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CME: July Red Meat, Poultry Supply Up from June Levels

26 August 2019

US - The combined inventory of beef, pork, chicken and turkey in cold storage at the end of July was estimated at 2.464 billion pounds, 1.8 percent lower than a year ago but still 5.4 percent higher than the five year average, reports Steiner Consulting Group, DLR Division, Inc.

Red meat and poultry supply in storage increased by 2.7 percent from June levels, a larger gain than last year’s m/m 2 percent gain and the 2.3 percent average increase in the last five years.

The total supply of beef in cold storage at the end of July was 455.1 million pounds, 6 percent lower than a year ago but 2.8 percent higher than the five-year average. It is not unusual for beef inventories to increase in July, in part because the slowdown in beef demand and high slaughter levels result in more beef going into cold storage.

We also think that higher than expected beef prices caused some end users to accumulate inventory ahead of Labor Day. The pace of beef inventory gains, mostly boneless beef, was far larger than normal in July.

At the end of July the inventory of boneless beef at 419.6 million pounds was 12.7 percent higher than at the end of June. Last year the June to July inventory increase was 9.1 percent and in the last five years it has averaged 2.6 percent.

Beef imports from Australia and New Zealand were lower in July so we do not see that as the reason for the increase in beef cold storage stocks. The larger inventory may be seen as somewhat bearish although current reduction in slaughter and sharply higher prices should result in higher than normal inventory depletion in August.

Total pork inventory in cold storage as of 31 July was estimated at 601.8 million pounds, 9 percent higher than a year ago and 4.8 percent higher than the five year average. The overall pork inventory declined 2.9 percent in July from June levels, which is a faster drawdown than we normally see during this time of year.

Higher pork prices in July likely encouraged end users and packers to work down some of the inventory that was accumulated following record June production. Ham cold storage stocks were 172.6 million pounds, 3 percent higher than a year ago but 4.7 percent lower than the five year average. Sharply higher ham prices limited the amount of ham going into cold storage in July.

In the last five years July inventories have increased by an average of 13 percent from the previous month. This year the m/m inventory build was just 2.3 percent. The inventory of pork bellies in cold storage was 52.6 million pounds, 36.5 percent higher than a year ago and 34.9 percent higher than the five year average. Low belly prices in late June and first half of July encouraged producers to push more bellies in cold storage.

While belly prices caught some of the seasonal demand in late July and first half of August, the large carryover stocks and the need to deplete some of that inventory in August may weigh on prices late August and early September. Loin inventories at the end of July were 74 percetn higher than year ago, a very bearish indicator for this product.

The supply of all chicken products in cold storage at the end of July was 850.5 million pounds, 3.1 percent lower than last year but 9.7 percent higher than the five year average. Breast meat inventories were 176.8 million pounds, 3.7 percent higher than the already heavy levels we saw last year and 16.4 percent higher than the five year average.

Turkey breast inventories declined 4 percent in July compared to an average 1 percent m/m increase in the last five years, possibly pointing to higher breast prices in the fall.

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