By Kirk Maltais

Analysts are looking for signs of contraction in the hog population from Department of Agriculture data, which may mean higher futures prices amid a thinning herd.

The USDA will release its Quarterly Hogs and Pigs report Thursday afternoon, which will include total inventories of hogs and pigs, breeding sows and hogs for marketing. Analysts are forecasting slight declines in all three categories, and are waiting to see where the USDA pegs inventories of breeding sows amid reports they are being liquidated for meat to put into the processing pipeline.

Allendale, an agricultural brokerage and research firm in McHenry, Ill., is forecasting a decline of 0.6 points in the total number of hogs and pigs from the same time a year ago.

"From what I hear, producers are still in the 'de-population' process where they are slaughtering sows," Hedgepoint Global's John Payne says. Slack demand for pork has been a pressure point for hog futures this year, but the U.S. Supreme Court's ruling allowing California to implement Proposition 12 caused a run-up in pork demand and a need to slaughter more swine.

Pork products have been an indicator of stronger consumer demand. The average prices for pork carcass cutout through Thursday has stepped back from its 2023 high in July, but still remains elevated - up 14% year-to-date at 97.76 cents per pound, according to USDA data.

If there's a sizable reduction in the population it may bring the breeding herd down to its lowest level since 2016. In its last report in June, the USDA assessed the inventory of hogs kept for breeding at 6.15 million head.

However, what may offset a reduction in the number of breeding sows is the pace that herds are being replenished. In the June report, the USDA reported an average litter size of 11.36 pigs per litter for the quarter ended in May, which is an increase of 3 points from the average size reported at this time last year.

"This number surged in the last report, bringing it closer to longer-term trend levels after a period of disease and Covid-related labor struggles in the industry," says Arlan Suderman, chief commodities economist at StoneX.

Analysts are expecting a higher litter size in this report as well, although not to the extent reported in June, Suderman says. If the average number of pigs-per-litter surges more than traders are expecting, that may significantly mitigate a growing shortage in sows and pressure hog futures lower.

Ahead of the report's release, lean hog futures trading on the CME have been trending higher. The most-active contract is up 4.2% to 76 cents a pound on Thursday, and more than 5% this week. The USDA will release the Hogs and Pigs report at 3 p.m. eastern time Thursday.

Write to Kirk Maltais at kirk.maltais@wsj.com


(END) Dow Jones Newswires

09-28-23 1301ET