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CME: <i>Cold Storage</i> Report Supportive of Meat Prices

by 5m Editor
26 September 2011, at 8:58am

US - USDA released on Thursday afternoon its latest Cold Storage report, offering a snapshot of the supply of beef, pork and poultry in cold storage as of 31 August 2011. The results of the survey were generally supportive for meat prices going forward, particularly for pork and chicken, write Steve Meyer and Len Steiner.

The impact on futures will likely be limited, however, as market participants are more focused on what is happening in outside markets.

Commodity and equity markets declined sharply on Thursday but have bounced back in overnight trading.

Concerns about the global economic outlook and the risk of a sovereign debt crisis in Europe will likely continue to have an outsize impact on markets, eclipsing, at least in the short term, fundamentals. Below are some of the highlights from the latest cold storage report.

You can find full details on page four (see full report).

Beef: Total beef stocks on 31 August were 429.2 million pounds, 10.8 per cent higher than the same period a year ago but still some three per cent lower than the five year average.

Beef inventories rose 3.4 per cent compared to the previous month, in line with historical averages. Seasonally beef inventories increase going into the fall and current stocks are far from burdensome.

Beef inventories should continue to increase into Q4 as retailers and foodservice operators build stocks ahead of year end holidays.

Pork: Total pork inventories at the end of August were reported at 440.7 million pounds, 13.5 per cent higher than a year ago but four per cent lower than the five year average.
In the last five years pork stocks on average have declined about one per cent from July to August. This August, however, pork inventories declined three per cent, an indication that domestic and export demand remains in good shape.

Total pork inventories are higher than last year but this largely reflects the need for larger staging stocks given the mammoth increase in export business. Some of our work in this area shows a strong relationship between export volume and the level of inventories required to service this business.

Ham stocks at the end of August were 148.8 million pounds, 4.7 per cent higher than a year ago and 7.6 per cent higher than the five year average.

Inventory build for the month was in line with historical trends. Belly inventories seasonally decline into September and this year is no different.

Belly stocks at the end of August were down 48.7 per cent from the previous month compared to a normal drawdown pace of about 45 per cent.

Inventories of pork loins at the end of August were 22.5 million pounds, 46 per cent higher than a year ago but we suspect this was in part driven by improvement in export business. Pork loin prices in the domestic market remain very strong.

Broilers: One of the more positive signs in the report was the sharp drawdown in chicken inventories during August.

Broiler stocks in August were 702.2 million pounds, 7.2 per cent lower than just a month ago. Total broiler inventories are now slightly lower than the previous year but still 4.7 per cent higher than a year ago.

Cutbacks in production appear to be having an effect. Inventories of leg quarters, an export item, were down 21.4 per cent from the previous month and are now 23.5 per cent lower than the previous year.

Inventories of breast meat remain heavy and it will take another two to three months to bring them in balance.

Further Reading

- You can view the full report by clicking here.