UPDATE 1-US Oct. Pork Stocks Set Record, Feed Costs Drive Output

Friday, 23 November 2012 08:27 AM EST

* Ramped up slaughter adds to swollen supplies

* Costly feed fuels increased hog slaughter

* Pork supply less than forecast, may support futures

* Pork price hikes inevitable for shoppers in 2013 (Adds details, analysts' comments)

By Theopolis Waters

Nov 21 (Reuters) - Pork supplies in U.S. warehouses in October were the highest ever for that month, a government report showed on Wednesday, the result of increased production as farmers rushed hogs to slaughter plants due to high feed costs.

That rush to sell hogs could result in fewer hogs, less pork and higher supermarket pork prices in 2013, analysts said.

The U.S. Agriculture Department on Wednesday 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 eclipsed the previous record for the month of 528 million lbs in 2008 and marked the sixth straight monthly record.

But inventories fell short of the average trade forecast of 632.5 million lbs, which could lend to the recent positive tone in Chicago Mercantile Exchange hog futures on Friday. CME futures markets will be closed on Thursday for the U.S. Thanksgiving holiday.

"Even with record pork production, the data suggests clearance from freezers was outstanding, which gives impetus to a big export program in October," said independent livestock market analyst Bob Brown.

Allendale chief strategist Rich Nelson pointed out that the 24-million-lb decline in pork stocks from September to October was the most ever for that time frame.

While domestic demand for pork last month may have been lackluster, exports grew from January through September which likely helped drawdown inventories going into October, he said.

USDA data shows year-to-date pork exports through September at nearly 4 billion lbs, up about 8 percent from a year earlier.


Analysts estimated the hog slaughter in October at about 10.774 million head, which would surpass the previous all-time high for any month of 10.654 million set in October 2008. USDA will publish its official slaughter numbers for October on Friday.

Hog sales typically increase during the fall. But this year producers appeared to sell more than normal in reaction to high feed costs. The historic drought last summer parched pastures, hurt crops, and reduced grain production.

Hams in freezers last month for Thanksgiving and winter-holiday use were down 12.6 percent from September but up nearly 40 percent from last year.

Analysts said the potentially record-large hog slaughter last month may have reduced the need by end-users to draw more frozen hams from storage this year.

Stocks of pork bellies at 19.124 million lbs were up 22 percent from September. That was up 119 percent from an unusually small supply in October 2011.

The prospect of fewer hogs and less pork next year should drive up pork prices then.

"There is no doubt (pork) prices will be going higher and consumers could see as much as a 5 percent year-over-year increase in retail prices during the summer," said Nelson.

December CME hog futures closed up 0.100 cent per lb at 81.750 cents in pit trading, and were up 0.175 cent at 81.825 cents in later electronic trading. (Reporting By Theopolis Waters. Editing by Andre Grenon and Bob Burgdorfer)

© 2024 Thomson/Reuters. All rights reserved.

Friday, 23 November 2012 08:27 AM
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