh, what was that? What happened? Or the hog pit, or even if it was the equities, a loud roar came out there. Well, then you better start looking. Something happened somewhere. And so you could kind of, instead of, you might miss, if you don't have your quote screen set.

up right or your alerts set up right you know the it's just a lot quieter you know so it's and it's that was a long time ago but it uh that was what i like the best about it yeah and you're no offense but you're the right body type size for it too right well that's what do you six four or something out i'm six six six sorry i shorter you two inches yeah big guy and uh it helped you know one of my first jobs actually down there was a summer thing they needed uh they needed someone to so it was unemployment number in the euro dollars and revco had a problem with some locals were bringing people in to box out the clerks in a certain way because space was so premium you know it was you know and so you would stand in there so they brought me in for this

unemployment number to just stand back to back with this guy and push him the whole time like it was like you know they brought me in and I got ridiculed for it too and I had to stand there for I think about two hours and just push against this guy to keep our lane open and how big was the other guy i mean he was a grown man i at this time i was probably like 17 18 something like that you know but i was a young kid on a summer job as a runner and i got just the guy hey yeah yep get in there yeah they brought me over there i mean i was pouring sweat and uh they were pretty mean to me too you know like why are you here you because you they know you're they know you're not there every day yeah it was this big big day so that was i think one of my first that that's where the size

really came came uh in handy a few times and other times did too i mean um and when you loud right you're screaming but the cattle pit wasn't that big how many guys in the cattle pit oh there were probably 50 to 70 maybe something like that 50 people 70 people so it could get really crowded when it was busy but um right versus the 30 year bond was maybe two, three hundred at its peak and S&Ps a thousand. Yeah, exactly. So yeah, it could be, it was a factor, but it was a factor for sure. If you could explain what's traded there, like what, there's two types of cattle contracts,

explain the differences, kind of how you looked at those contracts. Well, there's live cattle, which are, you know, animals that have been put in the feed yard. and fed, fattened up to whatever weight they've decided to put them to, and ready for slaughter, basically. Then there's the feeder cattle, which are, those are animals that are coming off grass and going to be put in the feed yard. So they're both alive when we try them. Yeah, they're both live. Feeder cattle is an index. The contract's an index that's made up of all these different auctions throughout the country. and live cattle is still alive, live delivery if it comes to that.

And then when, so when I buy it before it goes, I'm at an auction house, where are those mostly, Texas, Montana, where are those auctions? For feeder cattle? Yeah. They're all over the country. I mean, Florida's a huge feeder cattle state. Obviously, the prairie country or pasture country is big, Montana. That type of area, South Dakota, North Dakota, New Mexico, Arizona, Texas, of course.

I mean, anywhere there's grass, there's feeder cows. So a lot of states have them, you know, it's. And what's the side, like when I buy them from in that auction, how big are they versus when they leave to get slaughtered? Well, the weights can, you know, the weight breakdowns anywhere from 1,000 pounds to like 500 pounds. You know, depending on the, depending on how long you want to feed them. them and what weight you want to bring them to? I mean, different people are in different businesses of how long they feed them for. And a lot of it, and that's some of it's dependent on the time of the year too. As you come move into the winter and you get frost,

certain animals come off grass or they decide to winter them and then they come off in the, you know, in the spring. So it's kind of like Mother Nature decides some of the yeah. We had an old blog post we'll put in the show notes of the picture from space that proves commodities or diversify or something like that. I can't remember the exact title. But it was when there was this freak June, or maybe it was August, September snowstorm in the Dakotas, I believe. Right in the cattle hadn't gotten their winter coats yet. Yeah. So it killed a whole like tens of thousands of cattle, caused some limit up moves for a couple days. Yeah, I mean, absolutely. You know, the death loss is, it can be a thing if it's bad enough

at the wrong time of year. And the biggest thing is they lose weight. They lose weight just being out there or when they're... Well, yeah, because their body takes more calories to heat themselves up. You know, and they don't, and they don't get, sometimes they can't get to the food either. So they can't, you know, if they're whatever, the hay or the feeding agent is clogged, they can't get to it. And they can't walk in the snow drifts or what have you.

And what are they mainly feeding them in the feed lot? that's a mix of corn and and uh soybeans that kind of stuff milo but that's the game too right if corn's more expensive i'm shifting to more soybeans if soybeans is more expensive i'm shifting to corn yeah i mean there's a i'm sure every operation has a different mix that they their proprietary mix or whatever they have tested that works best for them the type of cattle they like to feed the conditions that type of stuff so i mean that that would vary on an operation by operation basis But I wanted you to tell me some great line of like they put on 20 pounds a week or something when they're eating this stuff. Well, it depends.

