US Swine Economics Report

Ron Plain

On September 29, USDA will release the results of their latest quarterly survey of the nation's hog inventory. My calculations indicate the breeding herd is 1.2% larger than a year ago and the market hog inventory is 1.3% larger than on September 1, 2005. These are small increases given that hog producers have 31 consecutive months of profit behind them. Sow slaughter during June-August was up 5.4% compared to last summer's low total. Summer hog slaughter was 1% above the level implied by the June inventory report.

In their June report, USDA predicted June-August farrowings would be 0.1% larger than a year earlier and September-November farrowings would be up 0.8%. I'm expecting a bit higher numbers in the September report with summer farrowings up 0.3% and fall farrowings 1.0% larger than last year. My calculations are for winter farrowings to be 1.3% greater than December-February 2006. year.

I believe that pigs per litter this summer increased by a smaller-than-normal 0.4%, due to hot weather, making the June-August pig crop 100.7% of a year ago. Feeder pig imports were up nearly 15% this summer, so the market hog inventory is up more than the pig crop implies.

My estimates of the September 1 market hog inventory by weight groups are: 180 pounds and heavier 102.4%, 120-179 pounds 101.1%, 60-119 pounds 101.0%, and under 60 pounds 101.1% of a year earlier. Hog slaughter since September 1 is up 3.2% compared to the same days last year. Hog slaughter during the next two will need to average 1.25% above year-ago levels to make my 102.4% estimate of the 180 pound plus inventory group correct.

My estimate of the number of hogs in the 60-179 weight groups implies that fourth quarter hog slaughter will be 1% above year-ago levels, assuming the inflow of slaughter hogs from Canada continues close to year-ago levels. I expect live hog prices to average in the mid $40s in the fourth quarter of 2006.

If my estimate of the light weight inventory is correct, first quarter 2007 hog slaughter is also likely to be 1% larger than the number slaughtered in January-February 2006. If so, look for late winter hog prices to average close to $44 on a live basis, $2/cwt higher than the year-earlier price level.

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