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COF & H&P · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_01: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: This is your host, Mike Minor.
• 0:22
  SPEAKER_01: Let's get started.
• 0:23
  SPEAKER_01: Today is December 22nd, and I've got Jeff with us here today.
• 0:26
  SPEAKER_01: How's it going, Jeff?
• 0:27
  SPEAKER_00: Good afternoon, Mike.
• 0:28
  SPEAKER_00: It uh depends what side of the fence you're on, man.
• 0:31
  SPEAKER_00: We had uh just a plethora of reports come out here this afternoon, didn't we?
• 0:35
  SPEAKER_01: Yeah, let's talk about that a little bit.
• 0:37
  SPEAKER_01: So our focus today is gonna be on two things cattle on feed and then the hogs and pigs report, Jeff.
• 0:42
  SPEAKER_01: So where do you want to start first?
• 0:44
  SPEAKER_00: Well, it's kind of one of those things.
• 0:46
  SPEAKER_00: You want the good news or the bad news first?
• 0:48
  SPEAKER_01: Let's start with the good news and then maybe they'll stop listening by the time we get to the bad news, and then we'll be good.
• 0:53
  SPEAKER_00: So all right, we'll try and go slow.
• 0:56
  SPEAKER_00: How's that sound?
• 0:57
  SPEAKER_01: I don't know about that.
• 0:58
  SPEAKER_00: All right, hogs and pigs report.
• 1:01
  SPEAKER_00: I'm pretty fired up about this.
• 1:03
  SPEAKER_00: So um, you know, we always like to look at these reports, and if they're bearish, especially in the hogs and pigs report, we always like to say the market's not gonna care anyhow.
• 1:12
  SPEAKER_00: Well, hopefully that's not true on this one.
• 1:15
  SPEAKER_00: Probably some of the bigger numbers that stand out to me here, Mike.
• 1:18
  SPEAKER_00: Um, kept for breeding.
• 1:20
  SPEAKER_00: So we were expecting that to be just a smidget over 1% less compared to last year.
• 1:26
  SPEAKER_00: It actually came in oh right at uh basically 3.3% less than last year.
• 1:34
  SPEAKER_00: So that by far one of the biggest adjustments that we've seen on this sow herd since we've been watching it, um, and much better news than what we had hoped to see.
• 1:45
  SPEAKER_00: You know, one of the things that we track here in the office is you know that sow slaughter information and how many sows have we harvested this year compared to what we're considered normal.
• 1:56
  SPEAKER_00: Um that's on that was only showing about a one, one and a quarter percent decrease.
• 2:02
  SPEAKER_00: Um so we've if if this is accurate, and hopefully it it is, you know, we've probably gotten into placing a few less gilts, um, maybe killing a few more sows than what was originally on there, and uh a 3.3 percent decrease is uh welcome news for sure.
• 2:22
  SPEAKER_00: Uh anybody that's been in the industry.
• 2:23
  SPEAKER_01: And that uh you'd so no no major change in that really.
• 2:27
  SPEAKER_01: I mean, that's been developing for a little bit of time, but we haven't really seen much progress on that stuff like that.
• 2:34
  SPEAKER_00: You have to go back and this will pull pour some cold water on the discussion, which probably needs to happen.
• 2:41
  SPEAKER_00: Um, you know, we've been overshooting or outproducing, maybe is a better word way to say it.
• 2:47
  SPEAKER_00: The the market hog inventory has been outproducing what the sow herds suggesting was supposed to be out there.
• 2:55
  SPEAKER_00: So we continue to kill uh one and to maybe almost three percent more pigs than what we're supposed to hear, Mike.
• 3:04
  SPEAKER_00: Um, so yeah, very there's there's been no progress.
• 3:08
  SPEAKER_00: Actually, we're gonna we're gonna kill more pigs in 23 than we did in 22.
• 3:11
  SPEAKER_00: It's not supposed to be happening.
• 3:13
  SPEAKER_00: Um, so hopefully this is happening as far as the sow herd goes, according to this report, and we can actually start to see fewer numbers a year out, six months out, nine months something where's in that time frame.
