The USDA reported 59.4 million hogs kept for marketing, a 2.7% decline from a year ago, but 0.5% more than the market was expecting. It reported six million sows kept for breeding, nearly 1% fewer than analysts predicted, according to a pre-report poll by Dow Jones.
Even with fewer hogs kept for breeding, the number of hogs saved per litter continued to climb, making analysts nervous about how much real reduction in hog production will result. The USDA reported 9.48 pigs saved per litter in the December-February period, up 2.6% from a year ago and nearly 1% higher than analysts expected.
“Rapidly increasing reproductive efficiency could be eating up most or all of the reduction in production capacity,” said Steve Meyer and Len Steiner in the CME’s Daily Livestock Report. They noted the 2.6% litter increase was the largest since 1996 and follows year-over-year increases during the past six quarters.
JP Morgan analyst Ken Goldman called the report “incrementally negative for Smithfield in the near-term, but incrementally positive in the long-term,” noting that the ability to sell expensive hogs for its hog production division matters more to the bottom line than the ability to buy cheap hogs for its pork division.
In a note to investors, Goldman called the report just the opposite for Tyson Foods — incrementally positive in the near-term but incrementally negative in the longer-term, given that Tyson buys live hogs for slaughter.
Source: Janie Gabbett/Meatingplace
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