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Is the Hog Market About to Surprise Everyone? · Professional Ag Marketing Podcast

• 0:02
  SPEAKER_00: Welcome to the Hog Market Talk Podcast.
• 0:06
  SPEAKER_00: Your weekly deep dive into hog market fundamentals, breaking news, and industry insights.
• 0:13
  SPEAKER_00: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_02: Well, today is August 26th.
• 0:24
  SPEAKER_02: I'm here with Jace Crockett.
• 0:25
  SPEAKER_02: It's the Hog Market Podcast.
• 0:27
  SPEAKER_02: I'm filling in for your host, Mike Minor.
• 0:29
  SPEAKER_02: Today, uh, my name's Kate Winniger.
• 0:30
  SPEAKER_02: Jace, how are you today?
• 0:32
  SPEAKER_02: Good.
• 0:32
  SPEAKER_02: How are you, Kate?
• 0:33
  SPEAKER_02: I'm doing pretty well.
• 0:34
  SPEAKER_02: Getting comfortable on this podcast studio.
• 0:36
  SPEAKER_02: I've been behind the scenes most of the time, but it's good to be up here in front of the camera.
• 0:40
  SPEAKER_02: It's a little different.
• 0:41
  SPEAKER_02: For sure is.
• 0:42
  SPEAKER_02: Well, let's get jumping into these uh markets right now.
• 0:45
  SPEAKER_02: Um, let's start with uh hog futures today.
• 0:47
  SPEAKER_02: So uh funds right now are at a historically large short position.
• 0:51
  SPEAKER_02: What does that kind of tell you about the market today?
• 0:54
  SPEAKER_01: Yeah, I think they've been working on getting shorter for a long time here.
• 0:59
  SPEAKER_01: We've seen pessimism build in the in the front month.
• 1:03
  SPEAKER_01: Front months especially, we've seen it in October, especially December, February, you know, at really low levels there.
• 1:10
  SPEAKER_01: I just think they've they've really they've really got this pessimism in it because we didn't really have our summer rally and we're seeing we're seeing lesser demand at the moment.
• 1:22
  SPEAKER_01: It's just kind of a a lot of bad news, but it just feels like they kind of had it on the run and wanted to keep it that way.
• 1:28
  SPEAKER_02: Are they pricing in uh too much bad news currently?
• 1:31
  SPEAKER_02: I mean, we had a little jump in hog features today in the October month, but what can you say about that?
• 1:36
  SPEAKER_01: It's it's hard to tell.
• 1:38
  SPEAKER_01: It's all about you get to this time of year and it's all about rate of descent instead of instead of appreciation when you look at the cutout and when you look at cash.
• 1:46
  SPEAKER_01: So I think I think they're anticipating a bigger descent than I I think our opinion would be.
• 1:52
  SPEAKER_01: It's maybe a little bit too much, but time will tell.
• 1:56
  SPEAKER_02: Yeah, absolutely.
• 1:57
  SPEAKER_02: I just pulled up the uh commitment of traders report.
• 2:00
  SPEAKER_02: Uh Jace can't see it, but um those numbers again showing a record short position.
• 2:05
  SPEAKER_02: Um let's jump into the fundamentals a little bit, Jace, and talk about these harvest numbers here that you see on the screen.
• 2:12
  SPEAKER_01: Yeah, so we've had we've had below the past three years harvest levels for running on five or six weeks here now, and we've seen a lot of that be made up in weights.
• 2:24
  SPEAKER_01: That's a little bit of a different discussion on the weight side, but our pork production has been running below last year for the past few weeks, yet we've seen price decline.
• 2:35
  SPEAKER_01: So, you know, in our in our minds, lower supply would be higher, demand stays the same, higher price would be the simple way to look at it.
• 2:45
  SPEAKER_01: But we've seen that lower too.
• 2:47
  SPEAKER_01: And a couple a couple things on that side, and I know Luke touched on it last week, but we have a couple demand demand factors in this.
• 2:55
  SPEAKER_01: Chicken prices are lower, productions, productions higher on the chickens, breast prices are down by about 34%.
