Latest / Professional Ag Marketing Podcast / Lots of Red in the Markets | Hog Market Talk May 21st, 2026

Transcript

Lots of Red in the Markets | Hog Market Talk May 21st, 2026 · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Hog Market Talk Podcast.
• 0:05
  SPEAKER_00: Your weekly deep dive into hog market fundamentals, breaking news, and industry insights.
• 0:12
  SPEAKER_00: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 0:22
  SPEAKER_02: All right.
• 0:22
  SPEAKER_02: Today is May 21st, and I've got Pat with us here today.
• 0:25
  SPEAKER_02: How's it going, Pat?
• 0:26
  SPEAKER_02: Good, Mike.
• 0:26
  SPEAKER_02: How are you this afternoon?
• 0:28
  SPEAKER_02: Great.
• 0:28
  SPEAKER_02: We've got some uh interesting topics to talk about today.
• 0:31
  SPEAKER_02: We're gonna talk a little bit just about some of the Iran news that kind of took place today because I was all over the board.
• 0:37
  SPEAKER_02: Uh, I want to touch on just the situation with cattle here a little bit, just because of the crazy day we had there with the limit move, and then work our way into talking about the uh hog space here, Pat.
• 0:48
  SPEAKER_03: Sounds like a good idea.
• 0:49
  SPEAKER_03: We've got a lot of red on the screen today.
• 0:51
  SPEAKER_03: We might be getting punished for waiting a day to do our podcast, Mike.
• 0:55
  SPEAKER_03: Do you think?
• 0:55
  SPEAKER_02: We might be.
• 0:56
  SPEAKER_02: I think that's part of it that we're coming out on a Thursday.
• 0:59
  SPEAKER_02: Uh June specifically on the hog market, Pat.
• 1:03
  SPEAKER_02: Uh, that wasn't very kind today, was it?
• 1:05
  SPEAKER_03: No, it was uh a tough day.
• 1:06
  SPEAKER_03: And again, sort of across the board there.
• 1:08
  SPEAKER_03: But yeah, June hogs uh down hard there at 215 and and uh maybe just giving up a little bit.
• 1:15
  SPEAKER_03: Uh we continue to experience uh um uh struggling cutout values here, flat to lower cutout values, and and uh no doubt about it, um it's the time of year where if the thing's gonna take off and go, it should be taking off and going.
• 1:32
  SPEAKER_03: Now, having said that, we also shouldn't overanalyze uh you know, going uh through a holiday week here, and we very easily could have already been seeing on this Thursday afternoon uh um a little bit of just reduced trading activity with folks looking for a long weekend.
• 1:48
  SPEAKER_02: For sure.
• 1:48
  SPEAKER_02: I think that flat cutout from this point on would be the concern, at least from a lot of traders as they look.
• 1:55
  SPEAKER_02: But the calendar would say it it should be a ticking by now.
• 1:58
  SPEAKER_03: Well, and then uh yeah, this is the week a year ago where it did it did take off, and and two years ago it really never did.
• 2:05
  SPEAKER_03: And so that's uh um that no doubt is is how you know all of us are looking at at this right now, is trying to determine if if um if uh this summer ends up behaving like last summer, where you get uh a more typical normal, you know, summer sort of a run, or or is it more like 2024 where where um we just really couldn't get things going?
• 2:27
  SPEAKER_03: And you know, Mike, it is worth noting from a supply side perspective um that weights have remained elevated here, um, and likely a little bit on purpose.
• 2:38
  SPEAKER_03: I mean, all of us are wanting to uh um hold inventory, um maximize weight opportunities uh going into the summer market here with margin over feed costs being positive.
• 2:51
  SPEAKER_03: Um, and it also might be just a a little bit of uh of uh of doing it uh on purpose from the standpoint of just trying to cover up some production shortfalls that are coming at us here.
• 3:03
  SPEAKER_03: And uh, you know, one of the items of note here that we've talked about is that uh um, you know, baby big baby pig prices um have remained at elevated levels here relative to the market opportunity and deferred slots.
• 3:16
  SPEAKER_03: And so um if or when we start to tighten things up a little bit, I think it's worth noting that we believe that uh at least the supply side of this thing can eventually be a little bit of a tailwind for us and a bit more supportive, but we really haven't seen that up till this point either.
