CME: Hogs & Pigs Report Close to Expectations

US - CME's Daily Livestock Report for 26th September 2008.
calendar icon 29 September 2008
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Friday’s quarterly Hogs and Pigs Report from USDA was generally quite close to pre-report expectations and indicates ample market hog supplies in the near term but some moderation of supplies late this year and into 2009. Figure 1 above shows the key numbers from the report and the pre-report estimates that we included in Thursday’s Daily Livestock Report. Some items of particular interest are:

  • Actual numbers for all hogs and pigs, hogs kept for breeding and hogs kept for market that were almost precisely the same as the average of analysts’ pre-report estimates. We do not recall ever seeing estimates this close to the actual numbers for these three categories. The 2.6% reduction in the breeding herd fits well with sow slaughter and gilt retention this year and represents a reasonable yet not robust liquidation rate for the U.S. sow herd
  • USDA”s estimates arrive at the 102.5% for the market herd in a bit of a different pattern from what analysts expected, with more hogs in the two heaviest classes and fewer in the two lightest classes. In fact, the 106.1% of 2007 for the 120-179 lbs. category was the largest actual vs. estimate deviation in the entire report. Pigs weighing 120 lbs on September 1 should reach market weight by late November so it appears that higher year-on-year slaughter increases will persist at least until then. AN IMPORTANT NOTE: Imports of Canadian market hogs have been averaging just over 23,000 head FEWER than last year since June 1 (see Figure 2). We expect import numbers to grow seasonally this fall but to remain about that much or slightly more below year-earlier levels. That would mean U.S. slaughter will be about 0.5% lower than indicated by the weight-group inventories in the table (bottom of page).
  • The Jun-Aug pig crop and under 60-lbs. inventories do not fit together very well. Deducting the 216,000 head (about 1% of the <60 lb. total inventory) increase in weaner and feeder pigs from Canada this Jun- Aug quarter from the under 60-lb. inventory would mean U.S.-born pigs numbered 98.7% of last year’s level. That is well below the 100.5% June-Aug U.S. pig crop number. Why the difference? Regardless, it appears slaughter could fall below year-ago levels by December. The question is “By how much?”
  • Though June-August farrowings were estimated at nearly 2% lower than last year, the June-August pig crop was still 0.5% larger than in 2007. The reason: RECORD-LARGE LITTERS. That productivity growth will offset some of the decline in farrowings for the Sep-Nov and Dec-Feb quarters. Continued reduction of the sow herd will enhance productivity as the least productive sows are liquidated. Is the –2.9% Dec-Feb intention number the result of the strong August hog market?
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