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Support Incoming in the Hog Market? · 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.
• 0:22
  SPEAKER_03: All right.
• 0:23
  SPEAKER_03: Today is the 17th of June.
• 0:25
  SPEAKER_03: I've got Luke Wells with us here today to talk about the hog market.
• 0:29
  SPEAKER_03: How's it going, Luke?
• 0:30
  SPEAKER_03: It's going great.
• 0:31
  SPEAKER_03: Mike, how are you doing today?
• 0:32
  SPEAKER_03: We're doing great.
• 0:33
  SPEAKER_03: We're going to talk about a list of different items here, but let's just get started with a few different things that you wanted to focus on in today's podcast.
• 0:41
  SPEAKER_01: Yeah, I suppose a hog podcast will start with uh with the hogs.
• 0:45
  SPEAKER_01: And I uh honestly, we're we're demand has been disappointing, right?
• 0:50
  SPEAKER_01: And that's not like just happened yesterday type thing.
• 0:52
  SPEAKER_03: No nice way to say it.
• 0:53
  SPEAKER_01: You know, we're just I'm just a little a little fatigued in in how our pork's performing against uh you know in in in this environment, and so as and so forth the futures have traded it.
• 1:04
  SPEAKER_01: So I just get into a few things.
• 1:06
  SPEAKER_01: I mean, hog harvest.
• 1:07
  SPEAKER_01: We you know, we're not coming into less pigs.
• 1:09
  SPEAKER_01: Um, in fact, last week was above a year ago, this week above a year ago.
• 1:13
  SPEAKER_01: I don't have a slide on it, but pigs are heavy.
• 1:15
  SPEAKER_01: It makes sense to make them heavy.
• 1:17
  SPEAKER_01: So we're putting a lot of pork on the market.
• 1:18
  SPEAKER_01: So, you know, I suppose that's the upside.
• 1:20
  SPEAKER_01: We're still moving pork at 95 bucks, right?
• 1:22
  SPEAKER_01: Uh, but uh uh we've we've we've we've failed.
• 1:26
  SPEAKER_01: In fact, uh, I mean, is uh you know, if you as you it really started to change uh about uh you know, about in May, May's the inflection point.
• 1:34
  SPEAKER_01: So as we take a kind of look at that next slide, I think you know, year over year, um we're like 24 bucks, I think is the number under a year ago.
• 1:43
  SPEAKER_01: You can look at that blue line to the green line.
• 1:45
  SPEAKER_01: Like we were tracking along really well uh the first part of this year, uh, and but then kind of may hit.
• 1:52
  SPEAKER_01: I think there's some things working against us here that hit it, but but pork is it's it's it's lost it's lost some traction, uh, and we're we're we're significantly weaker uh year over year, and it's why we've drugged the front end of this curve, you know, and the and the deferred down.
• 2:07
  SPEAKER_01: So, you know, as you stick into the next slide, you know, these two primals have kind of been, you know, it's kind of the near turn culprits.
• 2:14
  SPEAKER_01: All the primals are a little soft here now, right?
• 2:17
  SPEAKER_01: But uh, but but but belly demand, bacon demand, just it's it's not going anywhere fast.
• 2:22
  SPEAKER_01: Um, continue to hear things.
• 2:24
  SPEAKER_01: The food service is soft, Mike.
• 2:26
  SPEAKER_01: Less featuring of breakfast items, less bacon on cheeseburgers, right?
• 2:30
  SPEAKER_01: And you know, also too, I mean, maybe we've been a little bit of our own worst enemy.
• 2:34
  SPEAKER_01: Um, you know, we've been telling the market that we're gonna be short pigs all year, and we haven't.
• 2:39
  SPEAKER_01: So, like buyers, they're real short bought, meat buyers.
• 2:41
  SPEAKER_01: They're saying prove it to me, right?
• 2:43
  SPEAKER_01: They're real short bot.
• 2:44
  SPEAKER_01: Now, that could work to our benefit if we get into a few less pigs here, which I have not completely given up on, Mike, for the record.
• 2:50
  SPEAKER_01: Um, we can see some pretty violent price reactions.
• 2:53
  SPEAKER_01: I mean, as you look at that, when things turn on the hams or the bellies, they can move up pretty fast.
• 2:58
  SPEAKER_01: But hams also, they're sub-80.
• 3:00
  SPEAKER_01: Um, you know, we've heard some some some little extra hams around, kind of dumped to Mexico.
• 3:05
  SPEAKER_01: So you got those primals not working on the other primals that had been performing like one and two weeks ago really well, they've softened a little bit too.
• 3:13
  SPEAKER_01: So we, you know, we just got ourselves with a sub-95 dollar cutout.
