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Hog Talk: Boom · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Hog Market Talk Podcast with Professional Ag 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 Minor.
• 0:26
  SPEAKER_01: Let's cross.
• 0:27
  SPEAKER_01: Today is June 11th.
• 0:29
  SPEAKER_01: I've got Pat back with us here today.
• 0:30
  SPEAKER_01: How's it going, Pat?
• 0:32
  SPEAKER_00: Good, Mike.
• 0:33
  SPEAKER_00: How are you this afternoon?
• 0:34
  SPEAKER_01: Very good.
• 0:34
  SPEAKER_01: Well, we are back from the World Pork Expo and we are getting settled into uh an interesting week.
• 0:40
  SPEAKER_01: Yet again, we've got China Trade Talk news to talk about.
• 0:43
  SPEAKER_01: We have a cutout in the hog market that's wanting to uh kind of pop off lately here.
• 0:48
  SPEAKER_01: Where do you want to start today?
• 0:50
  SPEAKER_00: After 20 hours of negotiations in London, we have an agreement in principle to what, Mike Minor?
• 0:58
  SPEAKER_01: That it's like a pinky promise that we're gonna have a trade deal done at some point.
• 1:02
  SPEAKER_00: Alright, so is the trade deal, is this uh like did we start a fire and then put the fire out and take credit for it?
• 1:10
  SPEAKER_00: Or are we gonna end up with a deal that's better to tomorrow than what it was yesterday?
• 1:17
  SPEAKER_01: Part of uh mainly what I heard out of it was uh the agreement to send rare earth minerals back to the United States and to drop our tariffs on them.
• 1:27
  SPEAKER_01: But from my perspective, listening to people on on Bloomberg and stuff this morning and the way the markets reacted, it seemed like a win more for China.
• 1:38
  SPEAKER_01: One was up, US dollar was down, equities on our side really didn't pop or move at all.
• 1:43
  SPEAKER_01: So to get an announcement like that, and it as big of a deal as Lutnik tried to make it sound last night on TV and stuff, the markets sure didn't think it was very special, Pat.
• 1:53
  SPEAKER_00: Yeah, agreed.
• 1:54
  SPEAKER_00: And so um so as and I don't even know if we're putting some trade talk in the rearview mirror here, um, or we're becoming a little bit um less sensitive to the next round of talk or no talks or uh tariffs, no tariffs, all those sorts of things.
• 2:13
  SPEAKER_00: Um but but maybe uh maybe a different or better question, Mike, is is if you were an index trader, if you're a Goldman Sachs, and you're and how much interest today would you have in just um being well it being long commodities, some interest is a hedge against you know inflation, those sorts of things.
• 2:34
  SPEAKER_00: Like w what what's your opinion of the state of the economy today?
• 2:37
  SPEAKER_00: And try to separate like that question from the whole trade tariff talk question, right?
• 2:44
  SPEAKER_00: How do you feeling about US economic activity today?
• 2:47
  SPEAKER_01: So the US economy is still doing okay.
• 2:50
  SPEAKER_01: Inflation this morning 2.4% from last year.
• 2:54
  SPEAKER_01: So we're like clicking right along, like that's pretty benchmark, you know, inflation right around 2% is just fine.
• 3:00
  SPEAKER_01: Um, however, the consumers are really, really scared at this point.
• 3:04
  SPEAKER_01: And this was an interesting stat that came out on Friday on it.
• 3:08
  SPEAKER_01: We're at the like the lowest level in over 10 or 20 years, whatever it was, that people don't want to leave their jobs.
• 3:15
  SPEAKER_01: Like if you're stuck at a happy job, you don't want to leave your job unless you have a better job lined up.
• 3:21
  SPEAKER_01: And it that's at like a 9.8% rate right now, or something like that.
• 3:26
  SPEAKER_01: And it just shows that people are worried that if I leave my job, it isn't three years ago like it used to be, where I knew a month later I could find a better paying job, you know, in a month or two months, whenever I want to go back to work again.
• 3:39
  SPEAKER_01: And you're not seeing that at all.
• 3:41
  SPEAKER_01: So that was a really interesting stat, I thought, just about workers being able to leave their jobs, repos on vehicles, highest levels since 2019 and 2009 as well.
• 3:52
  SPEAKER_01: So some if you look hard enough, there's certain statistics that are like, huh, that's not as good as it maybe should be.
• 3:58
  SPEAKER_01: But in general, like cutout's still where it is, we're still spending plenty of money.
• 4:04
  SPEAKER_01: Gas is, you know, crude oil's rallying today still, gas demands okay.
