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(June 9, 1997) HOGS: The USDA will release the June 1 hog inventory on June 27. Based on the March report, slaughter should have fallen about one percent during the March-May period. However, preliminary data indicates that slaughter actually declined three percent. Therefore the March inventory was overstated--or, producers held back a large number of gilts for herd expansion. We believe it may have been a combination of both.

Based on information obtained from various industry sources, the breeding herd should be four percent over last year. Combining this with our estimate of total inventory, we expect the report to show the following. 

Table 2
U.S. Hog Inventory--June 1
Thousand Head


     			1996 		1997*     % Chg.
All hogs  		57,200    	58,350    +02
Kept for breeding   	 6,870     	 7,150    +04
Market hogs    		50,330    	51,480    +02


*PP estimate.
All hogs are forecast to increase two percent above last year. However, hogs held for breeding are expected to be up four percent. The sharp increase in breeding hogs explains to a large degree why slaughter fell short of March indications.

Although hog inventories are expected to be up two percent from last year, they will still be the second lowest since 1992.

We remain long-term bullish on hogs for the following reasons:

  • Hog inventories are not large by historical standards.

  • Overcapacity in the slaughter industry will keep packer bids strong, even with moderately greater supply.

  • Japan will cut port import tariffs on July 1. Export demand is expected to increase noticeably in weeks ahead.

  • Taiwan's export capacity has been crippled due to discovery of "foot and mouth" disease. The U.S. is expected to replace Taiwan as the major exporter to Japan.

  • Disease problems have been discovered in various European nations and herds have been reduced. Lower European exports to the U.S. will shift some demand to domestic producers.

    Bill Gary

    Consensus National Futures and Financial On Line Index
    Livestock Index

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