USDA's March Hogs and Pigs Report said the market hog inventory was 1.6% larger than a year ago. The trade was expecting only a 0.8% increase. USDA said that hogs kept for breeding was up 0.2%. USDA's estimate of the total number of hogs and pigs on U.S. farms at the start of March was 1.5% larger than 12 months earlier. (See Table 1 below) The average of the pre-release trade estimates were for a 0.3% increase in the swine breeding herd and a 0.7% increase in the total inventory.

USDA made some modest revisions to past inventory estimates to bring them in line with winter hog slaughter. USDA raised their previous estimate of the September market hog inventory by 470,000 head (0.8%) and raised their estimate of the December market hog inventory by 65,000 head (0.1%). They increased the reported number of sows farrowed during June-August by 38,000 (1.3%) and also increased the June-August pig crop by 385,000 head (1.3%).

The March swine breeding herd is 17,000 head larger than on December 1. In 2012, the March breeding herd inventory was also 17,000 head larger than on December 1. Thus, USDA says the breeding herd grew by the same amount this winter as last. December-February sow slaughter was down 8,300 from a year ago. Imports of Canadian sows for slaughter were up by 3,600, leaving 11,900 (1.9%) fewer U.S. sows slaughtered this winter than last. The USDA data implies 11,900 more gilts were added to the breeding herd this winter than last.

USDA said winter (December-February) farrowings were up 0.5% from a year ago. They said spring farrowing intentions are down 0.9% compared with a year ago and summer farrowings are likely to be down 0.8% compared to 12 months earlier. (See Table 3) Winter farrowings were 0.4% higher than trade expectations and 0.5% higher than forecast made by the December inventory survey. USDA's forecast of spring farrowing intentions is 0.4% higher than pre-release expectations and 1.0% higher than the December report predicted. Summer farrowing intentions are 1.7% below the trade forecast. USDA says the breeding herd is up 0.2%, but the number of litters to be farrowed in the next six months will be down 0.8%. History shows farrowing intentions to be a better predictor of future hog slaughter than is the breeding herd inventory.

The number of pigs per litter during December-February, 10.08 head, was up 1.1% from a year ago. The trade was expecting a 1.1% increase. The 10.08 pigs per litter was a new record for the winter quarter. Winter farrowings were up 0.5% and with 1.1% more pigs per litter, the winter pig crop was up 1.6%.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on March 1 was up 2.3% compared with 12 months earlier. (See Table 2) It looks like daily barrow and gilt slaughter in March was up 2.5% compared to a year ago. The 120-179 pound market hog inventory was up 2.2% from a year ago. The 50-179 pound inventory group was up 1.5% from a year earlier. The inventory of pigs weighing less than 50 pounds was up 1.0% compared to a year earlier.

Live animal imports from Canada during the December-February quarter showed feeder pigs down 10% and slaughter hog imports also down 10%. The December-February pig crop was up 0.3% and pig imports were down yet the inventory of pigs weighing 120 pounds or more on March 1 was up 2.2%.

Based on the market hog inventory and the expectation of a slow decline in live hog imports, our forecast is for an increase of 1.7% in second quarter 2013 daily hog slaughter. With this level of pork production, we expect 51-52% lean hogs to average in the mid $60s live and Iowa-Minnesota negotiated sales to average close to $87/cwt on a carcass weight basis.

For the third quarter of 2013 we expect hog slaughter to be up 1.1% on a daily basis with 51-52% lean hogs averaging close to $65/cwt live and Iowa hogs averaging around $86/cwt on a carcass basis.

With the number of litters farrowed expected to be down 0.9% this spring and pigs per litter increasing by 1.0% or so, the spring pig crop is likely to be close to a year earlier. We are forecasting fourth quarter 2013 daily slaughter to be up 0.3% compared to a year ago. Look for carcass prices of barrows and gilts to average in the high $70s/cwt.

The forecast 0.8% decrease in summer farrowings should be offset by an increase in litter size to yield a summer pig crop that is up about 0.4% compared to a year-earlier. We are forecasting first quarter 2014 hog slaughter to be up 0.3% on a daily basis.

Our estimates of slaughter and prices for the next four quarters are in Table 4. We anticipate a tight supply of competing meats in 2013 will allow for hog prices close to year-ago despite a slight increase in hog slaughter.