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Modest hog herd expansion boosts futures

The U.S. hog supply increased at a modest rate this fall, with the litter size hitting a record high, the latest USDA quarterly report shows.

The U.S. Department of Agriculture’s Dec. 23 quarterly hogs and pig report showed that an average of 10.02 pigs survived to maturity in the September-November period, up from 9.9 last year but below trade estimates for 10.04.

The report also showed that the breeding herd held flat in the September-November period. This was considered bullish since analysts polled by Reuters, on average, had expected an expansion of 100.8 per cent.

Pigs per litter in the September-November period increased one per cent to 10.02 pigs versus 9.89 a year earlier.

Analysts said futures were also lifted by data showing that the number of hogs weighing 180 lbs. and over stood at 100 per cent of a year ago versus expectations for 101.2 per cent.

“I didn’t see the pig inventory number as friendly because it was above the average forecast,” said Dan Vaught with Vaught Futures Insights.

He referred to the USDA report showing the total hog herd at 102 per cent, above an average of estimates for 101.3 per cent. USDA rounds its percentage estimate, the actual increase was 101.6.

The market hog supply came in at 102 per cent, or 60.12 million head, above the trade average of 101.3 per cent.

U.S. Commodities analyst Don Roose said the “positive” aspect that one can take from USDA’s breeding herd result is that expansion was not as significant as some had feared.

Before the survey’s release, analysts and traders said hog farmers had plenty of incentive to expand herds. Cash hog prices struck an all-time autumn high of $94.40 per cwt due to strong exports to China as it battled food inflation.

Also, spot corn futures at the Chicago Board of Trade slid almost 25 per cent from record highs near $8 per bushel in June as an unusually hot summer had traders worried about the U.S. crop.

However, the current breeding data not only reflects the residual effect of the past summer, but producers’ trepidation about the year to come.

Vaught said “hot weather harmed conception rates and may have reduced the number of piglets that were conceived. And, concerns about the economy played a role as well as cost of feed that is still over $5 per bushel.”

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