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Hogs & Pigs Recap · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_00: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_00: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_00: This is your host, Mike Minor.
• 0:22
  SPEAKER_00: Let's get started.
• 0:23
  SPEAKER_01: All right.
• 0:24
  SPEAKER_01: Uh today is September 29th.
• 0:27
  SPEAKER_01: Uh, and this is Lucas Peters filling in for Mike Minor on the Professional Egg Marketing Podcast.
• 0:33
  SPEAKER_01: And today I have Lucas Wells uh joining me.
• 0:36
  SPEAKER_01: How are we doing today, Luke?
• 0:38
  SPEAKER_01: Really good.
• 0:38
  SPEAKER_01: Glad to be here with you, bud.
• 0:39
  SPEAKER_01: Well, good.
• 0:40
  SPEAKER_01: Uh so we're heading into a uh last weekend in September, or October 1st will be Sunday.
• 0:46
  SPEAKER_01: Uh going into a harvest weekend.
• 0:49
  SPEAKER_01: Weather looks pretty hot and dry for a lot of us.
• 0:53
  SPEAKER_01: Uh I know there's some storms going across South Dakota and northern Minnesota right now, and chance for later today.
• 0:59
  SPEAKER_01: But uh temperatures are gonna be up in the 80s and 90s, uh, should uh finally dry out some soybeans and get soybean harvest rolling pretty well.
• 1:08
  SPEAKER_01: And you know, the talk this week on a few beans that have come out and some corn getting combined, you know, I'm gonna say, Luke, generally the feeling is yields are better than expected.
• 1:19
  SPEAKER_01: Would you agree with that?
• 1:20
  SPEAKER_02: Yeah, now if you would have asked me that a week ago, I mean, just variable, right?
• 1:25
  SPEAKER_02: Like uh continue to get that.
• 1:27
  SPEAKER_02: But this week, as people got into a little more, I have to really agree that they were kind of pleasantly surprised.
• 1:33
  SPEAKER_02: So we'll see, right?
• 1:34
  SPEAKER_01: But yeah, and that's as as harvest progresses, well, the the picture kind of fills in.
• 1:39
  SPEAKER_01: But you know, I I think better than expected in the guys, okay, if you're in a droughty area, maybe you were expecting 150 and you're getting 170.
• 1:48
  SPEAKER_01: If you're in a good area, maybe you were expecting 210 and you're getting 230 uh on corn.
• 1:54
  SPEAKER_01: And and soybeans pretty pleasantly surprised overall.
• 1:57
  SPEAKER_01: Uh talking to some guys in South Dakota this week where harvest is probably a little further along than it is locally here in southern Minnesota.
• 2:05
  SPEAKER_01: Um, a lot of their bean yields are upper 40s, pushing 50s in areas where uh you know they're pretty significantly dry and showing up on the drought monitor most of the summer.
• 2:15
  SPEAKER_01: So uh yeah, overall trending in the right direction for yield, uh for profitability for the farmers.
• 2:22
  SPEAKER_01: So hopefully uh that trend continues and and yields uh keep going up.
• 2:27
  SPEAKER_02: Uh moving just a little bit east.
• 2:29
  SPEAKER_02: I I had some clients in Illinois suggesting uh better yields too, just to put a few new numbers out there.
• 2:36
  SPEAKER_02: And I had one client that they got into their first field and it was some of their better dirt, but uh 190 acres and did 270.
• 2:43
  SPEAKER_02: I mean, which was which was a record in their history, right?
• 2:47
  SPEAKER_02: Way above their APH, but they were they were sit now.
• 2:50
  SPEAKER_02: I don't expect all their stuff to do that right, but that's uh pretty good way to start, right?
• 2:55
  SPEAKER_01: Yeah, and you want your best dirt to do really well, and that's really really well.
• 2:59
  SPEAKER_02: And we heard that through other Illinois clients too, not not that type of number, but good stuff.
• 3:04
  SPEAKER_02: And and then Ohio, right?
• 3:05
  SPEAKER_02: They're probably they're they're still a bit out, right?
• 3:08
  SPEAKER_02: That corn needs another couple weeks, would you say, as you get a little further in the eastern corn belt?
• 3:11
  SPEAKER_01: Yeah, so if you think back to planting season, the two states that were behind uh planting were Ohio and North Dakota, right?
• 3:18
  SPEAKER_01: So Ohio uh being delayed on planting, and you know, pretty good moisture all year.
• 3:25
  SPEAKER_01: Um, you know, you playing catch up on heat units, so everything's gonna be delayed a little bit further than it is, you know, just to the east of them.
