Latest / Professional Ag Marketing Podcast / Hog Talk: World Pork Expo

Transcript

Hog Talk: World Pork Expo · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Hog Market Talk Podcast with Professional Egg Marketing.
• 0:05
  SPEAKER_01: Come here to get fresh updates on what's happening week to week within the Lean Hog Complex.
• 0:10
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:16
  SPEAKER_01: And remember to visit swineweb.com, an excellent resource for information in the pork industry, where you can also find this podcast.
• 0:24
  SPEAKER_01: This is your host, Mike Miner.
• 0:26
  SPEAKER_01: Let's cross.
• 0:27
  SPEAKER_01: Today is June 6th.
• 0:29
  SPEAKER_01: I've got Luke Wells with us here today.
• 0:30
  SPEAKER_01: How's it going?
• 0:31
  SPEAKER_00: You know, it's it's it's a wonderful day, Mike.
• 0:33
  SPEAKER_00: It's uh it's a really wonderful day.
• 0:35
  SPEAKER_01: Talk about a fun, fast week, but we have a lot of exciting things to talk about today.
• 0:41
  SPEAKER_01: Luke's gonna get into some current hog fundamentals here after this, but Luke, I wanted to just talk about the World Pork Expo a little bit here too today, where we did film the Farm Progress show uh this week in agribusiness from our tent at World Pork Expo with Mike Pearson.
• 0:58
  SPEAKER_01: So that was a fantastic time.
• 1:00
  SPEAKER_01: We did quite a few interviews with Mike there, got to spend the whole day with him on Wednesday.
• 1:04
  SPEAKER_01: So we had a lot of cool things that we got to do this week.
• 1:07
  SPEAKER_01: That was one of them, and that show will be airing on RFD TV on Friday, Saturday, Sunday on that, and serious radio as well, Luke.
• 1:16
  SPEAKER_01: But uh where do you want to start today?
• 1:18
  SPEAKER_00: Yeah, no, that was really neat to have Farm Progress in the booth, and just uh, you know, th thank you for everybody that came to to to World Pork Expo and specifically and spent some time with us in our you know in our tent and and with our team.
• 1:30
  SPEAKER_00: Uh the show was was upbeat, excited, uh well attended, um lots of really good things going around, uh clearly in the whole protein space, but yeah in the hog space too.
• 1:41
  SPEAKER_00: We're we're really having a nice, a nice rally here.
• 1:43
  SPEAKER_00: So um very busy, very well attended.
• 1:46
  SPEAKER_00: I I mean I think high points, uh, you know, clearly there's some chest health challenges going around in the industry, right?
• 1:52
  SPEAKER_00: And then that was that was definitely a point of discussion.
• 1:55
  SPEAKER_00: Um supply continues, and we've been saying this for some time.
• 1:58
  SPEAKER_00: Supply is not our challenge in our industry right now.
• 2:01
  SPEAKER_00: Supply is uh supply is is is very manageable, but um, those got talked about.
• 2:06
  SPEAKER_00: But the you know, I think the the focus in order to look forward at this thing is is we've we we've we've had some some rallying and obviously some price appreciation into the pork expo, right?
• 2:16
  SPEAKER_00: And it was it was largely around anticipation that we would see an uptrend, you know, in the product.
• 2:22
  SPEAKER_00: Cash has been leading the way.
• 2:23
  SPEAKER_00: Problem with cash is cash is a very small component of the index.
• 2:26
  SPEAKER_00: It's it's it's all about the product.
• 2:28
  SPEAKER_00: And we we've been hearing good things about specifically ham.
• 2:32
  SPEAKER_00: Um quite frankly, though, I mean the picnic and and the belly and even the loins have moved up.
• 2:36
  SPEAKER_00: The loins gets it got a little set of challenges, right?
• 2:39
  SPEAKER_00: But uh we uh we we finally got our break, we finally got our pop.
