USDA’s monthly Cold Storage report, released on Wednesday afternoon, indicates that total frozen meat and poultry inventories declined 4.3% in October but remained much larger than one year ago as of October 31. The table on page two contains all of the report data for poultry and meat species. The top chart at right shows monthly frozen inventory numbers. Note that the right axis is for turkey and total meat while the left is for the other three major species. Some highlights of Wednesday’s report are:
• There were 2.161 billion pounds of total meat and poultry in freezers as of October 31. That figure is 4.3% lower than one month earlier but 6.2% higher than last year. This is the third straight month in which freezer stocks have been more than 6% larger than one year ago and the ninth straight month in which they have been larger than one year earlier.
• Stocks of all of the four major species were smaller on October 31 than they were one month earlier. The biggest reduction, as is always expected in October, was for turkey. Pork inventories, though, were reduced by 3.8% even with production averaging 1.5% higher than last year for the four weeks that ended October 30. Beef and chicken stocks were down fractionally—but down.
• Relative to last year, chicken inventories were down 6.8%. The leading contributor to that decline in tonnage terms was breasts/breast meat, of which there was 21% (27.7 million pounds) less in freezer versus last year. The largest increase in stocks among chicken items was for wings at +18.96 million pounds (37.2%).
• Pork stocks remain the most concerning figure relative to one year ago. The 606.2 million pounds in freezers represents a 24% increase. October 31 stocks represented 29.3% of estimated October production — about 5% higher than the average stocks/production level for 2006-2010 and the stocks/production level of one year ago but down 3.6% from last month’s 33%. The drop from September was roughly normal from a seasonal perspective.
• As has been the case for the past several months, hams are the biggest contributor to that growth. Ham inventories were 39.9% larger, yr/yr, on October 31 and the 53.56 million pound increase for hams represented nearly half of the total increase for pork.
• We believe Mexico will continue to be key in determining the level of ham stocks. Pork exports to Mexico usually peak in November and December. Ham prices have likely seen their peak and, save for a usual small rally in early December as the last of the Christmas hams go into processing, will decline, making them more attractive to all export buyers. A concern remains the value of the peso which has declined 3.3% since October 1 — after gaining nearly 10% from June to October. The peso, at last week’s 13.22/$, is about 14% less valuable than it was at its postrecession high of 11.57/$ in late April of 2011.
• Turkey stocks were 11.6% higher than one year ago on October 31. All of that increase was accounted for by whole birds meaning the supply of non-holiday-related products was about stable with one year ago.
• Boneless beef stocks were down 1% for the month and 2.6% from last year. We expect these to tighten further, depending on feed costs and pasture availability come spring.
• Total meat and poultry in freezers has been larger than one year earlier in 20 of the past 24 months. The only months in which inventories were smaller than one year earlier during that time span were October 2011 through January 2012. Freezer inventories have historically gone through long upward trends before dropping abruptly — such as can be seen in ‘02 and ‘03 and again in ‘09. The October level is still 14.5% lower than the October ‘02 peak and 9.8% lower than the peak of October ‘08. How much lower will stocks be after the normal seasonal declines for turkey and pork production add to cost-induced downturns in beef, chicken and, perhaps, pork production in 2013?