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Hog Talk: Hogs Take A Hit · Professional Ag Marketing Podcast

• 0:02
  SPEAKER_01: Welcome to the Hog Market Talk Podcast.
• 0:06
  SPEAKER_01: Your weekly deep dive into hog market fundamentals, breaking news, and industry insights.
• 0:12
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:20
  SPEAKER_00: Okay, today is January 28th.
• 0:22
  SPEAKER_00: I've got Luke Wells back here with us for the Hog Market Talk Podcast.
• 0:26
  SPEAKER_00: How's it going, Luke?
• 0:27
  SPEAKER_02: It's going great, Mike.
• 0:27
  SPEAKER_02: How are you doing today, bud?
• 0:28
  SPEAKER_00: Oh, we're doing really good.
• 0:30
  SPEAKER_00: You know, I'm a grain guy, so today was a pretty active day for the grain markets, Luke.
• 0:34
  SPEAKER_02: Yeah, Donald Trump kind of well, I don't know if for good or bad reason, but he fired it up a little bit, right?
• 0:39
  SPEAKER_00: A little bit.
• 0:40
  SPEAKER_00: You know, when you uh look at kind of a few things that have happened over the past 24 hours.
• 0:44
  SPEAKER_00: Uh one of them was Donald Trump gave a presentation in Iowa there, uh, really addressing some of the main concerns with E-15 and some of the news there, which that one was a big one because he said that a deal's close to getting done, and when it hits his desk, he's gonna sign it right away, not even look at it.
• 1:00
  SPEAKER_00: So that was a little bit friendly to uh the corn producer in the room, basically.
• 1:05
  SPEAKER_00: Talked about some John Deere plants uh coming online in the United States too, which has been a big move for him in the ag industry.
• 1:11
  SPEAKER_00: But uh that trip alone was nice, and then I, you know, otherwise, some of the the news we had in the past 24 hours to give us a little boost in the grains today was Argentina dryness concerns next couple weeks and and some other items.
• 1:24
  SPEAKER_00: But this is a hog market talk podcast, Luke.
• 1:26
  SPEAKER_00: So I I wanted to give you uh a chance to answer the question which seemed to get asked to me the most today, which was why did hogs have the reaction they had today with some negative trade?
• 1:37
  SPEAKER_02: Yeah, no, fair enough, Mike.
• 1:38
  SPEAKER_02: And I think a very simple answer is you just you just can't go up every day forever, right?
• 1:42
  SPEAKER_02: No, that's that's for certain.
• 1:44
  SPEAKER_02: You know, and we've got we still have we have tremendously awesome things going on in the hog market.
• 1:48
  SPEAKER_02: We've had one heck of a rally.
• 1:49
  SPEAKER_02: I mean, take a look at that chart in the April he's showing up.
• 1:51
  SPEAKER_02: That's I mean, it's just been pretty much a straight line bulldozer higher, right?
• 1:55
  SPEAKER_02: Yeah.
• 1:55
  SPEAKER_02: Um, and and it's reflected in commitment of traders.
• 1:57
  SPEAKER_02: You know, we got commitment of traders as of last posted report about 97,000, 98,000 long contracts.
• 2:03
  SPEAKER_02: Uh forward uh carries from spot fundamentals are pretty normalized.
• 2:07
  SPEAKER_02: We've got good buying, pork's a value, uh, protein's a value, right?
• 2:11
  SPEAKER_02: So we've had a good day.
• 2:12
  SPEAKER_02: Now, what triggered today's little bit lower move, uh cutout was off$1.50 yesterday.
• 2:17
  SPEAKER_02: Um, you know, I don't know that it like month end in January's a big deal, but month end always matters a little bit, right?
• 2:24
  SPEAKER_02: So I just think we're just at just a little healthy pause, right?
• 2:27
  SPEAKER_02: Um, and uh, but it's been hot, uh, you know, from a uh from a product standpoint, and I think Kate is showing you this chart.
• 2:34
  SPEAKER_02: Yeah, we were off a little bit yesterday,$1.57, but still, I mean, that's going back to 2021.
• 2:40
  SPEAKER_02: Demand's in a really good spot.
• 2:41
  SPEAKER_02: Pork demands, that's just a little bit of midweek volatility.
• 2:45
  SPEAKER_02: Um, also, I think the other thing to kind of throw out too, like the cash hog trade, still good.
• 2:50
  SPEAKER_02: I think Cade can find a national hog chart for me.