• 3:17
  SPEAKER_01: You go down, so why?
• 3:19
  SPEAKER_01: You know, everybody knows that's happening, but why?
• 3:21
  SPEAKER_01: And I don't I don't know that it's just one exact thing, Mike.
• 3:25
  SPEAKER_01: I mean, I think it's kind of some attrition by several cuts, if you will.
• 3:28
  SPEAKER_01: So Kate jumps to the next slide for me.
• 3:31
  SPEAKER_01: You know, I do think this is a big deal.
• 3:33
  SPEAKER_01: Um, you know, we we've and I think you'll maybe talk a little bit to like where a state of Iran conflict is midweek here.
• 3:40
  SPEAKER_01: Um, but you know, we've had higher, we've had inflation in a lot of different categories.
• 3:45
  SPEAKER_01: Uh uh energy, fuel inflation has been leading the mark.
• 3:48
  SPEAKER_01: You know how credit, you know, you buy gas, you put on a credit card, 30 days maybe you pay it or you let it ride to 60, right?
• 3:55
  SPEAKER_01: We'll just we know this goes back to 2023.
• 3:58
  SPEAKER_01: The red boxes uh would be the summer period.
• 4:01
  SPEAKER_01: I mean, we've got um we've got higher gas prices here that I think is is pinching the consumer.
• 4:07
  SPEAKER_01: And you know, they've pork's not been a winner in that that that environment.
• 4:12
  SPEAKER_01: You know, what are some things that have taken from pork just a little bit?
• 4:15
  SPEAKER_01: Uh uh chicken.
• 4:16
  SPEAKER_01: Um, go to the next slide, take a peek at that.
• 4:19
  SPEAKER_01: I mean, the the the the broiler industry, they've responded to this opportunity where they're up like 2.7 percent, just about 3% year to date.
• 4:27
  SPEAKER_01: Um, their price is going lower, just kind of keep on clicking through there.
• 4:32
  SPEAKER_01: Um, look at that top left.
• 4:34
  SPEAKER_01: I think that's a really good slide to look at.
• 4:36
  SPEAKER_01: So this would be wholesale level, beef really high.
• 4:39
  SPEAKER_01: Um, now beef, you know.
• 4:41
  SPEAKER_01: I don't have a choice box beef on here, but it stayed around 400, so it's not rallied past that, but it's 400.
• 4:48
  SPEAKER_03: It's holding in well.
• 4:49
  SPEAKER_01: I think it's a proxy too from just a little bit of a stung consumer.
• 4:52
  SPEAKER_01: 400, right?
• 4:54
  SPEAKER_01: But high um chicken price.
• 4:55
  SPEAKER_01: I said more of it.
• 4:56
  SPEAKER_01: Price is going down, and pork.
• 4:58
  SPEAKER_01: We just maintain kind of this steady eddy.
• 5:00
  SPEAKER_01: So take another click forward here.
• 5:02
  SPEAKER_01: I like these grabs, these are distribution and price.
• 5:06
  SPEAKER_01: Uh, I'm gonna focus a little more on the distribution, but more noticeably from the first of the year, starting the upper left with chicken breast, the velocity, the trend of chicken breast distribution, the blue line, it's up.
• 5:17
  SPEAKER_01: Chicken wing, it's up.
• 5:19
  SPEAKER_01: Beef 90-40.
• 5:20
  SPEAKER_01: So hamburger ground beef, up.
• 5:23
  SPEAKER_01: Pork loin first of the year, down, right?
• 5:25
  SPEAKER_01: We've been losing some share.
• 5:27
  SPEAKER_01: And again, I think we kind of came under some price pressure.
• 5:30
  SPEAKER_01: Um, and with these higher fuel prices, a little tighter consumer, and we've just we've we've slipped, um, producing not too much pork, plenty of pork, and we've slipped.
• 5:40
  SPEAKER_01: So, so demand is definitely uh my biggest concern.
• 5:43
  SPEAKER_01: Uh, I still haven't given up like all faith.
• 5:46
  SPEAKER_01: I, you know, I think protein demand in general is still good, but pork, uh, especially since May, we've we've underperformed.
• 5:53
  SPEAKER_01: Um, those are some things we're gonna have to kind of you know, kind of work through as an industry.
• 5:57
  SPEAKER_01: So just a few other comments here on the hogs.
• 6:00
  SPEAKER_01: I think there's a few more slides.
• 6:02
  SPEAKER_01: You know, now I've kind of been negative here on you.
• 6:04
  SPEAKER_01: Um, but we are hitting some uh some technical support levels.
• 6:08
  SPEAKER_01: This is the April 27 contract.
• 6:10
  SPEAKER_01: 82's been holding it.
