Market News & Headlines >> Hogs and Pigs Report Friendly

The USDA quarterly Hogs and Pigs report released on Sept. 27 was somewhat friendly for cash hog prices and front-end futures relative to trade expectations, helping to extend the rally in lean hog futures. 

Meanwhile deferred hog contracts have risen further even though the report showed a larger-than-expected sow herd and indicated expansion of the U.S. hog herd will continue into 2019. 

USDA pegged the total Sept. 1 U.S. hog herd and the market hog inventory at 103% of a year earlier, but also revised the Sept. 1 estimates in those categories downward by 250,000 head or about 0.3%. At 75.486 million head, the overall Sept. 1 hog herd was 657,000 head or 0.9% smaller than the average of trade expectations in a Reuters News Service survey. The Sept. 1 market hog inventory, at 69.156 million head, was 663,000 head or 0.9% smaller than the average of trade expectations. 

Supplies of market hogs in the 50-119 pound and under 50 pounds weight classes were lower than expected, suggesting USDA has been overestimating fourth quarter pork production in its monthly supply/demand reports. The market hog inventory shortfall was relatively small, but has helped drive December lean hog futures higher. 

The June-August pig crop came in at 103.3% of a year earlier versus trade estimates that averaged 103.2%, but was actually a bit smaller than was expected going into the report as USDA revised the June-August 2017 pig crop downward by 0.5%. 

Meanwhile, the supply of hogs kept for breeding purposes at 103.5% of a year earlier, was toward the high end of trade expectations that averaged 103.2% in a range from 102.3-103.8%. The Sept. 1 breeding herd of 6.330 million head was 19,000 larger than the average of trade expectations. 

Concerns about herd expansion have been limited because September-November farrowing intentions at 101.5% were a bit below the average of expectations. However, December-February intentions at 102.0% were slightly above the average of expectations. Concerns about Asian swine fever also remain a supportive factor for deferred lean hog futures contracts.