Hogs & Pigs Report: Bearish

September 27, 2013 09:31 AM
 

 

 

USDA's quarterly snout count has a decided bearish tone as nearly all categories were higher than expected. The U.S. hog inventory as of Sept. 1, which USDA puts at 68.360 million head, is surprisingly 188,000 head higher than year-ago. Based on the average pre-report trade guess, the hog herd was expected to be nearly 1 million head fewer than year-ago. That's a huge miss. The bigger hog inventory was largely driven by a bigger-than-expected summer pig crop and a continued rise in the number of pigs per litter despite the spread of porcine epidemic diarrhea virus (PEDV).

Quarterly H&P Report Expectations

USDA

Avg. trade guess

Range

 
 
 

% of year-ago

All Hogs and Pigs

100

98.6

96.4-100.3

Kept for breeding

100

101.5

100.6-102.0

Kept for marketing

100

98.3

95.9-100.2

June-Aug. pig crop

102

99.6

98.4-101.7

June-Aug. pigs per litter

102

100.0

98.5-101.8

June-Aug. farrowings

100

99.8

98.2-100.9

Sept.-Nov. farrowing int.

100

101.0

100.0-101.8

Dec.-Feb. farrowing int.

101

101.1

99.9-102.1

Hogs under 50 lbs.

101

98.8

97.0-101.6

Hogs 50 to 119 lbs.

101

98.9

96.1-100.0

Hogs 120-179

101

98.3

95.9-101.1

Hogs 180 and over

96

96.2

94.0-99.3

The bigger-than-expected market hog inventory suggests slaughter will run roughly 1% above year-ago through the first quarter of next year. Based on the pre-report guesses, traders were anticipating slaughter to run 1%-plus below year-ago through that timeframe.

Based on farrowing intentions for fall and winter, producers plan to expand the hog herd. That isn't a surprise given the strong rally in hog futures and the drop in feed prices since the last H&P Report.

This report data could very well put a top in the hog market -- if traders believe the data. But at a minimum, we expect to see heavy pressure on hog futures Monday.

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