• 2:43
  SPEAKER_00: Uh the market is responding, responding well.
• 2:46
  SPEAKER_00: Um, we made this morning uh a new year-to-date cutout high at just shy of 113.
• 2:52
  SPEAKER_00: You know, we'll see where that follows through this afternoon.
• 2:55
  SPEAKER_00: But yesterday's actual 602 print of 108.12 cents, you know, new contract high.
• 3:01
  SPEAKER_00: So it's it's following through, and we're seeing that in the futures.
• 3:04
  SPEAKER_00: We're having another really good day in the futures here, Mike.
• 3:07
  SPEAKER_00: We've got June up, you know, a little bit over 102.
• 3:10
  SPEAKER_00: We've got July just under 107, August just under 109, you know, October trading a little above 92, D's trading a little above 83, right?
• 3:20
  SPEAKER_00: And so so great things, and we do.
• 3:22
  SPEAKER_00: We've got a very nice mix um in the market here.
• 3:26
  SPEAKER_00: You know, we've got some great opportunities, so we're we're very, very excited about that.
• 3:30
  SPEAKER_00: I just, you know, also though, from a you know, a margin perspective, not only are we getting some nice appreciation in the lean hog side, you know, we've we've got a little strength here to end the week in corn, right?
• 3:40
  SPEAKER_00: But still largely not a lot of weather premium in our inputs, and we've got right now dies corn right now flirting around 450, right?
• 3:47
  SPEAKER_00: Um, but it's made a very nice crush opportunity.
• 3:50
  SPEAKER_00: So, you know, this is this whole time to balance all this around.
• 3:53
  SPEAKER_00: Um, yes, we've we and we needed the pork industry the last few years went through a bit of a tough time, right?
• 3:59
  SPEAKER_00: We we needed it, we needed our shot, we've reduced our sour, and now we're getting a really nice move in the market.
• 4:04
  SPEAKER_00: So a lot of optimism, a lot of very excited and very encouraging people um uh at the show, Mike.
• 4:11
  SPEAKER_00: Um, but these you know, those futures here, they they've got quite a premium.
• 4:14
  SPEAKER_00: And if you know, we've got August up near around 109, you know, we we we we probably need at least a 116-17, if not a not a 118-119 cutout.
• 4:24
  SPEAKER_00: So can we do that this summer?
• 4:25
  SPEAKER_00: Added a buck and a half yesterday.
• 4:27
  SPEAKER_00: Yeah, we can we can, we sure can, but that's that's my whole point is the futures is putting a lot of premium on.
• 4:32
  SPEAKER_00: So, you know, with that.
• 4:33
  SPEAKER_00: So when we look at the forward curve, you know, we look at margins now, we've got you know the rolling 12 well, well over$20, even with some health challenges, well over$20.
• 4:43
  SPEAKER_00: And and if if you're if you're running well, um, you know, a little bit better than that, right?
• 4:48
  SPEAKER_00: So again, we can't forget, even though uh we got a lot of positive supply momentum going on now, well, and and we still have trade risk.
• 4:56
  SPEAKER_00: We still have foreign animal disease risk.
• 4:58
  SPEAKER_00: Now, the trade risk seems to be in a the market's not focusing on it, right?
• 5:01
  SPEAKER_00: Not at the moment, but but Donald Trump is still our president, right, Mike?
• 5:05
  SPEAKER_00: Um and talks are happening.
• 5:07
  SPEAKER_00: So talks are happening, so yeah.
• 5:09
  SPEAKER_00: I can go both ways.
• 5:10
  SPEAKER_00: Yes, yes.
• 5:10
  SPEAKER_00: So again, I mean it, you know, a lot of great things going on, a lot, you know, a lot of really good things moving in momentum for our industry here, Mike, from from now the the revenue and the cost side, right?
• 5:21
  SPEAKER_00: Challenges out there with health.
• 5:23
  SPEAKER_00: Um, you know, and that's the thing.
