Livestock Markets with UK's Dr. Kenny Burdine

Join the Ag Credit as they speak with Dr. Kenny Burdine about the current cattle markets and where he predicts they will go this fall. Shelby talks about the Kentucky Ag Finance Program and how it works with Central Kentucky Ag Credits AgStart for young, beginning and small farmers. 

Central Kentucky Ag Credit https://www.agcreditonline.com/
Dr. Kenny Burdine https://twitter.com/kycattleecon
Sign up to receive Cattle Market Notes Weekly https://us15.campaign-archive.com/?u=d27b0f8ca2d30ab88ad971a94&id=b444c1d96b

Transcript

Caleb Sadler (00:01)

Welcome to Beyond Agriculture, the podcast that takes you beyond the scope of AG and into the real life stories, conversations, and events taking place in our community, who we are and what we do beyond agriculture. Hello, and welcome in to Beyond Agriculture. Caleb Sadler back with you today. We're in our Lexington branch, and I'm also joined today with Ben Robin, the man behind the scenes running our tech, as well as Shelby Wade. And we have a new cohost with us here today, Ben Van Hook. Welcome to the show, Ben, and tell us a little bit about yourself.

Ben VanHook (00:44)

Yeah, so, my name is Ben VanHook, born and raised in Harrison County, Kentucky. Grew up on our family farm there. We raised tobacco. We were unique in the sense that we grew seed tobacco as well as well as leaf tobacco. So had a couple of greenhouses there and raised tobacco and spent lots of time summers in the tobacco field, something I'm never going to forget. My brother and I joked we'd be out there chopping weeds and we would always have to recruit our buddies to be some cheap labor and for my dad, and we'd always bet on who would last the longest, how many days they'd last in the field. So we didn't have an option. We were out there no matter what. But I grew up in Harrison County, played football and baseball there, so spent a lot of time on the farm when I wasn't active in sports throughout school and really was involved in agriculture, but really developed that passion for agriculture when I was a senior in high school. Actually started taking AG classes prior to that point, I was in engineering, the Pathway, but kind of switched roles their senior year and had class with Savannah Robin, and she volunteered me for everything that she could get me in and really pushed me to develop myself more in agriculture and went on to the University of Kentucky and majored in agricultural economics, minor in business.

Ben VanHook (02:10)

And actually, Dr. Burdhain was my academic adviser, so I know him personally outside of today's podcast, but so he guided me throughout school and took his class. And Dr. Isaacs and was very involved in the agricultural economics department, worked for Dr. Isaacs as well as a lab assistant teaching his Excel management classes and things like that, and also worked out at the Spinal Type Research farm out here on Ironworks, doing tobacco and hemp research as well through school. So happy to be here. Just joined Ag Credit back in May as a loan officer and like Caleb said, training here in Paris and will eventually be in our Lexington office.

Caleb Sadler (02:54)

Thank you for that, Ben. I really appreciate it. Before we get into today's guest and today's podcast topic, there are a few things that we need to bring up in regards to what's going on within the association or in our counties in the community. So first topic that we needed to bring up was Mr. Jim Caldwell's retirement, actually retiring from Central Kentucky Ag Credit after 40 years of service, June 30. So starting on the 1 July, our new President and CEO elect, Jonathan Noe becomes our new CEO and go out and listen to that podcast with him and Richard Medley. It's a good way to get introduced to him. So congratulations on Jim's 40 years and we wish him well in retirement. And some other things going on in our communities right now is one big topic for the summer is county fairs. We have a lot of those coming up. Bourbon county just concluded. We have Garrett County, madison, Estelle, and Harrison County coming up. So all of our listeners be sure to attend those county fairs. Central Kentucky Ag credit is a proud sponsor in those events. So one thing I will bring up that just happened was congratulations to Finley Ben's daughter.

Caleb Sadler (04:19)

I think she was reserve champion or was she champion at the goat show costume?

Ben Robin (04:26)

She was champion.

Caleb Sadler (04:27)

Now tell us a little bit about what it was.

Ben Robin (04:30)

Yeah, so Finley has this little goat that she's been working with. And when we first got it, she loved to jump up on purina tubs and so she would just jump up there and hang out. Well, my wife got the idea to when she talked about showing, having costume contests, that Finley was going to be a lion tamer and the goat, Ruth, was going to be a lion. So she got her a lion mane. And so put the lion mane over Ruth and walk through the ring. And Finley had a top hat and look like she was lielion tamer from the circus.

Caleb Sadler (05:09)

The pictures are pretty cute. I would say.

Ben Robin (05:12)

Our listeners, one of my good friends, I sent it to him, he was like, you have to do a second take like that looks like a legit, like there's something weird going on there.

Caleb Sadler (05:20)

It really did look like a lion at first take. Yeah, it really did. The mane looks really good.

Ben Robin (05:25)

It was pretty good.

Shelby Wade (05:26)

And talk about the county fairs a little bit more at Central Kentucky I Credit, we support all of our local county fairs. A lot of times you'll see us out there just supporting our local youth and just agriculture, the agriculture projects that are there. So definitely get out and support your community. And it's always a good fun, good time.