• 4:09
  SPEAKER_01: But yeah, that's where that's the way I think.
• 4:12
  SPEAKER_00: Do you think the Fed's gonna make any rate cuts this year?
• 4:14
  SPEAKER_00: No.
• 4:14
  SPEAKER_00: Right.
• 4:15
  SPEAKER_00: And they're not gonna raise rates.
• 4:17
  SPEAKER_00: No.
• 4:17
  SPEAKER_00: Right.
• 4:17
  SPEAKER_00: And so that's sort of the point, right?
• 4:19
  SPEAKER_00: Is is I think those are some of the things that you're just saying, right?
• 4:22
  SPEAKER_00: Or some maybe some evidence to support what you're saying, or maybe what my observation was too, is that while there's been a certain amount of uncertainty, which would lend towards you, I'm gonna keep the job that I have, right?
• 4:35
  SPEAKER_00: I'm not gonna take any more risk than what I have to.
• 4:38
  SPEAKER_00: Um, that that uncertainty is certainly out there and potentially keeping a lid on growth.
• 4:46
  SPEAKER_00: And that can also be true for an individual uh switching jobs to a company or or someone wanting to reinvest in in uh infrastructure technology or whatever.
• 4:58
  SPEAKER_00: And so so there is some level of uncertainty that's inhibiting economic activity and economic growth, but generally data activity is relatively robust, some uh maybe some issues of personal disposal income issues and those sorts of things, but to your point, I don't think anything of significance.
• 5:17
  SPEAKER_00: And so we didn't intend upon um spending this much time on this before we got into pigs, but I I do think it's an important component backdrop to what we're talking about here, because we have seen a really nice appreciation in in spot um fundamentals here in a relatively short period of time, i.e., the hog market's been pretty good since Memorial Day, right?
• 5:40
  SPEAKER_00: Like, like and and today, you know, notwithstanding another real nice butt bump in the composite cutout uh uh printout today, and a very strong cash market this week as well.
• 5:52
  SPEAKER_00: And so when we look at the internal fundamentals um as it relates to the hog complex, the best it's been in a while, like uh you know, 20 22 months or something, potentially, you could argue, right?
• 6:04
  SPEAKER_00: And and so continue to see some some real nice appreciation in that market.
• 6:08
  SPEAKER_00: We're also getting the sense, Mike, that we're we're finally starting to see a little bit of the benefit of high record box beef values has been setting new highs every year for the last three, been pretty frustrating from a from a pork producer's perspective that we just really haven't seen much of a benefit or traction from all of that.
• 6:29
  SPEAKER_00: Starting to feel like we're seeing some of that today, so that's encouraging.
• 6:33
  SPEAKER_00: Um, our trade with Mexico uh seems to be improving here recently.
• 6:38
  SPEAKER_00: Um their economic activity is is uh is I think relatively robust as well.
• 6:45
  SPEAKER_00: You mentioned cheaper currency as a result of of maybe some of these uh um day-over-day trade talks, uh uh particularly against Chinese currency, but we've had a a cheaper dollar here for a while now, um, really since Trump took office.
• 7:01
  SPEAKER_00: And so, you know, that too has been kind of a quiet little sneaky support for us, too, as it relates to our ability to be competitive uh in the export markets.
• 7:11
  SPEAKER_00: And so um so there's a lot of good things happening in the hog complex today, and the futures market is trading it in, it's factoring it in.
• 7:18
  SPEAKER_00: When you start talking about, you know, August trading at a$10 uh plus um premium to the index, much wider than normal uh premium levels for for this time of year and for a lot of different times of the year through the th through the years.
• 7:35
  SPEAKER_00: And so um and so anyway, the the board's optimism is something that I think is critically important for hog producers to recognize, right?
• 7:43
  SPEAKER_00: We we as an industry um are spending a lot of time coming off of WordProk Expo and otherwise talking about um how good pork demand should be, right, given the relative tight supplies of not only U.S.
• 7:58
  SPEAKER_00: pork production, but also um but also global pork supplies and global protein supplies in general, right?
• 8:06
  SPEAKER_00: And so we're on the right side of the market, if you will, from a supply-side perspective.
• 8:11
  SPEAKER_00: We should be on the right side of the market as it relates to the demand side of these things for those reasons that we just described.
• 8:17
  SPEAKER_00: And so all of that is good news.
• 8:19
  SPEAKER_00: Um, and and the only uh I guess uh observation that I have to share with everyone is is the futures market also has a really big chunk of that priced in today, right?
