Latest / Professional Ag Marketing Podcast / Beware of Premium

Transcript

Beware of Premium · Professional Ag Marketing Podcast

• 0:02
  SPEAKER_00: Welcome to the Hog Market Talk Podcast.
• 0:05
  SPEAKER_00: Your weekly deep dive into hog market fundamentals, breaking news, and industry insight.
• 0:12
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: All right.
• 0:21
  SPEAKER_01: Today is July 1st.
• 0:23
  SPEAKER_01: I've got Jeff with us here today.
• 0:24
  SPEAKER_01: How's it going, Jeff?
• 0:26
  SPEAKER_02: It's going pretty good, Mike.
• 0:27
  SPEAKER_01: Good.
• 0:27
  SPEAKER_01: Well, this is a hog talk podcast here.
• 0:30
  SPEAKER_01: Let's get started.
• 0:31
  SPEAKER_01: Let's start on the cash side.
• 0:33
  SPEAKER_01: What are you seeing with some uh cash fundamentals here this week?
• 0:37
  SPEAKER_02: Well, I think week over week we're we're doing okay on that front, Mike.
• 0:41
  SPEAKER_02: Um, I'm not sure if we're gonna be able to see a lot higher bids than what we saw uh the past several weeks.
• 0:48
  SPEAKER_02: You know, we've been kind of stuck in that$98 range and and quite a few participants willing to pay that.
• 0:54
  SPEAKER_02: Um, which of course, compared to what remains to be a very lousy cutout, that's a that's a high bid, right?
• 1:03
  SPEAKER_02: Um so shouldn't be complaining about that.
• 1:06
  SPEAKER_02: That does still signal um that some packers are are expressing some willingness to own some pigs at some pretty good values and and some negative margins on on their end.
• 1:16
  SPEAKER_02: So that's not bad news.
• 1:17
  SPEAKER_02: Uh, we were hoping to maybe we could maybe get another dollar out of that market or something this week.
• 1:22
  SPEAKER_02: I'm not sure that's gonna happen.
• 1:24
  SPEAKER_02: Um, but probably more important than all that, we had one of the major packers was non-existent in that marketplace for four or five weeks, and they are coming back with some needs and some pretty good bids.
• 1:39
  SPEAKER_02: So I would say we've got um pretty much everybody participating from the packer side here this week.
• 1:46
  SPEAKER_02: So as you kind of think about the necessary steps for us to shorten the supply a little bit, I think that's one of the benchmarks that we're crossing, right?
• 1:56
  SPEAKER_02: Is okay, yeah, maybe prices aren't going up, but the needs are increasing.
• 2:01
  SPEAKER_02: So we're gonna maybe I'm stretching a little, Mike, but we're gonna count it as a win.
• 2:05
  SPEAKER_01: Anything specifically around this week, July 4th, uh anything to take from scheduling?
• 2:12
  SPEAKER_02: Well, so um we continued to lose a little bit of schedule here as as last week went on.
• 2:17
  SPEAKER_02: I do think uh we're we're we're still banking on getting real close to a two million kill, which is gonna be a pretty large one.
• 2:25
  SPEAKER_02: Um but specifically as you think about the cash market, and uh um you know a lot of us think about it as well, it's July 4th, so it's gonna be softer, um, shortened harvest week, right?
• 2:38
  SPEAKER_02: Um, but that's actually you have to be one step ahead of that.
• 2:41
  SPEAKER_02: So this is actually the week where you're gonna buy for the first full weeks after the holiday, right?
• 2:49
  SPEAKER_02: So last week should have been the softer week because of the the holiday and the shorter week.
• 2:55
  SPEAKER_02: Um, this one we should be getting a full look at a five-day uh operating week and and a better view of what the market actually looks like.
• 3:03
  SPEAKER_02: So it's a kind of a one of those things you have to kind of step back and think through just a little bit as you're thinking about that the cash values.
• 3:13
  SPEAKER_01: Let's wrap up with cash and kind of work our way over to more of the demand side here, Jeff.
• 3:18
  SPEAKER_01: We had posted a pretty rough cutout number again last night.
• 3:21
  SPEAKER_01: Talk to me about what you're seeing in product values here, and especially I want to talk uh specifically about hams.