• 3:26
  SPEAKER_01: So we talked about the the big guys.
• 3:29
  SPEAKER_01: Now let's talk about the little guys a little bit, Jeff, and what you're seeing with production here.
• 3:33
  SPEAKER_00: Yeah, so I think you know, la look at the pigs per litter number, up almost four percent from last year again.
• 3:42
  SPEAKER_00: So last quarter this came out, four percent increase in pigs per litter.
• 3:47
  SPEAKER_00: It's almost a half a pig.
• 3:49
  SPEAKER_00: We're like, God, well, wait, no, no way that's right.
• 3:52
  SPEAKER_01: Um so this was the second straight report that kind of confirmed that.
• 3:56
  SPEAKER_00: Yeah, we would we could say stuff like one one data point's not a trend, right?
• 4:00
  SPEAKER_00: Well now we've got two data points.
• 4:02
  SPEAKER_00: I think that's probably something we have to start facing reality on and uh and admitting that we pro it looks like we've taken a big step higher on pigs per litter that we're saving.
• 4:13
  SPEAKER_00: Uh, whether that's uh health related, a lot of been of um speculations around that, and and no doubt in my mind, I guess that's which shouldn't really be a surprise.
• 4:24
  SPEAKER_00: Yes, that's exactly right.
• 4:25
  SPEAKER_00: I think that's definitely happening.
• 4:27
  SPEAKER_00: Um, you know, did we and we have this long-term trend of always more pigs per litter all the time, right?
• 4:33
  SPEAKER_00: We get better at our jobs, they get better at their jobs.
• 4:36
  SPEAKER_00: Yep, yep, yep, genetics and people working in the bar, no doubt.
• 4:40
  SPEAKER_00: So I guess I'm I could probably get my head around this, except the fact that um you know, pigs per litter continues to go up.
• 4:50
  SPEAKER_00: Um, that's gonna be over 11 and a half pigs per litter on average.
• 4:54
  SPEAKER_00: Those are big numbers, but that's probably the efficiency of the industry talking.
• 4:58
  SPEAKER_00: Quickly look at the different weight groups on the inventory.
• 5:02
  SPEAKER_00: So on the you know, starting with the small pigs here, under 120 pounds, you're basically a little less than last year.
• 5:09
  SPEAKER_01: Not a surprising number.
• 5:10
  SPEAKER_00: Yep, I think that fits with everything we just talked about.
• 5:13
  SPEAKER_00: Smaller sow herd, more pigs per litter.
• 5:16
  SPEAKER_00: Um, 20 to 180, a little bit more, and then over the 180 category at 2.5%.
• 5:23
  SPEAKER_01: Talk about that one a little bit.
• 5:25
  SPEAKER_00: So we looked at that one as the estimates came out here this week, Mike, and you were part of these discussions, of course, but um you know the the the average guest to us really surprised us.
• 5:35
  SPEAKER_00: Uh only basically a one percent increase compared to last year.
• 5:39
  SPEAKER_01: Well So explain why that shocked us.
• 5:42
  SPEAKER_00: Yeah, so I mean you got you're you we we've the 180 and over category, like half of those pigs are already gone.
• 5:49
  SPEAKER_00: With by the time you get to um by the time this report comes out, at least.
• 5:54
  SPEAKER_00: So we've watched the slaughter take place, and it's been two and a half percent more, three percent more than last year.
• 6:03
  SPEAKER_01: So not point nine percent exactly.
• 6:06
  SPEAKER_00: So and we've got plenty of pigs on inventory yet, is everything that we've can can gather from the industry, I guess.
• 6:13
  SPEAKER_00: So yeah, it was almost like you were gonna have to kill less pigs in January than last year in order for the estimate to be right.
• 6:20
  SPEAKER_00: So that I I don't think that's gonna surprise anybody.
• 6:23
  SPEAKER_00: Maybe that puts a little bit of pressure on the February futures come Tuesday, Mike, but man, I'd I'd be a little surprised if people really focus on that because if nothing else, those pigs are all gone by the time you get to the end of January.
• 6:35
  SPEAKER_00: Yep.
