An important optimistic note emerged from USDA's September Hogs and Pigs Report. As of Sept. 1, the breeding herd had been reduced nearly 3 percent from 2007 levels. But, don’t celebrate yet; it is just a start.

Pork producers need to pick up the reduction pace.  The breeding herd must be reduced and it must occur at a faster rate than has been demonstrated thus far, say agricultural economists. Several important indicators point to the need.

The current trouble posed by the U.S. financial fiasco could lead to a reduction in consumer demand at a time when record hog slaughter is occurring. Not a pleasant scenario. While exports have been the golden child of 2008, with year-to-date exports up a glorious 70 percent, don’t believe that foreign demand is invincible.

Several factors point to the prospect of export demand slowing. For one, the Olympics are over and China is working diligently to stabilize and restore its herd. Russia has threatened to reduce imports due to U.S. objections over Russia's incursion into Georgia. In addition, the idea of U.S. pork exports continuing to set records, especially after this year, is unrealistic, say analysts.

Even though a 3 percent breeding herd cut is a good start, the effect is mitigated by record high weaning rates, which will dilute the reduction. Also, the breeding herd cut applies to low-producing animals, and leaves behind the most productive sows. 

 “The number of pigs per litter will be nearly 2 percent higher in 2008 (over 2007) as extremely high feed prices have forced the industry to trim low-productive sows, and it's encouraged management practices to save more pigs,” says Chris Hurt, Extension economist, PurdueUniversity. So, the breeding herd reduction thus far will not cut supply by the same amount.

“We still need to cut back more,” says Glenn Grimes, agricultural economist, University of Missouri.

The U.S. breeding herd must be reduced more in order to help the industry return to profitability. “The U.S.breeding herd, at 6.049 million head, is now 172,000 head smaller than it was at its December 2007 peak,” says Steve Meyer, president, Paragon Economics. “Still, the herd must decline by another 180,000 to 230,000 sows to see prices high enough to cover higher feed costs over the next five years.”

Adding to the urgency is the projected high production cost for the rest of 2008 and 2009, as well as record-high energy costs predicted for this winter.