U.S. beef exports continue setting records

Wet weather hampers auction demand

Calf and feeder cattle prices softened this week, pressured in part by wintry, wet and muddy conditions across wide swaths of the nation that limited livestock movement and demand.
“Some areas of Missouri received 8-10 inches of rain,” explained analysts with the Agricultural Marketing Service (AMS). “Travel conditions were poor in Nebraska and South Dakota after rain and snow in some areas left backcountry roads impassable. Significant flooding has occurred in the Midwest. The swollen Mississippi River north of St. Louis is making grain shipments difficult, as well. There were limited receipts from the Carolinas and Florida due to Hurricane Michael.”
Steers and heifers sold $1-$5 per cwt lower nationwide, except for weak to $2 higher in the North Central Plains, according to AMS.
Moreover, Andrew P. Griffith, agricultural economist at the University of Tennessee, says in his weekly market comments, “As expected, lightweight calf prices are slowly declining as the market moves through the month of October. However, prices are not declining as rapidly as is the seasonal tendency.”
Cattle futures moved lower much of the week, amid technical correction, sharply lower outside markets—tied to investor fears about rising interest rates—and plenty of wonderment about near-term direction. Firming grain prices at the end of the week added more pressure to Feeder Cattle futures.
Week to week on Friday, Feeder Cattle futures closed an average of $3.94 lower ($3.07 to $4.62 lower).
Seasonally speaking, negotiated cash fed cattle and wholesale beef prices should be on the cusp of climbing higher. In the meantime, fed cattle prices continued to putter along the well-worn, mostly steady track of recent week.
Negotiated cash fed cattle trade was mainly steady to weak with live sales at $111 per cwt in the Northern and Southern Plains; mostly $2 lower in the western Corn Belt at $108. Dressed sales were $1 lower at $174.
Week to week on Friday, Live Cattle futures closed an average of $1.66 lower ($1.25 to $2.12 lower).
“Fed Cattle prices normally have upside potential this time of year, however muddy pen conditions in all major feeding regions have left many fed cattle owners willing sellers at steady money recently,” AMS analysts explain.
At the same time, Nevil Speer, industry analysts at Bowling Green, Ky., points out fed cattle markets are showing strength and resilience in the face of growing supplies.
For perspective, projected beef production for this year of 26.94 billion pounds would be 757 million pounds more than last year. That’s with USDA’s Economic Research Service peeling 150 million pounds from this year’s projection, month to month, in the latest monthly World Agricultural Supply and Demand Estimates.
“Beef production is reduced from the previous month, largely due to lower expected fourth quarter fed cattle slaughter,” say ERS analysts. “Carcass weights are forecast lower on a higher expected proportion of cows in the slaughter mix.”
WASDE projects the fourth quarter fed steer price (Five Area direct) at $110-$114 per cwt. Prices for next year are projected at $117-$125 in the first quarter, $118-$128 in the second quarter and $109-$119 in the third quarter.
“The most favorable aspect working in the market’s favor revolves around beef demand,” Speer explains in a mid-week BEEF markets article. “It’s clear that consumers are feeling good about both the product and their pocketbook.
“For example, the September market averaged around $110 per cwt across a four-week beef production average of 517.1 million pounds. The same period last year pegged an average $107 fed market while averaging 509.9 million pounds weekly. So, 2018 claims better prices on bigger throughput – that’s a favorable outcome of better beef demand.”
On a related note, restaurant sales and traffic increased in August (latest data available), according to the National Restaurant Association’s (NRA) most recent Restaurant Performance Index (RPI). The August RPI rose 1% from the prior month to 102.0, driven mostly by more optimism surrounding current conditions.
“Restaurant operators reported a net increase in same-store sales for the 10th consecutive month, with customer traffic also turning positive in August,” according to the NRA report.
Wholesale beef values hovered close to even. Week to week, Choice boxed beef cutout value was 54 cents lower Friday afternoon at $202.71 per cwt. Select was 54 cents higher at $192.28.

U.S. beef exports surge to record levels

U.S. beef exports topped $750 million in August for the first time, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).
Specifically, August beef export value was $751.7 million, which was 11% more than the previous year, easily exceeding the previous monthly value record of $722.1 million reached in May 2018. In terms of volume, August beef exports were 7% more than the previous year at 119,850 metric tons.
For January through August, beef exports totaled 899,300 metric tons, up 9% from a year ago, while value climbed 18% to $5.51 billion.
“U.S. beef exports continue to achieve tremendous growth, not only in our mainstay Asian markets but in the Western Hemisphere as well,” says Dan Halstrom, USMEF president and CEO. “USMEF is excited about the recent market access developments achieved by the Office of the U.S. Trade Representative (USTR) and USDA, with favorable terms being preserved in Mexico, Canada and South Korea and trade talks getting underway with Japan. A trade agreement with Japan would bring opportunities for even greater expansion as U.S. beef becomes more affordable for Japanese consumers and is back on a level playing field with Australian beef.”
Beef export value averaged $320.92 per head of fed slaughter in August, up 11% from a year ago. The January-August average was $318.66 per head, up 16%. Through August, beef exports accounted for 13.5% of total U.S. beef production, which was 0.7% more than the previous year.
Conversely, U.S. pork exports were pressured by retaliatory tariffs in China and Mexico. August pork export volume was down 1% from last year at 182,372 metric tons, while export value fell 3% to $494.1 million.
China’s duty rate on pork muscle cuts and variety meat increased from 12% to 37% in April and from 37% to 62% in July. Mexico’s duty rate on pork muscle cuts increased from 0% to 10% in June and then jumped to 20% in July (pork variety meats continue to enter Mexico duty free). Beginning in June, Mexico also imposed a 15% duty on sausages and a 20% duty on some prepared or preserved hams and shoulders.
“Pork exports have posted an impressive performance in 2018, but the retaliatory duties are a clearly a significant obstacle,” Halstrom explains. “The fact that U.S. trade officials were able to secure duty-free access for U.S. red meat in the new U.S.-Mexico-Canada Agreement is critically important, and we are hopeful that duty-free access for U.S. pork entering Mexico will be restored soon.
“Tariff relief in China may not come as quickly, but USMEF continues to work with industry partners to keep as much product as possible moving to China while also working aggressively to expand exports in other key markets, including Korea, Central and South America, the ASEAN region and Australia.”
Keep in mind that U.S. beef still faces retaliatory duties in China and Canada. China’s duty rate increased from 12% to 37% in July, with the higher rate applying to all eligible products. Canada’s 10% duty, which also took effect in July, applies to cooked/prepared beef products. All other U.S. beef still enters Canada duty free.
Among August beef export highlights:
Beef exports to South Korea were 42% more than a year ago in volume (24,482 metric tons) and set another new value record at $176.4 million (up 60%). For January-August exports to South Korea of 161,379 metric tons, are 39% more than a year ago; export value was 54% more at $1.15 billion, just short of the 2017 full-year record of $1.22 billion.
Under the Korea-U.S. Free Trade Agreement (KORUS) that took effect in 2012, Korea’s duty rate on imports of U.S. beef declined from 40% to 21.3% and will be eliminated by 2026. These terms are preserved in the revised KORUS agreement signed Sept. 24.
Beef exports to leading market Japan climbed 8% from a year earlier in August to 33,548 metric tons, including a post-BSE record for muscle cuts of 28,863 metric tons. August export value was $209.3 million, up 5% from a year ago and the highest since 1996. For January through August, exports to Japan were up 7% from a year ago in volume at 224,785 metric tons; value was 11% more at $1.42 billion.

CATTLE MARKET WEEKLY by Wes Ishmael

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