All eyes in the hog and pork industry are turning to the USDA in anticipation of Friday's quarterly Hogs & Pigs report. The June report reminded producers, traders and analysts of the potential market moving nature of those results, especially amidst current confusing conditions.
The crux of the data will be the implied supply of hogs during the coming weeks and months. Early-September slaughter totals suggest the USDA will state older market hog supplies near the 5%-6% annual reductions implied by the June report.
The winter outlook will reflect the size of the summer pig crop, which in turn will depend heavily upon the number of sows farrowing and litter sizes, with the latter result likely being greatly affected by incidences of PEDV disease. Our pre-report forecasts are incomplete at this point, but we are projecting a summer pig crop down just 3% from last year. That likely falls in line with general industry thinking, since early-2015 futures are priced well below expectations for late 2014.
As for longer-term prospects, much depends upon the producer response to signals sent by CME futures. That is, 2014 cash prices have remained greatly elevated since late winter, with market hogs bringing less than $1.00/pound for less than 10 days around Labor Day. However, the 2015 hog contracts have consistently implied much more bearish conditions next year, as exemplified by June 2015 futures trading below anticipated fourth-quarter lows. We suspect that pessimism will slow industry expansion and cause next year’s supplies to fall short of expectations.
Editor’s Note: Dan Vaught is a livestock economist for Doane Advisory Services, St. Louis, Mo. Doane distributes a number of timely, relevant newsletters to farmers that contain expert commentaries and market advice. For more information, call 314.569.2700 or go to: www.Doane.com.