September 26, 2014 / 9:46 PM / 5 years ago

UPDATE 1-Pig virus shrinks U.S. hog herd, but low-cost feed limits decline

* September 1 hog inventory at 8-year low

* July-Aug herd expansion biggest in 6 years

* Pigs per litter mend from winter PEDv spread

* Report seen bearish for CME hogs on Monday (Adds analysts’ comments, background on pork/hog production)

By Theopolis Waters

Sept 26 (Reuters) - The U.S. hog herd continued to shrink during the June-August quarter as a deadly pig virus lingered on farms, but the decline was less than expected, a U.S. Department of Agriculture report showed on Friday.

The data also showed that producers least affected by the Porcine Epidemic Diarrhea virus (PEDv) added to their herds, encouraged by cheaper corn and higher prices for their animals, analysts said.

Chicago Mercantile Exchange hog deferred trading months <0#LH:> could open down as much as their maximum 3-cents per lb daily price limit on Monday, based on Friday’s report, analysts said.

Investors actively sold futures prior to the report, which could mitigate some of the data’s bearish bias, they said.

The USDA report showed the U.S. hog herd as of September 1 at 98 percent of the year-ago level, at 65.361 million head. Analysts, on average, expected 64.698 million head, or 96.7 percent of the year-earlier herd.

Friday’s hog herd total, as of September 1, was the smallest for the period since the 62.915 million head in 2006.

The U.S. breeding herd was 102.0 percent of the year-ago level, at 5.920 million head, compared with average trade expectations for 101.7 percent, or 5.915 million.

The September 1 breeding herd total was the largest for the summer period since 2008’s 6.061 million.

“We thought that as we go into the fourth quarter we were going start to see the numbers ramp up, encouraged by cheap grain,” said Don Roose, analyst with Iowa-based U.S. Commodities Inc.

On Friday, Chicago Board of Trade corn prices hit their lowest level in 5 years on forecasts for a record harvest.

Dan Vaught, an economist with Doane Advisory Services in St. Louis, said warm summer temperatures made PEDv less virulent.

Ultimately, the report implies that producers wholeheartedly committed to expansion during the summer after hog prices soared to record highs, said Vaught. The data may have been skewed somewhat by revisions made to the June report, he noted.

The September 1 supply of market-ready hogs for sale to packers was 97 percent of the year-earlier level at 59.441 million head. Analysts, on average, expected a 3.8 percent decline, or 58.769 million.

The data showed pigs per litter during the summer at 10.16 head, or 98.0 percent of the 10.33 in the year-ago period. Analysts expected an average 10.06 head.

The two percentage point decline in pigs per litter, compared with recent five percentage point declines, suggests the virus was not as disastrous this summer as it was last winter, said University of Missouri livestock economist Ron Plain.

“Heading into winter the question is how much of a PEDv increase we’ll see, which has yet to be determined,” said Plain. (Reporting by Theopolis Waters; Editing by Dan Grebler)

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