CME: Talk of Lower Production in Markets

US - The USDA November supply and demand projections were released on Tuesday, 10 November and that gave us an excuse to again present the chart below.
calendar icon 11 November 2009
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There is a lot of talk about lower production, higher exports, lower imports but it all comes down to this: how many pounds of beef, pork or chicken will the US consumer decide to put away in 2010 and what those levels of consumption imply for overall US meat prices going forward. As the chart shows, the decline in US per capita meat consumption so far this year and the further declines expected for 2010 are unprecedented. If the USDA forecast for next year holds up, and some think it may be even a bit too optimistic, combined beef, pork and poultry per capita consumption in 2010 at 205.2 pounds (retail wt. basis) will have declined for the third consecutive year and be the smallest since 1993.

The broad and deep decline in per capita consumption is reflected in the outlook for individual species. USDA slightly lowered its estimates of US beef per capita consumption in 2009 and 2010. The November estimate of 2009 beef consumption was 61.3 pounds, compared to 61.5 in the October estimate and for 2010 USDA projects beef consumption to be 60 pounds, a 2.1 decline from the already low 2009 levels and a full 10 per cent lower than the 10 year average 1998-2007.

The decline in consumption for 2009 reflected the fact that USDA lowered its estimates of US beef imports for 2009 by 45 million pounds while also raising estimates of US beef exports by 95 million pounds. This implies a net 140 million pounds that will not be available for consumption in the domestic market. USDA increased its estimate of US beef production for 2009 by 69 million pounds to 25.976 billion pounds and that helped offset some of the reduction in domestic supply. The upward revision in beef exports was likely influenced by the positive developments in export access to the Taiwan market as well as improving sales to a number of other trading partners.

A weak US currency, improved credit markets and an expected global economic recovery should be supportive of US beef exports in 2010. USDA raised its 2010 beef export forecast by 80 million pounds to 1.925 billion pounds, a 5.5 per cent increase from 2009 levels. On the other hand, 2010 beef imports were lowered by 80 million pounds to 2.795 billion pounds, which still represents a 3 per cent increase from 2009 levels. In the case of pork, the USDA November report contained very small changes. Pork production for 2009 was increased slightly by 43 million pounds to 23.073 billion pounds, now 1.3 per cent lower than a year ago but still the second largest amount of pork ever produced.

Pork production for 2010 was left unchanged at 22.455 billion pounds, 617 million pounds or 2.7 per cent less than 2009 levels. Pork exports for 2009 were lowered slightly by 25 million pounds to 4.135 billion pounds and left unchanged at 4.450 billion pounds for 2010. While beef and pork production are the two most watched numbers on the livestock side, in terms of prices it likely makes just as much sense to also look at broiler production. USDA currently expects broiler output to increase by 463 million pounds or 1.3 per cent in 2010. It is not an incredibly aggressive forecast but one that will depend greatly on what happens with feed prices and foodservice sales.

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