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Hog Report Seen as Bearish for Monday's Market

03/28/2014 @ 4:32pm

We thought our, and the rest of the trade’s prereport expectations were conservative. USDA took that to a whole new level this afternoon. The total hog herd was only 3.3% less than last year as of March 1. That was a much bigger herd than the 5.5% decline that analysts expected (ALDL -5.1%). I’m not saying this afternoon’s report is unrealistic but……..it is very, very unrealistic. 

The Kept for Market herd, those barrows and gilts that will hit the packing plant between March 1 and August 30, was estimated at 3.7% less than last year. The analyst guess here, which we suggest was conservative, was for a 6.0% decline. The category of hogs that are in the kill right now, those weighing over 180 pounds on March 1, was seen at 4.8% less than last year. Get this: USDA is already off with their numbers. The weekly slaughter since the start of March has run 6.7% lower than last year. The next two weight categories are only for a 3% year-over-year decline. The hogs that will be slaughtered from later July through August were 4% lower. Don’t forget, there are widespread industry expectations that summer slaughter will run 10% to 15% lower than last year!

Breeding Herd: The breeding herd was estimated to be 0.3% higher than last year. That is a change from the December 1 numbers of a 1.1% decline. Based on facts we know, that sow slaughter from December–February was 4% lower than last year. We can compute that new gilt additions, young females, ran 5.1% over last year. In other words, producers are expanding. We cannot argue with this at all. The tremendous profit incentive here is just too much to ignore. In the past Dec–Feb quarter sows farrowed, giving birth, to 2.8% more litters. Their pigs per litter count was 5.5% less than last year. This is the first year-over-year drop in pigs/litter since Jun/Aug of 2003! This is where they identified PED. It is another way of making May–Aug slaughter estimates (other than the Market Hogs weight breakdown noted above). For the next two quarters producers told USDA they intended farrowings 2.4% higher and 2.0% higher respectively.

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