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Hog Talk: Gov Shutdown · 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 October 2nd.
• 0:28
  SPEAKER_00: I've got Pat with us here today.
• 0:30
  SPEAKER_00: How's it going, Pat?
• 0:31
  SPEAKER_00: Good, Mike.
• 0:31
  SPEAKER_00: How are you?
• 0:32
  SPEAKER_01: It's pork month.
• 0:33
  SPEAKER_00: It is pork month, and the government's shut down.
• 0:36
  SPEAKER_01: Who cares?
• 0:37
  SPEAKER_00: Who cares?
• 0:38
  SPEAKER_00: I guess you know, if you follow like cut out some of these reports that we find important, WAS Day coming up next week, exports this morning.
• 0:46
  SPEAKER_00: We don't get any of that fun stuff anymore, I guess, from the government.
• 0:50
  SPEAKER_01: Um there is uh yeah, there's uh uh a list of reports that we are getting and a longer list of reports that we're not, and so uh so here we sit.
• 1:01
  SPEAKER_01: Um but uh an interesting time in the livestock industry for sure, Mike, isn't it?
• 1:06
  SPEAKER_00: Yeah, it is.
• 1:07
  SPEAKER_00: And uh we do have some other ways around that data, right?
• 1:12
  SPEAKER_00: Like we have other resources to follow, track stuff like that, or uh what would you say about like export activities?
• 1:19
  SPEAKER_00: Like if China comes in and buys a bunch of soybeans, are we gonna know about it or not?
• 1:23
  SPEAKER_01: Well, I think you know, we will we won't have the exact um USDA data, of course, right?
• 1:29
  SPEAKER_01: But but um you know, I think there's uh there's enough transparency in this market today that uh um I don't I'm not not too concerned about uh about losing track of things, Mike.
• 1:40
  SPEAKER_00: On the pork side, any comments with stuff like that?
• 1:42
  SPEAKER_01: No, I don't no I that's I think we we should talk about hog fundamentals and and let the let the politicians do their thing, fight with amongst each other and whatever.
• 1:52
  SPEAKER_01: I it's uh I mean I I I I frankly find the whole thing um quite silly, actually.
• 1:58
  SPEAKER_00: Well the last few times this has happened over the course of history, 2013-2018.
• 2:03
  SPEAKER_00: Uh the SP 500 traded a little bit higher in that time frame, and the egg space did trade higher as well, just for whatever it's worth.
• 2:10
  SPEAKER_00: Correlation between that would be a coincidence, I'd probably argue, especially in the egg space.
• 2:15
  SPEAKER_00: A lot of other stuff going on, you know.
• 2:17
  SPEAKER_00: So some people have tried to ask what a government shutdown does for us and uh the markets.
• 2:24
  SPEAKER_00: I've argued uh it's been a coincidence at that point, pretty much.
• 2:27
  SPEAKER_01: Makes sense to me.
• 2:28
  SPEAKER_00: What do you think about the hog space?
• 2:30
  SPEAKER_00: So here we are back, huh?
• 2:31
  SPEAKER_01: Yeah, uh we've seen a little bit of a sell-off here in in the futures market, a little bit of a of a depreciation or deterioration in the crush opportunity in the deferred as well, but um not significant and from some from historically uh um incredibly attractive levels, frankly.
• 2:49
  SPEAKER_01: And so um and so here we sit this week.
• 2:51
  SPEAKER_01: We've it's finally starting to feel like fall, not fall weather.
• 2:55
  SPEAKER_01: We've still got summer for temps out there, but but it's starting to feel like fall from the perspective of um you know these these these hogs are starting to come to town a little bit easier, the cash market's a little bit softer.
• 3:07
  SPEAKER_01: Um seeing a little bit of a sell-off in cutout, five bucks or so on the composite off of our our recent highs here.
• 3:14
  SPEAKER_01: And and all of those things, Mike, are are things that you frankly expect to have happen a month ago, right?
• 3:20
  SPEAKER_01: So we got a month, a month extra of summer markets is one way to sort of think through all of this, and now we're getting our seasonal break, which is the best guess.
