Freezer space is at a premium with pork supplies in cold storage at record levels. By April, there were 543 million pounds of pork in storage.
According to the National Agricultural Statistics Service, as of April 1, frozen pork supplies were 21 percent higher than for the same period in 2005. Pork belly stocks were up 62 percent from last year.
Those are big gains.
“This indicates a miscalculation. Either the market ended up producing more pork than expected or demand is weaker and we’ve been pricing pork too high,” says Ron Plain, agricultural economist, University of Missouri. “I think it’s the latter.”
Consumer demand for pork was fabulous in late 2003 through 2004, notes Plain, but it had started to soften as of the first quarter of this year.
There’s also a lot of chicken going into cold storage, 11 percent more than last year. Beef’s cold storage supplies are starting to increase, but are still 10 percent below 2004’s levels.
Another reason for pork’s cold storage buildup is that live-hog weights are super heavy — 280 pounds or higher — which results in more pork per hog then when weights are lighter.
Barrow/gilt carcass weights through mid-April averaged 200 pounds, which Plain points out is an all-time record high. He believes that live-hog and carcass weights will continue to run heavy all year, barring a dry summer and expensive feed.
If pork’s cold storage build-up continues and demand softens, Plain says packers will probably cut prices on wholesale cuts, meaning they can’t bid quite as high for live hogs.
Seasonally, April 30 is pork’s cold-storage inventory peak of the year. “We tend to have fluctuations,” says Plain. “Supplies could go back down.”
“Right now, we have slightly more than 30 percent of our monthly pork production in storage,” adds Steve Meyer, president of Paragon Economics. “It peaked at 40 percent in 1999, but it’s been running 25 percent to 35 percent of production for the last five years. Of course, we do expect to have more in cold storage since we’re producing more pork.”
On a positive note, U.S. pork exports are still going strong. First-quarter exports are running 22 percent above last year’s levels. If exports continue to climb, it could ease cold-storage supplies and keep hog prices strong.
The determining factor will be the amount of expansion by U.S. pork producers. Meyer expects some expansion, but says it’s too early to tell how much. Normal sow-herd growth out of a profitable hog cycle is 4 percent. Add in productivity trends and you can figure on 6 percent more pigs; with heavy market weights, it could equal 7 percent more pork. That’s not far from the 10 percent increase in 1998 that led to record low hog prices.