Sponsored By

LIVESTOCK MARKETS: USDA ‘Hogs & Pigs’ report comes in as expectedLIVESTOCK MARKETS: USDA ‘Hogs & Pigs’ report comes in as expected

Exports and domestic demand key as expansion continues.

Krissa Welshans 1

March 30, 2018

5 Min Read
hog barns farm and wind turbines in Iowa corn field

Pork exports, domestic consumption and low feed costs will remain key for to the hog sector, analysts said Thursday after the release of the U.S. Department of Agriculture’s latest quarterly “Hogs & Pigs” report, which, as expected, showed that hog sector expansion continues. USDA reported that U.S. inventory of all hogs and pigs on March 1, 2018, was 72.9 million head, 3% above the inventory for the same period last year but 1% below the Dec. 1, 2017 inventory. The inventory was in line with the average pre-report trade estimate.

The breeding inventory, at 6.20 million head, was up 2% from last year and up slightly from the previous quarter. It was also the largest on record for the March 1 inventory. The trade had expected a 1.5% increase.

The market hog inventory, at 66.7 million head, was up 3% from last year but down 1% from last quarter. It was also in line with expectations.

The December-to-February 2018 pig crop, at 32.3 million head, was 4% higher than 2017, as the trade had expected. Sows farrowing during this period totaled 3.06 million head, up 2% from 2017 and representing 49% of the breeding herd. The average pigs saved per litter was a record high of 10.58 for the December-to-February period, compared to 10.43 last year.

U.S. hog producers intend to have 3.08 million sows farrow during the March-to-May 2018 quarter, a 2% increase from actual farrowings during the same period in 2017 and a 4% increase from 2016. Intended farrowings for June to August 2018, at 3.16 million sows, are up 1% from 2017 and up 4% from 2016.

The total number of hogs under contract or owned by operations with more than 5,000 head but raised by contractees accounted for 47% of the total U.S. hog inventory, down from 48% the previous year.

Kevin Bost, president of Procurement Strategies, reacted to the report, saying, “It’s obvious that the herd is still growing, and it’s going to have to grow until producers start losing money consistently, which doesn’t look like it’s going to be anytime soon.”

Daniel Bluntzer, partner and director of research for NFC Markets, suggested that the expansion should continue over the next two quarters as well. “Certainly, there will be no holes in the hog supply at all,” he said.

Bluntzer did note, however, that USDA’s “Prospective Plantings” report, also released Thursday, showed lower acreage for both soybeans and corn. If the U.S. were to enter a weather market, he said this could slow hog sector expansion.

“Supply is big and underscores the importance of the export market and domestic demand,” Bost said, adding that these markets are going to have to be pretty stout to support this supply.

With the large production and supply, prices forecasts for this year are lower compared to last year.

Using the western Corn Belt as a basis with a built-in $2/cwt. premium, John Nalivka, president of Sterling Marketing, forecasts that prices will be $63/cwt. for the second quarter, $66/cwt. for the third quarter and $51/cwt. for the fourth quarter.

Bluntzer, using the CME Lean Hog Index as a basis, is projecting prices of at $68/cwt. for the second quarter, $69/cwt. for the third quarter and $56/cwt. for the fourth quarter.

Bost, also used the CME price as a basis and is forecasting $72/cwt. for the second quarter, $75/cwt. for the third quarter and $60/cwt. for the fourth quarter.

The analysts emphasized the important of producers using risk management tools for both input costs and output.

“The one thing they can do is manage their costs of production through hedging their feed costs and having sound contracts,” Nalivka said.

Production meeting capacity

Capacity will not be an issue this year as producers continue to build the herd into the new packer capacity, Nalivka noted.

However, he said the problem with the plants is getting enough labor, noting, “The hog numbers aren’t going to outpace the capacity, but the real problem is having the labor force to get to capacity.”

Steve Meyer, economist at Kerns and Associates, said it is important that the new Seaboard Triumph Foods (STF) plant in Sioux City, Iowa, get its second shift up and running as soon as possible.

He said first shifts in both the STF and the new Clemens Food Group (CFG) plant in Coldwater, Mich., are going to be full really soon. STF is expected to be running at full first-shift capacity in the next month, and then sometime in June is the expectation for the CFG plant.

“If we have a capacity challenge, I don’t see it being really severe, and I don’t see it being very many weeks,” Meyer said.

Market recap

Live cattle futures were mixed this week. April contracts closed lower Monday at $115.175/cwt., posted gains Tuesday and Wednesday but closed lower Thursday at $113.75/cwt.

April feeder cattle futures followed the same trend. Contracts closed lower Monday at $135.925/cwt. and Thursday at $135.60/cwt.

The Choice and Select beef cutouts closed lower at $221.00/cwt. and $209.68/cwt., respectively.

April lean hog futures were mostly lower, closing lower Monday at $63.150/cwt. and Thursday at $61.325/cwt.

Pork cutout values were mostly lower this week. The wholesale pork cutout closed lower at $69.97/cwt. Loins were lower at $69.06/cwt., while hams were higher at $53.35/cwt. Bellies were lower than the prior week, at $102.35/cwt.

Hogs delivered to the western Corn Belt were lower, closing Thursday at $50.41/cwt.

The U.S. Department of Agriculture reported the Eastern Region whole broiler/fryer weighted average price on March 23 at $1.0346/lb.

According to USDA, egg prices were steady, with a steady to lower undertone. Offerings were light to moderate, while supplies were light to moderate. Demand was moderate to good.

Large eggs delivered to the Northeast were higher at $2.67-2.71/doz. Prices in the Southeast and Midwest also were higher at $2.79-2.82/doz. and $2.63-2.66/doz., respectively. Large eggs delivered to California were higher at $3.35/doz.

For turkeys, USDA said the market was steady, with mixed undertones. Offerings and demand have been light to moderate. Prices for hens and toms were unchanged at 75-84 cents/lb.

About the Author(s)

Subscribe to Our Newsletters
Feedstuffs is the news source for animal agriculture

You May Also Like