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Smaller U. S. Hog Herd Surprises Traders

U. S. hog futures rose the three-cent-per-lb. daily limit, as expected, in several key contracts early on Monday after USDA surprised investors last Friday by reporting a smaller-than-expected U. S. hog herd, traders said.

Analysts on average expected about a one per cent smaller herd, but USDA reported a three per cent drop in hog numbers.

Prior to Friday’s report, investors had sold hog futures lower for about a week on ideas hog producers had started expanding herds. The USDA report indicated liquidation was still underway.

The USDA on Friday reported the March 1 hog herd at 63.988 million head, down three per cent from a year ago and the smallest herd for that date in three years.

The report showed the breeding herd at 5.76 million head, down four per cent from a year ago and the smallest on record.

“This is a real good report, it’s real bullish. I wouldn’t be surprised if you end limit-up two days,” Bill Cipolla, Chicago-based independent hog trader, said on Monday.

Optimism that China and Russia may resume purchases of U. S. pork also gave futures a lift, Cipolla said.

“Our export business is going to pick up. You couple that with this bullish pig crop report and this could be an interesting market,” he said.

Profitable hog prices for producers early this year had raised speculation that many of them had started to expand herds. The USDA report’s smaller herd put those predictions into question.

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