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Hog Talk: Power Of Both · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Hog Market Talk Podcast with professional egg marketing.
• 0:05
  SPEAKER_01: Come here to get fresh updates on what's happening week to week within the Lean Hog Complex.
• 0:10
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:16
  SPEAKER_01: And remember to visit swineweb.com, an excellent resource for information in the pork industry, where you can also find this podcast.
• 0:24
  SPEAKER_01: This is your host, Mike Minor.
• 0:26
  SPEAKER_01: Let's crow.
• 0:27
  SPEAKER_01: Today is June 17th.
• 0:30
  SPEAKER_01: I've got Jeff with us here today.
• 0:31
  SPEAKER_01: How's it going, Jeff?
• 0:32
  SPEAKER_00: Hey Mike, it's going pretty good.
• 0:34
  SPEAKER_00: June 17th already, huh?
• 0:36
  SPEAKER_01: I know.
• 0:36
  SPEAKER_01: Summer's flying by, but it hasn't been hot out.
• 0:40
  SPEAKER_00: It has not.
• 0:40
  SPEAKER_00: We're going to turn off the heat just a little bit here.
• 0:43
  SPEAKER_00: Just for a few days, right?
• 0:44
  SPEAKER_00: Because for the most part, bring some stuff into the 90s that will probably won't put any weight on these pigs, Mike.
• 0:51
  SPEAKER_01: I was going to say, what impact does that have on lean high production?
• 0:54
  SPEAKER_00: If you know, a short period of time like that, I I I don't think it'll be a major impact so we cool off pretty good into next week.
• 1:03
  SPEAKER_00: But yeah, on a on a situation that we're already um fairly current and some pruder producers kind of you know stressed on weights, you know, just not getting enough big pigs out the door when the markets are really good.
• 1:18
  SPEAKER_00: Not that that's an uncommon problem to have this time of year, right?
• 1:23
  SPEAKER_00: But um yeah, it'll it'll make that all a little bit more exaggerated, of course.
• 1:28
  SPEAKER_01: Well, today we're gonna talk about the power of both, Jeff.
• 1:31
  SPEAKER_01: Is it supply?
• 1:32
  SPEAKER_01: Is it demand?
• 1:34
  SPEAKER_01: This hog market's been on a tear.
• 1:36
  SPEAKER_01: Where do you want to start with uh whether it be health problems and numbers on the supply side, or do you want to talk about the demand side on what this US consumer is feeling, or should I say grilling?
• 1:48
  SPEAKER_00: Yeah, I think it's you know it's I think the big news is really on the cutout values and and what we've done the past week.
• 1:55
  SPEAKER_00: Um so if we start there a little bit, and of course we've you know, we we keep pondering the question of, you know, did we shrink the supply by just enough to get cut out to rally, or are we seeing a nice improvement uh at least for the season, if you will, in in pork demand.
• 2:15
  SPEAKER_00: And um so if you look backwards, you know, we've we've put about eight and a half, uh, good eight and a half dollars on product values uh in the past week, kind of week over week, Mike.
• 2:26
  SPEAKER_00: Um, you know, all primals were higher, of course, you know, some but bellies made a big run higher, so bellies were about$17 uh higher week over week, hams and ribs, you know, in that seven to eight bucks area.
• 2:41
  SPEAKER_00: So, you know, you see some in butts putting in a pretty good uh increase of six to seven bucks week over week.
• 2:50
  SPEAKER_00: So you see some really good action in you know what I'm thinking about is some of the products that are primals that you really care about.
• 2:59
  SPEAKER_00: And those are you know, we're looking for some signals to suggest that domestic demand is improving, say at least at least for this summer.
• 3:09
  SPEAKER_00: And I think we're seeing that.
• 3:10
  SPEAKER_00: You know, you get hams up really nicely in the past two weeks, especially.
• 3:14
  SPEAKER_00: Ribs need to go up, that happened.
• 3:16
  SPEAKER_00: Butts that um that never hurts to see that coming up this time of year.
• 3:21
  SPEAKER_00: You know, that belly rally um a little bit counter-seasonal, you know, usually that waits until you get very end of June, maybe getting into July.
• 3:30
  SPEAKER_00: So that one is certainly interesting now.
• 3:33
  SPEAKER_01: So a little early.
• 3:34
  SPEAKER_00: Yeah, a little early.
• 3:35
  SPEAKER_00: Some of the private folks that were watching, you know, they're they don't have that one going up quite as much.