• 2:53
  SPEAKER_02: And so there's been a cash hog market since the first of the year, but it's been really choppy.
• 2:58
  SPEAKER_02: That's why you see these days where it goes up 10, down 10, kind of on that blue line there.
• 3:02
  SPEAKER_02: It's the trend's been really good, though, hasn't it?
• 3:04
  SPEAKER_02: The trend's been good, but we had kind of just a little limited packer participation in the negotiated volume, confidentiality, right?
• 3:11
  SPEAKER_02: Um, but this week there's five packers bidding.
• 3:13
  SPEAKER_02: 87 was the top.
• 3:15
  SPEAKER_02: We'll see if that got done today.
• 3:16
  SPEAKER_02: 87 is a few bucks above index, right?
• 3:18
  SPEAKER_02: Paying more than index.
• 3:20
  SPEAKER_02: I mean, so we got nice robust cash demand.
• 3:22
  SPEAKER_02: I mean, the hog market's in a good spot.
• 3:24
  SPEAKER_02: So cash good this week.
• 3:26
  SPEAKER_02: Um, futures just taking a little bit of a breather, forward margins good.
• 3:30
  SPEAKER_02: You know, I think the one thing that our customers have been calling and talking, you know, about the most this week, because it is kind of some difficult decisions, it's it's this weaned pig market, right?
• 3:39
  SPEAKER_02: So I think Cade's got a graph.
• 3:40
  SPEAKER_02: Hey, he's already ahead of me.
• 3:41
  SPEAKER_02: Way to go, Cade.
• 3:42
  SPEAKER_02: You know, so weighted average last week was just shy of 100 bucks, okay?
• 3:46
  SPEAKER_02: And this data set he's showing, this takes us all the way.
• 3:48
  SPEAKER_02: Everybody's asking about 2014.
• 3:50
  SPEAKER_02: 2014 was a big PD year.
• 3:52
  SPEAKER_02: Um, and so and you can look at that going back to 2014.
• 3:56
  SPEAKER_02: This is the highest weaned pigs have traded in that data set.
• 3:59
  SPEAKER_00: That's high.
• 4:00
  SPEAKER_02: It's high.
• 4:01
  SPEAKER_02: And so you say 100 and actually top end, 110, 115.
• 4:05
  SPEAKER_02: That's high, right?
• 4:06
  SPEAKER_02: So just let's say hold the brakes a little bit of perspective, okay?
• 4:10
  SPEAKER_02: Um, we have 65,$70 margins on a cost of production type pig, right?
• 4:14
  SPEAKER_02: Yeah, so um that's like a$40,$41 pig off today's market.
• 4:19
  SPEAKER_02: If you can fill it, go for it.
• 4:20
  SPEAKER_02: Yeah, no, a little more in the in-depth than that, right?
• 4:23
  SPEAKER_02: So my point is is it is not uncommon when you have to buy a spot market pig this time of year in the winter, that there's not much of a margin on a wean pig, right?
• 4:33
  SPEAKER_02: Usually that margin gets bit very narrow to negative.
• 4:36
  SPEAKER_02: And you know, when you run the breakevens, I mean July was down today, but what did July close at?
• 4:40
  SPEAKER_02: 108, 109, uh, 10107.92 today, down a dollar 45.
• 4:45
  SPEAKER_02: Um, but traded up, you know, almost up to 110.
• 4:48
  SPEAKER_02: In fact, what was that?
• 4:49
  SPEAKER_02: That's June contract I'm on.
• 4:51
  SPEAKER_02: July closed at 108.87 yesterday, traded up to 110.30.
• 4:56
  SPEAKER_02: Okay.
• 4:57
  SPEAKER_02: And so somewhere, it depends on your system, but somewhere between 100 and 105 bucks, these things break even.
• 5:03
  SPEAKER_02: Okay.
• 5:03
  SPEAKER_02: So my whole point just I've I've gone through this with clients is yeah, 100, 105, 110, that's crazy high price.
• 5:10
  SPEAKER_02: It works really good for a fair we're selling wing pigs, right?
• 5:14
  SPEAKER_02: But not uncommon to have break even on a wing pig this time of year.
• 5:17
  SPEAKER_02: And if you know we had July futures at 100 instead of 110 or 109, we had corn at five bucks instead of 450, right?
• 5:26
  SPEAKER_02: It would be all relative and adjusted, right?
• 5:28
  SPEAKER_02: So, yeah, it's a big decision.
• 5:30
  SPEAKER_02: Um, but as we've been talking through our customers, I mean, 25 was a good year for lots of reasons.
