USDA's December hogs and pigs report said the market hog inventory was slightly larger than pre-release trade forecasts and the breeding herd was slightly smaller. USDA said the market inventory was up 1.7% and kept for breeding was up 0.4%. USDA's estimate of the total number of hogs and pigs on U.S. farms at the start of December was 1.5% larger than 12 months earlier. (See Table 1 below) The average of the pre-release trade estimates was for a 1.3% increase in both the market hog inventory and total inventory and a 0.8% increase in the swine breeding herd.

USDA made some upward revisions to past inventory estimates to bring them more in line with fall hog slaughter. USDA raised their previous estimate of the June market hog inventory by 620,000 head (1.1%), raised their September market hog inventory estimate by 145,000 head (0.2%), increased the reported number of sows farrowed during March-May 2011 by 1.4% and increased the March-May pig crop by 400,000 head (1.4%).

The December swine breeding herd is 3,000 head smaller than on September 1. This is the first quarter-to-quarter decline since September 2010. In 2010, the December breeding herd inventory was 8,000 head larger than on September 1. This year it was 3,000 head smaller. Thus, USDA says the breeding herd declined by 11,000 head this fall compared to last. September-November sow slaughter was up by 32,000 head compared to a year ago. Imports of Canadian sows for slaughter was up by 9,000, leaving 23,000 more U.S. sows slaughtered this fall than last. The USDA data implies 12,000 more gilts were added to the breeding herd this fall than last.

USDA said fall (September-November) farrowings were up 0.5%. They forecast winter farrowings to be up 0.8% and spring farrowings to be down 0.9% compared to 12 months earlier. (See Table 3) Fall farrowings were 0.6% greater than trade expectations. USDA's forecast of winter farrowings is 0.3% higher than expected, but spring farrowing intentions are 1.7% below the trade forecast. Farrowings during September-November were above the year-earlier level for the first time since March-May 2008. USDA says the breeding herd is up 0.4%, but the number of litters to be farrowed in the next six months will be down 0.1%. 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 September-November, 10.02 head, was up 1.3% from a year ago but slightly below the record set in the previous quarter. The trade was expecting a 1.6% increase. Fall farrowings were up 0.5%; but with 1.3% more pigs per litter, the fall pig crop was up 1.8%.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on December 1 was down 0.6% compared with 12 months earlier. (See Table 2) However, it looks like daily barrow and gilt slaughter in December will be up more than1%. The 120-179 pound market hog group was up 2.0% from December 2010. The 50-179 pound inventory was up 2.3%; and the inventory of pigs weighing less than 50 pounds was up 2.2% compared to a year earlier.

Live animal imports from Canada during the September-November quarter showed feeder pigs up 7.5% and slaughter hog imports down 10.3% despite an 8.4% increase in imports of sows for slaughter. Imports of Canadian hogs and pigs for 2010 totaled 5.7 million head. Look for 2012 imports to be close to that same level.

Based on the 50-179 pound market hog inventory and the expectation of little change in live hog imports, our forecast is for an increase of 2.1% in first quarter 2012 daily hog slaughter. With this level of pork production, we expect 51-52% lean hogs to average close to $64 live and Iowa-Minnesota negotiated sales to average close to $84/cwt on a carcass weight basis.

For the second quarter of 2012 we expect daily hog slaughter to be up 2.3% with 51-52% lean hogs averaging close to $69 live and Iowa hogs averaging in the low $90s/cwt on a carcass basis.

With the number of litters farrowed expected to be up 0.8% this winter and pigs per litter increasing by 1.5 or so, the winter pig crop is likely to be well above a year earlier. We are forecasting third quarter 2012 daily slaughter to be up 2.3% compared to a year ago. Look for carcass prices of barrows and gilts to average in the low $90s/cwt. Slaughter weights are likely to average 0.5% higher next fall.

The forecast 0.9% decrease in spring farrowings should be supplemented by an increase in litter size to yield a spring pig crop 1.0% above a year-earlier causing fourth quarter 2012 hog slaughter to be up 1.0% on a daily basis, but actually 2.6% higher than during October-December 2011 because of 1 more slaughter day.

