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Where are the Silver Linings in the Hog Market · Professional Ag Marketing Podcast

• 0:02
  SPEAKER_00: Welcome to the Hog Market Talk Podcast.
• 0:06
  SPEAKER_00: Your weekly deep dive into hog market fundamentals, breaking news, and industry insight.
• 0:13
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:22
  SPEAKER_02: Today is Thursday morning, bright and early before the close here.
• 0:25
  SPEAKER_02: How's it going, Jeff?
• 0:26
  SPEAKER_01: It's going good, Mike.
• 0:29
  SPEAKER_02: Good deal.
• 0:29
  SPEAKER_02: This is a hog market talk podcast.
• 0:31
  SPEAKER_02: We'll do our best not to talk about the hog market too much here, but hey, we've got like a green little streak going here lately.
• 0:38
  SPEAKER_02: Uh we'll take it for the time being.
• 0:41
  SPEAKER_01: Yeah, the market's trying to find a little support, right, Mike.
• 0:44
  SPEAKER_01: Um It's not going down, at least.
• 0:47
  SPEAKER_01: It's not going down.
• 0:48
  SPEAKER_01: That's that that's a win on this market, unfortunately, for now.
• 0:52
  SPEAKER_01: But um and we're not, you know, it's it's not the market's fault necessarily.
• 0:57
  SPEAKER_01: I mean, we're not putting any good fundamentals out there so far.
• 1:00
  SPEAKER_02: So And that's what we're gonna talk about today.
• 1:02
  SPEAKER_02: Let's just run through some of the fundamentals that we're trading.
• 1:05
  SPEAKER_02: I wanted to bring up first, it's gonna be hot next week.
• 1:08
  SPEAKER_02: And yeah, a lot of people would say, well, no duh, it's that time of the year, it should finally be hot.
• 1:13
  SPEAKER_02: But it it just has it's been so cool, I mean, in the last few weekends for us to be highs in the 60s in the Midwest, for example, through weekends, hasn't exactly been lake days by any means, Jeff.
• 1:25
  SPEAKER_02: So there's a very odd weather, I feel like.
• 1:28
  SPEAKER_02: Um this this next week.
• 1:30
  SPEAKER_02: Hopefully, some of that weather will bring rainfall as well.
• 1:33
  SPEAKER_02: But what impact do you think that will have on weights here for the first real hot streak in the in the summer?
• 1:39
  SPEAKER_01: Yeah, we're gonna put uh decent amount of days together most of next week, right, Mike?
• 1:44
  SPEAKER_01: Um gonna be well into the 90s on most of the corn growing area and most of the hog growing area.
• 1:49
  SPEAKER_01: And that's the first time that we've done that this season.
• 1:52
  SPEAKER_01: Um so the Doma Doom that the grain folks are talking about that definitely has some impact on the hogs as well.
• 1:58
  SPEAKER_01: And you know, we've been doing a nice job of taking these weights down compared to you know last year, compared to normal.
• 2:07
  SPEAKER_01: Obviously, we started extremely high back in May, right?
• 2:10
  SPEAKER_01: So just a real quick um history lesson there.
• 2:13
  SPEAKER_01: You know, we we had those couple weeks of lower harvest um right before Memorial Day.
• 2:18
  SPEAKER_01: And at the time we were kind of hoping that that was the reality of the situation, right?
• 2:23
  SPEAKER_01: And we were gonna get into some fewer pigs.
• 2:25
  SPEAKER_01: Well, that wasn't the case, those were mostly because of some breakdowns and some things like that at some backing plants.
• 2:31
  SPEAKER_01: So um that did add a lot of weight to our average inventory, and and we've been taking that off ever since.
• 2:38
  SPEAKER_01: So far, the lower weights have mostly been around um and maybe killing just a few more than what we need to.
• 2:48
  SPEAKER_01: Um, and look to your point, we hadn't really put we put in you know abnormally cool temperatures across these pigs.
• 2:55
  SPEAKER_01: So starting next week, um, I expect that to change.
• 2:58
  SPEAKER_01: I think you will definitely rip some weights off the pigs.
• 3:02
  SPEAKER_01: Um, and then uh you know, the other thing that we have to look at is you know, compared to last year, there's a quite a bit of difference between where the pack-one weights are and where the producer-owned weights are.
• 3:13
  SPEAKER_01: So um Cade's got the pack-rown weight on the screen here, and that's really you know the year-over-year change.
• 3:21
  SPEAKER_01: Um, you know, as we put a good percent and a half more weight on these pigs than we did a year ago, and that's been adding um you know, most of our additional pounds out of the packing plant that's coming from the weight side, right?
• 3:34
  SPEAKER_01: Um, packers really struggled on weights last year.
• 3:38
  SPEAKER_01: This year they've got their stuff together, they're making them um the size that they want to make them.
• 3:43
  SPEAKER_01: That's gonna be tough to get those pack owned weights down to last year's levels.
• 3:47
  SPEAKER_01: I think that's always gonna be um a little bit of a headwind for this market.
• 3:53
  SPEAKER_01: Um, producer owned weights, we're actually getting pretty close to a year ago.
• 3:57
  SPEAKER_01: Um, and I think we'll probably get on top of a year ago on the weight side.
• 4:00
  SPEAKER_02: They were pretty high here recently, though, early early summer here.
• 4:04
  SPEAKER_02: Pretty big gap on the producer side versus last year's you can see there.
• 4:08
  SPEAKER_01: No doubt part of the issues that we're dealing with today.
• 4:10
  SPEAKER_02: What do you think that means for harvest this next week?
• 4:14
  SPEAKER_02: It's a holiday, but it's a holiday on a weekend, and what impact is that gonna have?
• 4:18
  SPEAKER_02: Because I know like uh the last few years, having a holiday like July 4th on a Wednesday, for example, seemed like that whole week was just off.
