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.

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.