The USDA quarterly Hogs and Pigs report showed little growth in US hog numbers but no decline in the breeding herd size, contrary to expectations. Key metrics like the market herd size and farrowings were also larger than expected. This suggests fears of a shortage in pork production and bacon in 2013 are overblown. Globex and floor trading hours for CME Group will close early on December 31 and be closed on January 1 for New Year's Day.

1. Vol. 10, No. 251 December 31, 2012
All of us at CME Group, Paragon Eco-
nomics and Steiner Consulting Group
wish you a Happy, Healthy and
Prosperous 2013!
New Year’s Day holiday hours for CME Globex and Trad- USDA QUARTERLY HOGS & PIGS REPORT
ing Floors are as follows: December 28, 2012
 Globex trading for CBOT, KCBT and MGEX grain products and '12 as Pre-
CME livestock and dairy products will close as normal today, De- Actual -
2011 2012 Pct of Report
Category Est
cember 31 and will be closed all day tomorrow, New Year’s Day. '11 Est's
 Livestock and dairy products will reopen at 9:05 a.m. on Wednes- Inventories on Dec 1*
day. Grain products will reopen at 9:30 a.m., CST on Wednesday. All hogs and pigs 66,361 66,348 100.0 99.1 0.9
 All CME Group trading floors close at 12:00 p.m. today and will be Kept for breeding 5,803 5,817 100.2 99.3 0.9
closed Tuesday, January 1. They will reopen at normal times on Kept for market 60,558 60,531 100.0 99.1 0.9
Wednesday, January 2. Under 50 lbs. 19,524 19,448 99.6 98.4 1.2
About those dire predictions of massive liquidation of 50-119 lbs. 16,643 16,643 100.0 99.0 1.0
breeding animals by U.S. pork producers: “Ahem — never mind!” 120-179 lbs. 12,473 12,479 100.0 99.6 0.4
Friday’s quarterly Hogs and Pigs Report from USDA certainly showed 180 lbs. and over 11,918 11,961 100.4 100.5 -0.1
little growth in U.S. hog numbers but the big news was that is showed Farrowings**
no decline . Further, virtually every number in the report was larger Sep-Nov sows farrowed 2,929 2,900 99.0 97.9 1.1
than what the analysts surveyed by DowJones expected. Not dramati- Dec-Feb Intentions 2,864 2,865 100.0 98.4 1.6
cally larger but larger none the less in the face of very bad economic Mar-May Intentions 2,982 2,925 98.1 98.8 -0.7
conditions this year and a still -negative outlook for next year. It was Sep-Nov Pig Crop1* 29,365 29,443 100.3 99.0 1.3
enough to prompt one of our analyst colleagues to comment “These Sep-Nov Pigs Saved/ litter 10.02 10.15 101.3 100.8 0.5
guys are fearless!” We would argue with that a bit as we think there is *Thousand head **Thousand litters
plenty of fear out there among hog producers. Our judgment is that apples comparison says that slaughter this year is virtually the
these guys are courageous — overcoming their fear to do what they same as one year ago, meaning the 180+ inventory of 100.4% is
believe is right and good and necessary in the long run. We know there close enough to not cast doubt on this report’s accuracy.
is a pretty fine line between courage and foolishness but, for many rea-
sons discussed in these pages on several occasions, we do not think
 Sep-Nov farrowings were estimated to be 2.9 million litters, 1%
hog producers have crossed that line. But make no mistake—They are smaller than last year but more than a percent larger than ex-
“All in” in this situation — perhaps more so than they have ever been pected. The number is also 50,000 litters larger than the Sep-Nov
“All in.” Some highlights of Friday’s report are: expectations were in the September 1 report.
 The breeding herd did not decline — as so many (including us)  Dec-Feb intentions of 2.865 million litters are equal to last year but
have been expecting and some are insisting is happening in spite 1.6% larger than expected and 44,000 litters larger than the Dec-
of ample actual data that say otherwise. The Dec 1 inventory of Feb expectations in the September report.
5.817 million breeding animals was 0.2% larger than one year ago.  In its first estimate for the quarter, USDA expects Mar-May farrow-
That doesn’t suggest blind optimism by any stretch but is it almost ings to be lower than one year ago and the –1.9% is actually a
a full percent larger than what analysts expected and is 29,000 bigger decline than was expected, on average, by analysts.
head LARGER THAN THE SEPTEMBER 1 herd.  USDA made a HUGE revision to the Mar-May 2012 pig crop, add-
 The December 1 market herd of 59.117 million head is the second ing 636,000 head to, we presume, rectify the difference between its
largest Dec herd ever and was also nearly a full percent larger than September 1 estimate and fall slaughter. The new estimate of
the average pre-report estimate. The only weight classes that were 30.077 million head is the first ever above 30 million. Put that fig-
very close to expected sizes were the 120-179 pound and 180- ure with 1.9% fewer Mar-May 2013 litters that are 1 to 2% larger
pound and over groups. As we pointed out last week, comparing and you will get fall 2013 slaughter that is likely little, if any, smaller
slaughter this December to that of last year is a bit tricky due to the than this year’s numbers.
way Christmas fell in 2011 but our best effort to make an apples-to- Conclusion: Fear of a bacon shortage in 2013 are way overblown.
