The amount of beef in US freezers rose counter-seasonally last month, but many might not see it since it closely matches the amount in cold storage a year earlier.
The USDA’s National Agricultural Statistics Service said Friday in its monthly Cold Storage report that the US had 476.260 million pounds of beef on ice, almost identical to the 476.593 million in storage a year earlier. This was up 44.424 million, or 10.3%, from a month earlier, although it fell short of the record of 484.495 million pounds in cold storage at the end of August 2006.
However, in the 2011-2015 period, beef stocks continued to decline in August and didn’t begin turning upward until September.
The five-year average amount of beef in US cold storage was 421.704 million pounds, 54.556 million pounds, or 12.9%, less than what was being stored on Aug. 31, this year.
IS IT A PROBLEM?
The question is, is this a problem? The answer is: that depends. Depends on whether domestic and export beef demand rises to meet the challenge, and predicting that is like trying to catch smoke bare-handed.
Last year, beef stocks began to rise in June after bottoming in May. The same was true of beef stocks this year, although the bottom was much lower this year than last year.
Wholesale choice beef prices this year showed an exaggerated version of last year’s late-spring/early summer demand curve. Interestingly, a graph of the weekly USDA choice boxed beef price shows a price drop beginning in late June.
That’s an interesting correlation with prices for choice beef dropping at the same time that cold storage stocks began to rise.
BEEF PRODUCTION UP
Beef production so far this year was place by the USDA at 18.647 billion pounds, up 760 million, or 4.3%, from 17.887 billion last year. This might help explain the total amount in cold storage, but it doesn’t explain the counter-seasonal nature of the rise in stocks.
A look at weekly beef production data shows that weekly production exceeded last year by a greater amount in the period from February through early April and again in July through August. This helps explain part of the unseasonal nature of the rise in frozen beef stocks.
Beef production the second week of August, for instance, was 519.4 million pounds, 41.8 million, or 8.75%, more than last year’s 477.6 million. It also was 31 million, or 6.35%, more than the 2011-2015 average of 488.4 million pounds.
An unseasonal increase in beef production, coupled with a seasonal decline in beef demand could be all there is to the unseasonal nature of the amount of beef in cold storage.
CATTLE, BEEF RECAP
Three lots of cattle sold Wednesday on the Livestock Exchange video auction at $106.50 to $106.75 per cwt, up $1.75 to $2 from the previous week.
Cash trade was reported last week at $104 to $109.50 per cwt on a live basis, mostly $108, up about $2 to $4 from the previous week, and at $170 to $172 on a dressed basis, up $3.50 to $5.
The USDA’s choice cutout Friday was up $0.09 per cwt at $191.60, while select was up $0.32 at $188.73. The choice/select spread narrowed to $2.87 from $3.10 with 80 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday was $151.44 per cwt, up $0.33. This compares with Friday’s Sep settlement of $153.40, up $0.22, and the Oct settlement of $156.10, up $0.22.