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Hog Talk: Fund 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 Minor.
• 0:26
  SPEAKER_00: Let's cross.
• 0:27
  SPEAKER_00: Today is October 30th.
• 0:29
  SPEAKER_00: I've got Luke here with us.
• 0:30
  SPEAKER_00: How's it going, Luke?
• 0:31
  SPEAKER_00: It's going good, Mike.
• 0:32
  SPEAKER_00: How are you doing today?
• 0:33
  SPEAKER_00: Oh, we are doing swell.
• 0:35
  SPEAKER_00: So tell me about this hog market.
• 0:36
  SPEAKER_00: We've been on a sell-off here.
• 0:38
  SPEAKER_00: What do you think?
• 0:39
  SPEAKER_01: Yeah, I think uh maybe switching it up a little bit here today.
• 0:42
  SPEAKER_01: I mean, let's let's let's let's call this podcast a podcast like almost everything but hogs, right?
• 0:48
  SPEAKER_01: And and we'll talk about hogs here at the end, right?
• 0:51
  SPEAKER_01: But uh I mean, just overall this market, Mike, it's been so many headlines, so many things going on.
• 0:56
  SPEAKER_01: I mean, let's Fed, quarter basis point, right?
• 0:59
  SPEAKER_01: Yep, kind of indicated maybe not another one in D's.
• 1:02
  SPEAKER_00: That was surprising.
• 1:03
  SPEAKER_01: Yeah, that was a little surprising.
• 1:05
  SPEAKER_00: And a part of that had to do too with just no government data is what they could blame that on.
• 1:10
  SPEAKER_00: You know, we we don't have data to make the decision, so we're not gonna do anything.
• 1:13
  SPEAKER_01: That that that's a real thing, right?
• 1:15
  SPEAKER_01: You know, and then on Sunday night, all right, I mean, just China, right?
• 1:19
  SPEAKER_01: Or the announced Channel, which the meeting happened yesterday in China, overall, relatively successful.
• 1:26
  SPEAKER_01: But stock market went contract highs, right?
• 1:29
  SPEAKER_01: Sold off a little bit here today, got that going on.
• 1:32
  SPEAKER_01: The beef market, which finally found at least, I don't know if it found a bottom, but it found some support, right?
• 1:38
  SPEAKER_01: It stopped going limit down every day off of Trump and you know, Argentina.
• 1:42
  SPEAKER_01: Really, the only thing that happened was a little bit of Argentinian import came in.
• 1:46
  SPEAKER_00: Yeah, because Mexicans they went back home and they said, you know what, we didn't get a deal to reopen the border on a date.
• 1:51
  SPEAKER_00: So that kind of up in the air at the moment.
• 1:54
  SPEAKER_00: So and Brazil was talked about, but like the Senate shut that down.
• 1:58
  SPEAKER_00: Uh well, kind of it it President Trump, I think, when he gets back, he's gonna be working with the president of Brazil, and and maybe they can work something out on it, but it's up in the air.
• 2:07
  SPEAKER_01: So you got that going on, you got all that volatility there.
• 2:10
  SPEAKER_01: You got beans going gun show, right, off of Chinese demand, corn kind of following the leader.
• 2:16
  SPEAKER_01: Um, so just yeah, lots of different things going on, lots of volatility.
• 2:19
  SPEAKER_01: And yes, hogs have trended a little bit low.
• 2:22
  SPEAKER_00: But not a lot of talk directly impacting hogs.
• 2:24
  SPEAKER_01: No, no.
• 2:25
  SPEAKER_01: I mean, in fact, the only thing Trump did pick on uh uh Colombia, uh which is a nice export market for us, but he he also did something with Malaysia here and or there, but a lot of volatility, a lot of volatility around.
• 2:36
  SPEAKER_00: Anything with like Japan or any of those or South Korea with those trade deals?
• 2:40
  SPEAKER_01: Allegedly, he cut a deal with Japan while he was on his Asian tour, yeah, Asian region tour, but like soybeans was mainly mentioned, not uh Japan is a great pork market for us, right?
• 2:50
  SPEAKER_01: Yeah.
• 2:50
  SPEAKER_01: Um anyway, just kind of you know, all those things we could talk about that for hours, right?
• 2:55
  SPEAKER_01: But lots of moving pieces.
• 2:56
  SPEAKER_01: Trump's been really active.
• 2:57
  SPEAKER_01: There's been a lot of headlines and a and a lot of volatility, but we'll we'll kind of take it back to hogs.
• 3:02
  SPEAKER_01: And hogs did lose some forward margin, Mike.
