Key data from the report appear below and it was full of what the trade is viewing as bullish surprises. In fact, based on the differences between report numbers and the averages of analysts’ pre-report estimates, this is one of the most bullish reports in several years.

Some highlights are:

• The smallest breeding herd since the quarterly report was started in the early 1970s and very likely the smallest breeding herd since before 1900. 5.76 million head of breeding hogs were on hand on 1 March, 3.9 per cent fewer than last year. Analysts expected the herd to be only 2.6 per cent lower, so this would be supportive of deferred futures.
  
  
• A market herd of 58.228 million head, 2.7 per cent fewer than last year and 1.8 per cent fewer than were expected by analysts. The 1 March inventory, though, was the third largest 1 March inventory on record, trailing only those of 2008 and 2009 — a clear indicator of the productivity gains made by US producers over the past few years.
  
  
• 180-lbs and over inventory of 10.742 million head, 1.1 per cent fewer than last year. This group should have largely been harvested by the end of March and March FI slaughter (covering 20 weekdays and four Saturdays in both years) was 1 per cent smaller than last year. The number of Canadian market hogs imported was almost exactly the same so these numbers agree well, adding credibility to the report.
  
  
• Weight categories that suggest a very different year-on-year pattern for slaughter through November than were suggested by the December report. That report, which was revised in a few areas, suggested that the largest year-on-year reductions from 2009 to 2010 would be in the first and second quarters and that those reductions would be only 1.8 per cent and 1.5 per cent, respectively. Q1 slaughter totals, of course have been even lower (down 3.4 per cent from ‘09) but this report suggests that Q2 slaughter wil lbe 2.6 per cent lower than last year and Q3 slaughter will be 4.4 per cent lower. The gap remains large through November before December numbers close to those of 2009 bring Q4 slaughter back to “only” 2.3 per cent below 2009 levels. This report suggests that annual slaughter this year will be 3.1 per cent lower than last — a substantially larger decline than the 1.4 per cent suggested by the December report.
  
  
• USDA made some downward revisions in past estimates but those were probably not large enough to satisfy some. The Feds lowered the December market hog estimate by 0.8 per cent with virtually all of the reduction coming in the 120-179 pound inventory which was reduced 3.6 per cent or 450,000 head. The only other revision was to the 180 and over group, which was reduced by 30,000 head, only 0.3 per cent. Those reductions put the December inventory numbers in very close agreement with December-February farrowings AND raised projected March farrowings by 92,800 head from the levels forecast back in December. We are not sure that adequately accounts for the hogs that have had their marketing dates delayed this winter by poor growth rates as a result of corn quality and, to a lesser degree, harsh weather.
  
  
• USDA indicates that the robust productivity growth of the past 2 years may be waning. December-February farrowings (ie. sows giving birth) were 3.7 per cent lower than last year, a figure in very close agreement with the 3.9 per cent smaller sow herd. Farrowing intentions for the next two quarters were also in reasonable agreement with this sow herd. All three farrowing numbers (actual and intentions) were lower than analysts’ expected and the March-May number was down almost 2 per cent. The growth rate of pigs per litter (1.5 per cent) dropped below 2 per cent for the first time in over 2 years in December-February. Weather may have had some impact on that number but it should have been minimal in today’s industry which is dominated by climate-controlled farrowing houses. We doubt that the litter rate was impacted any by corn quality even though this could be a factor on future farrowings. Molds and toxins in feed have their greatest impacts on sows’ breeding and reproductive performance. Though producers are being very careful about the corn they use in sow diets, some negative impacts will likely be seen this spring and summer.