• 3:41
  SPEAKER_00: So maybe USDA's got it a little bit too high off some lower volume type of stuff.
• 3:47
  SPEAKER_00: But um, yeah, I think you look at all that, um, you know, one of the things we're gonna be watching really hard as we go into late June and and through July is you know, are we gonna see signals that uh this pork demand is taking over some of the beef pricing?
• 4:05
  SPEAKER_00: Right, uh beef prices are continuing to go up and um starting to speed up the pace at which they're increasing in value as far as the retail price goes.
• 4:14
  SPEAKER_00: So that'll be something to keep our eyes on as we go through the summer, something hopefully we're talking about on this podcast quite a bit, Mike, as we ask ourselves that question.
• 4:23
  SPEAKER_00: Are we jumping on the coattails of the beef market finally and going to get some longer-term effects for that?
• 4:30
  SPEAKER_00: Or are we just uh seeing kind of you know, blip in supply combined with some nice summer markets here?
• 4:38
  SPEAKER_01: So let's dive a little bit deeper into this futures versus cutout area with you you talked about mixing beef in there as well, maybe potentially finally pulling up pork, anyways.
• 4:49
  SPEAKER_01: But up until this point, it seems like the futures have been what somewhat optimistic versus what cutout values were at, for example.
• 4:57
  SPEAKER_01: Um today, how do you think we're sitting with the recent cutout spike?
• 5:02
  SPEAKER_01: Meanwhile, futures maybe they haven't taken off quite as much.
• 5:06
  SPEAKER_00: Yeah, no, that's an excellent point, and it's been an interesting few days.
• 5:10
  SPEAKER_00: Obviously, we've had some up days on these markets, and mostly what I'm focusing on in this discussion is going to be the July contract and the August contract.
• 5:19
  SPEAKER_00: Yeah, up to the summer stuff.
• 5:22
  SPEAKER_00: We'll classify it as that.
• 5:23
  SPEAKER_00: But um, yeah, the past few weeks, you know, we've watched the cutout go up, probably similar amounts, but we've seen futures go up almost as much, Mike, right?
• 5:34
  SPEAKER_00: That's what you're indicating, and uh continuing to price more good news into the market, and it and it's been right.
• 5:43
  SPEAKER_00: Um, obviously, this the cutouts gone up uh you know a little bit more than what they were expecting, even.
• 5:49
  SPEAKER_00: But that's a different story today.
• 5:51
  SPEAKER_00: So really um futures haven't moved much considering the seven or eight dollar increase in product values that we saw in the past week.
• 6:00
  SPEAKER_00: So, and then now as you turn over and look at the CME index, you know, that is quickly climbing, and uh you know, we'll be pushing well over$110 here before we get to the end of the week.
• 6:14
  SPEAKER_00: So, you know, you'd almost say, well, the current fundamentals have kind of caught up to the futures contract, and that's been that's a change.
• 6:23
  SPEAKER_00: That's a lot different than what we've saw.
• 6:25
  SPEAKER_00: And it makes sense, right?
• 6:26
  SPEAKER_00: It's just gonna be harder to push these values higher from this you know$118,$119 area, like we're talking.
• 6:36
  SPEAKER_00: Um and so probably priced appropriate in that way.
• 6:39
  SPEAKER_00: It just goes to show it's it's gonna get tougher to rally from these price values compared to you know where we were a couple three weeks ago.
• 6:47
  SPEAKER_01: And part of this problem might be the idea that you're seeing it in the beef market where you're seeing front-end liquidation on some of these managed money long contracts.
• 6:57
  SPEAKER_01: It'll be really interesting to see this commitment of traders report come out on Friday as of today.
• 7:03
  SPEAKER_01: But uh tell me a little bit more, I think, about money flow.
• 7:08
  SPEAKER_01: I mean, live cattle you've got near a record position on for managed money.
• 7:13
  SPEAKER_01: Lean hogs you have near a record position on, feeder cattle you are at a record position net long uh as of last week.
• 7:20
  SPEAKER_01: Uh this probably is having an impact on those futures as well up front, don't you think?
• 7:25
  SPEAKER_00: Yeah, that's probably fair, and hopefully, you know, the the managed money and index fund money for that matter is piled into that cattle market for a long, long time.
• 7:35
  SPEAKER_00: And obviously we're at some incredible levels over there, which, you know, in our opinion, uh increases the the ripeness for a pretty major setback, if not a reset of the values to some lower numbers over time.