Caleb Sadler (05:45)

All right, one other topic that we need to bring up is an event that's taking place. We just had one in Winchester, Kentucky, and that is a farm to table in Stanford with the Black Soils. That is a big event that's coming up there. And I would encourage you, if you're interested in attending that event, to reach out, to go to the website for Black Soils or Central Kentucky AG Credit. We can get you in contact with those people to attend that as well. So another event coming up. We're getting really close to Kentucky State Fair time in August. We just wish good luck to those exhibitors and really look forward to seeing them in Louisville at the Kentucky State Fair. So without further ado, I'd rather turn the mic over and introduce our guests with us on the show, mr. Kenny Burdine. And Kenny is an extension professor with the University of Kentucky. Kenny, tell us a little bit about yourself.

Kenny Burdine (06:42)

Yeah, thanks, Caleb. First of all, I appreciate the invite. Good to see everybody and good to be on. A real treat to be on with three former students and some friends. And one of the things that I guess I enjoy the most about my job is this very thing is that I get to know so many folks through my role as an instructor in the college and then a good chunk of those students to get to work with afterwards in different roles. And lending is one of those, and that's something I sincerely enjoy. You ask about me background. I grew up in Jessamine County. That's still my home, so I live there now. I grew up on mostly tobacco farm. We had tobacco, but we had some sheep and some cattle and horse too. So like everybody else, I grew up in the eighties in Kentucky. I grew up in tobacco field in a lot of ways. I've actually been at UK about 23 years. My role has changed some, but I am an extension professor now, so I get to do a lot of things. I get to travel the state and work a lot of good people, do a lot of extension programming, get to work on your publications and articles relative to the livestock sector.

Kenny Burdine (07:42)

Enjoy doing that. There's a few things that I think are more entertaining and informative than following AG markets. And I get to do that for a living and that's a real blessing.

Caleb Sadler (07:51)

Thank you, Kenny. And it is really a great to have you on beyond agriculture, and hopefully we get to have you back on here too, in the future, maybe in the fall or something like that as well. Because as everybody knows, the cattle cycle is certainly an evolving thing. And right now, if you talk to somebody, they'll tell you that we're going into the peak of the cattle cycle. So one thing I might ask right now is what do the markets kind of look like from a cattle background standpoint? And then we can get into the other commodities too, like poultry or swine or any of that stuff.

Kenny Burdine (08:23)

Sure, So starting with cattle, especially the cow calf level, we've honestly had several frustrating years back to back. We're in, I guess this is our fourth year of herd liquidation. So the cow herd is getting smaller, quite a bit smaller and still as we speak. But on the same note, we've had so many things that have really limited our ability to capitalize on the tighter supplies. So it was COVID in 2020, it was rising input prices, and it was an expensive feed in 2021. And we're dealing with inflation right now. So in reality, I don't think we're seeing the kind of price levels that we're going to see once we work through kind of the glut of beef production that we're dealing with right now that's drought driven. So longer term, the next several years, I think the cattle market looks extremely bullish. I'm very positive on it. We've seen heavy feeder cattle move up a fair amount here lately. Even this calf market, I always kind of watch a five weight steer, kind of as my baseline, if you will, for a cow calf operation. He's selling for about the same price that average that he was back in the spring.

Kenny Burdine (09:25)

And that's unusual. And I think because supplies are going to get tighter as we move through the year, I think we may see an unusual year where our calf market may actually be higher in the fall than it was back in the spring, and it wasn't too bad in the spring. So I think we're going to see our strongest calf market probably since about 2016, if I had to guess, when the dust settles on 2022.

Caleb Sadler (09:45)

And I would say this, and this is just me being the economist that I am in a loan officer at the end of the day, we've had several borrowers at Central Kentucky Ag Credit, that really started buying in on these stocker backgrounders early. So they were able to really soften that margin or really grow that margin that they had because they were able to incur some calf costs that were a little cheaper if they got them in November, or at the end of October. And then going into some long yearlings. Right now, looking at the board today, current board, it's up $3. So, I mean, that's really strong coming into the 4 July.

Kenny Burdine (10:22)

Absolutely. With input prices where they are, the truth is we need a really strong fall market for cow-calf operations to really offset the increased cost in fertilizer fuel, what have you. You mentioned stockers, though, Caleb, and this is going to end up being, I think, one of our better stocker years. One thing that high feed prices do right, is it limits how aggressive feed yards are when they're looking to place calves in the spring, right? So in one sense, your stock operators have a little bit less competition for calves in the spring of the year. They get a better buy on them. And when feeds higher, those price differential, price slides, we call them, right, the difference was by weight, those tend to tighten up, so it costs more to put weight on cattle via feed, and that tends to translate to higher value on feed or I'm sorry, higher value of gain. When we look at what we can do on the stocker side. So this is going to be a pretty darn good stocker year when the dust settles here in the fall.

Caleb Sadler (11:20)

No, I would agree. And honestly, if you look right now at the weather standpoint, too, they always tell me that a drier year, even though the grass is lighter, you'll still put more pounds on those cattle. And I don't know if there's any truth to that or not, but we were talking about it there's at the break a while ago. And Ben, you can pitch in here, too. I don't know what it's like down in Cynthiana exactly, but we're dry. We need a rain, let's put it that way.

Ben VanHook (11:49)

Yeah.

Ben VanHook (11:49)

And I'd like to touch a little bit back on my introduction there. I know I spoke on my tobacco background, but now we currently have beef cattle. We have a commercial herd of breeder cows, so I'm still involved on the family farm, and we produce our own hay as well. So I just wanted to ask you, we're pretty dry, and we've got some rain forecasted for this weekend, but it seems like the percentage keeps trickling back. What are some ways that producers can manage throughout this dry period with the next couple of months coming up and how they handle and make strategic decisions?

