CME: US Cold Storage Stocks Significantly Higher Than 2014

US - USDA’s monthly Cold Storage report shows (as expected) significantly larger stocks of frozen meat and poultry relative to last year, but some reduction of those stocks from last month, write Steve Meyer and Len Steiner.
calendar icon 24 July 2015
clock icon 4 minute read

We believe the report is neutral to bearish for both beef and pork and neutral for chicken.

Highlights of the report are:

  • Total stocks of frozen meat and poultry amounted to 2.331 billion pounds on June 30. That figure is 16.9 per cent higher than one year ago and 7.1 per cent higher than the average for June 30 over the past five years. It is clear from the green bars in the top chart at right that the 2.331 billion is a historically large figure but everyone should be careful about the large (16.9 per cent) year-on-year increase figure due to last year’s relative low stocks. As can be seen in the bottom chart, this year’s stocks are near the top of the 5-year range while last year’s were at the bottom of that range. The “denominator problem” is rampant this year in just about everything we do!
  • June 30 stocks of all meat and poultry were 1.3 per cent lower than one month earlier, a reduction very much in line with the normal June drawdown rate. We still attribute these large stock levels largely to the backlog that occurred during last winter’s port slowdown. Pork and chicken output since that time have allowed stocks to be reduced at a very slow pace but the bottleneck at the ports was what started this buildup.
  • The largest increase in terms of year-on-year percentage change was for beef stocks which were 30.4 per cent higher this June 30. Boneless beef accounted for the entire increase which was driven primarily by a huge increase in imports. Through May, imports from Australia had increase by 210 million pounds relative to last year — and beef stocks were 109 million pounds higher, yr/yr, in June.
  • Pork inventories remain very large and the big challenge is hams! Frozen ham inventories amounted to 180.7 million pounds on June 30, 42.8 per cent higher than one year ago and 13.7 per cent higher than last month. The monthly buildup of hams in freezers was about 27 per cent larger than the average for the past 5 years. The largest export buyer of hams is Mexico and they have, for the most part, remained a player this year taking nearly 10 per cent more US pork through May. But May exports to Mexico were DOWN 2 per cent from last year suggesting a slowing of the export pace. Did that continue in June and contribute to this increase?
  • Belly stocks, on the other hand, tightened significantly from both last year (-47 per cent) and the end of May (-31 per cent). The June reduction in belly inventories (20.3 million lbs.) was more than twice the average reduction over the past five years. The belly primal composite value from USDA gained roughly $30 in June and has gained another $18 since the end of June with significant talk of usage outstripping supplies at present — even with recent large slaughter levels.
  • Total chicken stocks amounted to over 722.5 million pounds on June 30, 22.2 per cent more than one year ago and 10.4 per cent larger than the five year average. The total was 2.2 per cent lower than one month earlier. The largest tonnage contributor to the buildup was “other” chicken whose stocks increased by 48 million lbs. (22.3 per cent) from last year but leg products (quarters, legs, thighs) were a close second at +47 million lbs. (29 per cent) from last year.
  • Perhaps the surprise in this report is the stock of breast meat which, at 146 million lbs., was nearly 30 per cent larger than one year ago on June 1. That figure is also 25 per cent higher than the five year average. The growth in the large, boning bird segment is supplying all that the market needs and, apparently, then some.
  • Turkey inventories were very near their year-ago levels but the June increase was only 19 million lbs., 39.6 per cent of its normal pace.
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