USDA’s March Hogs and Pigs Report numbers came in near trade expectations, so market reaction on Monday is likely to be ho-hum. Even though production numbers showed little growth, up 2 percent from 2011 levels, long-term, price expectations have softened.
Two influencing areas worth noting are the continued productivity of producers’ sow herds and heavy market weights. While both benefitted from this year’s mild winter, the trend reaches beyond unseasonably warm temperatures.
“When you put those two factors (productivity and weights) together, we can produce a lot of pork without breeding herd growth,” says John Nalivka, president of Sterling Marketing, Vale, Ore.
For the year, Karl Skold, president of Westside Economics, Omaha, Neb., is looking for 1.5 percent to 2 percent more pork produced than in 2011. But if productivity continues to meet or exceed the 2 percent annual climb, hog numbers could push beyond that level. It’s also worth noting that if market hog numbers this fall surpass 2011’s level by more than 2 percent, packer capacity limits will be tested and that’s never good.
While pork producers can still pencil out a profit it has been slipping, and packers have been running in the red all year. That does not bode well for the hog price outlook. “Slack demand and current packer margins make for a negative outlook,” says Len Steiner, president of Steiner Consulting Group, Manchester, N.H.
As the 2012 crop season gets underway, uncertainty enters the picture with a vengeance. Friday’s Prospective Plantings’ report provided the first indication of corn acreage—95.9 million acres, up 4 percent from last year. That could help producer profitability in terms of feed costs, Nalivka notes.
But there’s the soybean side to watch as well. “The bigger story is we need some soybean acres to balance out the South American crop losses,” Skold says. “Soybean meal supplies are still very tight and we need to attract more soybean acres.” USDA’s first plantings’ report indicated 73.5 million acres are planned for soybeans, down 1 percent from 2011’s acreage.
The three analysts and Steve Meyer, president of Paragon Economics offer the following lean-hog price projections.
To review a summary of the March pig crop report as well as full access to the USDA report, click here.