Last Friday the USDA released the 1 March Hogs and Pigs Report. There are no big surprises. It shows an industry treading water. We expect prices will track over the coming months very close to where lean hog futures closed. For example last Friday with June at 103.70.

US Breeding Herd

The US breeding herd was estimated at 5.788 million on 1 March up 28,000 from a year ago (5.760) and up 10, 000 (5.778) from 1 December. This is a year over year difference of about ½ of 1 per cent; basically no change. At this time we see no indications of significant expansion plans. Historically high hog prices are being balanced off by historically high feed prices and real tight financial credit. The mood of the industry in our estimation is restrained optimism. There appears to be little enthusiasm for breeding herd expansion.

Market

The USDA estimated 58,176 million market hogs in inventory 1 March up just under 400,000 head from a year ago. The 400,000 head increase can be explained by our market hog weights up around 4 – 5 pounds year over year. Heavier hogs lead to longer days to market and larger inventories. 400,000 head is just over one day of US hog marketing’s.

Farrowing Intentions

The US breeding herd according to the USDA on March 1st was ½ of 1 per cent higher than a year ago. If this is correct you would expect farrowing intentions to be essentially the same as a year ago.

Farrowing intentions according to the USDA will be about 150,000 litters less over the next six months than a year ago. This with a breeding inventory essentially the same? It doesn’t make sense in some ways how will there be less farrowings with the same number of sows? Either there are less sows or farrowing intentions are under estimated?! We have no strong opinion other than we don’t believe there will be more pork produced in the next six months compared to a year ago.

Pig Crop

The US pig crop the last three months was 27.986 million up about 400,000 compared to the same three months a year ago (27.596) but down 600,000 from two years ago (28.552).

Litter Size

The productivity from pigs per litter just keeps getting better and better with Dec – Feb this year 9.80 up from 9.61 last year and up 9.48 from two year ago. We expect the gain is mostly from improving genetics. The last two years gain of .32 per litter is actually tracking below our company’s .45 per litter genetic trend line over the last two years.

Summary

Breeding inventory, and market inventory are holding steady, we expect lean hog prices will continue strong for the rest of the year.

Other Observations

• We visited Korean customers this past week, the Foot and Mouth disease has eliminated approximately 350,000 sows and 3.5 million market hogs. Last week’s South Korean market hog price touched $7.00 US live weight a kilogram or about $3.28 US per pound. A price we have never seen so high, anywhere. Prices are always a reflection of supply and demand. Prices of $7.00 per kilogram are a true reflection of this scenario. Expect extraordinary amounts of pork to be exported to South Korea from North America in the coming months. It will be extremely price supporting.
  
  
• Packers we talked to last week and other reports indicate Japanese Pork Exports continue unabated despite the crisis underway. It’s a major reason June lean hog futures have recovered from 95 cents to $1.03 in the last ten days.

Conclusion

Pig Report shows little inventory change. A steady breeding herd tells us Market Hogs have a good chance to stay over 90 cents for the next year.

Further Reading

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You can view the USDA Quarterly Hogs and Pigs Report - March 2011 by clicking here.