• 3:28
  SPEAKER_01: I do think it's worth noting, though, that uh um we've seen a a relatively significant sell-off in box beef values.
• 3:36
  SPEAKER_01: Um and and now we're seeing a little bit, again, probably a seasonal little little break here in pork cutout.
• 3:44
  SPEAKER_01: Um, but we also do need to keep in the middle of our minds that uh you know the the you know the outside economic data that we look at has shown some more uh disfavorable readings recently.
• 3:58
  SPEAKER_01: I mean, if nothing else, the feds did decide to to uh lower interest rates here and and and it and it must be or would be because of some concern about economic activity for sure because of higher unemployment, those sorts of things.
• 4:09
  SPEAKER_01: And so and so did boxed beef sell off because the consumer can't afford high-priced beef anymore?
• 4:15
  SPEAKER_01: I don't know, that's a big jump, right?
• 4:18
  SPEAKER_01: But but um at some point in this process it that is a likely outcome, yeah.
• 4:26
  SPEAKER_01: And and I we all hope it's not today and and not for a while, but you never know.
• 4:31
  SPEAKER_01: And and so I I'd be surprised if that's also the reason why you know port cut off cut out has seen a little bit of a of a sell-off here, but we should keep an eye on it.
• 4:41
  SPEAKER_01: Um the weekly export data that that um you know that we saw this morning was was pretty good in the port complex.
• 4:47
  SPEAKER_01: The US dollar still um remains uh uh cheap, um definitely supporting Boeing exports uh uh there.
• 4:55
  SPEAKER_01: So so just a lot of really good things.
• 4:57
  SPEAKER_01: I suppose if there was something from the supply side on in the hog complex, uh we have seen a significant increase in weights here.
• 5:05
  SPEAKER_01: Um and and um and so maybe that coupled with a little weaker cash market uh uh uh week over week, maybe we're getting into a few more supplies here, which wouldn't be a big surprise either, not just from a seasonal perspective, but from the 2.5% less that we were.
• 5:24
  SPEAKER_01: We had some catching up to do that.
• 5:25
  SPEAKER_01: Exactly right.
• 5:26
  SPEAKER_01: Yeah, probably backed up inventory here just a little bit.
• 5:28
  SPEAKER_01: That's exactly right.
• 5:29
  SPEAKER_01: So um so let's see how it goes.
• 5:31
  SPEAKER_01: I mean, everything just feels feels feels pretty good actually for for this time of year and for this stage of the cycle.
• 5:38
  SPEAKER_01: And so um, so let's see what happens here as we be as we begin the the fourth quarter.
• 5:43
  SPEAKER_01: You know, Mike, I I think the other topic is is just just what's going on as it relates to to inputs and harvest and harvest progress and yield reports and those sorts sort sort of things.
• 5:54
  SPEAKER_01: So do you want to take a couple minutes and talk about the quarterly stocks report this week and and just talk about what we think we're seeing out there in the country for for yields?
• 6:02
  SPEAKER_00: Yeah, quarterly stocks, the the really big uh uh the really big news in that was that the USDA found more corn on September 1st than what they were anticipating.
• 6:12
  SPEAKER_00: They were anticipating to have 1.3 and billion bushels and change out there.
• 6:18
  SPEAKER_00: That was our cur estimate going into the report, they came out at 1.5.
• 6:22
  SPEAKER_00: So they found more bushels of corn out there than what they expected.
• 6:26
  SPEAKER_00: And that made sense, I thought, given the basis um changes that we've seen in the Western Corn Belt specifically, Pat, it it was fine to come out with that, I thought.
• 6:37
  SPEAKER_00: Um, it didn't seem like anyone's been getting pinched on corn.
• 6:41
  SPEAKER_00: There's probably more bushels than they let on out there in in this space.
• 6:45
  SPEAKER_00: Whether that was, you know, uh a derivative of maybe we didn't use as much as what we figured.
• 6:52
  SPEAKER_00: One of those two things.
• 6:53
  SPEAKER_00: Nonetheless, you're going into this next uh marketing year with a few more bushels of corn than what they anticipated.
