Evening Report: March 30, 2022

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Check our advice monitor on ProFarmer.com for updates to our marketing plan.

 

Hogs & Pigs Report: Herd contraction greater than expected, no signs of expansion restarting... USDA estimates the U.S. hog herd at 72.2 million head as of March 1, down 1.7 million head (2.3%) from year-ago and 837,000 head less than the average pre-report estimate implied. The market hog inventory declined 2.4% and the breeding herd dropped 1.9%. That’s the smallest March hog herd and market hog inventory since 2018. The breeding herd is the smallest since 2017.

Hogs & Pigs Report

USDA
(% of year-ago)

Average estimate
(% of year-ago)

All hogs March 1

97.7

98.8

Kept for breeding

98.1

100.1

Kept for marketing

97.6

98.7

 

 

 

Market hog inventory

 

 

  under 50 lbs.

99.0

101.1

  50 lbs.-119 lbs.

98.1

99.5

  120 lbs.-179 lbs.

96.5

96.5

  Over 180 lbs.

96.2

97.9

 

 

 

Pig crop (Dec.-Feb.)

99.0

101.3

Pigs per litter (Dec.-Feb.)

100.1

101.0

Farrowings (Dec.-Feb.)

99.0

100.4

Farrowing intentions (March-May)

98.5

99.7

Farrowing intentions (June-Aug.)

99.4

100.6


The winter pig crop came in 309,000 head (1.0%) below year-ago and well below expectations for a 1.3% increase. Sow farrowings during winter dropped 1.0%, which wasn’t offset by a 0.1% increase in litter size. With the breeding herd down 1.9%, spring and summer farrowing intentions look optimistic at 1.5% and 0.6% below year-ago levels, respectively. Producers are giving no indications they intend to throw the brakes on contraction and start to rebuild their herds. Even with an increase in litter size, pig crops will continue to decline and the hog herd will contract further.

Market hog inventories signal slaughter will run about 3.5% to 4% below year-ago through spring and then be about 1% to 2% under last year’s levels through summer and into fall.

USDA made relatively minor adjustments to past data. It revised its estimate of the Dec. 1, 2021 hog population lower by 55,000 head (0.1%) to 74.146 million head. That change came in the size of the breeding herd, with the 55,000-head drop to 6.125 million representing a 0.9% decline. The Sept. 1, 2021 hog population was boosted by 250,000 head (0.3%) to 74.867 million head, reflecting a 250,000-head addition to the number of market hogs.

The report data is bullish in virtually all categories, which should trigger a strong price rally on Thursday.


Fourth quarter GDP growth trimmed... In its third estimate for the fourth quarter of 2021, the Commerce Department said real gross domestic product (GDP) increased at an annual rate of 6.9%, down 0.1 percentage point from the “second” estimate released in February. Economists polled by Reuters expected GDP growth to be revised up to a 7.1% rate. Personal consumption expenditures were revised down 0.6 points from the previous estimate to up 2.5% for the fourth quarter of 2021. In the third quarter of 2021, real GDP increased 2.3%. For all of 2021, the economy grew 5.7%, unrevised from the second estimate. It was the strongest yearly growth since 1984.
 

More support for a possible bigger May interest rate hike... Federal Reserve Bank of Richmond President Thomas Barkin told Bloomberg Television he is open to raising interest rates by 50 basis points at the May 3-4 Federal Open Market Committee meeting. He would base his decision on the strength of the U.S. economy. He added that the interest rate might need to go above neutral, which is 2.4%, to bring down inflation. Philadelphia Fed President Patrick Harker is also open to a 50-basis point hike at the May meeting. Traders put the odds of a 50-basis point hike at the May meeting better than 50%.


Traders expect European Central Bank interest rate hikes sooner... Money market traders now expect the European Central Bank to raise interest rates two months earlier than previously thought. Investors think the bank will raise interest rates by 50 basis points through October. Previously, they thought rates would increase by the that amount through December. Investors switched their minds after Spain’s inflation rate increased more than expected. Germany’s inflation rate was also reported higher than expected. The euro zone's central bank plans to end its bond-purchasing program by summer and any rate hike would be after that.


Ukraine discussing shipping from Romanian port... Ukraine is discussing shipping its agricultural exports from the Romanian Black Sea port of Constanta, according to Ukraine’s agriculture ministry. The country is also discussing possibilities of rail transportation as an option. However, there are issues with Ukraine and European railways as they use different gauges. In addition, there is also a lack of European locomotives. Currently, Ukraine can ship exports three ways, the Danube ports, railways and highways. Danube ports account for 30% of the shipments. However, due to lack of investment because of limited use, they are limited on how much more exports can be shipped. 


Ukraine lost $1.5 billion in food exports... During the first month of the Russian invasion, Ukraine has lost $1.5 billion in food exports, according to the country’s First Deputy Minister of Agrarian Policy and Food of Ukraine Taras Vysotsky. He explained before the invasion, Ukraine exported up to 5 MMT of agricultural products a month through Odesa and Mykolaiv. The export capacity has dropped to 500,000 MT per month. Up to 30,000 MT of domestic grain products are shipped by rail daily.


Ukraine accuses Russia of planting mines in the Black Sea... In recent days, Turkish and Romanian military diving teams have been defusing abandoned mines around their waters. The shipping insurance market increased the area it considers high risk in the region and raised insurance premiums as the shipping risks increased.


USDA confirms more HPAI cases... USDA’s Animal and Plant Health Inspection Service (APHIS) confirmed more highly pathogenic avian influenza (HPAI) cases. A commercial turkey flock in Johnston County, North Carolina tested positive for the disease. APHIS confirmed a case in a non-commercial backyard chicken flock in Kidder County, North Dakota. Non-commercial, mixed-species backyard flocks in Berkshire County, Massachusetts, Johnson County, Wyoming and Franklin County, Ohio were also confirmed. That raises the total number of U.S. cases of HPAI to 84. 


Ethanol conversion kit sales soar in France... More French drivers are purchasing ethanol conversion kits to allow their cars to run on higher ethanol blends to take advantage of the ethanol and gas price differential. FlexFuel Energy Development reported it had sold 6,400 kits in the first 22 days of March, compared to 3,468 in February and 2,166 in January. Other companies are also reporting similar sales. The kits enable car engines to use an E-85 blend instead of the standard E-10 blend.


Israel shipping congestion increases... An unprecedented 80 cargoes are waiting to dock in Israeli ports, according to industry officials. They note some ships are deciding to bypass Israel altogether. Last week, Israel’s Minister of Transport, Merav Michaeli, instructed ports to prioritize t vessels unloading grain and livestock feed. The bottleneck comes just before Easter, Ramadan and Passover and the media is warning about possible shortages.


Iowa farmland soars 14% in the past six months... The Iowa Chapter of the Realtors Land Institutes survey pegs the state-wide value of high-quality cropland at $14,080 an acre, up 14.1% from September; the value of medium-quality cropland at $10,902, up 14.2%; and the value of low-quality cropland at $7,701 an acre, up 13.7%. In addition to cropland values, the survey lists a gain of 12.3% in pastureland value. According to the survey, 64% of all buyers were farmers and the remaining 36% were investors. Of the investor group, just over half, 52%, were local investors and 48% were non-local investors, some with 1031 money.


Spain allows supermarkets to ration products... Spain’s government authorized supermarkets to ration products until June 30 to prevent shortages. Supermarkets have requested legal backing from the government. The authorization comes after the Russian invasion of Ukraine and a trucker strike that resulted in shortages of eggs, milk, flour and sunflower oil. However, most of the shortages resulted from consumer hoarding more than actual supply issues.

 

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