Their estimate of total inventory was 102% of a year ago. The average of the trade estimates was 102.1%. USDA’s breeding herd estimate was 97.4% and the trade estimate was 97.3% of 2007. The market herd estimate was the same for both at 102.5%. (Table 1)

Slaughter from domestic production during September was quite consistent with the 180 lb. and heavier market inventory. (Table 2)

USDA’s estimate for the breeding herd relative to a year earlier was a littler larger than our gilt and sow slaughter data indicates. USDA’s estimates for both 2007 and 2008 showed extremely large productivity growth. We believe the breeding herd for both years was underestimated. USDA revised the September and December 2007 breeding herd inventories up nearly 1%, but we believe there is a chance that it was still underestimated relative to the 2008 inventory.

Our demand index for pork at the consumer level for January-August was down 4.9% from a year earlier. However, due to increased exports, demand for live hogs for this 8-month period was up 7.6%, but in late August and September it weakened.

Our demand index for beef at the consumer level for January-August was down by 6% compared to this period last year. We believe these significant declines in consumer demand for both beef and pork are due to a weak general economy and high energy prices. Consumer demand for broiler and turkey meat was up some during January-July. This suggests consumers are probably shifting to lower priced protein.

In September, sow prices were above barrow and gilt prices at times. The average price for pork trimmings was up relative to other wholesale of cuts. The higher sow prices were not due to lower sow slaughter. In early September, sow slaughter was up relative to a year earlier. Again, we believe that higher pork trimming prices are due to consumers shifting to lower priced cuts, which is positive for sausages.

Pork exports were up sharply. July exports were up 84.7% from a year ago. January-July pork exports were up 70.8% compared to the first 7 months of 2007. Exports to Japan were up 21.8%, to Mexico up 37%, to Canada up 25.7%, to South Korea up 23.2%, to Russia up 144.2%, to China-Hong Kong up 376%, to Taiwan up 20.5%, to Australia up 25.1%, and to other countries up 119.7%.

Net pork exports as a percent of U.S. pork production was 9.2% for January-July 2007. A year later it had grown to 17.9%, or nearly doubled.

For January-July, the value of pork exports per hog slaughtered in the U.S. was $24.60 per head. For the same 7 months of 2008, pork exports per head slaughtered grew to $35.89. The value of pork variety meats also increased. For January-July 2007, the value of pork variety meats exported per head slaughtered was $3.51 and grew to $5.40 per head for 2008. The total value of pork and pork variety meats exported per head slaughtered in 2007 was $28.11. For 2008 it had increased to $41.29.

Most of the increase in retail pork prices due to higher priced feed is still in the future. In August, retail pork prices were up 1.9% from July 2008 and up 2.9% from August 2007. For January-August 2008 retail pork prices were up only 1.3% from a year earlier.

In the September Hogs & Pigs report, the heavier weight market hog inventories on September 1 indicates fourth quarter hog slaughter in the U.S. will be up 2% from 2007. In Table 4, our fourth quarter slaughter estimate has been adjusted down about 1.5% due to fewer slaughter hog imports expected from Canada.

Total commercial slaughter in 2008 is expected to exceed 117 million head, up by nearly 7.5% from the previous record in 2007. Slaughter in the first quarter of 2009 is forecast to be down a little over 2% based on the light weight market hog inventories. The second quarter 2009 slaughter, based on farrowing intentions, shows a decline of 5%. We are a little apprehensive that this much decline will actually occur. This feeling is reinforced by the farrowing intentions for the first quarter of 2009 being down only 3%. Our slaughter estimates are based on the farrowing intentions shown in Table 3. Some productivity growth is built into our slaughter estimates.

If demand does not fall too much in 2009, hog prices in both the third and fourth quarters are expected to be near breakeven to somewhat positive for the average cost producer, assuming a normal corn crop in 2009.

Our estimates for slaughter and prices by quarter for the next year are in Table 4.

Table 1. Hog Inventories June 1, U.S.
______________________________________________________________

 2008 as % of 2007
 Market 106.2
 Kept for breeding 99.2
 All hogs and pigs 105.8
______________________________________________________________


Table 2. Market Hogs on Farms June 1, U.S..
______________________________________________________________

 Weight Category 2008 as % of 2007
 Under 60 pounds 103.7
 60 - 119 pounds 105.8
 120 - 179 pounds 109.5
 180 pounds and over 110.8
______________________________________________________________

Table 3. Sows Farrowing and Intentions, U.S.
______________________________________________________________

 2008 as % of 2007
 December-February 105.6
 March-May 101.9
 June-August 98.0
 September-November 96.0
______________________________________________________________



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)
_________________________________________________________________________

2002 1 24.148 $37.23 $39.43 $54.25
 2 24.280 32.77 34.99 50.43
 3 25.120 31.09 33.86 49.66
 4 26.715 28.52 31.34 46.10
 Year 100.263 32.40 34.91 50.09

