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CME: Decline in November Pork Inventories

by 5m Editor
23 December 2009, at 12:43am

US - USDA released on Tuesday the results of its monthly survey of refrigerated warehouses, showing that red meat and poultry inventories in cold storage remain well below year ago levels, according to Steve Meyer and Len Steiner.

More importantly, the survey indicated that the stock drawdown in November was the largest since 2002. Combined beef, pork, broiler and turkey stocks on November 30 were reported to be 1.807 billion pounds, 17.1 per cent lower than a year ago and 8.3 per cent lower than the five year average. This is overall a bullish report, especially for pork. Page 2 of the link below includes a complete summary of the latest release, below are some of the highlights:

Pork: Total pork supplies in cold storage at the end of November were 487.2 million pounds, 7.5 per cent lower than a year ago but still 3.9 per cent higher than the five year average. Markets will likely view as positive the fact that pork inventories declined by almost 30 million pounds compared to October levels. In the past five years, the November drawdown in pork cold storage inventories has been on average around 7.5 million pounds. The decline in cold storage stocks is even more impressive considering that total pork production in November was one of the largest on record. Ham stocks seasonally decline in November and this year was no different. Total ham stocks at the end of November were 83.6 million pounds, 20.2 per cent lower than a year ago but still some 14.9 per cent higher than the five year average. The inventories of pork bellies in cold storage remain relatively high for this time of year. This is in part a result of the big spread between current cash belly prices and out front futures, with commercial users increasing physical hedges. Total pork belly stocks on November 30 were 44.7 million pounds, 33.4 per cent higher than a year ago and 38.8 per cent higher than the five year average. Pork loin stocks were 36.3 million pounds, 10.6 per cent lower than a year ago while inventories of pork trimmings at 39.9 million pounds were 21.8 per cent lower than a year ago and only slightly higher than the five year average.

Beef: Total beef inventories were 430.8 million pounds, 10.5 per cent lower than a year ago and 9.1 per cent lower than the five year average. Boneless beef stocks, which includes much of the lean and fat beef trim, were 371.6 million pounds, 7.6 per cent lower than a year ago and 8.9 per cent lower than the five year average. This was the lowest boneless beef inventory since 2003 and we think it is generally bullish for ground beef prices going into Q1 of next year. While it is difficult to know based on the overly generalized “boneless beef“ USDA moniker, we suspect that a big reason for the decline in beef stocks is the reduction in beef imports during October and November. Also, relatively small steer and heifer slaughter has limited the supply of fat beef trim available, as evidenced by the current high price of 50CL beef . With very little imported beef on water, tight cold storage supplies and seasonally better ground beef demand in January and February, we suspect ground beef prices may show improvement going forward.

Further Reading

- You can view the full report by clicking here.