CME: Trade Flows Critical for Meat Protein Prices

US - An increasingly larger share of US beef, pork and poultry production now goes to export markets, making trade flows a critical driver for meat protein prices, write Steve Meyer and Len Steiner.
calendar icon 13 December 2012
clock icon 4 minute read

Based on the latest USDA December estimates, beef exports in 2013 will account for 10% of US beef production, while pork and broiler exports will account for 24% and 20% of production, respectively. The announcement by Russia recently that it would stop purchases of US beef and pork until/unless such shipments are accompanied by a USDA certification that the product is free of the feed additive ractopamine, is only the latest reminder of the inherent vulnerability of export demand. It is a key wild card that introduces significantly more price risk and volatility.

With that in mind, let’s look at the October trade data, released by USDA yesterday morning (Tuesday Dec 11). Please note that all data is reported in metric ton and shipped weight basis. Total beef and veal exports for the month were 73,397 MT, down 2,711 MT or 4% from a year ago. It was the 10th consecutive month that US beef exports have posted a year over year decline, driven in large part by a sharp reduction in trade with Mexico, S. Korea and Vietnam. Beef price inflation has caused Mexican buyers to replace beef purchases with more pork and chicken. Beef exports to Mexico in October were just 7,366 MT, 5192 MT or 41% less than a year ago. On the other hand, US pork exports to Mexico increased by 10,489 MT or 35% compared to last year and broiler exports were 17,255 MT or 48% larger than last year. Beef exports to Asia have been mixed. October shipments to South Korea were 6926 MT, 2426 MT or 26% smaller than a year ago. Exports to Vietnam, declined 1835 MT or 47% from last year.

The reduction in exports to Vietnam comes at a time when China has accelerated its overall beef exports. While China continues to limit its purchases of US beef, it has accelerated beef purchases from Australia and new Zealand, with China becoming the fourth largest market for Australian beef in October and November. But despite the reductions in exports to these key markets, not all is negative for US beef. Some markets continue to grow. Canada was the largest market for US beef in October, importing about 17,968 MT of beef, 4,639 MT or 35% more than the same period a year ago . On the other hand, US imports of Canadian beef declined 12,341 MT or 57%. This was in part due to the suspension of shipments from the XL plant in Alberta although the overall trend has been for Canada to export less beef to the US and import more. Beef exports to Russia in October were 6,424 MT, about 1,724 MT or 37% larger than a year ago.

US pork exports in October were 168,913 MT, about 7000 MT or 4% larger than a year ago. US pork exports increased despite a 62% decline in shipments to China/Hong Kong. Exports to most other markets increased. Exports to Russia were 11,450 MT, 5,435 MT or 90% larger than a year ago. Year to date exports to Russia account for about 1.3% of all US pork production compared to 0.8% of US pork production in all of 2011. US broiler exports for the month were 290,145 MT, 15,637 MT or 5% smaller than a year ago. Higher exports to Mexico were offset by big declines in exports to Hong Kong (- 76%), S. Korea (-44%), Japan (-76%) and Russia (-15%).

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