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Hog Talk: Left Out · 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 8th.
• 0:28
  SPEAKER_00: I've got Jeff with us here today.
• 0:29
  SPEAKER_00: How's it going, Jeff?
• 0:30
  SPEAKER_01: Hi Mike.
• 0:31
  SPEAKER_01: Things are going good.
• 0:33
  SPEAKER_00: Well, especially for the cattle feeders in the room, once again, Jeff, that market took off like a rocket ship once again.
• 0:39
  SPEAKER_00: It seems like uh, you know, this is a hog podcast, but I feel uh like we just can't leave out gold or feeder cattle when we see these markets doing what they're doing, Jeff.
• 0:49
  SPEAKER_01: Yeah, I think there's a a classic example going on of money movement in the marketplace, and I'll let you hit on that here in just a moment.
• 0:57
  SPEAKER_01: But um record new highs here, I think April fats on back, new record high, new contract highs, um, and and also I think in all of the feeder cattle markets.
• 1:12
  SPEAKER_01: Um the what's really been interesting, and this leads into your conversation, Mike, is we've been pushing those deferred cattle futures up quite a bit.
• 1:26
  SPEAKER_00: What is going on with these spreads in that cattle market?
• 1:28
  SPEAKER_01: Well, it's really impressive.
• 1:30
  SPEAKER_01: I mean, even today you look at the very front month, which you could argue maybe this is deceiving, but I I think it it might not be because um you know October fat cattle, of course, representing what the front-end fundamentals look like there.
• 1:44
  SPEAKER_01: Um and push that out to even next August, and you would you would say those two are in very normal relationship with each other.
• 1:53
  SPEAKER_01: A year from now, cattle feeders, futures, are in a normal relationship to the nearby.
• 1:59
  SPEAKER_01: That has not been true, um, boy, back eight months probably.
• 2:05
  SPEAKER_01: Um otherwise it's been front end has been pushing way harder than the back end.
• 2:10
  SPEAKER_01: I think there again is a signal of money flow, Mike.
• 2:14
  SPEAKER_01: Money wants to get into this cattle market.
• 2:16
  SPEAKER_00: It's interesting, because like uh feeder cattle, for example, this market's been ripping higher the past, let's say, four days.
• 2:23
  SPEAKER_00: The spreads have all weakened in that feeder cattle market.
• 2:27
  SPEAKER_00: So it I think it's just interesting based upon they're almost buying it for time frames that they like rather than we're rallying this market and we're buying the front three markets fastest and and running with you know it's it's not um it's abnormal, I think, compared to a we want to be long commodities into next summer, so let's go buy next summer's cattle.
• 2:49
  SPEAKER_00: Yeah, it's interesting.
• 2:50
  SPEAKER_01: Yep.
• 2:50
  SPEAKER_00: Yep.
• 2:51
  SPEAKER_00: In the gold market, I mean the gold, uh what a milestone here.
• 2:55
  SPEAKER_00: We shattered the uh four thousand dollar milestone on gold.
• 2:59
  SPEAKER_00: The silver bets are at record high as well.
• 3:02
  SPEAKER_00: Investors really seem to be rushing to safety here, Jeff.
• 3:05
  SPEAKER_00: Gold's up 54% so far this year, and that was before uh the last uh day's move here.
• 3:11
  SPEAKER_00: Um this is an incredible rally that we've really put together here.
• 3:17
  SPEAKER_00: We've had the the gold strength really, this is just reflecting everything that's been extremely positive macroeconomic and geopolitical background for just safe haven assets.
• 3:30
  SPEAKER_00: And and when we look forward, I think, to what's moving this market right now and going forward, it's you're looking at all this uncertainty.
• 3:38
  SPEAKER_00: The government shut down, you're running towards safe haven, you're debasing, you're playing debased currency type investment strategies like crazy.
• 3:48
  SPEAKER_00: Um, Bitcoin's running high.
• 3:51
  SPEAKER_00: Uh investors are really hedging against things like a recession, not by getting out of equities by any means and and capitalizing on those gains.
• 4:02
  SPEAKER_00: They're just making sure they're hedging their bets, and they're doing it in a huge, huge way, I think.
• 4:09
  SPEAKER_00: And uh this has m ran us into some incredible rallies.
• 4:13
  SPEAKER_00: And I think, like you said, they're running towards other commodities with fantastic fundamentals like feeder cattle, for example.
