The USDA estimate shows the breeding herd down 7%. Our gilt data indicated the breeding herd down 8%. But both data sets have the potential of more than a 1% sample error.

Market hog inventories were estimated down 4%, and the total herd down 4%.

North central states reporting a 10% or more decline in breeding herd were: Illinois, 21%; Indiana, 18%; Kansas, 12%; Minnesota, 10%; North Dakota, 17%; Wisconsin, 24%; and Ohio, 15%.

North central states with less than a 10% decline were: South Dakota, 8%; Iowa, 8%; Nebraska, 7%; and Michigan with no change. Missouri was the only north central state with growth in the breeding herd, reporting a 3% increase. Oklahoma's breeding herd was up 11%, Colorado's was up 17% and Utah's increased 17%.

The number of operations with hog inventory sometime during 1999 dropped 14% and slipped to 98,400, below 100,000 for the first time in many years.

The total number of hogs under contract owned by operations with more than 5,000 head, but raised by contracts or growers, accounted for 32% of the total U.S. hog inventory - up from 23% in 1998. Our 1998 industry structure study for 1997 would suggest the 32% number could be low.

Slaughter during December was very close to that indicated by the 180-lb. and heavier market inventories. The heavier weight market inventories indicated first quarter 2000 slaughter numbers will likely be down 4-5% from 1999. The eight-year relationship between these inventories and slaughter show the potential for something more than a 5% decline, but the 1999 relationship indicated only about a 4% decline.

The lighter weight market inventories show the potential for a 4-5% decline in the April-June slaughter. Again, the eight-year relationship showed a bigger decline than the 1999, one-year relationship.

The farrowing intentions for December-February are for only a 3% decline. For March-May, the farrowing intentions point to a farrowing decline of only 5%. With a 1% increase in litter size, it is possible that slaughter in July-September would only be down 2% from last year and the October-December quarter slaughter would be down only 4%. Data continues to show productivity growth of 3-5% - good for the individual producer but it complicates the supply situation for the total industry.

Demand for pork at the consumer level continues to show growth through the first 11 months of 1999. Our demand index shows a 1-2% growth for this period. Pork cold storage stocks set new records in the spring but by November were below year-earlier levels.

Unless we have strong pork demand growth and/or smaller slaughter than indicated by this report, cash live hog prices at the terminals are likely to average in the upper $30s for 2000 - the third consecutive year with average prices in the $30s. Our estimates of slaughter and prices are in Table 2.