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Hog Talk: CME and Me · 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 August 27th.
• 0:28
  SPEAKER_00: I've got Jeff with us here today.
• 0:30
  SPEAKER_00: How's it going, Jeff?
• 0:31
  SPEAKER_00: Good afternoon, Mike.
• 0:32
  SPEAKER_00: Yep, going pretty good.
• 0:33
  SPEAKER_00: Well, the hog market yesterday, I would write up that it had a pretty good technical day.
• 0:38
  SPEAKER_00: We broke out of the uh the July highs, broke above that, and uh broke out of this pennon or wedge pattern that you had over the past two months, Jeff.
• 0:47
  SPEAKER_00: Kind of gave an edge to the bulls.
• 0:48
  SPEAKER_00: You've got slaughter well below last week and last year.
• 0:51
  SPEAKER_00: You've had open interest rise a little bit.
• 0:54
  SPEAKER_00: Uh nice bullish signs there.
• 0:57
  SPEAKER_00: But also the CME index, uh lowest we've seen since the middle of July as well.
• 1:02
  SPEAKER_00: So just a few things I wanted to chat about today, Jeff.
• 1:05
  SPEAKER_00: What do you see on the CME index to start off with?
• 1:08
  SPEAKER_01: Well, I think you know, we do have that slipping a little bit here, and a a big uh you know, a big item that the market's trying to deal with, which isn't ca uncommon for this time of year, of course, is you know, the discount that October futures is trading compared to where the nearby fundamentals are, which gets wrapped up into the CME index, of course.
• 1:29
  SPEAKER_01: So that's something we're watching really closely.
• 1:32
  SPEAKER_01: Um as that index has slipped, which has you know really been a little bit of a little bit more about cash than what I would have expected.
• 1:38
  SPEAKER_01: You know, you look at the product values, we haven't really beat them up too much, like week over week, but the index slips uh just a little bit more than I thought it would.
• 1:47
  SPEAKER_01: It got under 107 here.
• 1:49
  SPEAKER_01: Uh so with the recent rally on the October futures, you know, pushing up against 94, um, you've closed that gap.
• 1:58
  SPEAKER_00: They're coming together a little bit, aren't they?
• 2:00
  SPEAKER_01: Now, yeah, actually fairly normal fashion.
• 2:03
  SPEAKER_01: I keep thinking that's gonna be hard to continue with.
• 2:07
  SPEAKER_01: I I keep thinking this index and product values, especially, and even cash to some extent, are gonna continue to be higher longer than what would be considered normal.
• 2:18
  SPEAKER_01: Um, and and I guess you could argue that is happening.
• 2:21
  SPEAKER_01: Um, it's just the the October futures is starting to respect that and and closing that gap a little quicker than I thought.
• 2:28
  SPEAKER_01: Um interesting about that as we look at the history on the difference between index and and futures in this time frame, it it'll get to like five dollars, five, six dollars is what history would say by the third of September.
• 2:45
  SPEAKER_01: So it really changes quickly here.
• 2:47
  SPEAKER_01: Um that would indicate if you don't see some uh lower product values that you're gonna, you know, have to have futures continue to roar higher.
• 2:59
  SPEAKER_00: Um product's been incredibly directionless, it seems like, in my opinion.
• 3:04
  SPEAKER_00: 112 to 115.
• 3:06
  SPEAKER_00: I mean, it just stays there, it seems like.
• 3:08
  SPEAKER_01: Certainly this for this time of year the graph looks pretty abnormal.
• 3:12
  SPEAKER_01: Um maybe didn't peak quite as high as some of the other years the in the comparison since uh COVID, but now is running quite a bit flatter, which you know, interesting observation, Mike, that we see that more often in this hog business in the last year and a half than what we've seen.
• 3:29
  SPEAKER_01: That's been a trend the last couple years.
• 3:31
  SPEAKER_01: Yep, and I think so the supply situation maybe continues to get just a little bit more level, and we see some signals of you know this industry leveling out a little bit.
• 3:40
  SPEAKER_01: Um but you know, as I look at uh where October pigs are at today, you know, where the the steadiness of the cutout values is is pretty bullish the October futures, but uh we've we're doing some things to change that in my opinion.
• 3:57
  SPEAKER_01: Uh this cutout staying in this 112, 113 area is almost 100% due to a small supply not saying much about the demand at all in my mind.
• 4:12
  SPEAKER_01: We are running some pretty low kills, keeping them right around this 2-4 area, nothing on Saturdays to speak of, a little short during the week.
• 4:21
  SPEAKER_01: Um, you know, going into Labor Day, we're gonna do that right into Labor Day holiday here.
• 4:27
  SPEAKER_01: Um that I I think we should be killing a few more hogs than that.
