CME: Beef Sales Driving Pork and Poultry Markets?

US - CME's Daily Livestock Report for 23 October 2008.
calendar icon 24 October 2008
clock icon 4 minute read

Part of the debate currently going on in the market is how significant has been the impact of the strong US dollar on US beef, pork and poultry exports to the rest of the world. It has been our contention that US meat exports will take a significant blow. But, because of the speed with which currency markets have collapsed and the month and a half lag in US reporting of export data, it is very difficult to back up such assessments with up to date information (unless you are a packer actively trading in export markets).

There is one exception, however. Thanks to a congressional mandate put in place back in the 1970s, USDA does collect and report weekly export shipment data for fresh, frozen or chilled cuts of beef. A quick look at the latest export numbers shows that the beef export picture has deteriorated significantly in the last few weeks. As the top chart to the right shows, total US beef shipments have declined from roughly 15,000 MT per week in late August to about 7,000 MT last week. A big reason for this has been the sharp cutbacks in Mexican purchases of US beef. Shipments in the last reported week were about 1,500 MT, compared to almost 6,000 MT back in July. Exports to other markets, especially Korea, have beef mixed. Shipments to Canada, another large market for US beef, are down by more than 50% compared to the peak in late July while exports to Korea at just a little under 3,000 MT per week are down from the 4,500 MT shipment levels in early September but still very strong, indeed making Korea the top market for US beef at the moment.

One surprise for US were shipments to Japan. Because the Japanese yen has gained ground vs. the US currency in recent weeks, we thought this would have been positive for exports to that market. Shipments to Japan in the last reported week were 869 MT, sharply lower than the 1,800 MT per week levels registered in late June but still some 37% higher than year ago levels for the comparable week.

Can the recent performance of US beef exports provide a clue as to how pork and broiler exports are doing? Maybe, but clearly one cannot be sure. We are quite concerned with exports to Mexico, which has seen a sharp devaluation of its currency in October. It currently takes 13.6 pesos to purchase 1 US dollar, compared to about 10 pesos in early August, a 37% increase. Other developing markets, including Russia, have also seen a significant decline in the value of their currency, making US meat purchases much more expensive in the process.

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