• 3:33
  SPEAKER_03: Pork production has um has maintained at levels slightly above a year ago with weights considered.
• 3:39
  SPEAKER_02: Does last week tell us anything?
• 3:41
  SPEAKER_02: I know we were down a couple days at some plant at a plant there, lost a little bit of kill.
• 3:45
  SPEAKER_02: We had to make up for it this week, but our folks going through this week just hoping we're gonna see a little response out of the meat market on the case.
• 3:52
  SPEAKER_03: Well, those pigs, I mean, those pigs are still around, of course, and and and so and then add a little more weight to them besides.
• 3:58
  SPEAKER_03: And so, um, so yeah, I mean that's the whole story.
• 4:01
  SPEAKER_03: We should be seeing a little bit uh of movement in cutout here, um, and we haven't yet.
• 4:07
  SPEAKER_03: And and so um, you know, we'll see.
• 4:09
  SPEAKER_03: We'll see how the week it goes through the weekend here, and and uh maybe we'll have better disappearance than what's expected at the retail sector.
• 4:16
  SPEAKER_03: And you know, it's you know, I guess a silver lining in all of this is that it's uh it's the belly primal that's um that's that's holding uh cutout lower here currently.
• 4:27
  SPEAKER_03: And I say silver lining because I um bellies have the best opportunity um to be reactive to tighter supplies as we go forward here.
• 4:37
  SPEAKER_03: Um belly demand historically is pretty inelastic, and so um, and so if we get again these tight tighter seasonal supplies, we should expect that belly prile to be able to show some strength pretty easily.
• 4:49
  SPEAKER_02: Good point.
• 4:50
  SPEAKER_02: Good point on that front.
• 4:51
  SPEAKER_02: Uh, what else do you got on the hog market here that you'd like to focus on?
• 4:54
  SPEAKER_02: Well, we've hit her pretty hard.
• 4:55
  SPEAKER_03: Why don't we talk about some of those macro things here and and uh and see where we can go from there?
• 5:00
  SPEAKER_02: So it we started the morning out talking uh about some headlines, Pat, that revolved around Iran wanting to keep all their your uranium in-house still.
• 5:10
  SPEAKER_02: They didn't want to give it up.
• 5:11
  SPEAKER_02: So the oil market ran a little bit, the grains ran with it, and the stock market got punished a little bit after a big day yesterday.
• 5:18
  SPEAKER_02: So money flow kind of doing all the right things for the headline that we were given.
• 5:22
  SPEAKER_02: And as we went through the day, it really appeared that all of a sudden something happened and the markets flipped in all of those capacities.
• 5:29
  SPEAKER_02: And it was all right around like 1210 uh central time here.
• 5:33
  SPEAKER_02: And it was announced that the final draft of the US Iran agreement had been reached uh with the mediation of Pakistan.
• 5:41
  SPEAKER_02: And that was expected to come out within the next few hours.
• 5:44
  SPEAKER_02: Um and that was for that was per the Iran state media as well, which uh sadly has been one of the more accurate, uh reliable news sources as of late, uh, ironically.
• 5:56
  SPEAKER_02: So we're waiting on some news here, but the the crude oil market got hit by the end of the day going into the close for the grains, those backed off as well.
• 6:04
  SPEAKER_02: So that really controlled some of the outside market flow that we saw throughout the day.
• 6:09
  SPEAKER_02: The more interesting long-term story on this, because I do believe you're gonna continue to see this back and forth a little bit with this Iran deal, you know, uh before this is all over with.
• 6:19
  SPEAKER_02: The more interesting space, I think, regarding uh just longer-term fund money flow in these commodities is inflation.
• 6:27
  SPEAKER_02: This week specifically, you continue to hear more and more stories about the uh percent chance of a rate hike now at some point this year is at like 37%.
• 6:36
  SPEAKER_02: So that's gone up dramatically.
• 6:38
  SPEAKER_02: 30-year loans on houses is up to six and a half percent.
• 6:42
  SPEAKER_02: Uh, and now, as you saw, even this morning when crude oil was going up, the market was concerned, especially on like the beef side, that they weren't gonna have enough money going into the summer to take a vacation and fill up the tank or eat that expensive steak, Pat.
• 6:56
  SPEAKER_02: And it it felt like that that inflation hedge as some of those commodities like crude oil really ran with it.
