Bloomberg News

U.S. Hog-Breeding Herd Grows 0.6% as Profit Spurs Expansion

September 28, 2011

(Updates with analyst comment starting in third paragraph and updates prices in next-to-last paragraph.)

Sept. 28 (Bloomberg) -- The U.S. hog-breeding herd on Sept. 1 was 0.6 percent bigger than a year earlier and more than analysts forecast as profitability prospects encouraged producers to expand.

About 5.806 million sows were being held back for breeding as the month began, up from 5.77 million on Sept. 1, 2010, the U.S. Department of Agriculture said today in a quarterly report. Nine analysts in a Bloomberg News survey forecast a 0.1 percent increase, on average. The breeding herd was little changed from 5.803 million at the end of the previous quarter.

Hog futures may open 0.5 cent to 1 cent a pound lower tomorrow, depending on economic news, because of the jump in the sow herd and an increase in pigs per litter, said Doug Harper, an analyst at Brock Associates in Milwaukee. Sows averaged a record 10.03 pigs per litter during the three months ended Aug. 31, up from 9.81 in the same period a year earlier, the USDA said.

“The number that continues to jump out at me is pigs weaned per litter,” Harper said. “You combine that with even a modest increase in sow numbers, and you’ve got more pigs.”

Producers made an average profit of $15 for each animal sold from June through August, said Rich Nelson, the director of research at McHenry, Illinois-based Allendale Inc. In the year- earlier period, the figure was $28, he said.

Higher Pork Prices

Wholesale-pork prices, up 26 percent this year, reached $1.1019 a pound on Aug. 8, the highest since at least October 1997, USDA data show. Retail pork averaged $3.512 a pound in August, a record high, and spot-market hogs reached $1.0408 a pound on Aug. 4, the highest since at least April 2003, government data show.

“Record hog and pork prices encouraged farmers to maintain their breeding herds at relatively high levels,” Dan Vaught, the owner of Vaught Futures Insights in Altus, Arkansas, said in an e-mail before the report.

The total hog herd was 1 percent bigger on Sept. 1 at 66.599 million, compared with 65.971 million a year earlier, the USDA said. Analysts expected a 0.7 percent gain.

The increase in the size of the breeding herd was “muted,” and while the market may react “slightly negatively initially,” export demand will drive prices going forward, not supply, Victor Aideyan, a senior risk-management consultant at HISGRAIIN Commodities Inc. in London, Ontario, said in a telephone interview.

‘Natural Flexing’

“At this very low level of expansion, I’m going to put this into natural flexing,” Aideyan said. “Since we’re back to profitability, this is an incremental increase, very small. There’s a natural ebb and flow.”

Hog futures for December settlement settled unchanged at 83.475 cents a pound at 1 p.m. on the Chicago Mercantile Exchange. Prices fell as much as 1.9 percent after the close of regular trading. The USDA released its report after markets closed in Chicago.

The inventory of hogs to be sold for slaughter was 60.793 million, up 1 percent from 60.201 million a year earlier, the USDA said. Analysts expected a 0.7 percent increase.

--Editors: Daniel Enoch, Steve Stroth.

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.


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