We are predicting hog slaughter during the fourth quarter of 2012 to be above 30 million head. That is a level that could put serious pressure on slaughter capacity and thus force a drop in hog prices. Our estimates of slaughter and prices for the next four quarters are in Table 4. We are counting on tight supplies of competing meats to support average annual hog prices at 2011 levels despite slightly more than a 2% increase in pork production.

Table 1.  Hog Inventories December 1, U.S.
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                                           2011 as % of 2010
       All hogs and pigs                         101.5
       Kept for breeding                         100.4
       Market hogs                               101.7
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Table 2.  Market Hogs on Farms December 1, U.S.
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     Weight Category                       2011 as % of 2010
        Under 50 pounds                          102.2
        50 - 119 pounds                          102.3
        120 - 179 pounds                         102.0
        180 pounds and over                       99.6
     Pig Crop
        September-November                       101.8
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Table 3.  Sows Farrowed and Farrowing Intentions, U.S.
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                                           2011 as % of 2010
      December-February                           99.0
      March-May 2011                              99.6
      June-August 2011                            98.5
      September-November 2011                    100.5
                                           2012 as % of 2011
      December-February                          100.8
      March-May                                   99.1
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Table 4.  Commercial Hog Slaughter and Barrow and Gilt Price by Quarter
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           --Comm. Slaughter--   ------Barrows & Gilts, price/cwt------  
                     Change        51-52%    Iowa-Minn   Non-packer-sold
Year &     Million    from         Lean         Base            Net
Quarter      Head   Year ago       Live        Carcass        Carcass
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2006 1       26.208   + 2.6%       $42.63       $56.38         $58.37
     2       24.839   - 0.8         48.45        65.27          65.96
     3       25.810   + 1.1         51.83        68.04          69.13
     4       27.880   + 1.4         46.13        60.53          62.04
     Year   104.737   + 1.1         47.26        62.54          63.86

2007 1       26.684   + 1.8%       $46.04       $59.90         $62.69
     2       25.526   + 2.8         52.55        69.45          71.39 
     3       26.566   + 2.9         50.34        66.14          69.17
     4       30.396   + 9.0         39.44        52.08          56.83
     Year   109.172   + 4.2         47.09        61.91          65.04

2008 1       29.601   +10.9%       $39.64       $52.49         $57.41
     2       27.941   + 9.5         52.51        70.43          72.24 
     3       28.696   + 8.0         57.27        75.67          78.05 
     4       30.214   - 0.6         41.92        55.60          61.38 
     Year   116.452   + 6.7         47.83        63.58          67.27

2009 1       28.503   - 3.7%       $42.11       $57.23         $60.43 
     2       27.072   - 3.1         42.74        57.32          61.76
     3       28.428   - 0.9         38.90        51.43          56.68
     4       29.615   - 2.0         41.20        54.98          57.64
     Year   113.618   - 2.4         41.24        55.23          59.11 

2010 1       27.630   - 3.1%       $50.41       $66.81         $68.32
     2       26.074   - 3.7         59.60        79.04          79.42
     3       26.930   - 5.3         60.13        79.44          80.70
     4       29.626   + 0.1         50.11        65.21          69.26
     Year   110.260   - 3.0         55.06        72.62          74.47

2011 1       27.486   - 0.5        $59.94       $79.28         $80.63
     2       26.113   + 0.2         68.80        91.80          92.39
     3       27.374   + 1.6         71.06        94.03          95.74
     4*      29.819   + 0.7         65.10        85.22          87.68
     Year*  110.791   + 0.5         66.23        87.58          89.12

2012 1**     28.060   + 2.1      $62 - 66     $82 - 86       $84 - 88
     2**     26.700   + 2.3       67 - 71      89 - 93        91 – 95
     3**     27.560   + 0.7       67 – 71      89 – 93        91 - 95
     4**     30.600   + 2.6       58 – 62      77 – 81        79 - 83
     Year** 112.920   + 1.9       63 – 67      84 – 88        86 - 90
 *estimated
 **forecast 
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