USDA's estimate of the total number of hogs and pigs on US farms at the start of December was down 1.8 per cent compared to 12 months earlier. The average of the trade estimates was for a 2.4 per cent decline. Kept for breeding was down 3.5 per cent according to USDA; the trade estimate was for a 3.4 per cent decline. The market inventory was down 2.0 per cent while the trade estimate was for a 2.3 per cent decline. (See Table 1 below)

The smaller herd is the result of a prolonged period of red ink for hog producers. The industry has lost over $5 billion in equity during the last 9 quarters. The current size of the swine breeding herd is 6.1 per cent lower than at the last cycle peak in December 2007 and is the smallest breeding herd since the 1800s.

USDA's survey indicates the breeding herd was 0.4 per cent smaller on 1 December than on 1 September. We hope that is right. September-November sow slaughter was down 1.7 per cent and our gilt slaughter data indicates gilt retention was up 1.1 per cent compared to September-November 2008.

USDA said fall (September-November) farrowings were down 1.8 per cent and forecast winter farrowings to be down 1.9 per cent and spring 2010 farrowings down 2.8 per cent compared to 12 months earlier. (See Table 3)

USDA said pigs per litter averaged 9.7 head during the September-November, the same as the previous quarter and 2.1 per cent more than the same months in 2008. Much of the benefit of reduced farrowings is being offset by increases in the number of pigs weaned per litter. Fall farrowings were down 1.8 per cent; but with 2.1 per cent more pigs per litter, the fall pig crop was up 0.2 per cent. For the decade ending with 2006, pigs per litter increased by an average of 0.7 per cent per year. Since 2006, pigs per litter have increased at an average rate of 2.0 per cent per year.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on December 1 was down 2.3 per cent compared to 12 months earlier. (See Table 2) The 120-179 pound group was down 2.1 per cent; the 50-179 pound inventory was down 1.9 per cent; and the inventory of pigs weighing less than 50 pounds was down 1.8 per cent compared to a year earlier.

In 2007, 10.0 million live hogs were imported from Canada. In 2008, 9.3 million head were imported. During 2009, roughly 6.4 million head came south. We are expecting only 5.4 million live hogs to be imported in 2010.

Based on the 50-179 pound market hog inventory and the expected continuing decline in the number of Canadian pigs coming south, our forecast is for a decline of 2.5 per cent in first quarter 2010 hog slaughter compared to January-March 2009. With this level of pork production, we expect 51-52 per cent lean hogs to average in the mid-$40s live and Iowa-Minnesota negotiated sales to average in the upper $50s to low $60s on a carcass weight basis.

For the second quarter of 2010 we expect slaughter to be down 2 per cent from April-June 2009 with 51-52 per cent lean hogs averaging in the upper $40s live, and Iowa hogs averaging in the low $60s on a carcass basis.

With the number of litters farrowed expected to be down only 1.9 per cent this winter and pigs per litter increasing by 2 per cent in recent quarters, the winter pig crop is likely to be close to that of a year earlier. Thus, any reduction in third quarter hog slaughter will come mostly from reduced imports of hogs from Canada.

The forecast 2.8 per cent drop in spring farrowings should more than offset any increase in litter size and yield a smaller spring pig crop and reduced fall hog slaughter.

USDA revised upward their estimate of the number of litters farrowed during March-May 2009 by 1.6 per cent and increased the pig crop during those months by 1.6 per cent. This brought the September market hog inventory in line with fall hog slaughter.

Our domestic demand index for pork for January-November was up 3.1 per cent at the consumer level, but live hog demand was down 4.4 per cent for these 11 months compared to a year ago. The weaker live hog demand than consumer demand was due to roughly 15 per cent smaller pork exports in 2009 than 2008.

The retail price of pork in November was down 2.2 per cent from October and down 6.2 per cent from November 2008. For the first 11 months of 2009, retail pork prices were 0.1 per cent below last year. Only the processor-retailer benefitted from these higher retail pork prices. The processor-retail margin was up 9.1 per cent for January-November 2009 compared to the same period in 2008. The packer margin was down 6.4 per cent for these 11months and live hog prices were down 13.1 per cent compared to a year ago.

Pork exports for January-October were down 15.7 per cent from 12-months earlier. Net pork exports as a percent of production at 14.1 per cent was down from 17.1 per cent for January-October 2009 compared to the same period in 2008.

Our estimates of slaughter and prices for the next four quarters are in Table 4.

Table 1. Hog Inventories 1 December, US
______________________________________________________________

 2009 as % of 2008
 Market 98.0
 Kept for breeding 96.5
 All hogs and pigs 98.2
______________________________________________________________


Table 2. Market Hogs on Farms 1 December, US
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 Weight Category 2009 as % of 2008
 Under 50 pounds 98.2
 50 - 119 pounds 98.1
 120 - 179 pounds 98.4
 180 pounds and over 97.8
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Table 3. Sows Farrowing and Intentions, US
______________________________________________________________

 2009 as % of 2008
 March-May 98.9
 June-August 96.4
 September-November 98.2
 2010 as % of 2009
 December-February 98.1
 March-May 97.2
______________________________________________________________


Table 4. Estimated Commercial Hog Slaughter by Quarter and Live Hog Prices
____________________________________________________________________

 Commercial Terminal Mkt. 51-52% Lean Non packer sold
 Slaughter Barrow & Gilt Hogs Hogs (avg. net
Period (mil. hd.) (price/cwt) (price/cwt) carcass price/cwt)
_____________________________________________________________________

2004 1 25.717 + 4.3% $44.18 $58.85 $60.56
 2 24.737 + 3.4 54.91 72.88 72.74
 3 25.817 + 4.3 56.58 75.81 74.73
 4 27.192 - 1.5 54.35 72.67 71.58
 Year 103.463 + 2.5 52.51 70.04 69.90

2005 1 25.538 - 0.7% $51.92 $69.79 $69.33
 2 25.030 + 1.2 52.09 70.21 70.25
 3 25.528 - 1.1 50.51 67.50 68.37
 4 27.486 + 1.1 45.54 60.22 61.68
 Year 103.582 + 0.1 50.02 66.96 67.43

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 28.488 - 3.8% $42.11 $57.23 $60.43
 2 27.063 - 3.1 42.74 57.32 61.76
 3 28.419 - 1.0 38.90 51.43 56.68
 4* 29.607 - 2.0 41.21 54.96 57.63
 Year* 113.577 - 2.5 41.24 55.22 59.11

2010 1** 27.775 - 2.5% $44 - 47 $59 - 63 $61 - 65
 2** 26.520 - 2.0 47 - 50 63 - 67 65 - 69
 3** 27.850 - 2.0 49 - 52 66 - 70 68 - 72
 4** 28.900 - 2.4 46 - 49 61 - 65 63 - 67
 Year** 111.045 - 2.2 46 - 49 62 - 66 64 - 68

 *estimated
 **forecast

Further Reading

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You can view the USDA Hogs and Pigs Report - December 2009 by clicking here.