• 3:32
  SPEAKER_01: And and in North Dakota, kind of the same way, although I know bean harvest is picked up and uh sugar beet harvest is kicking off, so they probably aren't uh that far behind a normal kickoff.
• 3:44
  SPEAKER_01: Uh, I know the wheat was delayed with some uh kind of crappy August weather for wheat harvest, but uh yeah, so again, we'll after this week, I would really expect harvest to be you know kind of full bore locally and kind of all the way across the corn belt, north, south, east, west.
• 4:02
  SPEAKER_01: And uh with that note, hopefully everybody that is harvesting is safe and uh has a successful harvest out there uh going forward.
• 4:10
  SPEAKER_01: Um today we did have a uh a grain quarterly grain stocks report uh come out from uh USDA um numbers on the corn, soybeans, and wheat.
• 4:19
  SPEAKER_01: Corn came in a little bit uh uh lower than expected, right, Luke?
• 4:24
  SPEAKER_01: So uh we had uh corn stocks.
• 4:27
  SPEAKER_01: Uh I'm trying to find the numbers here.
• 4:30
  SPEAKER_01: Um I got them pulled up before.
• 4:33
  SPEAKER_02: Why don't you uh fire me off?
• 4:35
  SPEAKER_02: Yeah, so corn, corn, uh uh corn carry out 1361 billion bushels, which average trade estimate was 1429, so so below, but slightly below where we at in USDA in September.
• 4:49
  SPEAKER_02: Uh in September 1377.
• 4:51
  SPEAKER_02: So a slight drawback in that, not a big change, but on the low end of trade expectations.
• 4:57
  SPEAKER_02: Um, soybeans, kind of a similar story.
• 5:00
  SPEAKER_02: They came in at 268 million.
• 5:02
  SPEAKER_02: Uh average estimate they were better than that was 242, so bested that a little bit, probably why the beans took it a little harder right today.
• 5:11
  SPEAKER_02: Um, and then uh uh on September it was 274, so just a slight drawdown there, but not as much as expected.
• 5:18
  SPEAKER_02: And and then wheat came in at a kind of a macro level, uh real similar 178 versus 177, and and real close to trade estimate um as well.
• 5:27
  SPEAKER_02: But there was another small grains report.
• 5:29
  SPEAKER_02: I didn't dive into that today as much, Lucas, but I I don't know if you looked at that, but the wheat the wheat market was down super hard.
• 5:36
  SPEAKER_02: I mean, we had wheat down 37 cents in in wheat on the deast contract today.
• 5:41
  SPEAKER_01: And that probably the weakness in the small grains plus just weakness overall brought uh everything down a little bit harder than maybe it should have.
• 5:48
  SPEAKER_01: I mean, the corn number wouldn't suggest it corn should be December corn should be down 10.
• 5:52
  SPEAKER_01: Right.
• 5:53
  SPEAKER_01: Um and uh you know, so probably a little bit of just a general commodity sell-off today.
• 5:59
  SPEAKER_01: And also the fact that everybody's a little nervous or questioning what a potential government shutdown is gonna do uh here this weekend and how that's gonna affect markets.
• 6:09
  SPEAKER_01: Uh any take on that, Luke?
• 6:10
  SPEAKER_01: What do you think?
• 6:11
  SPEAKER_02: Yeah, I I think that that that in itself um and plus a good pretty clear week for harvest, it did drag these down.
• 6:18
  SPEAKER_02: And like we said, 37 lower in the D suite at 541, corn down 11 and 34, 476 and 34 on the D'c corn, and and Nova beans down 25 and a half at 1275.
• 6:30
  SPEAKER_02: So yeah, I think just a little risk off risk off attitude there, and I I sure hope the government can uh get her done and and keep keep rolling, but it you know, I I guess we've been down to the final hours before, right?
• 6:43
  SPEAKER_02: But it it it does seem like we uh yeah, we might have that shut down.
• 6:48
  SPEAKER_02: And then for how long's the question, right?
• 6:49
  SPEAKER_02: For how long's the question.
• 6:51
  SPEAKER_01: Yep, and so you know that's gonna be there's gonna be a lot of questions that come out uh uh of this of uh if the government would shut down on what's gonna happen.
• 6:59
  SPEAKER_01: Um just you know for a little bit perspective, uh, since uh we do insurance and I'm the insurance guy, you're gonna get stuck listening to a little insurance talk.
• 7:07
  SPEAKER_01: But uh, you know, government uh their crop insurance is a government subsidized insurance, so uh an LRP, LGM, DRP, those livestock insurances probably will not be available if the government is shut down.
