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Hog Talk: H and P For Me · 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 Minor.
• 0:26
  SPEAKER_01: Let's crow.
• 0:27
  SPEAKER_01: Today is Christmas Eve.
• 0:29
  SPEAKER_01: Merry Christmas, Jeff.
• 0:31
  SPEAKER_00: Merry Christmas to you, Mike.
• 0:33
  SPEAKER_01: Well, let's start off with an HP report to start our Christmas off.
• 0:36
  SPEAKER_01: We had it yesterday.
• 0:42
  SPEAKER_00: Yeah, pretty bearish compared to expectations, I guess, was the thing.
• 0:46
  SPEAKER_01: Come on, you can't start the podcast like that.
• 0:48
  SPEAKER_01: We got to listen in.
• 0:50
  SPEAKER_00: We've got, I think we've got a little Christmas present today in the futures.
• 0:54
  SPEAKER_00: I think they traded really well compared to what the expectations were, and probably for some good reasons.
• 0:59
  SPEAKER_00: We'll get into that here as we get down the road a little bit further.
• 1:03
  SPEAKER_00: But you know, um Hogs and Pigs report, it's been kind of a tough report.
• 1:06
  SPEAKER_00: Um, I guess personally I I kind of discount the uh the activity you know of the marketplace and how much they really put how much weight they really put on it.
• 1:17
  SPEAKER_00: Um this one happens to match kind of what we were thinking, Mike.
• 1:21
  SPEAKER_00: So now we want to talk about it, right?
• 1:22
  SPEAKER_00: If it's telling our story, it's something we should focus on.
• 1:25
  SPEAKER_01: A lot of the time when the HP comes out or like cattle and feed, it doesn't seem like the market will actually trade it the next day very hard, right?
• 1:32
  SPEAKER_01: Right.
• 1:32
  SPEAKER_01: Today, I mean, we gapped lower on February hogs to open up the day.
• 1:36
  SPEAKER_01: So it I think it definitely had an impact this morning, right?
• 1:39
  SPEAKER_00: We also had the hogs and pigs report combined with um lower cutout.
• 1:44
  SPEAKER_00: And and uh maybe a little bit of a trend going on there.
• 1:47
  SPEAKER_00: I'm trying to grab some data points that aren't you know um very available, meaning we just had a couple days worth of it yesterday, um the day before a bit, and then uh the 11 a.m.
• 1:57
  SPEAKER_00: here this morning all showed lower product value.
• 2:01
  SPEAKER_00: So the two of those combined, I think, is what caused a gap this morning.
• 2:04
  SPEAKER_01: And then throw in low volume around the holidays.
• 2:07
  SPEAKER_00: That makes it a little bit more expensive.
• 2:09
  SPEAKER_00: But worked all the way back to uh unchanged almost on a lot of these markets.
• 2:13
  SPEAKER_01: We technically closed higher today than where we opened the day.
• 2:16
  SPEAKER_01: Sure.
• 2:16
  SPEAKER_01: Not versus yesterday's close, but I mean it m we went up through the trading session at least.
• 2:21
  SPEAKER_00: Yep.
• 2:21
  SPEAKER_00: So I I honestly am very happy with the way the futures traded today, um, considering the information that was flowing at us the last uh day and a half and the volume that's out there here on uh on a holiday week.
• 2:35
  SPEAKER_01: So what made the HMP report bearish?
• 2:37
  SPEAKER_00: It was really the expectations, Mike.
• 2:39
  SPEAKER_00: Um the expectations were showing uh one and a half to two percent lower supply um as far as the average trade guesstimate.
• 2:49
  SPEAKER_00: I think we've seen some folks come in there at um one percent more, but most of the expectations were not there.
• 2:57
  SPEAKER_00: Um and and I think that's the part that's a little bit unrealistic.
• 3:01
  SPEAKER_00: And um you know, in our minds, we have to adjust uh our sights a little bit on this supply thing.
• 3:08
  SPEAKER_00: You know, our benchmark that we're probably a little more comfortable using, Mike, is the current activity as far as kill levels go and what weights are doing.
• 3:19
  SPEAKER_00: Um so we we have spent some time on that this week, if we want to go down that road.
• 3:24
  SPEAKER_00: Um, you know, we've been in a about a six-week, seven-week time frame here where kills have been higher than expected and most certainly way higher than what the uh prior hogs and pigs reports.
