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Hog Talk: Wait and Weights · 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 September 10th.
• 0:28
  SPEAKER_00: How's it going, Pat?
• 0:30
  SPEAKER_01: It's going well.
• 0:31
  SPEAKER_01: How are you today, Mike?
• 0:32
  SPEAKER_01: We're doing pretty well.
• 0:33
  SPEAKER_00: We're doing pretty well.
• 0:34
  SPEAKER_00: I'll tell you what, this week so far, the protein complex has been incredibly active.
• 0:39
  SPEAKER_00: Uh, you know, we had a nice eight-day stretch or so there last week on the hog side.
• 0:44
  SPEAKER_00: Uh this week, a heck of a lot of activity on the cattle side, I would argue.
• 0:48
  SPEAKER_00: We had a really rough day yesterday in the feeder cattle market, pretty much locked limit lower across most of the board, but the hog market didn't seem to react much to that, did it, Pat?
• 0:57
  SPEAKER_01: No, it sure didn't.
• 0:58
  SPEAKER_01: So why don't we just uh like review with our listeners just a little bit here?
• 1:02
  SPEAKER_01: First of all, Mike, why uh uh what was the reason for the sell-off yesterday in the cattle complex?
• 1:08
  SPEAKER_01: And um and and I mean what what are your thoughts as it relates to what's going on on that side of the equation?
• 1:15
  SPEAKER_00: Yeah, I think it uh it had a lot to do with the focused uh aspect of cash being a little bit lower, more 235 to 237 type trade this week in the cash market.
• 1:25
  SPEAKER_00: It was about 245, so that has got a little bit weaker there.
• 1:30
  SPEAKER_00: Um we are getting to that time of the year too where you can see something like this.
• 1:35
  SPEAKER_00: It was m well overbought in the market technically.
• 1:38
  SPEAKER_00: Last time we had this sizable of a correction was June, so it was just very um it was time.
• 1:44
  SPEAKER_00: And then kind of lastly, when you look at just uh the presidential news when Trump came out and said that he uh he had a comment that he wanted to take action on high beef prices, and that was enough to really trigger a liquidation type event.
• 2:00
  SPEAKER_00: And uh when he came out, there was no specific outline that he mentioned on how that would get accomplished, of course.
• 2:07
  SPEAKER_00: Uh people can take their guesses at it essentially, but nonetheless, it's it's on his radar and a lot of other folks too.
• 2:14
  SPEAKER_00: Like it's always whenever I look at CNBC or Bloomberg and I see Jim Kramer talking about cattle numbers in the United States and record beef prices, it's always like, ah, we gotta be getting we're getting there.
• 2:25
  SPEAKER_00: You know what I mean?
• 2:26
  SPEAKER_01: Yeah, exactly right.
• 2:27
  SPEAKER_01: And it it's a while frustrating, I am uh it's a reminder of how uh sensitive this cattle complex is, the cattle futures markets are, obviously, given the level that they're trading, right?
• 2:41
  SPEAKER_01: And and so and so um any news is news that creates um some additional volatility.
• 2:48
  SPEAKER_01: And in this case, it wasn't even really news, right?
• 2:51
  SPEAKER_01: There isn't really anything to that that has gone on there.
• 2:54
  SPEAKER_01: And I I uh I do think that there's there is some level of of uh of uh illogical, you know, I mean it's not logical the way the markets behaved.
• 3:04
  SPEAKER_01: It actually wasn't logical in the statement that the president made either, right?
• 3:08
  SPEAKER_01: So so but but that's not a it's not an uncommon occurrence, and and and I think the the biggest takeaway is is that it's just I mean is is um um this is how this is gonna go from these levels, sort of a thing.
• 3:20
  SPEAKER_01: And so, you know, we've um you know from a pork industry's perspective, from a pork um uh hog futures market perspective, we've spent a lot of time over the last couple of years talking about the impact or opportunity that high beef prices are creating for the pork complex.
• 3:39
  SPEAKER_01: And um there's no doubt, I would argue, as we've gone through this summer, Mike, that we're finally starting to see the um uh some some benefit in the pork complex be because of high beef prices.
• 3:54
  SPEAKER_01: And and uh and and by the way, just a side note, uh, you know, congratulations to to Dr.
• 4:00
  SPEAKER_01: Newman and his his new role at the National Pork Board.
• 4:03
  SPEAKER_01: Incredibly excited about their initiative and the opportunity what the in in in in what they're doing today in terms of of uh of marketing uh uh pork's uh image uh uh uh domestically uh and and the timing couldn't be better because of this value proposition and and and high beef prices.
