USDA's September Hogs and Pigs report showed hog inventories were unchanged to somewhat larger.

Yet slaughter in recent weeks has been very low, seemingly indicating a divergence from the USDA reading. Low slaughter numbers have been the primary driver of higher lean hog futures and seasonally strong cash prices.

One common explanation of the recent low slaughter numbers is that death losses from the PED virus (porcine epidemic diarrhea) has reduced the market herd much more than had previously been thought. If that is true, hog prices could strengthen further with limited supplies this fall and winter.

However, there are other explanations that need to be considered.

How big is the reduction in recent slaughter supply? Since the middle of August, weekly slaughter rates have been down from three to 10 percent. For the last seven weeks, spanning mid-August through the end of September, slaughter has been down in aggregate by over five percent.

Given the low slaughter numbers, cash prices of hogs have been sharply higher than in the same period in 2012 when they averaged $55 per live hundredweight. With sharply lower slaughter this year they have averaged about $68 since mid-August. Lean hog futures have also increased about $4 to $5 over the same period.

The impact on hog numbers from the PED virus remains a mystery. There is no accurate national accounting of death losses from the disease. Pork producers and packers have suggested a one to two percent reduction in slaughter supplies this fall and winter. In addition, it had been felt that the lower slaughter numbers would not start to show up until the fall.