September 1996 hogs and pigs total inventories were four percent lower than last year and two percent below 1994 levels. Not only was this good news but it had been expected. Market numbers were also four percent less (table 1) while breeding numbers were only three percent below last year. However, future production may not decline as rapidly as the decline in current numbers. This is based on our smaller decline in breeding livestock, rapidly increasing efficiency of pigs per litter, a higher proportion of total production by large units, pigs weaned at younger ages, increased utilization of records, larger/higher quality carcasses, AI, and, advances in nutrition, health and genetics.

    Table 1.  USDA Hogs And Pigs Inventory; U.S.; September 1996. 

                                                           '96 % chg from 
     Category                1996     1995     1994        1995    1994    
*** U.S. September 1:        (------ mil. head------) 
  All Hogs And Pigs          58.200   60.540   62.320       -4%      -7%
  Kept For Breeding           6.770    6.898    7.415       -2%      -9%
  Market                     51.430   53.642   54.905       -4%      -6%
      Under 60 Pound         19.330   20.235   20.790       -4%      -7%
      60-119 Pounds          12.800   13.532   13.960       -5%      -8%
      120-179 Pounds         10.600   10.985   11.170       -4%      -5%
      180 Pounds & +          8.700    8.890    8.985       -2%      -3%
*** 17 States September 1:      
  All Hogs And Pigs          53.700   55.920   57.370       -4%      -6%
  Kept For Breeding           6.120    6.390    6.845       -4%     -11%
  Market                     47.580   49.530   50.525       -4%      -6%
      Under 60 Pound         17.720   18.475   19.037       -4%      -7%
      60-119 Pounds          11.900   12.470   12.837       -5%      -7%
      120-179 Pounds          9.850   10.265   10.381       -4%      -5%
      180 Pounds & +          8.110    8.320    8.270       -3%      -2%
*** All Other States             
  All Hogs And Pigs           4.500    4.620    4.950       -3%      -9%
  Kept For Breeding           0.650    0.508    0.570      +28%     +14%
  Market                      3.850    4.112    4.380       -6%     -12%

An important note for those who track reports is that USDA adjusted downward several recent reports so some historical numbers are not consistent. This means the industry had been operating with the assumption there were more hogs than actual slaughter data. Another significant data change is the market hog futures contract. Starting in FEB '97, the industry is changing from a "live hog" to a "lean hog" contract. The lean hog is much like the live hog one (40,000 lbs.) except it has 170-191 pound dressed hogs; 51-52% lean; .80-.99 inches of last rib backfat; and, the price is cash-settled to an index.

The September intentions/sows farrowing are reported in table 2. The JUN-AUG sows farrowing (those producing the most recent quarterly pig crop) were 7 percent less than the same period last year; on the other hand, the pig crop was 5 percent lower because of more pigs per litter. The SEP-NOV second intentions moved from -1 percent in the June Report to no change in September but the actual number of sows farrowing for SEP-NOV 1995 were very low -- just above 2.8 million head. There was also good news for first intentions for DEC-FEB 1996-97 as a -6 percent is expected. Generally, the trend for future production through the middle of next year is for reduction.

Table 2.  USDA U.S. Hogs and Pigs Report Farrowings and Intentions;
          1996 Reports, 1996-97 Intentions.
    ----------------------------------------------------------------
                                     Report Month              
     Quarter    Year     September    June        March     December 
    MAY-JUN      1996                  -6%        +1% 2/     +4% 1/
    JUN-AUG      1996       -7%        -4% 2/     +1% 1/
    SEP-NOV      1996        0% 2/     -1% 1/
    DEC-FEB    1996-97      -6% 1/
    -----------------------------------------------------------------
    PIG CROP
    JUN-AUG    23,650       -5%
    PIGS/LITTER
    JUN-AUG      8.57       +3%
    -----------------------------------------------------------------
   1/ First Intentions;  2/ Second Intentions

Based on these intentions, we can expect a continuation of tighter supplies, better prices and possibly better financial times ahead. However, much still depends on feed costs and competing meats.

Feed prices are a major decision and uncertainity for swine producers. After an extended period of high corn/SBOM costs, SEP corn prices were significantly lower. The issue is whether these prices will go lower or not; this means the important task for producers is to calculate their costs/returns, alternatives if (or rather when) feed costs change, and determine the risk they can/cannot afford. Producers must consider forward pricing -- the amount and timing is tough but best done by the producer himself and based on the best current calculations.

Another important factor that is impacting the industry is the demand side. Pork retail prices are significantly higher (average retail of $2.31, AUG '96 vs. $1.97, year ago) while consumer takings have remained fairly strong. However, there will likely be trouble if prices stay this high as there are large supplies of competing meats and these will continue into next year. For 1997, pork is projected at even to 1 percent larger; poultry is expected to be 5-6 percent larger, beef forecast to have a 1-2 percent increase, and turkey production up by 1-2 percent; this means that the total offerings of red meat and poultry will be some 3-4 percent larger. Unless exports are stronger this next year, the domestic market could have problems maintaining current prices.

Based on this Report, pork production is declining. The longevity of these reductions depend on profits and especially feed costs. In turn, much of the future feed price projections are based on grain producers responding to the 1996 higher prices, corn/crop program changes, and the possibility of producing a larger crop next year. It is now projected that South Carolina cash hog prices should generally remain above the $50 level for most of 1997. This means that prices may be close to the low-to-mid $50's in the first quarter, slipping closer to $50 in the second quarter, and well into the mid $50's range in the third quarter of 1997. If there are profits in the industry for the first part of 1997, last quarter prices could start to turn downward.