The average of the pre-release trade estimates was for a 0.6 per cent decline. Kept for breeding was down 1.2 per cent according to USDA. The trade estimate was for a 0.8 per cent decline. USDA's estimate of the total number of hogs and pigs on contents/ farms at the start of December was 0.9 per cent smaller than 12 months earlier. The average of the trade estimates was for a 0.6 per cent decline. (See Table 1 below)

USDA made some upward revisions to past inventory estimates to bring them more in line with fall hog slaughter. USDA raised their previous estimate of the September market hog inventory by 320,000 head (0.5 per cent), increased the reported number of sows farrowed during March-May 2010 by 1.9 per cent and increased the March-May pig crop by 531,000 head (1.9 per cent).

The December swine breeding herd was 6.9 per cent lower than at the last cycle peak in December 2007. For the last four quarters, the contents/ swine breeding herd has been within 14,000 head of 5.774 million. In 2009 the December breeding herd inventory was 25,000 head smaller than on 1 September. This year it was 8,000 head larger. Thus, USDA says the breeding herd grew by 33,000 head more this fall than last. September-November sow slaughter was down by 73,000 compared to a year ago. About 45,000 of the drop was due to reduced imports of Canadian sows for slaughter, leaving 28,000 fewer contents/ sows slaughtered this fall than last. The USDA data implies 5,000 more gilts were added to the breeding herd this fall than last.

The most encouraging news in the USDA report was farrowing intentions. USDA said fall (September-November) farrowings were down 2.3 per cent and forecast winter farrowings to be down 0.6 per cent with spring 2011 farrowings down 2.3 per cent compared to 12 months earlier. (See Table 3) Fall farrowings were 1.3 per cent lower than trade expectations. The forecast of winter farrowings is 1.1 per cent lower than expected and spring farrowings are forecast to be 3.1 per cent below the trade forecast. The lack of growth is likely due to the sharp increase in feed costs during the past four months.

The one bearish number in the report was pigs per litter. The trade was expecting a 1 per cent increase. USDA said September-November pigs per litter set a record of 9.89 head and were 2.0 per cent more than the same months last year. The benefit of reduced farrowings is being offset by increases in the number of pigs weaned per litter. Fall farrowings were down 2.3 per cent; but with 2.0 per cent more pigs per litter, the fall pig crop was down only 0.4 per cent.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on 1 December was even with 12 months earlier. (See Table 2) However, it looks like December barrow and gilt slaughter will be 1 per cent above last year. The 120-179 pound market hog group was down 0.7 per cent; the 50-179 pound inventory was down 1.6 per cent; and the inventory of pigs weighing less than 50 pounds was down 0.8 per cent compared to a year earlier.

Hog imports from Canada during the September-November quarter showed feeder pigs down 6 per cent but slaughter hogs imports up 2 per cent. In 2007, 10.0 million live hogs were imported from Canada. Last year, 6.4 million head came south. Total imports of Canadian hogs and pigs for 2010 should be close to 5.7 million head.

Based on the 50-179 pound market hog inventory and the expectation of little change in live hog imports, our forecast is for a decline of 0.7 per cent in first quarter 2010 daily hog slaughter compared to January-March 2010. (with one extra slaughter day, total first quarter slaughter should be up 0.9 per cent) With this level of pork production, we expect 51-52 per cent lean hogs to average in the mid $50s live and Iowa-Minnesota negotiated sales to average in the low $70s on a carcass weight basis.

For the second quarter of 2011 we expect hog slaughter to be down 0.7 per cent compared to April-May 2010 with 51-52 per cent lean hogs averaging in the low $60s live, and Iowa hogs averaging in the low $80/cwt on a carcass basis.

With the number of litters farrowed expected to be down 0.6 per cent this winter and pigs per litter increasing by 1 per cent to 2 per cent or so, the winter pig crop is likely to be above a year earlier. We are forecasting third quarter 2011 slaughter to be up 0.5 per cent compared to a year ago. Look for carcass prices of barrows and gilts to average close to $80/cwt.

