October 21, 2010

US pork stocks drop 26% to nine-year low

Pork supplies stored at US warehouses from August were down 26% from a year ago - the lowest in nine years due to low inventories and lower production this summer, analysts said.

An increase of 2 million to 15 million pounds is seen during September, the analysts said ahead of the USDA's cold storage report, which will be issued on Friday (Oct 22).

If stocks do rise, it would be the first increase after seven months of declining frozen pork supplies.

"This is the lowest end-of-September numbers since 2001," said Rich Nelson, director of research at Allendale Inc, who estimated total stocks at 387 million pounds.

"It also implies a two million pound increase from the previous month. Typically stocks increase by 22 million pounds. We see the smaller-than-usual increase due to sharply lower pork production in September," Nelson said.

Reduced pork production amid the seasonal drop in the pace of hog slaughter this summer and strong demand for pork during the summer kept pork stocks low. The average pork price rose to an all time high late in August due to the strong demand.

Analyst estimates for end of September stocks ranged from the 387 million to about 400 million pounds. That would indicate a range of increase of two million to about 15 million pounds from the 384.9 million that was reported at the end of August. Stocks stood at 528.7 million pounds a year ago.

"The Cold Storage stocks on pork was incredibly low at the end of August," said Ron Plain, livestock economist at the University of Missouri. "The product just started to go in at the end of the month," he said

Seasonally, demand drops off for bellies once it becomes too late to cure them into bacon and sell them in summer's bacon-lettuce-tomato sandwich season. Ham stocks grow in the fall as the industry stores hams for Christmas and New Year holidays.

Traders and analysts also noted that Mexico pulled back on its ham buying during September after prices ran up record high levels in August.
 

The increase in pork stocks appears to rising even faster going into October. Limited estimates on beef stocks showed a 10 million pound increase during the month, which was close to the normal rise for the industry of 13 million pounds.