• 3:02
  SPEAKER_01: So we're seeing we're still competing against a cheaper protein there on the chicken side.
• 3:07
  SPEAKER_01: Another thing that we've seen on the demand side has just been a consumer that we don't really know where they're at.
• 3:13
  SPEAKER_01: It's we've had this, we've had high gas prices now.
• 3:17
  SPEAKER_01: We've seen we've seen a consumer that's maybe been dinged a little bit on that side, and it it's been hard telling where exactly they are.
• 3:24
  SPEAKER_01: So maybe we are losing a little demand on that front at the moment, but time will tell on that one as well.
• 3:30
  SPEAKER_02: Yeah, thanks for that, Jace.
• 3:32
  SPEAKER_02: Um we've seen slaughter increase, but again, at lower than seasonal levels.
• 3:38
  SPEAKER_02: Let's jump into um our next uh talking point here, the cash market.
• 3:42
  SPEAKER_02: Uh, what's the news on uh the cash hog market?
• 3:45
  SPEAKER_01: Yeah, cash week to week is stronger.
• 3:47
  SPEAKER_01: We've seen in the west here, we're in the low 90s, you know, 91 sort of area in the west, but we have seen some pretty strong demand in the east.
• 3:56
  SPEAKER_01: So in that mid-90 range, out east, just some more cash needs out there, a little bit lower supply and Packers wanting to fill their shackle.
• 4:06
  SPEAKER_02: Awesome.
• 4:07
  SPEAKER_02: Um, jumping in again to uh one of our talking points today, the pork cut out, especially especially the ham side of things.
• 4:13
  SPEAKER_02: We've seen that take a real hit.
• 4:15
  SPEAKER_02: I've got that up on the screen.
• 4:16
  SPEAKER_02: Uh, what what can you say about that, Jace?
• 4:19
  SPEAKER_01: Yeah, so there's there's a few primals there that have have taken a hit, but it's been the hams, especially.
• 4:25
  SPEAKER_01: And the hams, you know, down near$70.
• 4:28
  SPEAKER_01: 65 is really where where you see a lot of value or where hams look pretty cheap.
• 4:36
  SPEAKER_01: We saw it get down to$35 during COVID, but at these levels, that's looked at as pretty cheap.
• 4:42
  SPEAKER_01: Um, not entirely, you know, we had some Tyson issues at the beginning of this whole deal, just labor shortages um that kind of, you know, they weren't deboning the hams, and that forced that price lower.
• 4:55
  SPEAKER_01: It was forcing a product on the market that wasn't necessarily as sale-friendly there.
• 5:02
  SPEAKER_01: But I do think, you know, we're kind of near support on that, and we we hope for that to hold in these areas.
• 5:08
  SPEAKER_01: And it is a big chunk of the cutout at about 25% of the cutout.
• 5:13
  SPEAKER_01: So it does matter from a from a price standpoint if that thing can stabilize.
• 5:18
  SPEAKER_01: Is there anything on the export side that could help out this part of the market?
• 5:23
  SPEAKER_01: Yeah, I mean, we've got demand the demand situation in like China and Brazil, you know, we're we're largely the only the only country right now that's been making money producing pork for a little while here.
• 5:37
  SPEAKER_01: You know, China's been culling sows, Brazil's been struggling a little bit there.
• 5:42
  SPEAKER_01: So I I don't know that you know we've kind of lost the China demand over the that's been over the past few years, you know, since the ASF stuff has kind of cleared up.
• 5:52
  SPEAKER_01: But the the Mexican side, we could, you know, we could see a little more demand out of them at the moment, but largely looks decent.
• 6:01
  SPEAKER_01: So why ham versus the other cutouts?
• 6:03
  SPEAKER_01: Why is this one taking the biggest dump here?
• 6:06
  SPEAKER_01: I think I think it all started around you see that sharp decline there was about the 29th of July, and that was that was about the time we had some visa issues and labor issues on the on the ham deboning side, and just lost some of our workforce there and it it forced it lower, you know, like I like I was saying about the hams that weren't getting deboned, and I I think we've we've just struggled ever since there.
