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Hog Talk: Vol and Mexico · 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 December 17th, and I've got Luke with us here today.
• 0:30
  SPEAKER_00: How's it going, Luke?
• 0:31
  SPEAKER_01: You know what's going pretty good, Mike?
• 0:32
  SPEAKER_01: How are you doing today, pal?
• 0:33
  SPEAKER_00: Pretty good.
• 0:34
  SPEAKER_00: I've actually got a pretty fun lineup for us to talk about in the hog world today, I think, Luke.
• 0:38
  SPEAKER_00: It's been pretty volatile lately in this hog market.
• 0:42
  SPEAKER_00: We bounced off some pretty major support and we've been rallying a little bit, but this week we've seen a little back and forth, haven't we?
• 0:49
  SPEAKER_01: Yeah, for sure.
• 0:50
  SPEAKER_01: For sure.
• 0:50
  SPEAKER_00: What can you say about the price action and direction here so far this week?
• 0:55
  SPEAKER_01: Yeah, absolutely.
• 0:56
  SPEAKER_01: I mean it it is.
• 0:57
  SPEAKER_01: We've got a lot of headlines in the hog market here.
• 0:59
  SPEAKER_01: And I also say we really have kind of two different time frames we're trading, right?
• 1:04
  SPEAKER_01: So I'm gonna call the front February, right?
• 1:06
  SPEAKER_01: Yep.
• 1:07
  SPEAKER_01: Delivery, right?
• 1:08
  SPEAKER_01: Here and now.
• 1:09
  SPEAKER_01: And February is uh very discounted to spot fundamentals.
• 1:14
  SPEAKER_01: I mean, basically it's a zero basis.
• 1:16
  SPEAKER_01: We're even up with index here, okay?
• 1:18
  SPEAKER_01: Normally there's a four to five dollar appreciation from today till Feb expiration.
• 1:22
  SPEAKER_00: What did D's come off the board at?
• 1:24
  SPEAKER_01: 83 sure change.
• 1:26
  SPEAKER_01: I'm rounding, right?
• 1:27
  SPEAKER_01: I mean, and and so eighty-three and some dollars, right?
• 1:30
  SPEAKER_01: But so like today with the index or like 83, almost 84 rising because cutouts rising, right?
• 1:35
  SPEAKER_01: I mean, it would not be uncommon to see, you know, an 89 type February futures here.
• 1:41
  SPEAKER_01: And we don't have that.
• 1:42
  SPEAKER_01: We have 83, right?
• 1:44
  SPEAKER_01: So what's happening, what's going on, it's kind of the front and the back, if you will, or the front and the middle, I should say, is we've got a lot of production coming at us here, Mike.
• 1:53
  SPEAKER_01: We've had really big kills.
• 1:55
  SPEAKER_01: Hogs are very heavy.
• 1:57
  SPEAKER_01: There's reasons they're heavy.
• 1:58
  SPEAKER_01: It's because corn's pretty reasonable and margin overfeed.
• 2:01
  SPEAKER_01: Hogs have been very profitable, right?
• 2:03
  SPEAKER_01: But we've two sevens, and I mean big, big kills, biggest kill of the year, right?
• 2:08
  SPEAKER_01: Pumping a lot of hogs through the system.
• 2:10
  SPEAKER_01: You know, next week Christmas, next week New Year's, that's two short kill weeks just by nature.
• 2:14
  SPEAKER_01: Do you think we've been front loading ahead of those two weeks?
• 2:17
  SPEAKER_01: I think we've been trying to a little bit, but I can't go as far as saying we've overkilled, right?
• 2:23
  SPEAKER_01: Um, but you know, it's also December, gonna be January.
• 2:27
  SPEAKER_01: Like, and so far we've had some snow events.
• 2:29
  SPEAKER_01: We've had more snow this winter than last winter, right?
• 2:31
  SPEAKER_01: But but it's not really disrupted kill.
• 2:33
  SPEAKER_01: I mean, it's kind of happened on weekends or here there.
• 2:36
  SPEAKER_01: We've got cleaned out, right?
• 2:38
  SPEAKER_01: But you know, we got a lot of pigs around, they're heavy.
• 2:40
  SPEAKER_01: We're you know, we need to kind of move through it, right?
• 2:43
  SPEAKER_01: And cash, cash is weak, cash is like 69 bucks, right?
• 2:46
  SPEAKER_01: Index is 84, cutouts 98, right?
• 2:49
  SPEAKER_01: Well, cash is low because it's not really a real market.
• 2:51
  SPEAKER_01: Nobody's really in the cash market right now because we're getting pigs slaughtered, right?
• 2:56
  SPEAKER_01: My whole point is is they've kept the the market has kept a very that that's get that's kept some skepticism in the February futures, right?
