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Hog Talk: Tech Slide · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Hog Market Talk Podcast with professional egg marketing.
• 0:05
  SPEAKER_00: Come here to get fresh updates on what's happening week to week within the Lean Hog Complex.
• 0:10
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:16
  SPEAKER_00: And remember to visit swineweb.com, an excellent resource for information in the pork industry, where you can also find this podcast.
• 0:25
  SPEAKER_00: This is your host, Mike Miner.
• 0:26
  SPEAKER_00: Let's cross.
• 0:27
  SPEAKER_00: Today is October 16th.
• 0:29
  SPEAKER_00: I've got Luke Wells with us here today.
• 0:30
  SPEAKER_00: How's it going, Luke?
• 0:31
  SPEAKER_01: You know, it's going pretty good, Mike.
• 0:33
  SPEAKER_01: How are you doing today?
• 0:34
  SPEAKER_00: Not too bad.
• 0:35
  SPEAKER_01: We actually got sunshine out.
• 0:36
  SPEAKER_01: We haven't had that for a few days.
• 0:38
  SPEAKER_00: It's been a little rainy.
• 0:39
  SPEAKER_00: It's been nice to give the farmers a little bit of a break here.
• 0:42
  SPEAKER_00: Uh soybean harvest went awfully fast for most folks.
• 0:46
  SPEAKER_00: So just got to the point where we're ready to break some stuff and take a nap, I think, is kind of how that worked out here the last couple days.
• 0:53
  SPEAKER_00: Half inch to an inch kind of area over the past weekend or so has given us a little break, probably about a quarter done with corn locally.
• 1:01
  SPEAKER_00: So uh what are you thinking today on this hog market?
• 1:04
  SPEAKER_01: Well, we've been in a bit of a downward channel for anybody that hasn't been watching.
• 1:08
  SPEAKER_01: You know, uh have uh, you know, I'll kind of you know go through a story here.
• 1:13
  SPEAKER_01: And I know I I you know we're flying a little blind, Mike, since the government shut down.
• 1:18
  SPEAKER_01: A little bit.
• 1:18
  SPEAKER_01: Um, but you know, the end of September, I mean, manage money was uh record long on the hog market.
• 1:24
  SPEAKER_01: Um and uh index funds weren't quite long, but they're right up there.
• 1:27
  SPEAKER_01: So big long position, and that's that's a good guy.
• 1:30
  SPEAKER_01: We like having that we're liking that money.
• 1:32
  SPEAKER_01: And you know, still, even though the hogs have turned down a little and cattle, you know, at least choice a little.
• 1:36
  SPEAKER_01: I mean, there's still protein supplies are tight.
• 1:38
  SPEAKER_01: Like, I mean, there's a protein bowl in the market, right?
• 1:41
  SPEAKER_01: So that's all that's all good.
• 1:43
  SPEAKER_01: But you know, I talk about this because when we have that big money position, it it it you know it creates more volatility both ways, right?
• 1:49
  SPEAKER_01: Um, and we got to the end of September, which is two important points for for managed money month end and quarter end, right?
• 1:56
  SPEAKER_01: They had a nice profit in the long, so I think we started sliding a little just on some month end, quarter end profit.
• 2:01
  SPEAKER_01: Some of it in late August, early September, you know, when we were running three, four percent under a year ago on harvest.
• 2:07
  SPEAKER_01: We were underkilling the supply.
• 2:08
  SPEAKER_01: Those pigs were there, we had to catch them back up.
• 2:11
  SPEAKER_01: So the last few weeks we've turned into you know high two fives, two sixes.
• 2:14
  SPEAKER_01: This week's gonna be a two six one type kill, you know, and that's created two things.
• 2:18
  SPEAKER_01: It it a little more leverage for the packer.
• 2:21
  SPEAKER_01: So the cash market has definitely turned down a little instead of paying over index for pigs.
• 2:26
  SPEAKER_01: Packers are getting them about under index, right?
• 2:28
  SPEAKER_01: Uh 92s and stuff trading this week.
• 2:31
  SPEAKER_01: Uh cutout, uh, instead of being 113, it trended down to 103.
• 2:35
  SPEAKER_01: And so we had fundamentals turned and we started to get a technical slide.
• 2:39
  SPEAKER_01: We, you know, we crossed that 20 day about the first of October.
• 2:42
  SPEAKER_01: Then we bounced on.
• 2:43
  SPEAKER_01: I'm talking about the December contract.
• 2:45
  SPEAKER_01: We sat right on the 50 day, and that held it for a few trade sessions.
• 2:48
  SPEAKER_01: But then just as we moved a little deeper into the calendar, just as we had a few more hogs harvested that had to get sold, you know, we crossed that and we went down and crossed it on the 9th, uh, the 100-day moving average, which is in the 84 type range, right?
• 3:03
  SPEAKER_01: And just had, you know, a little bit on Monday, a little bit of a tried to bounce a little bit.
• 3:07
  SPEAKER_01: Cutout was a little bit up on Friday, and but we've continued to trend a little bit softer, and uh, you know, we've got just we've got a seller in the market right here.
• 3:15
  SPEAKER_01: So D SOGs you know, traded below the 100 day by a fair bit today.