Kenny Burdine (12:24)

Yeah, great question and give you the best I can do in terms of answer, but we're in that time of year, and we'll be for a while still where rain are just so spotty. My wife and I were actually moving cattle Sunday afternoon. In the last two weeks, I've been shocked how much pastures deteriorated. It's a combination of lack of rain and certainly heat both right. But it's certainly a challenge that's out there. As we think about strategies, there are some things we can manage, some things we can't. Always, when I get into a situation, like I always say, think about rotational grazing, the more that we can rotate cattle, keep them moving, that always helps. I was optimistic about getting some rain was at about ten days ago now, I guess it was would have been last Sunday, I suppose, and even started raining in the middle of the night wife even woke me up and told me. And we got up in those two tents in the gage. Right. So you get into those kind of things all the time. Yet I've got some friends that got an inch or more. So being like you, I'm hoping that we think I'm hoping that we're able to get some more rain here in this next it looks like some four or five days ahead of us with some possibility, but I think rotational grazing first.

Kenny Burdine (13:35)

The second thing that I always like to think about is that we're in a situation like this where it's dry. I start thinking about, okay, what about winter hay supply? And I'm getting increasingly worried about that. And frankly, I was even back before it got dry here in Central Kentucky because so many parts of the US are dry. And if you look at hay stocks coming into this year, they were fairly low in a lot of places. So we may see some pull of the hay that we do have into other parts of the country. And you combine that with high fertilizer prices and I don't have any way to track this, but I guarantee on average folks applied less fertilizer than usual this year. And I would have done the same thing by the way. Okay. But my point is we're going to see lower production levels in all likelihood. So you combine all those and I think hay supply could be an issue come forward. So planning ahead for that I think is important. And then the third thing I would say sorry for the long answer no, but you've got to think about long term decisions and sometimes that means you cull a bit harder and you're like this.

Kenny Burdine (14:32)

And the reason I wanted to mention this is because we're in a unique situation now where we've got an extremely high cull cow market, right? I mean run of the mill cull cows are in the 80 to 90 cent range, some of them pushing a dollar.

Caleb Sadler (14:43)

Well, I was going to say I talk to Ben and I think he's got a really good example of this this week. I mean the cull market right now is just unbelievable.

Ben Robin (14:52)

That's what I was going to try to chip in and get your opinion on that. There's a lot of cows moving through the market and bulls and what kind of effect that's going to have on everything. Cow numbers.

Caleb Sadler (15:03)

Well, I mean when we also talk about it too, we're not the only place that's experiencinga drought. I was just had somebody in my office there earlier that made a comment that they had a couple of loads of cows that came out in Texas that were really thin and needing a place to go for them. And really there's not a real good place around here because we don't have the grass to put the pounds back on them right now either.

Kenny Burdine (15:26)

I've been shocked how strong the cull cow market has remained despite how many cows we're moving. It's a stunner. We've kind of got the perfect storm, right? We've had some challenging years, the cow calf sector back to back. We've got high cull cow prices and we've gotten dry in a lot of places. That's a recipe for moving cows. It's an opportunity in one sense, right? If I have to unload some cows, this is not a bad time to do it. The other thing that I would say is that if you kind of look at what the cull cow market is relative to the breeding stock market, I think breeding stock is a better buy right now, relatively speaking. So by that I mean it's probably not a bad time, if I had to, to think about unloading some cull cows, buying some young, breeding stock some bred heifers, something like that, have a younger herd. Right. Maybe a better quality herd in the next few years when I think prices are going to be better. Ben to your question about numbers. I'm trying to think when I ran this, I would have ran this back around the end of may, but we had moved we've slaughtered 220,000 more cull cows this year than last year. And to put that in perspective, I mean, last year was a pretty big cow movement here, too. So we're on track if that were to kind of continue forward, we're on track to harvest about 500,000 more cull cows this year than last year, which that in and of itself is two and a half, 3% of the US. Cow herd. Combine that with heifer retention, I think we could have 700,000 fewer cows in 2023 than we do now. So that's a tighter supply I think we're looking at down the road.

Caleb Sadler (17:05)

I was getting ready to bring that same thing up as we were sitting there talking. I wrote it down here, and that was heifer attention. You might speak into this, but if you look at the cattle on feed report right now, are there any signs of any heifers that are not being on me? A lower amount of heifers being on feed, maybe that producers are keeping back more, or no insight into that.

Kenny Burdine (17:27)

We're seeing the opposite. Okay. Heifer numbers on feed are pointing to the fact that we're keeping back fewer heifers for replacement, right? Yeah. We only get two estimates from USA on true heifer retention for cow replacement. One in January, 1 in July. So the january one was down. I forget the number 3%. I think july will be down, too. So all we can look at right now, really, is heifer slaughter placement of heifer on feed. And what it's pointing to is the same thing a calorie getting smaller.

Caleb Sadler (17:57)

Yeah. And we feed into that, too. That's a good way to transition from what else I wrote down, is how long do you really think this calf market will stay strong at that point in time? If we have less cows on the market, obviously, that's just less calves. They're going to be at the sale barn. I don't know how long that will take for. I mean, typically, you might go in to see or you tell us how long the cattle cycle is at that point in time before we start seeing that come back around.