• 7:19
  SPEAKER_01: So something to keep in mind um uh going forward.
• 7:23
  SPEAKER_01: Um once the government opens up, of course, everything be ready to roll again.
• 7:28
  SPEAKER_01: But a lot of those agencies are still kind of sitting back waiting to hear if the government shuts down, if their uh agency or department will be affected by it.
• 7:37
  SPEAKER_01: So we'll get a lot more clarity once we figure out, or I guess we get past midnight on Saturday and starting into next week.
• 7:46
  SPEAKER_01: And generally uh as the deadline gets closer, conversations start picking up on how we're gonna figure this out.
• 7:52
  SPEAKER_01: So so yeah, with all that said, uh a lot of going on, and then yesterday we had a uh hog and pig report uh come out, Luke, and and I guess after uh the report, uh what do you think?
• 8:05
  SPEAKER_02: Yeah, but be bearish, bearish report, and and the market traded that today.
• 8:09
  SPEAKER_02: Uh, you know, now we we did have some some strength yesterday.
• 8:13
  SPEAKER_02: We were about 275 yesterday, so that that kind of set it up to fail if the numbers didn't come out friendly, right?
• 8:19
  SPEAKER_02: But but limit down today.
• 8:21
  SPEAKER_02: Um hog limits, they're they're now 375.
• 8:23
  SPEAKER_02: September 1 they switched, they were 475 before.
• 8:27
  SPEAKER_02: So we as hog producers are glad that they can only go down 375 today.
• 8:31
  SPEAKER_02: But we we locked limit down first in D's and had a pretty big build-up there.
• 8:36
  SPEAKER_02: Um and and that just kind of drugged the others lower.
• 8:39
  SPEAKER_02: So I think that's what pulled October lower down 375, and Feb down 315, and even out to the summer down$1.72.
• 8:46
  SPEAKER_02: So yeah, rough day.
• 8:48
  SPEAKER_02: And and we'll kind of jump into the numbers and and and look at this.
• 8:52
  SPEAKER_02: And and it's it's it is an interesting report.
• 8:55
  SPEAKER_02: We've you know, we've we've obviously had uh really tough kind of financial to run here for at least 18 months, if if not two years, in this in this hog complex.
• 9:04
  SPEAKER_02: But it is uh, you know, there's a big investment into this, and it's it's a just like all our farmers out there, it's a it's a big, you know, a group of survivors, right?
• 9:13
  SPEAKER_02: So, you know, it's just kind of you know, not an easy way in a hard way, because it's never easy to liquidate your business, right?
• 9:20
  SPEAKER_02: But we we've kind of proven we're gonna definitely do this the hard way and and survival the fittest, right?
• 9:25
  SPEAKER_02: So we you know, we kind of came into the report, and you're gonna have to trust me on this, Lucas, because because uh you know, I'm gonna say what we thought and what happened, right?
• 9:33
  SPEAKER_02: But we you know, by looking at slaughter data, we we expected about a percent and a half less SOWs.
• 9:38
  SPEAKER_02: I mean, that's we we didn't we looked for that at least, and and um, and uh, you know, would would you know didn't didn't see like we had a lot more of that come through yet, and and we didn't quite get that.
• 9:50
  SPEAKER_02: Kept for breeding came in at 98.8, you know, so that's 1.2% less sows.
• 9:55
  SPEAKER_02: Um, not that far from the estimate.
• 9:57
  SPEAKER_02: And and for those people that you know, all these hog guys are into it, but others that are learning about the hog and pig, it's kind of about the report from variance, no different than a grain report, right?
• 10:06
  SPEAKER_02: Um, but the pre-report estimate on kept for breeding was 98.6, so two-tenths percent higher there.
• 10:12
  SPEAKER_02: Not a big variant, so that wasn't the shocker.
• 10:15
  SPEAKER_02: Um but uh and we've what we were fearful of, and and and and more than most reports, um, the pigs per litter is what got a lot of attention, and that's a proxy of of productivity.
• 10:27
  SPEAKER_02: And and you know, especially for those listeners that listen to our hog market podcasts.
• 10:31
  SPEAKER_02: I mean, we've talked about how weaned pigs have been really cheap for for since basically last last May, last April, longer than they should have been.
• 10:40
  SPEAKER_02: And and just south arms have been really productive.
• 10:43
  SPEAKER_02: Health has been good, and we've been able to experience good genetic potential, and we've we've just been kicking out a lot of production.