• 3:05
  SPEAKER_01: We kind of cut from the scissors both sides.
• 3:07
  SPEAKER_01: We've had higher corn and meal costs, the cost of production went up a little bit, especially meal.
• 3:12
  SPEAKER_01: Especially meal, especially meal, little lower, uh, a little lower hog cost, but you know, all in all, we're we're still in a relatively good spot.
• 3:20
  SPEAKER_01: I mean, yeah, things are moving a little bit lower in the hog complex.
• 3:23
  SPEAKER_01: It it's it's like almost November 1st, right?
• 3:26
  SPEAKER_01: And so cash market is moving a little bit lower, cutout moving a little bit lower, index moving a little bit lower.
• 3:33
  SPEAKER_01: But we continue to harvest a little bit less than a year ago, last couple, you know, and this trend probably this week continues.
• 3:39
  SPEAKER_01: Been some big volumes the last two weeks.
• 3:41
  SPEAKER_01: I think I'm not pulling this from memory, but something like 16,000 last Tuesday, this Tuesday, 17,000, um,$90 paid, a lower trend, but we still need some pigs to fill out the shackle.
• 3:52
  SPEAKER_01: Yes, cutout has fell, has fallen, if I should say, but it's still at$100.
• 3:58
  SPEAKER_00: Yeah.
• 3:59
  SPEAKER_01: Very high price.
• 4:00
  SPEAKER_01: Demand overall is in a a good spot.
• 4:03
  SPEAKER_01: And in all in all, just all this future sell-off in the beef complexes.
• 4:07
  SPEAKER_00: I feel like that's not a coincidence that the last eight trading trading sessions or last week on on cattle, it's been so rough and so much money has left that that it's hard to believe that hogs weren't tied to that and just I'm getting out of the proteins.
• 4:23
  SPEAKER_01: Yep, yep, yep.
• 4:24
  SPEAKER_01: And that's actually the next point I was gonna make.
• 4:26
  SPEAKER_01: And I I think we f we saw that a little bit this week, just because I mean December, December's trended down, yeah, trended down.
• 4:33
  SPEAKER_01: It's been below the 100 day for several trade sessions now, but up until this week, like June, the 100 day had stopped the June before.
• 4:41
  SPEAKER_01: But this this week we saw the June contract fall below the 100-day moving average, saw some weakness in that June in the 97, high 97 dollar range, 97.99 today's close.
• 4:51
  SPEAKER_01: So I I think that that like a week ago, what kind of held the June?
• 4:55
  SPEAKER_01: I think this was just a little little long liquidation.
• 4:58
  SPEAKER_01: And and you mentioned it too.
• 4:59
  SPEAKER_01: The government shut down, we're flying a little blind on data.
• 5:02
  SPEAKER_01: Just only a few more questions than than than answers out there, Mike.
• 5:06
  SPEAKER_01: Um, but you know, again, taking a step back and you know, looking at the hog complex, uh, still still good demand.
• 5:12
  SPEAKER_01: Pork is still a good price, demand's good.
• 5:15
  SPEAKER_01: We um we hear good things about Mexico yet.
• 5:18
  SPEAKER_01: I mean, bellies are at a price point they should catch uh freezer stocks.
• 5:22
  SPEAKER_01: Yeah, cash is is is moving lower, but still uh there's still good cash needs for it.
• 5:28
  SPEAKER_01: So, you know, we just kind of kind of forge on here.
• 5:31
  SPEAKER_01: We've we had some really great hedging opportunities um, you know, on this.
• 5:36
  SPEAKER_01: So a lot of people have some really good Q4 and Q1 and further out positions for that matter, right?
• 5:41
  SPEAKER_01: So we're getting to see our hedges workforce a little bit here, Mike.
• 5:44
  SPEAKER_01: Also, just like we experienced through the October delivery, really strong positive basis, you know, spot basis here, like 11 bucks positive.
• 5:52
  SPEAKER_01: Five-year history is like probably like uh seven here, you know, now so a nice and a nice bump.
• 5:59
  SPEAKER_01: They're good basis on these sales.
• 6:00
  SPEAKER_00: So I I am gonna ask then, like December being at 80, you know, cutouts at 101.
• 6:06
  SPEAKER_00: It is it to the point yet where that's too much, or is it just too much time there?
• 6:11
  SPEAKER_01: Well, it's a wide discount to the D.
• 6:13
  SPEAKER_01: So basically, when you've got December trading at 80 today, you know, with you take a normal kind of cutout to index or or for this time to cash rate, it's it's kind of suggesting like cutouts going to be around 90 on D's expiration, right?