• 6:34
  SPEAKER_02: Awesome, great insight there.
• 6:37
  SPEAKER_02: Um how can uh let's talk about a little bit strategy side.
• 6:41
  SPEAKER_02: How can uh we help you help our listeners here today?
• 6:45
  SPEAKER_01: Yeah, we try to you know, we try to sell hogs and buy court, you know, complete the crush when it when it makes sense.
• 6:53
  SPEAKER_01: And so when we're seeing it at a time where we've seen a huge decrease in the futures prices, you know, you look at October and December, there if you have futures positions there, there's quite a bit of equity.
• 7:06
  SPEAKER_01: You know, just looking at repositioning to get a little less intrusive coverage and allow a little more upside has kind of been our strategy, but also pushing some of these futures out into 2027.
• 7:18
  SPEAKER_01: You know, we kind of we kind of see some more headwinds coming there.
• 7:22
  SPEAKER_01: You see capital reinvestment when you make some money, which we have over 2025 and 26, the tail end of 24.
• 7:30
  SPEAKER_01: You know, there's maybe a little bit of an argument to be made that it's not it's not gonna be as intense of reinvestment as you saw prior to 2023, because we kind of struggled in that period with the Prop 12 stuff going on.
• 7:46
  SPEAKER_01: And, you know, I just think that headwinds into 27 would would favor us pushing a little coverage out further, but just making sure that we're maintaining coverage and and then a big piece of this, and we've seen it over the past few days, has been the corn price.
• 8:02
  SPEAKER_01: Corn going up really, really hurts our crush margins.
• 8:06
  SPEAKER_01: So making sure to to protect that side of things is very very important at this stage of the game.
• 8:14
  SPEAKER_02: Yeah, we um uh a a while ago on the podcast on the grain podcast, we had Jordan on here saying six dollar corn.
• 8:21
  SPEAKER_02: And it was almost a joke back then, but uh we're at 536 in the December contract right now as we're recording this, so not too far off.
• 8:30
  SPEAKER_02: Um uh what other feed costs are um are affecting this market?
• 8:36
  SPEAKER_01: Yeah, I guess we've we've we're kind of in the time of year where meal basis gets negotiated.
• 8:42
  SPEAKER_01: Um a little bit of that focus on that side of things, but just making sure as we we roll out of September positions on the corn and meal side that we're we're making sure to look at our coverage and maintain coverage.
• 8:57
  SPEAKER_01: I don't think we want to be, I don't think we want to be losing coverage here, just as we this is a counter-seasonal rally on the grain, so it's it's maybe a little bit of a wake-up call that we need to be very forward on this on this strategy.
• 9:13
  SPEAKER_01: So just just making sure that our inputs stay covered.
• 9:16
  SPEAKER_02: Yeah, absolutely.
• 9:17
  SPEAKER_02: Professional egg marketing here to help with that, not just on the hog feature side, but we'll protect those input costs as well.
• 9:23
  SPEAKER_02: That makes sense for your operation.
• 9:25
  SPEAKER_02: Um, just wanted to end this one off here.
• 9:28
  SPEAKER_02: Um, click the link in the description if you're interested in more uh information like this.
• 9:33
  SPEAKER_02: That we have our daily market commentary that gets sent out.
• 9:36
  SPEAKER_02: Um ProAg Power AI launching here next week for our customers.
• 9:41
  SPEAKER_02: So we'll have our first launch of that on Monday, getting people on with our first to know.
• 9:46
  SPEAKER_02: We've been checking that out.
• 9:46
  SPEAKER_02: Jace and I have, along with uh technical analysis and fundamental data all plugged into our own uh LLM here.
• 9:54
  SPEAKER_02: But uh, if you are interested in that, please reach out on our website or click again, click that link in the description.
• 10:00
  SPEAKER_02: But Jace, thanks for hopping on today.
• 10:02
  SPEAKER_02: Thanks for dealing with the newcomer, and uh, we'll see you next week.
• 10:06
  SPEAKER_01: Thanks, Kate.