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Meat inventories on the decline

Agriculture.com Staff 05/28/2010 @ 1:15pm

The most recent Cattle On Feed and Cold Storage report (released on May 21) confirmed that supplies of meat continue to decline. More specifically, the Cattle On Feed report indicated that feedlots with 1,000 head or more onfeed, as of the May 1, were 3.4% smaller that the previous year and 5.7% smaller than the five-year average. Total beef, pork, and poultry cold storage stocks are running about 9.9% lower than the five year-average.

To break it down, boneless beef stocks as of April 30 were 9.3% lower than a year ago and 9.2% lower than the five-year average. Inventories of pork were 21.2% lower than a year ago and over 16% lower than the five-year average. Frozen chicken supplies came in at 95% of the 2009 figure, while turkey supplies were about 74% of last year's figure.

So what does it all mean? Obviously the availability of meat in storage is not as great as it once was. However, countering tightening supplies is a rally in the US Dollar along with a tough economic environment that probably will curb consumers' appetites for meats. (One can only guess what kind of rally may have been in store for the meat markets with a good economy and a weak dollar.) It is possible that both the economy and the dollar will make turns in favor of meat exports and usage at home. If this were to be the case, new all-time high prices could be established. Demand is the problem, not supply. For now, we will look for the markets to hold, yet until demand picks up; the most likely scenario for meat prices is to hold in a sideways to possibly higher pattern. The tightness of inventory will help to keep prices supported. While that is not guaranteed, it is unlikely that the market will re-visit substantially lower prices as supplies continue to tighten. Yet as a producer, the economic conditions in Europe and problems abroad could lead to a sell-off in almost any market. We highly recommend the use of put options for safety valves to establish price floor.

If you have questions or comments, contact Top Farmer at 1-800-Top-Farm, Ext. 129.

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

The most recent Cattle On Feed and Cold Storage report (released on May 21) confirmed that supplies of meat continue to decline. More specifically, the Cattle On Feed report indicated that feedlots with 1,000 head or more onfeed, as of the May 1, were 3.4% smaller that the previous year and 5.7% smaller than the five-year average. Total beef, pork, and poultry cold storage stocks are running about 9.9% lower than the five year-average.

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