CME: Increasing Meat Volumes in Cold Storage

US - According to USDA's monthly Cold Storage report, released today, the quantities of pork, beef and chicken in US freezers all increased from one month ago, write Steve Meyer and Len Steiner.
calendar icon 23 November 2010
clock icon 4 minute read

Pork and beef inventories remain lower than one year ago but frozen chicken inventories are now 15.3 per cent higher than last year. All of the data for the meat and poultry species are given in the full report (see link below).

Some highlights of the report are:

  • A continuing increase in the amount of chicken in cold storage. 31 October marks the fourth straight month-end at which chicken inventories have risen – this time by 3.1 per cent versus the level of 30 September 30. October stocks are still 3.3 per cent lower than the 2004-2008 average for October but the trend is, to say the least, troubling especially with Russia's warning of banning frozen chicken imports come 1 January.

  • Stocks of chicken hind-quarter products – drumsticks, leg quarters, legs, thigh and thigh quarters and thigh meat – are now 78 per cent larger than one year ago and grew by 4.6 per cent in October. Leg quarters account for roughly 60 per cent of the 198.8 million pounds of these products in US freezers. Hind quarter (or dark meat) chicken goes primarily to export markets so this build-up, especially given the Russian situation is troubling. If prices fall sharply, chicken dark meat will displace other meats – primarily pork – in many processed meat formulations, softening demand for the other products. And the backlog is large.

  • Wing inventories grew by 6.4 per cent in September and were 78 per cent larger than last year on 31 October. The industry usually builds stocks for holiday usage but the year-over-year increase is indeed large. The ray of good news for chicken is that breasts/breast meat stocks were equal to 30 September and 6.6 per cent lower than one year ago. B/S chicken breast prices have fallen by one-third since September but appear to have found a base in the past two weeks.

  • Pork inventories grew by 12.7 per cent in October – nothing unusual there as October is almost always the high-production month of the year and, due to the magnitude of the surge of slaughter this year ,will almost undoubtedly be so in 2011. The good news is that stocks are 7.4 per cent lower than last year. Bellies stocks continued to rebound from this summer's extremely low levels but were still 37 per cent lower than last year. Stocks of all other cuts except hams were also lower than last year. Ham stocks were up 16.2 per cent from last October – a likely result of the five per cent tariff imposed by Mexico after it won the WTO case regarding truck equivalency. Year-to-date pork production is down 3.6 per cent from 2010.

  • Total beef inventories amounted to 402.003 million pounds, 1.3 per cent higher than last month but six per cent lower than last year. Boneless beef stocks grew by 5 per cent in October but remain seven per cent lower than last year – echoing our statements last week about the extremely tight situation for grinding beef.

USDA's monthly Chickens and Eggs report, released yesterday, indicated that the number of broiler-type laying hens increased last month for the first time since April. The downtrend that began in May and the turn-around in October both fit a rather normal seasonal pattern for the broiler flock but this year's bottom of 53.6 million hens in September is about 1.25 million higher than last year's bottom, which occurred in October. If broiler companies increase their flocks in a normal seasonal manner this year, the flock could reach 56.5 to 57 million hens in late winter – four to five per cent larger than this year's seasonal peak and its highest level since the summer of 2008.

Chicken companies are showing no signs of shying away from their plans to increase production – even with higher feed costs. Will the companies respond to prospective profits (or losses?) in 2011 or will they return to the market-share focus of the past?

Further Reading

- You can view the full report by clicking here.
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