The September Quarterly Hogs and Pigs report shows marginally larger hog inventories and farrowings, and a continued pigs-per-litter rate remaining above 10 indicates there will be slightly more pork production in 2012. The September 1 breeding herd was 0.6 percent higher than last year at that time. The USDA's latest Livestock, Dairy and Poultry report showed that December to February 2012 farrowing intentions were 2.857 million, up 0.46 percent
from 2011 farrowings. September-November 2011 farrowing intentions were revised upward to 2.874 million, just slightly lower than 2010’s level.

Third-quarter 2011 hog slaughter is expected to have been 27.4 million head, up 150,000 from last month’s estimate, and average dressed weights likely were just over 200 pounds, resulting in a total of 5.5 billion pounds of commercial product.

There has been a much larger number of hogs coming to slaughter, and the slaughter weight hog inventory (180 lbs and heavier), up 3.4 percent year-over-year, is a reflection of that. Annual 2011 slaughter is expected to be just over 110.6 million head, with 22.6 billion pounds of commercial pork production, 0.9 percent above the 2010 level.

Marginally larger breeding herd inventories and farrowings indicate that the industry is likely expanding. In light of a large pig crop in late 2011 and early 2012, 2012 hog slaughter was revised upward by 510,000 head to 112.6 million head. Dressed weights in 2012 should, on average, be marginally larger than 2011 due to lower than expected feed costs in 2012. Commercial pork production in 2012 is forecast to be 23.1 billion pounds, up 110 million pounds from last month’s WASDE forecast.

Although down from a record high in August of this year, 2011 third-quarter 51-52 percent lean hog prices averaged $71.06 per cwt, an 18-percent increase over last year’s third-quarter price and the highest average for that period. Fourth-quarter hog prices are expected to average in the $60-$62 per cwt range, with the 2011 annual price projected to average $65.20. 2012 annual 51-52 percent lean hog prices are forecast to average $62-$67, a slightly lower midpoint than 2011.

Interestingly, 2011 hog prices were higher than in 2010 despite pork production being slightly larger. This was mostly due to higher input prices driving up the costs of production and more international consumers bidding on the product, exemplified by surging U.S. pork exports this year. The recent decline in hog feed prices was largely due to the release of crop stock reports.

The October WASDE indicated that estimated United States ending corn and soybean stocks for 2011 and 2012 are higher than expected, thus relieving some price pressure on feed. Using WASDE price forecasts for corn, 48-percent soybean meal and National Base, live equivalent 51-52% lean hog prices indicate that hog producers’ face positive feed margins in the fourth quarter of 2011 and during 2012. The quality and quantity of the 2011 corn and soybean crops will play a large role in feed prices.