Swine Economics Report

USDA's latest survey of the U.S. swine herd had no big surprises. As expected, both the breeding herd and the market hog inventory are smaller than a year ago. The market herd was down 2.1% on December 1 and the breeding herd was down 2.4% compared to 12 months earlier. The total inventory of hogs and pigs is down 2.2% from last year. These numbers are reasonably close to the average of trade forecasts.

USDA made several changes in their previous hog inventory estimates. They raised the estimated size of the breeding herd by 12,000 head (roughly 2%) for each of the previous 4 quarters. The June 1 market hog inventory was decreased by 322,000 head (0.5%) and the September market herd inventory was decreased by 472,000 head (0.75%).

USDA said September-November farrowings were down 6.0% and forecast December-February farrowings to be down 3.3% and March-May farrowings to be down 1.6%.

Pigs per litter in the September-November quarter averaged 9.5 head, up 2.4% compared to a year earlier and the 21st consecutive quarter above year-ago levels. Weaning more pigs per litter is offsetting the decline in litters farrowed.

USDA said the inventory of market hogs weighing 120-179 pounds was up 0.5% on December 1 and the inventory of market hogs weighing 60-119 pounds was down 0.5%. If these numbers are correct, any significant change in daily hog slaughter during the first quarter will depend primarily on the number of slaughter hogs imported from Canada, which has been trending lower. Look for daily hog slaughter during January-March to average 2% lower than last year and carcass hog prices to average in the mid $50s.

USDA said the inventory of market hogs weighing less than 60 pounds was down 5.5% on December 1, implying hog slaughter during the second quarter of 2009 will be down more than 6% with fewer Canadian hogs. I expect second quarter carcass hog prices to average in the upper $60s.

I expect 2009 hog slaughter will be down about 3% and carcass hog prices in 2009 will average close to $65/cwt. Unfortunately, the cost of production could average close to $72/cwt on a carcass basis, resulting in a loss of $7/cwt or roughly $14 per head.

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