• 4:21
  SPEAKER_01: And and we do believe that uh um that uh while we're off to a good start on that front, as as I've mentioned, we think there's real opportunity there is as the the US consumer likely continues to get faced with higher beef prices even even yet.
• 4:39
  SPEAKER_01: Up 9% year over year is a little bit of the data that you and I were looking at.
• 4:43
  SPEAKER_01: And they probably've got a little more work to do from a retail beef perspective to get some margin back into that business from you know live cattle forward.
• 4:52
  SPEAKER_01: And so so we'll see how that plays out here.
• 4:54
  SPEAKER_01: But we're cautiously optimistic from a pork uh fundamental perspective that we that we have some nice opportunity here to gain some some market share uh domestically as we go.
• 5:05
  SPEAKER_01: And to your point, Mike, the the hog futures market reacted pretty well to all that down day in in cattle and and and hogs just continue to do what they what they've done recently, which is continue to work higher counter-seasonally, right?
• 5:20
  SPEAKER_01: And and so if I had a point to make in all of this, and we can all pull up, and I've got the the June crush uh in front of me as we're visiting here, the relationship between uh corn and meal and and June hogs out there next summer is frankly as good as it gets this far out.
• 5:36
  SPEAKER_01: It's an incredibly nice crush opportunity, and and so uh you know, call your trusted pro ag advisor to figure out the best way to execute on that.
• 5:44
  SPEAKER_01: But but uh, you know, the the uh the the uh the the pork complex continues to want to price in good news um relative to some really solid fundamentals, and again, a little bit counter-seasonal.
• 5:58
  SPEAKER_01: It's not uncommon for us to start to what do you road away at these markets just a little bit this time of year.
• 6:03
  SPEAKER_01: And so so those are just a few macro um observations as it relates.
• 6:09
  SPEAKER_01: So let's just get into just a little bit about what is happening today.
• 6:13
  SPEAKER_01: And we did um you know, since the last time you and you and I have had a t a chance to visit, you know, we've transitioned through Labor Day from summer August hogs to uh the beginning of fall, and and uh you know, we are gonna harvest uh you know 2.5 million or so uh uh pigs this week, and that is going to be down about 2.5% from the same week a year ago, um, which is in line with about I think it's 2.7% to be exact over the last eight weeks.
• 6:43
  SPEAKER_01: And so, and so Mike, we've been into a few uh less pigs, probably been under killing underlying supply just a little bit.
• 6:51
  SPEAKER_00: Packer margins aren't very good either, are they right now on the hog side?
• 6:54
  SPEAKER_01: Well, packer margins um are the the the uh the they've had to work just a little bit to to to to fill out their harvest here in the month of August.
• 7:03
  SPEAKER_01: That likely changes changes here in in the month of of September.
• 7:08
  SPEAKER_01: So um so I think that uh um we should uh uh continue to see the seasonal increase in available supply.
• 7:18
  SPEAKER_01: Again, nothing uh out of the ordinary there.
• 7:20
  SPEAKER_01: But you know, really what the futures market had been trading, and we've seen a little bit of improvement here this week and higher today as we speak, but but we have seen a little bit of a of a narrowing of that relationship between today's index and what October's trading at, and that's probably warranted.
• 7:33
  SPEAKER_01: I think um you know the the idea um I I think should be is that uh um given the level of higher box beef values, given the level of uh of uh uh less pork supply than for sure what the hog and pig report is forecasting, um, should uh allow for some pretty solid spot fundamentals here.
• 7:53
  SPEAKER_01: And so so there's a nice little baseline of of reasons to continue to put a little bit of strength into this hog complex.
• 8:01
  SPEAKER_01: There's also some of these macro reasons that we described.
• 8:03
  SPEAKER_01: We think there's a good opportunity from you know domestically for to to continue to pick up market share.
• 8:10
  SPEAKER_01: And exports have maintained, they've been pretty good.
• 8:12
  SPEAKER_01: Um US dollars is reasonably valued, right, as it relates to the opportunity for exports.
• 8:19
  SPEAKER_01: And so, you know, as we as we visit here today, it's uh it's another week of of generally good news in the port complex and a futures market that's pricing all that in.
• 8:29
  SPEAKER_01: So um, so you know, with those thoughts in mind, we just kind of remind everybody that the importance of of continuing to clip the coupon that's available to us and and and figure out the right way to to manage this opportunity because they don't come around very often.
• 8:44
  SPEAKER_00: And thank you to all our listeners.
• 8:46
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 8:50
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 8:55
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 9:01
  SPEAKER_00: See you next time.