The key data in the report are shown below. Note that all of the inventory numbers were higher than the average of analysts’ estimates. Only the 50-119 pound inventory exceeded the estimate by more than 1 per cent. The report may be slightly bearish for nearby CME Lean Hog futures on Monday. Lower-than-expected farrowing and farrowing intentions numbers may be slightly bullish for deferred contracts.

Some highlights from the report are:

• A 1 March breeding herd that numbers 5.788 million head, 0.5 per cent higher than one year ago and 10,000 higher than on 1 December. The trade had expected a slight reduction in the herd. We commented last week that we did not think sow slaughter had been large enough to reduce the breeding herd and USDA apparently agrees. The “hog crush“ (ie. estimated profits using corn, soybean meal and lean hogs futures) for 2011 has improved some since March 1 but is still not large enough in our opinion to encourage widespread expansion. But the primary limiting factor for hog number expansion remains uncertainty about the 2011 corn crop and resulting feed cots. Low projected 2011 carryout stocks offer livestock and poultry producers no comfort for the 2011-12 crop year.
  
  
• Market hogs on US farms numbered 58.176 million head, 0.6 per cent higher than last year but 2.8 and 4.7 per cent smaller than on 1 March of 2008 and 2009, respectively. While slightly larger than in 2010, hog supplies are still significantly smaller than just 2 years ago — in response to higher costs!
  
  
• 10.744 million head of pigs weighing 180 pounds and over on 1 March, virtually identical to the number of animals in this weight class one year ago. Many of those pigs will have already reached slaughter weight by now. Federallyinspected slaughter since 1 March has been 1.1 per cent LOWER than during the same period (24 weekdays and 4 Saturdays) one year ago. If anything, more of the 180 and over category should have reached market weight in March of this year due to better quality 2010 corn and higher growth rates. The difference here raises a bit of concern that USDA’s pig numbers may be a bit high. It is not, however, large enough to conclude that with any certainty.
  
  
• Farrowing numbers for Dec-Feb and farrowing intentions for the next two quarters that are significantly lower, relative to last year, than is the breeding herd. The implication is lower farrowing rates in the immediate past quarter and the two quarters to come. In fact, there have been only two lower annualized farrowing rates since the advent of circovirus vaccines in 2007 and, should they be correct, these would mark the first time since 1996-97 that three straight quarters have been below the 12-quarter moving average. Lower actual litters farrowed are definitely possible if the breeding herd is right. Of course, the breeding herd could be high.
  
  
• The second quarter of a return to 2 per cent yr/yr litter growth. This marks 10 of the last 12 quarters in which that rate has been achieved. The 9.8 pigs/litters saved in Dec-Feb is the highest ever for that quarter.