• 6:12
  SPEAKER_01: You know, that's a strong sign.
• 6:13
  SPEAKER_01: Also, I think manage money is the next one up, or like 24,000 contracts short, record shorts 36.
• 6:20
  SPEAKER_01: Not that we're getting close.
• 6:21
  SPEAKER_01: Not that we can't make new records, but we got a pretty big short book on uh commercial positions are up, right?
• 6:27
  SPEAKER_01: Like some of those are triggering that we can we can find a bottom.
• 6:31
  SPEAKER_01: You know, I'd also argue I've kind of been harping on cutout at 95.
• 6:35
  SPEAKER_01: Um I would think we'd find some demand at that kind of level.
• 6:39
  SPEAKER_01: Uh exports have been good.
• 6:40
  SPEAKER_01: It's to me it's a domestic thing, right?
• 6:43
  SPEAKER_01: Uh supply, while we've had plenty of supply, uh it's it's it's packer demand on cash hogs is good.
• 6:48
  SPEAKER_01: Cash hogs are 98 bucks, cutouts 95, and index is 92, right?
• 6:54
  SPEAKER_01: I mean, so it's not really a total supply problem, but we have not gone under a year ago.
• 6:59
  SPEAKER_01: I do think we'll get, you know, potentially as we get a little further in the summer, we could get into a little bit of year-over-year reduction.
• 7:05
  SPEAKER_01: I'm not a major supply bowl, but I think that could still be a bit of a good guy.
• 7:10
  SPEAKER_01: And then I think the last thing I'd say on the hogs, and I I can't remember if we talked about it, Mike, last week or the week before, but like the trend hasn't changed.
• 7:18
  SPEAKER_01: Not giving up on the summer rally, but it's July 17th after the summer's gone, right?
• 7:23
  SPEAKER_01: Um, if things change, they can change, but let's just say if we don't get this uh summer bump that that that was was the futures all gave us a good chance to hedge, the future's forecasted, right?
• 7:33
  SPEAKER_01: I'd also say I don't think protein demand, pork demand is just like it's gone all the way off the cliff.
• 7:39
  SPEAKER_01: So we've been looking at a lot at 24, kind of as an analog year.
• 7:42
  SPEAKER_01: 24 is the red line up on the chart.
• 7:45
  SPEAKER_01: Uh we did not get a big summer rally in 24, but we had good prices all the way through the end of the year.
• 7:51
  SPEAKER_01: So um again, I think we need to, you know, do you know when we have good opportunities to be hedging them?
• 7:57
  SPEAKER_01: But we are, you know, especially as you know, get out into the deferred months, October, December, on out further.
• 8:03
  SPEAKER_01: We've got a little optimism from these prices.
• 8:05
  SPEAKER_01: We we're we're not, you know, we're we're not drastically adding supply.
• 8:09
  SPEAKER_01: We're still in a good spot, right?
• 8:11
  SPEAKER_01: But here's short term, I guess demand has uh for sure stubbed its toe here.
• 8:16
  SPEAKER_01: Let's hope it's not cut off, it's just stubbed, right?
• 8:18
  SPEAKER_01: We can buy some of that back.
• 8:19
  SPEAKER_01: But pork demands, yeah, it's a it's a little disappointing here in the near term.
• 8:23
  SPEAKER_03: It's been a little disappointing, but we're seeing a few support levels, we're seeing a few things where some support could leak into this hog market, which I know a lot of us would say it yeah, hopefully it's about time here.
• 8:35
  SPEAKER_03: So hopefully we can turn the tide soon.
• 8:37
  SPEAKER_03: Yes, sir.
• 8:38
  SPEAKER_03: A few of the other things we've seen are you think we're wrapped up on the hogs here?
• 8:41
  SPEAKER_01: I think we're good on the hogs.
• 8:42
  SPEAKER_01: All right.
• 8:42
  SPEAKER_03: So a few things I wanted to cover just on inputs, outside markets here uh today.
• 8:47
  SPEAKER_03: Corn off to a pretty good start the last couple days.
• 8:51
  SPEAKER_03: We'll see how we end the week here.
• 8:52
  SPEAKER_03: It sold off a lot, though.
• 8:54
  SPEAKER_03: Now we're going into a three-day weekend, so maybe it just came, had a few good days here going into the weekend.
• 9:02
  SPEAKER_03: A couple different reasons, right?
• 9:04
  SPEAKER_03: One, uh the funds had liquidated all of their long positions.
• 9:07
  SPEAKER_03: They're actually net short in the corn market, so maybe taking a breather now after they got that risk off their table.
• 9:14
  SPEAKER_03: Uh, two, we took a lot off.
• 9:16
  SPEAKER_03: Like I said, we pulled back to some very nice support levels around 440 de corn.
