(Reuters) — The U.S. hog herd in the March-May quarter rose two percent to a record high from a year ago, according to a June 24 U.S. Department of Agriculture report, which exceeded most analysts’ forecasts.
Farmers added to their herds because of affordable feed, strong U.S. pork export demand and gradual price improvement for their animals, analysts said.
Producers became increasingly confident about their expansion plans as hogs recovered from the porcine epidemic diarrhea virus, which killed an estimated eight million pigs over the past three years.
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Some analysts said the government survey suggests weaker hog and pork prices for the rest of 2016 from a year ago.
“The reality is we had more hogs than we thought, and we’re going to have bigger numbers coming at us in the third and fourth quarter than anticipated,” said U.S. Commodities analyst Don Roose.
The USDA report showed the U.S. hog herd as of June 1 up two percent at 68.381 million head. It surpassed the record high of 67.166 million for the same period last year.
Analysts expected 67.695 million head, or a .8 percent increase.
The U.S. breeding herd was up one percent at 5.979 million head from 5.926 million last year.
The average trade forecast was 5.951 million, or a .4 percent increase.
The June 1 supply of market-ready hogs for sale to packers was up two percent at 62.402 million head from 61.2 million last year. Analysts looked for a .8 percent gain, or 61.722 million.
Analysts viewed the report as bearish for Chicago Mercantile Exchange lean hog futures. Futures had settled lower June 24, partly on worries over Britain’s break from the European Union.
Farmers appeared more optimistic now that PED is less of a factor than in previous quarters, said Roose.
Roose said one of the biggest issues that the hog industry wrestled with from 2005-2012 was high feed costs, which have now be-come more reasonable.
Bob Brown, an independent market analyst, cited the record pigs per litter and a 1.5 percent bump in the number of sows that had pigs as key drivers for expansion in the USDA report.
He also pointed to increased chatter about U.S. pork exports to China after their prices hit record highs, which motivated domestic producers.
