November 26, 2012

 

US October pork production hits record high

 

 

After the hog slaughter surged to an all-time high of 10.86 million head, US pork production in October hit a record high, as soaring feed costs drove producers to cull herds.

 

More hogs passed through US packing plants last month than ever before as farmers liquidated their herds as the worst drought in half a century shrivelled fields, catapulting feed prices to historic highs.

 

The USDA said pork production in October rose 9% from the previous year to 2.21 billion pounds. The October slaughter number was 10% higher 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 US$3.48 per pound last month, down from US$3.51 the month before and US$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 US 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 US$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 US$32.50 per head and about US$24 for the first quarter of 2013. He expects producers to be about US$0.70 in the hole in April with May being the first profitable month at US$2.

 

Chicago Board of Trade corn futures averaged US$7.56 per bushel in October. Although they were down from the August 10 record high of US$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 fuelling 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 4-5% higher than last year during the month of October," said Allendale chief strategist Rich Nelson. "At that time there were certainly some lingering concerns about high grain costs," Nelson added.

 

Armed with profitable margins, packers actively bought hogs while storing product in US cold storage warehouses for later use when prices move higher and to satisfy pork exports that climbed 8% from January-September.

 

On Wednesday (Nov 21), USDA reported end-of-October pork stocks at 606.2 million pounds, down 4% from September, but up 24% from a year earlier. That surpassed the prior record for the month of 528 million pounds in 2008 and marked the sixth straight monthly record.

 

However, last month's pork inventory fell short of analysts' forecast of 632.5 million pounds 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 US$80 per cwt after peaking at US$83.83 on October 23 and starting the month at US$77.54, based on USDA data.