Kenny Burdine (18:23)

That's the million dollar question. Right? I think we'll see a good calf market this fall. I think we'll see an even better calf market in 2023. And I think also in 2024 now, weather is going to impact that, right? We could see multiple back to back drought years. I hope we don't, but it's possible things could change quickly. So even if we started, even if weather got better in 2023 and we started rebuilding this hurt, right. It still takes some time to do that. So if everything changes at the drop of a hat, we're two or three years away from bigger calf crops, right. So it's going to take at least that long, probably longer. The other thing, though, is you also can't ignore that in reality the value of cattle is driven by the value of beef. Right. And that all kind of starts at the retail level. So what happens with the other species affects that, too. Fortunately, we're seeing high prices retail pretty much across the board, but that can change, too.

Caleb Sadler (19:21)

And I know that our export levels right now on the beef side are up right now. Are we seeing that maybe as a correlation to we're exporting more beef or is it just for the fact of a demand right now for it?

Kenny Burdine (19:32)

I think it's both. Exports are up, frankly. US. Demand has been strong and we're seeing good export. Most everything fundamentally looks good. I think the supply picture, beef production is artificially high right now because of the dry conditions. Because we're culling so many cows, we're pulling cattle forward. If you look at cattle on feed and the placements in the lower weight categories, a lot of the placements are in the lower weight categories, which is unusual right this time of year. But it's drought driven, so that's going to eventually work the system and we're going to be tight on supplies eventually. That's not sustainable is what I'm saying.

Caleb Sadler (20:09)

Yeah, and I was talking to somebody there yesterday and we were talking about as we move into the fall run, typically our basis here gets narrower. And he was telling me about some cattle that were trading out west right now, that we're above the board and not just a little above the board. They were substantially above the board trading. I mean, I know it takes longer, further for us to get cattle out west and cattle our value based on proximity of feed and feeding out those cattle. But why do those cattle out there, why are they trading so much higher above the board right now?

Kenny Burdine (20:47)

It's transportation costs, Caleb. It really is.

Caleb Sadler (20:51)

Well, if you couple that with $5 fuel, it doesn't take long to add up at the end of the day.

Kenny Burdine (20:55)

Exactly. All those things that we talk about can impact basis. But on the same, the bottom line is if I'm in Kentucky and a feed yard in western Kansas buys a group of steers, they got to get them there. Right. So our cattle prices typically reflect those transportation costs. And with diesel fuel where it is now, I don't think we're going to see an unusually strong basis here this year simply because of transportation costs.

Caleb Sadler (21:23)

So you think maybe we could be backwards a couple of cents off that basis than what we typically average?

Kenny Burdine (21:28)

Maybe we will be right. I mean, rule of thumb, a lot of folks use is roughly diesel fuel price per loaded mile. Now that works pretty well in kind of a normal diesel fuel price range. It doesn't work when you get to five, $6. The point being the transportation costs go up with fuel cost. And frankly, it's not just fuel cost, right. It's the cost of maintenance and it's the cost of the trucking. Right. It's all that kind of stuff. So yeah, that's going to impact our kettle prices. I think they'll be good. But I still think you'll see that differential between what we see in Kentucky versus what you see out there in the major cattle feeding areas.

Shelby Wade (22:03)

One of the things that you talked about there, Kenny, especially when Ben was asking about what producers here locally could do to kind of offset this drought year we're looking at potentially having one of the things I know you talk a lot about with your students and with other groups across the state is LRP insurance. And so for those who aren't familiar with that term, livestock risk protection. So tell us a little bit about that. And are more producers using it these days? I know it seems like it's a little bit more attractive nowadays, so it gives a little insight on that.

Kenny Burdine (22:35)

Absolutely. So I'm trying to think, I started UK in 2000, Shelby. I first started doing programs on futures and options, I think in 2001, maybe the very next year. And when I would do those programs, because we're talking about futures and options, the only risk management tool that we had was really the board, right? Yeah. And when I'm using the board, I'm locked into 50,000 pound quantities. So when LRP finally came around, we finally had a tool we could use to manage price risk in feeder cattle that could be scalable at a small level, so I can buy it on a few head. So a lot of our smaller operators that aren't trading in truckload quantities of cattle can utilize this tool. Simple way to think about it is you're buying an index insurance product that pays you based on movement in the CME feeder cattle index. And that index is seven day weighted average of feeder cattle in twelve major states. So when Caleb asked about prices out west, it's really those states that define that index. You got to think, okay, that index isn't go to transitransitionstion into kentucky, perfectly. But the idea is if that index moves and feeder cattle prices are lower out there, they're going to be lower here too.

Kenny Burdine (23:39)

So that's the idea. So it's a good product. You mentioned it being more attractive now. And that comes down to premium subsidy. When I first started doing programs on LRP, the premium subsidy was 13%. Right now, depending on the level you buy, it's 35, 45 or 55%. Now when I work with folks, I usually push them towards one of the higher coverage levels, which usually means one of the lower subsidy levels. The way to think about it is, on average, you're going to be paying about 35% less than what you would pay for a comparable put option. That's a pretty good subsidy.

Shelby Wade (24:13)

Yeah.

Kenny Burdine (24:14)

And it's attractive enough now that even larger producers that could use futures and options, it's looking more attractive for them to be using LRP, too. So if that's not in your risk management toolbox, it probably should be.

Caleb Sadler (24:28)

In my brief experience with it, it leaves the upside open. It still allows you to capitalize on the market. It protects the risk. So, I mean, the producer really just has to get comfortable with where they want to be at and what they think they can't take anything less than those cattle are for.

Kenny Burdine (24:44)

Work with your lender and see what level of LRP insurance you need to cover your downside. And then you hope for the best, right. You hope you spent some money on premium and didn't need it. Right? That's the best case scenario. Yeah.

