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Are Things Better Than They Seem In The Hog Industry? · Professional Ag Marketing Podcast

• 0:03
  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 involves substantial risk of loss and is not suitable for all investors.
• 0:22
  SPEAKER_02: Good afternoon.
• 0:23
  SPEAKER_02: It's been too long.
• 0:24
  SPEAKER_02: I've got Pat back with us today on September 17th.
• 0:27
  SPEAKER_02: How's it going, Pat?
• 0:28
  SPEAKER_02: It's good, Mike.
• 0:29
  SPEAKER_02: My pleasure.
• 0:30
  SPEAKER_02: Thanks for letting me join.
• 0:31
  SPEAKER_02: It is long overdue yet again.
• 0:34
  SPEAKER_02: I want to talk about the hog market today.
• 0:36
  SPEAKER_02: Let's uh start with a little bit of futures action.
• 0:39
  SPEAKER_02: October hogs here,$78.90 at the close today.
• 0:42
  SPEAKER_02: We put in a gap this week here from Friday to Monday at about 81.40.
• 0:48
  SPEAKER_02: Uh any bright takes here on this futures market that had another tough week?
• 0:53
  SPEAKER_01: Well, you know, we we've uh we've we've we we broke the index below 90 bucks here about a week or so ago, and now it's sliding pretty quick from there.
• 1:04
  SPEAKER_01: The the last printed number under$86.
• 1:07
  SPEAKER_01: And and so therefore, Mike, as as we're looking at that October uh contract um about four weeks from expiration, right?
• 1:17
  SPEAKER_01: Um it uh is starting to to wanting to sort of more appropriate position itself against where the index is trading at.
• 1:24
  SPEAKER_01: And so, you know what, for the longest time here, really up until a week ago, um, we have been able to accurately um make some comparisons to what was happening in 2024.
• 1:37
  SPEAKER_01: And you know, as we've gone through this year, you know, we really haven't, we never really had a summer, right?
• 1:43
  SPEAKER_01: I mean, we we had a summer weather-wise, we really haven't had a summer hog market-wise.
• 1:47
  SPEAKER_01: And and and we never really were able to rally that hog market.
• 1:50
  SPEAKER_01: And that's very the summer, and that's very similar to what happened in the summer of 2024.
• 1:55
  SPEAKER_01: And and um and and at least that year, um the the bad news is we didn't have summer markets.
• 2:03
  SPEAKER_01: The good news is is we didn't get the normal seasonal break from those summer values um into the fourth quarter.
• 2:10
  SPEAKER_01: And so up until a week ago, we were able to sort of we were able to say the same thing about this year, track very closely with what was going on in 2024, um, similar sort of product values, um, even with you know the supply side being a little bit smaller, and so maybe that's an indication, right, that there's a little bit more of a problem um with what's going on in in the hog market than what I don't know, an optimistic guy like me was willing to admit, right?
• 2:41
  SPEAKER_01: And so, um, and so but anyway, my story held in pretty well uh through last week.
• 2:47
  SPEAKER_01: Over the last week, though, you know, we have seen another correction of cutout values.
• 2:51
  SPEAKER_01: And if and if Mike, if or if Kate, if you want to pull up just the the pork cutout uh for this year and the pork cutout for 2024, um, you know, for our for our listeners and and and uh and the folks uh watching this on YouTube today, this does a good job of demonstrating that, right?
• 3:09
  SPEAKER_01: 2026 has done did a nice job hanging in with 2024 up until a week or so ago.
• 3:16
  SPEAKER_01: And that's a pretty dramatic breakoff here.
• 3:18
  SPEAKER_01: And and uh if I wanted to stay optimistic and try to explain that off, I can by just talking about some extra um belly volatility that's maybe pulling the primal down some and and uh and then also hope that that might be just a you know a little bit of a short-term phenomenon versus a longer-term one.
• 3:39
  SPEAKER_01: But but uh yeah, there it is.
• 3:41
  SPEAKER_01: Thank you for that.
• 3:42
  SPEAKER_01: That's a huge break here, and that's the large um that's the largest uh uh uh explanation, the biggest explanation for for the reason why the composites you know worked itself lower here.
• 3:53
  SPEAKER_01: So, you know what?
• 3:54
  SPEAKER_01: I mean, we're we're um if there's any of the individual primals that um is the the trickiest to analyze, the hardest to sort of flex into some additional demand when you got a few extra loads around, I think it's that it's that belly complex.
