Market News & Headlines >> Moderate Hog Herd Expansion Confirmed

The quarterly Hogs and Pigs report released by USDA on Dec. 22 confirmed continued moderate expansion of the U.S. hog herd and pegged winter/spring farrowing intentions above pre-report expectations signaling a larger increase in market hog supplies for 2018. 

However, based on lean hog futures’ positive reaction to the USDA report, the larger supply outlook was already factored into the market.

 USDA pegged the Dec. 1 U.S. hog herd at 73.230 million head, or 102.4% of a year earlier, in line with trade estimates that averaged 102.3% in a range from 101.3%-103.7%, according to a Bloomberg News survey. The Dec. 1 market hog inventory was reported by USDA at 102.5% of a year earlier, compared with pre-report estimates that averaged 102.2% in a range from 101.3%-103.6%, while USDA put the supply of hogs kept for breeding at 101.1% of a year earlier versus trade estimates that averaged 100.9% in a range from 100.3%-101.6%. 

USDA estimated the September-November U.S. pig crop at 103.2% of a year earlier, above trade expectations that averaged 101.9% in a range from 101.5%-102.3% on larger-than-expected farrowings of 102.0% of a year earlier. The number of pigs per litter came in at 101% of a year earlier, in line with the average of trade expectations. 

The biggest surprises in the report came from USDA’s survey of producers’ future farrowing intentions. USDA recorded December-February farrowing intentions at 102.8% of a year earlier, above trade estimates that averaged only 101.0% in a range from 99.5%-101.8%. March-May farrowing intentions were measured by USDA at 102.3% of a year earlier, topping trade expectations that averaged 101.1% in a range from 100.0%-102.0%. 

The larger farrowing intentions, combined with a continued rise in breeding efficiency suggest the December-February pig crop could rise about 4.0% versus a year earlier. The March-May pig crop could be up about 3.0%. Farrowing intentions are certainly subject to change, though, which may be one reason the futures market showed little reaction to the large intentions. Prospects for further expansion of U.S. slaughter capacity may also have limited supply concerns.

 USDA’s breakdown of market hogs by weight contained no bullish news for the hog market with supplies weighing 120-179 pounds at 102.3% of a year earlier versus trade estimates averaging 102.2%, supplies weighing 50-119 pounds at 101.8% against expectations averaging 101.9% and supplies weighing 50 pounds or less at 102.7%, topping trade estimates that averaged 102.0%.