Like the daily average gain is like, I think we used to say it was about three pounds a day. And I don't know if that's still the same as it was. I know that they have been feeding cattle a lot longer days. And I'm sure they've improved the rations to try to get that to optimize it. You know, I'm sure there's stuff in there that is optimizing the feed like weight gainer or what, what have you. we got the basics now so let's back up we wrote a blog post you gave us a quote for it a few press articles lately right eggs were in the news from whatever your political things are forget that for a second but egg prices hit spiked and now there's a couple

articles beef prices or the new egg prices um we're at well you tell us the stats, but basically we're at some near all-time highs. Yeah, I mean, retail prices is at or near all-time record high. And, you know, that's, you know, demand has held up excellent. You know, the consumer hasn't really cracked when it comes to beef yet. Production has been low over the last, you know, number of weeks. You know, slaughter is down quite a bit on the year there. And so that's led into this.

this higher retail price. And the retailer's got, you know, he's got margin to worry about as well. So they're keeping the price high right now. So let's pull on that there. So they're doing it on purpose, right? They control. Well, not. I mean, they just have their pricing model. So they have whatever margin built into, whether it's a store margin or a meat case margin. I mean, they want to try to maintain that and what's that chain look like it goes from so feedlot right goes from the rancher to the feedlot to someone like Purdue or something like who's buying it in mass from there the what do you call us the producers well like like like a chain store you know that's something like that or Walmart you know they're they're the ones buying it from let's say the

Packers, which would be the Packers. Tyson, yeah. So the Packers buying it from the feedlot? Yeah, they're buying the live animals and they're the slaughterhouses or the harvest, you know, they're processing the animal into the cuts of beef. That's either the consumer has told them to or that they, the common ones, whatever you want to say, ground beef, that stuff. You ever been to a slaughterhouse?

What's that? No, I haven't. I have not. No, thanks. I might swear off beef, right? It's not worth it. So back to the storyline. So those retail prices, that's across all these cuts and everything.

And that's as it hits the average, that's the average retail. The USA releases the average retail price where they smush them all together and make an average out of it. So that individual cuts could certainly be higher or lower than that. But, you know, like I think the 50s just made all-time record highs coming into the, you know, the from Memorial Day to July 4th as the retailer was featuring more brown beef and um you know because it's it's a little it's cheaper you know the average cost is cheaper for ground beef so they decided what's the 50s what does that mean 50 50s is like is half fat and half beef so they mix that with with a 90 to make it 80 20 which is what you get in the store 80% meat and 20% um fat which

is your basic, like, brown beef that you go and make a meatloaf out of or what have you? Love meatloaf. Meatballs? Oh, yeah. Yeah. So, what's that price? Did we say the price? It's, like, close to $10 a pound, or what is that? I thought that, gosh, I don't have that offhand. I thought it was eight something, wasn't it? Okay. It was eight something on the average.

I had a CNN with 926 a pound. Okay. Yeah, I mean, it's a moving target, so, yeah, I mean, it's up there. That's really high for ground beef. Right. You know, when you're talking about feeding for large parties or family gatherings, that type of stuff, you know, your outlay. It can be a lot for a family on a budget, that type of stuff. So, I mean, the- So tell us, right, the old line in commodities, the cure for high prices is high prices.

So- Correct. Correct. Right. Like, how does the, so who's controlling that? If they slaughter more, then the price go down, there's greater supply. Correct. But then they have less for the next cycle, right? So talk through that whole process. Well, right now the slaughter is reduced because packers are also losing money. So their pay, their cost to buy the animal is very, it is all time record high last week also. which is the futures price we see basically yeah but the live cattle price was like 230 to 240 last week and August futures are here at you know 227 so they're carrying a significant discount to that record high price which is I tend to think

that that's futures markets do that when a price is record high they don't anticipate it staying forever they start to look for the top and they would move to a you know futures under cash, right? Because of that statement, the cure for high prices is high prices. A lot of times the futures move to some sort of discount, whether it's, in a lot of, in all markets, I think, kind of. And that's per pound.