• 5:36
  SPEAKER_02: One of the things that made 25 good is just, and it's through we're a throughput industry, sell more pounds of pork, right?
• 5:42
  SPEAKER_02: So as you go through and if you've got a few holes, we're saying first, don't short yourself on summer space.
• 5:48
  SPEAKER_02: Like if you've got, okay, I've got pigs offered to me for 100, 105 bucks, don't jam them in, make yourself tight and have to sell light this summer.
• 5:55
  SPEAKER_02: And in fact, if you've got some extra pigs out of your system and maybe take a week, sell a week off, free up some space, make your pigs big this summer.
• 6:03
  SPEAKER_02: Don't get tight on space, right?
• 6:05
  SPEAKER_02: That's the second thing.
• 6:06
  SPEAKER_02: But you know, burden the hand a little bit, if you will.
• 6:08
  SPEAKER_02: Right now, they're they're they're not a horrible proposition, even though they're crazy high.
• 6:13
  SPEAKER_02: You can somewhat get close to break even.
• 6:15
  SPEAKER_02: You can buy a put, buy an LRP, sell a call, right?
• 6:18
  SPEAKER_02: But last year, last year was super interesting, Mike.
• 6:21
  SPEAKER_02: Um, is so a lot of this is is PERS and PE DB health driven.
• 6:26
  SPEAKER_02: So people are saying, well, what's this versus last year?
• 6:28
  SPEAKER_02: I think I maybe talked about it last week, but I'm gonna follow through on this story.
• 6:32
  SPEAKER_02: We started PERS in September last year.
• 6:35
  SPEAKER_02: This year it started a little bit in October for sure in November.
• 6:38
  SPEAKER_02: We broke with PERS all the way to July.
• 6:40
  SPEAKER_02: The reason I'm saying that is that put a we had a really strong October market last year.
• 6:44
  SPEAKER_02: In fact, I don't have it right in front of me, but October settled somewhere 97 or 98 bucks, right?
• 6:49
  SPEAKER_02: So you had that steep appreciation.
• 6:50
  SPEAKER_02: How long will PERS last this year?
• 6:52
  SPEAKER_02: I don't know.
• 6:53
  SPEAKER_02: We don't know, right?
• 6:54
  SPEAKER_02: But it's ramping up pretty hard right now.
• 6:56
  SPEAKER_02: And so, as this wing pig market, if Kate, if you go back to that chart, what's interesting is we're pricing off of August here now, and then in a month or four or five weeks, we'll be pricing uh off of an October contract.
• 7:08
  SPEAKER_02: It's typically Wienpigs flatten here, then they start to move down as they go off the fall market.
• 7:13
  SPEAKER_02: Last year was different.
• 7:14
  SPEAKER_02: Last year they stayed strong.
• 7:16
  SPEAKER_02: Um the the market stayed strong.
• 7:18
  SPEAKER_02: In fact, um, and so I think the show list is so tight, demand is so high, and there's probably some optimism in there that we're gonna have a really nice September market.
• 7:29
  SPEAKER_02: There is a possibility that instead of being able to buy something at break even minus five bucks, if we wait five weeks, it could be even it could be a minus fifteen dollar loss.
• 7:39
  SPEAKER_02: Because this wing pick market's got a lot of strength to it, right?
• 7:42
  SPEAKER_02: So everybody's got to evaluate it.
• 7:43
  SPEAKER_02: But take home points on that is yeah,$100 wieners is high, but so's the market.
• 7:48
  SPEAKER_02: So you know, so's the market.
• 7:50
  SPEAKER_02: Two, just lots of really good things going on here.
• 7:53
  SPEAKER_02: Um, forward margins, even with this little back today, still some excellent opportunity for pork producers out there.
• 7:59
  SPEAKER_00: Very interesting.
• 7:59
  SPEAKER_00: Well, we'll be watching that the next two weeks then, just from a seasonal aspect, see if that ice wine price is gonna start falling or not.
• 8:05
  SPEAKER_02: How high does it go?
• 8:06
  SPEAKER_02: That's one question we want to look at, but also what's the what what what's the rate of descent?
• 8:11
  SPEAKER_02: Very much.
• 8:12
  SPEAKER_02: That's the big question, in it.
• 8:13
  SPEAKER_00: What else do you got for me today on the hog market to chat about that you think is relevant uh to our listeners today?
• 8:19
  SPEAKER_02: Yeah, no, I I think that's it.
• 8:20
  SPEAKER_02: I I I I mean kind of covered the big points.
