Barbecue Season Considered Key to Reducing Excess Stocks of Frozen Meat

CANADA - Farm-Scape: Episode 2169. Farm-Scape is a Wonderworks Canada production and is distributed courtesy of Manitoba Pork Council and Sask Pork.
calendar icon 19 June 2006
clock icon 7 minute read

Farm-Scape, Episode 2169

Stakeholders within the North American pork industry are counting on a strong summer barbecue season to help drawn down a surprisingly large supply of stored frozen meat, particularly poultry and beef, in the United States.

“We’re in a very unique situation at the moment,” states Fiona Boal, vice president food and agribusiness research Rabbobank International. “Cold storage stocks in the U. S. (particularly beef and poultry) are much higher than we would normally see them at this time of year.”

Beef and Poultry Higher, Pork Lower than One Year Ago

In his June 2006 hog market update, released last week (June 7) Saskatchewan Agriculture and Food Livestock Economist Brad Marceniuk notes, “The United States’ pork stocks in cold storage totaled 516.26 million pounds on April 30, 2006, up 2.7 per cent from 502.59 million pounds on March 31, 2006, but down 8.4 per cent from 563.80 million pounds on April 30, 2005. U. S. pork stocks in cold storage have increased slightly over the last month, and continue to be significantly higher than they were during the fall of 2005.”

As for beef, his report indicates, “The United States’ beef stocks in cold storage totaled 429.07 million pounds on April 30, 2006, up 1.2 per cent from 423.96 million pounds on March 31, 2006, and up 30.3 per cent from 329.43 million pounds on April 30, 2005. Beef inventories have increased slightly from last month, but have risen significantly since the inventory low of 318.8 million pounds on May 31, 2005.”

As for poultry the report says, “The United States’ poultry stocks in cold storage totaled 1,279.26 million pounds on April 30, 2006, up 1.7 per cent from 1,258.02 million pounds on March 31, 2006, and up 12.9 per cent from 1,133.47 million pounds on April 30, 2005. While the volume of chicken in cold storage decreased slightly from 869.65 million pounds to 841.13 million pounds from March to April, the volume of turkey in cold storage increased from 380.44 million pounds at the end of March 2006 to 430.12 million pounds at the end of April 2006. While turkey in cold storage has fallen by 2.3 per cent from April 30, 2005, to April 30, 2006, chicken in cold storage has increased by 21.5 per cent over the year.”

Increased Meat Production and Market Restrictions Blamed

Boal attributes much of the increase in storage stocks to ongoing restrictions on the export market. She believes, “It’s actually a result of a number of factors and the main one there being an increase in production across the board of all the major meat types and a secondary factor there being some continuing disruptions on the export market. The result of that, we’ve seen stock volumes increase steadily over the last six months.”

She recalls, “We’ve seen the poultry industry go through somewhat of a turbulent few months, although exports and prices for poultry have recovered over recent weeks. And the same situation with beef. We still have some market restrictions into Asia and, with increasing production, it’s not unusual for stocks to be going up in that sort of environment.”

Frozen Stocks Viewed as an Indicator of Ability to Sell Product

“Definitely there’s been an increase in frozen stocks of both poultry and beef supplies,” agrees Ontario Pork sales team manager Patrick O'Neil.

He notes, “Beef supplies are up 30 percent compared to a year ago based on the most recent data and chicken supplies are up 22 percent over a year ago.”

O'Neil explains, “Cold storage is an indication of what’s going to happen to the price for any specific commodity and naturally, when consumers are at the grocery store they’ve got a choice on what protein they want to buy for their meals. They can choose chicken, beef or pork. If we have this possible negative, in so far as building supplies for chicken and beef, that’s generally going to be considered to be a negative for pork prices as well.”

He suggests, “When we start seeing a rapid buildup in cold storage supplies, that’s an indication that the market’s not selling all the product at the current price and that’s usually not good news for prices.”

He recalls, “This was a really hot topic at the beginning of April when the wholesale price of pork was about 15 to 20 dollars lower than the same time last year. In the last two months we’ve seen wholesale pork prices increase about 15 dollars per hundredweight U. S. which means that we are able to continue moving pork at a good price despite the increased competition from beef and poultry.”

Situation Showing Signs of Stabilizing

O'Neil notes supplies of both beef and poultry are starting to stabilize. “Chicken supplies had been building for quite some time over the last few months but the most recent data we have for chicken supplies shows that, at the beginning of April, chicken supplies were actually slightly less than the month before. That’s an indication that, despite the fact that chicken supplies are abundant compared to their historical level, they are no longer growing.”

As for beef, he says, “Beef supplies in cold storage are 30 percent more than the end of April last year but only one percent more than the end of March so we are seeing signs that these large storage levels are coming under control.”

Pork Values Remain Strong

O'Neil points out, “Wholesale pork prices have been strong despite the fact there is this increased competition from heavy supplies of beef and poultry in cold storage and I think part of that is from strong exports in the United States.”

He also notes, “We’ve had a rally going on the cash market in hogs. The last week was pretty good. I'd like to watch to see if we can sustain this strength that we've seen in prices this past week.”

Marceniuk agrees. In the week since issuing his June report, he observes, “Prices have risen substantially, unexpectedly.”

He adds, “A large reason for the increase in prices is believed to be lower daily hog slaughter numbers in the U. S.”

He notes, “U.S. hog slaughter numbers have been relatively stable. They’re slightly higher than they were in 2005 over the same period but they’re below the two million head per week which has been a number for gauging hog prices.

U. S. Slaughter, Cold Storage Stocks, Demand for Pork Expected to Drive Hog Prices

Marceniuk maintains, “The key factors that will likely play a significant role [in hog prices] are U. S. hog slaughter numbers, the demand for pork and meat in cold storage in the U. S.”

He notes, “Hog prices have improved with increased demand from seasonality with the barbecue season and a reduction in U. S. hog slaughter numbers.”

Boal concludes, “Coming into the traditional barbecue season here in the U.S. we do hope that some of those stocks will be reduced over the next couple of months but that remains to be seen.”

Staff Farmscape.Ca
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