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CME: USDA Quarterly Report Bullish and Bearish

by 5m Editor
30 March 2009, at 1:01pm

US - CME's Daily Livestock Report for 27 March 2009 comments on the latest USDA Hogs and Pigs Report.

USDA’s quarterly Hogs and Pigs Report, released on Friday, 27 March, was a mixture of potentially bullish and bearish numbers — which will likely be viewed pretty neutral come Monday morning. The report indicated continuing liquidation of the US breeding herd and a commensurately smaller market herd but rising productivity that will offset some of the cutbacks late in 2009 and into 2010. Figure 1 shows the report’s key numbers and well as the averages of pre-report estimates and differences between the two sets of year-on-year numbers.

Some of the highlights of the report are:

  • 6.011 million breeding animals, 3 per cent lower than last year and nearly 1 per cent lower than analysts expected. The USDA number is a bit lower than sow slaughter and gilt retention implied, especially considering that imports of cull Canadian sows and boars have been 10 per cent lower YTD. This number would be considered a bit bullish for the long term.

  • 59.378 million market animals, 2.7 per cent less than one year ago but 0.5 per cent more than were expected. The reduction of market numbers was quite consistent across the four weight classes with the 60-119 pound and 120-179 pound categories both exceeding average estimates by 1.3 per cent. These categories would contain pigs from the farrowings of Sep-Nov 2008 which, you might recall, were 6 per cent lower than those of 2007. The Sep-Nov pig crop was 3.7 per cent lower than one year earlier. Imports of Canadian pigs were over 1 per cent smaller and yet these categories are down only down 2.5 per cent vs. last year. Those smaller reductions in middle- weight inventories may be a bit bearish for April, May and June LH.

  • Lower farrowing intentions for both March-May (-2.9 per cent) and June- August (-4 per cent) would be bullish for fall hogs except for the next factor.

  • RAPIDLY INCREASING REPRODUCTIVE EFFICIENCY could be eating up most or all of the reduction in production capacity. Dec-Feb pigs saved per litter were record-high for that quarter (just as has been the case in the three previous quarters) and the 2.6 per cent increase is the largest since 1996 and the fourth largest EVER. It follows year-on-year increases of 2.0, 1.9, 1.7, 2.0, 2.4 and 2.4 per cent the past 6 quarters.

The biggest challenge in using these numbers to predict future supplies will be accounting for changes in the imports of Canadian market hogs and feeder pigs. Feeder pigs imported before 1 March are included in the numbers since they are among the inventories of US feeders. But imports since 1 March that differ from one year ago will impact year-on-year slaughter figures. Market hog import changes will immediately impact slaughter levels. In fact, 1.5 per cent of the 3.1 per cent decline in March slaughter is attributable to reduced number of Canadian market hogs. The remaining 1.6 per cent is due to lower numbers of US hogs. That is a bit large relative to the 2.4 per cent decline in 180-lb. and over pigs but not enough to question the validity of the report. Lower feeder pig imports since 1 March will begin to impact US slaughter about 21 weeks out — 15 July or so. There were about 2 per cent fewer in March but the year-on-year decline will get smaller later in 2009.

Further Reading

- You can view USDA Quarterly Hogs and Pigs Report - March 2009 by clicking here.