So it's 230 per pound for the live animal? Yes. And then it gets to $9.50 in the store, basically. So there's, if it's process, yeah, you know, after it's process and the debone and, you know, there's the drop value comes out of that. which is you know the that that's uh the guts basically you know and uh that that gets shipped overseas primarily oh what now we're talking what do they do with that well i mean they

we don't eat it here so that goes over there and they either eat it or process it into something tripe what does that come something like um so why are the packers losing my because the live animals so how does this resolve itself who has to move first well i mean you got to you got either have a price where people don't want to eat uh refuse to consumer backlash switching to other products which we've talked about i think on some posts which is what like hey McDonald's will be like hey we're losing money on these let's switch a little bit more to chicken something like that well and McDonald's has promoted they just added the they just added the snack wrap is back and that's a chicken product.

You know, so that that's already kind of happening in the menus. It just, you know, so that's one way it can have is you have a demand, a shift in demand, let's say, and people start eating something else or finding substitutes. And the other is you can get, you know, get more cattle, you know, and we think you're pretty close to running into more cattle seasonally here in August, September and October, supply is going to increase. So those two things would eventually take care of it. And how long does that take?

Like what's the total herd in the U.S. look like? Well, the number of cattle on feed is like 1% below the five-year average. There was just a report on Friday and, you know, we're a couple percent below a year ago on the on feed numbers, 2% below a year ago. So supply down. And how many is that? I'm looking back at our block. So two points we add in our book. The cattle herds at its lowest level since 1951. Yeah. At 86 million head. Yeah. But that's that that that includes like the calves and animals that are out on grass still, cows. So that's every every type of animal where, you know, feed yard animals are just the steers and heifers that are in the that we're going to eat basically. Yeah, and then they do slaughter cows as well for, that's primarily ground beef. And the cow slaughter is down, you know, quite a bit.

And that's where that 50-year load comes from. We had years of drought that ended up liquidating the cow herd. Because they were malnourished. They were, so you had to call them without. You didn't have grass. They didn't have grass. So if there's no grass, then instead of having them, starve out there you have to you know send them the market got it but they're not just dying on the

field no no i mean there there was some death loss probably but no generally now that's not what it's from so 86 million total then what we have here 11 million are in feed lots basically yes correct and what's the highest that number's got that goes high i don't know what the all-time high is but it's it's close to there well it's not i'm not sure exactly where we're relationship to that to that right now and talk about how long does it take a new is it two three years like a calf's born to when it can go into the feed lot how long does that take well it's born and then it depends depends on what weight they want to put them in it if they want to put them in his calves then they would like they'd be born in the spring and then in the fall they would go into

the feed yard if they're going to take him in another year make them what's called a yearling then they would winter them and then put them on feet in the spring. So how'd you learn all this stuff? Over time. Yeah. Just, you know, I mean, talking to, you know, talking to people listening, a lot of listening,

a lot of asking questions, a lot of wrong answers. You know, I mean, it's just, it's been, it's been time listening to my dad, you know, all the time. So it's just what I've, it's kind of something that, you know, instead of talking about sports, we talked about the cattle market.

You know, that that's kind of where it came from. And sports, no? Not that much, no. And you guys weren't watching Yellowstone, right? Like, basically, the lesson I took from Yellowstone is, this is a terrible business to be a rancher. There used to be an old joke that, you know, whether you died rich or poor in the cattle market,

just depended on when you died. Yeah. One of these days. All right. So how does it resolve itself? They'll just, there's more calves coming. Yeah, you got to, I mean, you got to have what's called expansion. And that this last report showed that, that, there were less heifers on feed than a year ago. So those are the females. And in order to, in order to get more, have more animals, you need to start retaining the females and breeding them. And, you know, and putting them out the pasture and having them have calves. And so that takes, that takes a. couple of years to get you got to hold it back you got to get it you know inseminate or pregnant and then have the animal all the way to the next cycle so that can take a while like a couple years a couple years could be a couple years yeah but that's the cycle we're

at we're the cure bribe prices because those ranchers are like all right prices right now to retain more females get more calves correct right I'm going to get my money back plus So are these, who's making the money right now? The ranchers? Cattle feeders are, have a profit right now. And that's probably about it. I think the cow calf guy is probably making some money too. And we don't really track that as much as the Packer margins because of the time frame we trade. We trade it closer up to the front. And so Packer margins tend to be, we think, a little bit more important than that part of the cycle. When you're talking about something that could take up to two years to happen, you know,

that's not something for our style that we really track a ton of. Which we're going to dive into, one more question on, should we put impossible burgers and beyond meat to bed? Like, wasn't that supposed to get the country and the world off beef? yeah i mean that wasn't that there was that there was that buzz but i think that if you look at the stock price of those companies that it's kind of the market has voted that those um that they didn't really want that type of thing so you know i mean i don't have an opinion on that but it looks like they've they're having some some headwinds let's say well for sure if you were like five years ago you could have made an argument of like cattle business stay away right they're coming out

with all this fake meat. Yeah. Like it's going to be a hard business, but it went as usually happens in the commodity markets. It went exactly the other way. Probably because of that, right? They drove down some prices in the beginning. They didn't retain enough females and grow the hurt enough and boom. Well, and I mean, beef demand has been excellent too.