• 4:13
  SPEAKER_01: And so again, if if we're still trying to to look through what's happening with this hog market today with some sense of of uh you know rose-colored optimism, we would just say that, right?
• 4:24
  SPEAKER_01: The belly primal's got a little bit of a problem right now, but it's fixable.
• 4:29
  SPEAKER_01: Um, they certainly are good value today, right?
• 4:31
  SPEAKER_01: And and and uh and maybe we can kind of turn this ship back around again.
• 4:36
  SPEAKER_01: So um, so we'll see like what's gonna happen here as we go forward, of course.
• 4:41
  SPEAKER_01: But uh, you know what?
• 4:42
  SPEAKER_01: I'm still, I guess, in the camp, in spite of you know what's uh you know, this this re this recent week over week activity.
• 4:50
  SPEAKER_01: I'm still in the camp that uh um the hog market isn't as broke as what the futures market is demonstrating, especially against the deeds um and fab and potentially April contracts here.
• 5:04
  SPEAKER_01: I think we still have an opportunity for 2026 to to mirror something closer to what happened in 2024.
• 5:12
  SPEAKER_01: We really didn't get a summer, but then we also didn't get a seasonal break from there, which is certainly what the the futures market is anticipating and trading at today.
• 5:21
  SPEAKER_01: So we'll see how that goes.
• 5:23
  SPEAKER_01: You know what?
• 5:24
  SPEAKER_01: We spent the first portion of this um of this podcast um talking all about demand and nothing about supply, and I still find that to be um strangely appropriate.
• 5:36
  SPEAKER_01: And what I mean by that, Mike, is is that is that um we haven't seen much movement in the composite cutout values really all year this year for the whole calendar year, in spite of um the normal seasonal change that we see in supply.
• 5:52
  SPEAKER_01: And so um I would just make that observation on how things have looked the nine months going back and and and try to make some sort of anticipation of how that can look going forward here.
• 6:03
  SPEAKER_01: Yes, we'll get into some more pigs seasonally.
• 6:05
  SPEAKER_01: We don't think it's gonna be a um you know a significant headwind or anything like that, but we also don't think that it's going to have a significant impact on on carcass uh uh cutout values either.
• 6:18
  SPEAKER_01: So yeah, we'll see how it goes.
• 6:20
  SPEAKER_01: Um but but again, I I I I'd like to think that that uh um that that the the demand side of the complex isn't quite as bearish as what the composite is trading at today, and for sure what the dis what the futures market is trading at relative to that composite.
• 6:37
  SPEAKER_02: And that's relative pretty much December on, especially.
• 6:41
  SPEAKER_02: You're thinking like October, if cutout expired around 86, 87 today, that's probably priced somewhat close where it's at, isn't it?
• 6:49
  SPEAKER_01: Yeah, that's right.
• 6:49
  SPEAKER_01: And I and we have not spent much time below 90 bucks on the on the on the composite cutout all year long.
• 6:56
  SPEAKER_01: And we are today, as we happen to do in this podcast, and we've recently worked over.
• 7:01
  SPEAKER_01: I'm not so sure that just because it's trading at that level this week, that it has to be trading at this level or lower uh a month from now when October goes off the board.
• 7:10
  SPEAKER_01: But you're right, that's certainly what uh you know what October Futures is anticipating would occur.
• 7:14
  SPEAKER_02: We definitely have some time, a full month to October 14th when that uh futures contract comes off the board yet.
• 7:21
  SPEAKER_02: Uh any other final thoughts for our listeners this week to kind of think over on this hog market?
• 7:26
  SPEAKER_01: Well, you know, we we we mentioned December, Feb, April.
• 7:30
  SPEAKER_01: What we didn't talk about is next summer.
• 7:32
  SPEAKER_01: And what is interesting is there's a there is a wider than normal carry.
• 7:37
  SPEAKER_01: The summer months uh of next year, you know, they haven't fallen off, you know, as far as uh, you know, what these nearby contracts have, and in fact, are still offering a revenue opportunity that's comparable to what we experienced this last summer.
• 7:50
  SPEAKER_01: And so, you know, if you're in a position today from a risk management perspective or from a production system that that is is concerned about dwindling coverage here, um, that's certainly a spot out there where where I I think I'd take a look, Mike.
• 8:04
  SPEAKER_02: That's nice to see, especially with higher corn and meal prices right now.
• 8:08
  SPEAKER_02: You kind of need that extra bump going into next episode.
• 8:10
  SPEAKER_01: Yeah, let's and let's talk about that a little bit too, Mike.
