Dec. 28 (Bloomberg) -- The U.S. hog-breeding herd on Dec. 1 rose unexpectedly on speculation that producers locked in costs for feed, avoiding eroding margins.
About 5.817 million sows were being held back for breeding at the start of this month, up 0.2 percent from 5.803 million a year earlier, the U.S. Department of Agriculture said today in a quarterly report. The breeding herd rose 0.5 percent from the end of the previous quarter, the USDA said.
Ten analysts in a Bloomberg News survey expected the herd to decline 0.8 percent, on average, as rising prices for corn, the main ingredient in livestock feed, damped profit prospects. The grain has climbed 7.3 percent this year, reaching a record $8.49 a bushel on Aug. 10, after the worst U.S. drought since the 1930s cut production.
“People aren’t feeling the pain economically because they’re using futures to manage their risk,” Mark Greenwood, who oversees $1.4 billion of loans and leases to the hog business as a vice president at AgStar Financial Services Inc. in Mankato, Minnesota, said in an interview before the report. “That’s why I think we haven’t seen the liquidation. The people who are left are pretty darn good at risk management.”
The average producer in AgStar’s portfolio made $5 to $10 a head in 2012, Greenwood said. Farmers may make $5 a head next year, he said.
The inventory of all hogs and pigs totaled 66.348 million on Dec. 1, little changed from 66.361 million a year earlier, the USDA said. Analysts expected a 0.5 percent drop.
Hog futures for February settlement fell 0.7 percent to settle at 86.375 cents a pound at 1 p.m. on the Chicago Mercantile Exchange. The price has climbed 2.5 percent this year. The USDA released its report after the markets closed.
The inventory of hogs to be sold for slaughter was 60.531 million, little changed from 60.558 million a year earlier, the USDA said. Analysts expected a 0.7 percent decline.
Sows averaged 10.15 pigs per litter in the three months ended Nov. 30, a record for the quarter and up from 10.02 a year earlier, the USDA said.
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