• 10:49
  SPEAKER_02: So the pre-report estimate on the pigs per litter was was basically 102, it was 1019, 2% more, which we kind of felt was right.
• 10:58
  SPEAKER_02: Um, but that was probably the biggest shocker in the report is it it came out at at 104, 104%.
• 11:05
  SPEAKER_02: And I, you know, now I'm saying I I wasn't looking for 4%.
• 11:09
  SPEAKER_02: I was I was thinking two was right in line, but that that picked up on that extra extra production, and that so that made our our heavy our market weight categories kind of heavy.
• 11:19
  SPEAKER_02: Um so the 180 and over pigs that you know everything at 100% or more, they were at 10.6, the 120 to 180s 100.7, um, and those didn't vary a lot, four tenths and seven tenths from pre-report estimate, but you know, we were all kind of holding on faith as you get into this keys Q1 pigs that maybe, especially as you got a little closer into April, we'd see a little reprieve.
• 11:44
  SPEAKER_02: Um, and and pre-report estimates had the 50 to 190s at 99.5%, and the under 50s at 98.5%.
• 11:52
  SPEAKER_02: So it was versus you know, like I said, around 100 for the others, and those were probably the next two kind of surprises of the report.
• 12:00
  SPEAKER_02: I think it's a little bit a proxy of this productivity, but we came in at 100.4 on the 50 to 190, 910, so basically a percent overestimate, uh, and 100.1, which that estimate was at 98.5, so 1.6% overestimate.
• 12:15
  SPEAKER_02: So those were those were kind of big deals, and it also it just solidifies.
• 12:20
  SPEAKER_02: And we've we've been really on the defensive here, especially Q4 and Q1, and that's not new to our listeners, but we've got a fair bit of inventory coming at us, and not a lot of reprieve, at least kind of you know, in that period, Lucas.
• 12:34
  SPEAKER_02: Um as we look forward a little bit into farrowing intentions, and and you know, we got a you know, faring intentions are always always just a little bit taken with a grain of salt, but uh they were down in the 98.6 and then 96.3 kind of numbers.
• 12:50
  SPEAKER_02: So it it it may shows, and we we do think that you know we've we've you know this report might have pushed some systems over the edge, because like I said, it's it's it's been tough and and it's not been profitable, and there's there's not profit on the board till next summer, and and this report sure didn't give you a lot of hope, for at least from a supply side, there's gonna be profit in the next two quarters.
• 13:11
  SPEAKER_02: So um we think liquidation's probably gonna slowly continue to grind out.
• 13:16
  SPEAKER_02: And and then the whole productivity thing, we're on a really good run of health, but you know, if all those people in the pig industry is as we get into these cool, colder weathers, and it kind of is PERS likes to jump around.
• 13:28
  SPEAKER_02: So this, you know, later October, November, December historically is our classic, you know, worst purr season, which means you know, is why we usually have less pigs in the summer.
• 13:36
  SPEAKER_02: So, you know, we we think we'll keep moving this hog market down, uh, the kept for breeding.
• 13:42
  SPEAKER_02: We're not sure we can sustain this 104%.
• 13:44
  SPEAKER_02: I mean, it it's just hard to keep health running that good that long, especially kind of as you look at the purr season ahead of us.
• 13:50
  SPEAKER_02: So it could get us into a better spot next summer, but you know, the challenge for all of us is next summer, it's just the end of this summer, right?
• 13:58
  SPEAKER_01: So that's a long ways away, Luke.
• 13:59
  SPEAKER_01: So, one question I do have for a quick follow-up on that.
• 14:02
  SPEAKER_01: So, what when when you compare say these numbers on what the can the report came in at versus estimate, what do you think is a significant move in Luke Well's opinion?
• 14:12
  SPEAKER_01: A difference, right?
• 14:13
  SPEAKER_01: Because you say like some are 1% and then 1.4 is a big one.
• 14:17
  SPEAKER_01: What's significant percentage in uh hog and paint report?
• 14:20
  SPEAKER_02: Well, I think yeah, two things is is one, like I said, the variance to pre-report estimate.
• 14:24
  SPEAKER_02: And if you're one percent, two percent off estimate, that's a big deal.
• 14:28
  SPEAKER_02: Yep.
• 14:28
  SPEAKER_02: I'd say from a sure supply side, I mean like five percent less cattle, we've seen what that, you know, what that can do to cattle prices, right?
• 14:36
  SPEAKER_02: So we needed to have you know, we needed to probably two to three percent less breeding to to kind of really start to make a den in that one and you know, one 1.2% less when your productivity jumped by four.
• 14:48
  SPEAKER_02: That's a kind of a rough proxy, right?
