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Counter-Seasonal Decline is Good News for Pork

USDA’s Cold Storage report, released last week, continues to indicate that supplies are at least “current” at present. The cold storage data appear in Table 1.

Total meat and poultry in freezers amounted to 1.86 billion pounds on Jan. 31. That was 3.5% higher than one month earlier, but 17.1% lower than one year ago. All four of the major species contributed to the decline with turkey leading the way in both pounds (169 million) and percentage (-37.5%). Pork was second in both categories, trimming total freezer stocks by 111.3 million pounds and 18.3% vs. one year ago. Chicken stocks continued to fall as well, declining 10% or 69.1 million pounds from January 31, 2009.

USDA estimates that there were 495.6 million pounds of pork in freezers on Jan. 31. That is 5.2% more pork than one month earlier and it represents the first month-to-month increase in pork inventories since last April. That is a very unusual circumstance, since pork stocks usually begin growing in September and swell in the fall of the year when hog numbers are high. The counter-seasonal decline in stocks last fall leaves supplies quite current as we go into spring and expected lower slaughter runs. That factor should be supportive of pork and hog prices.

Freezer inventories of every pork cut except ribs and butts were lower than one year ago. Ham inventories were down 15.4% (13.5 million pounds), while belly stocks were 22.5% (15.58 million pounds) lower. As with most months, the “other” and “unclassified” categories accounted for some of the largest actual inventory numbers but, again, both declined sharply (by 22.9 and 26.8%, respectively) relative to last year.

Chicken companies continued to keep freezer stocks low relative to historic levels and they were roughly steady relative to Dec. 31. One concerning number is leg quarters stocks that grew by roughly 27 million pounds (23.2%) during January as the United States and Russia wrangled over Russia’s decision to block imports of U.S. chicken due to our use of chlorinated water in processing. While stocks grew during the month, leg quarter prices have been remarkably steady indicating, in my opinion, that the “market” expects a solution to be reached.

Finally, last week marked the first week since Christmas that actual federally inspected (FI) hog slaughter was as large as what I had forecasted, based on the December Hogs and Pigs Report. The 2.163 million head was 0.7% lower than last year and equal to the prior week. Slaughter for the eight weeks ending last Friday numbered 17.213 million head, 4.5% lower than last year and 2.7% lower than the level suggested by the December report. Note in Figure 2, though, that actual slaughter has been inching closer and closer to both expected and year-ago levels for the past few weeks.

Some of the pigs that have not shown up at market may still be on farms, but it appears that the December inventory numbers were high – at least for market inventories. The question now is whether it was just high in the categories for pigs weighing 60-lb. and more, or if the error extends to lighter categories and farrowing intentions. All eyes will now turn to the March Hogs & Pigs report set to be released on March 26. The survey for that report hits the field this week.

Canadian Hog Count Snafu
It doesn’t help much to check your work when you make the same mistake – twice! Such was the case with my statement last week regarding hog number declines in Ontario and Quebec. In fact, it was Ontario – as expected – that saw the largest year-on-year total inventory decline (7.6%) among Canada’s major pork-producing provinces. Quebec’s herd fell by only 2.6%. As with the all-Canada numbers, though, the sow herd reductions (-3.3% in Ontario, -0.9% in Quebec) were much smaller than the total inventory reductions in both provinces.

Click to view graphs.

Steve R. Meyer, Ph.D.
Paragon Economics, Inc.