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Cold storage stocks show concerns of rising prices
Story Date: 10/24/2012
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Source: Tom Johnston, MEATINGPLACE, 10/23/12
Soaring pork, low chicken and declining beef inventories in freezers on Sept. 30 suggest a mix of demand considerations and reactions to expected increases in prices, according to analysts’ read of USDA’s monthly Cold Storage Report.
Total frozen pork supplies were up 8 percent from August but shot up 28 percent year-on-year. Chicken supplies decreased 3 percent from the previous month and 1 percent year-on year. Total beef inventories, meanwhile, were down 2 percent from the previous month and down slightly from last year, USDA said.
Livestock analysts Steve Meyer and Len Steiner said in CME Group’s Daily Livestock Report that the report offers a mixed picture, with pork stocks “heavy and indicating challenges in the short term” while beef and chicken stocks are “relatively current."
But more than just an indication of demand, the report shows end users building stocks to hedge against rising prices. A prime example is chicken wings, which shot up 32 percent compared with September 2011. End users fear further price appreciation going into the Super Bowl while broiler producers expect further cutbacks amid record high feed costs, the analysts point out.
“End users are clearly relying on freezer hedges more than in years past, especially now that wings are trading at a 50-cent premium to breast meat,” they wrote.
Red meat
The surge in pork supplies resulted from producers speeding hogs to market to get ahead of surging feed costs. Ham inventories rose 31 percent year on year, though the holiday period should help deplete those. Some extra supply will be exported, particularly to Mexico, the analysts said.
Meanwhile, declining beef inventories were anchored by cuts in lean beef by end users that are more reluctant to have large frozen stocks amid record high prices for such product.
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