Hog production returned to profitability in 2011, but producers remain cautious about the future. This is evidenced by the modest expansion of the breeding herd as reported by USDA at the end of the year, said a Purdue University Extension economist.

"Limited expansion would seem to be the prudent path until more is known about 2012 crop yields and feed prices. This suggests no expansion of the breeding herd until mid-summer 2012," said Chris Hurt.

Pork production is expected to rise by 2 to 2.5 percent in 2012, but most of that increase is due to more pigs per litter rather than from larger farrowings. Exports are expected to remain strong so that the per capita pork availability in the United States will only increase by about 1 percent.

"Pork demand will also be supported by smaller per capita supplies of beef and poultry in 2012. As a result, hog prices are expected to be down only modestly from 2011 levels with similar costs. This means another year of profitability is likely," Hurt noted.

According to Hurt, the breeding herd was up only 0.4 percent in the December inventory report from USDA. Market hog numbers were up about 2 percent for hogs coming to market through next May. Winter farrowings, which represent next summer's hog supply, were up about 1 percent.

"With the number of pigs per litter increasing about 2 percent, slaughter numbers will be up near 3 percent next summer. Fall hog supplies will be drawn from the spring 2012 farrowings where producer's intentions were down almost 1 percent. If so, this means fall 2012 hog slaughter would only be up 1 percent," he said.

Demand should remain favorable for pork in 2012. The U.S. economy is expected to continue to show signs of recovery and some modest improvement. Exports are expected to continue at a record pace in 2012, representing 22 percent of production.