You know, and whether it's these carnivore diets or, you know, it really came up. the, the, the, uh, pandemic really, everybody sat at home and ate and we started eating steaks. You know, they couldn't go out. So they went and made steaks at home. And that ended up spurring this, this big demand push that we still haven't really come to an end to yet. I think there's signs that it, it could be slowing. There are indications that the consumers in, you know, some, there's, their experience some headwinds, whether it's credit card debt or foreclosures or what have you um you know that but it still hasn't totally happened yet either and i'm always amazed go ahead sorry like here in chicago right like the we can put out a new steakhouse whereas an

eighty eight dollar steak like nobody's business and i'm like how can they keep rolling these out and the next one's just more expensive than the than the previous one yeah and And that part of the restaurant business has proven to be pretty, has been really resilient. And I, you know, maybe it's because of the income level of people that are going there are somewhat more insulated from inflation or is it corporate type of expense accounts that do that or travel, you know, which, which is all seemingly, I mean, the stock market's all time highs and there's unemployment's not really an issue. So, you know, the case, you know, the case, you Those two things would need to change to have a real demand event, right?

Yeah. I think that would be more widespread or deeper. Let's put it that way. But it's great. To me, when they break the $100 marker, they all seem to try and stay under $100 for now. I just pulled up for fun here, the steak 48. Have you been there? I don't know.

I've heard of it, though. He was the Mastro's guy, actually. And he sold Mastros for like $80 million. They had four, five, six restaurants, Arizona around here. weighted out is non-compete for like two and a half years and then boom launched steak 48 which is essentially the exact same thing um but write a new york strip 16 ounce new york strip 75 bucks bone in rib by 22 ounces 81 bucks 45 day dry age 99 bucks yeah like that's insane that's pretty expensive for a steak right you're telling me

all right so wharton so you don't just do this for fun you guys trade this right make a living trading this in and out so give us a little background on bob um you said you joined him a few years after he started but yeah tell us what you guys are doing at wharton well so then we use all this you know all this knowledge that we've accumulated over these years and and things we've seen, and we decided we should try to leverage that and start up with CTA, which allowed us to, you know, get into a bigger pool of investors than just your friends or just, you know, having accounts with buddies or what. And so we decided to do that. And we had always worked well together. Bob was a floor broker. I was a floor broker. We had partners

on some business. And we got along well. We spoke the same language. We kind of, Bob's from Nebraska and grew up in the cattle business. His dad was a cattle buyer. And so we had this kind of, we just spoke the same language in a lot of different ways and decided to become partners and, you know, started opening accounts. And so fully discretionary program? Yeah, we're a fundamental discretionary program. You know, we get a concept or an idea and then try to, um, where that fits into the way the board is priced, where the futures are priced, and which month, which instrument, which strategy, the best way to take advantage of that. You know, sometimes there's just different stories and so different products end up fitting that, whether it's

a spread or an option or futures. We tend to use a lot of options, long-only options, puts or calls with the overnight event risk and macro event risk announcements we think that's a way that we try to you know manage risk for our customers so it's all we try to do a defined risk strategy on the on options so we use a lot of now we do do futures too and we do spreads as well but we like to use in long puts and long calls mostly and this is all in cattle or other means We also do the hogs as well. Okay. You know, the hogs is another part of our business that we trade them a little bit,

maybe more technically with a fundamental bias. They kind of go hand in hand. There's some overlap in the markets. So we watch those and trades. Right. An economist would say they're elastic in price and people would switch to pork, right? If beef's too expensive, I'll eat more pork, I'll buy a pork tenderloin for dinner for the family. You would think, I mean, yeah, in theory they should.