• 4:26
  SPEAKER_02: It it just felt like uh very inconsistent, smaller kills all over the place.
• 4:31
  SPEAKER_02: What do you view for this next week and and what that looks like?
• 4:35
  SPEAKER_01: Well, I think that's it's been changing throughout this week.
• 4:38
  SPEAKER_01: Um, so it'll be interesting to see where we come in as we come through next week.
• 4:42
  SPEAKER_01: But you know, we we had the kill fairly high compared to other Fourth of July, just like you're talking about, Mike.
• 4:49
  SPEAKER_01: Um we had you know decent amount of runtime there on Friday when we coming into this week, but that we've been losing that uh that schedule, so we continue to see Packers back away from the Friday kill.
• 5:03
  SPEAKER_01: Um, so we were up over two million head um coming into this week as far as our estimates for next week.
• 5:10
  SPEAKER_01: I think we're gonna be down, we're gonna be down underneath that.
• 5:13
  SPEAKER_01: We're gonna be much more of what we would consider a normal four-day week, somewhere in that one nine area.
• 5:18
  SPEAKER_01: So I think they're doing that because of the hog supply.
• 5:23
  SPEAKER_01: Um, and maybe it's the meat movement too.
• 5:26
  SPEAKER_01: I'm not sure which one's more of a driving force on that.
• 5:29
  SPEAKER_01: But um in general, I don't think that's bad news.
• 5:32
  SPEAKER_02: All right.
• 5:33
  SPEAKER_02: Last but not least, you mentioned it.
• 5:35
  SPEAKER_02: Let's talk about cutout because I feel like that is where all roads really lead here in the hog fundamentals.
• 5:41
  SPEAKER_01: Yep.
• 5:42
  SPEAKER_01: For sure, that's true, Mike.
• 5:44
  SPEAKER_01: Um, so what we've been staring at the past few days, you know, we've been focusing uh, you know, for the past few weeks, we've been focusing on well, you know, what happened to our May-June rally, um, you know, and and it are we still gonna get some of that from a seasonal perspective?
• 6:02
  SPEAKER_01: Well, we've we missed that piece of it.
• 6:05
  SPEAKER_01: Um we've been sideways to lower.
• 6:08
  SPEAKER_01: Um, so the next thing we're focusing on here for the past couple days is well, what next now?
• 6:13
  SPEAKER_01: We we didn't get our rally in May and June.
• 6:16
  SPEAKER_01: What happens next year?
• 6:17
  SPEAKER_01: So from a seasonal perspective, um you know, we've got a week or two of actually sideways to lower product from a seasonal perspective.
• 6:27
  SPEAKER_01: Um, we've got uh uh three years on the screen here.
• 6:31
  SPEAKER_01: The five year and six-year averages look the same.
• 6:35
  SPEAKER_01: Um so we could I don't really see, you know, based on this history, I don't see any reason why we're gonna rally this um cutout market into next week, into the fourth of July, and maybe even after the fourth of July.
• 6:49
  SPEAKER_01: I think the five-year average would suggest we don't go anywhere until like July 8th, Mike.
• 6:55
  SPEAKER_01: So that's that's that'd be my expectation moving forward.
• 6:59
  SPEAKER_01: Um maybe something will change like on the hams.
• 7:02
  SPEAKER_01: You know, hams have been a problem for us here um again the past week.
• 7:06
  SPEAKER_01: We're hearing that you know Mexico business has been getting uh getting um taken over a little bit by Brazil and and Canada's been dropping some hams into the U.S.
• 7:18
  SPEAKER_01: here.
• 7:18
  SPEAKER_01: Um but maybe this will maybe something could change there.
• 7:22
  SPEAKER_01: You know, if we're fire sailing some hams, maybe that could get cleaned up and and see a little bit of a rally from there.
• 7:29
  SPEAKER_01: In general, I don't see this thing going anywhere for a few minutes here, and and what's important about that July 7th and 8th date is that gets really close to July futures expiration.
• 7:42
  SPEAKER_02: Very much so.
• 7:44
  SPEAKER_02: Now you start to talk more about August and Ock, hopefully.
• 7:47
  SPEAKER_02: But Ock is uh they've got plenty of premium taken out of that month too, don't they?
• 7:52
  SPEAKER_01: They do.
• 7:52
  SPEAKER_01: That's that's something uh if you're looking for some silver lining, you know, we've we've taken all the premium out of those deferred contracts.
• 8:01
  SPEAKER_01: Um you've got the uh managed money position almost a record short.
• 8:06
  SPEAKER_02: Pretty much right there.
• 8:08
  SPEAKER_01: So history would suggest there they don't you know get much shorter than this and they don't stay short for very long.
• 8:15
  SPEAKER_02: Well that's the good news, anyways.
• 8:17
  SPEAKER_02: Any other final thoughts wrapping up the markets here on this podcast?
• 8:21
  SPEAKER_01: We touched on the July contract there.
• 8:23
  SPEAKER_01: You know, those those are still holding a little premium to where the index is at today.
• 8:28
  SPEAKER_01: So we're kind of into a bit of a prove-it mode type of a thing on that July um itself, because you know, it's holding a good four dollar premium.
• 8:38
  SPEAKER_01: And if we don't see any movement on this cutout uh for a week or two weeks here, that market's gonna have to come down a little bit more, I'm afraid.
• 8:46
  SPEAKER_02: All right.
• 8:47
  SPEAKER_02: Well, thank you for tuning in this week.
• 8:49
  SPEAKER_02: Please click the link in the description below to access things like our daily market commentary and other cool market research info.
• 8:56
  SPEAKER_02: Please go to our website at professional marketing.com.
• 8:59
  SPEAKER_02: We'll see.