• 3:37
  SPEAKER_00: Now that's not new news that pretty much took place from the last report until last week.
• 3:43
  SPEAKER_01: Um but the question was if we were getting ahead of ahead of it or not.
• 3:47
  SPEAKER_00: Yep, and and so and I think we did, we killed a few more than what we needed to in the past few weeks, but here's the numbers.
• 3:55
  SPEAKER_00: Uh if you go six weeks back, you look at six weeks of um of the harvest levels compared to last year, you're running about one and a half percent higher than last year.
• 4:07
  SPEAKER_00: If you go eight weeks um in the rears and and look at that compared to last year, you're running about one percent higher than what you did last year.
• 4:16
  SPEAKER_00: Now, we kind of like this one percent more um type of estimate, and that happens to line up pretty well with what the hogs and pigs report showed us this week, Mike.
• 4:26
  SPEAKER_00: The reason for that is the past two weeks, it looks like we've we've done some pretty good work as far as reducing the average weight, and especially on the producer side.
• 4:37
  SPEAKER_00: I know we've got some producers out there maybe more worried about um their weights today than what they were a week ago and two weeks ago, but as the national data goes, um they're showing us making some progress as we've put in some of these 2.7 and some change kills under our belt.
• 4:55
  SPEAKER_00: And that would suggest, hey, you know, we don't have two to two and a half percent more pigs out there, but it sure looks like we've got a pretty um good set of information here suggesting that one and a half to one percent more pigs um being going through the plants than what we saw last year is probably getting to be really really reality here.
• 5:16
  SPEAKER_01: Where do you think that one, two percent came from?
• 5:19
  SPEAKER_00: Probably mostly production.
• 5:21
  SPEAKER_00: Um I I do believe that uh we've got a few more sows around today than what we did a year ago.
• 5:28
  SPEAKER_00: There are some repops that are coming back in line.
• 5:31
  SPEAKER_00: Um, just in general, when you we all know that when we have margins um the way that we've had them, and and hog fundamentals price fundamentals the way that they've been going on just a little over a year ago now.
• 5:44
  SPEAKER_00: The point in time that I continue to look at is about the first of October, one year ago, was when things started looking better um than than expected, and it's been that way, you know, going on 14 months now, right?
• 5:56
  SPEAKER_00: So any time in history when that has happened, we've added some supply.
• 6:02
  SPEAKER_00: That's where I think we've probably I don't think we should be surprised um if we have a few more sows around.
• 6:08
  SPEAKER_00: Um if and and productivity has a incredible history.
• 6:13
  SPEAKER_00: Only time that it actually went sideways to lower was through COVID, Mike.
• 6:17
  SPEAKER_00: Otherwise we always make more pigs per sow per weaning than what we did the year prior.
• 6:24
  SPEAKER_01: Major expansion, like you talked about though, probably not the two and a half percent.
• 6:28
  SPEAKER_01: I mean, we don't see any major expansion at all in this.
• 6:31
  SPEAKER_01: I mean, inflation's still expensive with building a new building and and those type of items.
• 6:36
  SPEAKER_01: I mean, we don't see anything like that.
• 6:38
  SPEAKER_00: There are some sow units that are gonna be getting built and are getting built.
• 6:42
  SPEAKER_00: Um you know, I I I don't know that it's gonna creep anywhere close to two percent, but there is some of that taking place.
• 6:50
  SPEAKER_00: So let's be a little careful not to assume that the the the number is zero, um, and not to assume that we're we're putting any sort of uh sow herd um expansion in place today, Mike.
• 7:02
  SPEAKER_00: I think there's gonna be some of that taking place.
• 7:04
  SPEAKER_00: I it's not gonna be the 2016 to 2018 era where we put two percent more on the sows every year, and then we put one percent more on the pigs per little productivity in it, and it really, really had a heavy blanket on the prices.
• 7:22
  SPEAKER_00: It won't be that, but I think there'll be some expansions in the in the you know 12 to 24 months to come.
• 7:28
  SPEAKER_00: Yeah, that's you know that's the other thing.
• 7:30
  SPEAKER_00: It takes takes more time.
• 7:31
  SPEAKER_00: It's it's more expensive, but also takes more time and or by the time you start building and and making a market ready pig.
• 7:39
  SPEAKER_01: And that's not just getting rid of the the oldest ones and starting new ones, right?
• 7:44
  SPEAKER_01: I mean, this is uh this is a a little bit of expansion, but maybe we'll lose some over here and gain some here type of.
