The Sept. 1 breeding herd estimate was down a little more than 0.5%. This was about a 1% larger herd than the 98.5% average of the trade estimates. The market herd and total herd at 99% of a year ago was very close to the average of the trade estimates.

The USDA breeding herd estimate is consistent with our sow and gilt slaughter estimate and shows some growth since June. For 1995-1999, the September breeding herd has been about 109,000 head smaller than June. This year, the breeding herd estimate by USDA is 32,000 head larger than the June estimate. This would be a relative growth of about 2% from June using the last five-year relationship.

The data continues to confirm productivity growth in the U.S. hog industry. For the 30-month period ending June 1, 2000, productivity of the U.S. herd grew about 4%. For the 12-month period ending June 1, our estimate of productivity growth was more than 5%. A 3% growth in productivity in 2001 and 2002 from 2000 will push slaughter to about 104.7 million head in 2002.

Even with Seaboard's just-announced plant at Elwood, KS, operating one full shift, a second shift at Farmland's Crete, NE, plant and no loss of slaughter capacity anywhere else, we would still be in a tight situation for slaughter capacity by the fourth quarter of 2002. In fact, our current estimate for fourth quarter 2001 slaughter is very close to the record fourth quarter kill of 1998.

Even with the Crete plant at double shift, we will need some gain in slaughter capacity elsewhere or some reduction in live hog imports from Canada. Otherwise, slaughter capacity will be a problem in the fourth quarter of 2001.

We had thought there was a chance for live imports from Canada to decline due to their increased slaughter capacity. But through the first seven months of 2000, live hog imports from Canada are slightly larger than in 1999. Slaughter hog imports are down, but feeder pig imports are up enough to more than offset the reduction.

Let us emphasize, these increased levels of slaughter could be attained without increasing the breeding herd above current levels if we have anything more than 60% of the productivity growth of the 12-month period ending June 1 this year.

Our gilt and sow slaughter data indicate growth in the breeding herd at the present time. This is supported by the USDA estimate of the September breeding herd being slightly above June. This has only happened one other time in recent history, and that year was 1997.

The slaughter for September has been down about 2% on a weekly basis based on preliminary data. These slaughter levels are quite consistent with 180-lb. and heavier market inventories, which were down about 1.4% on Sept. 1. Slaughter in both the fourth quarter of 2000 and the first quarter of 2001 should be down about 1% from last year, based on the Sept. 1 market inventories.

Our price estimates in Table 2 are for the terminal markets. We believe the average price received by U.S. producers for 51-52% lean hogs is about $2/cwt. above the six-market prices. Our price estimates assume we will not run into slaughter capacity problems in 2001. If we do have slaughter capacity problems, prices will be well below our estimates.