• 7:00
  SPEAKER_00: It's gonna give that balance sheet a little bit more cushion.
• 7:02
  SPEAKER_00: Yet again, I mean we added acres last time.
• 7:05
  SPEAKER_00: Now you found more corn laying out there on September 1st.
• 7:08
  SPEAKER_00: So uh a pretty bearish report on corn.
• 7:11
  SPEAKER_00: Soybeans, it was fine, no real changes there.
• 7:14
  SPEAKER_00: Um at this point, it seems like balance sheet wise, soybeans have done what they needed to.
• 7:19
  SPEAKER_00: They only planted 80 million acres, yields haven't blown uh our expectations out of the water as a lot of folks wrap up.
• 7:26
  SPEAKER_00: So it at this point, if if China would have stepped in, or if they would step in, the balance sheet honestly looks pretty good on soybeans.
• 7:34
  SPEAKER_00: So uh that's something to take note on.
• 7:36
  SPEAKER_00: The the corn wise is the one that it sure seems like it's gonna be hard to get away from two billion bushels on either side of the report.
• 7:44
  SPEAKER_00: So early harvest reports, uh I mean late harvest reports at this point almost on soybeans locally would just be um top three average for a lot of a lot of folks, like top three best yields ever, but not like even the people have said they had the best yields this year, it wasn't like 10 bushels above their prior record.
• 8:04
  SPEAKER_00: No, corn super early, but hearing you know, high teens, low 20s, I think moisture wise moisture-wise.
• 8:11
  SPEAKER_00: Um a little early on yield uh yield stuff, but the Iowa farmers, it sure sounds like uh disease pressure is the the uh real talking point, but it's all over the board, Pat.
• 8:21
  SPEAKER_01: Yeah, it sure is.
• 8:22
  SPEAKER_01: And and uh that's not an uncommon observation for this time of year either.
• 8:26
  SPEAKER_01: We're just kind of starting to to get rolling on the corn and harvest side of things.
• 8:30
  SPEAKER_01: And you know, Mike, that that's uh that improvement increasing ending stocks or carry-in number from last year, that's that's worth two bushels, three bushels, right, on on the harvested acres.
• 8:43
  SPEAKER_01: And so, you know, you and I were together that day when those numbers came out, and your first reaction was as well, you know, now they now they they just might be able to lower that yield from you know 184 down to 182 or something.
• 8:55
  SPEAKER_01: Most people think that it is.
• 8:56
  SPEAKER_01: And so um, and that's not gonna change the ending stocks number at all.
• 9:00
  SPEAKER_01: And so we've been talking about this since the first of uh of January that uh excuse me, the first of August, that that um the government's gonna continue to solve for a two billion bushel projected ending stocks number for next year, and so far that's held pretty true.
• 9:15
  SPEAKER_01: So yeah, um, so you know the the the futures market has seen a little bit of a sell-off, but it has more to do with just going back into the bottom end of this trading range, I would argue, and and and not even really quite there yet.
• 9:26
  SPEAKER_01: So, you know what, we're we're kind of stuck here for a while.
• 9:29
  SPEAKER_01: See how harvest goes.
• 9:31
  SPEAKER_01: Um, you know, from a real crop producer's perspective, um a lot of beans are going to town.
• 9:36
  SPEAKER_01: And so right, and so the the they're saving their space at home for for corn and and uh you know looking for some opportunities to to to merchandise their way into some profitability here.
• 9:46
  SPEAKER_00: All right.
• 9:47
  SPEAKER_00: Well, yeah, that'd be our most common question, I'd argue, this week.
• 9:50
  SPEAKER_00: Whenever I talk to somebody this week, it seems like I'm getting rid of all my soybeans.
• 9:53
  SPEAKER_00: What should I do with them?
• 9:54
  SPEAKER_00: So if you got a question, something like that, give us a call.
• 9:57
  SPEAKER_00: We've had that conversation about a hundred times this week.
• 10:00
  SPEAKER_00: So uh I I hope we're uh well prepared for that conversation, Pat.
• 10:04
  SPEAKER_01: Sounds great.
• 10:04
  SPEAKER_01: Thank you, Mike.