DES MOINES, Iowa — Despite the USDA’s March hog numbers dipping between December 2011 and February 2012, the latest inventory grew 2 percent since last September.

 “The USDA’s March 1 quarterly Hogs & Pigs report, released March 30, contained no big surprises, but it provided some fodder for both optimists and pessimists as they look to future hog markets,” said Steve Meyer, president of Paragon Economics in Des Moines.

At mid-morning April 2, Meyer said CME Group Chicago Board of Trade lean hogs futures prices were 38-80 cents per cwt., carcass, higher for contracts through February 2013, with the summer 2013 contracts over $1.30 per cwt., carcass, higher on very light volume.

But with these increases, Meyer warned “the entire commodities complex appeared to me to be very oversold going into Friday’s reports. Those USDA reports included the Prospective Plantings and Grain Stocks, the latter of which has been famously erratic over the past couple of years.

“Today’s positive price move may be more of a response to that oversold condition than to anything in the Hogs & Pigs report,” he said in a teleconference with reporters. “Only time will provide us with some insight about the driver of today’s market.”

Joining Meyer to analyze the March 2012 report were John Nalivka, president of Sterling Marketing in Vale, Ore., Karl Skold, president of Westside Economics in Omaha, Neb., and Len Steiner, president of Steiner Consulting Group in Manchester, N.H.

Sponsored by the pork checkoff in Des Moines, the report said the U.S. inventory of all hogs and pigs on March 1 was 64.9 million head, up 2 percent from March 1, 2011, but down 2 percent from Dec. 1, 2011, with a mild winter contributing to higher hog numbers and continually heavy market weights.

But Nalivka said, “Packers have been losing $10 to $15 per head in 2012; last year, they were making that per head in profit. Packers will only take those losses for so long.”

The report said the U.S. breeding inventory, at 5.82 million head, was up 1 percent from last year, and up slightly from the previous quarter. In addition, market hog inventory, at 59.1 million head, was up 2 percent from last year, but down 2 percent from last quarter.

The report also said the December 2011-February 2012 pig crop, at 28.7 million head, was up 3 percent from 2011, with sows farrowing during this period totaling 2.88 million head, up 1 percent from 2011.

While analysts forecast a 0.3 percent increase in their pre-report estimates, U.S. producers farrowed their sows during this quarter at 50 percent of the breeding herd, with the average pigs saved per litter at a record high of 9.97 for the December-February period, compared to 9.8 last year.

According to the report, pigs saved per litter by size of operation ranged from 7.3 for operations with 1-99 hogs and pigs, to 10 for operations with more than 5,000 hogs and pigs.

The report said U.S. hog producers intend to have 2.89 million sows farrow during the March-May 2012 quarter, down 1 percent from the actual farrowings during the same period in 2011, and down 1 percent from 2010; however, Skold said that could change.

“There is some question in the March-May and the June-August farrowing intentions,” he said. “I think in the end, those (farrowing) numbers will be unchanged, and with litter productivity, we’ll see 1.5 percent to 2 percent more hogs.”

The report also stated intended farrowings for June-August 2012, at 2.88 million sows, are down 2 percent from 2011, and down 2 percent from 2010.

“I find it hard to believe that we will lose farrowing efficiency, especially with this year’s mild winter,” Meyer said. “I know winter weather has far less impact than it once did, but I don’t think its influence is zero just yet.”

Steiner said while farrow-to-finish margins remain positive at about $11 per hog, those profits were about double that amount last year. “We have some risks coming in here for the critical summer months,” he said.

In the export market, Steiner said although the trend has been strong in recent years, further sales aren’t guaranteed.

“The export market will be even more important in 2012 than in 2011,” he said. “Anytime you count on a market for 20 percent of your annual production, that’s significant.

“Any significant glitch could be a problem,” he added, especially when countries like Communist China can profoundly affect the market.

With higher beef prices, all three analysts agreed that pork demand has been more sluggish this year than they expected. “We are comparing ourselves to a pretty high bar – last year was a very good year,” Skold said, especially with Japan, China and South Korea all making huge purchases of U.S. pork.

“Domestically, we have a few headwinds this year, with $4 gas and an improving but still sluggish economy, nervous consumers are looking to cut costs.”

Steiner said analysts have also been “surprised that there hasn’t been as much demand for both pork and chicken” because of the higher beef prices at retail meat counters.

The report concluded with the total number of hogs under contract owned by operations with over 5,000 head, but raised by contractees, accounting for 47 percent of the total U.S. hog inventory, up from 46 percent last year.