• 14:50
  SPEAKER_02: But gotcha.
• 14:50
  SPEAKER_02: Um yeah, we just we haven't we haven't shrinked the breeding herd enough yet relative to uh I guess the the demand structure we currently have.
• 14:59
  SPEAKER_02: Yep.
• 14:59
  SPEAKER_02: And and that's the other, and I know we're running out of time, so I'm gonna cut her short.
• 15:04
  SPEAKER_02: But that that's the tough thing out here is we we do have a lower cost corn crop coming at us.
• 15:09
  SPEAKER_02: How low cost, I mean, to be determined, and there's still gonna be basis fights.
• 15:13
  SPEAKER_02: I mean, oil.
• 15:14
  SPEAKER_02: Did oil where did oil settle?
• 15:15
  SPEAKER_02: It's been on a tear all week.
• 15:17
  SPEAKER_02: I'll just pull that up here quick.
• 15:19
  SPEAKER_02: Uh not on its highs, but still over 90 bucks, right?
• 15:23
  SPEAKER_02: So ethanol margins are great, ethanol bids are gonna be strong.
• 15:26
  SPEAKER_02: You know, globally, we're we're not adding south anywhere, right?
• 15:29
  SPEAKER_02: And and we know the beef herd just is where it's at, so there's there's like this this this this this prize at the end of the tunnel, right, to get there, but you know, it's it's so we you know that's why people are holding on, but uh yeah, it unfortunately we we got another pretty tough six months, I I think here in the pork industry, Lucas.
• 15:48
  SPEAKER_01: So I don't want to end it on a on a very sour note like that, Luke.
• 15:51
  SPEAKER_01: Like, are hogs ever gonna trade higher again?
• 15:54
  SPEAKER_01: I think so.
• 15:55
  SPEAKER_02: Yeah, yeah.
• 15:56
  SPEAKER_02: No, for sure.
• 15:57
  SPEAKER_02: We were we were limit down today, and I I I don't, you know, I had clients, is it gonna be limit down Monday?
• 16:02
  SPEAKER_02: And and then it could be.
• 16:04
  SPEAKER_02: I mean, is it everybody has a right, but I you know, we kind of took off what we gained, and we you know I think we I I hope that we traded the hog and pig report out today and kind of reset, and then we go back to trading fundamentals.
• 16:18
  SPEAKER_02: Yep now.
• 16:18
  SPEAKER_02: Unfortunately, we haven't even talked about fundamentals.
• 16:21
  SPEAKER_02: Product's a little weak.
• 16:22
  SPEAKER_02: That's not unseasonably normal, but we're we're trending that.
• 16:25
  SPEAKER_02: We'll see where this afternoon's numbers come in, but maybe a little closer to mid-90 than upper 90s.
• 16:31
  SPEAKER_02: Um cash was soft this week, Lucas.
• 16:33
  SPEAKER_02: Probably two to three bucks lower on the week.
• 16:35
  SPEAKER_02: Uh so we're you know, fundamentals are gonna become the front again, though.
• 16:39
  SPEAKER_02: We because we kind of reset these supplies and and then demand.
• 16:42
  SPEAKER_02: So you know, and in a good note, um, you know, we we do have good domestic demand.
• 16:47
  SPEAKER_02: I mean, we've got you know, at the end of September here, we've got cutout in the upper 90s.
• 16:52
  SPEAKER_02: That's a that's a good number.
• 16:54
  SPEAKER_02: Um and and exports, they're you know, year to date about 17, 18 percent higher.
• 16:59
  SPEAKER_02: And again, we I think we continue to look kind of good on the export market, so you know, those things are a plus.
• 17:05
  SPEAKER_02: We you know, we've just got to get into this lower cost of corn and and and and lower cost of of gain and and then you know probably get into a few less pigs, but you know, the hog and pig said that's that's not in the next couple months.
• 17:18
  SPEAKER_01: Yep.
• 17:18
  SPEAKER_01: So we got that behind us and we'll start focusing uh going forward.
• 17:22
  SPEAKER_01: And with that, I think we'll wrap it up, Luke.
• 17:24
  SPEAKER_01: Thanks for uh joining us uh today and talking about the hog and pig report and everybody out there have a great weekend and a safe harvest.
• 17:31
  SPEAKER_01: Take care.
• 17:32
  SPEAKER_00: And thank you to all our listeners.
• 17:34
  SPEAKER_00: Please reach out to us at professional eggmarketing.com.
• 17:38
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 17:43
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 17:49
  SPEAKER_00: See you next time.