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Ron Plain

USDA's June Hogs and Pigs Report implies that hog slaughter will run 2-3% above year-ago levels for the next 3-4 months then drop back near year-earlier levels for the following nine months.

The June inventory report was remarkably close to pre-release trade estimates. Ten of the twelve major numbers in the report were within one-half of one percent of the average of trade forecasts. The two exceptions were the inventory of market hogs weighing 180 pounds and over (USDA said it was up 1.8% on June 1, the trade predicted up 3.1%) and farrowing intentions for September-November (USDA said down 0.1%, the average of trade forecasts was for down 1.2%).

Regarding the inventory of pigs weighing 180 pounds and over on June 1, USDA's number (101.8% of year ago) looks low. We still have 3 days left in June, but it appears daily hog slaughter this month will be roughly 4.5% above that of last June. June slaughter accounts for about 85% of the 180 plus weight group. Thus, either 1) daily slaughter will have to drop-off dramatically in the coming week, or 2) we have pulled ahead on slaughter or 3) there was a huge increase in slaughter hog imports during June (about 210,000 head or 117.6% more than in June 2003) or 4) USDA's 180 pound inventory number is too low.

U.S. hog imports probably were up in June. Slaughter hog imports have been above year-ago levels each month since May 2003. But, data for the first two weeks of June imply that slaughter hog imports are running 36% above year ago levels, far short of what's needed to make USDA's numbers balance with hog slaughter. Nor does the USDA inventory number for 180 pound and heavier market hogs match well with their estimates of last winter's pig crop. USDA says the December pig crop was 3% larger than 12 months earlier and that January feeder pig imports were 36.8% greater than the year-earlier number. The combined pig crop and feeder pig imports imply June hog slaughter should be up 4.5% compared to a year ago, which is about what it is. If you believe average slaughter age is closer to 5 rather than 6 months, the January pig crop and February feeder pig imports imply daily hog slaughter during June would be up 3.7% compared to a year ago.