You know, it hasn't really happened that way yet, but I think we're getting ready to test that with the price of beef so high that you would think pork would catch some sort of bid somewhere. I mean, there's issues with the quality of maybe the pork chop that they're providing now. Maybe isn't the best all the time. but, you know, they've, they've, they've, uh, when pork was the called the other white meat, it was, you know, they made it less, uh, less fatty more health. They were trying to compete with chicken. Yeah. On a fat bay, that's when like fat was a big problem. And so I think that some of that changed the breed of the animal maybe, but you would think pork would get some sort of

play here on the feature side of it for retailers to offer something that, um, is more affordable for the family as you move into the fall. And so the option, right, cattle especially is known for these big limit moves every now and then? Yeah, I can. So talk through some of that. What's the longest you've seen a bee limit for a couple days? And what is that? That had to be mad cow in 2003 when they found that, they found the animal here.

And then it was down limit for, I think, three days. It traded maybe the third day. But they expanded the limit in there, too. So that was the first time they ever expanded them. But I think it can now the limits are so big that I don't think it's really as much of an issue. What are they? $9. I think $9 is the August, the futures limits.

$9.75 maybe. Yeah, it's very big. Yeah, very big. But to your point, those have happened over time, so you guys' experience was, hey, better to do options sometimes, not have that spike risk? Yeah, I mean, you know, the event risk can be serious. You know, there was a plant fire in, I don't know what year that was, 2019, you know, a plant, a slaughter facility caught fire, and that was a sharp down move. You know, they might not have been able to get out of in the future as effectively, depending on your position size or what, how quickly you move. You know, there are events from time to time, and we've seen them, so we just, that's how we choose to do it.

And, you know, we're like, you know, medium term time length. So, you know, we think that if we really get onto something that the options offer a way to take advantage of that. and there's no way to trade really or do you think there's a way to trade those events right you just have your positioning and the events are going to happen like in any other market and you just got to kind of sidestep those landmines well i mean that's where where money management comes into place or you know that's why well with position sizing or or through that use of the use of the options at least you know your risk i mean they can announce anything tonight and whatever we paid for those options is all we can lose right you know so that it's it's defined risk

you know it's almost like um if you have an error you want to establish a loss right away and then you know you know trade an error right throughout the day or something like that um you just get out of it right and what's your so what does that look like how much you're willing to risk per trade and do you have like sec do you have limits in live versus feeder do you have limits in port uh no because we don't have a hard fast thing on that that's why we that's why we use the options is because it can take time to develop some of these stories you know the the the cattle is a unique contract because of the it is still a live animal and so it can't be stored like gold like gold you can put in behind your desk and leave it there forever right

and oil same way corn has a long storage life but the live animal doesn't you know i mean it has to come to market at some point. And so it can take time for these things to develop depending on how fast they do or don't come to the market. And we're seeing some of that right now as days on feed has increased tremendously. And that's why we're seeing weights like 20, 25 pounds over a year ago. Because with back to the size of the herd being so low, the availability of feeder cattle is less that it had been. So in order to go out and get those animals, they have to compete on

priced. And instead of buying those outlaying all that cash for those animals with a high break even, they've chosen to keep the ones in the feed yard and feed them longer and make them fatter. And the packers have also been on board with that because they want to make up the tonnage that they're losing from the cow slaughter. And so it's been kind of a unique, unique situation as the cattle has been pushed back and back and back. And you can see that in the weight data, if you look at any weight data. And as part of that also, right, corn's been basically going straight down. Yeah.

Yeah. I mean, it, it, the, the price of corn, if a corn was at eight or ten, you know, at all-time highs, we would be having a different conversation. But so it's in here and it allows, it allows that strategy to happen. also. But that's also a weird part of this whole thing, right? Like, if the inputs, the feed is the main input, right? What else is there? Yeah. Well, and the animal, but yeah. Yeah, but that's one of the main inputs once it's there. If that's declining in price, why is the output increasing price? That's one of the weird pieces to the story. Oh, they feed, because if it's cheap, they feed it more, so

like they put more pounds on. You know, like the old theory used to be, you know, you you know, you would walk it off the farm instead of drive it off the farm, right? If prices were low, you feed it to your animals to try to get, you know, some of that back. Yeah. But, I mean, it, it adds weight when corn's cheap. They feed more of it. Talk through some of your old stories, as you call them, right? So that's your trade setups and whatnot?