• 6:37
  SPEAKER_00: I think that pretty well sums up Hogs and Pigs report.
• 6:41
  SPEAKER_01: Any reactions come Tuesday?
• 6:42
  SPEAKER_01: I know that's a fun one being a few days away because we don't have trade on Monday, and it's after the uh the close here today that it came out.
• 6:50
  SPEAKER_01: So I mean, do you expect much of a market reaction or I I think we can view this as friendly.
• 6:56
  SPEAKER_00: Some of our issue is we had so much premium into those deferred futures months already.
• 7:00
  SPEAKER_00: Yeah.
• 7:00
  SPEAKER_00: You look at out there, and uh you got you know 66 and some change for the index here as you cross over into the first of the year, and then you got all the summer months up there in the mid-90s.
• 7:10
  SPEAKER_00: That's that's gonna be kind of tough to take.
• 7:13
  SPEAKER_01: Um we did give them a good reason to take it though.
• 7:16
  SPEAKER_01: Yeah.
• 7:16
  SPEAKER_00: In this report.
• 7:17
  SPEAKER_00: I yeah, for sure.
• 7:19
  SPEAKER_00: I didn't so I I'm hoping that we can be a little bit higher.
• 7:22
  SPEAKER_00: It's not gonna be anything crazy, it'd be my best guess.
• 7:24
  SPEAKER_01: How about the catalon feed that came out today, Jeff?
• 7:27
  SPEAKER_00: Well, that one kind of hits us uh in the in the stomach here again.
• 7:32
  SPEAKER_00: Um there's a few things I really don't like about this report, I guess.
• 7:36
  SPEAKER_00: So on the placement side of things, Mike, we're we were hoping to see a 4% decrease in placements this November compared to last November.
• 7:45
  SPEAKER_00: As you as you well know, that's the category that's been hurting us here in the past, as we've had a few months here that were 3% more, 5% more than last year, and that created us to have uh more cattle on feed this year than last year, even though we're supposed to be decreasing those numbers significantly, right?
• 8:04
  SPEAKER_01: And that would be mainly because we've been not retaining heifers, we've been putting more stuff in feedlots quicker, or the do you not have a good retained?
• 8:15
  SPEAKER_00: It's gonna be all the above.
• 8:17
  SPEAKER_00: So we've no doubt um well we've we've we didn't place them as quickly as we can as we maybe should have way back last summer.
• 8:26
  SPEAKER_00: And then we started replacing them replacing them, excuse me, very rapidly in the fall, and that really was all about the feed situation.
• 8:34
  SPEAKER_00: Exactly.
• 8:35
  SPEAKER_00: Yeah, yep.
• 8:36
  SPEAKER_00: So now we have that going on.
• 8:38
  SPEAKER_00: Um and most recently now we've got this drought going on in Mexico.
• 8:42
  SPEAKER_00: So we're starting to watch those imported feeder cattle numbers coming in from Mexico into the U.S.
• 8:47
  SPEAKER_00: and those and it's significant.
• 8:49
  SPEAKER_00: It's going to make up, you know, we um some of these months where we've had three to five percent more coming into the US, or excuse me, going on feed, almost half of that increase, a good third of it at least, was additional numbers coming from Mexico.
• 9:06
  SPEAKER_00: So that's a big deal when you're playing with you know markets that 1% make a difference, right?
• 9:13
  SPEAKER_00: But one of the other things I really don't like about this, so we we've really been dragging our feet on marketings, of course.
• 9:19
  SPEAKER_00: And we've we've watched that shoot from June to now, right?
• 9:23
  SPEAKER_00: Um, but when it's all said and done here, we're gonna place two percent less than last year, which is a small win, not as much as we were hoping in the uh estimates, of course.
• 9:33
  SPEAKER_00: But we are gonna increase the total on feed um from October to November, and that's a bit unusual and pretty concerning.
• 9:44
  SPEAKER_00: You know, now we're gonna have almost three percent more on feed come December 1st here than what we did last year, and that's gonna continue to struggle.
• 9:53
  SPEAKER_00: Another thing that we do real quickly here is we take all the placements and we grow them out on a spreadsheet, right?