• 8:30
  SPEAKER_00: And so that that always gets a little bit tricky here when you get into situations like this.
• 8:35
  SPEAKER_00: And we've we've had other instances through this like this through the years where where we keep thinking we keep thinking about what spot fundamentals are and how long that can last and how sustainable it is and maybe it can get better from here and all those sorts of things.
• 8:48
  SPEAKER_00: But but keeping in mind that deferred curve, that forward opportunity that we keep talking about is extraordinary today.
• 8:55
  SPEAKER_00: December crush is off the charts.
• 8:57
  SPEAKER_00: Um 2026 opportunities are amazing.
• 9:00
  SPEAKER_00: And so uh anyway, all of those things are things that that that all of us in the business um have to spend some uh uh very serious consideration here.
• 9:10
  SPEAKER_00: And then just keep in mind, right, the about the seasonals of this thing, and it's not at all uncommon um you know for us to to crest the spot fundamental market uh in the hog complex sometime over the next 30 days or so.
• 9:23
  SPEAKER_00: And and of course, uh um history is is sometimes a decent guide, but seldom repeats itself, sort of a thing.
• 9:28
  SPEAKER_00: But anyway, something to keep in mind.
• 9:31
  SPEAKER_00: And then Mike, just before we wrap up here today, we just talk a little bit about what's going on the input side of things.
• 9:37
  SPEAKER_00: Um as we uh as we uh record this podcast, uh, you know, December closed today on on corn, um barely, but under 440, 439 and three-quarters.
• 9:48
  SPEAKER_00: You got Dece Meal trading 305.90, 306.
• 9:53
  SPEAKER_00: Um both of those are you know relative good buys from where we've been for the last three or four years.
• 9:59
  SPEAKER_00: And uh, you know, corn market in particular, we'll get a monthly supply and demand report out tomorrow.
• 10:03
  SPEAKER_00: And I I know a lot of our rook crop producers, including me to some extent, are sort of scratching our head on on how we can be trading under 440 on the 11th of June.
• 10:13
  SPEAKER_00: And and you know, it it feels like at a minimum that we really don't have any weather risk premium at all um built into this market.
• 10:21
  SPEAKER_00: It feels like the market's trading uh 95 or 96 million acres planted and and a 181 or a 182 yield that's in the bin, right?
• 10:30
  SPEAKER_00: And it it it all just seems uh a bit premature.
• 10:34
  SPEAKER_00: And so I think we're forced to maybe consider uh again from a fundamental perspective in the corn complex the the possibility at least that there's something else going on.
• 10:45
  SPEAKER_00: The safrina crop, is it is it that much better?
• 10:48
  SPEAKER_00: Um is there was last year's crop maybe a little bigger than what than maybe what uh was advertised here in the US?
• 10:55
  SPEAKER_00: Um is there something else going on, you know, that that is that is creating a softer fundamental outlook?
• 11:02
  SPEAKER_00: And so um that story remains to be told, something to certainly keep an eye on here, but uh at this point again, just the observation of there just isn't uh there isn't a whole lot of weather pream at all built into this market today.
• 11:14
  SPEAKER_01: Talk about a I mean it's gonna be a June Wazdareport, and it it'd be pretty surprising if there's any changes at all in it really, which I mean that's not the case most years.
• 11:23
  SPEAKER_01: So looking at a boring WASDA report there.
• 11:26
  SPEAKER_01: You mentioned the December crush opportunity, Pat.
• 11:28
  SPEAKER_01: Since about April 9th on December futures here, if you look at that chart, there's like one red day.
• 11:34
  SPEAKER_01: Yeah, I mean that whole time it's just been consistently higher.
• 11:38
  SPEAKER_01: No close under a buck lower either through that stretch.
• 11:41
  SPEAKER_00: Yeah, a week ago a week ago last Friday was that down day.
• 11:43
  SPEAKER_00: So it hasn't happened very often.
• 11:46
  SPEAKER_00: You're exactly right.
• 11:47
  SPEAKER_01: Yep.
• 11:47
  SPEAKER_01: All right, any final thoughts?
• 11:49
  SPEAKER_01: No, that's it.
• 11:49
  SPEAKER_00: Thank you, Mike.
• 11:50
  SPEAKER_01: Appreciate it.
• 11:50
  SPEAKER_01: All right, thanks, Bet.
• 11:51
  SPEAKER_01: And thank you to all our listeners.
• 11:53
  SPEAKER_01: Please reach out to us at professional eggmarketing.com.
• 11:56
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 12:02
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 12:08
  SPEAKER_01: See you next time.