November 23, 2012 / 2:20 PM / in 5 years

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
    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
    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
    "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.
    "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.
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