USDA's estimate of the total number of hogs and pigs on US farms at the start of March was down 2.8 per cent compared to 12 months earlier. The average of the trade estimates was for a 1.1 per cent decline. Kept for breeding was down 3.9 per cent according to USDA; the trade estimate was for a 2.6 per cent decline. The market inventory was down 2.7 per cent while the trade estimate was for a 0.9 per cent decline. (See Table 1 below)

As expected, USDA made some downward revisions to past inventory estimates to bring them more in line with winter hog slaughter. USDA lowered their previous estimate of the December market hog inventory by 0.8 per cent, decreased the reported number of sows farrowed during June-August 2009 by 0.2 per cent and decreased the June-August pig crop by 0.2 per cent.

The smaller herd on 1 March was the result of a long period of red ink for hog producers. The industry has lost over $6 billion in equity during the last 10 quarters. The March swine breeding herd was 7.6 per cent lower than at the last cycle peak in December 2007 and was the smallest breeding herd since the mid 1800s.

Despite optimism about better days ahead, the swine herd continues to decline. USDA's survey indicates the breeding herd was 1.5 per cent smaller on 1 March than on 1 December. December-February sow slaughter was down 4.2 per cent. Our gilt slaughter data indicates gilt retention was down 4.0 per cent compared to December-February 2009.

USDA said winter (December-February) farrowings were down 3.7 per cent and forecast spring farrowings to be down 4.0 per cent with summer 2010 farrowings down 2.4 per cent compared to 12 months earlier. (See Table 3)

USDA said pigs per litter averaged 9.61 head during the December-February quarter, down 0.9 per cent from the previous quarter but 1.4 per cent more than the same months last year. This was the smallest quarterly increase in pigs per litter in three years. Much of the benefit of reduced farrowings was offset by increases in the number of pigs weaned per litter. Winter farrowings were down 3.7 per cent; but with 1.4 per cent more pigs per litter, the winter pig crop was down only 2.4 per cent.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on 1 March was down 1.1 per cent compared to 12 months earlier. (See Table 2) The 120-179 pound group was down 2.0 per cent; the 50-179 pound inventory was down 2.6 per cent; and the inventory of pigs weighing less than 50 pounds was down 4.0 per cent compared to a year earlier.

Canadian hog imports during the December-February quarter showed feeder pigs down 9 per cent and slaughter hogs down 14 per cent. In 2007, 10.0 million live hogs were imported from Canada. In 2008, 9.3 million head were imported. During 2009, 6.4 million head came south. We are expecting 5-6 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 1.8 per cent in second quarter 2010 hog slaughter compared to April-June 2009. With this level of pork production, we expect 51-52 per cent lean hogs to average in the low $50s live and Iowa-Minnesota negotiated sales to average in the low $70s on a carcass weight basis.

For the third quarter of 2010 we expect slaughter to be down 3.5 per cent from July-September 2009 with 51-52 per cent lean hogs averaging in the mid $50s live, and Iowa hogs averaging in the low to mid $70s on a carcass basis.

With the number of litters farrowed expected to be down 4.0 per cent this spring and pigs per litter increasing by 1-2 per cent in recent quarters, the spring pig crop is likely to be 2-3 per cent smaller than a year earlier. We are forecasting fourth quarter slaughter to be off 2.8 per cent with carcass prices for barrows and gilts in the mid $60s.

The forecast 2.4 per cent drop in summer farrowings should be partially offset by an increase in litter size and yield a summer pig crop 1 per cent or so smaller than a year-earlier and therefore winter hog slaughter is likely to be down about 1 per cent compared to this past winter.

Our domestic demand index for pork for 2009 was up 1.8 per cent at the consumer level, but live hog demand was down 4.0 per cent compared to a year ago. The weaker live hog demand than consumer demand was due to weak export demand in 2009.

For the first 2 months of 2010, retail pork prices were 2.7 per cent below last year, but hog prices were 17.8 per cent above year-ago levels. The wholesale-retail margin was down 12.5 per cent for January-February 2010 compared to the same period in 2009. Tighter margins boost hog prices, but they will not last.

Pork exports for 2009 were down 11.6 per cent from 2008's record level. Pork exports equaled 17.9 per cent of US production in 2009 while pork imports equaled 3.6 per cent of production.

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

Table 1. Hog Inventories March 1, U.S.
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 2010 as % of 2009
 Market 97.3
 Kept for breeding 96.1
 All hogs and pigs 97.2
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Table 2. Market Hogs on Farms March 1, U.S.
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 Weight Category 2010 as % of 2009
 Under 50 pounds 96.0
 50 - 119 pounds 97.4
 120 - 179 pounds 98.0
 180 pounds and over 98.9
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Table 3. Sows Farrowing and Intentions, U.S.
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 2009 as % of 2008
 March-May 98.9
 June-August 96.2
 September-November 98.2
 2010 as % of 2009
 December-February 96.3
 March-May 96.0
 June-August 97.6
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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
_________________________________________________________________________

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 28.494 - 3.7% $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 29.613 - 2.0 41.20 54.98 57.64
 Year 113.589 - 2.5 41.24 55.23 59.11

2010 1* 27.621 - 3.1% $49.50 $66.75 $68.60
 2** 26.575 - 1.8 51 - 54 69 - 73 71 - 75
 3** 27.425 - 3.5 53 - 56 71 - 75 73 - 77
 4** 28.775 - 2.8 47 - 50 64 - 68 66 - 70
 Year** 110.396 - 2.8 51 - 53 68 - 71 70 - 73

*estimated
**forecast