USDA's March hogs and pigs report said both the market hog inventory and the breeding herd inventory were slightly larger than pre-release trade forecasts. USDA said the market inventory was up 2.0% and kept for breeding was up 0.6%. USDA's estimate of the total number of hogs and pigs on U.S. farms at the start of March was 1.9% larger than 12 months earlier. (See Table 1 below) The average of the pre-release trade estimates was for a 1.8% increase in the market hog inventory, a 1.7% increase in the total inventory, and a 0.3% increase in the swine breeding herd.

USDA made some upward revisions to past inventory estimates to bring them more in line with winter hog slaughter. USDA raised their previous estimate of the September market hog inventory by 490,000 head (0.8%), raised their December market hog inventory estimate by 430,000 head (0.7%), increased the reported number of sows farrowed during June-August 2011 by 27,000 (0.9%) and increased the June-August pig crop by 271,000 head (0.9%).

The March swine breeding herd is 17,000 head larger than on December 1 and the largest since December 2009. In 2011, the March breeding herd inventory was 10,000 head larger than on December 1. Thus, USDA says the breeding herd grew by 7,000 head this winter compared to last. December-February sow slaughter was up by 17,000 head compared to a year ago. Imports of Canadian sows for slaughter was up by 2,300, leaving 14,700 more U.S. sows slaughtered this winter than last. The USDA data implies 21,700 more gilts were added to the breeding herd this winter than last. This is more than indicated by our gilt slaughter data.

USDA said winter (December-February) farrowings were up 1.2%. They forecast spring farrowings to be down 0.9% and summer farrowings to be down 1.6% compared to 12 months earlier. (See Table 3) Winter farrowings were 0.5% greater than trade expectations. USDA's forecast of spring farrowings is 1.1% lower than expected and summer farrowing intentions are 1.9% below the trade forecast. USDA says the breeding herd is up 0.6%, but the number of litters to be farrowed in the next six months will be down 1.3%. History shows farrowing intentions to be a better predictor of future hog slaughter than is the breeding herd inventory.

The number of pigs per litter during December-February, 9.97 head, was up 1.7% from a year ago. The trade was expecting a 1.7% increase. Winter farrowings were up 1.2% and with 1.7% more pigs per litter, the winter pig crop was up 2.9%.

USDA's survey indicated the number of market hogs weighing 180 pounds or more on March 1 was up 0.8% compared with 12 months earlier. (See Table 2) It looks like daily barrow and gilt slaughter in March was up 0.8%. The 120-179 pound market hog group was up 1.7% from March 2011. The 50-179 pound inventory was up 2.5%; and the inventory of pigs weighing less than 50 pounds also was up 2.5% compared to a year earlier.

Live animal imports from Canada during the December-February quarter showed feeder pigs up 2.5% and slaughter hog imports down 11.3% despite a 2.1% increase in imports of sows for slaughter. Imports of Canadian hogs and pigs for 2011 totaled 5.8 million head. Look for 2012 imports to be close to that same level.

Based on the 50-179 pound market hog inventory and the expectation of little change in live hog imports, our forecast is for an increase of 2.1% in second quarter 2012 daily hog slaughter. With this level of pork production, we expect 51-52% lean hogs to average close to $66 live and Iowa-Minnesota negotiated sales to average close to $88/cwt on a carcass weight basis.

For the third quarter of 2012 we expect hog slaughter to be up 2.5% on a daily basis with 51-52% lean hogs averaging close to $67 live and Iowa hogs averaging around $90/cwt on a carcass basis.

With the number of litters farrowed expected to be down 0.9% this spring and pigs per litter increasing by 1.6% or so, the spring pig crop is likely to be 0.7% above a year earlier. We are forecasting fourth quarter 2012 daily slaughter to be up 0.8% compared to a year ago. Look for carcass prices of barrows and gilts to average in the low $80s/cwt. Slaughter weights are likely to average 0.5% higher.

The forecast 1.6% decrease in summer farrowings should be offset by an increase in litter size to yield a summer pig crop even with a year-earlier causing first quarter 2013 hog slaughter to be unchanged on a daily basis.

Our estimates of slaughter and prices for the next four quarters are in Table 4. We expect 2012 pork production to be 2.4% higher than in 2011 and hog prices to be $2/cwt or so lower than last year.

Table 1.  Hog Inventories March 1, U.S.
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                                           2012 as % of 2011
       All hogs and pigs                         101.9
       Kept for breeding                         100.6
       Market hogs                               102.0
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Table 2.  Market Hogs on Farms March 1, U.S.
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     Weight Category                       2012 as % of 2011
        Under 50 pounds                          102.5
        50 - 119 pounds                          102.5
        120 - 179 pounds                         101.7
        180 pounds and over                      100.8
     Pig Crop
        December-February                        102.9

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Table 3.  Sows Farrowed and Farrowing Intentions, U.S.
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                                           2011 as % of 2010
     December-February                            99.0
     March-May 2011                               99.6
     June-August 2011                             99.4
     September-November 2011                     100.5
                                           2012 as % of 2011
     December-February                           101.2
     March-May 2012                               99.1
     June-August 2012                             98.4

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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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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       27.630   - 3.1%       $50.41       $66.81         $68.32
     2       26.074   - 3.7         59.60        79.04          79.42
     3       26.930   - 5.3         60.13        79.44          80.70
     4       29.626   + 0.1         50.11        65.20          69.26
     Year   110.260   - 3.0         55.06        72.67          74.47

2011 1       27.484   - 0.5        $59.94       $79.28         $80.63
     2       26.113   + 0.2         68.80        91.80          92.39
     3       27.373   + 1.6         71.06        94.03          95.74
     4       29.892   + 0.9         65.10        85.03          87.39
     Year   110.862   + 0.5         66.23        87.54          89.04

2012 1*      28.101   + 2.2        $63.40       $84.80         $86.62
     2**     26.650   + 2.1        64 - 68      86 - 90        88 - 92
     3**     27.620   + 0.9        65 - 69      87 - 91        89 - 93
     4**     30.610   + 2.4        60 - 64      79 - 83        81 - 85
     Year** 112.981   + 1.9        63 - 66      84 - 87        86 - 89

2013 1**     28.100   + 0.0       $61 - 65     $81 - 85       $83 - 87

 *estimated
 **forecast
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