• 3:03
  SPEAKER_01: So Feb at 83 with index at basically the same value, that's bearish.
• 3:07
  SPEAKER_01: Yeah, right?
• 3:08
  SPEAKER_01: That's bearish.
• 3:09
  SPEAKER_01: But then you walk it forward and some of the things that's not the case in the back months, isn't it?
• 3:14
  SPEAKER_01: Exactly.
• 3:15
  SPEAKER_01: Um, so you know, you know, you just reminded me this is a podcast, right?
• 3:19
  SPEAKER_01: So we can talk about fun stuff, right?
• 3:21
  SPEAKER_01: Yeah, but okay, PERS, right?
• 3:23
  SPEAKER_01: Purs, how bad is PERS?
• 3:24
  SPEAKER_01: Is PERS worse than last year?
• 3:26
  SPEAKER_01: That's it's we can try to quantify it, but it's it's it's subjective.
• 3:29
  SPEAKER_01: It's just it's a it's a it's a it's more of an art than a science, if you will.
• 3:33
  SPEAKER_01: But there's been a lot of PERS activity.
• 3:35
  SPEAKER_01: It seems like it's heating up, especially in the last 10 days, especially kind of southeast Iowa, eastern into the corn belt.
• 3:41
  SPEAKER_01: Hearing a lot about PERS, that's taking some summer supply off, right?
• 3:44
  SPEAKER_01: Um, cutout.
• 3:45
  SPEAKER_01: Cutout is like 98 bucks.
• 3:47
  SPEAKER_01: You go back to 21, 21 and 22, really high demand years, post-COVID stimulus, great years, right?
• 3:53
  SPEAKER_01: We have the highest cutout on record in that time frame today.
• 3:56
  SPEAKER_01: Like demand is is amazing.
• 3:59
  SPEAKER_01: So I've been saying, kind of as a quote, you know, demand is actually saving our bacon, right?
• 4:04
  SPEAKER_01: For kind of a little joke and pun, because supply is bearish.
• 4:07
  SPEAKER_01: We've got a lot of pigs in the near term at us, right?
• 4:10
  SPEAKER_01: But you roll it forward.
• 4:12
  SPEAKER_01: Um, we've got some PERS activity, maybe into the summer.
• 4:15
  SPEAKER_01: You know, now this is what uh I don't know if we're on 10 or 15 days, but Spain broke with ASF, right?
• 4:20
  SPEAKER_00: Up to like 26 or something now, cases.
• 4:23
  SPEAKER_01: Yes, and they've added, you know, they've they've found more wild boars infected, right?
• 4:27
  SPEAKER_01: Spain, they have their three, three, the big customers, or also our three big customers, China, South Korea, and Japan, right?
• 4:34
  SPEAKER_01: Now, rules are different in different countries.
• 4:37
  SPEAKER_01: Our rules are different with different countries, right?
• 4:38
  SPEAKER_01: But Spain and China, they have a much better relationship than the US and China, right?
• 4:42
  SPEAKER_01: Good point.
• 4:43
  SPEAKER_01: So China's already done some regionalization there, and that's a really big deal, regionalization.
• 4:48
  SPEAKER_01: So instead of shutting the whole country down, they're just shutting regions down, counties down, areas down, right?
• 4:53
  SPEAKER_01: Yep.
• 4:54
  SPEAKER_01: So it'd be like in the US and I knock on wood.
• 4:56
  SPEAKER_01: Our listeners are gonna have to be uh trusting me, I'm knocking on wood right now.
• 4:59
  SPEAKER_01: But let's let's say AFS comes to our borders, which you know, we can get in the whole debate.
• 5:03
  SPEAKER_01: It's it's it's it's when not if, right?
• 5:06
  SPEAKER_01: Yeah.
• 5:06
  SPEAKER_01: I mean it's but with all that said, if you know, there's AS, there's wild, there's ASF in the Dominican, so like South Florida.
• 5:12
  SPEAKER_01: Yeah, let's say we find it in South Florida, okay?
• 5:15
  SPEAKER_01: Well, if China or other trading partners uh would just shut South Florida down, we could deal with that.
• 5:23
  SPEAKER_01: We don't raise any pigs in South Florida.
• 5:24
  SPEAKER_01: Yeah, but if they shut south and they shut the whole US down, you know, we're exporting 25-26% of our production, right?
• 5:30
  SPEAKER_01: It's a you know it's a big deal.
• 5:32
  SPEAKER_01: Conversely, basically between Spain in Spain, between China, South Korea, and Japan, it's like 806,000 million metric tons that they export, right?
• 5:43
  SPEAKER_01: And so if let's say some of that gets to place, they keep finding more cases, uh less worst case, it gets in their domestic hog herd, that'd be a big deal, right?
