Second quarter 2009 ended with both pork production and hog and pork prices below year ago levels, a combination that strongly suggests lower product demand. In USDA's Livestock, Dairy and Poultry Outlook, the estimate for second quarter 2009 commercial pork production at 5.5 billion pounds, is about 1.7 percent below second quarter 2008.

Live equivalent prices of 51/52 percent lean hogs averaged $42.74 per hundredweight for the quarter, almost 19 percent below a year ago. USDA-estimated pork carcass cutout for second quarter 2009 — a proxy for wholesale value — averaged more than 22 percent below the same period in 2008. Lower hog and pork prices result during times of low hog supplies when packer and wholesale demand drop.

Lower pork production and lower prices are expected to persist through year's end. Both third and fourth quarter commercial pork production is expected to drop below year ago levels. The third-quarter production estimate at 5.47 billion pounds, falls almost 3 percent below a year ago. Fourth quarter production is expected to be 6 billion pounds, or almost 2 percent below last year.

Lower quarterly estimates for the second half of 2009 are a product of expected lower year-over-year hog slaughter, which in turn derives from reduced farrowings and Canadian imports. Higher estimates for average dressed weights, from lower expected feed costs, are expected to mitigate slightly the decline in slaughter numbers.

Soft product demand — both domestic and export — is reflected in USDA's estimated second half 2009 hog prices: third-quarter prices are expected to average between $44 and $46 per hundredweight, more than 21 percent below third-quarter 2008. Fourth-quarter prices are expected to average between $39 and $41 per hundredweight, almost 5 percent below last year.

For 2010, commercial pork production is estimated at 22.5 billion pounds, more than 1 percent below 2009. Hog prices next year are expected to average between $46 and $50 per hundredweight, almost 13 percent above prices this year.

Source: ERS/USDA – Livestock, Dairy & Poultry Outlook