HOG REPORT SHOWS MORE HOGS ON FARMS The USDA quarterly hogs and pig report yesterday showed more hogs on U.S. farms compared to last year as profitability resulting from low grain prices encouraged producers to step up production, analysts said. Most analysts seemed to agree with Chicago Mercantile Exchange floor traders that the report will be viewed as bearish to pork futures and futures prices may open sharply lower today. Some traders and analysts expect limit declines in nearby contracts, with spillover selling likely in cattle. University of Missouri agronomist Glen Grimes said,"The report shows that hog producers have responded to a very desirable feeding ratio that they enjoyed for the past 10 months." Shearson Lehman analyst Chuck Levitt said hog futures prices are above producers' break even points. Even if futures fell the daily limit of 1.50 cents today, producers could still lock in a profit, which increases the likelihood of heavy selling pressure today. "We have not had a period of profitability of this magnitude since last summer," Levitt said. "In fact, hog operations on many mixed livestock/grain enterprises have been so profitable that it actually enabled some farmers to get back on their feet and refinance their loans just based on the hog operation alone." Levitt said the weight breakdown in the report also was negative, in that some lead time was anticipated before the slaughter increased from the previous year. We expected farmers to increase hog operations, but we didn't expect this degree of expansion to show up in a 10-state spring report, Levitt added. High hog corn ratios (the number of bushels of corn that could be bought for 100 lbs of hog) and the resulting increased profits, encouraged farmers and confinement operations to increase production starting late last year. Analysts also noted that part of the increase in the hog herd resulted from a revision of the December report and without the revision, the March report might have been very close to average expectations. Robin Fuller of Agri Analysis said the USDA made a major upward revision of 105,000 head in the size of the breeding herd in the December 1 report. So the December report was more bearish than initially indicated. But Fuller, as well as other analysts, expected the report to be less negative on deferred futures contracts. Distant contracts are already at a sharp discount to cash because traders anticipated high farrowing intentions, she noted. Discounts in the October and December contracts take into consideration a six to seven pct increase in March/May farrowing intentions, which was borne out in the March 1 report, Fuller said. Grimes said, "As far as the distant months are concerned, if our first quarter pig crop is up only six pct and under 60 lb inventories actually up only five pct, it would take a tremendous discount in price for each percent increase for us to push down to the prices that the current futures show for the July and August period." Jerry Abbenhaus, analyst for AGE Clearing noted that distant futures prices are already 15 to 20 dlrs lower than they were last summer. "If cash hogs at the 7-markets last year averaged 61 dlrs during July, that doesn't mean hogs have to be 15 dlrs cheaper this year because we have six pct more numbers," he said.