US - Inflation in the meat complex remains muted and the latest USDA/NASS ‘Cold Storage’ report offered more evidence why that is the case, write Steve Meyer and Len Steiner.
The combined amount of beef, pork, chicken and turkey in cold storage at the end of January was estimated at 2.270 billion pounds, 8.2 per cent larger than the previous year and 10.9 per cent higher than the five year average.
This was the largest January cold storage inventory on record and likely the largest ever given that production and storage capacity today is significantly higher than in the 1980s.
US beef, pork and chicken production has rebounded, and more product now is ending up in cold storage.
Larger cold storage stocks are not that big of a concern when exports are humming. After all, you need to put up more inventory in order to service export orders.
However, if exports continue to struggle, heavy inventories imply packers/processors are struggling to move the additional supply through domestic trade.
Cold storage stocks were higher for all three main species but the increase in chicken inventories is particularly worrisome.
In its latest WASDE report, USDA forecast 2016 broiler production at 40.586 billion pounds, 2.5 per cent higher than the previous year. While this supply increase is somewhat muted compared to what we have seen in previous years, it is still 2.5 BILLION pounds larger than what it was just two years ago. And it requires robust export demand to absorb some of this increase.
At the end of January, total chicken cold storage inventories were 824.8 million pounds, 12.9 per cent higher than a year ago and 22 per cent higher than the five year average.
Inventories of breast meat continue to be burdensome at 181.7 million pounds, 16.8 per cent higher than a year ago and 36.9 per cent higher than the five year average.
On the other hand, producers have been able to get current with their leg quarter stocks, thanks in large part to the dramatic price discounts we saw last year.
The inventory of wings at the end of January was quite substantial at 69.5 million pounds, 51.6 per cent higher than a year ago and 28.8 per cent higher than the five year average.
The biggest contributor to the increase in chicken stocks was in the “other” category. We suspect a big chunk of this is mechanically separated product, trim and related product.
Whether it is beef, pork or chicken, trim prices in the US remain particularly weak, good news for hot dog aficionados. Spring cannot come soon enough.
Beef cold storage stocks at the end of January were estimated at 518.5 million pounds, 5.4 per cent higher than a year ago and 10.2 per cent higher than the five year average.
We do not get a lot of detail as to what kind of beef is in cold storage, whether the increase is because of more imported beef or larger stocks of 50CL fat trim, or just more beef round cuts.
All we know is that inventories of boneless beef (which include all the above and then some) were 477.6 million pounds, surpassing the high from last year.
The supply of pork in cold storage also was higher than a year ago but once you review the details the increase is not particularly worrisome.
Total pork in cold storage at the end of January was 637.0 million pounds, 6.9 per cent higher than a year ago and 8.2 per cent higher than the five year average.
Ham inventories were not particularly large, up just 0.7 per cent from last year and pork belly stocks at 60.7 million pounds are not particularly burdensome.
Pork inventories are just 41 million pounds larger than last year and all of this increase is due to just one item - ribs. Demand for ribs has been extremely strong and prices are quite firm. It does not look to us that ribs are backing up in the freezer, rather they reflect efforts on part of some in the market to use the freezer as a hedge for their spring needs.
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