• 7:03
  SPEAKER_02: It looks like it's starting to actually scare the beef side a little bit, Pat.
• 7:07
  SPEAKER_02: What do you think about how the market seems to be preparing itself for some of the summer trim trade?
• 7:12
  SPEAKER_03: Well, this might be the time, right?
• 7:14
  SPEAKER_03: And and I um I mean that combination of uh of a buck a gallon on gas, and then you uh I mean if they actually do also raise interest rates at some point, and I I mean that that's gonna I I would that's gonna put an incredible amount of pressure on the consumer.
• 7:31
  SPEAKER_03: And so um we'll wait, we'll see how that all works out.
• 7:34
  SPEAKER_03: You and I have had a lot of discussions about uh about how that could look, you know, thinking about the impact of economic activity six months out.
• 7:43
  SPEAKER_03: And and I would just submit to you that there's a fundamental difference between a supply side inflation problem and a demand side inflation problem, and and uh you know, leave that for another discussion someday.
• 7:54
  SPEAKER_03: But but um, you know, as it relates or impacts the cattle complex in particular, which I mean I think it's a great point and a great discussion, um, again, this might be the time, right?
• 8:05
  SPEAKER_03: This might be the time where record high box beef prices um um starts to have a negative impact on demand.
• 8:13
  SPEAKER_03: And it frankly hasn't up until this point.
• 8:16
  SPEAKER_03: And so, and so we'll see.
• 8:18
  SPEAKER_03: Um, you know, the cattle market is nervous enough, behaving uh um more volatile than than than normal, and that's saying something, and and um also seeing some significant moves and significant significant sell-offs here again today.
• 8:35
  SPEAKER_03: Um, and it might be just as simple as um, you know, the trade being concerned about what's going on in Fort Morgan and and the Cardgill plan out there.
• 8:45
  SPEAKER_03: And, you know, as you mentioned, there's been some rumors of of potentially a permanent closure.
• 8:50
  SPEAKER_03: I'll just say as a as a as a a veteran of the Cardgill system, uh had the opportunity to spend 10 years with that company some years ago, but they're uh they would be the ones, they're disciplined and and uh and uh are able to make uh um some of those longer-term decisions in in a way that uh um is is a bit more objective than others, I would argue.
• 9:13
  SPEAKER_03: So um so we'll see what happens.
• 9:15
  SPEAKER_03: And we also just say, we've talked about this a lot um as we've gone through the winter months here, but but um you know there's uh the cow calf guy is is getting up 130 percent of the margin structure these days, right?
• 9:29
  SPEAKER_03: His his uh um there's a there's a nice gap, um, there's a nice gross margin between uh um input cost, corn to uh and grass, to uh on what box beef is trading at.
• 9:43
  SPEAKER_03: And the cow calf guy is able to capture a pretty good chunk of that, but he's also uh dipping into feedlot margins and packer margins as well.
• 9:52
  SPEAKER_03: And so um this uh uh the current uh structure of excess packing capacity relative to uh underlying supply likely does need to change.
• 10:03
  SPEAKER_03: If this is um if this uh the the this is the where it changes here, it uh um it would maybe make sense, right?
• 10:12
  SPEAKER_03: And so we'll we'll see how that goes.
• 10:14
  SPEAKER_03: Um we also know that feedlots are struggling to to maintain their their capacity.
• 10:19
  SPEAKER_03: And so anyway, um this sell-off in the cattle complex might might be as simple as um just needing to get things fixed a little bit internally in the industry, just the allocation of revenue from cow calf through feedlots through packers, or it might be an indication of something more significant, right?
• 10:37
  SPEAKER_03: Some some actual uh um sell-off or or reduction in consumer demand.
• 10:42
  SPEAKER_03: And so we'll see how that goes.
• 10:44
  SPEAKER_03: I know from a from a pork complex perspective, I keep thinking that that at least for a while can be another little tailwind for the pork complex.
• 10:53
  SPEAKER_03: Uh um if the U.S.
• 10:55
  SPEAKER_03: consumer um, because of higher gas prices and and uh more expensive money and other inflation isn't quite as able or apt to be taking trips this summer and eating out and all that.
• 11:07
  SPEAKER_03: Uh um focusing uh um on consuming protein through the retail sector, through the grocery sector, generally is a good thing for pork, um, especially now.
