Hog producers enjoyed record hog prices this summer and I fear it is causing some herd expansion. My estimates are that the breeding herd is 0.3 per cent larger than a year ago; the market hog inventory is 1.3 per cent larger; and the total herd is 1.2 per cent larger than in September 2010. My estimates of the September 1 market hog inventory by weight groups are: 180 pounds and heavier 103.0 per cent, 120-179 pounds 101.5 per cent, 50-119 pounds 101.0 per cent, and under 50 pounds 100.6 per cent of a year earlier.

Slaughter of barrows and gilts during June-August was down 0.16 per cent with a year earlier. USDA's June report implied summer slaughter would be up 1.6 per cent. So, there is need for USDA to revise downward their June market hog inventory and their estimate of sows farrowed and pig crop during December-February.

In their last inventory report, USDA predicted that June-August farrowings would be down 2.6 per cent and September-November farrowings would be 1.1 per cent lower than a year earlier. I think summer farrowings actually were down only 1.5 per cent. I'm forecasting fall farrowings to be down 1.0 per cent and December-February farrowings down 0.5 per cent compared to last winter. June-August sow slaughter was up 4.7 per cent. Imports of Canadian sows for slaughter during this period were down 6.7 per cent. Thus, net slaughter of US sows was up 6.9 per cent out of a sow herd that was 0.3 per cent larger compared to 12 months earlier. This implies a reduction in the sow herd, assuming gilt retention held steady. Our data implies gilt retention was up this summer.

I believe pigs per litter were up 2.0 per cent this summer. My estimate is the June-August pig crop was 100.5 per cent of a year earlier. Feeder pig imports during June-August were 3.5 per cent above last summer's level, so the light weight inventory should be up a tiny bit more than the pig crop.

My estimate of hogs in the 50-179 weight groups implies that daily hog slaughter during the fourth quarter will be roughly 1 per cent to 1.5 per cent above year-ago levels, if the inflow of slaughter hogs from Canada is close to year-earlier levels. I expect daily hog slaughter during the first quarter of 2012 to be 1.0 per cent higher than the number slaughtered in January-March 2011. I expect live hog prices to average close to $62/cwt ($82/cwt carcass) in the fourth quarter of 2011 and $64/cwt ($84/cwt carcass) in the first quarter of 2012. The futures market is more optimistic.