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Sunday September 28th , 2003
On Friday after the livestock close the USDA released it's All Important Quarterly Hog and Pig
report.
Newswires and traders are
calling the report mildly bearish.
Last week wholesale pork , cash hogs and futures
acted sluggish and slipped most of the week.
This is typical , on a seasonal
basis the pigs make a bottom during November to December. The nearby October contract experienced larger losses than the back end
of the market as traders sold off longs and / or Rolled positions to
December and back.. Taking into consideration last weeks
sell-off when trading resumes Monday it may be rather wide and range
bound .
However, the USDA supplied some interesting figures outside the main categories
of the report.
--Traders should stay tuned for flashes and updates ---
According to the USDA 'all hogs and pigs' as of
Sept.1 were 98% of last year, compared with the average street
guess 97.4% from a range of 97.0% to 98.9%...The
USDA did not revise it's June Report. Which points to
more hogs showing up after early June rather than before. Basically
confirming increased tonnage from Canada. Which is 'putting the pedal to
metal' on it's hog exports in the wake of the ban on beef.. The
result is a larger than expected herd (percentage difference from last year).
Producers have been cutting back on sow inventories for
a while now and that is obviously waning. High cattle prices since late
June apparently encouraged hog producers to
slow liquidation of sows and retain a bit more gilts than expected.
The USDA 'Hogs kept for breeding ' number
was 97.% , compared with the average guesstimate 96.9% from a
range of 95.2% to 98%..'Hogs kept for marketing' was 98.%
compared with the average estimate at 97.5% from a range of 96.9% to 99.1%...
The interesting part of the USDA report is apparent when
slicing past the headline categories and looking at the sub-categories.
In the report the USDA 'estimate for Hogs
weighing 60 to 119 pounds was 99%, compared with the average guess of
97.6 from a range of 96 to 99.6. The figure
for 'hogs under 60 pounds ' also came in at 99% versus the street estimate
of 97.9.
Both of these were on the high side and may pressure the December and February
contracts. As for October Hogs ,
it is trading at a discount to the 2 day cash index, which in itself
is supportive only if
the index stays where it is at or rises..
Farrowing intentions (expected newborn pigs ) which
came in at the high end of forecasts and show a rise through time( check the table below
) indicates an industry that may be looking at a bit of expansion.
As previously mentioned in the Corn section of the last Bi-weekly
this is somewhat supportive in the big picture for corn if it continues.
--After all, a hog is simply refined
corn--.
ALL in ALL.. .the 'kept for market 'hog inventory
and data for ' Hogs under 119 pounds' suggests that there are a lot of pigs coming
to slaughter the rest of this year. Which may lead to some
bearishness for Bellies down the road. The bacon market
is trying to contend with a ever so slight drop in usage from restaurants.
A minor
reversal of a trend that began in the mid 1990's when bacon prices were
generally lower. The change is slight but
may be enough to stifle prices a bit. As both large chains and small
establishments attempt to improve productivity while contending with high beef
prices and in some areas a slight drop in seated patrons due to smoking
laws.
No change in the short belly posture for now, stay tuned for
flashes and updates..
Happy Trading !!
Bill.
Sunday September 28th , 2003
9:00 PM
Average Range
USDA Estimates
Headline Categories:
All hogs and pigs on Sept 1
98.0 97.4
97.0- 98.9
Kept for
breeding
97.0
96.9 95.2- 98.0
Kept for
marketing
98.0
97.5 96.9- 99.1
Sub-categories:
Jun-Aug pig
crop
98.0
97.1 96.3- 98.0
Jun-Aug pigs per
litter
100.0 100.0
98.8-100.3
Jun-Aug
farrowings
98.0
97.1 96.2- 98.0
Sep-Nov farrowing intentions
99.0
97.8 97.6- 98.0
Dec-Feb farrowing intentions
100.0
98.5 97.5-100.0
Hogs weighing under 60 lbs
99.0
97.9 97.0-100.1
Hogs weighing 60 to 119 lbs
99.0
97.6 96.0- 99.6
Hogs weighing 120-179 lbs
98.0
98.0 97.0-100.4
Hogs weighing 180 and over
95.0
97.6 95.0-100.3
.