“A lot of us are breathing a sigh of relief after this report,” says Chris Hurt, Purdue University agricultural economist. “The industry will probably still suffer some loses in the fourth quarter, but not nearly as badly as we had feared.”

This relief was a pleasant surprise, after many industry analysts had predicted a price plunge in the fourth quarter reminiscent of the 1998 plunge that saw prices drop to under $10 per hundredweight.

In USDA’s September Hogs and Pigs Report, the total hog inventories came in at 60.2 million hogs, which was up only 1 percent above last year’s levels. The breeding herd was down 2 percent from September 2001 and the market hog inventory was 1 percent above last year. The June-August 2002 pig crop was 2 percent less than both 2001 and 2000.

Sow slaughter remained high and farrowing intentions for the immediate future are down, indicating producers have responded to the threat of a market crash by liquidating the breeding herd. If this report is correct, liquidations and marketings pulled forward appear to be enough to have avoided a 1998-level price crash. Most analysts now feel that the quarterly average for live hogs will be in the low-$30 per-hundredweight range for the fourth quarter.

Hurt says the 180-pound inventories match the September slaughter numbers closely, which is a good sign as to the accuracy of this report. Last week’s smaller slaughter levels gave analysts more confidence in the accuracy of the report, but the next couple weeks of slaughter will tell just how accurate the September report is.

“This is remarkable news,” says Ron Plain, University of Missouri agricultural economist. “If this report holds true, August and September have probably been the two lowest months of the year for prices. I’m not sure that’s ever happened before.”

Hurt and Plain gave their price forecasts for next year or so. Here are those projections:

Qtr Plain Hurt
4Q ’02 $32 N/A
1Q ’03 $36 $36-$38
2Q ’03 $42 $40+
3Q ’03 $40 $40-42
4Q ’03 $37 N/A