• 5:25
  SPEAKER_00: Every system here, if you know, there's there's really good salforms and and wean to finish flows right now, but there's some challenges out there too.
• 5:32
  SPEAKER_00: But part of those health challenges is what's given us this market opportunity as well, right, Mike?
• 5:37
  SPEAKER_00: So again, it's exciting.
• 5:38
  SPEAKER_00: It was it was really fun to see the the energy at the pork show.
• 5:42
  SPEAKER_00: Um, it's really good to see this opportunity, secure some fantastic margins, you know, for our business.
• 5:47
  SPEAKER_00: And and just just keep keep leaning into this thing, Mike.
• 5:50
  SPEAKER_00: Keep leaning into it would be our recommendation.
• 5:53
  SPEAKER_00: And um, you know, we're able to get ourselves in a really, really strong position here.
• 5:58
  SPEAKER_00: Uh that's a great thing to be looking forward at.
• 6:00
  SPEAKER_00: So uh yeah, this this this green day here.
• 6:03
  SPEAKER_00: If we can close, if we can, you know, we're about 1220, so we got to get into the close, but it looks like it's gonna finish the week pretty strong, Mike.
• 6:09
  SPEAKER_00: It's a uh it's a nice end of the week.
• 6:11
  SPEAKER_01: One of the most common questions I got this week at the World Pork Expo and following it up was uh a lot of people asking about expansion in the hog industry and if it's occurring or when it will occur, how capital looks.
• 6:24
  SPEAKER_01: Uh, that one seems to be getting brought up quite a bit, doesn't it, Luke?
• 6:27
  SPEAKER_00: Yeah, I I I I don't know.
• 6:29
  SPEAKER_00: I I I I I think that's the classic question.
• 6:32
  SPEAKER_00: When we get profit, we expand.
• 6:34
  SPEAKER_00: We've we've done that historically as an industry.
• 6:37
  SPEAKER_00: We haven't been able to keep our keep our supply in check, if you will.
• 6:40
  SPEAKER_00: But I I I it's a little different here, Mike.
• 6:43
  SPEAKER_00: We got we got a few things.
• 6:44
  SPEAKER_00: We you know, we had a few rough years, so we're doing a little bit of balance sheet rebuilding.
• 6:48
  SPEAKER_00: We still export, you know, around 25% of our production, and exports have risk in them under current administration, right?
• 6:56
  SPEAKER_00: Um, but cost of capital, um, cost of construction, um, it's just it's really hard to make to make things work, right?
• 7:05
  SPEAKER_00: So I I would say we're seeing, you know, a little bit if there's some new sales coming into industry from our perspective, it's more about switching sales out from a really poor health area into a higher health area.
• 7:16
  SPEAKER_00: Um now that should create that will create a few more pigs if the plan works, which it will.
• 7:20
  SPEAKER_00: Um also seeing, you know, maybe with some capital come back in, maybe some remodeling of some facilities, some upgrading of facilities.
• 7:27
  SPEAKER_00: Um, new finishers, they're still around a million dollars for a 2500 head site.
• 7:32
  SPEAKER_00: That that they're they're they're very so we're not I I I would say we're you know, we're we're doing some moving of the pieces on the board, trying to reinvest and get our our bulk assets better.
• 7:43
  SPEAKER_00: Um as far as uh expansion and and and new sales coming down.
• 7:47
  SPEAKER_00: I I think everybody's focus now, Mike, I mean, from an industry is is is dialing shorn back in what they have, improving what they have.
• 7:54
  SPEAKER_00: I I uh I I don't I I didn't get into a lot of expansion talks down there.
• 8:00
  SPEAKER_00: So and I I think the industry and and and hopefully we can you know we we can can can can curb that a little bit, but there's there's some some equity rebuild before that that and quite frankly, I mean construction costs can do what they want.
• 8:12
  SPEAKER_00: It's it's hard to see things go down, right?