Caleb Sadler (24:56)

Well, and we were talking I know the LRP really gained some traction here recently, and it had to do around that premium. I'll let you maybe get some insight into that because I think there before it was maybe paid ahead of time. And now you don't have to pay it until it's after you sell the cattle.

Kenny Burdine (25:14)

They made several changes to it over the last two or three years. Kind of hard to keep up with, truthfully. The premiums were increased. But yeah, what you're referring to was initially I don't know, actually, when this changed, I think 2020 I could be wrong, Caleb. Initially, though, you had to pay premium upfront, and now you pay it basically at the end of the policy. So it works the exact same way as PRF insurance. For example, if you're doing indemnity, then you never actually end up paying the premium if it offsets that. Right. And if you do, you pay it at the end. So it just makes a little more palatable sometimes. So in most cases, in a cattle scenario, you can deal with that after the cattle are sold.

Caleb Sadler (25:49)

Well, that's exactly right. And if you're looking at it right now with extremely high input costs, that's just something the producer doesn't need right now. You don't need to add another bill that's unnecessary at the time of purchase. So it really works out great for farmer

Ben VanHook (26:04)

At Ag Credit, we deal with a lot of young, new and beginning farmers. How does somebody who doesn't know a lot about LRP insurance learn and go about maybe enrolling in that?

Kenny Burdine (26:13)

That's a great question. So there are multiple ways that you can learn about any of those risk management tools. I like LRP, first of all. Right, on my team, we do a good job, I think, at the county level, doing extension programs on things like this. And one of the parts of my job I enjoy the most is going out and doing programs like that directly with farmers. On the same note, we've got a lot of material online. I've done a couple of video programs on LRP. So if someone just wants to watch something from the comfort of their home now we've got some YouTube videos that are out there that you can get that information from. Work with your lender, talk to them about what your goals are, be blunt with them and tell them about your pros and cons or cost structure, and they'll help you understand what risk levels you can tolerate and what you need to think about managing. And they'll kind of point you in those directions. It's one of those things too, though. You need to develop a relationship with someone that you trust on the insurance side. LRP the way that it's set up, it's not like you're going to be shopping for price, right?

Kenny Burdine (27:14)

That doesn't matter. So find someone that you're comfortable working with as an insurance provider and build a relationship there too.

Caleb Sadler (27:23)

On your operation. I know that you all turn a few calves yourself at that point. Do you all utilize that program yourself or do you strictly stay on the board side and with calls or puts and things like that on the cattle?

Kenny Burdine (27:38)

Good question. I run some cattle with a friend and colleague. In the past, when we had more of a traditional stalker operation, we actually have used LRP and used the board both. Right now we're moving smaller numbers. And the way I kind of describe it is we've got a grazing grazing-oriented stocker operation, but it's kind of evolved into like a forage finishing operation now. So what we're doing doesn't lend itself well to something like LRP your futures. So we're in a little bit different market right now. So we're very grazing oriented, actually. A bale graze through winter. Great system, by the way, but it doesn't lend, it doesn't fit with what we do. Our market is very different.  We sell a lot of cattle direct and some is freezer for beef.

Caleb Sadler (28:20)

Got you.

Shelby Wade (28:22)

So you mentioned that obviously beef in Kentucky, that's kind of your primary focus. The other proteins you do work with as well. What are you seeing on the side, those type of things. As far as Kentucky, nationally, globally, that kind of are affecting beef here in Kentucky.

Kenny Burdine (28:41)

The markets are relatively strong, much like the beef market, maybe even more so, frankly. Pork and poultry are impacted by feed cost. Right? Yeah, we don't think about it sometimes. We probably have more flexibility on the feed side when it comes to cattle than the other species do. Right. In Kentucky, both pork and poultry tend to be more contract integrated. We have a lot of independent operations, obviously, but we also have a lot of those that are out there under contract with Integrators. So it's a very different system. With construction costs like they are right now, I don't think we're seeing the growth that we were seeing at one time in some of those types of operations. And I think it's just a function of what it costs to get an integrated operation up and running.

Caleb Sadler (29:27)

The technology that's behind that right now is unbelievable. If you go into a chicken house, it's like working into a four star or five star hotel. So basically today that industry has come a long way.

Kenny Burdine (29:42)

There's no doubt sectors are healthy, but they have challenges, just like the beef sector on the input side.

Caleb Sadler (29:51)

Now, where do you see consumption or demand at the retail level being right now from a standpoint of beef or poultry or pork? Where do you see that falling at? Are people demanding more protein from those cheaper sources?

Kenny Burdine (30:14)

Really good question. And frankly, it's hard to track. The retail meat price series are not ideal. There are some series you can use, there's some composite series for the species. There's also some individual cut prices you can track. One of the things that we wrestle with when we look at retail prices of meat is featuring, right? And I live in Jessamine County, that's home, so I'm in a fairly competitive retail grocery type environment, but there's a lot of featuring that goes on with meat. Right. So a lot of your meat managers will tell you that a lot of what they move has moved at cost. Right. Because it generates traffic. So it kind of makes it tricky. General answer to your question, though. Prices have actually remained very strong. In fact, box beef prices have actually slipped backwards. Retail prices hold pretty well. But I do think that the fact that these cull cow prices are so high does point to something. Right. And if you look at trim prices, I do think we're starting to see some movement towards cheaper meat products, ground beef being one of those. Not the ground beef is cheap, by the way.

Caleb Sadler (31:20)

Yeah, no doubt. Well, the other things, yeah, if you look at it, compared to the nation's inflation rate right now.