you call them stories well yeah i mean those are scenarios let's put it that way yeah yeah i mean the uh you know the the cattle market's kind of like a it's a revolving scenario right so it evolves on itself like this drought you know the drought of two to three years ago has now the repercussions of that we're living through and it's been ongoing well there was lots of stops and starts along the way there was you know the whatever happened with the pandemic with as the market crashed into the 80s there was there's various things that come along to disrupt that story or delay it or but it always is kind of building on itself and so right now we're making these highs because of what happened with Mother Nature and the drought and we're probably doing something to

demand or changing some consumer sentiment somewhere that in the future there will be a hangover from it it just what it's it's kind of when when it ends up showing up or what are the circumstances that bring it about. So what's your stance right now as you're looking at the market at all-time highs? What's the Wharton playbook not to give away the farm, so to speak, pun intended. I mean, we think the prices are going to be topping out probably for the year pretty soon. We think you're headed into more cattle, particularly in the Midwest. You know, Iowa on that last report has 6% more on feed, and those cattle should start to be ready.

in the fall, that that's when those, that region, their cattle come to market. So we're looking for that to kind of pressure the market. You know, also the, you know, with the border being closed, the southern border being closed due to the screw worm risk, you know, that has, that has certainly, I think, made supply tighter or made people more bullish because those animals just aren't able to come over. Texas placed a lot. That was how they were getting a lot of animals. So Texas on feed numbers are way down due to that. And whenever that opens is anybody's guess. Wait, so what is that

screw worm? Yeah, that's a parasite that lives on a fly that can infect the animal. So the Mexican birds have screw worm? They're in Mexico. Yeah, there are a couple hundred miles from the border. They picked them up. So as a precautionary measure, then the U.S. closed the border to feeder cattle imports from Mexico. That was back in, I think, November. Yeah. And what are those tariffed and all that? Is those cattle even if they were coming over? No, there's no tariffs on the animals, but they're just not coming over anyways. Yeah. I mean, it's frozen. It's closed. And do we get some from Canada as well? well or it's too cold no they get they can we import peter kettle from canada but there's no there's no

restrictions on that right now so that's flowing fine um and so if you you have this out like how far out will you play it or like you said if there was the drought when was the drought in 22 yeah yeah 20 21 to 23 yeah so were you putting on positions three four years out thinking this would No, that's too far out. That's too far out. We just kind of trade the next 30 to 60 days or two weeks to two months kind of, I like to say. That's kind of a thing should set up. I mean, we're looking for something closer than that based on whatever, a seasonal shift in demand or a seasonal shift in supply.

Or interseasonal. it's every two weeks like something that's happening in between yeah i mean if it started or you know just each each scenarios is different but i mean we're short to medium term you know we're not going to go super far into the back and and do something for next year that's not really our style that's not what we grew up that's not our style yeah and then i'm assuming which i do have the numbers somewhere but not in front of me but that makes you uncorrelated to other cTAs to trend following to what you can call it because you have one you're not trading all the different markets but two you're on a different time frame it could be i mean that that could be one factor i mean i don't

i don't i don't totally know why we're uncorrelated like that but i mean we are um but it could be you are because you don't think about it you're not trying to think things like they do right yeah i mean we're just focused on our story and our system and hey we we have our we've been doing it together for so long talking, I mean, I've, that, you know, I think that's what kind of makes it unique is that, you know, the length of time we've been, like kind of the whole group has been together, you know, and so we have our own little way we look at the things and triggers and signals and, you know, you're kind of trying to remember different scenarios that happened before and see if they're happening again.

think that's one thing where I think we were pretty good at and it's how we add some value is if something new does come up, I think that through our experience and through our long-term contacts, we can fit new pieces into the puzzle, you know, and figure out what it means to the futures market, you know, as fast as, you know, as anyone we think, you know, or pretty fast. You know, I don't want to be, I don't, I'm not saying we're the smartest guys out there, which we're not. It's just, I think we can plug new stuff in, uh, well. And how does that, look, you're, so you're calling around all the time talking to feedlots, talking to Packers, talking to these groups and kind of getting intel or is it more? Yeah, yeah, we have, we have, you know, commercial context that we talk to. And then also knowing how to read the reports, which reports to read.

Um, you know, I certainly monitor all the news wires I possibly can through. whether it's X or any other type of sites that I can find. You know, I mean, you're constantly combing the news or anything that could affect it. I mean, any more you have to watch everything because something could happen overseas that could completely invalidate your entire theory.

Yeah. You know, I mean, there could be something going on with tariffs or, with a parasite So you need something Yeah I mean there's just who knows You know it's so interconnected What are your thoughts on right

There's these groups doing what they call quantum mental right So they're kind of systematizing all these fundamental inputs Or they're having AI read X and read these things And kind of trying to do what you're doing But in a systematic quant way Like, do you think that's viable or what are your thoughts on it? Well, I mean, it's, I'm sure it's a factor. I mean, I don't know to what degree and I'm sure it's going on.