• 8:14
  SPEAKER_00: But an interest rate decrease would be the cost of capital is probably the biggest part of making some of those longer-term investments work, Mike.
• 8:21
  SPEAKER_01: Those are definitely some of the main bullet points, I think, in that discussion.
• 8:26
  SPEAKER_01: So I appreciate you going through that.
• 8:27
  SPEAKER_01: Any final thoughts for our listeners this week as we wrap up a huge week for the pork industry?
• 8:33
  SPEAKER_00: Yeah, I just think the other maybe big picture thing, and you know, the the the pork board, I mean, we uh launching new campaigns trying to market pork differently.
• 8:41
  SPEAKER_00: And and we we all we all know and we've we've all been frustrated in the pork industry.
• 8:45
  SPEAKER_00: Specifically, we look at the price spread between beef, chicken, and pork, and and and and beef continues.
• 8:51
  SPEAKER_00: And I mean this week in the kettle world, if anybody hasn't been watching, it's been it's been it's been insane.
• 8:57
  SPEAKER_00: But uh a nice value opportunity here, and we we we heard some good things.
• 9:01
  SPEAKER_00: We're hearing more innovation in the product, uh more marketing in the product, pork is an ingredient, maybe finding a way for ground pork to come in with beef, make some blends, right?
• 9:09
  SPEAKER_00: But we we we absolutely have some good things going.
• 9:12
  SPEAKER_00: But this this is time our industry, our our our our systems, uh the the the the packers, the retailers, I mean we need to we need to continue to innovate here, Mike.
• 9:20
  SPEAKER_00: And I, you know, health and nutrition, some new research coming out there, human nutrition.
• 9:24
  SPEAKER_00: When I say that about the the the value of animal fat, pork fat specifically, more protein in the diet.
• 9:31
  SPEAKER_00: So, you know, those are all things we've we've got to build on and need to continue to build on.
• 9:35
  SPEAKER_00: But that I'd say how we're you know, the the the pork is the center of a plate, you know, the the the baby boomers we're gonna eat a pork chop and a whole ham, like those days are moving, our our marketplace is changing, right?
• 9:47
  SPEAKER_00: So, you know, we're doing really good and focusing on the production side and and trying to tune that up.
• 9:52
  SPEAKER_00: The you know, the product innovation, the demand side.
• 9:55
  SPEAKER_00: That that that's still an area, but I I we're I think we're finally some want to see it faster, but we're seeing some movement there.
• 10:01
  SPEAKER_00: So we need to, you know, hopefully continue to see some good follow-through on that, which I think we will.
• 10:05
  SPEAKER_00: And you know, the big opportunity pork is uh is an amazing protein, right?
• 10:10
  SPEAKER_00: And it's got lots of different ways to be used.
• 10:12
  SPEAKER_00: And and I think we finally got some of our some some of our uh uh meat side of the business focused on and and why not when you've got choice beef, it's over 360 now, right?
• 10:21
  SPEAKER_00: And you know, pork at you know one 108 or sub-110.
• 10:24
  SPEAKER_00: I'm there there's huge value opportunities there, not not only for the the the the food chain, but for the consumer as well.
• 10:31
  SPEAKER_00: So those are all things we we need to build on, and man, we have a great opportunity to capitalize on it, Mike.
• 10:36
  SPEAKER_01: Well, thank you for your time today, and thank you for your time this week.
• 10:39
  SPEAKER_01: Earlier as well, we had a blast at the World Pork Expo.
• 10:42
  SPEAKER_01: If you guys need anything, please reach out to us at Professional Egg Marketing.
• 10:46
  SPEAKER_01: We really appreciate it.
• 10:47
  SPEAKER_01: Thanks, Mike.
• 10:48
  SPEAKER_01: And thank you to all our listeners.
• 10:50
  SPEAKER_01: Please reach out to us at professional eggmarketing.com.
• 10:54
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 10:59
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 11:05
  SPEAKER_01: See you next time.