Pork stocks in U.S. warehouses in September soared to a record high for that month, a government report showed on Monday, a sign that the rush to market hogs this summer due to high feed costs may mean fewer hogs and less pork next year.
The bulk of the price gains could come in the second half of next year, analysts said.
"We slaughtered lots of hogs during September, far more than expected, with a good chunk ending up in cold storage," said University of Missouri economist Ron Plain.
The U.S. Agriculture Department on Monday reported end-of-September pork stocks at 630.7 million pounds, up 8 per cent from August and up 28 per cent from last year. It was the fifth straight monthly record.
Leading the way was the tally for hams at 213.9 million lbs, an all-time high for any month. Pork bellies also jumped 79 pct from a year earlier to 16.9 million lbs.
More hams landed in cold storage facilities for the upcoming holidays. And some were concerned that high prices for bacon last summer slowed demand for product, backing bellies up in storage.
Fewer hogs, less pork
"Retail pork prices will begin to move up modestly through next April or May, and a rapid increase in the last half of 2013, due to the reduction in the breeding herd," said University of Purdue livestock economist Chris Hurt.
He sees retail prices for pork to remain steady to higher into the end of the year.
The retail pork price in September was $3.50 per lb, compared with $3.52 in August and $3.56 a year earlier.
Pork prices have come down, but not as much as some had anticipated given the glut of supplies.
"It’s the in-between costs, getting product from the farm gate to the dinner plate, that adds up and generally doesn’t go down, but goes up over time," said independent market analyst Bob Brown.
He said any subsequent retail pork price increases may be more associated with continually rising marketing costs — everything from transportation to packaging of the product — and less so because of eventual tighter hog numbers.
Pork month pick up slack
Linn Group analyst John Ginzel said pork was heavily featured in grocery stores when prices declined in the middle of September through October, the latter being National Pork Month. That will begin to wind down soon, he said.
"We’re still are running fairly decent hog numbers and sizable Saturday kills that appear will be the case for another week or two," said Ginzel. "I suspect a lot of that product is going into freezers.
In September, packers processed 2.4 per cent fewer hogs that resulted in a 2.2 per cent decline in pork production, both compared with a year-earlier periods. This was because of two less days to process pork last month.
Still, pork production from January through September was estimated to be up 2.6 per cent versus a year earlier.
The industry is likely stockpiling bellies for use during the summer bacon-lettuce-and tomato season. Meanwhile, ham stocks may start to come down soon in preparation for Thanksgiving and year-end holidays, said Ginzel.
He said the high pork supply could be due to some large retailers storing items like ribs to sell during the spring and summer. He did not believe meat packers were storing pork supplies in order to sell when prices are expected to be higher next year.
The United States has more than 1,500 public and privately owned cold storage facilities with a combined capacity of almost 4 billion cubic feet.
Storage length varies depends on the cut of pork, product quality, how it is frozen, fat content and whether that product has been cured, said Ginzel.
Some pork can be stored for eight months at zero degrees Fahrenheit or 10 months at minus 20 degrees Fahrenheit, according to the World Food Logistics Organization (WFLO) Commodity Storage Manual. Cured product such as ham and bacon can be stored for four months at zero degrees Fahrenheit or six months at minus 20 degrees Fahrenheit.