As Dr. Steve Meyer explained in his September column, I will be taking over his spot writing for National Hog Farmer. I do not take this responsibility lightly. Dr. Meyer had a long, storied career and a big part of that was educating readers about the latest developments and key issues in hog and pork markets. I am honored to continue on that path. I sincerely thank Dr. Meyer for mentoring me and all that he has taught us over the years.
For my inaugural article, I will discuss the latest Quarterly Hogs and Pigs report. Agreed, the report USDA’s National Agricultural Statistics Service released Sept. 26 is already old news. Rather than re-massaging the numbers, I will dive deeper into the report and USDA’s process for estimating inventories and how it makes revisions. Hopefully insight on how inconsistencies occur will aid in interpreting future reports.
USDA begins working on a report before surveying producers for data. The hog statistician at NASS headquarters, livestock branch chief, livestock section head and a methods branch representative determine whether hog slaughter and balance sheet data evolving since earlier reports justify revisions in previous reports. In March, June and September NASS may revise estimates for the previous three quarters. The December report may contain revisions for up to seven previous quarters.
For each Quarterly Hogs and Pigs report, NASS surveys producers during the first half of the month in which the report is released. Experienced staff in NASS regional field offices process, edit and review the raw data. They prepare summaries and formulate recommendations, which they submit to the headquarters hog statistician who generates preliminary estimates using a statistical model. The statistician delivers these preliminary estimates to a pre-board panel consisting of livestock statisticians at NASS headquarters.
Lightweight pigs in one report become heavyweight market hogs in the next report. The pre-board panel looks for inconsistencies between current survey data and estimates for lightweight categories reported three months earlier. The panel next looks at a comparison of the model-based numbers with the survey numbers for totals and by various inventory categories. They use this information to develop pre-board scenarios. One scenario is based on the model-based estimates. Another is to project weight group inventories by expected growth of the previous quarter’s small pigs to heavier weight categories.
The hog statistician presents the pre-board scenarios and balance sheets to the Agricultural Statistics Board. In addition to the hog statistician, this board includes the NASS statistics division director, livestock branch chief, livestock section head, methods branch representative, survey administration representative and two or three regional field office representatives. After a discussion, all board members enter their targets into a model. The hog statistician then pulls up a summary of everyone’s recommended targets. A roundtable discussion ensues about why board members chose their national targets, and then the board establishes a consensus on the national targets. Next, the headquarters statistician and regional field office representatives set the state-level estimates using a top-down approach.
How deviations from expectations can move futures prices
A few days before USDA releases a Quarterly Hogs and Pigs report, market analysts, traders and others anticipate the numbers that NASS will publish. Analysts use the relationship of inventories to other reported data and a general understanding of current market conditions to make pre-report estimates. Analysts typically use prior Quarterly Hogs and Pigs reports, especially the most recent one, as a reference point.
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