U.S. hog producers are not expanding herds as worries about high feed costs have them managing what they have, analysts said Friday after a government report showed only a slight increase in hogs.
The U.S. Agriculture Department showed the hog herd as of March 1 at 63.964 million head, up 0.7 per cent from a year ago. But that increase was largely due to better herd management as more young pigs are surviving to maturity.
USDA on Friday put the breeding herd at 5.78 million head, up 0.5 per cent from a year ago, and the market hog supply at nearly 58.185 million, up 0.7 from a year ago.
While all of those numbers were slightly higher than average trade estimates, analysts were reluctant to predict an end to the recent surge in hog prices because of this year’s strong demand for hogs and pork. USDA forecasts U.S. pork exports to be up more than 10 per cent this year.
Nearby hog futures are nearing record highs at the Chicago Mercantile Exchange and deferred contracts are even higher.
“It is slightly negative, if anyone cares,” Jim Clarkson, analyst with A+A Trading, said of the report.
Robust pork exports to Mexico, South Korea, Japan and others have had analysts and traders focused on demand rather than supply.
“I think cash fundamentals will rule the day and the expected increase in exports to Japan will outweigh any impact,” Dan Norcini, an independent hog trader, said.
High feed corn prices have discouraged expansion. Corn costs about $6.80 a bushel now and there are worries it could surpass $7 or even $8 should the 2011 corn crop be hurt by production problems (all figures US$).
“Hog producers are waiting for some signal that feed is going to be cheaper before adding any sows,” said Ron Plain, agricultural economist at the University of Missouri.
Plain noted the report forecast a slight decline in pig litters this year versus 2010, which could mean fewer hogs and higher hog prices in 2012.
Chicago hog futures closed at a one month high on Friday at 92.475 cents per lb and are near the record high for a lead contract of 95 cents set in February.
“Numbers were just a little bit heavier than expected as far as upfront supplies. But we would not think this would impact Monday’s trade at all,” said Rich Nelson, analyst at Allendale Inc.
— Additional reporting for Reuters by Michael Hirtzer.
