Latest / Professional Ag Marketing Podcast / Hog Talk: The Ham Report

Transcript

Hog Talk: The Ham Report · 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 November 13th.
• 0:28
  SPEAKER_01: I've got Pat back with us here today.
• 0:30
  SPEAKER_01: How's it going, Pat?
• 0:31
  SPEAKER_00: Good, Mike.
• 0:32
  SPEAKER_00: How are you today?
• 0:32
  SPEAKER_01: Real good.
• 0:33
  SPEAKER_01: It's been a while since I had you on the hog market talk podcast, so it's gonna be great to get your perspective once again.
• 0:39
  SPEAKER_00: Yeah, I think you waited until the hog market went down a little bit before you put me back in.
• 0:43
  SPEAKER_00: Thanks for that.
• 0:43
  SPEAKER_01: Well, I wasn't gonna have Luke on here for crying out loud.
• 0:47
  SPEAKER_01: What do you think about this market?
• 0:49
  SPEAKER_01: I mean, gosh, it uh it's been a little bit of a sell-off here, and now cutouts going down a little bit.
• 0:54
  SPEAKER_01: What can you tell us about the price action?
• 0:56
  SPEAKER_00: Yeah, there's a couple things that I'd like to talk through here this morning, Mike, and and so that the first thing is let's just talk about the supply side a little bit.
• 1:03
  SPEAKER_00: And I think last week's harvest was uh uh 1.2% higher than the same week a year ago, um, been running closer to unchanged for the last five or six weeks, compared to uh one and a half to two and a half percent lower for a period um you know late last summer.
• 1:23
  SPEAKER_00: And I just like throw out all those numbers just to I guess make the first observation, which is that we've had a larger than normal seasonal increase in pork production, um, which no big deal, right?
• 1:38
  SPEAKER_00: Like I don't wanna I don't wanna like overstate or overemphasize that too much, other than to make the point that um you know cutout actually, I mean your point is right, we keep settling lower here and all of those things, but but cutout still has I would would argue has performed amazingly well from a historical perspective for sure.
• 1:58
  SPEAKER_00: But also uh given the fact that we've uh uh just put uh you know more than normal increase in pork production on the market here uh on this increase over the last couple months.
• 2:08
  SPEAKER_00: And so that's the first thing.
• 2:09
  SPEAKER_00: And then and then the second thing is is is uh again on the supply side here, um you know, we think that the supply side is manageable in the sense that while producer weights are quite high, um we we really haven't seen a huge uh negative push um in the cash market.
• 2:31
  SPEAKER_00: Um and that can or has started to happen, you know, this time of year and previous years.
• 2:37
  SPEAKER_00: And so, you know, as we're you know faced with uh you know a little bit uh tighter uh harvest schedule um you know this week and going forward, by the way, uh happy uh Veterans Day week to all of our veterans out there.
• 2:50
  SPEAKER_00: But uh, as we go into these next few holidays here, Thanksgiving and Christmas, we're gonna have a little bit more of a of a of a truncated schedule.
• 2:59
  SPEAKER_00: And and uh but so far, you know, from a producer's perspective, so so good, right?
• 3:04
  SPEAKER_00: In terms of just not not needing to sort of force some some extra lows to town.
• 3:09
  SPEAKER_00: And and so that portion of it, again, uh very manageable.
• 3:13
  SPEAKER_00: So now let me flip back to the revenue side again and talk about cutout just a little bit.
• 3:17
  SPEAKER_00: And and um, you know, it's it hams are the one that that um if we were able to maintain higher composite cutout than what we are today.
• 3:27
  SPEAKER_00: And by the way, this week is the first time since the early part of June, I think, that cutouts been at or below a year ago levels.
• 3:36
  SPEAKER_00: And so anyway, we've had a I mean just a little bit of a break here, but but um um I think it's the it's the ham primal that's pulled that down the most.
• 3:45
  SPEAKER_00: That one's the the one that's most curious to me.
• 3:47
  SPEAKER_00: I mean, we've seen um we still are seeing relatively high uh pork prices in Mexico.
• 3:55
  SPEAKER_00: We're anecdotally hearing about good demand for deli meats, those sorts of things.
• 4:00
  SPEAKER_00: And then one would think as we enter the holiday seasons here, um, expensive uh um you know, premium cups of beef, tighter turkey.
• 4:11
  SPEAKER_00: Turkey prices are very high, right?
• 4:12
  SPEAKER_00: Exactly right.
• 4:13
  SPEAKER_00: And so you'd think there'd be some good underpin um um support uh to that ham primal, and it again just is fallen off just a little bit more than what I would have guessed, given those uh those admittedly anecdotal observations.
• 4:28
  SPEAKER_00: And so we'll see what happens here as we go forward.
• 4:31
  SPEAKER_00: But um I don't think it's anything that that's uh terribly concerning as it as it relates to any of those things, and and so so we'll see.
• 4:39
  SPEAKER_00: Now, uh one more supply side, bouncing back and forth here, one more supply side observation.
