Is the February rocket ship back?

It’s easy to say pork demand is hot because production is very close to year ago levels but cash hog prices, pork cutout value are substantially higher than this time last year.

A little over a year ago I predicted a rocket move higher in February lean hogs and it actually happened. This year, in my opinion, the fundamental landscape is bullish enough for rocket ship #2.

So, why am I bullish? First, and the easiest to see is the fact that pork production roughly since Oct. 1 has been running well below projections based upon the September Hog and Pig Report. In fact, numbers have been running as much as 3% to 4% lower than projected. The report projected December hog numbers to be up 3% and then for numbers to drop off after the first of the year, running down 1% to 2%.

I’m hearing that packers will be aggressively looking for hogs to kill this week, the week after Thanksgiving. Normally after the slaughter disruption due to Thanksgiving always falling on a Thursday, disrupting the kill on Thursday, Friday and Saturday, there’s plenty of hogs to kill in the week following. Many, if not most of the years, the week after Thanksgiving is the largest weekly kill of the entire year. Producers are current as measured by average live hog weights. The latest data showed weights running 1.2 pounds lower than the same week last year.

Exactly how or why the USDA posted such a big miss in the September report remains a mystery. No doubt the December report will contain some revisions but I’m more interested in exactly how/why the overcount occurred. The entire trade is currently wondering if market hogs will run down 1% to 2% after the first of the year or will they run down 3% to 5%? We know for a fact that the industry has lost a great deal of equity over the last three years. Recent Hog and Pig reports measured some contraction but vastly improved efficiencies in pig production, specifically through rising pigs per litter, kept production from falling. My guess is that somehow this measure has been inaccurate over the last couple of quarterly reports. The result is fewer pigs than expected.