And it's just another, hey, markets are always changing, you know, whether it was, you know, the limit used to be 100 points and there was only 50,000 open interest and then this change and the contract specs change. And I mean, it's, it's always been, I think it's always been changing. So it's just a new change. And maybe it could make things more volatile or more extreme on prices if, you know, they can push it a certain way or someone can get trapped or whatever. But, I mean, it's always been a moving target. Yeah. It's never been easy. I mean, I don't, I don't, I never have thought that that trading cattle futures was easy for, you know, it's just has always been difficult and a lot of work and a lot of discipline.

yeah i joked with i think we had a guy in one so i was like why doesn't citadel or someone do this right yeah and the the wrong answer to me it's like oh they don't have the contacts i do like well they could probably buy those but the right answer is me it's too small it's not worth their time well i mean yeah it just i mean all a lot of the news is available it's not it's not as on you know it's a lot more transparent than it used to be i think and and sure i mean it's It's not, you know, you're competing when there's, you know, money involved, people are competing for it. And so you're part of that. I mean, we just try to stick to our system and it works for us and not really worry about what other people are doing.

And I think that that's something that you learned on the floor or in the pit is because there were so many different traders down there. And this guy was a back month spreader and that guy was a front month only. And necessarily, and hey, I'm a fundamentalist. And you didn't really, everybody kind of stayed in their lane what they were good at. You know, some people were market makers and they were great at that. But if they tried to get into a fundamental trade, well, then they might have some difficulty. And so you would just try to focus on, you know, what market suited you and what style suited you and your personality and stick with that. And it's adherence to that that I think over time, you know, allows us to be competitive in the space.

And I think you could drive yourself crazy, right? of like chasing on the floor back then like oh that guy's buying i wonder what he's buying like he might have some weird reason offsetting some book got an order from the floor like yeah you can't know right you have to focus on your trades and in your system and what works for you and if it doesn't work for you and then you change your system but don't try to you necessarily compete so i mean that i'm sure that stuff's going on and uh you know hopefully they make a lot of money in it you know And how's it look between you and Bob? Like, if he thinks you're going higher, you think you're going lower, what's that look like?

You have a meaning in the minds? Well, you got to, if you come up with this, that's an interesting question. If you cut the way we do it is, you know, you come up with an idea and you kind of got to sell it to each other. And so, hey, you know, look at this. It's, you know, and over, you know, here, we think it's going, market's going higher. Well, you know, the box beef cutouts going. and higher and it sounds like cattle are a little tight in certain areas right now and all the stochastics is oversold and oh look it's it's uh you know in this perfect area so

you've got to sell the trade to each other you know and uh you know or if let's say let's say it's not going well then somebody could be like well i've just had enough of this trade and then you know being partners you say well if somebody says that you kind of just say let's get out of it And we can always buy it or sell it back tomorrow. And so we're never really afraid to miss any trade. If it's not working, we tend to try to get out of it and find something that is working. And we don't like sitting with big losers for long periods of time and having to drain mental capital. And it's, you can, I mean, we used to say that, hey, there's nothing like getting, nothing to get you both.

bullish like getting along you know and so just sometimes get out and maybe the next day you come in and say boy I should buy this thing or I should sell this thing and so um you know to try to like keep your mind clear whatever the positions if you're not sleeping because of your position you've got the wrong position position which is an interesting point like as discretionary traders how do you you have any training with that or how do you just learn to live with that or that is a good theory like if I can't can't sleep with it on it's it's the wrong you got too many on yeah you know and so uh i don't like how yeah go ahead sir it's somehow i picked up just picked up over the uh you know that's probably

listening to old timers talk you know something like that if they take you out dinner i just um you know the mental side of trading is is you know almost as is or as important as anything so yeah but it's right the systematic guys trend followers like hey we've been here here before here's the average of all our past drawdowns and this and that and right they it's probably false sense of security right because they can have a big huge one in the future but they have this sense of security of the models doing just fine don't worry about it yeah they trust the process and and to some degree we just do the same our yeah fundamental system ends up over time we ended up figuring it out and and uh these things you know stuff ends up happening that that makes

it makes it work and uh you know because the the fundamentals do our drivers and if somebody's technical and systematic that's once again that's the system they've chosen and um it certainly works you know i mean there used to be an old saying that all systems work people don't you know and so it's it's if you just got to kind of get out of your own way sometimes and and uh we're a fundamental based program so it's it's not always just below this area we get out or above the area we get out. My change to that line, I used to say systems don't break, they just get more risky. There you go, sure.

