Swine Economics Report

USDA’s latest survey of the U.S. swine inventory said the market herd was down 2.2% on September 1 and the breeding herd was down 3.1% compared to 12 months earlier. The total inventory of hogs was down 2.3%. The inventory was a bit smaller than the average of trade forecasts. The breeding inventory was the smallest in over a century.

USDA said June-August farrowings were down 3.5% and forecast both September-November farrowings and December-February farrowings to be down 3.1%. Pre-release trade estimates put June-August farrowings at down 3.2%, forecast September-November to be down 2.7% and December-February down 3.1%.

Pigs per litter in the June-August quarter averaged a record 9.7 head, up 2.0% compared to a year earlier and the 24th consecutive quarter above year-ago levels. The last five quarters have averaged 2.36% more pigs per litter, offsetting much of the decline in farrowings.

June-August slaughter of barrows and gilts was above the level predicted by the June report. So, USDA revised upward the number of litters farrowed last winter by 46,000 and raised the winter pig crop by 443,000 head compared to their June estimate.

USDA said the inventory of market hogs weighing 60-179 pounds was down 1.8% on September 1. If correct, daily hog slaughter during the fourth quarter should be down 1.8% plus the drop in slaughter hogs imported from Canada. Look for carcass hog prices during October-December to average in the mid $40s.

USDA said the inventory of market hogs weighing less than 60 pounds was down 3.7% on September 1, implying hog slaughter during the first quarter of 2010 will be down 4% or so given the downward trend in hog imports from Canada. I expect first quarter carcass hog prices to average in the low to mid $50s.

Hog producer have been lost over $4 billion in the last 7 quarters and are cutting production. The sow herd has averaged 2.8% below year-earlier levels during the past year. But, because of more pigs per litter June-August hog slaughter was up 0.2% compared to last year and due to heavier slaughter weights June-August pork production was up 2.3%. The supply of pork on the market needs to be sharply reduced or a lot of hog producers will be facing bankruptcy.

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