By DOUG SCHMITZ
Iowa Correspondent

DES MOINES, Iowa — The USDA’s latest Quarterly Hogs & Pigs report showed the total U.S. herd at 64 million head, up 1 percent from last March, but down 1 percent from December 2010 – which was slightly higher than analysts forecast in pre-report estimates.

Released March 25, the first quarterly report of 2011 “contained no big surprises, although there were a couple of definite trends that may impact hog and pork markets in the weeks and months to come” said Steve Meyer, president of Paragon Economics, in a conference call sponsored by the pork checkoff. “The report is being viewed as slightly bearish for nearby futures contracts, and slightly bullish for deferred futures contracts in today’s trading.”
The USDA said the U.S. breeding inventory was at 5.79 million head, up slightly from last year and the previous quarter.

“The March swine breeding herd was 7.1 percent lower than at the last cycle peak in December 2007,” said Ron Plain, professor of agricultural economics and extension economist at the University of Missouri-Columbia. “For the last five quarters, the U.S. swine breeding herd has been within 12,000 head of 5.7 million.

“In 2010, the March breeding herd inventory was 90,000 head smaller than on December 1. This year it was 10,000 head larger. Thus, the USDA says the breeding herd grew by 100,000 head more this winter than last.”

The U.S. breeding herd was also up modestly compared to numbers from a year earlier, according to Chris Hurt, Purdue University extension agricultural economist. “This is the first time since March 2008 that the breeding herd increased. The herd has been in decline for the last three years, as producers were adjusting the herd due to high feed prices and large financial losses.”
The USDA also stated the market hog inventory was at 58.2 million head, up 1 percent from last year, but down 1 percent from last quarter.

“The report indicated that the market herd was up nearly 1 percent, primarily as a result of a somewhat larger-than-expected winter pig crop,” Hurt said. “This means pork production will likely be up somewhat over 1 percent in 2011.”
The December 2010-February 2011 pig crop, at 28 million head, was up 1 percent from 2010 but down 2 percent from 2009, the report said, with sows farrowing during this period totaling 2.86 million head – down 1 percent from 2010 and 5 percent from 2009.

U.S. sows farrowed during this quarter represented 49 percent of the breeding herd. Erica Rosa, agricultural economist at the Livestock Marketing Information Center in Lakewood, Colo., said “from our standpoint, although the intentions did come in lower, it’s not so much a concern when you look at pigs per litter.”
The USDA said average pigs saved per litter was a record high 9.8 for the December 2010-February 2011 period, compared to 9.61 last year. “Pigs saved per litter by size of operation ranged from 7.5 for operations with one to 99 hogs and pigs, to 9.9 for operations with more than 5,000 hogs and pigs,” the report read.

Moreover, U.S. hog producers intend to have 2.85 million sows farrow during this March-May quarter, down 3 percent from the actual farrowings during the same period in 2010, and 5 percent from 2009. Intended farrowings for June-August, at 2.87 million sows, will be down 3 percent from 2010 and 3 percent from 2009, the report stated.

“If producers follow through with these intentions, the size of the fall and winter pig crops will be smaller once again,” Hurt said, with producers reducing by 3 percent this spring and summer.

“North Carolina has seen the largest reduction of the breeding herd over the past three years, accounting for about 40 percent of the national reduction. In contrast, the combined states of Minnesota, Iowa (the nation’s top hog producer) and Missouri have accounted for only 24 percent of the decline.”
Meyer said his biggest concern is that the farrowing intention numbers in the report look far too low relative to the breeding herd. “At 97.4 percent of last year, both the spring and summer quarter intentions are significantly below analysts’ pre-report estimates and imply a definite slowdown in reproductive performance,” which, he added, “would mark a significant deviation from the upward trend line for litters/sow that dates back to the mid-1990s.”

The total number of hogs under contract owned by operations with more than 5,000 head, and raised by contractees, accounted for 46 percent of the total U.S. hog inventory, up from 44 percent last year, the USDA stated. Despite the slightly larger herd size, compared to a year ago, analysts said prices should stay high as well.

Daniel Bluntzer, director of research for Frontier Risk Management in Corpus Christi, Texas, said he expected an average year-over-year increase this year of about $84.70, up 12.5 percent from 2010. “It’s funny to say, but I can’t get my model to go as high as the futures are right now,” he said. “This market is really on fire, and it’s not a flash in the pan; the market just continues to improve and improve and improve.”

Altin Kalo, economist with Steiner Consulting in Manchester, N.H., told reporters pork prices in 2011 would average 52 percent higher than the five-year average. But, if hog prices move into the lower $70s as expected this spring and summer, Hurt said, “Then, pork producers will be able to pay above $7.50 a bushel for corn and still break even.”