Hog futures dip amid doubts over breeding cutbacks

by Agrimoney.com

Hog futures tumbled in Chicago, sapped by weaker cash markets and doubts over production curbs by US producers who have, for the first time, achieved 10 piglets per litter.

Cash prices for hogs - which in Iowa-Minnesota averaged nearly $103.51 a hundredweight on Thursday - were $5.80 a hundredweight cheaper on Monday, US Department of Agriculture data showed, in a decline blamed by investors on high prices deterring demand.

Meanwhile, many investors took an increasingly downbeat view of a benchmark USDA report late on Friday which was initially seen as only modestly bearish, showing the domestic hog herd some 0.4% larger than the market had expected.

However, the overall figure concealed, at 12.4m animals, a significantly higher number of larger, 120-179 pound pigs than had been expected.

This figure is "bearish for cash hogs during the July-to-September time frame", during which they are likely to hit the market, US Commodities said.

'Conflicting data'

Furthermore, some observers questioned the prospect of muted hog production, as implied by falling farrowing intentions, which were forecast to fall 2.6% in the current, June-to-August period - implying a drop to a 25-year low.

"This report contains conflicting data," analysts at Paragon Economics and Steiner Consulting said, flagging the apparent contradiction of falling farrowing intentions with separate statistics in the USDA report showing a rise in the breeding herd.

"Logic does not support a decline in this important driver of total productivity and profits."

The analysts also highlighted the rise in surviving piglets per litter to a record 10.03 during the March-to-May quarter, taking the average growth rate over the last four years back over 2%, compared with 0.5% during the previous decade.

US farmers achieved fewer than 7.8 piglets per little 25 years ago.

Chicago prices

In Chicago, lean hogs for July delivery stood 2.1% lower at 93.95 cents per pound in late deals.

The better-traded August lot fell the daily limit of 3.0 cents at one stage before recovering some ground to stand at 92.375 cents per pound, down 2.825 cents, or 3.0%.

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