• 3:28
  SPEAKER_02: You bet.
• 3:29
  SPEAKER_02: So, yeah, I obviously uh continue to be very disappointed in this marketplace.
• 3:34
  SPEAKER_02: Um a few things that uh you know we're kind of noticing this week.
• 3:40
  SPEAKER_02: One is, and we talked about this last week, some, you know, the we just ran out of the seasonal time frame for that thing to rally, right?
• 3:48
  SPEAKER_02: So we might not be just overly surprised that we're going through another week here after we missed that May-June rally, that we're going through another week of you know, sideways to maybe even a little bit lower cutout.
• 4:00
  SPEAKER_02: That actually that actually is the seasonal here.
• 4:02
  SPEAKER_02: Once you get past the 4th of July, around the 7th or the 8th, um, you look at almost any of the seasonals, and even including 2024, which was the last summer that really disappointed us, um, we saw some really nice rallies starting at that time.
• 4:20
  SPEAKER_02: So that to me is still very much in the cards, Mike.
• 4:24
  SPEAKER_02: Um, time will tell.
• 4:26
  SPEAKER_02: Um, so back, you know, you mentioned the hams, and that's a good one to look at.
• 4:31
  SPEAKER_02: Uh, another thing that we've been noticing and or or think we've experienced is um some fire sales of some of the primal products, right?
• 4:42
  SPEAKER_02: And and hams were a good one.
• 4:44
  SPEAKER_02: Um, you know, butts would be another one to to stare at a little bit, but um we are seeing some of those bounce back here and hams specifically.
• 4:54
  SPEAKER_02: They went down to that$75 range, they're back up into the mid-80s here.
• 4:59
  SPEAKER_02: Um, so good news on either somebody that was had a few too many of them had to get rid of some that might be over with.
• 5:07
  SPEAKER_02: You know, we also talked to uh in the past couple weeks about the challenges that we are seeing in Mexico right now.
• 5:12
  SPEAKER_02: Maybe we got some of that market back too, Mike.
• 5:15
  SPEAKER_02: Um, it's uh you know, we haven't seen it show up like on the weekly data much, but maybe this this week will be the week that we see a bit of an uptick on some of the movements back over to Mexico.
• 5:27
  SPEAKER_01: Talking about this week being the week, let's talk about some of the weather that we've been experiencing here.
• 5:32
  SPEAKER_01: Very hot week.
• 5:34
  SPEAKER_01: What kind of impact is that gonna have on weights here, you think?
• 5:37
  SPEAKER_02: Well, we are seeing carcass weights uh you know fairly aggressively moving lower.
• 5:45
  SPEAKER_02: Um I think uh you know, we're probably getting through this heat just a little bit better than what we anticipated.
• 5:52
  SPEAKER_02: Uh I'm not completely ready to write this off as far as you know, significantly adjusting the weights lower.
• 5:59
  SPEAKER_02: We'll we'll continue to take weight off these pigs.
• 6:02
  SPEAKER_02: Some of that is um very much seasonal, maybe most of that's very much seasonal, right?
• 6:08
  SPEAKER_02: So um to say that we're gonna be down, you know, a week from now more than what would be uh seasonal adjusted, I'm not sure of that anymore.
• 6:16
  SPEAKER_02: A week ago when I was looking at forecast, um thinking yes, that would be very much the case, but you know, we're getting pretty cool at night.
• 6:24
  SPEAKER_02: Um, we're experiencing some rains uh in the western part of the belt for sure, um, as well as parts of the eastern.
• 6:32
  SPEAKER_02: So seems like we might get along just a little better than we thought.
• 6:35
  SPEAKER_02: Now, that's you know, compared to a year ago, we might not make a ton of progress.
• 6:41
  SPEAKER_02: We of course will take make a lot of progress um from here until about the end of July, is just weights in general.
• 6:48
  SPEAKER_02: They go down every year.
• 6:49
  SPEAKER_02: That's still gonna take some pounds off the market and should help us um take a hard a good swing at that seasonal cutout rally starting here next week.
• 7:02
  SPEAKER_01: It seems like supply hasn't been the problem thus far.
