Pork Commentary by Jim Long, March 28, 2011

USDA March 1st. Hogs and Pigs Report: More of the same

Last Friday the U.S.D.A. released the March 1^st Hogs and Pigs Report.  There are no big surprises.  It shows an industry treading water.  We expect prices will track over the coming months very close to where lean hog futures closed. For example last Friday with June at 103.70 U.S. Breeding Herd The U.S. breeding herd was estimated at 5.788 million on March 1^st up 28,000 from a year ago (5.760) and up 10, 000 (5.778) from December 1^st. This is a year over year difference of about ½ of 1%; basically no change.  At this time we see no indications of significant expansion plans.  Historically high hog prices are being balanced off by historically high feed prices and real tight financial credit.  The mood of the industry in our estimation is restrained optimism.  There appears to be little enthusiasm for breeding herd expansion. Market The U.S.D.A. estimated 58,176 million market hogs in inventory March 1^st up just under 400,000 head from a year ago.  The 400,000 head increase can be explained by our market hog weights up around 4 – 5 pounds year over year.  Heavier hogs lead to longer days to market and larger inventories.  400,000 head is just over one day of U.S. hog marketing’s. Farrowing Intentions The U.S. breeding herd according to the U.S.D.A. on March 1^st was ½ of 1% higher than a year ago.  If this is correct you would expect farrowing intentions to be essentially the same as a year ago.

U.S.D.A. Farrowing (thousands)

YEAR	2009	2010	2011
MARCH – MAY	3018	2929	2854
JUNE – AUGUST	2959	2944	2867

Farrowing intentions according to the U.S.D.A. will be about 150,000 litters less over the next six months than a year ago.  This with a breeding inventory essentially the same?  It doesn’t make sense in some ways how will there be less farrowings with the same number of sows?  Either there are less sows or farrowing intentions are under estimated?!  We have no strong opinion other than we don’t believe there will be more pork produced in the next six months compared to a year ago. Pig Crop The U.S. pig crop the last three months was 27.986 million up about 400,000 compared to the same three months a year ago (27.596) but down 600,000 from two years ago (28.552). Litter Size The productivity from pigs per litter just keeps getting better and better with Dec – Feb this year 9.80 up from 9.61 last year and up 9.48 from two year ago.  We expect the gain is mostly from improving genetics. The last two years gain of .32 per litter is actually tracking below our company’s .45 per litter genetic trend line over the last two years. Summary Breeding inventory, and market inventory are holding steady, we expect lean hog prices will continue strong for the rest of the year. Other Observations

• We visited Korean customers this past week, the Foot and Mouth disease has eliminated approximately 350,000 sows and 3.5 million market hogs.  Last week’s South Korean market hog price touched $7.00 U.S. live weight a kilogram or about $3.28 U.S. per pound.  A price we have never seen so high, anywhere.  Prices are always a reflection of supply and demand.  Prices of $7.00 per kilogram are a true reflection of this scenario.   Expect extraordinary amounts of pork to be exported to South Korea from North America in the coming months.  It will be extremely price supporting.
• Packers we talked to last week and other reports indicate Japanese Pork Exports continue unabated despite the crisis underway.  It’s a major reason June lean hog futures have recovered from 95 cents to $1.03 in the last ten days.

Conclusion Pig Report shows little inventory change.  A steady breeding herd tells us Market Hogs have a good chance to stay over 90 cents for the next year.

Categorised in: Pork Commentary

This post was written by Genesus