Friday’s Cold Storage report was not wildly bullish, but was certainly good news regarding the status of frozen meat and poultry inventories. Stocks for every species were well below year-ago levels and lower than the already-low levels reported in the December report. Data for all meat and poultry species appears in Table 1 and the monthly species totals are shown in Figure 1 to provide a historical perspective.

Total meat and poultry in freezers on Dec. 31 amounted to 1.813 billion pounds, 19.1% lower than one year ago and 1.2% lower than last month. That remains the lowest monthly inventory since November 2003. Stocks of pork and beef are about the same as at that time, but chicken inventories are 100 million pounds lower and turkey inventories are almost exactly 100 million pounds higher now than in November 2003.

Turkey Totals
The big driver of the year-over-year decline in total meat protein stocks is turkey, whose stocks were nearly 146 million pounds (36.8%) lower than last year. They were 6.7% higher than stocks at the end of November 2009, but they are still not back to the levels held at the year-end of 2005 and 2006.

Turkey inventories are in far better shape heading into 2010 than they were last year, when I pointed out that they could easily become problematic. The reduction in stocks, of course, was driven by a sharp drop in turkey production. While monthly data for December (and thus 2009 as a whole) are not yet available, weekly production data indicate that 2009 turkey production was 6.9% lower than 2008.

Pork Belly, Rib Supplies Up
The reduction in pork tonnage in freezers was led in percentage terms by ham stocks (down 32.8%, 24.334 million pounds) and in tonnage terms by “other” pork (down 24.711 million pounds, 23.4%). Only bellies and ribs inventories were higher than one year ago on Dec. 31 at +12.3% and +15%, respectively.

The ham category showed the largest reduction during December. Stocks fell by over 33 million pounds or 40.2% from November levels, a draw-down that fits with anecdotal reports of very good ham exports at year’s end.

Chicken Supplies Generally Down
Chicken inventories continued to decline in December and their status will be quite important in 2010. The situation with Russia will be key to that status and the news, so far, has not been positive. I don’t know how much Mr. Putin actually knows about chicken and chlorine, but the fact that he saw fit to comment on the topic in such a forceful manner last week is, to me, not a very good sign.

The only chicken product for which freezer inventories were higher on Dec. 31 was thigh meat at +44.1%. But note that this category accounts for less than 4% of the total, while “other” chicken accounts for over half and breast meat accounts for about 20%.

It is probably better to consider all of the dark meat chicken products (drumsticks, leg quarters, legs, thighs and thigh quarters, and thigh meats) together since their supplies are directly linked and prices will adjust to demands for the specific pieces and parts. Stocks of chicken hind-quarter products on Dec. 31 were 110.8 million pounds, 30.6% lower than last year but 6.1% higher than on Nov. 30. This category may be quite important as the Russian saga plays out.

Beef Supplies Mostly Steady
Finally, beef stocks exhibited an unusually large year-on-year decline in December, primarily due to the lack of a normal seasonal increase in 2009. As can be seen in Figure 1, beef stocks normally grow through year’s end. The seasonal pattern applies to both beef cuts and boneless beef, but due to the relative size of the boneless category, is primarily driven by the latter. The USDA data indicate that boneless beef inventories have simply not grown this year.

All in all, this report was a positive for meat and poultry supplies heading into the new year.

Click to view graphs.

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