Editor's Note: The USDA will release its quarterly Hogs & Pigs report shortly after this week’s Doane Ag Report goes to press. See the website for the results and our interpretation of them.
We are inclined to expect generally bearish numbers, especially pertaining to the fourth-quarter outlook. However, readers should recall that the hog industry and CME traders seemed to ignore the bearishly construed March report.
Last week’s hog kill fell 4.0% below the comparable year-ago result, but the decline was almost surely exaggerated by the temporary closure of Smithfield’s big Tarheel plant due to an ammonia leak.
Conversely, Wednesday’s weekly report concerning Iowa-Southern Minnesota hog weights indicated a 2.0 pound weekly drop to 285.0 pounds/head. The drop was partly seasonal in nature, but one could certainly argue that it reflected tightening market- ready hog supplies. Despite last week’s reduced slaughter, increased weights once again pushed pork production 1.1% over the comparable 2013 result.
Nevertheless, hog and pork prices have continued their recent surge. The advance probably reflects improving demand. Is this a seasonal phenomenon, since hog and pork prices often post their annual peak in late June, or does it reflect a return of the torrid buying that powered the complex to stunning highs in late winter and early spring?
We suspect a combination of those factors, with buyers currently accelerating purchases in order to get a jump on likely mid-to-late summer needs. This may bode well for short-term price prospects, but the late-summer outlook may suffer accordingly.