• 4:32
  SPEAKER_01: Um and you know, I think we'll put on some Saturdays right after Labor Day, of course, might be a little slow there too, based on recent activity from the Packers side, and the temperatures have really changed dramatically.
• 4:47
  SPEAKER_01: Uh it all of a sudden feels very much like fall all the way from here to Missouri, you know.
• 4:52
  SPEAKER_01: So pigs are gonna be growing.
• 4:54
  SPEAKER_01: Um kills are a little bit low.
• 4:57
  SPEAKER_01: I wouldn't be surprised if we come into a little bit more supply as we get into September here.
• 5:03
  SPEAKER_00: You are right from a seasonal perspective.
• 5:05
  SPEAKER_00: Those back months, even once you get to December, they're historical-wise, we're gonna start holding those back quite a bit.
• 5:13
  SPEAKER_00: Uh December, for example, even the highest close ever in 2014.
• 5:17
  SPEAKER_00: You came off the board 87 and a half.
• 5:19
  SPEAKER_00: We bumped over 87 today on the December.
• 5:22
  SPEAKER_00: So a historical context, I guess, is gonna try to hold some of those winter months back, probably against if October, for example, up front is gonna try to go up here a little bit towards what high 90s, something like that, if it tried.
• 5:35
  SPEAKER_01: So that'll be a relationship to watch as well between it'll spread out against the December, is what you're saying, if it if it wants to go up from here.
• 5:43
  SPEAKER_00: It should try to.
• 5:43
  SPEAKER_00: There should be a limiting factor, you would think, on those December, February type contracts going forward from these type of levels.
• 5:50
  SPEAKER_00: I think you're probably right about that.
• 5:52
  SPEAKER_00: Not if cutout's gonna stay up here forever, I guess.
• 5:55
  SPEAKER_00: Any other final thoughts today on the hog market?
• 5:58
  SPEAKER_01: Well, the other thing I've been watching, Mike, is you started out talking about technicals and stuff, and you know, kind of watching the cattle market and today more than anything relative to the hogs, and they did seem to travel together uh fairly well.
• 6:12
  SPEAKER_00: Um I just can't help but think A disclaimer here, you really have to watch that cattle market closely to keep an eye on it these days with how fast it moves.
• 6:20
  SPEAKER_00: That had a heck of a range again today, didn't it?
• 6:22
  SPEAKER_01: Yeah, yeah, you really gotta appreciate that.
• 6:25
  SPEAKER_01: Um, I think for a while we were up to four dollars higher.
• 6:28
  SPEAKER_01: We actually got cl we traded some of the back months red for a bit.
• 6:32
  SPEAKER_01: I don't think we ever got October and December there, but big range again.
• 6:36
  SPEAKER_01: And clearly the hogs didn't have anything close to that sort of range, but as you watch that range happen, pigs were kind of moving back and forth in the same type of a manner.
• 6:46
  SPEAKER_00: I can't think they have a similar fun position.
• 6:50
  SPEAKER_00: I mean, they're very long corn or very long cattle, very long hogs.
• 6:53
  SPEAKER_00: I mean, the managed money is pretty much the same.
• 6:56
  SPEAKER_01: That's probably can the connecting piece, but yeah, I gotta believe if you got if if cattle are gonna be you know 240 plus, somebody's out there thinking, well, I better buy some December hogs at 86.
• 7:09
  SPEAKER_00: That's just a pork producer in you speaking, Jeff.
• 7:12
  SPEAKER_01: Dreaming, you're saying.
• 7:14
  SPEAKER_00: Logically, the the cattle futures just goes up because they want to at this point, don't they?
• 7:18
  SPEAKER_01: They definitely have a mind of their own.
• 7:20
  SPEAKER_00: Yes, it's a tough one.
• 7:21
  SPEAKER_00: All right.
• 7:22
  SPEAKER_00: Well, thank you for your time today, Jeff.
• 7:24
  SPEAKER_00: I appreciate it.
• 7:25
  SPEAKER_00: This hog market finally got some excitement in it here yesterday after a very, I gotta say, just boring stretch here in this futures market for the last uh probably since the middle of July, I would almost argue, Jeff.
• 7:37
  SPEAKER_00: It's it's been a quiet one, hasn't it?
• 7:39
  SPEAKER_01: Yep, it's all about the whether the the rate of descent of things like product and then the cash market.
• 7:45
  SPEAKER_01: It's not, I'm sure we'll be weaker in the days to come, um, but just how much compared to is what's going to drive that October futures.
• 7:54
  SPEAKER_00: All right.
• 7:54
  SPEAKER_00: Thank you for your time.
• 7:56
  SPEAKER_00: And thank you to all our listeners.
• 7:58
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 8:01
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 8:06
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 8:12
  SPEAKER_00: See you next time.