Andrew Griffith, ag economist for the University of Tennessee, says the latest monthly cold storage report contained some interesting information for the beef supply and prices.
“Though the information is not surprising, it does confirm many industry expectations and thoughts,” he says in his weekly market update. “The quantity of beef in cold storage at the end of May was 414 million pounds. This is the lowest monthly quantity in two years and the lowest level for May since 2017.”
Griffith says this trend of less beef in cold storage reflects the recent desire to cash in on high beef prices.
“The extremely strong cutout prices in April, May and early June resulted in many participants pulling meat out to capitalize on strong wholesale and retail values,” he says.
The seasonal perspective is also something to consider, Griffith says. Beef in cold storage may go up in the coming months.
“From a seasonal standpoint, beef in cold storage can be expected to increase moving through the second half of the year,” he says.
Griffith says the pork in cold storage data is also part of the overall meat supply and price picture.
“The quantity of pork in cold storage has been relatively flat the past 12 months and currently sits at 461 million pounds, which is a slight increase from April and a slight decrease from May 2020,” he says. “The quantity of red meat in cold storage would indicate that meat supplies are manageable at this time.”
Griffith cautions that inflation could also affect the meat storage situation.
“However, if inflation takes off or the value of the dollar increases then exports may soften and result in more meat in cold storage,” he says.
There are several other factors that could affect the meat situation going forward and contribute to overall volatility, Griffith says. These include drought in the Western states and the Great Plains, wide variation in corn prices and continued strong meat demand. He says the markets may not follow seasonal trends, but there could be marketing opportunities in the second half of the year.
“The volatility and the fundamental aspects of the market are setting up a contra-seasonal market,” Griffith says. “This means the seasonal tendencies of markets may not hold the next several months. Producers will have to be active marketers through the summer and early fall to take advantage of the opportunities presented.”