The hog inventory numbers within USDA's June Hogs & Pigs Report were higher in nearly every category than the trade was expecting, which means the markets will likely respond by heading south on Monday. (See U.S. Hog Inventory up 6 Percent)

"There are a lot of hogs out there; a lot of hog slaughter yet to come this year," says Ron Plain, University of Missouri agricultural economist. "It will be a drag on prices." 

The weight categories were all 1 percent to 2 percent higher than the pre-report estimates, notes Steve Meyer, president of Paragon Economics. Most stunning was a 2 percent gain in the number of pigs saved per litter for the March/May pig crop. At a 9.38-pig average, it was the largest year-over-year increase since 1978.

This gain reflects the industry's structure, it's overall production efficiencies, technology adoption and the effectiveness of the porcine circovirus vaccines, say analysts. 

That pig crop, which totaled 29 million head, will mean that third- and fourth-quarter slaughter also will be higher than  previously expected-- to the tune of 4 percent higher, notes Darrell Mark, University of Nebraska Extension livestock marketing specialist.

"We're looking at slaughtering a record 118 million hogs this year," notes Plain. "That's up 8 percent from last year's record level." He points out that the packing capacity will be tested this fall. "We'll be setting a bunch of records this fall, including daily slaughter levels."

He offers his price projections, but adds that they are based on the fact that slaughter capacity will be sufficient to handle the daily load. He points out that price volatility will be wider than in the past. His projections are based on the Iowa/Southern Minnesota carcass price.

2008:
(price per hundredweight)
3rd quarter - $66
4th quarter - $55

2009:
1st quarter - $58
2nd quarter - $75
3rd quarter - $71
4th quarter - $60