It's a similar, similar. Like, this model's broken. Like, well, or it's just way more risky than you thought. So prices are going to fix themselves. We don't need to worry about $300 stakes over there at stake 48. I don't, that that's an expensive steak. Yeah, that's an expensive steak. But it's crazy, right?

There'll be a new steak restaurant in Chicago next year that'll up the ante. So we have to break that $100 mark. You know, we have to get into, right now is seasonally, is a slow time of year. I mean, you know how hot it is here in Chicago right now. Nobody is grilling right now, right? So the weekend, it was everybody's inside, not, you know, just ordering takeout, right? Right. And so, and everybody's traveling. Kids aren't on a weird schedule. So that's why they call it the dog days of summer kind of. It's, it's the lack of a fixed schedule. And then as you move into football season or back to school, well, then everybody starts having this more schedule. And that's considered a better demand time. And so even if the, you know, you can sell less meat in July and August than you can in May and June, no matter what the price is. and so it's if it was cheap you can move less of it now because it's just nobody's eating and um in that

way and so you we have to get into a better demand period and see if if the consumer has really switched once families start having more dinners after school or you know that that type of stuff whatever the better scheduling is a more rigid scheduling here's what i want to see the kit the kids are obsessed with canes fried chicken like everyone every kid I know is just going there nonstop I'm like yeah forget beef they want this I don't think it's all that great I think chick-fil-a is better but it seems to me chicken is like taking over right yeah I mean I think there is that's maybe a generational thing that they're they're into a little bit more chicken fingers and ranch and yeah there's a chick-fil-a here it's packed there's a canes here it's

packed. You know, that's why McDonald's is adding the snack wrap. You know, I mean, you got Popeye's chicken sandwich is excellent. Everywhere is basically adding chicken. I mean, I wholeheartedly agree with that, that anecdotally, it looks like the fast food chains are trying to add chicken. They're not adding burgers right now. And, you know, that's probably due there's, you know, that it's one that for some reason they like it better. And then two, it's probably a, at some level of price issue or margin issue but it's not cheap it's like

18 bucks for yeah it's crazy yeah yeah I think that guy's a billionaire already but yeah that's you know that that's is expensive and Chipotle is kind of the same way I mean that Chipotle is very popular you know and so that's an expensive meal

but in theory those the right those guys will become more beef right beef the more money you have the more beef you buy is kind of the better the economy's doing all this yeah and you see that in third world kind of developing countries the more their GDP goes up the more beef they eat correct you know we believe that too if you if you get fired from your job you're not going to go out and have a steak dinner it's a celebratory type of meal right and let's say if you get a new job

and you start doing better you're going to go out and celebrate hey let's get a steak you know so it certainly fills that void for being a treat you know what I mean yeah or a you know a date night dinner or something like that in special occasions well we'll see if these kids grow up and don't just take their dates to canes okay go out hey let's go get some canes remember you got the ice there they got the good ice there that's what they're like too my son likes the bread the best he's like I'm like I don't know about this chicken he's like oh the chicken's not that good, but you get this piece of garlic bread. Yeah, that is pretty good.

That's awesome. I'm like, okay. And the sauce. And it's just dipping the bread in the sauce. Yeah. All right, Jeff. Anything else we should know? We'll put your contact info in the show notes. We put the link to that blog post in there, and

thanks for coming on. Well, Jeff, when I saw you last week of the game and you're like, well, hey, we're going to you want to do this podcast. Of course, I was like, yeah, thinking it was maybe someday way in the future not necessarily be like three days later and so I was pretty relaxed about it and then today as we got closer I was like man I don't know if I know you know have all these stats down quite good enough and uh it went we went well so thanks for helping lead you through it

I really appreciate that and you made me real comfortable with it so thanks thank you for coming home we'll see you soon all right thanks from this episode will be in the episode description of this channel. Follow us on Twitter at RCMaltz and visit our website to read our blog or subscribe to our newsletter at rcmaltz.com. If you liked our show, introduce a friend and show them how to subscribe. And be sure to leave comments. We'd love to hear from you. This podcast is provided for informational purposes only and should not be relied upon as legal, business, investment, or tax advice. All opinions expressed by podcast participants are

solely their own opinions and do not necessarily reflect the opinions of RCM alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations nor reference paths or potential profits, and listeners are reminded that manage futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.