• 8:13
  SPEAKER_01: Maybe you can kind of share with your with with the listeners here, just on the input side of things, you know, what has happened here week over week as it relates to to corn and meal specifically, and and any thoughts going forward there.
• 8:26
  SPEAKER_02: Corn seems like the boring one this week.
• 8:28
  SPEAKER_02: We had the Wazi report come out last week.
• 8:30
  SPEAKER_02: It affirmed that we had a slightly smaller yield than what the August report was.
• 8:35
  SPEAKER_02: So uh it kind of tempered expectations a little bit there, just calming the waters.
• 8:40
  SPEAKER_02: We've been able to pull a little bit of premium out of this corn market, slid a little lower.
• 8:44
  SPEAKER_02: Um, it's getting close to some moving averages and things now.
• 8:47
  SPEAKER_02: It's kind of um getting uh getting pulled into a little bit of a sideways slower trend.
• 8:53
  SPEAKER_02: And uh we'll see as it holds near some of those support levels as they're approaching quickly here as we go into early uh early harvest.
• 9:01
  SPEAKER_02: Now, one thing I want to bring up is that that report we had last week showed a lower yield in September.
• 9:06
  SPEAKER_02: We also had a lower yield in August.
• 9:09
  SPEAKER_02: Now, if you go back the last 30 years, we've had that happen in eight different occurrences in the United States where we've had yield drop in August and September.
• 9:17
  SPEAKER_02: Seven of those eight years, we had a higher posted yield in the month of January for our final crop report than the September number by average of 2.3 bushels.
• 9:28
  SPEAKER_02: So it'll be interesting to see the year that we didn't post a higher yield, it was 0.9 lower in that final crop report.
• 9:36
  SPEAKER_02: So it'll be interesting to see is this your outlier year where we end up a little lower than what that September number was.
• 9:42
  SPEAKER_02: But historically speaking, we've we've ended higher than what this 178.7 yield would be in that final crop year report.
• 9:49
  SPEAKER_02: So there you go.
• 9:49
  SPEAKER_02: The final yield for this year's crop is 180.6.
• 9:52
  SPEAKER_02: Yeah, that's pretty boring.
• 9:54
  SPEAKER_02: So yeah, it but that but corn's a boring discussion this week, which hasn't always been the case.
• 10:00
  SPEAKER_02: It's all about meal this week.
• 10:01
  SPEAKER_02: We've had a huge rally.
• 10:02
  SPEAKER_02: Uh we were up uh almost another 10 bucks at one point today.
• 10:06
  SPEAKER_02: Uh, we were up 10 bucks two days ago.
• 10:08
  SPEAKER_02: Uh we've had a massive rally.
• 10:10
  SPEAKER_02: All of a sudden we're at 370 across the board on this meal market.
• 10:13
  SPEAKER_02: Um, so it's gone up about 50 bucks in a pretty big hurry here, Pat.
• 10:17
  SPEAKER_02: And something to just mention there are a few changing dynamics.
• 10:20
  SPEAKER_02: One, uh, India, there, they have a little bit shorter crop.
• 10:24
  SPEAKER_02: They turned off their meal exports.
• 10:25
  SPEAKER_02: So that would be potentially one thing helping out right now, which has been developing.
• 10:29
  SPEAKER_02: And it's not a very new thing.
• 10:30
  SPEAKER_02: It's just something that's, you know, you pour that on the fire as well.
• 10:34
  SPEAKER_02: Uh, you had a NOPA crush report that came out and showed that we have soybean oil stocks at a very low level, which is very similar to what diesel is for the United States, for example.
• 10:43
  SPEAKER_02: We have low diesel levels as well in the United States for for reserves.
• 10:47
  SPEAKER_02: And then uh the NOPA crush wasn't uh wasn't quite as strong as what it could have been here uh as of really, really late.
• 10:55
  SPEAKER_02: But going forward here, uh it looks like this meal market's been a little bit supportive, and uh it'll be interesting to see if they can keep pouring in the funds into that market with last as of last Tuesday, we had a record fun long position in both meal and soybeans in that, and almost record in corn.
• 11:13
  SPEAKER_02: So uh as they used to say or should say, you gotta feed a bull every day.
• 11:17
  SPEAKER_02: So it'll be interesting to see if the funds can keep uh pouring onto these grain and oil seed markets.
• 11:22
  SPEAKER_01: Yeah, I know for from an end user's perspective, the the the the levels that meal is trading at currently are some are some um scary levels from a historic perspective, right?
• 11:33
  SPEAKER_01: It doesn't it seems like through the years, once we get up to this level, that there's been a propensity for us to really elevate from here.