• 6:27
  SPEAKER_01: Which which that that that could happen, right?
• 6:29
  SPEAKER_01: I mean that that would that would still be a good cutout, but it you know, it's it's it's trading a bigger than normal discount.
• 6:36
  SPEAKER_01: That's why basis is running four or five bucks wider than the five-year average, because we've got more of a discount in the futures curve, and and you know, so yeah, well, but so that's the thing with this December here.
• 6:47
  SPEAKER_01: It's it's technically uh it's oversold, yeah.
• 6:50
  SPEAKER_01: Um so we'll have Rogers roll and pre-roll kind of going on here.
• 6:56
  SPEAKER_01: Probably won't help.
• 6:57
  SPEAKER_01: Well, it we'll see.
• 6:59
  SPEAKER_01: Uh, there's about 125 or so thousand open interests in the D' right now without looking right at it.
• 7:04
  SPEAKER_01: You know, probably gonna move 60,000 of those out, you know.
• 7:08
  SPEAKER_01: So that that in theory, I I I think a lot of questions, but I think the protein long is gonna the protein bowl is gonna want to stay long in the hogs.
• 7:17
  SPEAKER_01: So I think they're gonna roll.
• 7:18
  SPEAKER_01: But the flip side, we have a lot of hedges on, a lot of producers hedge Q4 up because we got$90, I mean up to$90 looks, right?
• 7:25
  SPEAKER_01: We got strong bases, so we're getting good buy-side coverage too.
• 7:28
  SPEAKER_01: So how will the roll shake it all out?
• 7:30
  SPEAKER_01: I don't know.
• 7:31
  SPEAKER_01: We'll see.
• 7:32
  SPEAKER_01: But uh, I don't know.
• 7:34
  SPEAKER_01: Personal biases, we you know, we I don't know that we've seen the bottom of December hogs here, and I think they could easily trade into the trade into the low in the high 70s, Mike.
• 7:42
  SPEAKER_01: But you take a click back, supply seems pretty manageable.
• 7:47
  SPEAKER_01: Um uh demand is still in a good spot.
• 7:50
  SPEAKER_01: You know, I could think we could see a little turn up in this D S hog market here come to expiration from the$80, 8080 we're trading to it'll be something to watch.
• 7:57
  SPEAKER_01: But time will tell.
• 7:58
  SPEAKER_01: Yeah, it's exciting times, still in a good spot.
• 8:00
  SPEAKER_01: Industry, you know, tis the season uh for manure, uh manure spreading.
• 8:06
  SPEAKER_01: That does send to stir around a few bucks.
• 8:08
  SPEAKER_01: We're here.
• 8:09
  SPEAKER_01: A little bit of purrs kind of talk.
• 8:12
  SPEAKER_01: But it like I say, it is the season, nothing I would say upticked worse than normal, at least on the south side.
• 8:17
  SPEAKER_01: Hearing about some wean to finish stuff kind of stirring it, but that happens when we're stirring up these pits, right?
• 8:22
  SPEAKER_01: Uh wean pick market still pretty darn strong.
• 8:25
  SPEAKER_01: Um, trading above break-evens.
• 8:26
  SPEAKER_01: Did hear in kind of midweek that wean pick market weakened down a little bit.
• 8:30
  SPEAKER_01: That's kind of interesting.
• 8:31
  SPEAKER_01: But the boards drop too, right?
• 8:32
  SPEAKER_01: So those two things tie together.
• 8:34
  SPEAKER_01: So yeah, just keep buckled down.
• 8:36
  SPEAKER_01: We, you know, we're not at uh, you know, we're not at record our you know, recent high margins.
• 8:41
  SPEAKER_01: But if you take a look at the 12-month forward strip on hogs, we'll see where we settled here today, Mike, get to my number, you know.
• 8:48
  SPEAKER_01: But we're showing the next 12 months, you know, just shy of 20 bucks at$19, right?
• 8:52
  SPEAKER_00: So still above normal his targets.
• 8:55
  SPEAKER_01: Yeah, still still some really good stuff out there.
• 8:57
  SPEAKER_01: So so yeah, we're we're excited.
• 9:00
  SPEAKER_01: Um, it's a sunny day here on the October 30th.
• 9:03
  SPEAKER_01: Pretty nice fall weather yet.
• 9:05
  SPEAKER_01: And uh, you know, we'll just keep buckled in and uh and riding this roller coaster forward, right?
• 9:10
  SPEAKER_00: All right, that will do.
• 9:11
  SPEAKER_00: Thank you for your time today.
• 9:12
  SPEAKER_01: Thanks, Mike.