Shelby Wade (31:28)

You mentioned it there, beef is higher in the store relative to a couple of years back, but so is poultry, so is pork. So that, you know, all of the meats are increasing price wise. And like you mentioned, Caleb, inflation, no doubt families are feeling a little tight in the pocketbook, so they're going to cut back a little bit. It's just a matter of how long this inflation holds out. And hopefully all the proteins, especially beef, of course, remain high on the list at the grocery store.

Caleb Sadler (32:00)

So one topic, and that Shelby I think you fed right into it, really. But if you look back 2020 with Covid, we've seen grocery store shelves bare, completely bare, and we've seen a lot of people start pick up and selling beef off the farm. And there's two people here. Well, really? Three, you do it yourself. What's the demand like there? Is it still the same as it was in 2020? Or are we seeing any softening there or all three might pitch in here?

Shelby Wade (32:35)

Yeah, that's a great question. On my side, it's still very strong, and especially if we can keep our products, I mean, they're going to be a little bit higher than the grocery store. It's a little bit more of a premium product, but if we can keep it at a good price point to where it's not over the budget of consumers, I see this as a trend that's going to last a while. This local driven people want to get their beef from the farm. They want to go out there and get it directly from us. So I definitely see a good positive still market there.

Ben Robin (33:11)

Yeah, I agree with you, Shelby. Our customers are still calling us left and right stock freezers, and it's just different times. I worry about the talks of recession and how that's going to affect consumption and sales. But yeah, I mean, business is still good.

Kenny Burdine (33:33)

I would have bet money that we would have seen a fall off in demand for local protein, but I don't know that we have.

Caleb Sadler (33:41)

I would think there's probably an increase. I'm only speaking from a consumer level standpoint. I raised beef cattle myself, but I don't slaughter any. But there's just a comfort level knowing.

Ben Robin (33:53)

I was going to say trust. Definitely.

Kenny Burdine (33:57)

We've always been a little bit tight on local process capacity in Kentucky. Right. As far as capacity to actually have livestock slaughtered and sold for direct consumption. And that became really apparent during COVID. And we've added some capacity and we're adding more. But it seems to me like anecdotally what I see is we're still pretty backed up in a lot of these plans. So that's a sign to me. That market keeps growing. 

Shelby Wade (34:23)

Yeah, I agree with that. And Ben, we're booked out all the way through the middle of next year. I have appointments already at these places because we have a set schedule. They're working us in. But, you know, just Farmer Joe down the road, he just wants to take one beef. He's going to wait a while, depending on the different processing plants. So that's definitely something that's still in effect today.

Ben VanHook (34:54)

I think a lot of that demand was driven by COVID. But since people are starting to source some of their proteins and beef here locally, they're creating relationships with local farms. And that's what we really like to do here at Ag Credit. Once you meet a producer and create that relationship and you're able to ask them questions and really learn about where their beef comes from, you can't do that at the grocery store.

Caleb Sadler (35:18)

That's right.

Ben VanHook (35:18)

So some of that is continuing and hopefully that will continue in the future.

Ben Robin (35:24)

Yeah, what we say all the time is they're not buying beef from us. They're buying our family story and our product and how we raise the cattle and our livelihood of the animals out there, too.

Caleb Sadler (35:39)

Well, we'll get back a little bit more on topic, I guess you could say. But I know when we were talking there, Kenny, before, I know you do a lot of programming with university. Tell us a little bit about the programming that you do. Do you travel all the way across the state of Kentucky, or are you more centralized here in central Kentucky or how does that work?

Kenny Burdine (35:58)

No, I'm based here on campus, obviously. My office is really just maybe a mile from here or something. But I travel the state from east to west, north to south, and that's one of the things I enjoy. Naturally. I spend more time in areas that have more livestock production, of course. But no, I've been in 119 in Kentucky's 120 counties. Wow. Now not all of those are extension related travels, but I've got one left to hit.

Caleb Sadler (36:23)

What county, if you don't mind me?

Kenny Burdine (36:24)

I don't mind you asking one bit, and I apologize. Any listeners that live there? It's nothing against Martin County. I just have never been in that county.

Caleb Sadler (36:30)

I never even knew there was a Martin County in Kentucky. I'm sorry.

Kenny Burdine (36:34)

It's a beautiful county. I know it is. I've just not been there. But, no, I enjoy traveling east to west. I enjoy the Mississippi to the Big Sandy.

Caleb Sadler (36:42)

I will ask, though, what do you see across the state? I mean, do you see stronger cattle prices in certain communities or how do you see that across the state of Kentucky?

Kenny Burdine (36:52)

There's always going to be variation and it comes down a lot of things, frankly. Right. The type of cattle, the quality of cattle, how strong the buying community is right in that area. I had a graduate student, I'm dating myself now because this has been a while, but they did a study of I think he looked at four or five different markets across the state, and he had obviously a lot in this area, some kind of in, what I'd call more true central Kentucky when you get a little bit west of here than some out in the far western part of the state. And when he statistically looked at those prices and the conditions that they sold and accounted for, whether it was an inway or an outweigh market, there really was not much difference in price. I think that's interesting to think about. These markets are pretty efficient, right? If they were a big difference in one market versus another one, the market will sort that out. Right. Then you don't know what markets do. So we tend not to see major differences. Now, on a given day, anything can happen. Right. But if you look over the long term week after week after week.

Kenny Burdine (37:53)

We don't see a lot of variation.

 (37:54)

Right.