• 4:20
  SPEAKER_00: Um one of the areas that we're probably not seeing money run flow this week to is the lean hog market, Jeff.
• 4:28
  SPEAKER_01: Well, that's what we're leaning up to, of course.
• 4:30
  SPEAKER_01: Um, you know, to pile on your discussion and equities are having a pretty good week here so far, too.
• 4:36
  SPEAKER_01: But um, yeah, the the the hogs unfortunately have, I think, been sitting on the sidelines for the most part in the past ten days or so as far as any of this money flow into some of these um fundamentally strong uh commodity markets.
• 4:52
  SPEAKER_01: Um and that's largely because we have flipped over the fundamentals on the hog side.
• 4:57
  SPEAKER_01: Um everything, you know, very much seasonal is the way I keep describing it.
• 5:02
  SPEAKER_01: And that's and I think that's remains true as we see product values again down a couple dollars, two dollars twenty cents, I think it was here this afternoon, um, pushing just under 104.
• 5:15
  SPEAKER_01: Um that's gonna be one of the lower levels that we've saw uh going back to last spring.
• 5:20
  SPEAKER_01: Um so you know, fundamentally they're very seasonal.
• 5:24
  SPEAKER_01: We're getting into a few more numbers.
• 5:26
  SPEAKER_01: That market's looking a little bit more soft.
• 5:30
  SPEAKER_01: Uh, a little bit extra production is making the uh product values seem a little bit soft, and then you know, unfortunately, that that's getting us to miss out on uh some of this money flow coming into these commodity markets.
• 5:45
  SPEAKER_00: What else can you tell us about outside of just money flow?
• 5:50
  SPEAKER_00: Let's talk about the internal fundamentals on this hog market.
• 5:52
  SPEAKER_00: We've gone lower the last few days.
• 5:55
  SPEAKER_00: Um we could start with cutout, anyways, another rough, rough print last night or this this afternoon here, down another two plus dollars.
• 6:03
  SPEAKER_00: Uh meanwhile, the beef market seems like choice beef has bottomed and and we've started to rally here the last few days.
• 6:11
  SPEAKER_00: Uh pork doesn't look really look like the case, does it?
• 6:14
  SPEAKER_01: No, it it it doesn't.
• 6:15
  SPEAKER_01: And it comes back to you know pretty big increase in um production um that really started here right around the first part of September, but it's become more and more true back after September, first part of September.
• 6:30
  SPEAKER_00: Numbers or weights or both?
• 6:31
  SPEAKER_01: Yep, both.
• 6:32
  SPEAKER_01: Uh and again, not anything too detrimental.
• 6:35
  SPEAKER_01: I would just say very normal for this time of year, wherever as we went through August into the first part of September, things were abnormally short.
• 6:43
  SPEAKER_01: Supply was abnormally short, weights were down, uh, especially on the packer-owned side.
• 6:47
  SPEAKER_01: And that that's all changing.
• 6:48
  SPEAKER_01: Packers have been adding some weight to their pigs.
• 6:51
  SPEAKER_01: Um, some of the most recent data points is maybe showing that flattening off some or maybe even decreasing a little bit on the packer-owned weights, but I don't think that'll be the trend.
• 7:00
  SPEAKER_01: Producer owned weights have just been we've been continuing to pound higher there.
• 7:04
  SPEAKER_01: And I think as you look at the margin over feed um combined with the weather and the new crop corn, all the stuff again that we talk about from a seasonal standpoint, Mike, that's all very alive and well here, where you know the big news two or three weeks ago was um we weren't partaking in some of these more negative seasonal fundamentals, and that's why the markets um you know are at the levels that they have been, and uh, you know, we're really not too far off of those recent highs, even sitting here today after we got kind of pretty steady flow of negative news.
• 7:40
  SPEAKER_01: Um, so let's let's dive into that just a little bit deeper, like you mentioned.
• 7:44
  SPEAKER_01: Um, we talked about product values being now under$104.
• 7:48
  SPEAKER_01: Um, you know, as we peel back the layers a little bit, we look at the individual primals.
• 7:54
  SPEAKER_01: A few things that have been really impressive to us is one's been the rib market, you know, pretty low volume there, of course, but uh you know, domestic demand related for sure.
• 8:03
  SPEAKER_01: You know, they're off, I think they're off six bucks here tonight's report.
• 8:08
  SPEAKER_01: So, you know, maybe that is coming to a close here, as we see from again from a seasonal perspective, probably a little bit less demand.
