different hog report comments
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Hefty supply of hogs, although US producers are starting to cut back.
A USDA report Thursday afternoon confirmed there’s still a large supply of hogs on US farms, albeit down slightly from a year ago.
Although the demand side of the market will play a key role in determining how prices move from here, supplies will decline only gradually. That’s the main idea from the US quarterly hogs and pigs report.
Below are some highlights, along with our thoughts on what it means.
June 1 US inventory of all hogs and pigs was down 2% at 75.7 million head. This is well within the range of trade guesses. Some contraction has taken place, but no more than expected. Call it neutral news.
Breeding herd at 6.23 million head, also down 2%. The right direction, but within expectations. Not bad news for the outlook, but not surprisingly good, either.
Market hogs, at 69.4 million head, down 2%. Still one of the largest June 1 estimates since 1964, when record keeping started. An ample supply on hand in barns across the country.
Productivity dipped slightly, which could raise a few eyebrows. Pigs per litter came in at 10.95 for the March-May period of 2021. That’s down slightly from the record of 11.0 set in the same period of 2020. The decline is not a huge shock to us, given the rumblings we’ve been hearing about PRRS viruses and other issues in US sow barns. Most trade guesses were for a small increase though, so the news looks friendly for futures.
June-Aug farrowing intentions were down 4%. Sept-Nov intentions down 2%. That’s broadly in line with trade guesses but is still good news. It’s supportive for the long-term outlook. Less supply ahead.
Two key caveats
When reviewing the data, keep in mind that it was collected before the recent meltdown by hog futures. Since early June, the July hog future has plunged $24 US! Deferred contracts for the spring of 2022 are down around $10. Over this period, corn futures have been volatile but remain at a high price level. Point being, actual contraction is likely to be greater than Thursday’s USDA report indicated. Farrowing intentions, as reported, are likely overstated, although to what extent remains unclear.
Note too, hog futures were under extreme pressure before today’s report came out, as mentioned. It is important to pay more attention to how the market reacts to the news than to the news itself. A market that is as oversold as hogs right now could snap higher anytime selling has run its course, even if the flow of news remains bearish.
Summing up the big picture for hogs, it’s not fully confirmed but there’s a good chance hog prices formed a major peak in early June. Now, with hog futures way down from the highs, it’s time to look for a corrective rally. Thursday’s USDA report was not flat-out bullish but at least it was not bearish, meaning it is still reasonable to wait for a rebound before adding to hedges or forward contracting of hogs.

Checking prices before the USDA report was released, the July hog future sank the expanded $4.50 limit, to US$100.02. Aug lost $2.02 at $98.70. Oct was down 65 cents to $83.20.

Cash prices are weakening after a huge rally. The CME Constructed index lost $2.86 today, at US$116.16.
One key US price for barrows and gilts plunged $6.61 today, pulling the five-day average down to US$119.10 dressed

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