September 28, 2009

Analysts and traders viewed Friday's (September 25) US government quarterly hogs and pigs report as neutral for Chicago Mercantile Exchange lean hogs on Monday because the bulk of the data was nearly in line with trade estimates.

 

The figure for all hogs and pigs as of September 1 was put at 98.0 percent compared with analysts' average forecast of 98.2 percent and a range from 97.4 percent to 99.0 percent.

 

The USDA pegged kept-for-breeding at 97.0 percent compared with the average of analysts' predictions of 97.4 percent and their projected range of 96.5 percent to 98.2 percent.

 

The US Department of Agriculture put hogs kept-for-marketing at 98.0 percent compared with the average estimate at 98.3 percent, ranging from 97.3 percent to 99.1 percent.

 

"It's a non-report after all this buildup," a CME hog trader said. "With the exception of the light-weight hog category, everything else was pretty much as expected, so we can get back to trading fundamentals."

 

The fundamentals that the trader referred to are late-Friday's USDA pork cutout price that was reported up US$1.12 per hundredweight. Also, cash hog prices for Monday so far are called steady to weak.

 

Ron Plain, a University of Missouri livestock economist, saw "nothing exciting" in Friday's government hog figures because the outcome didn't stray from pre-report estimates.

 

However, Plain said hogs weighing 180 pounds and more at 100.0 percent might be viewed as somewhat bearish for the CME October hog contract on Monday. However, most agree those hogs are close to being, or have already been, processed at this point.

 

By the same token, Plain said he believes the report's 96.0 percent result for hogs under 60 pounds might be somewhat positive for the February and April futures because it was lower than expectations.

 

Nonetheless, the report overall suggests producers still aren't cutting back hog numbers as much as they should to return to a level of profitability in the long run, said Plain. Despite a lot of red ink, it has been a slow cutback which continues based on Friday's numbers, he said.

 

Don Roose, president of US Commodities, said Friday's survey produced "no shockers" and reinforces what had already been known the past three quarters in that hog farmers are trimming herds but the drawdown isn't "deep" enough.

 

"The hint is the September-November and December-February farrowings down 3 percent," said Roose. "Yes, we're going in the right direction but it';s probably not deep enough until we get supply to go down and demand to pick up."

 

Roose views the report as neutral to friendly due to the survey's close proximity to trade forecasts and the smaller-weight hog class outcome at 96.0 percent. However, he said, lean hogs' movement and cash hog's fate next week will be tied to the still-fragile pork-demand structure.