The Ever.Ag Podcast

Hog Talk – June 25, 2024


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In the latest edition of the Hog Talk podcast from Ever.Ag Insights, we preview the Quarterly Hogs & Pigs report. Will the hog inventory move higher? How do the numbers reflect disease challenges the industry faced over the winter? Has the breeding herd dropped? Will the summer grilling season bring the hog market out of a price slump?

Join host Mike McGinnis and panelist Eric Brunton for a spirited discussion.

Questions or comments? Topics you’d like to hear us discuss? Contact us at [email protected].

Show Transcript

(Transcript auto-generated)

00;00;00;10 – 00;00;08;21

VOICEOVER
Future trading involves risk and is not suitable for all investors. Content provided in this segment is meant for educational purposes and is not a solicitation to buy or sell commodities.

00;00;08;23 – 00;00;27;27

MIKE
Hello and welcome to Hog Talk, brought to you by Ever AG Insights. Each week we talk with subject matter experts on news and topics affecting the hog market. I’m your host, Mike McGuinness. And today is Tuesday, June 25th. Our guest today is Eric Brunton, Ever Egg’s livestock advisor. And plenty to talk about. Eric, as we get set for the Hogs and Pigs report.

00;00;27;27 – 00;00;33;16

MIKE
It’s a monthly report that released Thursday, June 27th. First off, thanks for joining the program, Eric.

00;00;33;17 – 00;00;34;28

ERIC
Yeah, definitely good to be here.

00;00;35;03 – 00;00;47;23

MIKE
Well, tell us what’s expected with this hogs and pigs report, as I understand it, possibly a larger swineherd and possibly market hog inventory going up a couple of percentage points. But what is your perspective here? What can we expect?

00;00;47;24 – 00;01;12;21

ERIC
Yeah. So it’s going to be a very, very interesting quarterly report that will be released Thursday at 2 p.m.. You know, by and large, if you think back to where we have been, what’s expected in terms of productivity, you know, there’s no question, obviously, that we’re going to see maybe a few more pig numbers. I guess it really comes down to what this report says in regards to some of the disease challenges that we’ve had over the winter, and continue to kind of hear some chatter.

00;01;12;21 – 00;01;26;03

ERIC
So we need to finish health challenges. And just seeing how all of those numbers, I guess, kind of get culminated in this report that’s going to be released on Thursday. So certainly it’s going to be interesting. Everybody in the industry is going to be watching this report very, very closely.

00;01;26;04 – 00;01;35;03

MIKE
You have the estimate. You’ve seen them pre report estimates. Anything jump out to you. That would be surprising. I mean what would have to happen with this report to really make the market move.

00;01;35;04 – 00;01;57;01

ERIC
I think as you look across things right now obviously we’re going to see a reduction in the breeding herd down 2.7% as far as the herd report estimates are concerned. That would actually be an increase from our March report, an increase of 22,000 sales. As you look at some of the breakdowns, obviously productivity and pick save for litter is going to continue to increase.

00;01;57;01 – 00;02;26;29

ERIC
Free report estimates are showing that an increase of 2.3%. And that’s on top obviously, of several quarterly reports up to this point where we’ve seen some pretty significant increases as well. As I look across the board, the weight breakdown, obviously, the over 180 pound category with free report estimates of 101.8, that one’s usually pretty easy to get right, particularly as we’ve chewed through a good chunk of those pigs and they will be wrapped up as far as harvested here as we get to the early part of July.

00;02;27;00 – 00;02;45;18

ERIC
So far from June 1st onward, we’ve actually killed roughly 3% more pigs. And we have a year ago. And so, you know, that number maybe comes out just a little bit higher than what the pre report estimates would say perhaps. But again a lot of that is just kind of pushing and pulling our supply ahead. You know we’ve had some breakdowns of some plants.

00;02;45;18 – 00;03;06;29

ERIC
We’ve had holidays in there. And as you think back to what the market had kind of anticipated having for the summer market futures curve said, you know, producers should probably add some weight and add some pounds and hold the whole pigs, push them into the summer market. And so, you know, maybe that number skewed a little bit, but certainly the over 180 pounds category is one that kind of catches my eye.

00;03;06;29 – 00;03;35;08

ERIC
And then as I look at the remaining categories, sign up saying 101 to 1 to one and a half, kind of across the board as far as growth over a year ago. That is going to be some interesting numbers. As I alluded to earlier, with some markets, these challenges that we’ve seen. And then there’s just some other things, I guess, that we maybe could dive into or touch base on, maybe point to, you know, these numbers perhaps being a little bit lighter and some of those things that I would mention are very healthy when pig market open market negotiated.

00;03;35;08 – 00;03;56;09

ERIC
I mean, pigs off average closed at $40 over the past several weeks. That doesn’t necessarily jive or make sense when we’ve got a December futures market under 70. Additionally, there’s quite a bit of open finishing space, you know, that’s currently open or going to be open, and that doesn’t necessarily set the stage for just a burdensome pig supply as you head into fall.

00;03;56;09 – 00;04;07;21

ERIC
Usually we are gearing up where every bit of finishing space is filled to the gills. That’s not necessarily the case right now in the chatter within the industry. So I think all eyes are going to be on this report and it’s going to be very interesting.

