The Quarterly Hogs and Pigs report, issued by USDA on March 28, showed all hog inventories larger than a year ago. The inventory of all hogs and pigs was about 1 percent higher than March 1 of last year. The herd of breeding animals was up slightly—0.2 percent, or 14,000 animals—from a year ago. The report also showed that there were 2 percent more market hogs on farms as of March 1st compared with a year ago.

Taken as a whole, the March 1 inventories suggest that despite weak margins since last summer, the U.S. hog production industry is not reducing hog numbers. While producers reported lower farrowing intentions for the March-May quarter— down 1 percent from a year earlier—it is notable that these March-May intentions increased from those reported in December.

n the December Quarterly Hogs and Pigs report, producers indicated plans to farrow 2 percent fewer sows in the MarchMay quarter. Even so, slightly fewer farrowings in the first half of 2013 are likely to be offset by increasing litter rates in both the March-May period and the JuneAugust (third) quarter.

Growth in litter rates will offset slightly lower farrowings and translate into an increase in pork production this year of about 1 percent, despite slightly lower first-half average dressed weights.

Larger hog numbers and increased pork production come at a time when the prices of both hogs and wholesale pork have lagged year-ago levels almost since the beginning of 2013.

The increased pork supplies, coupled with weakness in foreign demand for U.S. pork products, would make for a grim outlook except for prospects of imminent relief from high feed costs. With feed costs comprising upwards of half of the costs of hog production, Christmas perhaps came early for hog producers—on March 28th—when USDA reported higher than expected corn stocks and prospective corn acreage of 97.3 million acres, up slightly from last year.

With realistic prospects of lower corn prices, hog producers appear to be looking past the currently grimsituation, toward a market environment where lower feed costs improve negative production margins and attractive wholesale pork prices spark both domestic and foreign pork demand.

Source: Livestock, Dairy and Poultry Report