* Q3 profit 27 cents/share on 214.3 mln shares
* Year ago was $1.07 share on 77.1 million shares
* Rev $1.72 billion vs $1.74 billion yr ago
* Retail, food service sales volumes increase
* Current quarter production up 10 pct vs 2009 (Rewrites, with company comments, details, share price)
By Bob Burgdorfer
CHICAGO, Oct 29 (Reuters) - U.S. chicken producer Pilgrim's Pride Corp posted a higher-than-expected quarterly profit on Friday and said it will increase production in 2011 as sales to retail and food service businesses have improved.
Shares of the No. 2 chicken producer, which said it had added higher-margin products, rose as much as 10.7 percent.
Pilgrim's Pride, which competes with larger rival Tyson Foods Inc, said it has had an increase in retail and foodservice demand for next year. It has been boosting production, with output in the current quarter forecast to be up 10 percent from a year earlier.
The 10 percent increase compares with a year ago, when the company had closed plants and laid off workers as it moved through bankruptcy. It is now set to reopen at least two plants and possibly a third in 2011 and 2012.
"Given the reduction in beef supply and the higher prices that are expected for beef and pork, chicken should be attractively positioned with consumers who are looking for the best value," Chief Executive Don Jackson said in a statement.
EARNINGS BEAT ESTIMATES
Pilgrim's Pride reported a profit of $58.5 million, or 27 cents per share, for the third quarter ended Sept. 26, compared with $82.7 million, or $1.07 per share, a year earlier on many fewer shares.
Revenue was $1.72 billion versus $1.74 billion a year earlier.
The few Wall Street analysts who follow the company, on average, had expected 18 cents per share and revenue of $1.76 billion, according to Thomson Reuters I/B/E/S.
Profit and revenue were down from a year earlier due in part to production cutbacks, reorganization efforts and reduced demand for table eggs.
Jackson denied that this year's high corn prices will slow production. In the past two months, corn shot to a two-year high of more than $5.50 per bushel.
"We are not anticipating any reduction in production on our part," Jackson told analysts on a conference call.
The company, which feeds its chickens about 4 million bushels of corn a week, said it has about 40 percent of its feed needs hedged through September 2011, up from 15 percent at the end of the quarter.
Industrywide prices for breast meat, a key sales item, were the highest in the quarter since 2004, the company said.
Breast meat prices may weaken, said Paul Aho, economist with consultancy Poultry Perspective.
"The outlook is for lower breast meat prices for the rest of the year because the economy is not as strong as we thought," said Aho.
On Friday, the company said its Douglas, Georgia, plant will reopen and begin processing chicken in November, with slaughter to start in January.
Since exiting bankruptcy in late 2009, Pilgrim's Pride has realigned its quarterly earnings reports to match those of JBS SA, a Brazilian meat producer that now owns a majority stake in the chicken producer.
The company's shares were up 38 cents, or 6.7 percent, at $6.09 in afternoon trade on the New York Stock Exchange. Earlier, they had reached as high as $6.32. (Editing by Steve Orlofsky and Gerald E. McCormick)