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CME: Beef Exports Quite Robust Through August

26 September 2018

US - At the end of August there were 2.622 billion pounds of beef, pork, chicken and turkey in cold storage, 7.7 per cent more than a year ago and 14.1 per cent more than the five year average, reports Steiner Consulting Group, DLR Division, Inc.

The combined inventory increased 4.9 per cent compared to where it was in July. In the last five years, August inventories have on averaged increased just 0.2 per cent from July levels.

The higher inventories were largely driven by a big jump in chicken cold storage stocks. Broiler product prices were particularly weak in August and it appears processors had to put product away in the freezer rather than continue to push it into the marketplace.

The inventory of all chicken products at the end of August was 927.6 million pounds, 18.6 per cent higher than a year ago and now 28 per cent above year ago levels. According to the USDA survey, of the +145 million pound of additional chicken supply, some 70 million pounds was located in the South Atlantic region and another 50 million pounds was located in the West South Central.

These are two areas with a concentration of chicken producing plants and suggest who owns these inventories. Inventories of wings at the end of August were 97.6 million pounds, 54 per cent higher than last year and 25.4 per cent higher than the five year average.

Some of the stockpiling is likely due to the normal preparations ahead of the start of NFL season. August broiler wing inventories were up 11 per cent vs. July. This compares to a five year average buildup of 5 per cent.

We think that low priced chicken breasts have bolstered boneless wing features and negatively impacted wing demand. The inventory of leg quarters remains well below year ago levels as export demand appears to be in good shape.

Total beef inventories at the end of August were 503.5 million pounds, 5.6 per cent higher than last year and 14.4 per cent higher than the five year average. Boneless beef inventories at 458.6 million pounds were 4.7 per cent higher than last year and 14.6 per cent higher than the five year average.

Beef inventories increased 3.3 per cent in August compared to a five year average month-by-month increase of 0.1 per cent. Beef exports were quite robust through August and this may have contributed to the increase in inventories.

Beef imports have not increased appreciably vs. last year so we do not see that as a reason for the increase in beef stocks. Beef price inflation has been a concern for a number of end users and so far they remain willing to hold more product in stock in order to manage their purchases.

While the beef number may not be bearish per se, it tends to add to the overall supply of protein carried into the fall, especially when considering the higher feedlot supplies (+5.9 per cent).

The total supply of pork in cold storage at the end of August was 582.6 million pounds, 1.2 per cent higher than a year ago and 0.6 per cent lower than the five year average. Pork inventories increased 6 per cent compared to July when on average we have seen August stocks increase by 2.4 per cent.

In the last two weeks pork prices have recovered as Hurricane Florence forced packers to idle some major plants. The supply of hogs on the ground is higher than a year ago and pork production should establish record highs later this fall.

The total pork belly inventory at the end of August was 35 million pounds, 82 per cent higher than last year and 34.6 per cent higher than the five year average. In the last five years pork belly inventories have declined 30 per cent from July to August.

This year the decline was just 14 per cent. Ham inventories in August were 204.8 million pounds, 0.4 per cent higher than last year but still 2.8 per cent lower than the five year average.

Takeaway: Large meat protein supplies, a big increase in feedlot inventories and expected record pork production this fall will likely temper meat price inflation in the near term. We would expect to see more pork going into cold storage in part because end users will likely be more comfortable to put product away knowing that seasonally pork supplies will decline in Q1 (vs. Q4). Risk from ASF and the forward futures premiums should make it more feasible to put pork in cold storage in Q4.


Daily Livestock Report - Copyright © 2008 CME. All rights reserved.


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