December’s USDA Quarterly Hogs and Pigs report released Friday indicates higher risk levels await U.S. producers in 2013.

Expected reductions in the U.S. swine herd due to record 2012 feed prices have not materialized, according to industry analysts following release of the report. The report   indicated the nation’s breeding herd at 5.817 million head was up 0.2 percent from a year ago. The average pre-report estimate on the breeding herd was for a reduction of 0.7 percent.  

The report shed new light on hog slaughter levels expected in 2013. “It appears that the pig crop through 2013 could reach record highs,” according to Bob Brown, independent meat market consultant, Edmond, Okla.

In addition to stronger than expected animal numbers, sow productivity is continuing to rise. The report showed a record 10.15 pigs saved per litter, up 0.8 percent- a larger increase than predicted by pre-report estimates. “Large production units that dominate the U.S. pork industry are constantly turning over their breeding herds, bringing in new genetics. It’s just one thing they all have to do to stay in business,” Brown said. “The productivity train just keeps on running.”

First quarter 2013 hog slaughter levels will be about as expected, according to Kevin Bost, president, Procurement Strategies, Inc., Des Plaines, Ill. “Beyond that, there will be a bigger increase than the market has priced in.” Bost sees no reduction in Q2 through Q4 2013 slaughter numbers from those registered in 2012. “That is not what the market has been expecting up to now.”

The analysts speculated on the reasons pork producers have not reduced hog numbers in the face of high feed prices. “An increasing number of producers have been actively managing risks and margins and have been able to avoid the losses indicated by cash markets,” said Steve Meyer, president, Paragon Economics. “Producers came into this summer and fall in better financial shape than many of us expected.”

U.S. pork producers are betting on a significant improvement in the 2013 growing season and the moisture levels needed for driving much better yields than experienced in 2012. “There are huge risks being taken by producers currently,” Meyer said. “From my perspective, and from what I see in the industry, everything is on the line.”

Brown and Bost provided their predictions for 2013 hog prices (CME lean hog price per hundredweight):

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The press conference was sponsored by the National Pork Board’s Pork Checkoff.