H&P Report: Mixed to Supportive

Posted on 03/09/2017 10:24 AM

USDA reports the March 1 U.S. swine population stood at 67.644 million head, which represented a 0.4% annual increase and essentially matched pre-report forecasts. The winter 2015-16 pig crop topped the year-ago level by just 45,000 (0.2%). Farrowing intentions, especially for summer 2016, fell short of expectations and may support fall-winter futures prices.

Quarterly H&P Report Expectations
USDA
Avg. trade guess
Range
 
% of year-ago
All Hogs and Pigs
100
100.3
99.0-101.5
Kept for breeding
100
100.6
100.0-101.0
Kept for marketing
100
100.3
99.0-101.5
Dec.-Feb. pig crop
100
99.9
98.1-101.4
Dec.-Feb. pigs per litter
101
102.0
101.0-102.7
Dec.-Feb. farrowings
99
98.6
98.0-100.4
Mar.-May farrowing intentions
99
100.0
99.9-100.2
June-Aug. farrowing intentions
97
100.0
98.0-100.8
Hogs under 50 lbs.
100
100.8
99.0-102.4
Hogs 50 to 119 lbs.
101
100.1
98.0-101.3
Hogs 120 to 179 lbs.
101
100.0
99.0-101.6
Hogs 180 and over
100
100.2
99.3-101.7


As the accompanying table shows, the latest USDA totals in the left-hand column. Note the agreement between the percentage change figures and the forecast averages at right. Only the farrowing intentions data are significantly different.

hogz032516

The preceding chart puts the total population total in perspective, with the March 1 figure marking a modest reduction from that posted on December 1 and well below the record high posted last September. This latest figure is only slightly above the comparable year-ago total, which itself was drastically above the disease-reduced total posted in early 2014. There can be little doubt that the current hog and pig population is very high by historical standards.

December-February farrowings at 2.873 million exceeded the December intentions figure by 33,000 head or just over 1%, but it fell 22,000 (0.8%) below the comparable year-ago figure. Industry analysts had anticipated a similar result, but expected a 2% surge in the number of pigs saved per litter. Thus, having that figure actually post an increase of less than 1% annually put the winter pig crop at 29.8582 million head, which largely met industry expectations.

farz032516

The report implied hog slaughter during March and early April would essentially match the year-ago total, which largely agrees with the slaughter total seen since March 1. It then implies hog supplies to be seen during April and May will exceed comparable 2015 results by about 1%. That is slightly larger than was indicated on the December report and industry expectations. Thus, spring hog futures may open rather weakly next Monday morning.

The winter pig crop figure and the lightest (0-50 pounds) weight category, both of which came in at 100% of year-ago, pointed to summer kills that would generally match those seen in mid-2015, so the summer hog contracts may react little to the data. Conversely, the fall-winter contracts may rally next Monday, since the farrowing intentions figures for spring (99%) and summer (97%) came in below forecast levels. The 3% annual summer reduction certainly seems to imply a smaller winter hog supply, so the December 2016 and February 2017 contracts may perform quite well.

Ultimately, the report probably won't have a great deal of impact on the current situation or the short-term hog supply outlook. The real question is spring-summer demand strength. Lower retail prices may spur a much stronger consumer demand response than is generally expected (as reflected in current CME futures prices). We are still inclined to think there is a larger chance of an exaggerated spring hog/pork rally than there is for a disappointing seasonal advance.

 


"

Add new comment