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CME: Hogs and Pigs Report Viewed as Neutral

28 June 2010

US - USDA’s quarterly Hogs and Pigs Report, released on Friday, indicates that both the breeding herd and market herd are still significantly smaller than one year ago and are very close to pre-report expectations, write Steve Meyer and Len Steiner.

The report is being viewed by the trade as neutral. If the numbers push CME Lean Hogs futures at all on Monday, they will most likely be supportive of near-term contracts and bearish for deferred contracts. The key national data appear in the table below.

Some items of particular usefulness would include:

  • A breeding herd of 5.788 million head, 3 per cent lower than last year but 28,000 head LARGER than on 1 March. It is not unusual for the herd to grow from March to June as producers add females to overcome the impacts of hot summer weather on conception rates — called seasonal infertility. The idea is to over-breed during summer months to keep a steady flow of females farrowing (ie giving birth) during the winter. The efforts usually help but hardly ever completely offset the impact of high temperatures even with the farsuperior conditions provided by today’s modern production facilities.

  • The market herd, at 58.612 million head, was 3 per cent smaller than one year go and 0.7 per cent SMALLER than the average of analysts’ pre-report estimates. Most of that shortfall was accounted for by a very unusual 50-119 lb. inventory which was 2.5 per cent smaller than the average analysts’ estimate. When all of the other weight categories were 2.5 to 3.5 per cent smaller than in 2009, why was this one 5.4 per cent smaller? It’s not easy to explain but the answer may be death losses due to porcine respiratory and reproductive syndrome or PRRS. We have always been loath to predict shortages of market hogs due to health situations and our reticence is borne out by the data. It has historically been very difficult to find a “marketing hole” or shortfall of market hog numbers several months after news of a severe outbreak of PRRS or any other disease. The outbreaks usually cover limited geographies, happen to some degree every year and tend to get washed out over time as the rest of the U.S herd sort of fills in the hole. But this time, the USDA data coincides reasonably well with the timing of anecdotal reports of some rather severe bouts with this serious disease. Whether the shortfall persists all the way to market is yet to be seen but the low number for the 50-119 pound class on 1 June would suggest some lower-than-expected market hog numbers from late August through September.

  • A 180-lb and over estimate that looks a bit low. This weight category should represent pigs that will be, for the most part, slaughtered in June. Using daily slaughter data and estimates from USDA and adjusting for one less weekday through last week, June FI hog slaughter was just over 99,000 head or 1.2 per cent smaller than last year. Canadian market hog imports accounted for roughly 7,000 of that decline so adding them back in would make the year-on-year reduction for US pigs even smaller. Ditto for sow slaughter if one wants to get back to only barrows and gilts. A deviation of 1 per cent or so between the year-on-year changes for slaughter and the 180-lb and over inventory is acceptable. 1.5 per cent is stretching it a bit, suggesting that this category may have been undercounted. What about others?

  • Farrowing intentions and litter size that indicate productivity growth is rebounding. December-February saw a slight slowing in the pace of litter size growth to a still-healthy 1.3 per cent. The March-May figure for pigs saved per litter is record high at 9.81 and represents a return to over 2 per cent year-on-year growth. In addition, producers plan to farrow 97.7 per cent and 99.5 per cent as many litters as one year ago in the June-August and September- November quarters, respectively — from a breeding herd that is 97 per cent the size of one year ago. Productivity growth has been a key factor for the pork industry for many years but the past four have truly been remarkable. Litters per sow per year have, in general, been stable but bigger litters and much better pig survival have resulted in higher slaughter and production from smaller and smaller breeding herds.

  • North Carolina’s breeding herd fell by 110k (of a total 180k decline) since June ‘09. Minnesota, Nebraska, and Iowa lost 30k, 20k and 10k, respectively.

Further Reading

- You can view the USDA Quarterly Hogs and Pigs Report - June 2010 by clicking here.


Daily Livestock Report - Copyright © 2008 CME. All rights reserved.


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