• 11:17
  SPEAKER_03: Uh, you know, we're seeing some nice stories of fresh pork uh and ground pork and and fresh pork products being featured in in grocery stores.
• 11:25
  SPEAKER_03: And so, and so you uh you know the pork complex could be very well suited um to take advantage of some of these uh concerns that we have from a macro perspective.
• 11:35
  SPEAKER_02: I've always wondered this, Pat.
• 11:36
  SPEAKER_02: So they say uh uh cheaper protein, like like uh like pork, for example, benefits maybe when folks are a little bit more conscious about spending money uh versus like beef.
• 11:47
  SPEAKER_02: Does that help pork just stay at a level where it's at today if beef starts to head lower, or does it actually support that cutout you think?
• 11:56
  SPEAKER_03: Well, it can support it, but this is a that's a challenging window that you sort of want to try to live in, right?
• 12:01
  SPEAKER_03: Yeah, you want some reduced economic activity to increase pork consumption, but you don't want the economic activity to be reduced so much that we just plain stop eating protein, right?
• 12:11
  SPEAKER_03: So so that's a that's a narrow window to sort of take advantage of, but it potentially could could provide support, particularly from the levels that we're trading at today.
• 12:20
  SPEAKER_02: The story continues with just there's a lot of stories.
• 12:23
  SPEAKER_02: There's a lot of balls in the air for a lot of these markets, uh, a lot of volatility.
• 12:27
  SPEAKER_02: It's the right time of the year for volatility too.
• 12:30
  SPEAKER_02: So I I know that the markets usually do get a little bit crazy around the end of May, whether you're looking at the the lean hog market or the grains market uh uh or the cattle market, but just in general, it seems a little bit more this year, doesn't it?
• 12:46
  SPEAKER_02: For at least things moving this market.
• 12:48
  SPEAKER_03: Yeah, I think so.
• 12:49
  SPEAKER_03: And I I mean I think you can make the same argument on the input side of things, right?
• 12:52
  SPEAKER_03: I mean, I I we're off to a relatively good start um you know as it relates to the the corn crop here, but you know, the folks in Nebraska would say, hey, it's pretty dry out here, and the folks in Ohio would say, hey, it's pretty wet out here, right?
• 13:06
  SPEAKER_03: So so I think to your point, right, that there's there's plenty of things to to talk about and things to trade if if the market wants to do it.
• 13:16
  SPEAKER_03: So um probably the thing to do here is to is to uh um accept the long weekend and uh and see how things materialize as we get into next week.
• 13:25
  SPEAKER_02: Well, our smoker will be on Pat.
• 13:28
  SPEAKER_02: Cade, what do you got for us on an update for uh the World Pork Expo?
• 13:33
  SPEAKER_01: Yeah, Mike, thanks for having me on the podcast for once.
• 13:36
  SPEAKER_02: Hey, anytime.
• 13:37
  SPEAKER_01: Yeah, we're introducing our first ever Fiesta Day pig at uh World Pork Expo at Jalapeno Pete's.
• 13:43
  SPEAKER_01: It actually ends up being right behind our tent, if you know where that is.
• 13:46
  SPEAKER_01: If you don't, you're a newcomer, we still invite you to that tent.
• 13:49
  SPEAKER_01: Uh G420 right on the main drag there near the McDonald's truck is where it ends up being.
• 13:56
  SPEAKER_01: But it should be a pretty good time.
• 13:58
  SPEAKER_01: We're gonna start things off at around 3.30.
• 14:00
  SPEAKER_01: Um, hopefully keep it that fiesta theme.
• 14:03
  SPEAKER_01: So some margaritas, some drinks, and uh move things towards uh pork nachos and tacos bar.
• 14:08
  SPEAKER_01: So just celebrating the pork industry and the people in it.
• 14:11
  SPEAKER_01: So we're pretty excited and bring anyone, bring everyone to this event.
• 14:15
  SPEAKER_01: We'll be happy to have you.
• 14:16
  SPEAKER_01: I'll be there.
• 14:20
  SPEAKER_02: Awesome.
• 14:21
  SPEAKER_02: Thank you for your time today, Pat.
• 14:22
  SPEAKER_02: Thanks.
• 14:23
  SPEAKER_02: And please click the link on the description below to get access to our daily market commentary and other market research.
• 14:30
  SPEAKER_02: Uh please go to our uh website as well, professional.com.