CHICAGO (Reuters) - Total U.S. pork and beef warehouse stocks unexpectedly declined last month versus May as seasonal grilling helped offset trade issues and abundant domestic meat output, analysts said after Monday’s U.S. government cold storage data.
The U.S. Department of Agriculture’s monthly cold storage report showed total pork inventories for June at 560.0 million pounds, down nearly 64 million from May - the second largest-ever withdrawal for the month, analysts said.
Two key components, pork bellies and ribs, declined 10 million and 30 million pounds, respectively.
“I’m surprised that they sold so many bellies and pulled out a lot of ribs. They’re not a problem as I was viewing they potentially could be,” said Linn & Associates vice president John Ginzel, citing U.S. production and trade challenges.
China slapped extra tariffs on U.S. pork in response to higher duties imposed by U.S. President Donald Trump on Chinese steel and aluminum.
Mexico is allowing in duty-free U.S. pork under a quota system despite retaliatory measures taken after Washington imposed tariffs on Mexican steel and aluminum imports.
It comes at time of historically high U.S. hog production and a record July 1 cattle feedlot supply.
Ginzel attributes the strong pork belly and ribs storage removal to increased retail featuring of ribs for outdoor cookouts. The country’s summer bacon-lettuce-and-tomato sandwich season is also under way.
“It relieves some of the bearishness for the pork sector. But we have a lot of pork to come at us yet,” Ginzel said.
Rich Nelson, chief strategist with Allendale Inc, said exports were clearly disrupted, but that significance has not yet appeared in USDA’s data.
“It is a problem and it is a concern for us. But I don’t think it’s Armageddon in the big picture,” Nelson said.
Monday’s USDA cold storage report for June included total beef inventories at 448.6 million pounds, a drop of over 16 million pounds.
Boneless beef, the biggest component of the beef stocks category, fell 19 million pounds during the month versus the five-year average decline of 2 million, according to independent market analyst Bob Brown, who noted that boneless beef is processed into hamburger, a backyard summer grilling staple.
He also pointed out that China’s tariff on U.S. beef was not as influential because China had only opened its borders to beef from the United States in June 2017 after a 14-year absence over mad-cow disease fears.
Reporting by Theopolis Waters; Editing by Leslie Adler