Caleb Sadler (37:56)

And I'm going to get a little deeper in the weeds here because I've been out west and I've experienced a spring out there and I know a lot of backgrounders out there will buy calves or feed lots. They'll buy calves and they'll graze them on the wheat or whatnot. Have we seen any softening on that this year with wheat prices?

Kenny Burdine (38:16)

Yes, although I think so a lot of that occurs in the Southern Plains. I think Texas, Oklahoma, and I don't know, maybe the southern half of Kansas, something like that. I think wheat prices certainly matter. But remember, it was starting to get dry there way earlier. So I really think that the dry conditions that we've been in that area really started in the fourth quarter. Right. It was not dry in the Southern Plains until we got to about September, October. And it was almost like I took that drought and I kind of shifted it counterclockwise and it moved into the Southern Plains. So we saw a lot of movement there. But even ignoring that, just the basic question do wheat prices impact wheat grades? And answers, yes, they'll use the term out there, they'll use the term graze out. And what a lot of times they'll talk about is, okay, if I can graze cattle and wheat and get them off, I think like mid March kind of the rule of thumb that I won't have much impact on yield. All right. Now there's still some impact on whether or not they want to place cattle or not on.

Kenny Burdine (39:13)

But certainly when you think about grazing cattle post that mid March time period when prices are high, there's much less interest in that graze out, they call it.

Caleb Sadler (39:24)

If you're sitting there looking at the board right now, I would probably be more inclined to harvest the wheat off of that. 

Shelby Wade (39:33)

As far as our next kind of category question going into you talked about your extension programming. Of course, one of the topics that we discuss a lot with our customers and just people who are interested is going to be the transition from the older generation of farmer. We got the rising average age of farmer across the nation transitioning that into this younger generation. So is that something that you done work with? And of course, obviously the majority of our foothold is going to be the cattle producer. So touch a little bit on that.

Kenny Burdine (40:06)

I don't do a lot of programming directly to transitions myself.  Steve Isaacs probably does more of that than anybody in our department. But it's an important topic and it's one that I think a lot of folks don't want to think about. But it's one that if you don't think about it, it will come back to bite you. And sometimes it's as simple as just having the conversation. For example, I don't do programming with it, but I oftentimes am involved when something comes up, I'll put it that way. And it's not uncommon for one generation to just assume that the next generation wants to operate the farm and they never really have the conversation. So it drives the planning and the decision making to a point that if they had just simply known what each other's goals were, it may have changed things drastically. So the first thing is just to have a conversation. Don't just assume that the farm is going to be operated after you're gone. It's not pleasant to think about, but it's better to know than not know.

Caleb Sadler (41:06)

No, that's exactly right. And secession planning, I'm a big believer and a big component of that. At least write it down. That way somebody knows.

Shelby Wade (41:17)

That's a great tip. Yes. And Ben Van Hook here alluded to that a little bit. Of course he's going to potentially follow in his family's footsteps and take over the family farm one day. But we have a good number of young farmers that are coming to us and whether that's maybe taking over their family farm or a new farm in general, just getting started. So we have what we call the AgStart program. We've talked about it a lot here on the podcast, but that's the new young beginning farmer that's really just getting started and where do they need to go? So they come to us. We kind of break down the different things. We have different programs. One of the things we work a lot with is USDA. Of course, we have a guaranteed loan program that we work with them, but also Kentucky Ag Finance Corporation. So of course you're very familiar with that program. So if you want to tell us a little bit about your time there and how that program, you've seen, it benefit a lot of young farmers.

Kenny Burdine (42:14)

Absolutely. I really enjoy working with the Kentucky Ag Finance Program. It's been one of the most rewarding things I've gotten to do. So this is a program that really was kind of started by the Ag Development Fund through tobacco settlement dollars. The corporation itself was kind of created to manage those funds and the staff there does a fantastic job. But put simply, this is a partnership loan program and that's the way you want to think about it. You work with your lender, that's where it starts. And then they work with the Ag Finance Board and we've got limits on what we can do, but up to a certain amount, we'll provide half the funding for the loan. And we have some different provisions too, by the way, for beginning farmers. But the idea behind it is you get a little more attractive interest rate because the money from Ag Finance goes into a pretty good rate. But the other thing that we do is we take second position typically on the loan. So what that means is it really puts the lender in a better position to loan money and we like to think that in a lot of cases that we can make loans to folks that would have a hard time getting a loan otherwise because we take the riskier back into that loan.

Kenny Burdine (43:27)

So I'm proud of that. It's worked extremely well and I have learned a lot from some very smart people I get to work with on that board and I really do enjoy being part of Ag Finance.

Caleb Sadler (43:37)

So you talk about the money that they lend out and I know on my end, but where does that money come from and how does Kentucky AG Finance, how do they get that money?

Kenny Burdine (43:47)

Sure, over time that has basically come from the Ag Development board, which of course we're talking about to back a set of dollars. Right. So that's just been one of the things that's been established as part of those dollars. Okay? But now we're at the point now it's actually a pretty big loan pool doing very well and a lot of our money is coming back in. So it's starting to get the point where it's

Caleb Sadler (44:08)

Could be lending out your own capital at that point.

Kenny Burdine (44:12)

Which is something i'm proud of.

Shelby Wade (44:14)

You mentioned there, getting those loans into hands that otherwise might not qualify for the loan and we absolutely see that on our end. I know Caleb has made more of these loans than I have, but being able to help that young farmer get going if that wasn't an option so it is a very rewarding feeling to see that happen. So if anybody listening wants any more information on those programs, feel free to reach out. We'll definitely talk to you one on one about that.

