According to the USDA's Livestock, Dairy and Poultry report, the Quarterly Hogs and Pigs Report released by USDA on March 30th showed increases in both the breeding inventory, and the December-February 2012 litter rate, but slightly lower farrowing intentions for the second and third quarters of 2012, suggesting continued cautious sector optimism.

The report clocked the March 1 inventory of breeding animals at 5.82 million head, 0.55 percent greater than a year earlier, the fifth consecutive quarterly increase since March 2011. The modest size of the increase may suggest the extent to which expansion optimism in the sector continues to be tempered by risks surrounding feed costs and prices. The report also showed that breeding herd productivity continues to climb.

The litter rate for the December-February quarter was measured at 9.97 pigs-per-litter, an increase of 1.73 percent over the same period a year ago. Although a bit smaller than the 2011-2010 increase (1.98 percent), the steady string of consecutive litter rate increases since 2003 (see figure below) suggest that producer adoption of innovations in genetics and nutrition, together with enhanced management skills in animal care, can boost hog sector productivity.

Producers’ negative farrowing intentions for March-May (-0.93 percent) and for June-August (-1.61 percent) are likely another indication of the degree of uncertainty that currently characterizes the U.S. pork sector. Although the Hogs and Pigs producer surveys were made before release of USDA’s Prospective Planting Report—with prospects for lower 2012-2013 feed costs—considerable feed cost uncertainty remains. Also, with monthly cold stocks of pork through February averaging higher than a year ago, foreign demand for U.S. pork is a focus in 2012, particularly for a sector that in 2011 exported almost 23 percent of total U.S. commercial production. It is notable, however, that projected slightly lower March-May and June-August farrowings, if realized, are likely to be more than offset by continued gains in litter rates.

Based on the information provided by the March Quarterly Hogs and Pigs Report—with slightly higher Dec.-Feb. farrowings than were indicated by the second intentions reported in December and unchanged, lower second intentions for March-May 2012—USDA is forecasting a 2.1 percent increase in commercial pork production for the second half of 2012. Part of this change in expected production is premised on assumptions of the higher second-half dressed weights that forecast lower feed costs will likely bring about.

Total commercial pork production for 2012 is expected to be 23.3 billion pounds, an increase of 2.2 percent above 2011. Second-quarter average prices for live equivalent 51-52 percent lean hogs are expected to be $66-$68 per cwt, 2.6 percent below the same period last year. For 2012, prices are expected to average $62-$65 per cwt, 3.3 percent below 2011. February Exports to China Continue To Slow

U.S. pork exports were 455 million pounds in February, 17.5 percent larger than a year ago. In February, the three largest foreign destinations for U.S. pork were Japan (-0.24 percent), Mexico (+25.4 percent), and China (+128.4 percent). Shipments to China in February were almost 35 percent lower than last month, likely representing the gradual filling of Chinese orders placed late last year. Robust February exports to Mexico likely reflect an improving Mexican macroeconomy.

As a consequence of strong first-quarter export demand, USDA raised its first-quarter 2012 forecast to 1.325 billion pounds, an increase of 6.3 percent over the same period last year. Export forecasts for the second half of 2012 were also raised on expectations that U.S. pork prices, reflecting seasonally strong pork supplies, will draw foreign buying interest. For 2012, U.S. pork exports are expected to be 5.3 billion pounds, 2 percent larger than exports last year.