UPDATE 2-US pork supplies at all time high amid record slaughter
* Seasonal hog buildup reinforce production surge * Hog prices fare well despite burdensome supplies * Pork price hikes for 2013 as hog numbers tighten By Theopolis Waters Nov 23 (Reuters) - U.S. pork production in October hit a record high as the hog slaughter surged to an all-time high of 10.86 million head, government data showed on Friday, as high feed costs drove producers to cull herds. More hogs passed through U.S. packing plants last month than ever before as farmers liquidated their herds as the worst drought in half a century shriveled fields, catapulting feed prices to historic highs. The U.S. Department of Agriculture said pork production in October rose 9 percent from the previous year to 2.21 billion lbs. The October slaughter number was 10 percent higher year-on-year and surpassed the previous record of 10.654 million in October 2008. The rush to slaughter could benefit consumers in the near term as increased supplies weigh on pork prices, but costs are expected to go up by mid-2013 as hog supplies tighten, analysts said. Government data showed retail pork prices at $3.48 per lb last month, down from $3.51 the month before and $3.47 a year ago. "Producers have not been slowing down on their numbers and are buying grain hand-to-mouth while hoping for better days down the road," said analyst Jason Roose of U.S. Commodities. Hog numbers typically increase during autumn, particularly after unusually warm weather last spring improved sow breeding rates, resulting in more hogs coming to market now. And, packers last month had 23 weekdays and four Saturdays to process hogs, compared with 21 weekdays and five Saturdays last year in October, said USDA. The flood of hogs strained the bottom line of producers who in September lost about $54 per head, according to the Iowa State University hog producer profit index. University of Missouri livestock economist Ron Plain forecast fourth quarter 2012 hog losses to average $32.50 per head and about $24 for the first quarter of 2013. He expects producers to be about $0.70 in the hole in April with May being the first profitable month at $2. Chicago Board of Trade corn futures averaged $7.56 per bushel in October. Although they were down from the Aug. 10 record high of $8.43-3/4, they were the third-highest on record. Heated competition between livestock producers and ethanol manufacturers for corn, the major ingredient in cattle rations, is further fueling feed prices along with hay costs that doubled as drought withered fields and pastures. LIQUIDATION UNABATED "We not only saw a liquidation of market hogs, but we also saw sow slaughter move about 4 to 5 percent higher than last year during the month of October," said Allendale chief strategist Rich Nelson. "At that time there was certainly some lingering concerns about high grain costs," said Nelson. Armed with profitable margins, packers actively bought hogs while storing product in U.S. cold storage warehouses for later use when prices move higher and to satisfy pork exports that climbed 8 percent from January through September. On Wednesday, USDA reported end-of-October pork stocks at 606.2 million pounds, down 4 percent from September, but up 24 percent from a year earlier. That surpassed the prior record for the month of 528 million lbs in 2008 and marked the sixth straight monthly record. However, last month's pork inventory fell short of analysts' forecast of 632.5 million lbs amid strong demand as grocers featured product during National Pork Month in October -- which also underpinned hog prices. The average hog price in the most-watched Iowa/Minnesota market in October finished the month at $80 per cwt after peaking at $83.83 on Oct. 23 and starting the month at $77.54, based on USDA data.