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2. Vol. 10, No. 251 December 31, 2012
PRODUCTION AND PRICE SUMMARY Week Ending 12/29/2012
Current Pct. Pct. Pct.
Item Units Week Last Week Change Last Year Change YTD Change
Total Meat & Poultry Prod. Million lbs. 1492.9 1766.0 -15.47% 1490.9 0.13% 87,707 -0.20%
C FI Slaughter Thou. Head 476 633 -24.80% 540 -11.88% 32,338 -3.59%
A FI Cow Slaughter Thou. Head 141.9 147.4 -3.72% 142.8 -0.60% 6,192 -4.24%
T Avg. Live Weight Lbs. 1329 1329 0.00% 1306 1.76% 1,305 1.94%
T Avg. Dressed Weight Lbs. 798 798 0.00% 781 2.18% 790 2.22%
L Beef Production Million Lbs. 379.1 504.1 -24.80% 420.9 -9.93% 25,500 -1.34%
E Live Fed Steer $/cwt live wt. 127.06 126.18 0.70% 121.70 4.40%
Dressed Steer $/cwt carcass 200.00 200.60 -0.30% 200.16 -0.08%
& OKC Feeder Steer 600-700 Lbs. #N/A 148.78 #N/A #N/A
Beef Cutout 600-750 Choice 194.00 193.50 0.26% 193.78 0.11%
B Hide/Offal $/cwt live wt. 13.24 13.23 0.08% 12.35 7.21%
E Rib Choice 281.33 306.17 -8.11% 283.89 -0.90%
E Round Choice 173.17 166.97 3.71% 179.76 -3.67%
F Chuck Choice 161.94 156.42 3.53% 164.73 -1.69%
Trimmings, 50% Fresh 72.92 73.34 -0.57% 98.97 -26.32%
Trimmings, 90% Fresh 206.96 206.78 0.09% 197.50 4.79%
H FI Slaughter Thou. Head 1755 2340 -25.00% 1962 -10.53% 111,873 1.74%
O FI Sow Slaughter Thou. Head 65.1 65.5 -0.67% 64.7 0.59% 2,906 -0.70%
G Avg. Dressed Weight Lbs. 207 207 0.00% 209 -0.96% 206 0.08%
S Pork Production Million Lbs. 363.2 485.6 -25.21% 409.3 -11.26% 23,012 1.82%
Iowa-S. Minn. Direct Avg. 81.43 81.36 0.10% 78.59 3.60%
& Natl. Base Carcass Price Weighted Avg. NQ 80.29 NA 80.21 NA
Natl. Net Carcass Price Weighted Avg. NQ 82.64 NA 82.43 NA
P Pork Cutout 200 Lbs 81.86 82.80 -1.10% 85.88 -4.70%
O Hams Primal Cutout 62.20 64.61 -3.70% 70.21 -11.40%
R Loins Primal Cutout 86.47 87.04 -0.70% 94.28 -8.30%
K Bellies Primal Cutout 125.11 125.14 0.00% 108.30 15.50%
C Young Chicken Slaughter* Million Head 155.55 152.38 2.08% 136.57 13.90% 7,759 -2.52%
H Avg. Weight Lbs., RTC 4.20 4.34 -3.26% 4.19 0.36% 4.3 0.43%
I Broiler Production Million Lbs., RTC 653.6 661.8 -1.25% 571.8 14.31% 33,671 -1.10%
C Eggs Set Million 195.9 195.1 0.42% 195.4 0.27% 9,898 -2.16%
K Chicks Placed Million Head 166.9 163.6 1.98% 162.8 2.52% 8,252 -1.69%
E 12-City Broiler Composite 102.06 98.17 4.00% 82.17 24.20%
N Georgia Dock Broiler 2.5-3 Lbs. 97.82 97.41 0.40% 89.5 9.30%
Northeast Breast Skinlss/Bonelss 131.03 130.45 0.40% 126.98 3.20%
Northeast Leg Quarters 64.83 65.32 2.00% 70.16 -4.80%
T Young Turkey Slaughter* Million Head 3.83 4.72 -18.89% 3.55 7.79% 228.0 0.20%
U Avg. Weight Lbs. 25.31 24.23 4.46% 25.02 1.18% 24.3 2.10%
R Turkey Production Million Lbs. 97.0 114.4 -15.27% 88.9 9.07% 5,524 2.40%
K Eastern Region Hen 8-16 Lbs. 97.50 99.50 -2.00% 100.25 -2.70%
F Corn, Omaha $ per Bushel 7.19 7.24 -0.76% 6.30 14.14%
E DDGS, Minnesota $ per ton #N/A #N/A #N/A 170.00 #N/A
E Wheat, Kansas City $ per Bushel 7.84 8.00 -2.00% 6.92 13.29%
D Soybeans, S. Iowa $ per Bushel 14.39 14.29 0.70% 11.85 21.40%
SB Meal, 48% Central Illinois $ per Ton 447.30 443.70 0.81% 299.10 49.50%
* Chicken & turkey slaughter, production and prices are 1 week earlier than the date at the top of this table. Cow & sow slaughter are for 2 weeks earlier