Caleb Sadler (44:46)

And really you can reach out to any office at Central Kentucky Ag Credit. There is a loan officer in each office that will be more than happy to give you some guidance into that Ag Start program and to answer any questions you might have about an FSA guarantee type loan or Kentucky Ag Finance loan. Kenny, I will ask this and I don't know if you said it and I might have missed it myself, but how long has Ag Finance been in existence? And I don't know off the top of my head either. I'm not going to hold you to it.

Kenny Burdine (45:18)

It predated my involvement on the board. I've been involved with the board, I think 14 years. Okay. And don't even hold me to that one. I'm at that point in my life, but I would have to go back and look to when it actually started. But it's been around since pretty early in the days of the fund. The idea of having a low interest loan fund that we could partner with existing lenders to make Ag loans was a goal of the aging of the Ag Development board and some of our leadership. And I think that foresight is why that loan program is where it is today.

Shelby Wade (45:54)

And I think definitely in the rising interest rate environment that we're in now, that's even more attractive because our blended rate is much better than the current market rates. So very attractive to young and beginning farmers.

Ben VanHook (46:09)

So, Kenny, I know another resource that the University of Kentucky puts out there is the Cattle Market Notes Weekly, and I know you're directly involved in that, as well as with some fellow extension professors at Mississippi State and University of Arkansas. I think that would be a great resource or tool in the toolbox for local producers. Talk a little bit about what you all put out there and how do people subscribe and get that weekly report?

Kenny Burdine (46:37)

Yeah, great question, and I really enjoy working on Cattle Market Notes Weekly, the full story on that. Like everybody right when COVID would really begin to impact things in March of 2020, you're talking to somebody who spends a lot of time on the road. In fact, I had a series of cow-calf conferences literally planned for like a week after they kind of started pulling things back. So it was quite a shock to me all of a sudden, how do I do extension programming and how do I get information out when I can't be on the road face to face like I'm used to doing it? So I started doing a weekly market update just as a way to kind of keep in communication with our stakeholders, our county agents. And then as things picked back up, I got back in the classroom. I really couldn't do that every week. So Cattle Market Notes Weekly is a weekly newsletter, but I rotate, like Ben said, with two of my friends and colleagues, Josh Maples and James Mitchell. So every third week one of us writes, but our clientele gets something every week, so there's no easy way on the air to share how to sign up for that.

Kenny Burdine (47:38)

It goes through MailChimp, there's links I can send you, I can get you on there. Probably the simplest way to do it is reach out to me or one of your lenders and we can get you on the sign up list. The URL would be long and I don't know what to actually get you signed up, but that comes out once a week on Monday afternoons. One thing I always say about Cattle Markets weekly, there are several there's several Cattle Market newsletters out there that are good, and I read them all, but because I'm in Kentucky, Josh is in Mississippi, and James is in Arkansas, it tends to be a little bit more calf and feeder cattle oriented. So we tend to focus on topics that are a little bit more feeder cataliented and less fed cattle oriented.

Shelby Wade (48:19)

Okay, that's good. Yeah, that would be great information for.

Caleb Sadler (48:21)

Our listeners, and I think this is still the case, but I knew Kentucky at one time was the largest beef producer this side of the Mississippi. Is that still the case?

Kenny Burdine (48:30)

We are, we have the largest cow herd east Mississippi, so we rank 8th. Okay. But largest on this side of the Mississippi River.

Caleb Sadler (48:37)

Awesome. Well, Kenny, as we finish up and wrap up here today, I do want to give you the opportunity to go back and we'll just touch on the high points here real quick. I'd like to maybe give your take or a brief forecast of what you think the cattle market will be and then we can wrap up and go from there.

Kenny Burdine (48:53)

Sure, glad to do it. Of course there are so many things that impact these cattle markets, although I'm always glad to give you my best guess, understand that anything can change that and I have been wrong in the past and I'm sure I will. Again, I like to always say that I really do think this calf market is falls going to be unusual because I'm going is a really good chance that we see calf prices higher this fall than we saw in the spring at a bare minimum flat. So five weight steer in the spring averaged about $1.75. He's not really moved much from that state average right now I've got groups in the 180s, don't get me wrong, right? But just state average run of the mill $1.75, I think he'll be at least that high this fall. I think October, I think decent chances even higher. So that'll be a good cap market. Now, in all fairness, with fuel and fertilizer prices eat up a good chunk of that. I think this heavy feeder cattle market is also going to run. I don't think we've seen the top yet, I don't. Seasonally August usually is our peak in the heavy feeder cattle market.

Kenny Burdine (49:58)

But again, I think because supplies are going to get tight, I think we're going to actually see probably those prices higher in the fourth quarter than we even see this summer. So I'm pretty optimistic going forward. One last thing, don't want to leave without saying this, just how much I appreciate the relationship that we as the UK extension service has with Ag Credit, friends, partners, sponsors and we're so glad for that relationship. Thank you all so much.

Caleb Sadler (50:23)

Thank you again, Kenny, thank you for coming on and we really appreciate the insight and the wisdom there that you have to share with the listeners of Beyond Agriculture and thanks for Ben for coming on today, first timer. So really appreciate him as well. And Sheby for joining us again.

Shelby Wade (50:37)

Yeah, good job, Ben. Thanks Kenny, it's been a pleasure as always. And go cats.

Kenny Burdine (50:51)

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