The forecast 2.3 per cent decrease in spring farrowings should be supplemented by an increase in litter size but still yield a spring pig crop below a year-earlier causing fourth quarter 2011 hog slaughter to be down 1 per cent or so on a daily basis (down 2.7 per cent due to one fewer slaughter day). Slaughter weights are likely to be 1.5 per cent higher next year. Our estimates of slaughter and prices for the next four quarters are in Table 4.

Table 1. Hog Inventories December 1, U.S.
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 2010 as % of 2009
 Market 99.2
 Kept for breeding 98.8
 All hogs and pigs 99.1
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Table 2. Market Hogs on Farms December 1, U.S.
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 Weight Category 2010 as % of 2009
 Under 50 pounds 99.2
 50 - 119 pounds 98.4
 120 - 179 pounds 99.3
 180 pounds and over 100.0
 Pig Crop
 September-November 99.6
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Table 3. Sows Farrowed and Farrowing Intentions, U.S.
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 2009 as % of 2008
 March-May 2009 98.9
 June-August 2009 96.2
 September-November 2009 96.3
 2010 as % of 2009
 December-February 95.4
 March-May 2010 97.1
 June-August 2010 98.2
 September-November 2010 97.7
 2011 as % of 2010
 December-February 99.4
 March-May 2011 97.7
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Table 4. Commercial Hog Slaughter and Barrow and Gilt Price by Quarter
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 --Comm. Slaughter-- ------Barrows & Gilts, price/cwt------
 Change 51-52% Iowa-Minn Non-packer-sold
Year & Million from Lean Base Net
Quarter Head Year ago Live Carcass Carcass
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2005 1 25.538 - 0.7% $51.92 $69.79 $69.33
 2 25.030 + 1.2 52.09 70.21 70.25
 3 25.528 - 1.1 50.51 67.50 68.37
 4 27.486 + 1.1 45.54 60.22 61.68
 Year 103.582 + 0.1 50.02 66.96 67.43

2006 1 26.208 + 2.6% $42.63 $56.38 $58.37
 2 24.839 - 0.8 48.45 65.27 65.96
 3 25.810 + 1.1 51.83 68.04 69.13
 4 27.880 + 1.4 46.13 60.53 62.04
 Year 104.737 + 1.1 47.26 62.54 63.86

2007 1 26.684 + 1.8% $46.04 $59.90 $62.69
 2 25.526 + 2.8 52.55 69.45 71.39
 3 26.566 + 2.9 50.34 66.14 69.17
 4 30.396 + 9.0 39.44 52.08 56.83
 Year 109.172 + 4.2 47.09 61.91 65.04

2008 1 29.601 +10.9% $39.64 $52.49 $57.41
 2 27.941 + 9.5 52.51 70.43 72.24
 3 28.696 + 8.0 57.27 75.67 78.05
 4 30.214 - 0.6 41.92 55.60 61.38
 Year 116.452 + 6.7 47.83 63.58 67.27

2009 1 28.503 - 3.7% $42.11 $57.23 $60.43
 2 27.072 - 3.1 42.74 57.32 61.76
 3 28.428 - 0.9 38.90 51.43 56.68
 4 29.615 - 2.0 41.20 54.98 57.64
 Year 113.618 - 2.4 41.24 55.23 59.11

2010 1 27.631 - 3.1% $50.41 $66.81 $68.32
 2 26.069 - 3.7 59.60 79.04 79.42
 3 26.927 - 5.3 60.13 79.44 80.70
 4* 29.644 + 0.1 50.15 65.21 69.30
 Year** 110.271 - 3.0 55.07 72.62 74.65

2011 1** 27.880 + 0.9 $54 - 57 $71 - 75 $73 - 77
 2** 25.900 - 0.7 60 - 63 79 - 83 81 - 85
 3** 27.050 + 0.5 60 - 63 78 - 82 80 - 84
 4** 28.840 - 2.7 52 - 55 68 - 72 70 - 74
 Year** 109.670 - 0.5 57 - 61 74 - 78 76 - 80

 *estimated
 **forecast
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