• 7:51
  SPEAKER_01: For sure.
• 7:52
  SPEAKER_01: Yeah.
• 7:52
  SPEAKER_01: Yep, for sure.
• 7:53
  SPEAKER_01: Not perfectly offset by any means, a little bit of a gain though.
• 7:56
  SPEAKER_00: That's usually the the other his history that we have on that.
• 7:59
  SPEAKER_00: That's usually the case if we're building something we're maybe not getting rid of, you know, not getting rid of the old quite as fast.
• 8:06
  SPEAKER_00: You know, if if margins are good and and uh wean pig prices are good and hard to come by, it's really easy to try to keep, you know, maybe you stop breeding, but maybe you keep producing for you know another few months here, or maybe you do breed another couple rounds here and just don't bring any new guilt in, right?
• 8:24
  SPEAKER_00: So we're we're definitely seeing some of that take place and you know health will be the driver on that.
• 8:30
  SPEAKER_00: So if we get into some pretty major health um issues, those those older units will shut down faster, of course.
• 8:37
  SPEAKER_01: Any final thoughts on hogs here to wrap up?
• 8:39
  SPEAKER_00: Well, let's jump into the the what the hogs and pigs report did say.
• 8:42
  SPEAKER_00: You know, we ran all hogs and pigs inventory and basically up 0.6%, so kind of in that 1% area.
• 8:49
  SPEAKER_00: Um all kept for marketing is gonna be right about 1% greater than what it was last year.
• 8:55
  SPEAKER_00: The the heavyweight category was uh 2.8% higher than it was last year.
• 9:00
  SPEAKER_00: Uh so that kind of matches what some of the very recent um uh kill speeds have been.
• 9:07
  SPEAKER_00: Um all the younger weights, um, right around that one percent more type of number.
• 9:13
  SPEAKER_00: The pigs per litter, that one was right at last year's number.
• 9:17
  SPEAKER_00: So we didn't see an increase in pigs per litter as far as the hogs and pigs report goes.
• 9:22
  SPEAKER_00: The kept for breeding, the sow inventory, one percent less than last year.
• 9:28
  SPEAKER_00: Um that one we probably struggle with a little bit, Mike.
• 9:30
  SPEAKER_00: Um, kind of got to believe that we're seeing at least the same same number on in the sow herd, you know, this time compared to what we did a year ago.
• 9:38
  SPEAKER_00: And the other thing I wanted to quick talk about is, you know, I I feel solid enough about the estimates that we're making on this hogs and pigs report.
• 9:47
  SPEAKER_00: Um, more importantly, probably the estimates and the the actual data that we're able to put together on the past uh month and a half to two months of um harvest speed compared to what we saw a year ago, compared to the weights.
• 10:03
  SPEAKER_00: Um we put all that together.
• 10:05
  SPEAKER_00: Um I think you can feel pretty good about making some projections into next year, into 2026, Mike, at least the first half.
• 10:14
  SPEAKER_00: Um our expectations that we're gonna have at least the same number of pigs going through the the supply chain as what we saw a year ago, probably gonna be a smidgen more, right?
• 10:26
  SPEAKER_00: We're looking to, in my mind, we're we're looking at a 1% increase, and you probably push that expectation out through most of 2026.
• 10:35
  SPEAKER_00: Now, admittedly, um, you know, health the health story will still be getting written over the next few months from a seasonal perspective, but that would I think you gotta punch in a 1% increase as you think about the big picture.
• 10:50
  SPEAKER_00: Think about supply um in the next six to twelve months.
• 10:54
  SPEAKER_01: All right.
• 10:55
  SPEAKER_01: Well, thank you for your time.
• 10:56
  SPEAKER_01: Merry Christmas out there for everybody uh catching in on this week.
• 11:00
  SPEAKER_01: And uh we'll be back to work on Friday.
• 11:02
  SPEAKER_01: We will have uh normal day trade session through Friday.
• 11:06
  SPEAKER_01: Uh nothing here tomorrow, obviously, with the holiday or uh or tomorrow night.
• 11:11
  SPEAKER_01: So we'll reopen Friday morning and with lower volume.
• 11:15
  SPEAKER_01: Some of those days I think are are very interesting trading sessions, Jeff.
• 11:19
  SPEAKER_01: So some key resistance points out there.
• 11:21
  SPEAKER_01: Keep an eye on that market, and we appreciate your time.