• 8:16
  SPEAKER_01: Um, the trim products, uh the picnics, things like that.
• 8:20
  SPEAKER_01: Some of that lower end stuff has been holding up really well.
• 8:23
  SPEAKER_01: That's showing just a little bit of weakness here in the past maybe uh two days or so.
• 8:29
  SPEAKER_01: Um before that, you know, we had your normal suspects like the bellies.
• 8:33
  SPEAKER_01: They they were able to kind of more quietly this year than normal, um, but took a good almost$30 off now from uh about 10 days ago in the belly market.
• 8:46
  SPEAKER_01: So some of those seasonal things are just really really happening.
• 8:50
  SPEAKER_01: Um, and then that's been taking the cutout lower, which of course is affecting the uh CME index.
• 8:57
  SPEAKER_01: You know, that market is drifting lower here, gonna continue to do so.
• 9:01
  SPEAKER_00: Um so the index is like 100 right now.
• 9:04
  SPEAKER_00: October's coming off the board here in six days.
• 9:07
  SPEAKER_00: Um that's at 97 and a half.
• 9:10
  SPEAKER_00: Then December 86.
• 9:12
  SPEAKER_00: Quite the quite the discount to December there.
• 9:14
  SPEAKER_00: A little undervalued today, probably given current fundamentals, or yeah, I I I think so.
• 9:20
  SPEAKER_01: It's hard for it's still hard for me to look at the December and call 86 something undervalued, but I know it's a dangerous word, but that's why I said it.
• 9:30
  SPEAKER_01: It's right, though.
• 9:31
  SPEAKER_01: If you just if you um get rid of some of your longer-term bias on the marketplace, you know, and look at today's fundamentals, that's certainly what you'd have to say.
• 9:40
  SPEAKER_01: Um good$11 lower than where the October's trading at.
• 9:44
  SPEAKER_01: I do think, you know, back up and talk about the index for a minute, that will continue to drift lower.
• 9:48
  SPEAKER_01: I think the October futures are gonna be very much right, continue to keep this uh distance away from the CME index.
• 9:55
  SPEAKER_01: Obviously, with today's uh lower cutout, once again, if that holds a gift for a day or two, that's gonna be pushing uh the index down well into the 97 and lower type of an area.
• 10:08
  SPEAKER_01: Um, but if you fast forward another week or two, no doubt we'll most likely be looking at uh larger than normal spread between the index here in the middle of October and where the oct and where the December futures are at.
• 10:24
  SPEAKER_01: And and my bias would be is you know, yeah, we had to take some money off this product, but are we in trouble in a big way?
• 10:32
  SPEAKER_01: And are we gonna do um you know more normal seasonal stuff would be to take us down further into November, December.
• 10:41
  SPEAKER_01: I I don't think that's a huge risk.
• 10:43
  SPEAKER_01: In my mind, it's not surprising we're gonna get down close to a hundred bucks um on the on the product, but I'm not too worried that we're gonna continue to push lower than that.
• 10:55
  SPEAKER_01: Um so eventually, you know, that's gonna create some pretty nice support for like those December futures.
• 11:02
  SPEAKER_00: All right, any final thoughts for our listeners today?
• 11:04
  SPEAKER_01: Well, you know, speaking of support, um, you know, we put a low in today at what right around that 8550, and we've done that a few different times here um this week.
• 11:14
  SPEAKER_01: There's some moving averages there, there's some Bullinger band indicators there, there's a decent amount of technical support at that type of a level.
• 11:23
  SPEAKER_01: That's a number I'd be watching pretty hard with the negative fundamentals here.
• 11:27
  SPEAKER_01: Maybe we go in there and take that out and take the next leg lower on those December futures.
• 11:33
  SPEAKER_01: You know, in my mind, that's probably another couple bucks down more into that uh eighty-four dollar area or so.
• 11:41
  SPEAKER_01: Um, if we don't do that and we continue to see some negativity on the fundamental side, I think you gotta count that as a really big win and start being pretty optimistic on these December's.
• 11:53
  SPEAKER_01: But my gut says we'll we'll we'll probably take that next step lower here.
• 11:57
  SPEAKER_01: Don't be surprised.
• 11:58
  SPEAKER_01: And I don't think, you know, don't be too discouraged with that either, would be uh my advice.
• 12:04
  SPEAKER_00: All right.
• 12:04
  SPEAKER_00: Well, thank you for your time today.
• 12:05
  SPEAKER_01: Thank you, Mike.