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Hog Talk: Cut From Cutout · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Hog Market Talk Podcast with Professional Egg 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 Miner.
• 0:26
  SPEAKER_01: Let's cross.
• 0:27
  SPEAKER_01: Today is July 3rd.
• 0:28
  SPEAKER_01: I've got Jeff back with us here today.
• 0:30
  SPEAKER_01: How's it going, Jeff?
• 0:31
  SPEAKER_00: It's going good, Mike.
• 0:33
  SPEAKER_01: Good deal, where we're going to talk a little bit about the hog market here.
• 0:36
  SPEAKER_01: We've seen some interesting things as of late regarding fundamentals, so it's going to be a fun talking point today, not so fun to talk about.
• 0:44
  SPEAKER_01: We're down about a buck, buck and a half most of these months, it seemed like here.
• 0:48
  SPEAKER_01: We've set back a little bit since putting in our highs just over a week ago here, Jeff, on these summer months.
• 0:55
  SPEAKER_01: So uh we'll do a real quick fundamental recap, how kill is, weights, things like that, and then we'll get a little bit into this dive of what demand's doing.
• 1:04
  SPEAKER_01: So, what can you tell me about uh what you're seeing in the supply side?
• 1:09
  SPEAKER_00: I think the storyline continues to be very similar there, Mike.
• 1:12
  SPEAKER_00: It it seems like we're just in in really good shape here in the near term.
• 1:17
  SPEAKER_00: Um, you know, you we're killing just a few less than what we have last year and and the year before type of a thing, um, which is you know good news.
• 1:29
  SPEAKER_00: Um weights continue to come off in a very respectable fashion.
• 1:35
  SPEAKER_00: So it seems like um, you know, even if we're killing uh not quite a percent less than last year, weights are coming down just as fast, if not probably a little bit faster than a year ago.
• 1:47
  SPEAKER_00: So, you know, we aren't we aren't um slow, slow playing this kill any.
• 1:52
  SPEAKER_00: We're we're killing the right number of hogs, um maybe killing a few more than what we should be, but I guess it'll be a little difficult when you throw in you know just just a few days so far.
• 2:02
  SPEAKER_00: But we did say I had some pretty hot weather that's probably impacting these weights some.
• 2:07
  SPEAKER_00: So you just feel really good about where we're sitting on the kill side of things.
• 2:11
  SPEAKER_00: Um, interestingly enough, we did kill a few more last week than what we thought we would, so we actually put in a decent little Saturday there.
• 2:20
  SPEAKER_00: Uh and you know, so so kind of unexpected from that standpoint.
• 2:25
  SPEAKER_00: Um, and we're probably gonna end up killing a few more this week than what we thought we were going to.
• 2:30
  SPEAKER_00: We just got a little bit of scheduled activity on Saturday this week, too, which is kind of surprising.
• 2:36
  SPEAKER_01: So how do you think all that's aligning with what the HP report told us?
• 2:40
  SPEAKER_01: Any any main talking points there?
• 2:43
  SPEAKER_00: Not too much right up front here.
• 2:45
  SPEAKER_00: You know, the HP basically had us on top of last year.
• 2:49
  SPEAKER_00: We're gonna probably gonna come in, you know, it's still gonna be less than a percentage point different, is my opinion, Mike.
• 2:55
  SPEAKER_00: Uh so I I don't think there's anything in this recent data that would say that the hogs and pigs report is way off.
• 3:03
  SPEAKER_00: And then they they had the inventory growing some.
• 3:06
  SPEAKER_00: And uh, you know, I'd kind of be in the camp that um, you know, as we go into late summer here, we may end up having a few more hogs than what we think we should have.
• 3:17
  SPEAKER_00: I'm I'm strictly going off the what I think was the trend in the disease patterns here throughout the winter and the spring.
• 3:23
  SPEAKER_00: You know, we had that time frame where ice wine prices dropped very sharply, and uh availability sure seemed like it was better for a bit there.
• 3:33
  SPEAKER_00: Um, those pigs would be targeted for kind of July, August, maybe September.
• 3:38
  SPEAKER_00: And then you know our biggest discrepancy was under 50 pounds.
• 3:44
  SPEAKER_00: They had that category growing compared to last year, and uh I think that'll be very tough based on what we think we know about disease pressure.
• 3:54
  SPEAKER_00: Not that that would show up real quickly in the USDA report, but I think that's gonna be hard to have more pigs than a year ago as we roll into like November and December, for an example.
• 4:04
  SPEAKER_01: So let's get into the main talking point here that uh most people are probably logging on to listen to today, which is cutout.
• 4:11
  SPEAKER_01: We've seen a major decline since our uh little high last week.
• 4:15
  SPEAKER_01: I just want to pose the question, which is gonna be a fun one to answer.
• 4:19
  SPEAKER_01: Is this where you put in your high and now we just trade off the rest of the year normally in the hog market, or does this bounce around a little bit?
