The USDA's latest Livestock, Dairy and Poultry report on inventories of market hogs and breeding animals shows both categories were one percent higher than a year ago as of June 1. The June 1 breeding herd increase represents the sixth consecutive quarterly increase since the current expansion began on March 1, 2011. It is likely, however, that reduced prospects for U.S. corn production in the 2012-2013 crop year, with accompanying expectations for significantly higher corn prices, will temper additions to the breeding inventory this year and into at least the first half of 2013.

The report showed a March-May litter rate of 10.09 pigs per litter (ppl), 0.6 percent higher than a year ago. While the year-over-year increase for the spring quarter is less than in previous years, it is likely that 2012 will finish with an average litter rate of 10+ pigs per litter. The smaller increase for March-May could be attributable to both harsh weather and disease incidence. But it is also possible that 10+ ppl has finally become the norm in the U.S. industry and that the 2 percent—or more—year-over-year increases often seen earlier in the last decade will become less frequent. Further gains are more likely to come about as a result of enhanced stocks of the human capital (i.e., labor and management) engaged in day-to-day hands-on operation of U.S. hog barns than from genetic improvements alone.

With lower second-half farrowing intentions indicated in the June report, total farrowings in 2012 will likely be slightly lower than in 2011. Higher litter rates and average dressed weights—2012 dressed weights are expected to average about a pound more than in 2011—are expected to more than offset lower farrowings, yielding a 2012 commercial pork production of 23.3 billion pounds, almost 2.4 percent higher than last year. Next year, expectations for slightly higher farrowings and litter rates, together with only a small increase in estimated average dressed weights (given higher expected feed costs) are expected to result in 2013 commercial pork production of 23.7 billion pounds, about 1.6 percent more than this year.

Prices for live equivalent 51-52 percent lean hogs are expected to be $62-$64 per cwt for third-quarter 2012, more than 11 percent below prices in the same period last year. For fourth-quarter 2012, hog prices are expected to be $55-$59 per cwt, almost 12 percent below a year ago. When making the comparison between hog prices in the second half of 2012 and 2011, bear in mind that that second-half prices last year were exceptionally high due to very strong Chinese demand for U.S. pork, resulting from lower Chinese pork production. Hog prices in 2013 are expected to average $58-$62 per cwt, about 1percent below the annual average price for 2012.