By DOUG SCHMITZ
Iowa Correspondent

DES MOINES, Iowa — The lower U.S. hog and pig numbers shown in the USDA’s final quarterly report of 2010 are indicating the nation’s pork producers are backing off expanding their operations, with feed prices driving tighter profit margins going forward, according to leading agricultural market analysts.
“We are seeing quite a bit of restraint, which is good,” said Karl Skold of Westside Economics in Omaha, Neb., who participated in a Dec. 27 teleconference with reporters, along with fellow panelists John Nalivka of Sterling Marketing in Vale, Ore. and Joe Kerns of the International Agribusiness Group in Ames, Iowa.

Sponsored by the Pork Checkoff in Des Moines, the USDA’s December Quarterly Hogs & Pigs Report showed the hogs and pigs inventory on Dec. 1 totaled 64.3 million head, down 1 percent from December 2009 and down 2 percent from Sept. 1, 2010; and the September-November 2010 pig crop, at 28.2 million head, was down slightly from 2009.

“When you compare producers’ margins now versus a year ago, the difference is night and day,” Nalivka said. “Producer margins will average $22 to $23 per head for 2010. Contrast this with 2009, when producers lost $16 per head, on average, for the year.”

The USDA report showed that the current breeding inventory, at 5.78 million head, was down 1 percent from last year but up slightly from the previous quarter.
Moreover, U.S. hog producers intend to have 2.86 million sows farrow during the December 2010 to February 2011 quarter, down 1 percent from farrowings during the December 2009 to February 2010 quarter, and down 5 percent from December 2008 to February 2009 quarter.

The report said intended farrowings for March to May 2011, at 2.86 million sows, are down 2 percent from 2010 and down 5 percent from 2009.
While the December 2010 report was neutral to slightly positive, based on farrowing intentions, higher feed costs will likely impact pork producers’ profitability, Skold said corn futures surpassed the $6 mark in late 2010.
But Navilka said producers “are not going to expand into these higher grain prices, and lose all the equity they’ve built this past year.”

The report also said the average pigs saved per litter was a record high 9.89 for the September-November 2010 period, compared to 9.70 last year, according to the report. U.S. pigs saved per litter by size of operation ranged from 7.70 for operations with 1 to 99 hogs and pigs to 10.00 for operations with more than 5,000 hogs and pigs.

Iowa still ranks first in pork

According to the report, Iowa still remains the nation’s top hog-producing state with 18.9 million hogs as of Dec. 1, compared with 19 million in December 2009, which was down about 500,000 from Sept. 1 and 100,000 from September 2009.

Annually, Iowa’s 8,300 hog operations generate $5 billion in cash directly from sales and steadily supply the state’s packing and meat processing plants.
The report said Iowa had 4.77 million pigs from September through November, with a total of 475,000 sows farrowed with an average litter size of 10.05 pigs per sow – the highest average litter size ever recorded in the state.
As of Dec. 1, Iowa pork producers planned to farrow 460,000 head of sows and gilts in the December 2010 to February 2011 quarter. The state’s farrowing intentions for the March-May 2011 period were estimated at 470,000 as of Dec. 1, 2010.

In addition, Iowa’s hog inventories continued to increase steadily from 12.4 million in 1997, mainly due to the growth of hog confinements for contract production, which drew about 70 percent of Iowa hog sales.

As the second-largest hog producer, North Carolina’s hog numbers plummeted from 9.6 million in 2009 to 8.8 million on Dec. 1.

The report added that the total number of hogs under contract in the U.S. – owned by operations with more than 5,000 head, but raised by contract growers – accounted for 45 percent of the total U.S. hog inventory, up from 44 percent last year.

Feed costs expected to stay high

For 2011, Kerns said risk management must start with the grain side.
“Someone has to scream ‘Uncle’ in this corn-demand situation, and right now, I don’t see where this will be,” he said.

Nalivka said U.S. pork producers also need to watch the export market, which he projected a $78-per-head average hog price for 2011, based on western Corn Belt figures.

“We don’t want to reduce U.S. production too much,” he said, “because we don’t want to lose our share of global exports.”

As far as the price trends heading into 2011, Skold said futures are showing fairly strong demand and “we have a lot priced in going forward.”

“[But] because of a tight feed situation – we have all next spring to go through – don’t expect much easing of feed costs,” he said. “It’ll be a lot tougher margin situation going into next year.”