• 7:05
  SPEAKER_01: So I want to talk just a little bit more about the demand side.
• 7:08
  SPEAKER_01: You talked about exports and hams in Mexico.
• 7:11
  SPEAKER_01: One of the things I wanted to bring up that sometimes gets mentioned in the ag world, but not a ton, or at least given a lot of weight, is the U.S.
• 7:18
  SPEAKER_01: dollar.
• 7:19
  SPEAKER_01: Now, there's been a trend lately.
• 7:21
  SPEAKER_01: We've seen an appreciating uh dollar.
• 7:24
  SPEAKER_01: It's been rallying pretty recently a hard uh level above 101 here today.
• 7:30
  SPEAKER_01: Uh it's up about 2% over the last month, up almost 5% over the past year here, Jeff.
• 7:35
  SPEAKER_01: And one of the things that we see is you've had a new Fed chairman come in, and uh it it looks like the Fed is going to remain somewhat hawkish at this time.
• 7:44
  SPEAKER_01: They're going to try to raise rates more than cut them here in the near future, rounding out the rest of this year.
• 7:50
  SPEAKER_01: And one uh thing to help back this up is we've had some stronger employment data that's helped back this, uh back this up, and uh really that's reduced a lot of the expectations for any aggressive rate cuts going forward, which were still in question.
• 8:06
  SPEAKER_01: And um if you look higher interest rates uh generally are gonna attract money into the dollar-denominated assets here, Jeff.
• 8:15
  SPEAKER_01: So if you look at U.S.
• 8:17
  SPEAKER_01: economic data has been better than a lot of our competitors, so the money's really ran towards the US dollar there.
• 8:24
  SPEAKER_01: You've seen safe haven buying as well during this war.
• 8:26
  SPEAKER_01: Uh the dollar's been a very quick recipient to any fund inflows because of the Iran conflict, which still isn't over.
• 8:34
  SPEAKER_01: It seems like the oil side, we've pulled every lever we kind of can to milk that thing lower, um, kind of pull out of the reserves.
• 8:42
  SPEAKER_01: We've exported oil globally.
• 8:44
  SPEAKER_01: Uh China stopped importing a lot of oil.
• 8:47
  SPEAKER_01: So uh the dollar side has been one of the main areas that continues to find buying pretty quickly on any conflict issues.
• 8:55
  SPEAKER_01: And then you're just seeing relative weakness throughout many of the other currencies.
• 8:59
  SPEAKER_01: So when you look at from the ag side, a stronger dollar is generally more bearish for U.S.
• 9:05
  SPEAKER_01: exports.
• 9:06
  SPEAKER_01: And uh I'm just curious if one, it's helped money really short the hog market because we have been near a record short position there.
• 9:15
  SPEAKER_01: You're maybe seeing some demand problems both domestically and export-wise, potentially, uh, relative to what the supply has been, which is near unchanged.
• 9:24
  SPEAKER_01: And uh just a few things I thought worth mentioning when it comes to if money flows into anything, whether it be currencies or uh equities or egg commodities, etc., where is it going?
• 9:36
  SPEAKER_01: Seems like the US dollar's been a pretty easy place for that to go lately, and that's been a little bearish on all grains, uh, hog market, things like that, I think, lately.
• 9:47
  SPEAKER_02: Yeah, well, I I really appreciate the perspective on that because I I do think it's uh impactful.
• 9:53
  SPEAKER_02: Um the other thing that we have to combine with the dollar discussion, the export market, is just our our prices versus um some of our competitors.
• 10:03
  SPEAKER_02: And I know we've hit on that in the past too, but that gap has widened a little bit in the past couple weeks.
• 10:09
  SPEAKER_02: Um, where even though we've been kind of disappointed in the values that we're seeing here in the US, some places like Brazil and Canada have been dragging quite a bit harder than what we are.
• 10:22
  SPEAKER_02: So they're quite a bit cheaper than us today, and then throw in all the stuff that you're mentioning about a dollar being a little bit stronger here.
• 10:31
  SPEAKER_02: Um I think that's very real, uh very real from an export standpoint.
• 10:37
  SPEAKER_02: Now, the data that we've seen through April um would be very impressive.
