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CME: combined beef, pork, chicken inventory higher than a year ago

26 February 2020

USDA issued the results of its monthly survey of cold storage warehouses. Participants have well-formed expectation about output in a given month and knowing how much was carried over from the previous month helps better shape the supply picture, writes Steiner Consulting Group, DLR Division, Inc.

However, it is always good to remember that with larger production and exports there will be larger freezer stocks. We think this report is more useful in helping understand the dynamic for specific items. Using the cold storage numbers to draw broad conclusions on demand is not particularly helpful.

The combined inventory of beef, pork, chicken and turkey in cold storage at the end of January was estimated at 2.374 billion pounds, 2.4 percent higher than a year ago and 6 percent higher than the five year average. The combined month end inventory of the four main species increased by 4.5 percent from December levels. This compares to an average increase of 6.3 percent in the last five years.

The total supply of beef in cold storage at the end of January was 489.1 million pounds, 4.1 percent lower than a year ago and 5.1 percent lower than the five year average. Boneless beef inventories at 455.9 million pounds were 4.5 percent lower than a year ago. High prices for boneless beef in November and December likely encouraged end users to draw down their inventories rather than continue to bid up prices in the spot market. Boneless beef inventories increased 1.3 percent in January from December levels. This is in line with the average increase of recent years. Bone-in beef inventories were 33.2 million pounds, 1.6 percent higher than last year but still 17.6 percent lower than the five year average.

Record pork production in December and January and a strong export pace resulted in a sharp increase in the supply of pork in cold storage. At this time it is difficult to say whether the increase in inventory was due to a product getting backed up or because packers/exporters were staging a higher supply in order to feed the export pipeline. According to the USDA, the total supply of pork in cold storage at the end of January was 625.2 million pounds, 11.1 percent higher than a year ago and 8.2 percent higher than the five year average.

January inventories increased by 8 percent compared to December levels. In recent years the m/m increase has been around 14 percent. A big part of the reason for the large January inventory is the large carryover from December. Ham inventories at 114.6 million pounds were 1.7 percent higher than last year and 4.6 percent higher than the five year average. Despite higher production demand for hams remains strong, limiting the supply accumulated in the freezer.

On the other hand, belly inventories remain burdensome. At the end of January the total supply of bellies in cold storage was 70.9 million pounds, 31.9 percent higher than a year ago and 57 percent higher than the five year average. The belly inventory build in January was low by historical standards but a large carryover from December continues to clog up the pipeline. Pork loin inventories at the end of January were 50.1 million pounds, 43.4 percent higher than a year ago and 24 percent higher than the five year average.

The supply of chicken in cold storage has increased dramatically. At the end of January the supply of whole broilers and broiler parts in cold storage was estimated at 957.5 million pounds, 12.2 percent higher than a year ago and 18.4 percent higher than the five year average. Broiler producers have ramped up production in order to capitalize on expected strong China demand. The large carryover stocks and slowdown in exports to China is negative for broiler prices.


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