By Tom Polansek
CHICAGO, Dec 23 (Reuters) – U.S. hog futures hit a four-week high on Thursday before retreating and may rise further next week because of smaller-than-expected national inventory numbers, analysts said.
The U.S. hog herd totaled 74.2 million head on Dec. 1, down 4% from a year earlier, the U.S. Department of Agriculture said in a quarterly report. Analysts surveyed by Reuters on average expected the herd would be 2.9% smaller.
The inventory of market hogs was down 4% from last year at 68 million head, the USDA said, while analysts were expecting a 3.1% drop.
The larger declines were a surprise because profits for hog producers were good in 2021, said Ron Plain, extension economist emeritus at the University of Missouri.
The USDA report shows the country will have a “tight supply of hogs for the next five months and likely some pretty good prices for hog producers,” Plain said.
Hog farmers may expand their breeding herds if the USDA report leads to higher prices, said David Miller, chief economist for Decision Innovation Solution.
Before the report was released, Chicago Mercantile Exchange (CME) February lean hog futures LHG2 settled down 0.125 cents at 83.225 cents per pound. The contract reached its highest price since Nov. 26 at 83.925 cents per pound earlier in the session.
The USDA, in a separate report, said the number of U.S. cattle on feed for slaughter on Dec. 1 was 11.985 million head, down 0.4% from a year earlier. That was largely in line with analysts’ expectations.
Before the data was released, CME February live cattle LCG2 settled up 2.250 cents at 139.625 cents per pound and reached its highest price since Dec. 7 at 139.725 cents.
CME March feeder cattle FCH2 closed 1.825 cents higher at 163.750 cents and reached its highest price since Dec. 17 at 164.225 cents.
(Reporting by Tom Polansek in Chicago; Editing by Ramakrishnan M.)
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