Although there’s been plenty of talk in recent weeks about inventory building ahead of Proposition 12, Steiner Consulting Group’s chief economist Altin Kalo says this does not seem to be backed up by the data.
Pork inventory depletion in June was bigger than in previous years, he points out. Ongoing concerns about Proposition 12 eligibility may be to blame, but he believes higher prices also contributed to this.
Source: Daily Livestock Report
Total pork in cold storage at the end of June was 490.2 million pounds, 9.1% lower than a year ago and 6.5% lower than the five year average. Inventories declined 7.8% m/m compared to an average 3.9% decline in the past five years.
“Ham inventories normally increase in June but that was not the case last month, with inventories only slightly higher than in May and now 1.2% lower than a year ago. This may be construed as bullish for ham values in Q3,” Kalo says in the latest Daily Livestock Report.
Belly inventories declined 14.5% compared to the previous month. In the past five years, the inventory drawdown in June averaged 9%. But belly inventories started from a much higher level and they are still about 33% higher than a year ago, he says.
“For now the larger inventories do not appear to be an issue as those that own that supply are likely looking to support California demand into the fall. Inventories of pork ribs were sharply lower as users sought to capitalize on the runup in price and cashed out of their position,” Kalo says.
Total rib inventory at the end of June was 62.7 million pounds, 42% lower than a year ago. Pork trim inventory also declined 12% m/m, compared to an average 5% drawdown in the last five years.
“Lower inventories combined with the seasonal decline in supply during July has resulted in sharply higher pork trim prices recently. Different from beef, USDA does not provide a regional breakdown of inventory numbers,” he says.
Export outstanding sales are up by double digits from a year ago, which would mean there is more pork staged for export than last year.
“The implication is that pork inventory available for domestic us may be even lower than top line numbers suggest,” Kalo says.
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