Frozen stocks have been running significantly higher than last year for not only pork, but beef and poultry as well, according to USDA's Cold Storage reports.
Looking at the May report, frozen pork stocks were up 31 percent from supplies reported in the May 2001 report, with bellies up 44 percent. Frozen beef supplies were nearly as high, with a 29 percent increase over a year ago. Poultry stocks were up 30 percent over 2001 levels, as well.
Large stocks of all three meats have led to a war in the grocery store. Each type of meat is lobbying for retailers to run specials to help move their particular mountain of meat. That in turn causes packers to drop their bids on live animals – especially if they are having trouble moving the product.
"The No. 1 effect of large cold storage stocks is a drag on live-hog demand," says Ron Plain, University of Missouri agricultural economist. "If there is a lot of pork in storage, packers have little incentive to bid up hog prices."
Having pork, beef and chicken with large stocks is highly unusual, and a coincidence that's weighing on the pork market. It, and the Russian embargo on U.S. poultry imports, are the most commonly cited reasons for the current meat backlog.
The Russian embargo was officially lifted on April 15, but only three ships carrying U.S. chicken have cleared port in Russia between April 15 and late May, says Richard Lobb spokesperson for the National Chicken Council.
"Russia was U.S. chicken's No. 1 export market, taking about 38 percent of our exports," says Lobb. "In 2001, we sent about 90,000 tons of product to Russia each month. The last time we were even close to that total was in February."
The excess product has hampered retail chicken prices, especially on leg quarters. Russia typically buys about 15 percent of all U.S. leg-quarters, says Lobb. Breast-meat prices have remained fairly stable, which may indicate that chicken is taking a bite out of domestic beef and pork consumption.
However, retail beef prices were soaring to record levels during that same period. April's average beef price across all cuts was $3.06 a pound – just 2 cents off the record-high, which came in February of this year, says Dave Weaber, Cattlefax director of research.
Cold storage is not as big of an issue for beef as it is for pork because most beef in storage is ground meat, says Weaber. Other cuts make up 75 percent to 80 percent of production.
"Psychologically, large supplies are a factor, but otherwise cold storage doesn't mean too much for beef," says Weaber.
Retail data from April shows that pork retail prices were 3.4 cents higher than in April 2001, notes Plain. That's despite lower live-hog prices and cutout prices.
Plain expects to see May retail pork prices at levels below a year-ago levels once those numbers come in.
"Historically, retail pork prices peak in August with the summer grilling season, but don't look for much of a summer rally this year," he says. "Look for retail pork prices to move sideways as we go through the summer."
There is now a 1.5-week supply of pork in cold storage, but it will take until about Labor Day to work that through the system. Plain expects lighter hog slaughter weights to develop due to the summer heat, which can help reduce the amount of pork on the market.
However, the other meats, may not clear out their frozen stocks as quickly as pork. The Russian situation leaves poultry shrouded in questions, while beef is not expected to be moving product out during the next few months.
How the grocery-store battle plays out will influence the prices you receive for live hogs. The unexpected competition from cheap chicken has left packers bidding low for live hogs that are difficult to move as pork products.
Hopefully for pork, chicken exports to Russia will resume and consumers can turn their attention to other meats and begin to work through the large pork supplies during the summer grilling season.