Numbers can be deceiving and there’s a feeling that USDA’s Quarterly Hogs and Pigs Reports may be missing the boat.

The good news out of the June report, released last Friday, is that there may be some fall pricing opportunities. Near-term slaughter numbers are bunched up— but looking into the fourth quarter, the numbers were much better than expected.

Market hogs weighing 120 lbs. and more as of June 1 are reported at 4 percent to 5 percent higher than last summer. But if you get into the 119 lbs. and lower weight groups, you’re looking at a 1 percent year-over-year increase. Not bad—provided you can believe the numbers.

“If you take it at face value, the June report is good news,” says Glenn Grimes, University of Missouri ag economist. “Right now I do not trust the numbers. I would not take very much risk on these numbers being correct—even though I hope they are.”
(See “H&P Report Offers Hope, But Red Flags Remain” for more information.)

Grimes is frustrated with and cautious about the report. With hog slaughter running 5 percent above year-ago levels for the past several weeks, and weights averaging 1.5 pounds higher, Grimes doubts that the producers have pulled enough hogs forward into second-quarter slaughter to justify the numbers shown in the June report.

He also points to the September 1998 pig crop report that suggested fourth-quarter slaughter in that year would be up 2 percent from 1997 levels. In reality, slaughter was 9.5 percent higher.

“I’m afraid that any surprises that we have from this report is that marketing are going to continue to run above expectations,” says Grimes.

He and others advise that you keep a close eye on slaughter runs. “Over the next few weeks and months, it’s important to see if slaughter tracks with USDA’s June report,” says Robin Fuller of Tallgrass Consulting, Lancaster, Wis. “If we continue to slaughter bigger numbers, then it increases the likelihood that the fourth-quarter numbers will be higher too.”

Don Vaught, livestock analyst with A.G. Edwards in St. Louis, says the October and December lean-hog contract prices should gain from this report, and could offer some pricing opportunities. “Buying out-of-the-money puts is good insurance,” he says. The point is not to try to lock in $35 hogs, but rather to insure that you prevent taking $8 for your hogs.