Smithfield to benefit from positive hog report

Smithfield Foods, as the largest US hog producer, may be set to benefit from Friday's bullish Hogs and Pigs report, according to Wall Street analysts.

"Smithfield's shares are well-positioned to increase fuelled by an earnings recovery given the improving hog cycle," Stephens Inc. analyst Farha Aslam said.

Aslam noted the quarterly report showed the sow herd on March 1 came in down 3.9% or 90,000 heads below last year versus expectations of a 2.6% decline. She also pointed to other bullish numbers in the report, including farrowing intentions in the upcoming periods coming in below expectations, which she said should support hog futures longer-term.

Analyst Ken Goldman noted very few gilts (young females who have not yet given birth) are being ordered by farms, which is keeping the total breeding herd small. He went even further to suggest farrowings in upcoming quarters might be even lower than the 4% drop USDA projects.

"Farmers lately have overstated their farrowing intentions - probably in an effort to dissuade competitors from increasing production — which suggests that the actual March-May decline may be steeper than 4%," Goldman said.

On the demand side, Aslam pointed to domestic demand for pork being supported by higher beef and chicken prices and international demand benefiting from greater market access to Chinese and Russian markets.