Merry Christmas from Steve Meyer, Len Steiner, Altin Kalo and the CME Staff!
We appreciate so much the honor of your time and attention to our work every day — or at least most days! And we thank you for that support over these past 8 years.
At this joyous time of year, consider that, while markets and trading and analysis and such comprise your livelihood, they hopefully do not comprise your life. A life lived well is comprised of friends and family — and faith and hope and love. And the greatest of these is love.

The results of DowJones’ survey of analysts’ pre-report estimates for USDA’s quarterly Hogs and Pigs report were released today and they suggest that Monday’s report will look very much like last year’s. The ranges and average of the analysts’ predictions for the key numbers are shown below and there are no averages below 99.0 or above 101.0. That’s a bit scary.

Should the analysts be correct regarding the 1 December breeding herd relative to last year’s 5.85 million, this year’s herd will be 5.815 million, 45,000 head larger than the herd was on September 1. It will indeed be interesting to see if that increase occurred given the level of sow slaughter for this year and the deterioration of profit prospects for 2011 (see below). There have no-doubt been some empty sow barns and spaces re-filled this fall but those sow slaughter numbers suggest that some farms were liquidating at the same time.

Analysts expect productivity to continue to grow in terms of both litters per sow and litter size. The rates for both that are implied by these estimates are quite reasonable relative to history. The 1 per cent litter size growth rate would confirm a break in the rapid growth seen since 2007 and up until September.

The 180-and-over number looks very small relative to December slaughter through the 20th. Comparing this year’s 14 weekdays and 3 Saturdays to the same numbers one year ago, this year is ahead by 4.8 per cent. We would expect this year’s December slaughter increase to be larger than the 1 December inventory change due to better performance. But 4.7 per cent is very large indeed.

Even with Wednesday’s healthy gains for CME Lean Hogs futures, the profit picture for next year has become significantly less attractive over the past few weeks. Higher corn and soybean meal prices have 2011 average costs above $80/cwt carcass weight. According to today’s corn and meal futures, hogs to be sold in July next year will cost average Iowa farrow-to-finish operations $83.35/cwt to produce. Projected average 2011 profits were $1.00/head as of today. The cost line (red) in this chart is a bit different since it is based on an updated regression equation that uses data through October 2010.