• 9:21
  SPEAKER_03: Historically, we don't want to go much below that.
• 9:23
  SPEAKER_03: Same with meal, right around 300.
• 9:25
  SPEAKER_03: It doesn't want to stay below that very often.
• 9:27
  SPEAKER_03: Uh, a couple other things, you know, uh the the weather story's been played out a little bit here, just we've had very good weather.
• 9:34
  SPEAKER_03: We keep getting rain, so that was a bearish influence, but not much has changed.
• 9:38
  SPEAKER_03: And then the Iran situation this week on Friday or uh the next couple days, it sounds like we're supposed to get a signing of the Iran deal.
• 9:47
  SPEAKER_03: Maybe that's wavering a little bit here as we get into the end of the end of the talks here or this weekend with the signing, potentially.
• 9:55
  SPEAKER_03: The other thing is the clarity behind it, the signing with Iran could have been a little bit more definitive, uh definitive, I would say.
• 10:03
  SPEAKER_03: It's basically a 60-day ceasefire, and it's nothing uh solidifying uh the nuclear act, uh nuclear front, for example.
• 10:12
  SPEAKER_03: So it could have been a little bit more strict or a little bit more defined.
• 10:16
  SPEAKER_03: Um so the crude oil market bounced back a little bit with corn and soybeans here as well.
• 10:21
  SPEAKER_03: And then last but not least, probably the biggest reason why we found some support here the last couple days has been uh the soybean market finding a bid.
• 10:30
  SPEAKER_03: Um, long story short, there are some boats of soybeans headed to China.
• 10:35
  SPEAKER_03: Uh that's kind of the reason for some support the last couple of days.
• 10:39
  SPEAKER_03: Not a whole lot of details on it, but it is happening.
• 10:41
  SPEAKER_03: So uh that's something to keep an eye on.
• 10:44
  SPEAKER_03: And uh some of the reasons to watch these spreads as well going forward between kind of old crop, new crop, bull spreading action, anything like that, I think, as well.
• 10:52
  SPEAKER_03: Um last but not least, if you just go to some of the outside markets, equities.
• 10:59
  SPEAKER_03: We've uh we've had a really strong couple weeks here.
• 11:02
  SPEAKER_03: We got excited, we had a SpaceX IPO, it was the largest IPO in history.
• 11:07
  SPEAKER_03: Money's been flowing into the stock market, and people have been excited about it.
• 11:11
  SPEAKER_03: Taking a breather today, the new Fed chairman Warsh stepped in, uh, had his first meeting that he gave a press conference on.
• 11:19
  SPEAKER_03: So he did come out.
• 11:20
  SPEAKER_03: They held interest rates between three and a half and three point seven five percent, so unchanged.
• 11:25
  SPEAKER_03: But he was pretty hawkish.
• 11:27
  SPEAKER_03: He came out and he basically said that they're looking at that 3.8% uh inflation number.
• 11:33
  SPEAKER_03: It's running above target.
• 11:34
  SPEAKER_03: That's probably a problem.
• 11:36
  SPEAKER_03: So they want to try to use uh rising rates to uh combat that later on this year.
• 11:42
  SPEAKER_03: Most of the most of the people in the community uh talked about we're probably gonna raise rates by the end of the year.
• 11:48
  SPEAKER_03: So the markets today priced in basically one rate hike by October, from the looks of it.
• 11:54
  SPEAKER_03: So a little hawkish news.
• 11:56
  SPEAKER_03: The SP pulled back pretty hard.
• 11:58
  SPEAKER_03: NASDAQ, the dollar went up over 100 again today.
• 12:01
  SPEAKER_03: So just a few outside markets changing things around a little bit after we've been smooth sailing here for a little bit, Luke.
• 12:09
  SPEAKER_03: All right.
• 12:09
  SPEAKER_03: Well, other than that, please uh click the link in the description below and uh please check out our daily market commentary and other marketing info that you may find interesting there on our website as well at www.professionalagmarketing.com.
• 12:24
  SPEAKER_02: I'm gonna say something too, Mike.
• 12:25
  SPEAKER_02: Let's get it to you, Kate.
• 12:26
  SPEAKER_02: Yeah, I like that.
• 12:27
  SPEAKER_02: Uh we'll be at NPIC coming up in July.
• 12:30
  SPEAKER_02: We'll be unveiling our new ProAg Power AI tool.
• 12:34
  SPEAKER_02: So stay tuned, listen for that.
• 12:36
  SPEAKER_02: And if you are at NPIC, please stop by us so we can introduce that to you.
• 12:40
  SPEAKER_02: We're excited to show it.
• 12:42
  SPEAKER_03: All right, can't wait.