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Smaller Breeding Herd But Larger Hog Inventory Expected

On Friday USDA will release the results of their latest survey of the U.S. swine inventory. 

Ron Plain, University of Missouri economist, calculates the breeding herd is 3.5% smaller than a year ago, but the market hog inventory is 2.4% larger and the total herd is 1.8% bigger than on Sept. 1, 2007. "If I'm correct, this will be all-time records for both market and total inventory," he says.

Plain does not expect USDA to make any major revisions in their previous estimates even though hog slaughter during June-August was lower than expected based on the June inventory report. "The 43% decline this summer in slaughter hog imports from Canada explains the difference," he says. "June-August slaughter of U.S. raised market hogs was within 0.1% of what the June report implied."

Producers stick to intended farrowing cuts. In the June inventory report, USDA predicted June-August farrowings would be 2.0% smaller than a year earlier and September—November farrowings would be down 4.0%.

"I agree with both these forecasts," says Plain. "I'm forecasting winter farrowings to be down 5.0% compared to December-February 2007. Record feed prices have caused the financial losses that are driving this cut back. Through August, sow slaughter was 8.8% higher than a year ago.

Plain estimates pigs per litter were up 1.5% this summer, making the June-August pig crop 99.5% of a year ago. Feeder pig imports this summer were very close to last year's level, so the light weight market hog inventory should be in line with the summer pig crop.

Market hogs by weight group. By weight groups, Plain pegs the September 1 market hog inventories as:

·        180 pounds and heavier 105.6%

·        120-179 pounds 104.0%

·        60-119 pounds 103.0%

·        Under 60 pounds 99.5%

All figures are measured as percents of Sept. 1, 2007 inventories.

"My estimate of hogs in the 60-179 weight groups implies that fourth quarter hog slaughter will be 2.5% or so above year-ago levels, if the inflow of slaughter hogs from Canada continues to be sharply lower," says Plain.

Plain projects live hog prices to average close to $48/cwt ($63/cwt carcass) in the fourth quarter of 2008. Prices could be much lower if any slaughter plants run into capacity problems.

"I expect daily hog slaughter during the first quarter of 2009 to be 1% lower than the number slaughtered in January-March 2008," he says. "If so, look for first quarter 2009 hog prices to average close to $52/cwt on a live basis and $68.50/cwt on a carcass basis."