Lean Hogs: Numbers for tomorrow's quarterly Hogs and Pigs report have been released. The average guess for hogs Kept for Marketing is for a 5.3% higher number than last year. These are hogs that were alive on March 1 and destined for the packer at 270 lbs. It would imply hog slaughter (excluding Canadian slaughter hog imports) would run 5% to 6% higher from March 1 through August 30. That is a bit simplistic, but it makes a point. We should easily have more hogs to kill from now through August. Add on extra Canadian numbers along with the mystery circovirus vaccine effect and we will be amply supplied.
Future Pork Production: The Kept for Breeding category will let us know how aggressive liquidation has been. The trade looks for the breeding herd to be .2% higher than last year. Keep in mind on December 1 it was 1.1% higher so there has been some liquidation. Here is the farrowing (birth of a litter of piglets) guesses for the three quarters covered on tomorrow's report. December/February 2.6%, March/May .6%, June/August .1%. From farrowing (birth) to slaughter is six months. This would imply slaughter hog levels would remain over last year through the rest of this year. We would guess the first quarter of 2009 would be the one where slaughter levels decline.
Near Term: Big declines in future contracts mainly centered on the summer and fall months. We would guess the CME trade just got a wake up call here from the Hogs and Pigs estimates released. The CME has been trading under the assumption that all these hogs we are swimming in right now would miraculously disappear during the summer. We have stated, and continue to state, that June through December contracts are overpriced.
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