Source: Rita Jane Gabbett, MEATINGPLACE, 3/31/14


USDA’s quarterly Hogs and Pigs reports on Friday showed evidence of herd rebuilding even as the damage from porcine diarrhea epidemic virus (PEDv) was reflected in fewer pigs saved per litter.

Nearly all the key indicators, including all hogs and pigs on March 1, breeding inventory and market inventory, came in above analysts’ expectations.

J.P. Morgan analyst Ken Goldman called the report “mixed, but we think generally negative for hog/pork prices,” and thus positive for Hillshire Brands, Kraft and to a lesser extent for Tyson Foods.

“The sow herd is being rebuilt,” said Goldman in a note to investors, noting the number of sows slaughtered remained at 10-year lows over the last two months.

Report
USDA reported the U.S. inventory of all hogs and pigs on March 1, 2014, was 62.9 million head. This was down 3 percent from March 1, 2013. Analysts, on average, expected that number to be down 5.4 percent. The inventory was down 5 percent from Dec. 1, 2013.

Breeding inventory, at 5.85 million head, was up slightly from last year, and up 2 percent from the previous quarter. Analysts had expected a slight decline in breeding inventory.

Market hog inventory, at 57 million head, was down 4 percent from last year, and down 5 percent from last quarter. Analysts were expecting market hog inventory to be down nearly 6 percent from last year.

The December 2013-February 2014 pig crop, at 27.3 million head, was down 3 percent from 2013. Sows farrowing during the period totaled 2.87 million head, up 3 percent from 2013. The sows farrowed during the quarter represented 50 percent of the breeding herd.

The average pigs saved per litter was 9.53 for the December-February period, compared to 10.08 last year. Pigs saved per litter by size of operation ranged from 7.70 for operations with 1-99 hogs and pigs to 9.60 for operations with more than 5,000 hogs and pigs.

Prices
Analysts on a Pork Board-sponsored teleconference agreed that already strong producer profitability and the outlook for that to continue are driving herd expansion.

Sterling Marketing President John Nalivka noted processors are also enjoying strong profitability even in the face of high hog prices as they are receiving record cutout prices. Also on the Pork Board call were Daniel Bluntzer, director of research, Frontier Risk Management and Jim Robb, director, Livestock Marketing Information Center. All three analysts predicted steadily increasing hog prices through the second and third quarters before falling back in the fourth quarter.

Bluntzer was the most optimistic, predicting hog prices as high as $128 per hundredweight in the second quarter.

In regard to an immediate reaction to the report, however, Goldman predicted hog futures prices may decline on Monday, given the larger-than-expected hog numbers in the report.  

A moment in time
The analysts noted the report reflects conditions as of March 1, which was nearly a month ago, and suggested some of predictions in the report appear more optimistic than anecdotal evidence in the industry.

“The Hogs and Pigs report is not always the whole story,” said Robb, predicting the seasonal changes in the market this year “could be more dramatic than we’ve seen in the past.”

Bluntzer said anecdotal evidence from the industry suggests many of the hog inventory numbers in the report would go down in the coming months.

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