Frozen Meat Stores Climbing

Cattle and hog futures prices were expected to remain soft today, a continuation of late-day action Tuesday after the USDA’s monthly Cold Storage report revealed total US frozen red meat supplies on Aug. 31 were up 3% from July and up 26% from last year.

Month-to-month poultry supplies were down slightly, but stocks were up 13% from a year ago.

 

BEEF SUPPLIES GROWING DESPITE LOWER PRODUCTION

 

Total pounds of beef in US freezers was up 2% from July but were up 36% from a year earlier in spite of lower beef production.  The USDA said in another report that year-to-date beef production as of last week was down 4.3% at 16.6 billion pounds from 17.3 billion a year earlier.

On a percentage basis, boneless beef in cold storage was up 39% from a year ago at 430.0 million pounds from 308.4 million.  This compares with the 6% year-over-year rise in beef cuts on hand at 40.4 million pounds, compared with 38.2 million a year earlier.

The increase in the amount of frozen beef on hand despite lower slaughter rates and lower beef production shows that beef buying interest is down.

Whether lower domestic beef buying interest is related to slow earnings growth, high retail prices or both is debated among economists, but economic statistics show that real earnings are growing, even if paychecks aren’t.  Foreign buying interest can be tied to a rising US dollar.

 

PORK SUPPLIES RISING WITH PRODUCTION

 

Total pounds of pork in US freezers was up 4% from July but were up 21% from a year earlier as production rises.  The USDA said in another report that year-to-date pork production as of last week was up 7.4% at 17.2 billion pounds, compared with 16.0 billion a year earlier.

At one time, the amount of pork bellies, from which bacon is made, was the single most important piece of information about the cold storage report.  This has changed over the years as traders pay more attention to the rise and fall of other cuts and their relationship to competing meats.

On a percentage basis, amount of nearly every cut in cold storage at the end of August was up sharply from a year earlier, with bellies and butts the clear losers, showing buying interest for these products remains strong, even though it is not keeping up with production of other cuts.

The poundage of pork bellies on hand was down 70% from a year earlier at 13.7 million pounds from 45.6 million.  Butts in cold storage also were down 15% at 20.1 million pounds from 23.8 million a year ago.

The total amount of pork loins on hand was up 54% from a year earlier at 32.1 million pounds from 20.9 million a year earlier  Compared with July, however, total loin storage was down 5% from 34.0 million.

Total ham stores were up 32% from a year ago and up 16% from a month earlier at 237.5 million pounds.  At least some of this gain may be related to reduced exports to Mexico

 

CASH FED CATTLE TRADE QUIET

 

No cash cattle trade remained quiet through Tuesday with no trades reported.  Bids were posted at $206 to $208 per cwt in Nebraska’s dressed market, well below last week’s traded range of $214 to $215.  Asking prices were holding around $215.

In live-basis markets, no bids were reported with asking prices posted at $138 per cwt.  Last week, cattle traded at $135 to mostly $136 per cwt.

The USDA reported lower boxed beef prices Tuesday with its choice cutout down $2.77 per cwt at $222.77 and select off $3.36 at $216.79 with 139 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $196.91 per cwt, down $1.13.  This compares with the Sep futures settlement Tuesday of $195.70, up $1.00.