• 5:51
  SPEAKER_01: But if the US and Spain sells other places like France and Italy, and those aren't major trading partners of us, right?
• 5:59
  SPEAKER_01: But if we could pick up like 320,000 metric tons of that, less than half, that would be close to a short 2% of our domestic supply, that would put us like in record export territory, right?
• 6:10
  SPEAKER_01: So my point is the front's been uh the front's been subdued because of this large supply, right?
• 6:16
  SPEAKER_01: But like June futures, I mean, right, even with today's dollar sell-off, every June, July, and August, all over a dollar, all over a hundred bucks, right?
• 6:23
  SPEAKER_01: We've put some premium back in there.
• 6:25
  SPEAKER_01: So I think a little bit of PERS, which that happens every year, is it worse or better than last year, right?
• 6:30
  SPEAKER_01: A little bit of we just have to be mindful um uh of the changing dynamics that could happen from African swine fever in Spain.
• 6:39
  SPEAKER_01: I think I mentioned this, Spain's largest exporter, Germany second, right?
• 6:42
  SPEAKER_01: Germany also has it.
• 6:44
  SPEAKER_01: Um, you know, on the so kind of put that all in spec.
• 6:47
  SPEAKER_01: One thing, if China, China is oversupplied with pork right now, they're working on their prices are pretty low.
• 6:54
  SPEAKER_01: Their prices are low, they're trying to liquidate their domestic herd.
• 6:56
  SPEAKER_01: China's always going to be a buyer of pork, right?
• 6:59
  SPEAKER_01: But if they were really a buyer of primals and and big time buyer, this could be really explosive, right?
• 7:04
  SPEAKER_01: So that's kind of putting a cap on it.
• 7:06
  SPEAKER_01: But it's all a good guy, it's helping the deferred futures.
• 7:09
  SPEAKER_01: We've also had the October and December, you know, further out in the curve.
• 7:12
  SPEAKER_01: You know, it's good.
• 7:13
  SPEAKER_01: And we've seen margins, margins are good again, right?
• 7:16
  SPEAKER_01: We now, you know, two weeks ago, we were a little underwater in February and April, and about breaking, you know, not break even, but at targets in May and June.
• 7:24
  SPEAKER_01: Now I'm not talking about breaking, I'm talking about target margins.
• 7:27
  SPEAKER_01: You know,$23,$24 on the rolling 12.
• 7:30
  SPEAKER_01: We've got nice margins out ahead of us.
• 7:32
  SPEAKER_01: So um a lot of dynamics going on.
• 7:35
  SPEAKER_01: Um, you know, yesterday, you know, this really well it came out Monday morning in the trade, right?
• 7:40
  SPEAKER_01: The the the Mexico thing, right?
• 7:42
  SPEAKER_01: Um, and I I I I want to be careful not to go down too many rabbit holes with this.
• 7:46
  SPEAKER_00: I mean, futures were down quite a bit at the open on Monday.
• 7:49
  SPEAKER_01: He traded it, right?
• 7:50
  SPEAKER_01: I mean, so for a little bit.
• 7:51
  SPEAKER_01: You you've got some decent perspectives on that.
• 7:53
  SPEAKER_01: Why don't you talk about that a little bit?
• 7:55
  SPEAKER_01: Yeah, and let our listeners hear about that.
• 7:57
  SPEAKER_00: I I think Mexico has been trying to go down a checklist with the United States to to favor their relationship, whether it be a water treaty that they had just resolved over the weekend, or uh the US was pushing Mexico to put uh very similar tariffs on China to what the United States had.
• 8:15
  SPEAKER_00: And and Mexico's made progress and especially the last week or two in a lot of those aspects.
• 8:22
  SPEAKER_00: And after that had happened, uh Rollins was in uh at the border last week and nothing really came of it.
• 8:28
  SPEAKER_00: And then after that experience, a week later, all of a sudden we see news that Mexico is launching this probe into anti-dumping of pork into Mexico.
• 8:38
  SPEAKER_00: This was mainly led, it sounded like, by five major producers out of Mexico that, you know, s supposedly the United States could be subsidizing our agriculture to uh ship exports to other countries like Mexico, kind of undercutting the the producers in their country.
• 8:56
  SPEAKER_00: You know, as you've mentioned, pork, not necessarily a very subsidized agricultural product, but maybe some of the things we feed it, like the grains are, for example, that could uh artificially lower our prices.
• 9:07
  SPEAKER_00: So a few things have happened there that is mainly rumors, speculation at this point, and that could be because we haven't reopened the border yet, Luke, for feeder cattle.
• 9:18
  SPEAKER_00: And we'll see what this becomes of.