• 3:20
  SPEAKER_01: Um, you know, if you look at a chart, I'm not trying to say we have to or need to go down there, but if you look at a chart, I mean there's probably a pretty clear channel down like into the 79 type range.
• 3:30
  SPEAKER_01: A little bit of a gap there, too.
• 3:32
  SPEAKER_01: Right, right, right.
• 3:33
  SPEAKER_01: Right around 84 and a half, which which looks vulnerable, you know.
• 3:36
  SPEAKER_01: So these hogs today closing at 8260.
• 3:39
  SPEAKER_01: Um, you know, taking a step back, you know, we we we you know we still have really good uh you know, root, you know, for in history, really good fundamentals.
• 3:48
  SPEAKER_01: I mean, cut out, you know, 102 here midday, cash hogs midday, you know, running about 93 was kind of weighted average.
• 3:57
  SPEAKER_01: Um, but kind of is the season.
• 3:59
  SPEAKER_01: We got a little bit of selling going on in right here.
• 4:01
  SPEAKER_01: I think we got just a few more bigger weeks of kill to kind of kind of get through, if you will.
• 4:06
  SPEAKER_01: And and yeah, um, but this is this is why, you know, why we hedge.
• 4:11
  SPEAKER_01: You know, we all own a calendar.
• 4:12
  SPEAKER_01: We know we got some more production running at us here.
• 4:15
  SPEAKER_01: But uh, you know, looking forward, we you know, we, you know, last year, which was uh we think a fairly similar supply year.
• 4:22
  SPEAKER_01: In fact, I think there'll be a few more pigs come the end of December this year.
• 4:25
  SPEAKER_01: Demands better, you know.
• 4:26
  SPEAKER_01: You look at the pork cutout and you kind of look at the individual primals, Mike.
• 4:30
  SPEAKER_01: You know, bellies, bellies have exuded the most weakness, which is very, very normal.
• 4:35
  SPEAKER_01: You know, bellies are down trading in that 130, 135 range.
• 4:39
  SPEAKER_01: Somewhere in here, and I don't know, Mike, if it's 120 or 130, but you know, cold storage is current.
• 4:44
  SPEAKER_01: Bellies are going to start getting freezer bids, they're gonna get put away.
• 4:46
  SPEAKER_01: So I I don't feel like we have to have much downside on the bellies, but you know, the two other, I always talk about the three big hitters, bellies 16% of the composite cutout, then hams and loins, respectively, are both 25%.
• 4:58
  SPEAKER_01: So um, you know, loins, they're you know, look at history at 95 bucks, they're they're about where they need to be.
• 5:04
  SPEAKER_01: They're not really overweight, underweight.
• 5:06
  SPEAKER_01: Loin is one of the tougher things for us to move, unfortunately, in the pork industry.
• 5:10
  SPEAKER_01: But hams, hams are punching kind of above their weight, you know, right about 100, give or take a little, depending on the day.
• 5:16
  SPEAKER_01: But we keep hearing good demand things.
• 5:18
  SPEAKER_01: Mexico demand continues to be good.
• 5:20
  SPEAKER_01: We also continue to hear um high demand for deli meat.
• 5:24
  SPEAKER_01: I think you can attribute that a little bit to just all proteins being more expensive, inflation and all that.
• 5:29
  SPEAKER_01: You probably have people maybe having a few more ham sandwiches at lunch and then spending their dollars for their expensive T-bone at dinner, if you will, and whatnot.
• 5:37
  SPEAKER_01: But uh, you know, kind of all moving along.
• 5:40
  SPEAKER_01: Um, you know, corn, you know, still a little bit higher today in nickel, but still uh, you know, very competitive cost of production.
• 5:47
  SPEAKER_01: So you kind of roll all that together, Mike.
• 5:50
  SPEAKER_01: I mean, the rolling 12 crush margin is about 25 bucks now.
• 5:53
  SPEAKER_01: You know, it was trading well over 30 um, you know, a couple of weeks ago, so definitely have have slid a little bit, but still$25 for outlook.
• 6:01
  SPEAKER_01: And you know, then the other thing just to kind of wrap up for today is you know, we had very positive basis uh, you know, through the October contract, which expired yesterday, right?
• 6:10
  SPEAKER_01: DC's front months or expired Tuesday, I'm sorry.
• 6:13
  SPEAKER_01: But you know, we're stepping into uh this week uh on these DC futures, and we got a positive$14,$14.5 basis, and which is you know, budget basis is probably positive nine this week, right?
• 6:25
  SPEAKER_01: So, you know, that's a big win too.
• 6:27
  SPEAKER_01: So just kind of keep keep keep watching all this.
• 6:30
  SPEAKER_01: We uh we might have a little more slide here, but uh um, you know, take advantage of that strong basis and uh again a little perspective.
• 6:38
  SPEAKER_01: We've definitely fallen off, but we're we still got a good demand picture and and still supply is is you know is is a good outlook for twenty twenty six, Mike.
• 6:46
  SPEAKER_00: All right.
• 6:47
  SPEAKER_00: Thank you for your time today.
• 6:48
  SPEAKER_01: Have a good one, sir.