CHICAGO, Ill. (Reuters) Ñ The U.S. hog herd grew slightly from a year ago according to the March 24 United States Department of Agriculture report, indicating that producers are still not expanding herds despite profitable prices.
“I consider that a friendly type of report,” said Dennis Smith, livestock broker with Archer Financials. “After this long a period of profitability, we are not showing expansion. It is a sigh of relief for the market that we are not expanding.”
USDA reported the U.S. hog herd at 101 percent of a year ago on March 1. The breeding herd was 100 percent and market hogs at 101 percent. Analysts noted that the USDA percentages were rounded up and the actual numbers were up less than one percent for all hog categories.
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The rate of growth of the hog herd slowed from previous years because the industry has nearly filled all of its barns. New barns are not being built because of environmental restrictions and protest from the public, which views hog operations as unwanted neighbours.
Most of the increase in hog numbers has been due to more pigs per litter. This was attributed to mild weather and better management practices.
“It (hog production) is at the outer limits. Unless we get new production facilities, we are close to capacity,” said John Kleist with Kleist AG Consulting.
Some of the forecasts for higher deferred hog futures came from the report’s lower-than-expected March-May farrowing intentions and lowered projections for the June-August farrowings, analysts said.
The lower summer farrowing estimate was attributed in part to an upward revision to last year’s number. That may temper any bullishness in the futures, they said.
“They (USDA) found more hogs born last summer that are coming into the first quarter of this year,” said Chuck Levitt, senior livestock analyst with Alaron Trading Corp.
The fall pig crop showed a two percent rise, which points to an increase in the slaughter rate for the summer, or third quarter.
“What this report is saying is that the July-September slaughter could be one to two percent over the previous year with second and fourth quarter slaughter from domestic hogs about unchanged from last year,” Levitt said.
Because of the increase in pork production in the first quarter and anticipated increase in the third quarter, pork production will likely post another record this year.
“The numbers in the report still imply a pork production this year that will at least match last year’s record large number and may exceed it,” Levitt said.
The large pork production is not bearish as long as demand remains as strong as this past year.
