The USDA's latest Livestock, Dairy and Poultry reports showed that estimates published in The Quarterly Hogs and Pigs report issued by USDA on December 23, suggest that there will be a small increase in the supply of slaughter-ready hogs in 2012. Such increases will likely be the product of modest farrowing increases and continued-strong gains in litter rates.

Unlike most recent sector expansions, expected hog production increases in 2012 appear set to depend less on expanded breeding inventory numbers, and more on increasing litter rates via genetic improvements, along with enhanced management and animal care technologies.

The quarterly report indicated that producers farrowed slightly more sows (+0.5 percent, year-over-year) in the fall quarter of 2011. Strong year-over-year gains in the litter rate however, yielded a pig crop almost 2 percent greater than the fall 2010 crop. A larger second-half 2011 pig crop (a 0.7 percent larger summer 2011 pig crop, and a 1.8 percent larger fall 2011 pig crop) points to a larger first-half 2012 hog slaughter.

The report also indicated that hog producers intend to farrow fractionally fewer sows (-0.1 percent) in the first half of 2012 compared with the same period a year ago. Again however, forecast year-over-year larger litter rates are expected to lift first-half pig crops—which are slaughtered in the second half of 2012—to almost 2 percent ahead of second-half 2011 pig crops.

Larger pig crops available for slaughter in 2012, about the same number of live swine imports from Canada, and slightly higher estimates for average dressed weights are together expected to result in total commercial pork production of 23.2 billion pounds in 2012, a year-over-year increase of almost 2 percent.

Prices of hogs and pork in 2012 are expected to reflect slightly larger hog supplies, in the face of expected-small production increases and stable exports. However, significantly higher prices for substitute animal proteins—beef in particular--are expected to provide some support for U.S. pork sector prices in 2012.

Prices of live 51-52 percent hogs are expected to average $63-$65 per cwt for the first quarter, $66-$70 per cwt in the second quarter, $66-$72 per cwt in the third quarter, $57-$61 per cwt in the fourth quarter and between $63-$67 per cwt for the year. Retail pork prices in 2012 are expected to average in the mid-to-low $3.50s per pound.