2003 1 24.654 $33.32 $35.38 $50.40
 2 23.922 39.86 42.64 58.92
 3 24.747 38.66 42.90 59.27
 4 27.608 34.15 36.89 52.36
 Year 100.931 36.50 39.45 55.25

2004 1 25.717 $40.82 $44.18 $60.56
 2 24.737 51.56 54.91 72.74
 3 25.817 53.72 56.58 74.73
 4 27.192 50.58 54.35 71.58
 Year 103.463 49.17 52.51 69.90

2005 1 25.538 $48.46 $51.92 $69.33
 2 25.030 49.08 52.09 70.25
 3 25.528 46.72 50.51 68.37
 4 27.486 42.20 45.54 61.68
 Year 103.582 46.62 50.02 67.43

2006 1 26.208 $39.23 $42.63 $58.37
 2 24.839 45.81 48.45 65.96
 3 25.810 46.92 51.83 69.13
 4 27.880 41.56 46.13 62.04
 Year 104.737 43.38 47.26 63.86

2007 1 26.684 $41.49 $46.04 $62.69
 2 25.526 48.14 52.55 71.39
 3 26.566 45.07 50.34 69.17
 4 30.396 33.61 39.44 56.83
 Year 109.176 42.08 47.09 65.04

2008 1 29.597 $33.86 $39.64 $57.41
 2 (part. est.) 27.917 $47.20 $52.52 $72.24
 3 (projected) 28.800 43 - 47 48 - 52 66 - 72
 4 (projected) 31.200 35 - 39 40 - 44 55 - 61
 Year (proj.) 117.514 40 - 42 45 - 47 63 - 66

2009 1 (projected) 29.300 $37 - 41 $43 - 47 $60 - 66
 2 (projected) 27.100 49 - 54 55 - 60 75 - 79
____________________________________________________________________


Table 1. Hog Inventories September 1, U.S.
______________________________________________________________

 2008 as % of 2007
 Market 102.5
 Kept for breeding 97.4
 All hogs and pigs 102.0
______________________________________________________________


Table 2. Market Hogs on Farms September 1, U.S.
______________________________________________________________

 Weight Category 2008 as % of 2007
 Under 60 pounds 99.7
 60 - 119 pounds 101.1
 120 - 179 pounds 106.1
 180 pounds and over 106.4
______________________________________________________________


Table 3. Sows Farrowing and Intentions, U.S.
______________________________________________________________

 2008 as % of 2007
 March-May 101.9
 June-August 98.2
 September-November 94.5
 
 2009 as % of 2008
 December-February 97.1
______________________________________________________________


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)
_________________________________________________________________________

2002 1 24.148 $37.23 $39.43 $54.25
 2 24.280 32.77 34.99 50.43
 3 25.120 31.09 33.86 49.66
 4 26.715 28.52 31.34 46.10
 Year 100.263 32.40 34.91 50.09

2003 1 24.654 $33.32 $35.38 $50.40
 2 23.922 39.86 42.64 58.92
 3 24.747 38.66 42.90 59.27
 4 27.608 34.15 36.89 52.36
 Year 100.931 36.50 39.45 55.25

2004 1 25.717 $40.82 $44.18 $60.56
 2 24.737 51.56 54.91 72.74
 3 25.817 53.72 56.58 74.73
 4 27.192 50.58 54.35 71.58
 Year 103.463 49.17 52.51 69.90

2005 1 25.538 $48.46 $51.92 $69.33
 2 25.030 49.08 52.09 70.25
 3 25.528 46.72 50.51 68.37
 4 27.486 42.20 45.54 61.68
 Year 103.582 46.62 50.02 67.43

2006 1 26.208 $39.23 $42.63 $58.37
 2 24.839 45.81 48.45 65.96
 3 25.810 46.92 51.83 69.13
 4 27.880 41.56 46.13 62.04
 Year 104.737 43.38 47.26 63.86

2007 1 26.684 $41.49 $46.04 $62.69
 2 25.526 48.14 52.55 71.39
 3 26.566 45.07 50.34 69.17
 4 30.396 33.61 39.44 56.83
 Year 109.172 42.08 47.09 65.04

2008 1 29.597 $33.86 $39.64 $57.41
 2 27.942 $46.68 $52.51 $72.24
 3 (part. est.) 28.728 $52.60 $58.00 $78.00
 4 (projected) 31.000 41 - 44 46 - 50 62 - 66
 Year (proj.) 117.267 43 - 44 49 - 50 67 - 68

2009 1 (projected) 28.975 $43 - 47 $49 - 53 $68 - 72
 2 (projected) 26.500 52 - 56 58 - 62 80 - 84
 3 (projected) 27.850 54 - 58 60 - 64 81 - 85
_________________________________________________________________________	

Further Reading

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You can view the full USDA Quarterly Pigs and Hogs Report - September 2008 by clicking here.