CHICAGO (B)--Most analysts said they saw the Sept. 22 U.S. Department of Agriculture quarterly census pressuring April and June, as producers intend to increase pig births this fall and winter. The December to February farrowing category numbers from a year ago were revised by USDA, which means the just-released December to February figure would have equated to an increase of 102% rather than 103%, according to Dan Vaught, analyst with AG Edwards and Sons.
The major categories came in at 99% of a year ago across the board, or just slightly higher than the average of analysts' estimates. The breeding herd number showed the widest disparity, which indicates robust expansion plans for the coming months.
"Producers have been making money and are expanding with the cheap corn prices," said one floor trader.
Chuck Levitt, analyst with Alaron Trading Corp., said the breeding herd was the smallest on record for Sept. 1, but farrowing intentions indicate female hogs will be working hard with 46% of the sows farrowing during the September to November timeframe. "This will be the largest percentage for the September to November period," he said.
Spring increases in kills will result, Levitt added. "Expansion is ongoing but at what pace remains to be seen." He also said the implied gilt retention rate is 20% greater than a year ago. Still, he sees no serious break in hog futures because of their discounts to the cash, which should limit declines.
Most market observers are calling for a widening of the long December against short April and June futures spread. The biggest question appears to be whether sufficient discounts have been built into the deferred futures. Bulls, of course, think the numbers have been accounted for, but the bears do not.
Some analysts see the weight breakdown figures limiting October, as the 180-pound-plus category was higher than the analysts' estimates. "This tells the packer there is no need to chase hogs," said Dale Benson, of Crystal River Capital. As in previous reports, he said, he "sees a more efficient breeding herd, so I ca not get real excited about the breeding herd being down slightly."
Benson repeated his forecast of gloom and doom for the fall of 2001 if expansion takes place as he projects. Benson predicts a drop of 50 to 75 points in April and June.
"Only pork product demand can come to the rescue," he said.
Vaught thinks the survey is much more bearish for the 2001 contracts. However, he also agrees October could be pressured by the heavy 180-pound weight numbers.
Bob Brown, independent analyst, was disappointed the June to August pigs per litter did not make a new high. He also said the most unique feature of the report was that the December to February farrowing intentions were above those of September to November.
"That has never happened before but is a logical progression in the trend toward parity in the quarterly farrowings numbers that has been going on for a while. But that trend continues to mess with the "normal" slaughter pattern pushing more and more hogs into the summer period relative to the spring time.
Currently, hog slaughter in September has been below his forecast made after the last report, Brown noted.
"This report reinforces my forecast for a relatively small increase in hog slaughter from here forward into October and November, similar to last year," Brown said.