Wed, 04 Jul 2018
There is no doubt that the USDA is showing significantly more pigs in inventory. There will be no lack of pork in the near future.
We certainly believe that the USDA has played catch up in the breeding inventory. There is no way 110,000 were added in April-May. Probably missed sows in prior months.
The increase of 3% in market hog inventory probably reflects the fact the breeding herd was probably higher then previously stated in earlier quarterly reports.
Thank goodness new packing plants have come on stream, as hogs marketed will be record numbers in the coming months. We expect all hogs will be handled but the billion-dollar question at what price?
Wildcards on pricing are beyond just hog supply. Tariffs on U.S. pork by both China and Mexico will make market access cost more expensive for U.S. product. The tariffs no matter how we look at them are not doing anything but lowering the price of U.S. hogs and pork.
We wrote last week that we see little sow herd expansion currently in USA. We stand by that assessment. We are of the opinion that big jump in breeding herd in April-May was done previously. With current market conditions and lack of labour reality we expect sow herd expansion to be quite limited.
As you can see the jump in sow numbers was all over the U.S. with no geographical area dominating.Of note the only state to decline was Indiana dropping from 260,000 to 250,000.
Lots of Pigs, Tariffs, looks like tough slugging in the months ahead.The Hog Cycle is alive.The coming months will be challenging for profitability.