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Hog sector still bullish, analysts say
Story Date: 1/2/2013
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Source: Michael Fielding, MEATINGPLACE, 12/31/12
United States inventory of all hogs and pigs on Dec. 1, 2012, was 66.3 million head. This was down slightly from Dec. 1, 2011, and down 2 percent from Sept. 1, 2012. Analysts had projected a reduction of .9 percent in all hogs and pigs inventories.
“These pig crops remain very large,” said Bob Brown, an independent meat market consultant, from Edmond, Okla. He was one of three economists on a media conference call hosted Friday afternoon by the National Pork Board and the Pork Checkoff.
Breeding inventory, at 5.82 million head, was up slightly from last year, and up slightly from the previous quarter – despite analysts’ estimates of a slight reduction of .7 percent year-on-year. Market hog inventory, at 60.5 million head, was down slightly from last year (in line with analysts’ projections of a slight .9-percent reduction), and down 2 percent from last quarter.
The September-November 2012 pig crop, at 29.4 million head, was up slightly from 2011. Sows farrowing during this period totaled 2.90 million head, down 1 percent from 2011. The sows farrowed during this quarter represented 50 percent of the breeding herd.
The average pigs saved per litter was a record high 10.15 for the September-November period, compared to 10.02 last year. Analysts had estimated a slight increase of .8 percent. “That productivity train just keeps on running down the track,” Brown said. Pigs saved per litter by size of operation ranged from 7.60 for operations with 1-99 hogs and pigs to 10.20 for operations with more than 5,000 hogs and pigs.
United States hog producers intend to have 2.86 million sows farrow during the December 2012-February 2013 quarter, up slightly from the actual farrowings during the same period in 2012, and up 1 percent from 2011.
Intended farrowings for March-May 2013, at 2.93 million sows, are down 2 percent from 2012, but up slightly from 2011. “The potential is there for new record high for the Dec-Feb pig crop,” Brown added.
Kevin Bost, president of Des Plaines, Ill-based Procurement Strategies, Inc. agreed, saying that beyond the first quarter of 2013, “I can see no reduction at all year-over-year,” he explained. “That’s not what the market had been expecting up to this point.”
The total number of hogs under contract owned by operations with more than 5,000 head, but raised by contractees, accounted for 47 percent of the total United States hog inventory, up from 45 percent last year.
Friday’s report gives reason for Tyson Foods and Hillshire Brands to smile, J.P. Morgan analyst Ken Goldman said in an analysis released Friday afternoon.
“As a general rule, the cheaper the hog the better the margin for these two non-vertically integrated companies,” he wrote. “For Smithfield, which is vertically integrated, the read-through is more mixed. Cheaper hogs will be negative for [Smithfield’s] hog farming business but positive for pork processing.”
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