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CME: Meat, Poultry Inventory Down

23 July 2012, at 2:30pm

US - USDA’s Cattle (Inventory) report indicated that July 1 U.S. cattle numbers were lower than expected across the board and will thus likely be bullish for cattle futures price on Monday, write Steve Meyer and Len Steiner.

As can be seen at right, total cattle inventories on July 1 numbered 97.8 million head, 2.2% lower than last year and 0.8% lower than the average prereport expectation. The beef cow herd continued to decline in the face of limited pastures and, now, higher feed costs. The 2.9% fall from July 2012 was 0.8% larger than expected and the 39.7 million beef cows on U.S. farms and ranches is the lowest number ever for the July report which dates back to 1973. And there is no help on the way as the number of beef heifers being retained was equal to last year’s very low 4.2 million head and sharply lower than analysts’ expectations. All classes of young, non-breeding cattle showed numbers lower than expected.

There was a total of 37.5 million other heifers, steers, bulls and calves outside of feedlots on July 1. This “feeder cattle supply” was 3.3% lower than last year. Finally, the first estimate for the 2012 calf crop was sharply lower than analysts’ expectations. The forecast crop of 34.5 million calves would be the smallest annual calf crop since 1942.

USDA’s Cattle on Feed report contained numbers VERY close to analysts’ pre-report estimates and will likely be neutral to Live Cattle futures on Monday. There were 10.71 million head of cattle in yards with over 1000 head capacities, 2.7% more than last year. Note that the inventory of cattle in all feedyards (from the top table) was up only 0.8% versus last year indicating a growth in the share of cattle on feed held by the larger lots. It also supports the continuation of lower steer/heifer slaughter relative to COF report inventories. Placements in June were 1.8% lower than last year’s drought-enhanced level. Of course the big drought-driven wave came in July last year. Will it do so again? Conditions in the Southwest are much better this year but those elsewhere are worse. And who want to place cattle and feed them $8 corn? It’s not a very attractive choice this year.

Finally, USDA’s July Cold Storage report indicates some reductions of freezer inventories during June. Data for meats and poultry appear on page 2. Some key figures are:

Total meat/poultry inventory of 1.089 billion pounds on June 30 was 6% lower than at the end of May. That’s the good news. The bad news is that this was still 14.7% higher than last year.

The total pork inventory was 7% lower at the end of June versus the end of May. The amount of every cut except hams fell during the month. Again, that’s the good news. The bad news is that the 591.7 million pounds in freezers on June 30 was still 19.5% higher than one year ago and a record high for June. Bellies and ribs were the categories with the largest inventory reductions at 16.6 and 18.6 million lbs., respectively.

Chicken inventories grew slightly during June. The 647.3 million pounds in freezers on June 30 was 0.9% higher than at the end of May. Unlike the pork situation, that is actually the bad news for chicken. The good news remains the much lower level of frozen chicken on hand relative to one year ago — 14.4% less to be exact. Breast meat stocks are down 33% from last year while leg product stocks are 23% lower.

The story on beef is much like that for pork — Lower than at the end of May but higher than last year. The year-on-year increase for beef is not as large as is that for pork but the June 30 stock of 470.8 million pounds is the largest ever for that date. Boneless beef stocks are 27.2 mil. lbs. higher this year.