• 11:41
  SPEAKER_01: And so it'll be interesting to see too on in that market um whether or not this rally is able to sustain itself.
• 11:49
  SPEAKER_01: And to your point, we're gonna need to continue to see friendly, uh, bullish information to support the thing.
• 11:55
  SPEAKER_01: But if the next um, you know, the next balance sheet, if the next USDA offering in terms of of a balance sheet shows, you know, uh uh tightening stocks again, it's gonna it's gonna start to get a little bit tricky to find a place for for rationing in that meals meal market.
• 12:11
  SPEAKER_02: Now the thing that's gonna be the huge driver of meal going forward is gonna be South America.
• 12:17
  SPEAKER_02: So in South America, they just they have a window from most states from June until September where they can't have soybeans because of uh a rust problem that they've got.
• 12:26
  SPEAKER_02: And so they just started planting soybeans down there.
• 12:29
  SPEAKER_02: And uh we've got an El Nino that's the strongest ever now on record.
• 12:33
  SPEAKER_02: And typically what we'll see with that is it's gonna peak in Christmas time frame.
• 12:38
  SPEAKER_02: And uh what we typically see is a wetter Argentina with that and a drier Brazil.
• 12:43
  SPEAKER_02: So we could see some volatility from that Brazil uh growing period that should start somewhere around that November, December period if if we start to see it get a little too dry down there.
• 12:54
  SPEAKER_02: So that's gonna be what I think uh the meal market's really gonna keep an eye on going forward is something that's gonna be.
• 12:59
  SPEAKER_01: Yeah, you're right.
• 13:00
  SPEAKER_01: And and and so we'll we'll um and and we're doing our part on this podcast today to amp up the weather talk down there, and we'll create the the markets will trade that volatility for sure, right, Mike.
• 13:12
  SPEAKER_01: And then, you know, the next discussion point, which I know has been a talking point for you guys this week, is is um you start thinking about planning intentions for for now, right?
• 13:23
  SPEAKER_01: I mean, the the fringe areas of our corn belt, the whole horseshoe, the U-shaped uh uh fringe areas around the central part of the belt, um, there's a good chunk of that area that's gonna be really interested in where wheat values are trading at today and be thinking about winter wheat.
• 13:39
  SPEAKER_01: And then if if you get some moisture next spring, why you could come back with some soybeans on that too, at the expense of corn acres, right?
• 13:46
  SPEAKER_01: And so um, you know, we're we're now just pontificating some, right?
• 13:51
  SPEAKER_01: And and but but the point is that it's important for us to consider that once we've tightened up both balance sheets, really all three balance sheets, corn, beans, and wheat to the levels that we have.
• 14:04
  SPEAKER_01: Now all of a sudden that La Niña or El Nino talk in in the southern hemisphere means a little bit more.
• 14:11
  SPEAKER_01: This acreage discussion means a little bit more.
• 14:14
  SPEAKER_01: Um, we we don't have the cushion that we had built up over the last three years to sort of stand a couple of those things, right?
• 14:21
  SPEAKER_02: Yep.
• 14:22
  SPEAKER_02: So it'll be uh volatility is a little higher than what we normally have for the month of September.
• 14:28
  SPEAKER_02: It's usually pretty quiet right now, and these input sides are going a little crazy.
• 14:32
  SPEAKER_01: Absolutely right.
• 14:33
  SPEAKER_01: And and uh and and you know what?
• 14:35
  SPEAKER_01: I I uh if we haven't we we've learned a lot through the years as we've had the pleasure uh to interact with some of the the the best producers on the planet uh here at ProAg.
• 14:46
  SPEAKER_01: And one of the things that we've learned is that uh is that uh volatility creates opportunity, and and so we look forward to uh uh interacting with our clients and any and and and prospects and in and helping them manage that volatility and creating opportunity for your business.
• 15:02
  SPEAKER_01: Absolutely.
• 15:03
  SPEAKER_02: All right.
• 15:03
  SPEAKER_02: Well, thank you for joining today.
• 15:05
  SPEAKER_02: Please click the link on the description below, and uh you can get a hold of things like our daily market commentary, other marketing research information.
• 15:12
  SPEAKER_02: We're working on some really cool stuff right now.
• 15:15
  SPEAKER_02: So please reach out to one of us, Cade.
• 15:17
  SPEAKER_02: Thank you.
• 15:18
  SPEAKER_02: Pat, thank you for joining us.
• 15:20
  SPEAKER_01: Have a great rest of your week.