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CME: Little to No Good News for Meat Sectors

23 May 2012

US - USDA’S monthly Cold Storage report was released today and it contained little good news for the meat and poultry businesses and was particularly ugly for the pork sector, write Steve Meyer and Len Steiner.

The chart below shows inventory levels for the four major meat species as well as the total.

The table on page 2 (please see link below) contains all of USDA’s data regarding the amounts of the various cuts in the US freezers on 30 April. Some important features of the report are:

  • Total frozen meat and poultry inventories stood at 2.249 millin pounds on April 30. That is 5.9 per cent larger than last year and 7.5 per cent larger than on March 31. It is also the largest stock of frozen meat and poultry at the end of any month since August 2009. YTD meat and poultry production is DOWN 2.3 per cent.


  • The total inventory of pork, at 659.532 million pounds is the second largest on record. It falls just short of the 663.443 million pounds that was in freezers at the end of April 2008. This year’s April 30 inventory is 20.1 per cent higher than last year and 8.1 per cent higher than last month.


  • Hams are the largest contributor to the grown in frozen pork stocks, coming in 46 per cent higher than last year and 40.6 per cent higher than last month. There are 35.6 million more pounds of hams in U.S. freezers than one year ago — and 32.5 million more than last month! Hams have been a challenge all winter and spring after the holidays passed with significant volume still on hand. It doesn’t appear that we are very near working through the backlog yet.


  • Bellies were the second big contributor to freezer stock growth, coming in 40.6 per cent higher than last year and 13.2 per cent higher than last month. That 40.6 per cent means that there are 21.6 million more pounds of bellies available this year.


  • Based on weekly data, April 30 pork stocks amounted to roughly 36 per cent of April pork production. That is the highest percentage of monthly production in month-end cold storage since April 2000.


  • Chicken inventories grew by 5.6 per cent in April but remained 18.2 per cent lower than one year ago. April stocks are the second lowest (to March) since March 2007. Wing inventories are barely half of their April 2011 level but did increase by 10.3 per cent last month — maybe those prices are getting a bit too high to keep them moving? Stocks of breasts and breast meat fell to 119.97 million pounds, 18 per cent lower than last year and 2.7 per cent lower than last month. This is the lowest level of breast meat in freezers since November 2010. The only hiccup for chicken was a buildup of leg products in April with drumstick, leg, leg quarter and thigh/ thigh quarter stocks growing by 19.5 million pounds or 18.7 per cent.


  • Total beef stocks, at 517.5 million pounds, were 16.8 per cent larger than last year and 2.9 per cent larger than last month. Those percentage increases were, to a great degree, equally shared between boneless beef and beef cuts. The April 30 total was the largest since November 2006 and marks only the 6th time that month-monthend beef inventories have exceeded 500 million pounds. It should be noted that monthly beef output in April 2011, based on weekly data, will be about 2 billion pounds. It was 2.2 billion in November 2006 and in the range of 2.2 to 2.5 billion pounds in the fall of 2002 when beef stocks were also over 500 million. This year’s stocks represent a larger share of production than did similar levels in the past.


  • Finally, turkey inventories are sharply higher this year. April’s 438.5 million pounds was 20.3 per cent larger than last year and 16.9 per cent larger than last month. As can be seen in the chart above, monthly gains in turkey stocks through June or July are the absolute norm as producers and end-users build the inventories necessary to handle holiday sales. This year is no different except that the pace of the buildup is considerably faster than the past two years. While whole birds, as expected, counted for the largest volume of April’s increase, every other cut category except mechanically de-boned turkey saw larger percentage increase relative to last year.

So what does this mean? The data suggest that meat and poultry movement in April was nothing to shout about. That’s especially true of pork. That slow spring movement has left enough product in freezers to perhaps blunt any cash rallies that could start when hog numbers finally decline this summer — In history we trust!

When we look at year-on-year changes, we have to be a bit concerned about beef, whose stocks have increased even though production has moved lower. If exports remained below 2011 levels in April, these mean beef movement was indeed slow.

Maybe it is time to move away from record-high and near record-high retail prices long enough to clean up some of these inventories. Grilling season is here and some aggressive features could attract a lot of retail traffic and move a lot of product.

Further Reading

You can view the full report by clicking here.


Daily Livestock Report - Copyright © 2008 CME. All rights reserved.


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