Somewhat hidden within the discussion about the latest U.S. Department of Agriculture “Cattle on Feed” report was the amount of beef in cold storage revealed in the most recent USDA “Cold Storage” report, according to Josh Maples, Mississippi State University agricultural economist.
Frozen beef stocks on Aug. 31 were at 476.3 million lb., a 10.3% increase in stocks from July. On a percentage point basis, Maples said this was the largest July to August increase in stocks since 2002. It also followed moderate month-over-month increases for the previous three months, he added, noting that cold storage inventories typically increase seasonally near the end of the year and then decline into the summer grilling season months.
Maples explained that cold storage beef inventory is defined as frozen beef supplies maintained in commercial warehouses for more than 30 days and is reported for two categories: boneless beef and beef cuts. These inventories include a mix of boneless beef trimmings and muscle cuts, along with bone-in beef cuts.
According to the latest report, boneless beef represented more than 92% of the beef in cold storage in August. Additionally, each category showed a 10% or higher increase over July.
Maples noted that an overwhelming majority of the total beef produced in the U.S. never enters cold storage. “However, cold storage behavior can be indicative of overall market conditions and is worth watching when beef production is increasing,” he explained.
Cold storage inventories are primarily driven by the ground beef market and international trade, he said, adding that stocks may build up due to increased imports or to support greater export demand.
“While we have seen increases over the past few months, cold storage inventories have remained below 2016 levels on a monthly basis since February, despite increases in beef production,” Maples said.
Beef production in July 2017 was 4% higher than July 2016. However, the large increase from July to August 2017 still leaves inventories just below the August 2016 total at less than 1% lower. “Granted, cold storage inventories were large in 2016,” he acknowledged.
While beef in cold storage is only a small component of the total beef supply picture, however, Maples pointed out that year-over-year stocks are not rising, even with increased beef production.