• 8:23
  SPEAKER_02: Use this volatility, right?
• 8:24
  SPEAKER_02: Um basis is pretty well normalized now.
• 8:27
  SPEAKER_02: Index is climbing up, that cash finally came like we talked about.
• 8:30
  SPEAKER_02: Index is gonna be right at 85, still trending higher.
• 8:34
  SPEAKER_02: Well, 13 days left till Feb expiration, so that contract's about done.
• 8:38
  SPEAKER_00: We'll be ripping into Do you expect much volatility on that Feb contract here going forward?
• 8:42
  SPEAKER_02: I mean, I I don't.
• 8:43
  SPEAKER_02: I think it's gonna trend up.
• 8:44
  SPEAKER_02: Base is gonna narrow like normal.
• 8:46
  SPEAKER_02: And I I mean, I I I'm I I think it's gonna expire somewhere in this 88, maybe 89.
• 8:52
  SPEAKER_02: But you know what?
• 8:53
  SPEAKER_02: Product, I mean, demand's good.
• 8:54
  SPEAKER_02: If product steps up a little bit, cash, I don't think cash is going backwards seasonally, it shouldn't, and the way that the market's acting.
• 9:02
  SPEAKER_02: You know, there could be a little bit of good in that Feb yet, but you know, all in all, this hog market's got a lot of good undertones.
• 9:08
  SPEAKER_02: You know, we'll see tomorrow.
• 9:09
  SPEAKER_02: Maybe we'll be down.
• 9:10
  SPEAKER_02: We'll see what this afternoon's cutout is.
• 9:12
  SPEAKER_02: Cutouts down this afternoon, and as we've looked at that, you know, cutout got up to what like 97 or whatever the other day.
• 9:18
  SPEAKER_02: 102 was our high last year at this time of the year, I noticed when I was looking at it.
• 9:22
  SPEAKER_02: So um, but it's some of our private meat fork at meat trade, you know, they they've kind of been holding it more at 94, 95, right?
• 9:28
  SPEAKER_02: So again, that's volatility.
• 9:30
  SPEAKER_02: But uh, you know, no, it's it's things are good, but I say burden hand and and what's this saying, and Bush and the other, however that goes, I said that wrong.
• 9:39
  SPEAKER_02: But the things we can see, we hedge some things we can't see, right?
• 9:42
  SPEAKER_02: Right now things look really good, but so is the forward market.
• 9:45
  SPEAKER_02: So um, nah, I think the pork industry is in a good spot.
• 9:48
  SPEAKER_02: You know, let's watch this uh, you know, these things we talked about this week.
• 9:52
  SPEAKER_02: But you know, Mike, coming into almost February here, I tell you what, I'm excited as I've ever been, sir.
• 9:57
  SPEAKER_00: Are there some things to be excited about next week with events going on uh out in the out in the world that professional egg marketing will be taking place in?
• 10:05
  SPEAKER_02: Uh we are going to be uh a couple different so I'm gonna go out to uh a seminar in Colorado hosted by Swine Vet Center, and I think there's around 75 producers, so it's it's not a big, big conference, that's a nice small peer group.
• 10:17
  SPEAKER_02: So we'll be out in Colorado speaking at that event, and then uh CattleCon.
• 10:21
  SPEAKER_02: I know this is a hog talk, but National Cattle Convention is next week, and that's in Nashville, I believe, right?
• 10:26
  SPEAKER_02: Yeah, and so we'll have uh a team out there, and then we're actually gonna go north of the border.
• 10:31
  SPEAKER_02: Uh Manitoba Swine Seminar is next week as well, and we've got a team going up there to been asked to speak at that conference.
• 10:37
  SPEAKER_02: So yeah, we'll be out hitting the circuit a little bit next week, Mike.
• 10:40
  SPEAKER_00: And even the week after that, then we've got Minnesota Port Congress.
• 10:44
  SPEAKER_02: Yeah, rolling right back around, and that's we really like having that show in Mankato.
• 10:47
  SPEAKER_02: That's a really nice venue for that.
• 10:49
  SPEAKER_02: So that'd be coming right around, sir.
• 10:51
  SPEAKER_00: All right.
• 10:51
  SPEAKER_00: Well, if you're at any of these events, please stop by, see Luke or I.
• 10:55
  SPEAKER_00: Uh we're looking forward to the opportunities.
• 10:57
  SPEAKER_02: Yep, have a good one.
• 10:58
  SPEAKER_02: Stay warm.