March 26, 2009

The US Department of Agriculture's coming quarterly hog report could show that producers may have changed their minds about liquidating herds as corn prices receded toward the end of last year.

 

The federal government's quarterly hog report is to be released on Friday at 3 p.m. EDT (1900 GMT).

 

Pundits' projections for the top three categories included a March 1 all-hogs-and-pigs estimate that ranged from 96.1 percent to 98.5 percent of a year ago, with an average of 96.9 percent.

 

Respondents submitted a 97.9 percent average projected kept-for-breeding figure, from a 97.0 percent to 98.5 percent range. And they arrived at a 96.8 percent average kept-for-market number from forecasts that ranged from 95.9 percent to 98.6 percent.

 

Of the three main groupings, the number of hogs that are kept for breeding may unearth clues whether producers have slowed or abandoned their liquidation strategies altogether.

 

The price of corn, the main ingredient in hogs feed, has descended to currently just under US$4 a bushel from last-summer's lofty US$8 level. The price remains relatively high historically, but not enough to discourage hog farmers who may have adjusted to the current price regime.

 

Producers had originally put off herd expansion plans as mounting feed bills eroded their bottom lines.

 

University of Missouri livestock economist Ron Plain said, based on the U of M's gilt retention data, he projects June-August farrowing intentions down only 1 percent from a year ago. A smaller-than-anticipated summer farrowings number by the government, he said, would be "good news" for the industry. The "bad news" is the potential for the breeding herd and farrowings to come in larger than expected, which could leave the industry with more hogs than expected, said Plain, who offered a 98.1 percent kept-for-breeding estimate.

 

Corn became less expensive as 2008 wound down, said Plain. He said brisk US pork exports last year planted the seeds of producer optimism by late last year.

 

However, Plain pointed out that pork shipments abroad for 2009 may be steady, and in some cases worse than a year ago, as countries struggle to improve their economies.

 

"Given the soft global economy, it is difficult to be optimistic about anyone buying more US pork in 2009, Plain said.

 

Furthermore, Plain said that during normal industry cycles, producers tend to reduce the size of their herds, then refrain from that practice after a while.

 

Don Roose, analyst with US Commodities, said he foresees a 98.5 percent kept-for-breeding outcome, an indication that liquidation has slowed or stopped for the most part as evidenced by smaller sow slaughter numbers during the first couple of months of this year.

 

Roose also said there are not as many small-and medium-size producers exiting the business as before. He added that corn prices dropped so abruptly that it may have changed the mindset of producers fairly quickly.

 

Plain and Roose voiced concern about ongoing pigs-per-litter growth that they said could result in more pigs in the production channel. Both market observers attribute the steady yearly climb to increased industry efficiency, reduced death losses and better herd performance.

 

"It's kind of like increasing the yield on a crop," said Roose, who provided a 102.0 percent pigs per litter estimate.