• 7:50
  SPEAKER_00: But and you like to think that the hogs would not have to participate in that, right?
• 7:55
  SPEAKER_00: So heck of a lot to ask.
• 7:57
  SPEAKER_00: Yeah, that's that is gonna that'd be very discouraging if if uh that beef market starts to crumble here and and that they decide they gotta sell off the pigs right with it, because from our standpoint, if we're starting to, and that's still a big if, a lot of signs are pointing towards it, but if we are starting to see some benefits from that beef market, you know, really we should continue to see some really nice tailwinds there, even as the you know, futures and such are going down on the cattle side.
• 8:29
  SPEAKER_00: But I know that's a lot to ask.
• 8:31
  SPEAKER_01: Um, futures markets usually don't work that way, but you know, some of the five-year bill rally on the cattle at two months out of the hogs, that's about right, isn't it?
• 8:40
  SPEAKER_00: Unfortunately, history would probably be with you on that comment, Mike.
• 8:44
  SPEAKER_00: But you know, another thing we looked at this week is um managed money as they pile into the hogs, they only do it, well, exactly what you just said, about nine weeks, Mike.
• 8:55
  SPEAKER_00: Um that's that's what the very much the the big rallies that we've seen is in in man and driven by managed money on these pigs have come in basically nine, ten week increments.
• 9:09
  SPEAKER_01: Pretty specifically very weeks.
• 9:11
  SPEAKER_01: I mean, there's not a heck of a lot of standard deviation away from that number.
• 9:15
  SPEAKER_01: It it's pretty consistent.
• 9:16
  SPEAKER_00: Yep.
• 9:16
  SPEAKER_00: And so we are on week nine of that, unfortunately.
• 9:20
  SPEAKER_00: So we it might be a bit par for the course to at least uh you know not be attracting much more of that energy into these futures markets.
• 9:28
  SPEAKER_01: Any final thoughts for our listeners this week?
• 9:32
  SPEAKER_00: I think just to obviously be looking really hard at your hedge position.
• 9:36
  SPEAKER_00: Um, you know, maybe we're a tick early from a seasonal standpoint here, but you can't argue with the opportunities that are out in front of you.
• 9:44
  SPEAKER_00: I think you you owe it to your business, to yourself to be looking at taking you know advantage of these type of markets.
• 9:52
  SPEAKER_00: I know many of us have got a lot of positions on today, um, and we'll continue to push that position further out, and that's kind of the name of the game.
• 10:01
  SPEAKER_00: There's always or more pigs coming down the pipeline, so to speak.
• 10:05
  SPEAKER_01: Well, you can probably blame a little bit of this on me, Jeff.
• 10:08
  SPEAKER_01: Uh about a week and a half ago, I was complaining how boring my job was for the middle of summer compared to most years.
• 10:14
  SPEAKER_01: And uh, you know, last week there was about a headline a day that had a major impact on any agricultural market, whether it be a raid or whether it be some RVO news.
• 10:27
  SPEAKER_01: It's been a very volatile time.
• 10:29
  SPEAKER_01: And the equities today, we are selling off the SP 500 down about 50 points here as we talk.
• 10:34
  SPEAKER_01: And, you know, maybe that had a part to do these outside markets and geopolitical impact on uh on the cattle market, specifically here, and trying to drag some other things down.
• 10:45
  SPEAKER_01: So I have a feeling this uh this is not the not the end of some pretty extreme volatility here, Jeff.
• 10:53
  SPEAKER_00: Yeah, I'm sure you're right about that.
• 10:55
  SPEAKER_00: And the the part I forgot to mention is the the next deadline on the whole tariff situation is not crazy far away here as we start you know looking at the beginning of July.
• 11:07
  SPEAKER_00: Um, and I think that that conversation may bring come into the marketplace, you know, even starting next week or something.
• 11:15
  SPEAKER_00: So it that is right around the corner as well.
• 11:18
  SPEAKER_01: July 8th and 9th, I believe, we have a few major tariff uh deadlines coming up, Mexico, Canada, etc.
• 11:25
  SPEAKER_01: So uh keep an eye on those.
• 11:27
  SPEAKER_01: All right, thank you for your time today, Jeff.
• 11:29
  SPEAKER_00: Thank you, Mike.
• 11:30
  SPEAKER_01: And thank you to all our listeners.
• 11:32
  SPEAKER_01: Please reach out to us at professional eggmarketing.com.
• 11:35
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 11:40
  SPEAKER_01: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 11:47
  SPEAKER_01: See you next time.