CME: Total 1 March Hog, Pig Inventories Larger than a Year Ago

US - According to the latest USDA survey of US hog producers, total hog and pig inventories as of 1 March were 65.911 million head, 1.5 per cent larger than a year ago, write Steve Meyer and Len Steiner.
calendar icon 2 April 2013
clock icon 4 minute read

Prior to the report analysts were expecting a 0.7 per cent increase in the total of hogs coming to market. USDA made some notable revisions to previously reported numbers. The 1 September inventory was revised up by 470,000 head while the December 1 inventory was revised by 65,000 head. USDA goes back and revises previously reported inventories based on actual slaughter numbers.

The inventory of market hogs as of 1 March was 60.077 million head, 1.6 per cent larger than a year ago. Inventories of hogs over 180 pounds, which is basically hogs and came to market in March, were up 2.3 per cent from a year ago. This is consistent with weekly hog slaughter for March which is currently running around 2.1 per cent above year ago levels. Inventories of pigs under 50 pounds were 19.426 million head, 1 per centlarger than a year ago. Market hogs in the 50-120 pound category were up 1.5 per cent from a year ago while hogs weighing 120-180 pounds were 2.2 per cent higher than last year. This implies that that hog slaughter for Q2 of 2013 will be larger than earlier expected. The latest WASDE supply/ demand tables pegged total pork production for Q2 at 0.9 per cent above year ago levels. However, with hog weights steady to slightly lower than a year ago and around 1.8 per cent more hogs coming to market during the quarter, we could see pork production up 1.3 per cent for Q2.

Producers surveyed in March indicated that they expect to keep farrowings in check for the next two quarters. Farrowing intentions for the March—May quarter were pegged at 2.955 million head, 0.9 per cent below year ago levels while farrowings for Jun- Aug were 2.905 million head, 0.8 per cent lower than a year ago. Despite the expected lower farrowings, the pig crop should be modestly higher in the next two quarters, thanks to steady gains in the number of pigs per litter. The latest survey showed that 10.08 pigs were saved from each litter in the Dec-Feb quarter, a 1.1 per cent increase from a year ago. While producers continue to increase the number of pigs saved per litter, the pace of increases has slowed down. And with more hogs expected to go into group housing facilities in the coming years, the expectation is for pig per litter growth to remain slow.

The biggest risk to the projections for future supplies is the true rate of farrowings. There is plenty of anticipation this spring that big corn plantings (+97.3 million acres) will help boost corn supplies and push corn prices lower by next fall.

Also, USDA reported on Thursday that corn supplies as of 1 March were not as tight as previously thought. The grain stocks estimate caught many in the market on the wrong side, with most analysts ahead of the report expecting notably lower stocks. The USDA 1 March stocks estimate implies a feed use during the Dec - Feb period that is down almost 30 per cent from a year ago. However, feed and residual use for the six months Sep - Feb, is down just 6 per cent. The year over year change in quarterly grain stocks has become much more volatile, in part due to more volatile weather events but also the increased importance of ethanol production as both a consumer of corn and supplier of feed byproducts.

Bottom line: A larger than expected hog inventory and lower corn prices should help contain pork price inflation for the balance of 2013 and in 2014.

Further Reading

You can view the USDA Hogs and Pigs report by clicking here.

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