The following comments by Glenn Grimes and Ron Plain were recently issued as part of the weekly review of the U.S. hog industry for the week ended Oct. 6:

The September 1 Hogs and Pigs report came in above the average of the trade estimates. The total herd and market herd came in close to forecast, but the breeding herd was larger than estimated. The USDA inventory showed the total herd up 2.8 percent, the breeding herd up 1.1 percent and the market herd up 2.9 percent from Sept. 2006.

Fourth quarter slaughter is expected to be a record high, near 29.2 million head commercial slaughter with an estimated October kill of over 10 million head. If this occurs, which is highly likely, it will be the first month of record with over 10 million head slaughtered. With this level of slaughter and a stable demand, we expect 51-52 percent lean hogs live to average in the upper 30s to low 40s.

USDA showed the inventory of hogs weighing less than 60 pounds was up 2.9 percent on September 1. However, they also said the June-August pig crop was up 3.5 percent from a year ago. During June-August, feeder pig imports from Canada were up 72,000 head from a year earlier, implying the supply of under-60-pound pigs should have been up 3.8 percent.

We are leaning toward the pig crop estimate being the most accurate prediction of January-March slaughter. This would give a slaughter for this quarter up 3.6 percent and a price for 51-52 percent lean hogs live in the upper 30s to low 40s. Current data suggest the average cost producer will likely see substantial red ink in the next six months following one of the longest periods of profit of record.

One of the big questions about the current hog industry is how quick producers will react to red ink by reducing production. With the current structure of the hog industry, the response may be slow. If so and we do not get substantial demand growth in the next 2-3 years, red ink may flow for some time.

Hog prices continued under pressure last week with continued large slaughter. The top live prices Friday morning were steady to $2 per hundredweight lower than a week earlier. Weighted average negotiated carcass prices on Friday morning were 1.83 per hundredweight lower to $1.42 higher than seven days earlier.

The top live prices for select markets on Friday were: Peoria $35.50 per hundredweight, St. Paul $38 per hundredweight and interior Missouri $38.75 per hundredweight. The weighted average negotiated carcass prices Friday morning by area were: western Cornbelt $55.90 per hundredweight, eastern Cornbelt $52.14 per hundredweight, Iowa-Minnesota $55.71 per hundredweight and nation $53.02 per hundredweight.