• 4:44
  SPEAKER_00: We have seen ice wine prices remain at an elevated level, um, which would suggest that we do have a little bit of space chasing baby pigs, um, and we're not hearing about anything like that.
• 4:57
  SPEAKER_01: That's interesting to me because it's not like we're expanding space really in the United States.
• 5:02
  SPEAKER_00: Oh, that's right.
• 5:02
  SPEAKER_00: And so so the first observation would be, well, maybe we're having um you know some some disease issues in South Farms and folks are out trying to replace that that inventory by but in in the ice ween market, but we're not really hearing much um as it relates to you know, PERS being any worse than normal, knock on wood.
• 5:21
  SPEAKER_00: I mean, it's but but I mean I you know we're not hearing anything real significant there.
• 5:25
  SPEAKER_00: So it is interesting that and and I wonder if it if we're not still just in a in a stage of the industry here, uh Mike, where um well there clearly isn't any sow farm expansion.
• 5:37
  SPEAKER_00: We would we would be betting on a little improved productivity year over year, but but that's a that's a challenging, challenging thing to to overcome.
• 5:46
  SPEAKER_00: So um so given all of that, uh I mean the prospects for let's just say manageable supplies as we look into 2026 is you know it looks looks to be you know supportive, and we sure don't get the sense from a competing protein perspective that we're gonna be um significantly expanding the poultry industry and we can expand the cattle industry.
• 6:07
  SPEAKER_00: And if anything, if we start doing that, we're gonna tighten up beef supplies even more.
• 6:11
  SPEAKER_00: So so anyway, all of those things on the demand side um seem to be generally well supported as we think and look into 2026.
• 6:20
  SPEAKER_00: Um, but yet we're still getting a fairly significant sell-off here, especially in the deferred markets.
• 6:27
  SPEAKER_00: And you know, we're also getting it in cattle, we're also getting it in equities to some extent, we're also um you know, have the Fed cutting interest rates, which which uh you know is an indication that um they're a little bit concerned about economic activity, uh unemployment, jobless rates, those sorts of things.
• 6:44
  SPEAKER_00: And so as I as I think and look into 2026 and wonder why the futures market is frankly trading at a discount to spot fundamentals, um looking for reasons why, and it can just be money flow, increased uncertainty as it relates to trade and China and Trump and government shutdown and all the things I'd rather not even talk about.
• 7:09
  SPEAKER_00: Um but but if it if there's more to it than that, if we if the sell-off in the deferred lean hot futures and sell-off in cattle and sell-off in equities has has less to do with the uncertainty items that I just described, and more to do with um outside money in our commodities that are concerned about uh economic activity, consumer sentiment, um and just plain buying power, then that starts to be a little bit different discussion and potentially um a change in fundamentals that uh the futures market is in front of.
• 7:46
  SPEAKER_00: And so, anyway, I don't know the answer to that.
• 7:49
  SPEAKER_00: I wish I did, but um after or as we see this deferred break, um, it is certainly something worth considering, and we're certainly uh gonna keep an eye on that uh uh on our team, Mike, as it just relates to trying to measure consumer sediment, trying to measure what's going on with with consumer behavior here and and uh and I guess looking for uh clues as to whether or not this, you know, just the overall US economy is maybe sliding into uh you know a little bit more of a of a challenging time as it relates to economic activity and then whatever corresponding impact that might have on on protein demand.
• 8:29
  SPEAKER_01: In this market this week, it was a really interesting week because if you look back on uh on Monday's trade, it was, I know Fitzgerald in our office used the expression the power of a working order pat in these hog markets.
• 8:43
  SPEAKER_01: You uh saw two days basically where we saw some pretty elevated levels here at the beginning of the week, and we've immediately retraced to all of that.
• 8:50
  SPEAKER_01: So just a reminder to everybody listening of the power that a working order can have for your operation if it gets to levels that make sense for your business, anyways, especially in some of those deferred hog markets, for example.
• 9:03
  SPEAKER_01: So uh any final thoughts on that.
• 9:05
  SPEAKER_00: Yeah, that's a great point.
• 9:06
  SPEAKER_00: I mean, I I just just looking this up as you're saying that December of 26 hogs over a year out, uh, you know, over a five-dollar trading range this week on that contract.
• 9:15
  SPEAKER_00: It's in that's incredible.
• 9:16
  SPEAKER_01: Crazy.
• 9:17
  SPEAKER_01: And it's hard to make that decision when you're in the moment.
• 9:19
  SPEAKER_01: Like it that did that in the matter of a morning, right?
• 9:22
  SPEAKER_01: And then it wiped it away.
• 9:24
  SPEAKER_01: So it it's just difficult to make, especially good observations that quickly.
• 9:28
  SPEAKER_00: Yep, and and and so you know, a a good uh uh implementation of risk management strategies is to, you know, as you mentioned, you know, know what you want to do, have the order working, and and uh sometimes the type of opportunities that uh have uh have traded this week provide that opportunity for you to take advantage of it.
• 9:46
  SPEAKER_01: All right.
• 9:47
  SPEAKER_01: Well, thank you for your chat this morning, Pat.