• 10:43
  SPEAKER_02: That would say that we got no issues as far as um pork exports leaving the U.S.
• 10:50
  SPEAKER_02: But you know, you start looking at some of this weekly information, it's it's tailed off a little bit.
• 10:56
  SPEAKER_02: We've been able to pinpoint Mexico on some of that, but some of it's some of the Mexico situation is also cheaper meat in Canada, um higher US dollar, um, a little bit less uh buying power from the Mexican peso, right?
• 11:11
  SPEAKER_02: So no, I there's no doubt in my mind that that is a bit of a a headwind for us right now.
• 11:17
  SPEAKER_02: Um and you know, where it goes from here, I you know, Trump's trying really hard to get some energy prices down, right?
• 11:27
  SPEAKER_02: And and having some success at doing that.
• 11:30
  SPEAKER_02: Um I know he was out telling gas uh retailers that they gotta get their prices down, so we'll see if that if they listen to them or not.
• 11:39
  SPEAKER_02: So that you know, maybe we can get some things going there where the inflation data doesn't look quite so bullish for the U.S.
• 11:46
  SPEAKER_02: Um at the same time, you know, one of our question marks since we kind of ran into some of the doldrums that we're experiencing today, it lines up very well with the higher fuel prices.
• 11:58
  SPEAKER_02: So are we seeing a little bit of a tweak in domestic demand because of fuel prices?
• 12:05
  SPEAKER_02: And if that is true, can we get some of that demand back here the back half of the summer if uh we can get the the prices lower at the pump?
• 12:16
  SPEAKER_02: I think there's some real possibilities there that we we get a couple good guys heading our direction here in the next couple months.
• 12:23
  SPEAKER_01: And pork as a protein is already competitively priced in the United States to be able to take advantage of that opportunity.
• 12:29
  SPEAKER_01: So it's not like you're really asking for it to do anything new, just uh a little bit of marketing opportunity and and away we go.
• 12:37
  SPEAKER_01: So what else do you have for us here this week to wrap up?
• 12:41
  SPEAKER_02: Well, the one thing I wanted to mention, um, you know, we talked about how we can probably see this seasonal increase um in the in the cutout value as well.
• 12:49
  SPEAKER_02: You we've got to be a little careful with that because August futures um it was went up uh it's been it's gone up some here in the last uh seven to eight trading days and now is posting a really big premium to where the nearby index is at.
• 13:05
  SPEAKER_02: So basically what I'm saying there is August has quite a bit of good news priced into it ready, Mike.
• 13:10
  SPEAKER_02: So it's anticipating this seasonal rally and cutout, unfortunately, when it's trading up in that$98 area.
• 13:17
  SPEAKER_02: Um last thing I've got is we are all heading over to MPIC over in West Can Wisconsin Dells here in a in a couple weeks.
• 13:27
  SPEAKER_02: Um pretty excited about uh one of our topics out there, maybe gonna take about half of our breakout session, Mike.
• 13:35
  SPEAKER_02: Is um we're gonna do a pretty deep dive into uh how we are looking to utilize um artificial intelligence.
• 13:45
  SPEAKER_02: And we've got a new product coming out that we're gonna be launching out there in Wisconsin.
• 13:50
  SPEAKER_02: Um, we're gonna have some of our technology team out there talking about hey, this is this is really the what we see as uh AI being a part of our business and how it might be able to help us on the risk management side, maybe how it can help the producers out there as well.
• 14:08
  SPEAKER_02: Um, so check that out.
• 14:10
  SPEAKER_02: Be watching the your inboxes for some invites and and come see us out there.
• 14:15
  SPEAKER_01: All right.
• 14:15
  SPEAKER_01: And don't forget to click the link in the description below.
• 14:19
  SPEAKER_01: Uh you can access our daily market commentary, other market research as well you may find interesting.
• 14:25
  SPEAKER_01: Go to our website at professional.com.
• 14:28
  SPEAKER_01: There'll be tons of things ready for you to take advantage of uh when it comes to marketing opportunities.
• 14:33
  SPEAKER_01: Thank you, Jeff, for spending the time with us here today.
• 14:36
  SPEAKER_02: Thank you, guys.