• 4:27
  SPEAKER_00: That is certainly the$100 question, and we've got that question thrown at us a lot this week.
• 4:33
  SPEAKER_00: Um, you know, I think I was probably more surprised that it went to you know$122 or yeah, roughly right around there.
• 4:43
  SPEAKER_00: Not much more than a week ago, Mike.
• 4:45
  SPEAKER_00: Uh so we've went from that 121, 122 down to this 110 area, 111 area in just over a week.
• 4:54
  SPEAKER_00: That you know, 121 to 22 I thought was a really impressive push when we were hanging around that 118.
• 5:02
  SPEAKER_00: I personally didn't think we would take that next big step higher.
• 5:06
  SPEAKER_00: And uh I I think because we did is part of the reason why this drop feels so aggressively, right?
• 5:13
  SPEAKER_00: So you know I think we maybe got a little bit overzealous there.
• 5:17
  SPEAKER_00: And actually, if you go back and look at there isn't too many years where we had product values in the 120s, but if you go back and look at them, 21 we did, 22 to some extent, 2014 for sure.
• 5:31
  SPEAKER_00: There was quite a bit of volatility or more volatility in the product values than what you might consider normal year, right?
• 5:38
  SPEAKER_00: So normal year you'd just kind of slowly grind higher through June into July and then speed up the rate of of uh you know, accelerate that rate of of go moving higher into late July, first of August, and um and that's you know because there's some really strong seasonals on some primals like the belly market, of course.
• 6:01
  SPEAKER_00: So this year, you know, these other years where you scream higher than what you expect, early or than what you expect, it's not uncommon to have some pretty major setbacks.
• 6:11
  SPEAKER_00: Uh almost looks more like a futures chart if you look at some of these product value charts, these you know, composite 602 charts, um, you know, and the val just the simple volatility that you can see in them.
• 6:23
  SPEAKER_00: So that's where my head's still at today.
• 6:27
  SPEAKER_00: Uh I'm not horribly worried that we took this market down into this 110 area.
• 6:32
  SPEAKER_00: We'll kind of see what's what we do from here.
• 6:34
  SPEAKER_00: You know, if we find some footing here, this 110, maybe 108, uh, you start getting down to that 105 area, I might start to get a little bit more nervous.
• 6:44
  SPEAKER_00: But I think the seasonals from these type of levels, the seasonals and some things like Hams, which you know is one of the markets that have taken quite a bit of money off.
• 6:54
  SPEAKER_00: Belly's, of course, another market that's taken quite a bit of money off here recently.
• 6:58
  SPEAKER_00: Um, if we can kind of find some footing, tag on to those seasonals in late July, I think we can push back to those product values uh close to 120.
• 7:09
  SPEAKER_00: Maybe new highs again.
• 7:11
  SPEAKER_00: That's gonna be tough, but I think we can at least challenge the tight the highs that we saw there at the very end of June.
• 7:19
  SPEAKER_01: What final thoughts do you got for our listeners based upon where futures are at and and some of the other things you're focused on here to wrap up this week, Jeff?
• 7:27
  SPEAKER_00: Yeah, we we still have been rewarding this market some.
• 7:30
  SPEAKER_00: Um so we haven't totally given up on hedging.
• 7:34
  SPEAKER_00: So I guess, you know, there's I I for one of am not great at selling anything in a lower market, Mike.
• 7:41
  SPEAKER_00: That's just hard for me to do, but there's no shame, you know, four bucks off the highs, three and a half bucks off the highs on some of these winter months.
• 7:50
  SPEAKER_00: There's still some really good values.
• 7:52
  SPEAKER_00: Personally, I I think if you can get that seasonal rally back on the product, you know, you can you can pull those uh winter months back up to you know kind of the highs that they've saw too back in late June.
• 8:06
  SPEAKER_00: So maybe keep your eye on the ball there a little bit, you know.
• 8:10
  SPEAKER_00: You start looking at next summer, I think it's definitely something to start uh paying attention to and start developing a plan on.
• 8:18
  SPEAKER_01: Um they haven't taken as much off out there, have they?
• 8:21
  SPEAKER_00: They really haven't.
• 8:22
  SPEAKER_00: I don't know if they've taken any.
• 8:23
  SPEAKER_01: I mean, you're I mean you're really like today, for example, next June, you're at ninety-seven ninety today, and uh your high here this last week was ninety-eight fifty-seven and a half.
• 8:36
  SPEAKER_01: So I mean hardly anything there.
• 8:38
  SPEAKER_00: So and you know, that market's I think that market's gonna be have a very difficult time going much higher, Mike.
• 8:45
  SPEAKER_00: Uh, you know, as we as we study the money flow, which you know, by the way, that they were record long last Tuesday uh when they collected the information.
• 8:54
  SPEAKER_00: So record long coming into this week, you'd probably a really good excuse to sell off the futures even without what you know what we saw happen in the product, right?
• 9:03
  SPEAKER_01: Well, you're probably gonna trade that.
