April 23, 2007

 

Slow domestic demand escalates US pork stocks

 

 

The usual than normal rise in frozen US pork stocks in March showed that American pork market has lagged expectations which could weigh on hog futures prices this week, livestock analysts said on Friday (April 20).

 

A report from the US Agriculture Department (USDA) showed total pork stocks increased by 22.45 million pounds (lbs) from February despite a steep decline in ham stocks and pork belly stocks being under year-ago levels.

 

Pork stocks normally decline during March and the 10-year average decline is 1.7 million lbs during the month.

 

Dan Vaught, livestock analyst with AG Edwards said the figures would dampen bullish forecast associated with ham and belly numbers.

 

USDA put end-of-March total pork stocks at 505.65 million lbs, up from 483.2 million at the end of February and 505 million lbs last year.

 

Ham stocks fell a little more than 15 million lbs in March, but much of that was attributed to pre-Easter sales. USDA put ham stocks at 57.9 million lbs, down from about 73 million at the end of February and 57.27 million last year.

 

Pork belly stocks rose 8.6 million lbs to about 55.3 million lbs from 46.6 million in April and 61.6 million last year.

 

Senior livestock analyst John Kleist of the Top Third AG Marketing said the increase in pork stocks will allow meatpackers to be more cautious in paying up for cash hogs. He added the packers will likely use some of the buffer stocks to supplement needs while hog numbers ease seasonally.

 

Although the supply of pork bellies in storage was up from last month, it remained under last year and that may lend support to pork belly futures on Monday.

 

Analysts, however, were reluctant to speculate on the direction of lean hog and pork belly futures in the Chicago Mercantile Exchange lean hog and pork belly futures this week and felt that cash markets will likely give futures direction.

 

Frozen beef supplies declined about 24.7 million lbs during March compared with a 10-year average decline of about 10 million lbs. But analysts were mixed on what effect this number would have on live cattle futures.

 

Others felt the beef number should have plunged more to reflect the decline in cattle marketings during the month and the use of frozen stocks should have been higher, Vaught said.

 

Kleist said cattle marketings 6 percent under the previous year with beef having 25 million pounds under the previous month also indicate a slow demand for beef. He added the lower slaughter should have a bigger "draw-down in beef".