H&P Report Negative Compared to Expectations

Posted on 03/09/2017 10:22 AM

Hogs & Pigs Report: More expansion than anticipated... USDA estimated the June 1 U.S. hog inventory at 68.381 million head, up 2% from last year and well above traders' expectations. The data seemingly confirms USDA's March estimates, since the upper weight categories (and revision to the winter farrowing and pig crop numbers) largely matched industry expectations. However, the spring pig crop at 30.347 million head (up 3%) easily topped expectations and boosted the June herd total.

H&P Report
USDA
Avg. trade estimate
Range
% of year-ago
All Hogs and Pigs
102
100.8
100.1-102.1
Kept for breeding
101
100.4
99.7-101.6
Kept for marketing
102
100.8
100.1-102.1
March-May pig crop
103
100.6
99.6-101.0
March-May pigs per litter
101
100.9
100.1-101.4
March-May farrowings
101
99.7
99.5-100.0
June-Aug. farrowing intentions
98
97.8
96.5-99.0
Sept.-Nov. farrowing intentions
99
100.6
99.4-101.1
Hogs under 50 lbs.
102
101.2
100.5-103.8
Hogs 50 to 119 lbs.
102
100.5
99.5-101.4
Hogs 120 to 179 lbs.
101
100.3
99.0-101.2
Hogs 180 and over
101
101.0
100.3-101.5


The pig crop estimate was the product of spring farrowings at 101.47% of last year and a 1.05% surge in litter size. The March-May intentions figure had fallen 1% below last year, so this latest figure essentially repudiated it. In our pre-report commentary, we had pointed out that it has been quite common for spring farrowings to substantially exceed the winter figure, so a larger figure would not be terribly surprising.

Market hog inventories suggest early-to-mid summer hog kills will tend to remain about 1% over year, then generally run about 2% over 2015 levels through late summer and much of fall. Thus, the data is somewhat bearish for the August, October and December hog contracts.

Summer farrowing intentions essentially matched expectations about 2% under mid-2015 levels, whereas the fall estimate came in lighter than expected. When combined with the long-term upward trend in litter sizes, these summer farrowing figures suggest late-fall and winter kills will run about 1% under last year and possibly match year-ago rates if litter size continues to climb. Fall farrowing intentions point to spring slaughter even with or slightly above year-ago levels.

Given the bearish report data compared to pre-report expectations, lean hog futures are likely to face pressure early Monday. But with futures down sharply ahead of this report, we wouldn't be surprised if the market eventually rebounds on a "sell the rumor, buy the fact" reaction. Outside market volatility in the wake of the Brexit vote is the wild card for hog futures near-term.

 

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