• 9:04
  SPEAKER_01: I mean, it's gonna be hard to hold that thing above a hundred for an entire year, right?
• 9:08
  SPEAKER_00: Yeah, yeah.
• 9:09
  SPEAKER_00: 100,000 on the managed money you're talking.
• 9:12
  SPEAKER_01: Or just a hundred, but I mean you're at just below a hundred today.
• 9:14
  SPEAKER_01: I mean, are you are we really gonna try to hold that above a hundred dollars for an entire year?
• 9:19
  SPEAKER_01: Oh, a whole year out you're I see what you're saying.
• 9:21
  SPEAKER_00: Out into next summer.
• 9:23
  SPEAKER_01: At some point, you're probably gonna take some off that market.
• 9:26
  SPEAKER_00: Yeah.
• 9:26
  SPEAKER_00: And I I think you know, that's also the reason why you're you're really failing to get much buying action going back there.
• 9:32
  SPEAKER_00: You know, so even on the we haven't we haven't sold it off much, but that's mostly because we didn't rally it nearly as much either.
• 9:38
  SPEAKER_00: And and that's the issue as you try to get money to flow that far back into the hog complex is very difficult, even though we've got a record long, you still didn't see those positions move back to the April and the June out there.
• 9:52
  SPEAKER_00: So I look at that and think, you know, it's just gonna be tough to get any real big rallies until you get more time to pass, quite honestly.
• 10:00
  SPEAKER_00: So I I think if you're not doing it today at 98, you might be waiting until next spring to see any higher market, you know, and hope this market stays as the fundamentals stay as good as what they are today, type of a thing.
• 10:13
  SPEAKER_00: So um yeah, it's it's certainly worth looking at and and you know, probably starting to reward out there some.
• 10:19
  SPEAKER_01: So we've had a completed trade deal with Vietnam, rumors of possible Chinese purchase announcement, which would uh cover the ag commodities as well.
• 10:27
  SPEAKER_01: So anything before Trump talks tonight at 7.30, Jeff, that you've seen relevant to the hog market besides input costs?
• 10:36
  SPEAKER_00: You know, I think the Vietnam, I think, could be okay for the hog business.
• 10:42
  SPEAKER_00: We don't have much hope for China, Mike.
• 10:44
  SPEAKER_00: Uh, we just think that they're gonna be a marketplace that takes our variety meats, our all falls, and things like that, which they are currently today.
• 10:52
  SPEAKER_00: Um they they stopped for a little bit when the trades discussions you know got pretty heavy for just a bit there in April.
• 11:00
  SPEAKER_00: Um it's it's gonna be difficult for them to take a lot more volume than what they are today.
• 11:06
  SPEAKER_00: They supposedly have plenty of supply over there right now, um, to the point of you know, really about the only spot in the across the globe that you would say is plentyful on protein at the moment.
• 11:18
  SPEAKER_01: So they they did show up in the export pork report though this week, didn't they?
• 11:22
  SPEAKER_01: China did, which was a good sign, I guess.
• 11:26
  SPEAKER_00: I I think that that is a good sign, and I I still don't think any of that's the primal values.
• 11:31
  SPEAKER_00: I think it's more just the the lower end stuff, I guess.
• 11:34
  SPEAKER_00: Which is a good thing.
• 11:34
  SPEAKER_00: We still need to move, they're the only ones that are gonna buy it.
• 11:37
  SPEAKER_00: Yeah, absolutely.
• 11:38
  SPEAKER_00: So I I get pretty nervous if they're completely out of the export market for sure.
• 11:43
  SPEAKER_00: Um but no, I don't so we're not looking for anything huge on the pork side from a Chinese perspective.
• 11:50
  SPEAKER_00: Um maybe we can you know I'd say if if you have you know more trade access in the places like Vietnam, I I think that can make a difference, whether it's immediate or not.
• 12:01
  SPEAKER_01: You know, it's it's not just a ton of yeah, not there's a huge population over there, but nonetheless, that news has pretty much lifted all egg commodities and prices here over the past two days.
• 12:13
  SPEAKER_01: So a little optimistic.
• 12:15
  SPEAKER_01: Probably some things like short covering on the grains going on into a three-day long weekend here, you know, want to take some risk off, things like that.
• 12:23
  SPEAKER_01: Hog market's been selling off recently here.
• 12:27
  SPEAKER_01: Um, you know, maybe a little bit of a reverse action on that on some of the uh futures yesterday, a little bit lower today.
• 12:34
  SPEAKER_01: So it's been choppy across all ag sectors, but uh it'll be an interesting weekend for news going through the Fourth of July here for sure.
• 12:43
  SPEAKER_00: Absolutely.
• 12:44
  SPEAKER_01: Thank you, Mike.
• 12:45
  SPEAKER_01: Well, thank you for your time today, Jeff.
• 12:47
  SPEAKER_01: And thank you to all our listeners.
• 12:48
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 12:52
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 12:57
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 13:03
  SPEAKER_01: See you next time.