CME: Latest Pork Cold Storage Report Positive

US - Market participants were expecting the monthly release of USDA cold storage figures with some trepidation, unsure of the demand for meat products in August and fearful of the negative impact of large freezer stocks going into the fall, according to Steve Meyer and Len Steiner.
calendar icon 23 September 2009
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The latest cold storage report, however, was generally more positive that market expectations, especially in the case of pork. Total pork supplies in cold storage at the end of August were estimated to be 517.9 million pounds, 3 per cent higher than a year ago and some 19.2 per cent higher than the five year average. While this is still a very large amount of pork in cold storage, it is lower than pre-report estimates which were looking for stocks in the high 530s. The report also showed a significant drawdown in stocks during August.

August pork inventories were down almost 22 million pounds from the previous month, while in 2006, ‘07 and ‘08 August stocks have been generally flat to slightly lower compared to July levels. So despite the large August pork output, packers apparently were able to keep up and move product through the supply chain. It is also a positive sign with regard to exports, implying export demand continues to recover and product is not backing up in cold storage warehouses. One pork item that is closely watched going into the holiday season is ham and ham stocks at the end of August were 133.2 million pounds, 15.6 per cent lower than a year ago but still 7.3 per cent higher than the five year average. To be sure, ham stocks are still quite large but it was positive that the seasonal increase in ham supplies seemed to slow down in August.

Compared to July, August ham stocks increased by only 4.5 million pounds. On average in the previous five years, ham stocks in August were about 12.5 million pounds higher than July levels. One could argue that improved ham exports to Mexico have been supportive in this regard but one has to wait for the export data to confirm such speculation. It is also likely that with fall hog futures declining sharply, end users that normally would have put up ham inventories refrained from doing so, betting on ample supplies and lower prices in September and October.

As for beef stocks, they showed a significant reduction in August, mostly due to a sharp decline in stocks of beef cuts. Total beef stocks at the end of August were 426.4 million pounds, 3.3 per cent lower than a year ago and 5.8 per cent lower than the five year average. The data on beef in cold storage is more muddled and so we don’t have a very good idea as to what products were mostly affected. Chicken stocks remain below year ago levels, with total chicken inventory at 642.3 million pounds down 15 per cent from a year ago and 9.5 per cent lower than the 5-yr average.

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