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CME: Latest 'Cold Storage' Reports Shows Amount of Red Meat, Poultry Up at End of January

26 February 2018

US - Higher meat protein production and higher exports also imply more product available in cold storage channels, reports Steiner Consulting Group, DLR Division, Inc.

The latest USDA Cold Storage report showed that at the end of January there were 2.317 billion pounds of beef, pork, chicken and turkey in cold storage, 6.4 per cent more than a year ago and 8.5 per cent higher than the five year average. With more beef, pork and chicken already in the production pipeline, we expect cold storage stocks to continue to increase into the spring and summer.

The distribution of stocks by species varied, however, and current inventory conditions have different implications for red meat and poultry prices:

Beef: There has been a fair amount of discussion about the amount of beef trimmings end users have started to put away in order to hedge some of the price risk for the spring. Prices for 50CL beef skyrocketed last year and some are speculating that more fat trim is now going into the freezer to avoid a repeat this year.

USDA does not tell us what kind of beef is in storage but the inventory of boneless beef at the end of January was 456.8 million pounds, 8.4 per cent lower than a year ago and just 1.6 per cent higher than a year ago. When we look at the breakdown of beef inventories, stocks were higher in the Pacific region (+17 per cent), likely to support higher exports. They were also higher in West North Central, cold storage warehouses that are close to packing plants.

However, inventories in the Middle Atlantic were down some 56 million pounds (-31 per cent) from a year ago. High prices for fat trim during January appear to have induced processors to work down some of their inventory positions. Overall we view the beef numbers as constructive for the market in the near term.

Pork: Total pork in cold storage at the end of January was 568 million pounds, 8.3 per cent higher than a year ago but still as much as 4.4 per cent less than the five year average. One could view the pork inventory numbers as somewhat bearish given the y/y increase and expected higher production in the next three months.

However, we are more inclined to view the report as neutral overall, recognizing that the primary reason pork inventories were higher was due to more bellies in storage. Total pork belly stocks at the end of January were 44.7 million pounds, 219 per cent higher than the minimal levels a year ago.

Minimal belly stocks last year set the stage for a sharp increase in price during the summer months. Belly stocks have normalized somewhat but they are still less than in 2014, 2015 and 2016. Pork inventories also remain well below the five year average despite record production.

Pork exports have helped absorb much of the increase in pork stocks and we think higher pork inventories are needed to support increased export volumes. Due to confidentiality reasons, USDA does not provide a breakdown of pork inventories by region as it does for beef and chicken.

Below you can view the full details for all red meat and poultry items in storage at the end of January.

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TheCattleSite News Desk

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