00;04;07;24 – 00;04;31;14

MIKE
Yeah. Well the numbers come out again on Thursday in the afternoon. So we’ll be anticipating the the hogs and Pigs report that’s coming up this week. Also you mentioned the market. The August lean hog futures have fallen hard from essentially since April 24th bottoming at around 8672 on Monday. Is this a key reversal? I mean, the charts are showing that the market moved higher from this date in the last three years.

00;04;31;14 – 00;04;33;00

MIKE
Will we see that again this year?

00;04;33;01 – 00;04;55;09

ERIC
We would like to hope so. And in fact, yesterday we put another new contract low and several contract months. But as you mentioned, the August actually set another low yesterday at 8627. And then we bounced off of that. Actually we’re trading quite a bit higher today. The over 8867 for the high today peers. We’re going to close down here about unchanged.

00;04;55;09 – 00;05;11;29

ERIC
And when we get through the day today. But the market certainly is in a prove it to me type of scenario. In regards to we’re going to have to see some fundamental news turn more positive before we kind of get this market to resume in an upward fashion. Could the Hogs and Pitch report be the start of that?

00;05;11;29 – 00;05;31;00

ERIC
Certainly it could, but we’re going to need some cash. Fundamental news that improves and certainly a cutout market that improves. And as you mentioned, you know, the past few years we have seen that happen, particularly going back to last year, it was more a prop 12 driven type scenario. Some of the law changes that provided us a significant bounce in the latter part of the summer.

00;05;31;00 – 00;05;45;12

ERIC
We don’t have that this year, so it’s probably going to take something from a supply surprise in order to kind of bounce us after these lows here and to get any meaningful rally, which is certainly possible. You know, as we move forward in the latter half of the summer.

00;05;45;16 – 00;06;07;28

MIKE
Let’s take a look at how producers and processor ers are seeing the market right now. As I’m told, the month of May was only the fourth profitable month in the last 19 months. You have the pork cutout at $100 108. That’s usually some sort of a benchmark for the markets, right? But give us your perspective on how are the producers and processors seeing this summer’s market in today’s market?

00;06;08;05 – 00;06;34;28

ERIC
I guess the good thing is that we’ve continued to be profitable. And while the futures market paints a pretty bleak picture, realistically going back for over two months now, the production community has indeed been profitable. We haven’t had a whole lot of volatility, particularly when you look at, for instance, you know, one metric that we used in the CME index is stayed relatively flat within roughly a $2 trading range or settlement range since April settlement.

00;06;34;28 – 00;06;55;25

ERIC
We’ve just now kind of broke the $90 mark for the CME index. But for this year, we traded a high of 92.9. And just under $90 has been our low since April 15th. So it’s been a very, very steady price perspective that we’ve seen over the past couple of months. And we haven’t really printed any red ink quite yet.

00;06;56;00 – 00;07;13;07

ERIC
Again, the futures market is painting a pretty bleak picture once we get August onward in the back half of the year. So certainly if that comes to fruition, we are indeed going to see some red ink. As you look at the 12 month curve in terms of profitability and what a producer could hedge again, if it’s red figures.

00;07;13;07 – 00;07;15;09

ERIC
Now, as you look at the next 12 months, and.

00;07;15;09 – 00;07;33;13

MIKE
What part of the hog industry is supporting prices? I mean, we have basically subpar demand. The exports seem to be a bright spot. Production, you know, is this heat. Some might think the heat is causing lower weights. And then this idea that good herd health limited liquidation might equal higher production in the second half of this year into next year.

00;07;33;13 – 00;07;52;02

ERIC
I think a lot of scenarios that you just described, and obviously our export forecast and exports have been very, very good to us. Thankfully for exports, you know, it has been the saving grace. Obviously, Mexico has been a shining star and continue to be that way over the past several years. You know that buyer in our ham market every single day.

00;07;52;02 – 00;08;10;10

ERIC
And we’re thankful for them. I would say expected as far as exports, you know, are projected to be 9%. There’s certainly some analysts that would foresee, you know, if they were to take a bet that we could foresee double digit export growth by the time we get to the end of the year. And so that’s very, very positive.

00;08;10;10 – 00;08;28;27

ERIC
But as you alluded to, the main driver, the concern obviously, that kind of domestic demand propped well, and my personal opinion is really started to hurt us as far as our overall demand, particularly in the case of our extra production that we’re seeing versus a year ago. And as you alluded to, our additional weight that we’re seeing here right now.

00;08;28;29 – 00;08;54;13

ERIC
Yes, indeed, the heat that we have seen in the Midwest is certainly going to impact weight. But the other side of the equation is we’re going to have a shortened kill week on July 4th. And so it just seems like once we kind of get wait, that kind of getting our numbers and a little bit more current type scenario, then we kind of get whacked again with a shortened holiday kill week coming up, which will on day kind of under kill what some of our available supply.

00;08;54;13 – 00;09;06;18

ERIC
Yes. But again the heat is going to take our weight lower. We’ve just kind of got to chew through some of our additional our excess supply that we’ve got currently in order to kind of improve our fundamental outlook as we get to the back half of the summer.

00;09;06;22 – 00;09;23;19

MIKE
Eric, nice job and thanks for being with us. You have. Thank you. Eric Brunton, ever AG Livestock advisor. Thank you for joining us today. And if you’ve enjoyed listening to Hog Talk. Be sure to tell a friend or to and subscribe to us wherever you listen to your podcast. Thank you to the Ever Track Insights Crew for their work on today’s show.

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