October 20, 2011


US pork production relatively higher in 2012



Marginally larger hog inventories and farrowing indicated in the September Quarterly Hogs and Pigs report coupled with a continued pigs-per-litter rate staying above 10 has suggested a relatively higher US pork production in 2012, reports USDA's Economic Research Service.


The September 1 breeding herd was 0.6% higher than last year at that time. December to February 2012 farrowing intentions was 2.857million, up 0.46% from 2011 farrowings. September to November 2011 farrowing intentions was revised upward to 2.874 million, just slightly lower than 2010's level.


Third-quarter 2011 hog slaughter is expected to have been 27.4million heads, up 150,000 from last month's estimate, and average dressed weights likely were just over 200 pounds, resulting in a total of 5.5billion pounds of commercial product. There has been a much larger number of hogs coming to slaughter, and the slaughter weight hog inventory (180 pounds and heavier), up 3.4% on-year, is a reflection of that. Annual 2011 slaughter is expected to be just more than 110.6million heads, with 22.6 billion pounds of commercial pork production, 0.9% above the 2010 level.


Marginally larger breeding herd inventories and farrowing indicate industry is likely expanding. In light of a large pig crop in late 2011 and early 2012, 2012 hog slaughter was revised upward by 510,000 heads to 112.6million heads. Dressed weights in 2012 should, on average, be marginally larger than 2011 due to lower than expected feed costs in 2012.


In 2012, commercial pork production is forecast to be 23.1billion pounds, up 110million pounds from September's WASDE forecast. Although down from a record high in August of this year, 2011 third-quarter 51% to 52% lean hog prices averaged US$71.06 per cwt, an 18% increase over last year's third-quarter price and the highest average for that period.


Fourth-quarter hog prices are expected to average in the US$60 to US$62 per cwt range, with the 2011 annual price projected to average US$65.20. 2012 annual 51% to 52% lean hog prices are forecast to average US$62 to US$67, a slightly lower midpoint than 2011.


This year's hog prices were higher than in 2010 despite pork production being slightly larger. This was mostly due to higher input prices driving up the costs of production and more international consumers bidding on the product, exemplified by surging US pork exports this year.


The recent decline in hog-feed prices was largely due to the release of crop stock reports. The October WASDE indicated that estimated US ending corn and soybean stocks for 2011 and 2012 are higher than expected, thus relieving some price pressure on feed. Using WASDE price forecasts for corn, 48% soybean meal and National Base, live equivalent 51% to 52% lean hog prices indicate that hog producers' face positive feed margins in the fourth quarter of 2011 and during 2012.

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