USDA said the market inventory was down 2.7 per cent. The average of the pre-release trade estimates was for a 2.8 per cent decline. Kept for breeding was down 1.8 per cent according to USDA. The trade estimate was for a 1.1 per cent decline. USDA's estimate of the total number of hogs and pigs on US farms at the start of September was down 2.6 per cent compared to 12 months earlier. The average of the trade estimates was for a 2.7 per cent decline. (See Table 1 below)

USDA made some downward revisions to past inventory estimates to bring them more in line with spring hog slaughter. USDA lowered their previous estimate of the June market hog inventory by 250,000 head (0.4 per cent), decreased the reported number of sows farrowed during December-February 2009 by 1.0 per cent and decreased the December-February pig crop by 281,000 head (1.0 per cent). The revisions helped, but I do not think they were quite large enough.

The September swine breeding herd was 7.4 per cent lower than at the last cycle peak in December 2007. On average, the breeding herd is 37 thousand head smaller on 1 September than on 1 June. This year it was 18,000 head (0.3 per cent) smaller than in June but 10,000 head (0.2 per cent) larger than in March. The lack of steady growth is encouraging. It will be very helpful for producers' balance sheets if rebuilding the sow herd occurs slowly.

In 2009 the September breeding herd inventory was 93,000 head smaller than on 1 June. This year it was 18,000 head smaller. Thus, USDA says the breeding herd declined by 75,000 fewer head this summer than last. June-August sow slaughter was down by 123,500 compared to a year ago. About 60,000 of the drop was due to reduced imports of Canadian sows for slaughter, leaving 63,500 fewer US sows slaughtered this summer than last. The USDA data implies 11,500 more gilts were added to the breeding herd this summer than last.

USDA said summer (June-August) farrowings were down 1.8 per cent and forecast fall farrowings to be down 1.2 per cent with winter 2010-11 farrowings up 0.5 per cent compared to 12 months earlier. (See Table 3) Summer farrowings were 0.7 per cent higher than trade expectations and the forecast of fall farrowings is 0.4 per cent lower than expected.

USDA said June-August pigs per litter tied the record of 9.81 head set the previous quarter and were 1.1 per cent more than the same months last year. Much of the benefit of reduced farrowings was offset by increases in the number of pigs weaned per litter. Summer farrowings were down 1.8 per cent; but with 1.1 per cent more pigs per litter, the summer pig crop was down only 0.7 per cent.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on 1 September was down 5.6 per cent compared to 12 months earlier. (See Table 2) This is in line with barrow and gilt slaughter since September 1. The 120-179 pound market hog group was down 3.4 per cent; the 50-179 pound inventory was down 2.0 per cent; and the inventory of pigs weighing less than 50 pounds was down 1.1 per cent compared to a year earlier.

Canadian hog imports during the June-August quarter showed feeder pigs down nearly 7 per cent and slaughter hogs imports down 20 per cent. In 2007, 10.0 million live hogs were imported from Canada. Last year, 6.4 million head came south. We are expecting 5.5 to 5.7 million live hogs to be imported in 2010.

Based on the 50-179 pound market hog inventory and the expectation of a continuing decline in live hog imports, our forecast is for a decline of 3.1 per cent in fourth quarter 2010 hog slaughter compared to October-December 2009. With this level of pork production, we expect 51-52 per cent lean hogs to average in the mid $50s live and Iowa-Minnesota negotiated sales to average in the low to mid $70s on a carcass weight basis.

For the first quarter of 2011 we expect daily hog slaughter to be down 1.2 per cent from January-March 2010 (with one extra slaughter day, total first quarter slaughter should be up 0.4 per cent) with 51-52 per cent lean hogs averaging in the mid to upper $50s live, and Iowa hogs averaging close to $76/cwt on a carcass basis.

With the number of litters farrowed expected to be down 1.2 per cent this fall and pigs per litter increasing by 1 per cent or so, the fall pig crop is likely to be close to a year earlier. We are forecasting second quarter 2011 slaughter to be down 0.3 per cent compared to a year ago. Look for carcass prices of barrows and gilts to be mostly in the high $70 to low $80s.

The forecast 0.5 per cent increase in winter farrowings should be supplemented by an increase in litter size and yield a winter pig crop 1.6 per cent or so larger than a year-earlier.

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

Table 1. Hog Inventories September 1, U.S.
______________________________________________________________
 
 2010 as % of 2009
 Market 97.3
 Kept for breeding 98.2
 All hogs and pigs 97.4
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Table 2. Market Hogs on Farms September 1, U.S.
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 Weight Category 2010 as % of 2009
 Under 50 pounds 98.9
 50 - 119 pounds 98.0
 120 - 179 pounds 96.6
 180 pounds and over 94.4
 Pig Crop
 June-August 99.3
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Table 3. Sows Farrowed and Farrowing Intentions, U.S.
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 2009 as % of 2008
 March-May 2009 98.9
 June-August 2009 96.2
 September-November 2009 96.3
 2010 as % of 2009
 December-February 95.4
 March-May 2010 95.3
 June-August 2010 98.2
 September-November 2010 98.8
 2011 as % of 2010
 December-February 100.5
______________________________________________________________
 
 
Table 4. Commercial Hog Slaughter and Barrow and Gilt Price by Quarter
_________________________________________________________________________
 
 --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
_________________________________________________________________________
 
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 28.503 - 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 27.631 - 3.1% $50.41 $66.81 $68.32
 2 26.069 - 3.7 59.60 79.04 79.42
 3* 26.972 - 5.1 59.90 79.50 80.65
 4** 28.700 - 3.1 55 - 57 72 - 76 74 - 78
 Year** 109.372 - 3.7 56 - 57 74 - 75 75 - 77
 
2011 1** 27.750 + 0.4 $56 - 59 $74 - 78 $76 - 80
 2** 26.000 - 0.3 59 - 62 79 - 83 81 - 85
 3** 27.400 + 1.6 56 - 59 74 - 78 76 - 80
 4** 29.000 + 1.1 49 - 52 65 - 69 67 - 71
 Year** 110.150 + 0.7 55 - 58 73 - 76 75 - 78
 *estimated
 **forecast
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