U.S. Pork Supply Surges as Hog Slaughter Rises on Feed Costs

U.S. pork inventories climbed 28 percent at the end of September from a year earlier to the highest in almost a century, the government said, as rising feed costs prompted producers to send more animals to slaughter.

Warehouses held 630.7 million pounds (286,061 metric tons) of pork, up from 491.9 million pounds on Sept. 30, 2011, the U.S. Department of Agriculture said today in a report. The figure is the highest for the end of September since the USDA started tracking the figure in 1915. Inventories rose 7.7 percent from the end of August.

The price of corn, the main ingredient in livestock feed, has jumped 50 percent since mid-June as the worst drought since 1956 damaged yield prospects. The USDA is projecting the smallest crop in six years. Meatpackers processed an estimated 89.211 million hogs this year through Oct. 20, up 2.1 percent from a year earlier, USDA data show. Feed costs are probably prompting producers to send animals to slaughter at an “accelerated pace,” Doug Houghton, an analyst at Brock Associates in Milwaukee, said in an interview before the report.

“Excessive September production very likely boosted pork stocks substantially,” Dan Vaught, the owner of Vaught Futures Insights in Altus, Arkansas, said in an e-mailed report.

Hog futures for December settlement fell 1.2 percent to settle at 78.675 cents a pound at 1 p.m. on the Chicago Mercantile Exchange. Prices are down 6.7 percent this year.

Price Outlook

Futures rose 1.6 percent last week, the third straight weekly gain. The high inventories are “going to make it harder for this rally to continue,” Lawrence Kane, a market adviser at Stewart-Peterson Group in Yates City, Illinois, said in a telephone interview.

There are still “pretty decent hog prices” even with high pork inventories because the industry is “still concerned” farmers will have difficulty rebuilding herds next year, Kane said.

As of Sept. 30, stockpiles of pork bellies, which are cured and sliced to make bacon, rose 79 percent from a year earlier to 16.7 million pounds, according to today’s report. Warehouse supplies of ham surged 31 percent from a year earlier to 213.9 million pounds.

Chicken-meat inventories at the end of September were 2.7 percent smaller than a year earlier at 651.7 million pounds, the USDA said. Beef supplies fell 0.5 percent to 425.6 million pounds.

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