• 9:59
  SPEAKER_00: And we call that our placed for graph, if you will.
• 10:02
  SPEAKER_00: I've got January, February, and March all having more cattle placed to be marketed in those three months.
• 10:10
  SPEAKER_00: All three of them are higher than what they were last year, not by a ton.
• 10:15
  SPEAKER_01: And this isn't based upon herd expansion in any way.
• 10:18
  SPEAKER_01: This is simply simply how we placed them, Mike.
• 10:23
  SPEAKER_00: And so eventually that will change.
• 10:26
  SPEAKER_00: We'll we'll start dealing with fewer numbers and probably in a pretty big way.
• 10:31
  SPEAKER_00: It's a lot of that will be centered around heifer retention.
• 10:35
  SPEAKER_00: Do we start pulling some of these girls out of the feedlots or or or not place them into the feedlots, bringing them back into the cow herd, that'll start to make a big difference.
• 10:43
  SPEAKER_01: So and still not seeing any sign of that, really.
• 10:46
  SPEAKER_00: No sign.
• 10:47
  SPEAKER_00: Oh, the first thing we're starting to see is bread heifers being worth a lot of money.
• 10:52
  SPEAKER_00: So that's starting to show some pretty good demand, I think.
• 10:56
  SPEAKER_00: Um, but as far as any actual data points, no, we're not really seeing much of that.
• 11:01
  SPEAKER_00: Um so we'll have fewer numbers eventually.
• 11:04
  SPEAKER_00: It just doesn't look like it's gonna happen before March right now.
• 11:07
  SPEAKER_01: What do you want to wrap up with here, Jeff, on the final minutes?
• 11:11
  SPEAKER_00: Well, I think uh Cattle Market's been rallying, it's done some pretty nice things from a technical standpoint.
• 11:18
  SPEAKER_00: This is gonna be a bit of a blow, so don't be surprised if we're gonna run into some trouble there um come Tuesday and Wednesday of next week.
• 11:27
  SPEAKER_00: Hopefully, nothing too drastic.
• 11:29
  SPEAKER_01: And like I said, you got Monday off, so hopefully the traders can kind of let this blow over through the weekend and not completely get too down on it, I guess going.
• 11:38
  SPEAKER_01: Which wouldn't be I I gotta say it because it that wouldn't be uncommon for the cattle on feed.
• 11:43
  SPEAKER_01: It seems like sometimes they just don't really care.
• 11:46
  SPEAKER_00: It's hard to know.
• 11:47
  SPEAKER_00: I mean, that one in October was a huge catalyst to lower markets.
• 11:50
  SPEAKER_00: Many of them didn't matter up until then, um, with with the very similar information.
• 11:55
  SPEAKER_00: So yeah, it's it's hard to know.
• 11:56
  SPEAKER_00: We are$28 off the highs, so that might help temper some of the bearish report, right?
• 12:02
  SPEAKER_00: Um, and then yeah, on the hogs, I I think there's some good quite a bit of good news in there.
• 12:07
  SPEAKER_00: Those already holding a huge premium.
• 12:10
  SPEAKER_00: Hopefully we can still see it a little bit higher.
• 12:12
  SPEAKER_00: Um, but other than that, Mike, I just think uh hopefully every everybody has a wonderful Christmas weekend here, and uh we'll be back at it on Tuesday.
• 12:22
  SPEAKER_01: Thank you for everyone uh tuning in today.
• 12:24
  SPEAKER_01: Yeah, catch us next uh next week on Wednesday on the swine podcast, and then we'll wrap up and uh do this one next Friday ahead of New Year's as well.
• 12:34
  SPEAKER_01: No trade on Monday.
• 12:35
  SPEAKER_01: Uh markets will open again on 830 on Tuesday.
• 12:39
  SPEAKER_01: Thanks for chiming in.
• 12:40
  SPEAKER_01: And thank you to all our listeners.
• 12:42
  SPEAKER_01: Please reach out to us at professional eggmarketing.com.
• 12:46
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 12:51
  SPEAKER_01: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 12:57
  SPEAKER_01: See you next time.