• 9:20
  SPEAKER_00: I think with some of the steps Mexico's taken here in progress, that I I wouldn't be surprised if we did take a step towards opening that border back up here in in Q1.
• 9:29
  SPEAKER_00: But at this point, I feel like this was just showing Mexico showing that they have a little something to to uh to kind of have Trump as well.
• 9:41
  SPEAKER_01: Yeah, exactly, exactly.
• 9:42
  SPEAKER_01: So you boil all that together, and obviously when Mike's talking about the border reopening, he's talking about for feeder cattle, right?
• 9:47
  SPEAKER_01: Yeah, feeder, you know, screw room thing that's been going on.
• 9:50
  SPEAKER_01: So all this mixed around, um, you know, big take like a couple steps back.
• 9:54
  SPEAKER_01: Sometimes we get in December and we get in reflection mode for the year, right?
• 9:58
  SPEAKER_01: We're getting towards the end of the year.
• 10:00
  SPEAKER_01: Um, we all know in the hog industry, I mean, we had some tough times in 23 and early 24.
• 10:05
  SPEAKER_01: Um, really high cost of grains, right?
• 10:07
  SPEAKER_01: Just couldn't outrun that.
• 10:08
  SPEAKER_01: Some losses.
• 10:09
  SPEAKER_01: Back half of 24, pretty good.
• 10:11
  SPEAKER_01: 25's been a good year for hog producers, right?
• 10:14
  SPEAKER_01: Um, 25 has been a good year.
• 10:15
  SPEAKER_01: And the forward curve in 26 is a good year.
• 10:18
  SPEAKER_01: Yes, you know, we've got some great things.
• 10:20
  SPEAKER_01: Demand is good, beef price is very high, beef herd is still low, hog herd's not noticeably growing at this time.
• 10:28
  SPEAKER_01: Yeah, we got a few extra pigs around in the short term, right?
• 10:31
  SPEAKER_01: But structure we've not added, in our opinion, a lot of sales to the industry.
• 10:36
  SPEAKER_01: Um, we got some nice things ahead of us.
• 10:38
  SPEAKER_01: You've got maybe some changes in the global pork market with Spain now, but then you turn around, and yeah, anything about Mexico, we have to be ears up in the pork industry.
• 10:47
  SPEAKER_01: They are our largest trade partner, right?
• 10:49
  SPEAKER_01: They're mission critical.
• 10:50
  SPEAKER_01: And also you mix all that in.
• 10:52
  SPEAKER_01: Yeah, I think the biggest thing we're very excited about 26, Mike, when we look at the 25 we just had, when we look at the off the margins that a lot of clients have laid off in 26, can lay off in 26, depending on where you're at, right?
• 11:07
  SPEAKER_01: Put that runway out.
• 11:08
  SPEAKER_01: Also, you know, we have great tools in the show.
• 11:11
  SPEAKER_01: We can put some cost-effective floors in, give us some windows, right?
• 11:14
  SPEAKER_01: Because things protect ourselves from uncertainties around trade.
• 11:18
  SPEAKER_01: We export 25%, we need trade partners.
• 11:20
  SPEAKER_01: We piss Mexico off.
• 11:22
  SPEAKER_01: We got a problem, right?
• 11:23
  SPEAKER_01: Is that likely?
• 11:24
  SPEAKER_01: I don't know.
• 11:25
  SPEAKER_01: We've played pretty good with Mexico.
• 11:26
  SPEAKER_01: Is it off the table?
• 11:27
  SPEAKER_01: Absolutely not, right?
• 11:29
  SPEAKER_01: African swine fever mentioned it before.
• 11:31
  SPEAKER_01: It could come here, right?
• 11:32
  SPEAKER_01: So, anyway, we're excited about 26.
• 11:35
  SPEAKER_01: We're thankful for 25.
• 11:36
  SPEAKER_01: It's been a good year.
• 11:37
  SPEAKER_01: The pork industry needed it.
• 11:39
  SPEAKER_01: We've got reasonable feed costs.
• 11:41
  SPEAKER_01: It looks, you know, this right now, South America weather's pretty, pretty favorable, right?
• 11:45
  SPEAKER_01: You can't really find a scare down there, so it looks like we've got some nice margins.
• 11:49
  SPEAKER_01: Um, you know, so lean into this thing.
• 11:52
  SPEAKER_01: And and uh anyway, yeah, a lot of a lot of things going on.
• 11:56
  SPEAKER_01: We'll continue to be a lot of things going on.
• 11:58
  SPEAKER_01: Um, but here in this shop, we're super excited for 2026 for for our industry and our customers, Mike.
• 12:03
  SPEAKER_00: All right.
• 12:03
  SPEAKER_00: Well, thank you for your time.
• 12:04
  SPEAKER_01: Have a great one.