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U.S. hog herd expands

07/02/2012 @ 8:56am

The number of hogs and pigs on U.S. farms as of June 1 was up 0.8% compared with a year ago and about 1.1% higher than three months earlier, according to federal data released Friday, largely in line with expectations for a modest expansion in supplies later this year.

The U.S. Department of Agriculture reported the total size of the U.S. hog and pig herd at 65.8 million head, a bit lower than the expectations of analysts, who'd been anticipating a 1.3% rise compared with a year ago. The total herd is 0.3% smaller than the five-year average.

In the quarterly hogs and pigs inventory report, the USDA reported the nation's herd of hogs used for breeding, to produce fresh batches of piglets, on June 1 was at 5.86 million head, up 1% from a year ago and 0.8% below the five-year average. Analysts surveyed by Dow Jones Newswires expected the breeding herd to grow 0.7%.

The report could be considered mildly bullish for hog futures. That's because the signs of producers restraining their production were collected prior to a recent two-week rally for corn futures, which have shot upward at the Chicago Board of Trade due to signs a hot, dry heat wave across much of the Corn Belt is posing grave threats to the coming corn crop.

September corn futures have spiked 24% in the last two weeks to settle most recently around $6.28 a bushel--a long way from the $5-a-bushel corn that many hog producers were expecting. The recent spike in feed costs could further deter hog producers from expanding production later this year and next year. The soonest-expiring hog futures on Friday closed down 0.1% to 96.62 cents a pound, up 1.8% on the week.

The data could help ease traders' worst fears that last year's impressive global demand for pork would entice U.S. hog producers to expand their production this year. "Compared to previous expansionary cycles" the report shows "very mild" growth in supplies, said Rich Nelson, director of research at Allendale Inc.

The U.S. hog-producing sector has become much more concentrated over the past two decades as a big population of small-time hog farms has steadily consolidated into an industry dominated by big industrial hog producers, like Smithfield Foods Inc. (SFD), the world's largest. That ongoing consolidation has slowed the boom-and-bust production cycles that used to plague the industry as fat profits from one year would entice producers to expand too quickly, eventually swamping markets with supplies before the ensuing rash of losses forced farmers to pull back.

The USDA reported the number of hogs kept for marketing, or for sales to slaughterhouses, as of June 1 at 59.97 million head, up 0.8% from a year ago and 0.2% below the five-year average. Analysts had estimated about 60.35 million head would be held for marketing, or 1.4% higher than a year ago.

The number of pigs saved per litter for the three-month period from March to May was 10.09, up 0.6% from a year ago. The U.S. pork industry first topped 10 pigs per litter a year ago, in the June 2011 hogs-and-pigs report. The growth in pigs-per-litter is a knock-on effect from the industry's use of selective breeding and very careful management of pregnant females. The industry average was below nine pigs per litter as late as 2003.

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